Intelligent Hotel Group Ltd 10-Q for FY2024 Q1
Intelligent Hotel Group Ltd. (ZHJD)
About this 10-Q
Intelligent Hotel Group Ltd filed this 10-Q on May 20, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $289.87K
- up 87.9% from $154.29K a year earlier
- Net income
- $155.61K
- up 122.6% from net income of $69.89K a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the Quarterly Period Ended
or
For the transition period from ______ to ______
Commission
File Number
(Exact name of registrant issuer as specified in its charter)
| 2870 | ||||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Number) |
(IRS Employer Identification Number) |
(Address of principal executive offices, including zip code)
(
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit and post such files).
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” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large Accelerated Filer ☐ | Accelerated Filer ☐ | Smaller
reporting company | |
| Emerging
growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
N/A
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name on each exchange on which registered | ||
| N/A | N/A | N/A |
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at May 20, 2024 | |
| Common Stock, $0.0001 par value |
TABLE OF CONTENTS
| -2- |
PART I — FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
YCQH AGRICULTURAL TECHNOLOGY CO. LTD
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2024 AND DECEMBER 31, 2023
(Currency expressed in United States Dollars (“US$”), except for number of shares or otherwise stated)
| As
of March 31, 2024 | As
of December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Inventories | ||||||||
| Prepayment, deposits and other receivables | ||||||||
| Total current assets | ||||||||
| Non-current Assets | ||||||||
| Right-of-use assets, net | $ | $ | ||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Trade payables | $ | $ | ||||||
| Other payables and accrued liabilities | ||||||||
| Deferred revenue | ||||||||
| Amount due to a director | ||||||||
| Lease liability – current portion | ||||||||
| Total current liabilities | $ | $ | ||||||
| Non-current liabilities | ||||||||
| Lease liability – non-current portion | $ | $ | ||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock, $ par value; shares authorized; issued and outstanding | ||||||||
| Common stock, $ par value; shares authorized; shares and shares of common stock issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | $ | $ | ||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive (loss)/income | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | $ | ( | ) | $ | ( | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-1 |
YCQH AGRICULTURAL TECHNOLOGY CO. LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”), except for number of shares or otherwise stated)
Three months ended March 31, 2024 | Three months ended March 31, 2023 | |||||||
| REVENUE | $ | |||||||
| COST OF REVENUE | ( | ) | ( | ) | ||||
| GROSS PROFIT | $ | |||||||
| OPERATING EXPENSES | ||||||||
| Selling and distribution | ( | ) | ( | ) | ||||
| General and administrative | ( | ) | ( | ) | ||||
| PROFIT FROM OPERATION BEFORE INCOME TAX | ||||||||
| INTEREST INCOME | ||||||||
| PROFIT BEFORE INCOME TAX | $ | |||||||
| INCOME TAX EXPENSES | ( | ) | ||||||
| NET PROFIT | $ | |||||||
| Other comprehensive income: | ||||||||
| - Foreign currency translation (loss)/income | ( | ) | ||||||
| TOTAL COMPREHENSIVE INCOME | $ | |||||||
| NET INCOME PER SHARE, BASIC AND DILUTED | ||||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-2 |
YCQH AGRICULTURAL TECHNOLOGY CO. LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”), except for number of shares or otherwise stated)
| COMMON STOCK | ||||||||||||||||||||||||
NUMBER OF SHARES | AMOUNT | ADDITIONAL PAID-IN CAPITAL | ACCUMULATED DEFICIT | ACCUMULATED COMPREHENSIVE INCOME | TOTAL STOCKHOLDERS’ DEFICIT | |||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| Net profit for the period | - | |||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| COMMON STOCK | ||||||||||||||||||||||||
NUMBER OF SHARES | AMOUNT | ADDITIONAL PAID-IN CAPITAL | ACCUMULATED DEFICIT | ACCUMULATED COMPREHENSIVE INCOME | TOTAL STOCKHOLDERS’ DEFICIT | |||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| Net profit for the period | - | |||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements
| F-3 |
YCQH AGRICULTURAL TECHNOLOGY CO. LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”), except for number of shares or otherwise stated)
Three Months Ended March 31, 2024 | Three
Months March 31, 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net profit | $ | $ | ||||||
| Adjustments to reconcile net profit to net cash used in operating activities: | ||||||||
| Change in operating lease ROU asset | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Inventories | ( | ) | ||||||
| Prepayment, deposits and other receivables | ( | ) | ( | ) | ||||
| Other payables and accrued liabilities | ( | ) | ||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Change in lease liability | ( | ) | ( | ) | ||||
| Account payables | ||||||||
| Net cash provided by/(used in) operating activities | $ | $ | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Amount due to director | ( | ) | ||||||
| Net cash (used in)/provided by financing activities | $ | ( | ) | $ | ||||
| Effect of exchange rate changes on cash and cash equivalents | $ | ( | ) | $ | ||||
| Net increase/(decrease) in cash and cash equivalents | $ | $ | ( | ) | ||||
| Cash and cash equivalents, beginning of year | ||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOWS INFORMATION | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest paid | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-4 |
YCQH AGRICULTURAL TECHNOLOGY CO. LTD
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”), except for number of shares or otherwise stated)
1. ORGANIZATION AND BUSINESS BACKGROUND
YCQH Agricultural Technology Co. Ltd., was incorporated on October 15, 2019 under the laws of the State of Nevada of which Ms. Wang Min was appointed the President, Secretary, Treasurer and sole director of our board.
The Company primarily operates in bio-carbon-based fertilizer (“BCBF”) trading business, including wholesale and retail sale to customer mainly based in People Republic of China, sourcing directly from producers in China. The Company does not maintain and operate any production and manufacturing of BCBF facility or machine and equipment. On July 25, 2022, the Company ventures into online retailing business through e-commerce platform, retailing a series of daily use products covering from healthcare products, cosmetic products, fashion products, household products and so forth to customer mainly based in People Republic of China. The Company acts as the intermediary role and does not keep any form of inventory throughout the online retail transaction.
| Company name | Place/date of incorporation | Principal activities | ||
YCQH Holding Limited (“YCQH Seychelles”) |
Seychelles / October 11, 2019 | Investment holding | ||
YCQH Agricultural Technology Co. Limited (“YCQH HK”) |
Hong Kong / October 10, 2019 | Investment holding | ||
| YCWB Agricultural Technology Co. Limited (“YCWB”) | SiChuan Province, China /December 10, 2019 |
Operates in bio-carbon-based fertilizer trading business | ||
SCQC Agriculture Co. Limited (“SCQC”) |
SiChuan Province, China /November 1, 2019 (acquired on June 15, 2020) |
Operates in bio-carbon-based fertilizer trading business and daily use products online retailing business |
On December 16, 2019, the Company acquired YCQH Holding Limited, a company incorporated in Republic of Seychelles. In the same day YCQH Seychelles acquired YCQH Agricultural Technology Co. Limited, a company incorporated in Hong Kong.
On December 10, 2019, the YCQH HK incorporated YCWB Agricultural Technology Co. Limited, a wholly foreign owned enterprise, in SiChuan Province, China, with Ms. Wang Min as the legal representative.
On
June 15, 2020, the Company through subsidiary YCWB Agricultural Technology Co. Limited acquired SCQC Agriculture Co. Limited, a company
incorporated in SiChuan Province, China for a consideration of CNY
On
April 19, 2023, the Company through subsidiary YCWB Agricultural Technology Co. Limited incorporated XMYC Trading Co. Limited, a company
incorporated in XiaMen City, China with an investment capital of CNY
On September 25, 2023, the Company through subsidiary YCWB Agricultural Technology Co. Limited disposed XMYC Trading Co. Limited, with a consideration of CNY (approximate $). After the disposal of XMYC, the Company will continue to operate the beauty products trading business.
The Company’s executive office is located at No. 1104, Ren Min Nan Road, No. 45, Wuhou District, Chengdu, Sichuan Province, China 610000.
| F-5 |
2. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of the Company are prepared pursuant to the rules and regulations of the U.S. Securities and Exchanges Commission (“SEC”) and in conformity with generally accepted accounting principles in the U.S. (“US GAAP”). All material inter-company accounts and transactions have been eliminated on consolidation. The Company has adopted December 31 as its fiscal year end.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. Under the PRC Foreign Exchange Control Regulations and Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, the Company is permitted to exchange Chinese Renminbi for foreign currencies through banks that are authorized to conduct foreign exchange business.
Prepayment, Deposits and Other Receivables
Prepayments
and deposits are mainly cash deposited or advance payments made to third parties for future purchases or future services such as rent
or other general expenses. This amount is refundable and bears no interest. The Company will recognize an allowance account for doubtful
accounts to the extent it is probable that a portion or all of a particular account will not be collected. Management reviews its prepayments
and deposits on a regular basis to determine if the allowance is adequate and adjusts the allowance when necessary. The Company’s
management continues to evaluate the reasonableness of the allowance policy and update it if necessary.
Lease
The Company adopted the ASU No. 2016-02, on October 15, 2019 (date of inception). The Company leases office space for fixed periods with pre-emptive extension options. The Company recognizes lease payments for its short-term lease on a straight-line basis over the lease term.
As
of March 31, 2024, the Company has
In determining the present value of the unpaid lease payments, ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As most of the Company leases do not provide an implicit rate, the Company uses its incremental borrowing rate as the discount rate for the lease. The Company adopted 4.75% as its incremental borrowing rate which is estimated to approximate the interest rate on a collateralized basis with similar terms and payments.
| F-6 |
Revenue Recognition
The Company generates two streams of revenue.
The first stream of revenue is generated through sale of goods, primarily Bio-Carbon-Based-Fertilizer (“BCBF”). Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods and services. The Company applies the following five-step model in order to determine this amount:
(i) identification of the promised goods and services in the contract;
(ii) determination of whether the promised goods and services are performance obligations, including whether they are distinct in the context of the contract;
(iii) measurement of the transaction price, including the constraint on variable consideration;
(iv) allocation of the transaction price to the performance obligations; and
(v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Under Topic 606, the Company records revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. The Company records revenue from the sale of product upon shipment or delivery of the products to the customer.
While another revenue stream is our online retailing business. In online retailing business we have differentiate into two distinct revenue streams: sales revenue with inventory risk and sales revenue without inventory risk. Initially, the Company act as an agent in transactions, meaning we place orders with suppliers upon receiving orders from customers. The suppliers will then directly send the goods to the customer based on our order info. A reporting entity assumes the role of agent in a transaction and arranges for the other party to provide the specified goods or service. Consequently, product sales revenue is recorded net of cost of sales, as we act as an agent and do not bear inventory risk.
During the last quarter of 2023, we transitioned to purchasing stock from several suppliers and outsource the inventory warehouse to few suppliers and we are liable for the inventory risk hence we are principal in this extent. Similar to previous operations, contracts are formed when customers place orders in the app, and the performance obligation remains unchanged. Revenue recognition continues to be based on the point in time when customers assume control and legal ownership of the purchased products, without deducting any associated costs, as this reflects the normal transactional relationship between seller and buyer. We recognize revenue when customers take control and legal ownership of the purchased products.
From the quarter four of 2023 onwards, the company will continue operate as sales income from BCBF and online retailing business with and without inventory risk. As such, revenue derived from online retailing business is being recognized on net basis, i.e. gross revenue received from customer deduct the cost of purchase to supplier.
Besides, adopting ASC 606-10-55-42, we give an option to customers, which they will be received of cash back of 44% from their purchased amount in the online platform. Hence, 44% of cash back is a material right, so we will net off the cash back portion with the revenue instead of recognize the whole purchased amount as revenue.
Deferred revenue
The
Company’s accounting policy related to deferred revenue is to recognize revenue for performance obligations that have not yet been
fulfilled. As of March 31, 2024 and 2023, the Company recognized amounts of $
| F-7 |
Shipping, Storage and Handling costs
Costs for shipping, storage and handling activities, including those activities that occur subsequent to transfer of control to the customer, are recorded as selling and distribution expense and are expensed as incurred. The Company accrues costs for shipping, storage and handling activities that occur after control of the promised good has transferred to the customer.
Advertising costs
The Company’s accounting policy related to advertising costs for annual reporting purposes is to expense costs incurred in marketing events for example event venue fees, emcee fees and others, as of the first date the advertisements take place. All marketing expenditures are expensed in the annual period in which the expenditure is incurred. For the three months ended March 31, 2024 and 2023, the Company did not incurred expenses for advertising costs.
The Company reports earnings per share in accordance with ASC 260 “Earnings Per Share”, which requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. Further, if the number of common shares outstanding increases as a result of a stock dividend or stock split or decreases as a result of a reverse stock split, the computations of a basic and diluted earnings per share shall be adjusted retroactively for all periods presented to reflect that change in capital structure.
The Company’s basic earnings per share is computed by dividing the net income available to holders by the weighted average number of the Company’s ordinary shares outstanding. Diluted earnings per share reflects the amount of net income available to each ordinary share outstanding during the period plus the number of additional shares that would have been outstanding if potentially dilutive securities had been issued.
Inventories
Inventories consist of finished goods and are stated at the lower of cost or net realizable value using the first-in first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. The Company reviews its inventories regularly for possible obsolete goods and establishes reserves when determined necessary.
During the last quarter of 2023, we transitioned to purchasing stock from several suppliers and outsource the inventory warehouse to few suppliers and we are liable for the inventory risk hence we are principal in this extent. Our inventory is stored and managed at the facilities of third-party logistics providers. These arrangements involve contractual agreements outlining the terms of storage, handling, and distribution of our inventory. Besides, the third-party logistics providers are responsible for maintaining the quality and condition of the inventory in accordance with our specifications.
Each third-party logistics provider uses its own inventory management system to track the movement and availability of our products. They will send us a copy of the movement and balance of inventory at the end of the month, which we then compare with the inventory movement worksheet maintained by our company. This allows us to identify any inventory discrepancies promptly. The third-party logistics providers facilitate the distribution of our inventory to our customers and fulfillment centers as per our instructions. Additionally, the logistics providers are responsible for our inventory in any aspect of damaged goods due to their responsibility, for example, stolen inventory, damaged goods due to warehouse conditions, and other factors.
| F-8 |
Related parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
Income Taxes
The Company accounts for income taxes using the asset and liability method prescribed by ASC 740 “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the years in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
Foreign Currency Translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of operations.
The reporting currency of the Company is United States Dollars (“US$”). The Company’s subsidiary in Seychelles, Hong Kong and PRC have functional currencies in United States Dollars (“US$”), Hong Kong Dollars (“HK$”) and Chinese Renminbi (“CNY¥”) respectively.
In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.
The shareholders’ equity accounts were stated at their historical rate. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.
Translation of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective periods:
SCHEDULE OF FOREIGN CURRENCIES TRANSLATION
For
the three March 31, 2024 | For
the three March 31, 2023 | |||||||
| Period-end HK$ : US$1 exchange rate | ||||||||
| Period-end CNY¥ : US$1 exchange rate | ||||||||
| Period-average HK$ : US$1 exchange rate | ||||||||
| Period-average CNY¥ : US$1 exchange rate | ||||||||
| F-9 |
Fair Value Measurement
Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures”, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The statement clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. It also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and that market participant assumptions include assumptions about risk and effect of a restriction on the sale or use of an asset.
This ASC establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
Recently issued accounting pronouncements
In November 2023, the FASB issued ASU 2023-07, Improvement to Reportable Segment Disclosures (Topic 280). Asu 2023-07 aims to improve segment disclosures through enhanced disclosures about significant segment expenses. The standard requires all public entities, including those public entities that have a single reportable segment, shall disclose all of the following for each period for which an income statement is presented. However, reconciliations of balance sheet amounts for reportable segments to consolidated balance sheet amounts are required only for each year for which a balance sheet is presented. This standard will be effective for the Company in fiscal year of 2024. The Company is currently evaluating the impact of the additional disclosure requirements on the Company’s condensed consolidated financial statements.
The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s unaudited condensed consolidated financial statements.
Economic and political risks
Substantially all the Company’s services are conducted in the People’s Republic of China (“PRC”), of which operations in the PRC are subject to special considerations and significant risks not typically associated with companies in rest of the world. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.
| F-10 |
4. GOING CONCERN UNCERTAINTIES
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company currently
in a net liability position and incurred a net cash provided by operating activities of $
The Company’s cash position may not be significant enough to support the Company’s daily operations. While the Company believes in the viability of its strategy and in its ability to raise additional funds, there can be no assurances to that effect. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and the ability to acquire funding through public offering. If funding from public offering is insufficient, then the Company shall rely on the financial support from its controlling shareholder.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that financial statements are issued. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.
5. INVENTORIES
As of March 31, 2024 and December 31, 2023, the Company inventories consist of following:
SCHEDULE OF INVENTORIES
| As
of March 31, 2024 | As
of December 31, 2023 | |||||||
| Finished goods | $ | $ | ||||||
| Total inventories | $ | $ | ||||||
6. PREPAYMENT, DEPOSITS AND OTHER RECEIVABLES
As of March 31, 2024 and December 31, 2023, prepayment, deposits and other receivables consist of following:
SCHEDULE OF PREPAYMENT, DEPOSITS AND OTHER RECEIVABLES
As of March 31, 2024 | As of December 31, 2023 | |||||||
| Deposits for Hong Kong Company Secretary | $ | $ | ||||||
| Staff Advancement & Prepaid Staff Cost | ||||||||
| Rental Deposit & Prepayment | ||||||||
| Supplier Deposit & Prepayment | ||||||||
| Prepaid transfer agent fee and OTCIQ renewal | ||||||||
| Total prepayment, deposits and other receivables | $ | $ | ||||||
7. OTHER PAYABLES AND ACCRUED LIABILITIES
As of March 31, 2023 and December 31, 2022, other payables and accrued liabilities consist of following:
SCHEDULE OF OTHER PAYABLES AND ACCRUED LIABILITIES
As of March 31, 2024 | As of December 31, 2023 | |||||||
| Other payables | $ | $ | ||||||
| Accrued audit fee | ||||||||
| Accrued professional fee | ||||||||
| Total other payables and accrued liabilities | $ | $ | ||||||
8. AMOUNT DUE TO A DIRECTOR
SCHEDULE OF RELATED PARTY TRANSACTION
As of March 31, 2024 | As of December 31, 2023 | |||||||
| Amount due to a director | $ | $ | ||||||
As
of March 31, 2024, the Company has an outstanding payable of $
| F-11 |
9. SHAREHOLDERS’ EQUITY
As of March 31, 2023 and December 31, 2023, the Company has shares and shares of common stock issued and outstanding, respectively.
During the three months ended March 31, 2024, the Company has not issued any shares.
The Company has shares of commons stock and shares of preference stock authorized, share of preference stock issued and outstanding.
10. LEASE RIGHT-OF-USE ASSET AND LEASE LIABILITIES
On
December 01, 2022, the management of the Company through indirect wholly owned subsidiary SCQC Agriculture Co. Limited enter into a tenancy
agreement to rent an office with an area of approximate
On
February 29,2024, the management of the Company through indirect wholly owned subsidiary SCQC Agriculture Co. Limited terminated the
tenancy agreement of the office. On March 5, 2024 the management enter into a tenancy agreement to rent an office for a monthly rental
of CNY
As of December 31, 2023, operating lease right-of-use assets as follows:
SCHEDULE OF OPERATING LEASE RIGHT AND LEASE LIABILITY
| Right-of-use assets, net as of December 31, 2022 | $ | |||
| Amortization for the period ended November 30, 2023 | ( | ) | ||
| Right-of-use assets as of Nov 30, 2023 | ||||
| Reassessment of lease | ( | ) | ||
| Amortization of December 31, 2023 | ( | ) | ||
| Foreign exchange translation | ( | ) | ||
| Right-of-use assets, net as of December 31, 2023 | $ |
As of December 31, 2023, operating lease liability as follows:
| Lease liability as of December 31, 2022 | $ | |||
| Add: imputed interest for the period ended November 30, 2023 | ||||
| Less: gross repayment for the period ended November 30, 2023 | ( | ) | ||
| Operating lease liability as of Nov 30, 2023 | ||||
| Reassessment of lease | ( | ) | ||
| Add: imputed interest of December 31, 2023 | ||||
| Less: gross repayment of December 31, 2023 | ( | ) | ||
| Foreign exchange translation | ( | ) | ||
| Lease liability as of December 31, 2023 | $ |
| F-12 |
As of March 31, 2024, operating lease right-of-use assets as follows:
| Right-of-use assets, net as of December 31, 2023 | $ | |||
| Amortization for the two months ended February 29, 2024 | ( | ) | ||
| Foreign exchange translation | ||||
| Right-of-use assets, net as of February 29, 2024 | $ | |||
| Termination of right-of-use asset | ( | ) | ||
| Right-of-use assets, net as of February 29, 2024 | ||||
| New right-of-use assets recognized as of March 5, 2024 | ||||
| Amortization of March 31, 2024 | ( | ) | ||
| Foreign exchange translation | ||||
| Right-of-use assets, net as of March 31, 2024 |
As of March 31, 2024, operating lease liability as follows:
| Lease liability as of December 31, 2023 | $ | |||
| Add: imputed interest for the two months ended February 29, 2024 | ||||
| Less: gross repayment for the two months ended February 29, 2024 | ( | ) | ||
| Foreign exchange translation | ||||
| Lease liability as of February 29, 2024 | $ | |||
| Termination of right-of-use asset | ( | ) | ||
| Lease liability net as of February 29, 2024 | $ | |||
| Lease liability net as of February 29, 2024 | $ | |||
| New lease liability recognized as of March 5, 2024 | ||||
| Add: imputed interest of March 31, 2024 | ||||
| Less: gross repayment of March 31, 2024 | ( | ) | ||
| Foreign exchange translation | ||||
| Lease liability net as of March 31, 2024 | ||||
| Lease liability current portion | $ | |||
| Lease liability non-current portion | $ | |||
| Maturities of the loan for each of the five years and thereafter are as follows: | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 |
Other information:
SCHEDULE OF COMPONENTS OF LEASE EXPENSE
| Three
months ended March 31 | ||||
| 2024 | ||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating cash flow to operating lease | $ | |||
| Remaining lease term for operating lease (years) | ||||
| Right-of-use assets obtained in exchange for operating lease liabilities | ||||
| Weighted average discount rate for operating lease | % | |||
| F-13 |
11. CONCENTRATION OF RISK
Customer Concentration
For
the three months ended March 31, 2024, the Company generated total revenue of $
SCHEDULE OF CUSTOMER CONCENTRATION RISK
| For the three months ended March 31 | ||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Revenues | Percentage of revenues | Accounts
receivable, trade | ||||||||||||||||||||||
| Customer A | $ | $ | % | % | $ | $ | ||||||||||||||||||
| Others | % | % | ||||||||||||||||||||||
| Total | $ | $ | % | % | $ | $ | ||||||||||||||||||
Vendor Concentration
For
the three months ended March 31, 2024, the Company incurred cost of revenue of $
SCHEDULE OF VENDOR CONCENTRATION RISK
| For the three months ended March 31 | ||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Cost of revenue | Percentage of Cost of revenue | Accounts
payable, trade | ||||||||||||||||||||||
| Vendor A | $ | $ | % | % | $ | $ | ||||||||||||||||||
| Vendor B | % | % | ||||||||||||||||||||||
| Vendor C | % | % | ||||||||||||||||||||||
| Vendor D | % | % | ||||||||||||||||||||||
| Others | % | % | ||||||||||||||||||||||
| Total | $ | $ | % | % | $ | $ | ||||||||||||||||||
| F-14 |
12. INCOME TAXES
The
Company being a United States entity is subject to the United States federal income tax at
YCQH Holding Limited was incorporated in the Republic of Seychelles and, under the laws of Seychelles, is not subject to income taxes.
YCQH
Agricultural Technology Co. Limited was incorporated in Hong Kong and is subject to Hong Kong income tax at a tax rate of
YCWB
Agricultural Technology Co. Limited and SCQC Agriculture Co. Limited were incorporated in the PRC and subject to the company income tax
rate of
Effective and Statutory Rate Reconciliation
The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates.
The following table summarizes a reconciliation of the Company’s income taxes expenses:
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION
| 2024 | 2023 | |||||||
| For the Three Months Ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| Computed expected expenses | % | % | ||||||
| Effect of foreign tax rate difference | % | % | ||||||
| Deferred tax assets not recognized | % | % | ||||||
| Temporary difference not recognized | ( | )% | ( | )% | ||||
| Income tax expense | % | % | ||||||
| 2024 | 2023 | |||||||
| For the Three Months Ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| PRC statutory tax rate | % | % | ||||||
| Computed expected expenses | ||||||||
| Effect of foreign tax rate difference | ||||||||
| Deferred tax assets not recognized | ||||||||
| Temporary difference not recognized | ( | ) | ( | ) | ||||
| Income tax expense | ||||||||
The following table sets forth the significant components of the aggregate deferred tax assets of the Company as of March 31, 2024:
SCHEDULE OF DEFERRED TAX ASSETS
As of March 31, 2024 | As of December 31, 2023 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carry forwards | ||||||||
| - United States of America | $ | $ | ||||||
| - Hong Kong | ||||||||
| - People Republic China | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets | $ | $ | ||||||
Management
believes that it is more likely than not that the deferred tax assets will not be fully realizable in the future. Despite the Company
starting to turn a net profit for the year according to reporting figures, economic uncertainties dictate that the Company will only
adjust its valuation allowance policy if it can sustain net profits over consecutive reporting periods. Therefore, the Company has provided
for a full valuation allowance against its deferred tax assets of $
| F-15 |
13. SEGMENT REPORTING
ASC 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about services categories, business segments and major customers in financial statements. The Company has two reportable segments based on business unit, bio-carbon-based fertilizer (“BCBF”) trading business and online retailing business and two reportable segments based on country, United States and China.
In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes.
SCHEDULE OF SEGMENT REPORTING
| For
the Three Months Ended and As of March 31, 2024 | ||||||||||||
| By Business Unit | BCBF Trading Business | Online Retailing Business | Total | |||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of revenue | ( | ) | ( | ) | ||||||||
| Selling and distribution expenses | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ||||||||
| Profit from operations | ||||||||||||
| Total assets | $ | $ | $ | |||||||||
| Capital expenditure | $ | $ | $ | |||||||||
| F-16 |
| For
the Three Months Ended and As of March 31, 2023 | ||||||||||||
| By Business Unit | BCBF Trading Business | Online Retailing Business | Total | |||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of revenue | ( | ) | ( | ) | ||||||||
| Selling and distribution expenses | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ||||||
| Profit from operations | ( | ) | ||||||||||
| Total assets | $ | $ | $ | |||||||||
| Capital expenditure | $ | $ | $ | |||||||||
| For the Three Months Ended and As of March 31, 2024 | ||||||||||||
| By Country | United States | China | Total | |||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of revenue | ( | ) | ( | ) | ||||||||
| Selling and distribution expenses | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ||||||
| Profit from operations | ( | ) | ||||||||||
| Total assets | $ | $ | $ | |||||||||
| Capital expenditure | $ | $ | $ | |||||||||
| For
the Three Months Ended and As of March 31, 2023 | ||||||||||||
| By Country | United States | China | Total | |||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of revenue | ( | ) | ( | ) | ||||||||
| Selling and distribution expenses | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ||||||
| Profit from operations | ( | ) | ||||||||||
| Total assets | $ | $ | $ | |||||||||
| Capital expenditure | $ | $ | $ | |||||||||
14. SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after March 31, 2024 up through the date the Company issued the financial statements. No subsequent events have occurred that would require recognition or disclosure in the financial statements.
| F-17 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained in this quarter report on Form 10-Q is intended to update the information contained in our Form 10-K dated March 31, 2024, for the year ended December 31, 2023 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.
The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarter report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form S-1/A registration statement, filed on June 3, 2021, in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarter report on Form 10-Q. The following should also be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto that appear elsewhere in this report.
Company Overview
The Company has seen a business opportunity in wholesaling and retailing high quality, sustainable, environmentally friendly bio-carbon-based fertilizer (herein referred to as “BCBF”), which is capable of not only increasing the crop yield but also at the same time preserving the environment. The Company’s BCBF is sourced from, and produced by, a third party through heating straw in a closed container with little or no available air. This method is also known as thermal decomposition of organic material under limited supply of oxygen at relatively low temperature. In accordance with requirements imposed by the PRC Ministry of Agriculture, the Company’s Supplier of BCBF has registered with Sichuan Province Provincial Department of Agriculture and Rural Affairs, which has an effective period of 5 years, from December 2019 to December 2024. The Company does not maintain or operate any production and/or manufacturing of any BCBF facility, machine and/or equipment.
The Company is currently wholesaling and retailing BCBF through its wholly owned subsidiary SCQC. Management of the Company believes that the BCBF sold by the Company is capable of maintaining soil fertility, enhancing crop yield, improving soil structure, improving water and fertilizer retention capability and improving fertilizer utilization efficiency and effectiveness. This is achieved through balancing carbon and nitrogen content, neutralizing soil pH while at the same time creating soil particle structure that is conducive to plant growth.
The BCBF sold by the Company, produced through straw thermal decomposition, replaces the function of activated carbon. The combination of soil and BCBF is capable of absorbing and reducing pollution content such as heavy metals from agricultural residual wastes. Further, the combination of water and BCBF is capable of purifying water by producing carbohydrate and glucose, which could be absorbed by, and is conducive to the growth of, plants. Additionally, BCBF possesses outstanding water storage capacity, which can store up to 10 times the water content when compared to soil without BCBF, which in turn provides farmers greater flexibility during times of hardship such as a drought.
As such, the management of the Company believes that the Company’s BCBF is not only a superior option compared to conventional fertilizer in terms of environmentally sustainability, but also from an economic perspective due to the improvement in crop yield quality and quantity. The Company’s BCBF consists of roughly 45% organic matter, 20% bio-charcoal, 10% humic acid, 5% NPK and boats an effective microorganism count of 20,000,000 per gram.
On July 25, 2022, the Company ventures into online retailing business through e-commerce platform, retailing a series of daily use products covering from healthcare products, cosmetic products, fashion products, household products and so forth. Customer will place order through platform and make payment accordingly of which shall be collected by Company. Meanwhile Company shall place exact order towards supplier and supplier will deliver such ordered products directly to customer, settlement between Company and supplier will take place once a week. It is worth mentioning that the Company act as the intermediary role and do not keep any form of inventory throughout the transaction.
| -3- |
Results of operations
For the three months ended March 31, 2024 and 2023, the Company has generated a revenue of $289,866 and $154,294, respectively. Breakdown of revenue as following:
| Three months ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| BCBF Business Sales Revenue | $ | - | $ | 57,622 | ||||
| Percentage towards Total Revenue | - | % | 37 | % | ||||
| Online Business Revenue without inventory risk | $ | 5,807 | $ | 96,672 | ||||
| Online Business Revenue with inventory risk | 284,059 | - | ||||||
| Total Online Business Revenue | 289,866 | 96,672 | ||||||
| Percentage towards Total Revenue | 100 | % | 63 | % | ||||
| Beauty Products Business Revenue | $ | - | $ | - | ||||
| Percentage towards Total Revenue | - | % | - | % | ||||
| Total Revenue | $ | 289,866 | $ | 154,294 | ||||
| BCBF Business Cost of Sales | - | (33,751 | ) | |||||
| Online Business Cost of Sales – with inventory risk | (64,897 | ) | - | |||||
| Beauty Products Business Cost of Sales | - | - | ||||||
| Total Cost of Sales | $ | (64,897 | ) | $ | (33,571 | ) | ||
| BCBF Business Gross Profit | - | 24,051 | ||||||
| Online Business Gross Profit – without inventory risk | 5,807 | 96,672 | ||||||
| Online Business Gross Profit – with inventory risk | 219,162 | - | ||||||
| Beauty Products Business Gross Profit | - | - | ||||||
| Total Gross Profit | $ | 224,969 | $ | 120,723 | ||||
| Gross Profit Margin | 78 | % | 78 | % | ||||
| BCBF Business Gross Profit Margin | - | % | 42 | % | ||||
| Online Business Gross Profit Margin | 78 | % | 100 | % | ||||
| Beauty Products Business Gross Profit Margin | - | % | - | % | ||||
For the three months ended March 31, 2024, the Company has experience significant improvement in total revenue due to the establishment of new business segment, which is the online retailing business through e-commerce platform. For the three months ended March 31, 2024, the BCBF trading business segment and the online retailing business segment contributed 0% and 100% of the total revenue respectively.
Three months ended March 31, 2024 and 2023
The Company generated revenue in the amount of $289,866 for the three months ended March 31, 2024 while the cost of revenue for was $64,897, which resulted in gross profit of $224,969 and a gross margin of 78%. For the three months ended March 31, 2024, the Company generated revenue from online retailing business in the amount of $289,866 while the cost of revenue for was 64,897, which resulted in gross profit of $224,969 and a gross margin of 78%.
The Company generated revenue in the amount of $154,294 for the three months ended March 31, 2023 while the cost of revenue for was $33,571, which resulted in gross profit of $120,723 and a gross margin of 78%. For the three months ended March 31, 2023, the Company generated revenue from BCBF trading business in the amount of $57,622 while the cost of revenue for was $33,571, which resulted in gross profit of $24,051 and a gross margin of 42%. For the three months ended March 31, 2023, the Company generated revenue from online retailing business in the amount of $96,672 while the cost of revenue for was none, which resulted in gross profit of $96,672 and a gross margin of 100%.
The Company has improved the revenue due to the establishment of new business segment, which is the online retailing business through e-commerce platform. Fluctuation in gross profit margin of BCBF trading business which caused by fluctuation in unit selling price, may vary amongst customers, depending on number of factors including customer historical purchase quantity and payment terms. The gross profit margin of online business may vary amongst customers due to the types of products required by the customers based on their consumption behaviors.
| -4- |
The selling and distribution expenses and the general and administrative expenses for the three months ended March 31, 2024 were $2,439 and $66,991 respectively. The selling and distribution expenses and the general and administrative expenses for the three months ended March 31, 2023 were $495 and $50,147 respectively. The selling and distribution expenses are primarily the shipping fee and free products sample provided incurred while the general and administrative expenses are primarily related to salary and social contribution, storage and logistic expenses, lease expenses, audit fees and consultancy fees. The general and administrative expenses have been increased because increased in overseas travelling expenses.
As result, the Company generated an operating profit of $155,539 and $70,081 for the three months ended March 31, 2024 and 2023, respectively.
Liquidity and Capital Resources
Three months ended March 31, 2024 and 2023
Cash Provided by/Used In Operating Activities
For the three months ended March 31, 2024, the Company generate $119,013 by operating activity, of which primarily consist of increase in prepayment, deposits and other receivables, increase in inventories, decrease in deferred revenue and reduction in lease liability contra by net profit, amortization, increase in account payables and increase in other payables and accrued liabilities.
For the three months ended March 31, 2023, the Company used $256,898 in operating activity, of which primarily consist of increase in prepayment, deposits and other receivables, decrease in other payables and accrued liabilities, decrease in deferred revenue and reduction in lease liability contra by net profit, amortization and decrease in inventories.
Cash Used In Investing Activities
For the three months ended March 31, 2024 and 2023, the Company did not generate nor used any cash in investing activities.
Cash Provided by Financing Activities
For the three months ended March 31, 2024, the Company has repaid amount due to director amounting to $83,193.
For the three months ended March 31, 2023, the Company has received cash provided by director amounting to $27,940.
Foreign Currency
Most of our revenues and operating expenses are denominated in Renminbi. The Renminbi is currently freely convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans. Under our current corporate structure, our company in the United States may rely on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have.
Under existing PRC foreign exchange regulations, payments of current account items, including payment of dividends, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. Our PRC subsidiaries may also retain foreign exchange in its current account, subject to a ceiling approved by SAFE, to satisfy foreign exchange liabilities or to pay dividends. However, we cannot assure you that the relevant PRC governmental authorities will not limit or eliminate our ability to purchase and retain foreign currencies in the future.
| -5- |
Since a significant amount of our future revenues will be denominated in Renminbi, the existing and any future restrictions on currency exchange may limit our ability to utilize revenues generated in Renminbi to fund our business activities outside China, if any, or expenditures denominated in foreign currencies.
Foreign exchange transactions under the capital account are subject to limitations and require registration with or approval by the relevant PRC governmental authorities. In particular, any transfer of funds from us to any of our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, is subject to certain statutory limit requirements and registration or approval of the relevant PRC governmental authorities, including the relevant administration of foreign exchange and/or the relevant examining and approval authority. Our ability to use the U.S. dollar proceeds of the sale of our equity or debt to finance our business activities conducted through our PRC subsidiaries will depend on our ability to obtain these governmental registrations or approvals. In addition, because of the regulatory issues related to foreign currency loans to, and foreign investment in, domestic PRC enterprises, we may not be able to finance the operations of our PRC subsidiaries by loans or capital contributions. We cannot assure you that we can obtain these governmental registrations or approvals on a timely basis, if at all.
The amount of cash denominated in RMB is approximately CNY921,630 (Equivalent to USD 127,667) as of March 31, 2024.
Off-balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders as of March 31, 2024.
Contractual Obligations
As a smaller reporting company, we are not required to provide the aforementioned information.
Critical Accounting Policies
Recent accounting pronouncements
In November 2023, the FASB issued ASU 2023-07, Improvement to Reportable Segment Disclosures (Topic 280). Asu 2023-07 aims to improve segment disclosures through enhanced disclosures about significant segment expenses. The standard requires all public entities, including those public entities that have a single reportable segment, shall disclose all of the following for each period for which an income statement is presented. However, reconciliations of balance sheet amounts for reportable segments to consolidated balance sheet amounts are required only for each year for which a balance sheet is presented. This standard will be effective for the Company in fiscal year of 2024. The Company is currently evaluating the impact of the additional disclosure requirements on the Company’s condensed consolidated financial statements.
The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s consolidated financial statements.
| -6- |
Item 3 Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 4 Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer, of the effectiveness of our disclosure controls and procedures as of March 31, 2024. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our chief executive officer concluded that our disclosure controls and procedures were not effective. The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (i) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (ii) inadequate segregation of duties and effective risk assessment; (iii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines; and (iv) lack of internal audit function due to the fact that the Company lacks qualified resources to perform the internal audit functions properly and that the scope and effectiveness of the internal audit function are yet to be developed. The aforementioned material weaknesses were identified by our chief executive officer in connection with the review of our financial statements as of March 31, 2024.
Management’s 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. The internal controls for the Company are provided by executive management’s review and approval of all transactions. Our internal control over financial reporting also includes those policies and procedures that:
| 1. | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; | |
| 2. | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management; and | |
| 3. | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
| -7- |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls.
As of March 31, 2024, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 2013 and SEC guidance on conducting such assessments. Based on such evaluation, the Company’s management concluded that, during the period covered by this Report, our internal control over financial reporting were not effective due to the presence of material weaknesses.
Management’s Remediation Initiatives
Since 2021, we engaged Dude Business Consultants Limited as an external consultant to assist with the identification and address of complex and proper accounting issues. Dude Business Consultants Limited has extensive experience on US listing and company reporting, including GAAP conversion, account consolidation and drafting of notes to accounts. Their professional team focus on national stock exchanges and OTC Markets listing, from corporate restructuring, supervision of listing timeline to strategy planning.
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we also plan to initiate the following series of measures to further strengthen the Company’s internal controls going forward:
| 1. | hire a reporting manager (“Internal Finance Manager”) who has the requisite relevant U.S. GAAP and SEC reporting experience and qualifications; |
| 2. | make an overall assessment on the current finance and accounting resources and hire additional accounting members with appropriate levels of accounting knowledge and experience; |
| 3. | streamline our accounting department structure and enhance our staff’s U.S. GAAP and SEC reporting requirements on a continuous basis through internal training provided by the Internal Finance manager; |
| 4. | participate in trainings and seminars provided by professional services firms on a regular basis to gain knowledge on regular U.S. GAAP / SEC reporting requirements updates; and |
| 5. | engage an external “Sarbanes-Oxley 404” consulting firm to help us implement Sarbanes-Oxley 404 internal controls compliance together with the establishment of our internal audit function. |
We anticipate that these initiatives will be at least partially, if not fully, implemented by the end of fiscal year 2023.
Changes in Internal Control over Financial Reporting:
There were no changes in our internal control over financial reporting during the nine months ending March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| -8- |
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We are not subjected to nor engaged in any litigation, arbitration or claim of material importance, and no litigation, arbitration or claim of material importance is known to us to be pending or threatened by or against our Company that would have a material adverse effect on our Company’s results of operations or financial condition. Further, there are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to our Company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
Insider Trading Arrangements
During the quarter ended March 31, 2024, none of our directors or officers adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities to satisfy the affirmative defense conditions of “Rule 10b5-1 trading arrangement” or any “non-Rule 10b5-1 trading arrangement”.
ITEM 6. Exhibits
| 31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer | |
| 32.1 | Section 1350 Certification of principal executive officer | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| -9- |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| YCQH Agricultural Technology Co. Ltd | ||
| (Name of Registrant) | ||
| Date: May 20, 2024 | ||
| By: | /s/ Wang Min | |
| Title: | Chief Executive Officer, President, Secretary, Treasurer, and Director (Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer) | |
| -10- |
EXHIBIT 31.1
CERTIFICATION
I, WANG MIN, certify that:
1. I have reviewed this quarterly report on Form 10-Q of YCQH Agricultural Technology Co. Ltd (the “Company”) for the quarter ended March 31, 2024;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control to be designed under our supervision, 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. | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 20, 2024 | By: | /s/ WANG MIN |
| WANG MIN | ||
Chief Executive Officer, President, Secretary, Treasurer, Director | ||
| (Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION
PURSUANT TO 18
U.S.C. SECTION 1350,
AS ADOPTED
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
In connection with the quarterly report of YCQH Agricultural Technology Co. Ltd (the “Company”) on Form 10-Q for the period ending March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), The undersigned hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: May 20, 2024 | By: | /s/ WANG MIN |
| WANG MIN | ||
Chief Executive Officer, President, Secretary, Treasurer, Director | ||
| (Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer) |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.