UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

☒   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended:  December 31, 2016

 

or

 

☐   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

 

Commission File Number: 333-169397

 

China Herb Group Holdings Corporation

(Exact name of small business issuer as specified in its charter)

 

Nevada		333-169397		27-3042462
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification Number)

 

1333 S. University Dr., Suite 202, Plantation, Florida 33324

(Address of principal executive offices and zip code)

 

(919) 869-0279

(Registrant’s telephone number, including area code)

  

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days.    YES ☒   NO ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES ☒   NO ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

	Large accelerated filer	☐	Accelerated filer	☐
	Non-accelerated filer	☐	Smaller reporting company	☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☒   NO  ☐

 

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant, as of June 30, 2016, was $64,128,164 (based upon the closing price of the registrant’s common stock of $3.90 per share as reported by the OTC Bulletin Board for the last trading date prior to this date).  

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 37,493,120 shares of common stock, as of March 27, 2017.

 

 

 

TABLE OF CONTENTS

 

Item				Page
PART I
	Item 1	Business		1
	Item 1A	Risk Factors		4
	Item 1B	Unresolved Staff Comments		4
	Item 2	Properties		4
	Item 3	Legal Proceedings		4
	Item 4	Mine Safety Disclosure		4
PART II
	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		5
	Item 6	Selected Financial Data		5
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations		6
	Item 7A	Quantitative and Qualitative Disclosures About Market Risk		10
	Item 8	Financial Statements and Supplementary Data		10
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		10
	Item 9A	Controls and Procedures		10
	Item 9B	Other Information		12
PART III
	Item 10	Directors, Executive Officers and Corporate Governance		12
	Item 11	Executive Compensation		13
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		14
	Item 13	Certain Relationships and Related Transactions and Director Independence		15
	Item 14	Principal Accountant Fees and Services		15
PART IV
	Item 15	Exhibits, Financial Statement Schedules		16
Signatures				17

 

 

PART I

   

FORWARD LOOKING STATEMENTS

 

There are statements in this report that are not historical facts. These “forward-looking statements” can be identified by use of terminology such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions. You should be aware that these forward-looking statements are subject to risks and uncertainties that are beyond our control.  For a discussion of these risks, you should read this entire report carefully, especially the risks discussed under the section entitled “Risk Factors.” Although management believes that the assumptions underlying the forward looking statements included in this report are reasonable, they do not guarantee our future performance, and actual results could differ from those contemplated by these forward looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements.  In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained in this report will in fact transpire. You are cautioned to not place undue reliance on these forward-looking statements, which speak only as of their dates. We do not undertake any obligation to update or revise any forward-looking statements.

 

As used in this Annual Report, unless otherwise noted, references to the “Company”, “we”, “our” or “us” means China Herb Group Holdings Corporation unless the context clearly requires otherwise.

 

Item 1.  Business

 

Overview of Our Business

 

Recent History

 

We were incorporated on June 28, 2010 in the State of Nevada under the name “Island Radio, Inc.” and changed our name to “China Herb Group Holdings Corporation” effective July 17, 2012. 

 

On June 27, 2012, Eric R. Boyer and Nina Edstrom (collectively, the “Sellers”), who were then the major shareholders of the Company, entered into a Share Purchase Agreement with Chin Yung Kong, Qiuping Lu and Fumin Feng (collectively, the “Purchasers”), pursuant to which the Sellers sold to the Purchasers an aggregate 4,000,000 shares of the common stock of the Company, which represented approximately 93% of the then total issued and outstanding stock of the Company, for a total purchase price of $159,970 (the “Change in Control”). As result of this share purchase transaction, Chin Yung Kong, Qiuping Lu and Fumin Feng became the controlling shareholders of the Company.

 

Our original business plan was to become a commercial FM radio broadcaster. Subsequently, following the Change in Control, we changed our business plan and intended to become a medical and spa company with a focus on Asia. However, after consultation with our professional and business advisors in the United States and the People’s Republic of China (“China or the “PRC”), our management decided during the third quarter of 2014 that this would no longer be our plan of operations. No agreements had been entered into by us with any party in connection with such plan of operations.

 

Business Model

 

We currently have no business operations. We currently intend to evaluate new industry, geographic and market opportunities. Our entry into a new business may take the form of acquiring a business or being acquired by an existing business or, least likely, developing a business organically. Any such efforts may require significant capital, which we currently lack. There is no assurance that any such opportunity will become available. There is also no assurance that, if any opportunity becomes available, we will have the financial and other resources available to take advantage of such opportunity, since we have extremely limited liquidity.

 

We will look for potential target companies in a broad range of industries and we may engage in a business combination with any type of business. We intend to focus on target companies that are located or operate exclusively or primarily in China, although, under certain circumstances, we would consider a business combination with a company located or operating in a different country. The circumstances under which we would consider a business combination with a company located or operating in a country other than China would be primarily those situations where we are unable to locate a suitable business combination candidate in China or in response to a change in interest on the part of U.S. investors in investing in China such that such a business combination would no longer be considered advantageous to us.

 

 

The analysis of target companies and the business opportunities they may present to us will be undertaken by or under the supervision of the Company’s sole officer and director, Qiuping Lu.  As of this date, we have not entered into any definitive agreement with any target company or any other party. No assurance can be given that we will consummate a transaction with any target company. We have unrestricted flexibility in seeking and analyzing target companies, and structuring and negotiating a business combination. In our efforts to analyze potential target companies, we consider numerous factors, including the following:

 

	●	Potential for growth, indicated by new technology, existing brand name recognition, market penetration, anticipated market expansion and/or new products;

	●	Competitive position as compared to other businesses of similar size and experience within the industry segment as well as within the industry as a whole;

	●	Strength and diversity of the target company’s management, either in place or scheduled for recruitment;

	●	Capital requirements and anticipated availability of required funds, to be provided by the Company, from operations of the target company, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;

	●	The cost of participation by the Company as compared to the perceived tangible and intangible values and potentials;

	●	The extent to which the target company’s business opportunity can be advanced by means of the business combination;

	●	The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and

●

Other relevant factors based on industry, geopolitical, market and other considerations.

 

In applying the foregoing criteria, no one of which will be controlling, we will attempt to analyze all facts and circumstances and make a determination based upon reasonable investigative measures, due diligence and available data. Potentially available business opportunities may occur in many different industries, and target companies may be at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. However, due to our limited capital available for investigation and due diligence, we may not discover or adequately evaluate adverse facts about a target company. In addition, we will be competing against other entities that possess greater financial, technical and managerial capabilities for identifying and completing business combinations.

  

In evaluating a target company and potential business combination, we will conduct as extensive a due diligence review of potential target companies as is reasonably possible given the relative lack of information which may be available regarding private companies, our limited personnel and financial resources and the inexperience of our management with respect to such endeavors. We expect that our due diligence will encompass, among other things, meetings with the potential target company’s incumbent management and inspection of its facilities, as necessary, as well as a review of financial and other information, and agreements, to the extent they are made available to us.

   

This due diligence review will be conducted by our management and/or unaffiliated third parties, including professionals, who we may engage. Despite such efforts, our limited funds and the lack of our having full-time management will likely make it impracticable to conduct a complete and exhaustive investigation and analysis of a target company before we consummate a business combination. Management decisions, therefore, will likely be made without detailed feasibility studies, independent analysis, market surveys and the like which, if we had more funds and personnel available to us, would be suitable in analyzing a target company. We will be particularly dependent in making decisions upon information provided by the promoters, owners, sponsors, directors and officers or other affiliates or agents of the target company, and we may not be able to ascertain the accuracy or completeness of all such information that is provided to us. We will also face competitive pressures in identifying target companies and negotiating and consummating a business combination.

 

 

Form of Business Combination

 

The manner in which we structure a business combination will depend upon numerous factors, including the nature of the opportunity, the respective needs and desires of the Company and the target company, the relative negotiating strength of the Company and the target company, and certain legal and regulatory considerations. Typical forms of business combinations include statutory mergers, stock purchases, share exchanges and asset purchase transactions. However, it is likely that, in engaging in a business combination with a target company, we will issue shares of our Common Stock or other securities to the stockholders of the target company as sole or partial consideration.

 

Although the terms of any business combination cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called “tax free” reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”) depends upon whether the owners of the acquired business (the target company) own 80% or more of the voting stock of the surviving entity at the conclusion of the transaction. If a business combination were structured to take advantage of these provisions rather than other “tax free” provisions provided under the Code, our then-existing stockholders in the aggregate would in such circumstances retain 20% or less of the total issued and outstanding shares of the Company upon the consummation of the business combination. Depending upon the relative negotiating strength of the parties, our then-existing stockholders may retain substantially less than 20% of the total issued and outstanding shares of the Company upon the consummation of the business combination. It is likely that as a result of a business combination, however it is structure, our then-existing stockholders would incur substantial additional dilution in their percentage ownership of the Company compared to their ownership percentage prior to the business combination.

 

Depending upon the way the business combination is structured, it may be accomplished upon the sole determination of our then-serving directors without any vote or approval by our stockholders. However, in the case of a statutory merger or consolidation directly involving the Company, it will likely be necessary under Delaware law to call a stockholders’ meeting and obtain the approval of the holders of a majority of our voting securities outstanding on the record date. Should it be necessary to obtain such stockholder approval, there could be a delay and additional expense involved in approving the proposed business combination. Additionally, such a structure will also likely give rise to certain appraisal rights to dissenting stockholders under Delaware law. For these and other reasons, our management will likely seek to structure any business combination so as not to require stockholder approval or trigger appraisal rights in favor of dissenting stockholders.

 

The time and costs required to identify, select and conduct due diligence on a target company and to structure, negotiate, document and consummate a business combination cannot presently be ascertained with any degree of certainty.  However, such efforts will require substantial management time and attention and substantial cost for accountants, attorneys and others. Any costs incurred with respect to the identification and evaluation of a target company and potential business combination that is not ultimately completed will result in unrecoverable expenses to us.  Finally, there can be no assurance that any business combination which is consummated will be on terms that are favorable to us and our stockholders.

 

Competition

 

We are in a highly competitive market for a relatively small number of business opportunities which could reduce the likelihood of consummating a successful business combination. We are, and will continue to be, a minor participant in the business of seeking business combinations with target companies. A large number of established and well-financed entities, including small public companies, private equity firms, hedge funds and venture capital firms, are active in mergers and acquisitions of companies that may be suitable target companies for us.  Nearly all of these entities with which we would compete for target companies have significantly greater financial resources, technical expertise and managerial capabilities than we do.  Additionally, we will be competing with other companies who have a similar business model to ours, including special purpose acquisition companies (SPACs) and other strategic acquirers.  Consequently, we will face stiff competition and may be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination with a target company. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination on favorable terms or at all.

 

 

Certain Regulatory Matters

 

Based on the current and proposed business activities described above, the Company is a “blank check” company. The Securities and Exchange Commission (the “SEC”) defines a blank check company as “any development stage company that is issuing a penny stock, within the meaning of Section 3 (a)(51) of the Securities Exchange Act of 1934 (the {“Exchange Act”), and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies.” 

 

Pursuant to Rule 12b-2 under the Exchange Act, the Company is also a “shell company” because it has no or nominal assets (other than cash) and no or nominal operations.  Many states have enacted statutes, rules and regulations limiting the sale of securities of “blank check” companies in their respective jurisdictions.

 

We intend to comply with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements.

 

Our offices are located at 1333 S. University Dr., Suite 202, Plantation, Florida 33324, and our telephone number is (919) 869-0279.

 

Employees

 

As of December 31, 2016, we had no employees.  All functions, including development, strategy, negotiations and administration, are currently being provided by our sole director and officer, Qiuping Lu. Ms. Lu is engaged in outside business activities and anticipates that she will devote very limited time to our business until a successful business opportunity has been identified. We currently expect no significant changes in the number of our employees other than such changes, if any, incidental to a business combination.

 

Item 1A.  Risk Factors

 

As a “smaller reporting company”, as defined in Rule 12b-2 under the Exchange Act, we are not required to provide the information required by this Item.

 

Item 1B.  Unresolved Staff Comments

 

None.

     

Item 2.  Properties

 

The Company does not own any office space or equipment. The Company pays a comprehensive service fee in the amount of $100 per month on a month-to-month basis for its offices located at 1333 S. University Dr., Suite 202, Plantation, Florida 33324.

 

Item 3.  Legal Proceedings

 

There are presently no material pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

 

Item 4.  Mine Safety Disclosure

 

Not applicable.

 

 

PART II

 

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Prior to April 19, 2011, our common stock was quoted on the OTC Markets under the symbol “ISLD”, from April 19, 2011 to July 17, 2012, our common stock was quoted on the OTC Bulletin Board under the symbol “ISLD” and from July 17, 2012 to July 17, 2014, our common stock was quoted on the OTC Bulletin Board under the symbol “CHGH’, although the first posted quote for our common stock was on May 28, 2014. Since July 17, 2014, our common stock has been quoted on the OTCQB under the trading symbol “CHGH”.   For the periods indicated, the following table sets forth the high and low bid prices per share of common stock.  The below prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions:

 

		Fiscal 2016								Fiscal 2015
		High				Low				High				Low
First Quarter ended March 31		$	3.75			$	3.75			$	3.75			$	3.75
Second Quarter ended June 30		$	3.90			$	3.75			$	3.75			$	3.75
Third Quarter ended September 30		$	3.90			$	3.90			$	3.75			$	3.75
Fourth Quarter ended December 31		$	3.90			$	3.90			$	3.75			$	3.75

 

As of March 27, 2017, there were 74 registered holders of our common stock.

 

Dividend Policy

 

We have never declared or paid cash dividends.  We currently intend to retain all future earnings for the operation of our business and do not anticipate paying cash dividends on the common stock in the foreseeable future.  Any payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, contractual restrictions and other factors deemed relevant by our directors. 

 

Securities Authorized for Issuance under Equity Compensation Plans

 

As of March 27, 2017, we have not adopted an equity compensation plan and have not granted any stock options.

 

Recent Sales of Unregistered Securities

 

On August 15, 2016, we sold 1,050,001 shares of common stock at a purchase price of $0.001 per share to 28 investors pursuant to 28 stock purchase agreements. We did not engage a placement agent with respect to the sale. We received proceeds of $1,050.

 

Issuer Purchases of Equity Securities

 

We have not repurchased any of our equity securities during the period covered by this report.

 

Item 6.  Selected Financial Data

 

Not applicable.

 

 

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion of our results of operations and cash flows for the year ended December 31, 2016 and 2015 and financial condition as of December 31, 2016 should be read in conjunction with our financial statements and the related notes included elsewhere in this report.

 

We have no business operations and are not currently generating any revenue.  Our independent registered public accounting firm has issued a going concern opinion.  This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months.  We do not anticipate generating revenue until we engage in a merger or other business combination with an operating business. Accordingly, we must raise additional cash from sources other than operations to meet our expenses.  

 

Plan of Operations

 

We currently have no business operations. We currently intend to evaluate new industry, geographic and market opportunities. Our entry into a new business may take the form of acquiring a business, being acquired by an existing business or, least likely, developing a business organically. Any such efforts may require significant capital, which we currently lack. There is no assurance that any such opportunity will become available. There is also no assurance that, if any opportunity becomes available, we will have the financial and other resources available to take advantage of such opportunity, since we have extremely limited liquidity.

 

We will look for potential target companies in a broad range of industries and we may engage in a business combination with any type of business. We intend to focus on target companies that are located or operate exclusively or primarily in China, although, under certain circumstances, we would consider a business combination with a company located or operating in a different country. The circumstances under which we would consider a business combination with a company located or operating in a country other than China would be primarily those situations where we are unable to locate a suitable business combination candidate in the China or in response to a change in interest on the part of U.S. investors in investing in China such that such a business combination would no longer be considered advantageous to us.

 

Our principal strategic objective for the next 12 months and beyond will be to identify and consummate a business combination with a target company. There are no agreements with any such target company and there can be no assurance that we will engage in a business combination within the next 12 months or at any time in the future.

 

During at least the next 12 months, unless we complete a business combination sooner, we anticipate incurring costs primarily related to:

 

	●	preparing and filing Exchange Act reports;
	●	identifying, investigating and conducting due diligence on target companies; and
	●	negotiating, structuring, documenting and consummating a business combination.

 

We believe that we will be able to meet these costs through cash on hand and additional amounts, as may be necessary, to be loaned by or invested in us by our stockholders, management and/or others. Currently, however, our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due.  Our ability to continue as a going concern is also dependent on our ability to find a suitable target company and enter into a business combination.  Management’s plan includes obtaining additional funds through a combination of sales of our equity securities before, contemporaneously with, or following, the consummation of a business combination; and borrowings, although we do not believe that we will be eligible to borrow funds from a bank until at least a business combination is consummated.  However, here is no assurance that any additional funding will be available on terms that are favorable to us or at all.

   

We currently rely on loans from our sole director and officer, Qiuping Lu, to meet our expenses. There is no guarantee that Ms. Lu will continue to lend us funds to meet our expenses in the future. Currently, we do not have any other arrangements for financing.  We have no assurance that future financing will be available to us on acceptable terms, or at all. If financing is not available to us on satisfactory terms or at all, we may be unable to develop operations or meet our expenses.  Additionally, any equity financing in which we might engage would result in dilution to our existing shareholders.

 

 

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

 

Revenues.  As of December 31, 2016 and 2015, we had not generated any revenues.

 

Operating Expenses.  For the year ended December 31, 2016, total operating expenses amounted to $36,823 as compared to $64,892 for the year ended December 31, 2015, a decrease of $28,069 or 43.3%. Since inception, our operating expenses primarily consisted of fees and expenses related to complying with our ongoing SEC reporting requirements, which have consisted of legal, fees, accounting fees, transfer agents fees, filing fees, and consulting fees.

 

Other income (expenses).  During the year ended December 31, 2016 and 2015, we recorded $13,841 and $9,817, respectively, in imputed interest expenses related to advances outstanding to related parties. These imputed interests were recorded in our financial statements under additional paid-in capital. During the year ended December 31, 2016, we recorded other expense of $10,000 and we did not have other expense in the year ended December 31, 2015.

 

Net Loss.  During the year ended December 31, 2016 and 2015, we had a net loss of $60,664 and $74,709, respectively.

 

Liquidity and Capital Resources

 

As of December 31, 2016, we did not have any cash, while, we had liabilities of $206,433, and had a working capital deficit of $202,066. We expect to incur continued losses during 2017, possibly even longer.

 

For the year ended December 31, 2016 and 2015, net cash used in operating activities amounted to $44,169 and $64,298, respectively. We expect to require working capital of approximately $100,000 over the next 12 months to meet our financial obligations.

 

For the year ended December 31, 2016 and 2015, net cash provided by financing activities amounted to $42,374 and $63,971, respectively. For the year ended December 31, 2016, we received proceeds from sale of common stock of $1,050 and received proceeds from loans from officer of $41,324 for working capital purposes. For the year ended December 31, 2015, we received proceeds from loans from officer of $63,971 for working capital purposes.

 

We have not generated any revenues from operations to date. It is not likely that we will generate any revenue until at least a business combination has been consummated. Even following a business combination, there is no guarantee that any revenues will be generated or that any revenues will be sufficient to meet our expenses. We may consider a business combination with a target company which itself has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop one or more new products or services, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital.

 

Moreover, any target business that is selected may be financially unstable or in the early stages of development or growth, including businesses without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with a target company in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target company, there can be no assurance that we will properly ascertain or assess all significant risks.

 

The foregoing considerations raise substantial doubt about our ability to continue as a going concern.  We are currently planning on devoting the vast majority of our efforts to identifying, investigating and conducting due diligence on target companies; and negotiating, structuring, documenting and consummating a business combination. Our long-term ability to continue as a going concern is dependent upon our ability to develop additional sources of capital, complete a business combination and, thereafter, achieve profitable operations.

 

We believe that we will be able to meet these costs through cash on hand and additional amounts, as may be necessary, to be loaned by or invested in us by our stockholders, management and/or others. Currently, however, our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due.  Our ability to continue as a going concern is also dependent on our ability to find a suitable target company and enter into a business combination.  Management’s plan includes obtaining additional funds through a combination of sales of our equity securities before, contemporaneously with, or following, the consummation of a business combination; and borrowings, although we do not believe that we will be eligible to borrow funds from a bank until at least a business combination is consummated.  However, here is no assurance that any additional funding will be available on terms that are favorable to us or at all.

 

   

We currently rely on loans from our sole director and officer, Qiuping Lu, to meet our expenses. There is no guarantee that Ms. Lu will continue to lend us funds to meet our expenses in the future. Currently, we do not have any other arrangements for financing.  We have no assurance that future financing will be available to us on acceptable terms, or at all. If financing is not available to us on satisfactory terms or at all, we may be unable to develop operations or meet our expenses.  Additionally, any equity financing in which we might engage would result in dilution to our existing shareholders.

 

During the fiscal year ended December 31, 2016 and 2015, Ms. Lu, the sole director and officer of us, advanced an aggregate $41,324 and $63,971, respectively, to us to pay some of our expenses and for working capital purposes. These advances in the aggregate amounts of $175,072 and $133,748, respectively, at December 31, 2016 and 2015, are payable on demand and are reflected as related party loans on the accompanying balance sheets.

 

Imputed interest of $13,841 and $9,817 was recorded for the year ended December 31, 2016 and 2015, respectively, and the imputed interest was recorded as interest expense and an increase in additional paid-in capital, respectively.

 

Going Concern Consideration

 

Our independent auditors included an explanatory paragraph in their report on the accompanying financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

 

Contractual Obligations

 

As of December 31, 2016, we had no contractual obligations.

 

Off –Balance Sheet Operations

 

As of December 31, 2016, we had no off-balance sheet activities or operations.

 

Critical Accounting Policies

 

The accompanying financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (US GAAP) for financial information and in accordance with the Securities and Exchange Commission’s (SEC) Regulation S-X. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates.

 

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, we consider highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. As of December 31, 2016 and 2015, we had no cash equivalents. 

 

Fair Value of Financial Instruments

 

ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

As of December 31, 2016 and 2015, we believe that the recorded values of all of our financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

Net Loss per Share Calculation

 

Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per shares is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. During the periods presented, we had no dilutive financial instruments issued or outstanding. 

 

Income Taxes

 

We account for income taxes pursuant to FASB ASC 740, “Income Taxes”. Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

 

We maintain a valuation allowance with respect to deferred tax assets. We establish a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration our financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws.

 

 

Changes in circumstances, such as us generating taxable income, could cause a change in judgment about its ability to realize the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.   

 

Recently Issued Accounting Pronouncement

 

Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. We do not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to our financial condition, results of operations, cash flows or disclosures.

 

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

Item 8.  Financial Statements and Supplementary Data

 

See pages F-1 through F-10.

 

Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A.  Controls and Procedures

 

Disclosure Controls and Procedures

 

Under the supervision and with the participation of our officers and directors, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act as of a date ("Evaluation Date") within ninety (90) days prior to the filing of our Annual Report for the year ended December 31, 2016 on Form 10-K with the SEC.

 

Based upon that evaluation, our management has concluded that, as of December 31, 2016, our disclosure controls and procedures were not effective in timely alerting management to the material information relating to us required to be included in our periodic filings with the SEC.

 

Our officers and directors have concluded that our disclosure controls and procedures had the following material weaknesses:

 

●

We were unable to maintain any segregation of duties within our financial operations due to our reliance on limited personnel in the finance function.  While this control deficiency did not result in any audit adjustments to our 2016 interim or annual financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties;

 

●

We lack sufficient resources to perform the internal audit function and do not have an Audit Committee;

 

●

We do not have an independent Board of Directors, nor do we have a board member designated as an independent financial expert.  The Board of Directors is comprised of one (1) member who is also our only executive officer.  As a result, there is a lack of independent oversight of the management team, lack of independent review of our operating and financial results, and lack of independent review of disclosures made by us; and

 

●

Documentation of all proper accounting procedures is not yet complete.

 

 

These weaknesses have existed since our inception on June 28, 2010 and, as of December 31, 2016, have not been remedied. To the extent reasonably possible given our limited financial and personnel resources, we intend to take measures to cure the aforementioned material weaknesses, including, but not limited to, the following:

 

●

Consider the engagement of consultants to assist in ensuring that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures;

 

●

Hire additional qualified financial personnel, including a Chief Financial Officer, on a full-time basis;

 

●

Expand our board of directors to include additional independent individuals willing to perform directorial functions; and

 

●

Increase our workforce in preparation for commencing revenue producing operations.

 

Since the recited remedial actions will require that we hire or engage additional personnel, these material weaknesses may not be overcome in the near-term due to our limited financial resources.  Until such remedial actions can be realized, we will continue to rely on the limited advice of outside professionals and consultants.

 

Internal Control over Financial Reporting

 

(a)

Management’s Annual Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.  Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

Our officers assessed the effectiveness of our internal control over financial reporting as of December 31, 2016.  In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 Internal Control-Integrated Framework.  Based on that assessment under such criteria, management concluded that our internal controls over financial reporting were not effective as of December 31, 2016 due to control deficiencies that constituted material weaknesses.

  

Management has identified a lack of sufficient personnel in the accounting function, due to our limited resources, with appropriate skills, training and experience to perform the review processes to ensure the complete and proper application of generally accepted accounting principles.

  

We are in the process of developing and implementing remediation plans to address our material weaknesses in our internal controls.

   

Management has identified specific remedial actions to address the material weaknesses described above:

 

●

Improve the effectiveness of the accounting group by augmenting our existing resources with additional consultants or employees to improve segregation procedures and to assist in the analysis and recording of complex accounting transactions and preparation of tax disclosures.  We plan to mitigate the segregation of duties issue by hiring additional personnel in the accounting department once we have achieved positive cash flow from operations and/or have raised significant additional working capital; and

 

●

Improve segregation procedures by strengthening cross approval of various functions including cash disbursements and quarterly internal audit procedures where appropriate.

 

 

Inherent Limitations on Effectiveness of Controls

 

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

(a)

Attestation Report of the Registered Public Accounting Firm

 

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management's report in this Annual Report.  We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the SEC that permit us to provide only management’s report in this Annual Report.

 

(b)

Changes in Controls and Procedures

 

There were no significant changes made in our internal controls over financial reporting during the year ended December 31, 2016 that have materially affected or are reasonably likely to materially affect these controls.  Thus, no corrective actions with regard to significant deficiencies or material weaknesses were necessary.

 

Item 9B.  Other Information

 

None.

   

PART III

 

Item 10.  Directors, Executive Officers and Corporate Governance

 

As of March 27, 2017, our executive officers and directors were as follows:

 

Name		Age				Position
Qiuping Lu			45			President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and Director

 

Qiuping Lu, age 45, has served as the Company’s President, Chief Executive Officer, Chief Financial Officer and a director since June 27, 2012. She has served as the Board Director of Hong Kong Han Fang Zhen Bao Group Holding Company from 2003 to present. Ms. Lu was the Accounting Director of Jiangsu Jiu Jiu Accounting Firm from 1998 to 2003 and was the Accounting Director of Changzhou Nonferrous Metal Factory from 1991 to 1998. Ms. Lu graduated from the Accounting Major of Changzhou Industrial Institute in 1991.

   

Involvement in Certain Legal Proceedings

 

None of our directors and officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor has been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement. There have been no events under any bankruptcy act, no criminal proceedings, no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any of our directors, executive officers, promoters or control persons during the past ten years.

 

 

Corporate Governance

 

We are a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act and an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

 

The OTC Bulletin Board, where our common stock is quoted under the trading symbol “CHGH”, does not have any director independence requirements.  In determining whether our directors are independent, we refer to Nasdaq Stock Market Rule 4200(a)(15). Based on these criteria, we have determined that our sole director does not meet the independence requirements of the Nasdaq Stock Market as currently in effect.

 

We do not have standing audit, compensation and corporate governance committees, or committees performing similar functions. Our Board, as a whole, handles the matters usually addressed by such committees. Our sole director is also the sole executive officer of the Company. Our Board does not currently have any member who qualifies as an audit committee financial expert.  We believe that the cost of retaining such a financial expert at this time is prohibitive.  Additionally, because we have not yet begun business operations, we believe the services of an audit committee financial expert are not necessary for us at this time.

 

At this time, we have not adopted corporate governance guidelines, a code of business conduct, a code of ethics or a related party transaction policy. We anticipate that as we engage in a business combination and commence operations, we will implement appropriate corporate governance structures to comply with SEC and/or stock exchange requirements that would be applicable to us at such time.

 

We maintain a corporate website and post our SEC filings on a page of that website. The information on our website is not, and shall not be deemed to be, a part of this report or incorporated by reference into this or any other filing we make with the SEC.

   

Potential Conflicts of Interest

 

Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our Board as a whole.  Therefore, there is a potential conflict of interest in that our sole director has the authority to determine issues concerning management compensation and audit issues that may affect management decisions.  

 

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Section 16(a) of the Exchange Act requires our Section 16 officers, directors and beneficial owners of more than 10% of our common stock to file reports of ownership and changes in ownership with the SEC. Copies of these filings must be furnished to us. Based solely upon a review of the forms filed with the SEC by our Section 16 officers, directors and beneficial owners of more than 10% of our common stock, regarding their ownership of, and transactions in, our common stock and upon written representations from such persons that no additional forms were required, we believe that during the 2016 fiscal year all Section 16(a) reports were timely filed.

 

Item 11.  Executive Compensation

 

No compensation has been paid to our officers during the fiscal year 2016 and 2015. We have no current plans to begin paying our officers any compensation until our business becomes operational.

 

Director Compensation

 

No compensation has been paid to our directors during the fiscal year 2016 and 2015 during the periods that they served as such.  We have no current plans to begin paying our directors any compensation until our business becomes operational.

 

Employment Agreements

 

We have not entered into any employment agreements with any of our officers or directors.  

 

Long-Term Incentive Plan Awards

 

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.

 

    

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth information regarding beneficial ownership as of March 27, 2017 by (i) each named executive officer; (ii) each member of our Board of Directors; (iii) each person deemed to be the beneficial owner of more than five percent (5%) of any class of our common stock; and (iv) all of our named executive officers and directors as a group:   

 

Name of Beneficial Owner		Shares of Common Stock				Percentage of Class (1)
5% Shareholders
Qiuping Lu President, CEO, CFO, Treasurer, Director #1501, Unit Yi, Building 2, Xinfengyuan Community, Qinglong Jiedao Tianning District, Changzhou City Jiangsu Province People’s Republic of China			15,000,000				40.01	%
Fumin Feng Block 5, Room 2503 No. 93 Jianguo Road, Chaoyang District, Beijing People’s Republic of China			5,000,000				13.34	%
Guangyang Liu Room 402, Ding Dan Yuan, 16th Building, Huai De Yuan, Zhong Lou District Jiangsu Province People’s Republic of China			2,340,000				6.24	%
Renliang Xu Room102,Bing Dan Yuan,51th Building, Shun Yuan New Village, Xinbei District Jiangsu Province People’s Republic of China			2,131,432				5.68	%
Directors and Named Executive Officers
Qiuping Lu #1501, Unit Yi, Building 2, Xinfengyuan Community, Qinglong Jiedao Tianning District, Changzhou City Jiangsu Province People’s Republic of China			15,000,000				40.01	%
All directors and named executive officers as a group (1 person)			15 ,000,000				40.01	%

 

(1)

Based on 37,493,120 shares of common stock issued and outstanding as of March 27, 2017. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days, are deemed outstanding for determining the number of shares beneficially owned and for computing the percentage ownership of the person holding such options, but are not deemed outstanding for computing the percentage ownership of any other person. Except as indicated by the footnote, and subject to community property laws, where applicable, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We did not have any authorized equity compensation plans during the fiscal year ended December 31, 2016.

 

 

Item 13.  Certain Relationships and Related Transactions, and Director Independence

 

During the fiscal year ended December 31, 2013, Chin Yung Kong, then a director of the Company, advanced an aggregate $20,000 to the Company to pay some of its expenses and for working capital purposes. These advances in the aggregate amount of $20,000 are payable on demand and, at December 31, 2016 and 2015, reflected as related party loans on the accompanying balance sheets. Of these amounts, a total of $20,000 was outstanding at December 31, 2016 and 2015.

 

During the fiscal year ended December 31, 2016 and 2015, Ms. Lu, then the sole director and officer of the Company, advanced an aggregate $41,324 and $63,971, respectively, to the Company to pay some of its expenses and for working capital purposes. These advances in the aggregate amounts of $175,072 and $133,748, respectively, are payable on demand and, at December 31, 2016 and 2015, are reflected as related party loans on the accompanying balance sheets. Of these amounts, a total of $175,072 and $133,748, respectively, was outstanding at December 31, 2016 and 2015.

 

Imputed interest of $13,841 and $9,817 was recorded for the year ended December 31, 2016 and 2015, respectively, and recorded as interest expense and an increase in additional paid-in capital.

 

Director Independence

 

No member of management is required by us to work on a full time basis.  Accordingly, certain conflicts of interest may arise between us and our officers and directors in that they may have other business interests in the future to which they devote their attention, and they may be expected to continue to do so although management time must also be devoted to our business.  As a result, conflicts of interest may arise that can be resolved only through their exercise of such judgment as is consistent with each officer's understanding of his or her fiduciary duties to us.

 

The OTC Markets, where our common stock is quoted under the trading symbol “CHGH”, does not have any director independence requirements.  In determining whether our directors are independent, we refer to Nasdaq Stock Market Rule 4200(a)(15). Based on these criteria, we have determined that none of our directors who served in that capacity at any time during 2016 met the independence requirements of the Nasdaq Stock Market as currently in effect.

 

Item 14.  Principal Accounting Fees and Services

 

Audit Fees

 

The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the annual audit of our financial statements and review of financial statements included in our quarterly reports and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows: 

 

		For the fiscal year ended December 31, 2016				For the fiscal year ended December 31, 2015
Audit Fees		$	6,850			$	6,000
Audit Related Fees			0				0
Tax Fees			0				0
All Other Fees		$	0			$	0

 

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

 

Given the fact that we currently have only one director, as well as the limited financial resources and operational state of us, our Board acts as our Audit Committee.  Our Board pre-approves all audit and permissible non-audit services.  These services may include audit services, audit-related services, tax services and other services.  Our Board approves these services on a case-by-case basis.

 

   

PART IV

 

Item 15.  Exhibits, Financial Statements Schedules

 

The following documents are filed as a part of this Annual Report:

 

(1)

Financial Statements

 

The financial statements required to be filed as part of this report are set forth in Item 8 of Part II of this Annual Report.

 

(2)

Financial Statement Schedules

 

All schedules are omitted for the reason that the information is included in the financial statements or the notes thereto or that they are not required or are not applicable.

 

(3)

Exhibits

 

Exhibit Number		Description of Exhibit
3.1 (1)		Articles of Incorporation
3.2 (2)		Amendment of Articles of Incorporation dated July 17, 2012
3.3 (2)		Amendment of Articles of Incorporation dated December 19, 2013
3.4 (1)		Bylaws
31.1*		Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934

 

31.2*		Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934
32.1*		Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS **		XBRL Instance Document
101.SCH **		XBRL Taxonomy Extension Schema Document
101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB **		XBRL Taxonomy Extension Label Linkbase Document
101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

 

*	Filed herewith.

 

**

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

(1)	Incorporated by reference from our Registration Statement on Form S-1/A filed with the SEC on October 12, 2010.

 

(2)	Incorporated by reference from our Annual Report on Form 10-K filed with the SEC on April 14, 2015.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	China Herb Group Holdings Corporation
	(Registrant)
Date: March 27, 2017	By:	/s/ Qiuping Lu
		Qiuping Lu President, Chief Executive Officer and Chief Financial Officer

 

  

 

 

 

 

 

 

 

 

 

 

 

CHINA HERB GROUP HOLDINGS CORPORATION

FINANCIAL STATEMENTS

December 31, 2016 and 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHINA HERB GROUP HOLDINGS CORPORATION

INDEX TO FINANCIAL STATEMENTS

December 31, 2016 and 2015

 

CONTENTS

 

Report of Independent Registered Public Accounting Firm	F-2
Financial Statements:
Balance Sheets - As of December 31, 2016 and 2015	F-3
Statements of Operations - For the Year Ended December 31, 2016 and 2015	F-4
Statements of Changes in Stockholders’ Equity (Deficit) - For the Year Ended December 31, 2016 and 2015	F-5
Statements of Cash Flows – For the Year Ended December 31, 2016 and 2015	F-6
Notes to Financial Statements	F-7 to F-10

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and

Stockholders of China Herb Group Holdings Corporation

 

We have audited the accompanying balance sheets of China Herb Group Holdings Corporation as of December 31, 2016 and 2015, and the related statements of operations, changes stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2016. China Herb Group Holdings Corporation’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of China Herb Group Holdings Corporation as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ M&K CPAS, PLLC

www.mkacpas.com

Houston, Texas

March 27, 2017 

 

 

CHINA HERB GROUP HOLDINGS CORPORATION

BALANCE SHEETS

 

		December 31,
		2016				2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	-			$	1,795
Prepaid expenses			4,367				-
TOTAL CURRENT ASSETS			4,367				1,795
TOTAL ASSETS		$	4,367			$	1,795
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities		$	11,361			$	4,340
Related party loans			195,072				153,748
TOTAL CURRENT LIABILITIES			206,433				158,088
STOCKHOLDERS' DEFICIT:
Preferred stock ($.001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding)			-				-
Common stock ($.001 par value; 70,000,000 shares authorized; 37,493,120 and 36,443,119 shares issued and outstanding at December 31, 2016 and 2015, respectively)			37,493				36,443
Additional paid-in capital			128,411				114,570
Accumulated deficit			(367,970	)			(307,306	)
TOTAL STOCKHOLDERS' DEFICIT			(202,066	)			(156,293	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	4,367			$	1,795

 

The accompanying notes to the financial statements are an integral part of these statements.

 

 

CHINA HERB GROUP HOLDINGS CORPORATION

STATEMENTS OF OPERATIONS

 

		For the Year Ended December 31,
		2016				2015
Revenues		$	-			$	-
Operating Expenses:
General and administrative			18,033				7,162
Legal fees			-				35,060
Accounting fees			13,350				15,895
Transfer agent fees			5,440				1,775
Consulting fees			-				5,000
Total Operating Expenses			36,823				64,892
Loss from Operations			(36,823	)			(64,892	)
Other Expense:
Interest expense - related parties			(13,841	)			(9,817	)
Other expense			(10,000	)			-
Total Other Expense			(23,841	)			(9,817	)
Net Loss		$	(60,664	)		$	(74,709	)
Net loss per common share, basic and diluted		$	(0.00	)		$	(0.00	)
Weighted average number of common shares outstanding:
Basic and diluted			36,841,890				36,443,119

 

The accompanying notes to the financial statements are an integral part of these statements.

 

 

CHINA HERB GROUP HOLDINGS CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE YEAR ENDED DECEMBER 31, 2016 AND 2015

 

										Additional
		Common Stock								Paid-in				Accumulated
		Shares				Amount				Capital				Deficit				Total
Balance at December 31, 2014			36,443,119			$	36,443			$	104,753			$	(232,597	)		$	(91,401	)
Imputed Interest			-				-				9,817				-				9,817
Net Loss			-				-				-				(74,709	)			(74,709	)
Balance at December 31, 2015			36,443,119				36,443				114,570				(307,306	)			(156,293	)
Common stock sold for cash			1,050,001				1,050				-				-				1,050
Imputed Interest			-				-				13,841				-				13,841
Net Loss			-				-				-				(60,664	)			(60,664	)
Balance at December 31, 2016			37,493,120			$	37,493			$	128,411			$	(367,970	)		$	(202,066	)

 

The accompanying notes to the financial statements are an integral part of these statements.

 

 

CHINA HERB GROUP HOLDINGS CORPORATION

STATEMENTS OF CASH FLOW

 

		For the Year Ended
		December 31,
		2016				2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(60,664	)		$	(74,709	)
Adjustments to reconcile net loss to net cash used in operating activities:
Imputed interest on related parties loans			13,841				9,817
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses			(4,367	)			100
Increase in accounts payable and accrued liabilities			7,021				494
NET CASH USED IN OPERATING ACTIVITIES			(44,169	)			(64,298	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock			1,050				-
Proceeds from loans from officer			41,324				63,971
NET CASH PROVIDED BY FINANCING ACTIVITIES			42,374				63,971
NET DECREASE IN CASH			(1,795	)			(327	)
Cash, beginning of year			1,795				2,122
Cash, end of year		$	-			$	1,795
SUPPLEMENTAL DISCLOSURES:
Interest paid		$	-			$	-
Income taxes paid		$	-			$	-

 

The accompanying notes to the financial statements are an integral part of these statements.

 

 

CHINA HERB GROUP HOLDINGS CORPORATION

NOTES TO FINANCIAL STATEMENTS
December 31, 2016

 

NOTE 1 – ORGANIZATION

 

China Herb Group Holdings Corporation (the “Company”) was incorporated under the name “Island Radio, Inc” under the laws of the State of Nevada on June 28, 2010.

 

On June 27, 2012, Eric R. Boyer and Nina Edstrom (collectively, the “Sellers”), who were then the major shareholders of the Company, entered into a Share Purchase Agreement with Chin Yung Kong, Qiuping Lu and Fumin Feng (collectively, the “Purchasers”), pursuant to which the Sellers sold to the Purchasers an aggregate 4,000,000 shares of the common stock of the Company, which represented approximately 93% of the then total issued and outstanding stock of the Company, for a total purchase price of $159,970 (the “Change in Control”). As result of this share purchase transaction, Chin Yung Kong, Qiuping Lu and Fumin Feng became the controlling shareholders of the Company.

 

The Company’s original business plan was to become a commercial FM radio broadcaster. Subsequently, following the Change in Control, the Company changed its business plan and intended to become a medical and spa company with a focus on Asia. However, after consultation with its professional and business advisors in the United States and the People’s Republic of China, the Company’s management decided during the third quarter of 2014 that this would no longer be its plan of operations. The Company’s plan of operations is to evaluate various industries, geographic and market opportunities. This may take the form of acquiring a business, being acquired by an existing business or developing a business organically. Any such efforts may require significant capital, which the Company currently lacks. There is no assurance that any such opportunity will become available. There is also no assurance that, if any opportunity becomes available, the Company will have the financial and other resources available to take advantage of such opportunity, since the Company’s has extremely limited liquidity. Through December 31, 2016, the Company has no revenues or operation.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying financial statements for China Herb Group Holdings Corporation have been prepared in accordance with accounting principles generally accepted in the United States of America and in accordance with Regulation S-X promulgated by the Securities and Exchange Commission.

 

Use of Estimates

 

The accompanying financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment. Actual results may vary from these estimates.

 

Fair Value of Financial Instruments

 

ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

As of December 31, 2016 and 2015, the Company believes that the recorded values of all of its financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

 

CHINA HERB GROUP HOLDINGS CORPORATION

NOTES TO FINANCIAL STATEMENTS
December 31, 2016

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Fair Value of Financial Instruments (continued)

 

Description

Level 1

Level 2

Level 3

Total Realized Loss

December 31, 2016

-

-

-

-

December 31, 2015

-

-

-

-

Total

-

-

-

-

 

ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. As of December 31, 2016 and 2015, the Company had no cash equivalents.

 

Prepaid Expenses

 

Prepaid expenses relates to cash paid in advance for rent and annual listing fee. These amounts are recognized as expense over the related service periods. At December 31, 2016 and 2015, prepaid expenses amounted $4,367 and $0, respectively.

 

Income Taxes

 

Deferred income tax assets and liabilities arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and liabilities are classified as current or non-current, depending upon the classification of the assets or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

 

The Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10). Certain recognition thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a "more-likely-than-not" threshold. As of December 31, 2016 and 2015, the Company does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying financial statements.

 

Loss per Share Calculation

 

Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per shares is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. During the year ended December 31, 2016 and 2015, the Company had no dilutive financial instruments issued or outstanding.

 

Recent Accounting Pronouncements

 

Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

 

 

CHINA HERB GROUP HOLDINGS CORPORATION

NOTES TO FINANCIAL STATEMENTS
December 31, 2016

 

NOTE 3 - GOING CONCERN

 

The Company has minimal operations, and as such has devoted most of its efforts since its inception to developing its business plan, issuing common stock, attempting to raise capital, establishing its accounting systems and other administrative functions.

 

As of December 31, 2016, the Company had $0 in cash and has been funding its working capital needs from loans from related parties. The Company is seeking sources of funding. Without limiting its available options, future equity financings will most likely be through the sale of additional shares of its common stock. It is possible that the Company could also offer warrants, options and/or rights in conjunction with any future issuances of its common stock. However, the Company can give no assurance that financing will be available to it, and if available, in amounts or on terms acceptable to the Company.

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United State of America, which contemplate continuation of the Company as a going concern. The Company has not established a source of revenues sufficient to cover its operating costs, and as such, has incurred an operating loss since its inception. Further, as of December 31, 2016, the Company had an accumulated deficit and stockholders’ deficit of $(367,970) and $(202,066), respectively. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.

 

NOTE 4 - RELATED PARTIES TRANSACTIONS

 

Related Parties Loans

 

In year 2013, Chin Yung Kong, the director and shareholder of the Company, advanced $20,000 to the Company for working capital purposes. These working capital advances of $20,000 are payable on demand and, at December 31, 2016 and 2015, reflected as related party loans on the accompanying balance sheets.

 

Starting from year 2014, Qiuping Lu, President, CEO, director and shareholder of the Company, advanced funds to the Company for working capital purposes. These working capital advances are payable on demand. As of December 31, 2016 and 2015, these working capital advances amounted to $175,072 and $133,748, respectively, are reflected as related party loans on the accompanying balance sheets.

 

During the year ended December 31, 2016 and 2015, in connection with these related party loans, the Company imputed interest of $13,841 and $9,817, respectively, and recorded interest expense and an increase in additional paid-in capital.

 

NOTE 5 – STOCKHOLDERS’ EQUITY (DEFICIT)

 

Preferred Stock

 

The total number of preferred shares authorized that may be issued by the Company is 5,000,000 shares with a par value of $0.001 per share.

 

As of December 31, 2016 and 2015, the Company had no shares of its preferred stock issued and outstanding.

 

Common Stock

 

The total number of common shares authorized that may be issued by the Company is 70,000,000 shares with a par value of $0.001 per share.

 

As of December 31, 2016 and 2015, the Company had 37,493,120 and 36,443,119 shares of its common stock issued and outstanding, respectively.

 

Common Stock Sold for Cash

  

On August 15, 2016, the Company sold 1,050,001 shares of common stock at a purchase price of $0.001 per share to 28 investors pursuant to a stock purchase agreement. The Company did not engage a placement agent with respect to the sale. The Company received proceeds of $1,050.

 

 

CHINA HERB GROUP HOLDINGS CORPORATION

NOTES TO FINANCIAL STATEMENTS
December 31, 2016

 

NOTE 6 – INCOME TAXES

 

The Company maintains deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred tax assets at December 31, 2016 and 2015 consist of net operating loss carryforwards. The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty of the attainment of future taxable income. The items accounting for the difference between income taxes at the effective statutory rate and the provision for income taxes for the year ended December 31, 2016 and 2015 were as follows:

 

		Year Ended December 31,
		2016				2015
Income tax benefit at U.S. statutory rate of 35%		$	(21,232	)		$	(26,148	)
Non-deductible interest			4,844				3,436
Change in valuation allowance			16,388				22,712
Total provision for income tax		$	-			$	-

 

The Company’s approximate net deferred tax asset as of December 31, 2016 and 2015 was as follows:

 

Deferred Tax Asset:		December 31, 2016				December 31, 2015
Net operating loss carryforward		$	111,166			$	94,778
Valuation allowance			(111,166	)			(94,778	)
Net deferred tax asset		$	-			$	-

 

The net operating loss carryforward was $317,619 at December 31, 2016. The Company provided a valuation allowance equal to the deferred income tax asset for the year ended December 31, 2016 and 2015 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward. The increase in the allowance was $16,388 in 2016. The potential tax benefit arising from the loss carryforward will expire in 2036.

 

Additionally, the future utilization of the net operating loss carryforward to offset future taxable income may be subject to an annual limitation as a result of ownership changes that could occur in the future. If necessary, the deferred tax assets will be reduced by any carryforward that expires prior to utilization as a result of such limitations, with a corresponding reduction of the valuation allowance.

 

The Company does not have any uncertain tax positions or events leading to uncertainty in a tax position. 

 

NOTE 7 - SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and has determined there are no additional events required to be disclosed.

 

 

F-10