Item 1. Business
Background
Green Vision Biotechnology Corp. (formerly known as Vibe Wireless Corp., originally known as Any Translation Corp.), (the “Company”, “GVBT”), was incorporated under the laws of the State of Nevada on July 5, 2012. The Company was founded to be in the business of translation and interpretation. On November 12, 2015, the Company changed its name from Any Translation Corp. to Vibe Wireless Corp. On September 30, 2016, we changed our name from Vibe Wireless Corp. to Green Vision Biotechnology Corp.
On September 30, 2016, the Company filed a Certificate of Amendment with the Nevada Secretary of State (the “Nevada SOS”) whereby it amended its Articles of Incorporation to increase the Company’s authorized number of shares of common stock from 75 million to 750 million and forward stock split all of its issued and outstanding shares of common stock at a ratio of ten (10) shares for every one (1) share held. The Company’s Board of Directors approved this amendment on September 30, 2016. This stock split has been retroactively applied to the financial statements.
On the same date, September 30, 2016, the Company filed Articles of Merger with the Nevada SOS whereby it entered into a statutory merger with its wholly-owned subsidiary, Green Vision Biotechnology Corp. pursuant to Nevada Revised Statutes 92A.200 et. seq. The effect of such merger is that the Company is the sole surviving entity and changed its name to “Green Vision Biotechnology Corp.”
The investment transaction under the share exchange agreements and contractual agreements as described below (collectively the “Transaction Agreements”) was entered into, between each of the Shareholders of Lutu International Biotechnology Limited (“Lutu International”), a company incorporated under the laws of Cayman Islands and GVBT (the “Investment Transaction”) on May 12, 2017. As a result of closing the Investment Transaction, GVBT acquired part of the shares of Lutu International and assumed management of Lutu International and all its direct and indirect subsidiaries (“the Lutu Group”).
On May 12, 2017, GVBT entered into a share exchange agreement with Harcourt Capital Limited (“Harcourt”), a limited company incorporated in the British Virgin Islands, which holds 6% of the issued and outstanding shares of Lutu International; and Woodhead Investments Limited (“Woodhead”), a limited company incorporated in the British Virgin Islands, which holds 5% of the issued and outstanding shares of Lutu International (the “Minority Interest Exchange Agreement”). Under the Minority Interest Exchange Agreement, Woodhead agreed to transfer GVBT a total of 5% of the issued and outstanding shares of Lutu International. In consideration, GVBT agreed to grant Woodhead, or persons designated by Woodhead, a right to receive a total of 5 million shares of GVBT’s common stock. Under the Minority Interest Exchange Agreement, Harcourt agreed to transfer to GVBT a total of 6% of the issued and outstanding shares of Lutu International. In consideration, GVBT agreed to grant Harcourt, or persons designated by Harcourt, a right to receive a total of 6 million shares of GVBT’s common stock. The transactions under the Minority Interest Exchange Agreement were completed on May 12, 2017.
Able Lead, an 89% shareholder of Lutu International, has an outstanding loan of $4.43 million denominated in Renminbi (“RMB”) owed to an unrelated third party with its maturity date on January 22, 2018 (the “Outstanding Loan”). Able Lead is negotiating an extension of the Outstanding Loan to 2019 with the third party creditor. Shares of Lutu International held by Able Lead were offered by Able Lead as collateral to secure repayment of the Outstanding Loan (the “Security”).
On May 12, 2017, GVBT entered into a share exchange agreement (the “Majority Interest Exchange Agreement”) with Able Lead, the 89% shareholder of Lutu International. Under the Majority Interest Exchange Agreement, Able Lead agreed to enter into a series of contractual arrangements with GVBT (collectively, the “Contractual Arrangements”) (as described below), in which GVBT assumed management control of the Lutu Group. Able Lead further agreed to deliver the shares of Lutu International to GVBT once the Outstanding Loan is fully repaid. In consideration, GVBT agreed to issue and deliver a total of 89 million shares of GVBT’s common stock to an escrow agent (issued in the name of the escrow agent or its nominee) (the “Escrow Shares “). The Escrow Shares are held in escrow for a period of one year or such period of time to be agreed by GVBT and Able Lead upon the execution of the Majority Interest Exchange Agreement. Conditional upon the full repayment of the Outstanding Loan and the release of the Security, the Escrow Shares shall be released to Able Lead in exchange for the delivery of a total of 89% of the issued and outstanding shares of Lutu International by Able Lead to GVBT. In the event that Able Lead fully repays the Outstanding Loan and causes the release of the Security, then the Escrow Shares shall be delivered to Able Lead. In the event that Able Lead cannot fully repay the Outstanding Loan (within a period of one year, or such period of time to be agreed by GVBT and Able Lead) and cause the release of the Security, then the Escrow Shares shall be delivered to transfer agent for cancellation. Unless otherwise expressly agreed in writing by GVBT and Able Lead, the Majority Interest Exchange Agreement shall be automatically terminated upon the termination of any of the agreements in the Contractual Arrangements described as below. The transactions under the Majority Interest Exchange Agreement were completed on May 12, 2017.
Pursuant to an escrow agreement (the “Escrow Agreement”) entered into between Booth Udall Fuller, PLC (the “Escrow Agent”) and GVBT on May 12, 2017, the Escrow Shares shall be held by Booth Udall Fuller, PLC for a year following the execution of the Majority Interest Exchange Agreement. The Escrow Shares shall not be subject to any lien, attachment, or any other judicial process of any creditor of GVBT, and shall be held and disbursed solely for the purposes and in accordance with the terms of the Majority Interest Exchange Agreement.
On May 12, 2017, GVBT entered into the Contractual Agreements with Lutu International and/or Able Lead. Upon execution of the Contractual Arrangements, GVBT assumed management of Lutu International and its subsidiaries (the “Lutu Group”) and received economic benefits which includes the right to receive the expected residual returns and and/or obligation to absorb expected loss from the Lutu Group. Each agreement in the Contractual Arrangements constitutes valid and binding obligations of the parties of such agreements and is enforceable and valid in accordance with the laws of Cayman Islands. All agreements executed by Lutu International were duly approved by its board of directors and the Shareholders of Lutu International.
Consulting Services Agreement
Pursuant to the exclusive consulting services agreement entered into between GVBT and Lutu International on May 12, 2017, GVBT has the exclusive right to provide to the Lutu Group general business operation services, including advice and strategic planning, as well as consulting services related to the technological research and development of bio-fertilizers. Further, GVBT owns the intellectual property rights developed or discovered through research and development, in the course of providing the consulting services, or derived from the provision of the consulting services. In consideration, Lutu International pays an annual consulting service fees to GVBT in the amount equivalent to all of Lutu International’s net profits for the relevant financial year. The term of this consulting service agreement is five (5) years from its effective date and may be terminated upon GVBT’s written confirmation prior to the expiration of this agreement.
Unless otherwise expressly agreed in writing by GVBT and Able Lead, the Consulting Services Agreement shall be automatically terminated upon the termination of any of the agreements in the Contractual Arrangements or the Majority Interest Exchange Agreement.
Operating Agreement
Pursuant to the operating agreement entered into between GVBT, Lutu International and Able Lead on May 12, 2017, GVBT agreed to provide guidance and instructions on the Lutu Group’s daily operations, financial management and employment issues. Able Lead agreed to designate candidates recommended by GVBT as their representatives on the boards of directors of each member of the Lutu Group. GVBT has the right to appoint senior executives of each member of the Lutu Group. In addition, GVBT agreed to guarantee the Lutu Group’s performance under any agreements or arrangements relating to the Lutu Group’s business arrangements with any third party. In consideration, Lutu International agrees that it will not, and will cause the Lutu Group not to, without the prior consent of GVBT, engage in any transactions that could materially affect their respective assets, liabilities, rights or operations, including but not limited to, incurrence or assumption of any indebtedness, sale or purchase of any assets or rights, incurrence of any encumbrance on any of their assets or intellectual property rights in favor of a third party or transfer of any agreements relating to their business operation to any third party. The term of this operating agreement is five (5) years from its effective date and may be extended and terminated only upon GVBT’s written confirmation prior to the expiration of this agreement.
Unless otherwise expressly agreed in writing by GVBT and Able Lead, the Operating Agreement shall be automatically terminated upon the termination of any of the agreements in the Contractual Arrangements or the Majority Interest Exchange Agreement.
Proxy Agreement
Pursuant to the proxy agreement entered into between Able Lead, Lutu International, and GVBT on May 12, 2017, Able Lead agreed to irrevocably grant a person to be designated by GVBT the right to exercise its voting rights and other rights, including the attendance of, and the voting at the shareholders’ meetings of Lutu International for and on behalf of Able Lead (or the signing of written resolutions in lieu of such meetings) in accordance with applicable laws and its articles of association, including but not limited to the appointment and voting for the directors and chairman of the board as the authorized representative of Able Lead to exercise controlling power in the Lutu Group. The proxy agreement may be terminated by joint consent of the parties or upon 7-day written notice from GVBT.
Changes Resulting from the Investment Transaction
The closing of the Investment Transaction occurred on May 12, 2017, resulting in a change of control of GVBT. Prior to closing of the Investment Transaction, GVBT had a total of 60,790,000 shares of common stock issued and outstanding. As a result of the closing of the Investment Transaction, GVBT now has a total of 160,790,000 shares of its common stock issued and outstanding, of which 60,790,000 shares, or approximately 37.8%, are owned by the previous existing shareholders of GVBT, with the balance of 100,000,000 shares, or approximately 62.2%, owned by the previous shareholders of Lutu International, with certain shares held in escrow pursuant to the Escrow Agreement.
Following the closing of the Investment Transaction, GVBT began carrying on the business of the Lutu Group. The Lutu Group, with its operation primarily located in the Shanxi Province of China, is engaged in the biotechnology industry, in particular, the production and distribution of bio-fertilizers. Revenues of the Lutu Group are currently generated from China.
Changes to the Board of Directors and Officers
Simultaneous with the closing of the Investment Transaction, there was a change in the officers and directors of GVBT. As authorized by the bylaws, the existing director of GVBT, Mr. Ma Wai Kin, appointed two (2) additional members to the Board of GVBT. Such members are Mr. Lam Ching Wan (also known as William Lam) and Mr. Leung Kwong Tak (also known as Dr. Michael Leung). Mr. Ma also appointed Mr. William Lam as GVBT’s Chief Executive Officer and Mr. Lo Kwok Leung as GVBT’s Chief Financial Officer. Mr. Lo Kwok Leung is not related to Dr. Michael Leung.
All members of the Board shall hold their respective offices for a term of one year from their respective dates of appointment, or until the election and qualification of their successors, and thereafter to resign as a director of GVBT. In accordance with the bylaws, officers are elected by the board of directors and serve at the discretion of the board of directors.
Accounting Treatment
The Investment Transaction was accounted for as a reverse-merger and recapitalization. For financial reporting purposes, Lutu International is the acquirer and GVBT is the acquired company. After completion of the transaction, the assets, liabilities, operations results and cash flow of GVBT that will be reflected in the historical consolidated financial statements prior to the Investment Transaction will be those of Lutu International and its subsidiaries and will be recorded at the historical cost basis of Lutu International and its subsidiaries. Number of shares deemed to be outstanding for the period from January 1, 2018 to the acquisition date will be reflected in the balance of the common stock and paid in capital. The Company changed its fiscal year ended from January 31 to December 31.
Tax Treatment and SEC Filer Status: Small Business Issuer
The Investment Transaction is intended to constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), or such other tax free reorganization exemptions that may be available under the Code. Immediately following the Investment Transaction, the filer status of GVBT will be a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K, as promulgated by SEC.
Item 1A.
Item 1A. Risk Factors
Smaller reporting companies are not required to provide the information required by this item.
Item 1B.
Item 1B. Unresolved Staff Comment
None
Item 2.
Item 2. Properties
We acquired a piece of industrial land in Jinzhong city in Shanxi Province in 2011 as a manufacturing plant. The industrial land use right lasts until 2054. The size of the manufacturing plant is 34,256 square meters. We have completed the phase 1 facilities with an annual production capacity of 100,000 tons per annum. The facilities were tested and adjusted, and are now ready for full scale production.
According to the laws of the PRC, the government owns all the land in the PRC. Companies or individuals are authorized to possess and use the land only through the land use rights granted by the government. The land use rights represent cost of the rights to use the land in respect of properties located in the PRC.
Lutu currently owns the land use right of the production plant. The expiry date of the land use right is May 8, 2054. The building and land use right are under the name of "Shanxi Lutu" or Shanxi Green Biotechnology Industry Limited. Regarding the cost of the land use right and building, please refer to [Audit Report and]: the cost of Land use rights is USD 1,170,388 and Buildings are USD 2,907,836. The address of Lutu’s production plant is Chang Ning Town West, Chang Ning Village, Yuci District, Jinzhong City, Shanxi Province, China.
Item 3.
Item 3. Legal Proceedings
Civil case with Mr. Yao Gui Mu
Yao Gui Mu (“the Plaintiff”), former operation manager of the subsidiary in Shanxi, Shanxi Green Biotechnology Industry Company Limited (“the Shanxi Subsidiary”), brought a lawsuit against the Shanxi Subsidiary, in the District People’s Court of Jin Zhong City, Yu Ci District. The subject dispute of the lawsuit concerns an unsettled current account balance of $141,550 (RMB900,000) which was claimed to be a loan advanced to the Company by the Plaintiff. Together with the subject dispute, the Plaintiff also claimed the relevant interest was RMB513,100 calculated from November 6, 2012 to August 15, 2017 with 1% monthly interest rate. The Company’s PRC lawyer had submitted a Statement of Defense on November 23, 2017 to The District People’s Court of Yuci District, Jin Zhong City (“the Court”). A court hearing was held on December 5, 2017. Upon the request by the Court, Shanxi Subsidiary provided supplemental evidence to the Court on 16 January 2018. The second hearing was held on September 19, 2018.
The District People’s Court of Jin Zhong City, Yu Ci District released the civil judgement decision (2017) 晋0702 民初3879号, that there were not sufficient evidence provided by the Plaintiff for the dispute, and the Court did not support for the claim of loan and related interest against the Shanxi Subsidiary. The judgement decision dated on August 31, 2018.
Yao Gui Mu (“the Appealer”) appeal for the decision to the Intermediate People’s Court of Shanxi Province, Jin Zhong City. On May 10, 2019, the Intermediate People’s Court of Shanxi Province, Jin Zhong City released civil judgement decision (2019) 晋07民終355号, that due to the fact that there was a second hearing held on September 19, 2018 after the judgement decision made on August 31, 2018, which was a severe disorder of procedures. Therefore, the civil judgement decision (2017) 晋0702 民初3879号 was revoked and the case was put to re-trial, which was subsequently carried out on October 16, 2019.
On December 16, 2019, the Court released the civil judgement decision (2019) 晋0702 民初3543号之一, that the related dispute loan was being a criminal case under police investigation. Before the police formed a decision, the Court could not confirm that the civil case was under the district court’s judgement jurisdiction. Therefore, the lawsuit against the Shanxi Subsidiary was rejected.
For the relevant interest of RMB513,100 claimed by the Plaintiff, there is no evidence showing that it is more likely than not that the Company will be liable for the said interest. Hence, no provision was made as at December 31, 2018.
Criminal investigation regarding a potential fraud with one of its former customers
Management of the Company suspects that there was a potential fraud committed in the sales made to one of its previous customers. Management reported to the local police of Yuci District, Jinzhong City, Shanxi Province, China about the said potential fraud. The Bureau of Public Security of Yuci District officially undertook the case and initiated investigation procedures on 11 September 2017. Management has been informed that the case is currently still under criminal investigation by relevant authorities.
Criminal investigation against one of GVBT’s former employee
Management of the Company suspects that one of its former senior staff may have committed the offence of “unlawfully taking possession of company property through taking advantage of his position” under his employment with the Company. Management reported to the local police of Yuci District, Jinzhong City, Shanxi Province, China about the said potential fraud on 10 October, 2017. The Bureau of Public Security of Yuci District officially undertook its case and initiated investigation procedures on 28 January 2018. Management has been informed that the case is currently still under criminal investigation by relevant authorities in China.
Besides the disclosure stated above, management is not aware of any other legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.
Item 4.
Item 4. Mine Safety Disclosure
Not Applicable
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
There is a limited public market for our common shares. Trading in stocks quoted on the OTC Bulletin Board is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects. We cannot assure you that there will be a market in the future for our common stock.
OTC Bulletin Board securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
As of December 31, 2018, no shares of our common stock have traded on an exchange or on the OTC Marketplace. Our common stock is quoted on the OTC Bulletin Board under the symbol “GVBT.”
Number of Holders
As of December 31, 2018, 160,790,000 issued and outstanding shares of common stock were held by a total of 10 shareholders of record.
Dividends
No cash dividends were paid on our shares of common stock during the fiscal years ended December 31, 2018 and 2017. We have not paid any cash dividends since our inception and do not foresee declaring any cash dividends on our common stock in the foreseeable future.
Recent Sales of Unregistered Securities
None.
Purchase of our Equity Securities by the Company and any of our Officers and Directors
None.
Other Stockholder Matters
None.
Item 6.
Item 6. Selected Financial Data
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement for Forward-Looking Statements
This discussion and analysis of our financial condition and results of operations includes “forward-looking” statements that reflect our current views with respect to future events and financial performance. We use words such as “expect,” “anticipate,” “believe,” and “intend” and similar expressions to identify forward-looking statements. You should be aware that actual results may differ materially from our expressed expectations because of risks and uncertainties inherent in future events and you should not rely unduly on these forward-looking statements. We disclaim any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. Reference in the following discussion to “our”, “us” and “we” refer to the operations of Green Vision Biotechnology Corp. and its subsidiaries (“We”), except where the context otherwise indicates or requires.
The following discussion of our financial condition and results of operations should be read in conjunction with the audited financial statements and the notes to the audited financial statements included in this annual report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
Corporate Background
Green Vision Biotechnology Corp. (the “Company”), formerly known as Vibe Wireless Corp., also formerly known as Any Translation Corp., was incorporated under the laws of the State of Nevada on July 5, 2012. We were founded to be in the business of translation and interpretation. The Company undertook translation and interpretation projects for various fields from business, economics, to science issues. The Company later adopted a business plan to pursue business opportunities in the global telecommunications industry.
On September 2, 2015, a change in control of the Company took place by virtue of the Company's largest shareholder and sole officer and director at that time, selling 4,000,000 shares of the Company's common stock to Forestbay Capital Partners II, LLC, a Delaware limited liability company. Such shares represented 65.8% of the Company's total issued and outstanding shares of common stock. As part of the sale of the shares, Forestbay Capital Partners arranged with the former officer and director, prior to his resignation as the sole officer and director of the Company Board, to appoint Mr. Edward Mooney as the sole officer and director of the Company. Mr. Mooney is the Manager of Forestbay Capital Partners II, LLC.
On November 12, 2015, we changed our name to Vibe Wireless Corp in connection with merging with our wholly-owned subsidiary. This name change and our ticker symbol change was acknowledged by FINRA and effected in the market on November 23, 2015.
The Company was originally incorporated under the laws of the State of Nevada on July 5, 2012 as Any Translation Corp.
On September 30, 2016, the Company filed a Certificate of Amendment with the Nevada Secretary of State (the “Nevada SOS”) whereby it amended its Articles of Incorporation to increase the Company’s authorized number of shares of common stock from 75 million to 750 million and forward split all of its issued and outstanding shares of common stock at a ratio of ten (10) shares for every one (1) share held. The Company’s Board of Directors approved this amendment on September 30, 2016.
On September 30, 2016, the Company filed Articles of Merger with the Nevada SOS whereby it entered into a statutory merger with its wholly-owned subsidiary, Green Vision Biotechnology Corp. pursuant to Nevada Revised Statutes 92A.200 et. seq. The effect of such merger is that the Company is the surviving entity and changed its name to “Green Vision Biotechnology Corp.”
On September 30, 2016, the Company filed an Issuer Company-Related Action Notification Form with FINRA requesting that the aforementioned forward split and name change be effected in the market. The Company also requested that its ticker symbol be changed to “GVBT”. This name change and our ticker symbol change was acknowledged by FINRA and effected in the market on November 27, 2016.
As disclosed in our Current Report on Form 8-K dated May 12, 2017 there was a change in our management. Effective May 3, 2017, the Company accepted the resignation of Edward P. Mooney as the sole officer of the Company and as the sole member of the Company’s board of directors. Simultaneously, Mr. Ma Wai Kin, was elected as the Company’s President, Secretary, Treasurer and a member of the Board of Directors.
Executive Summary
In the year ended December 31, 2018, our revenue was $99,595 decreased 26.3% from $135,126 for the year ended December 31, 2017.
·
Selling, General and Administrative, and other operating expenses for the year ended December 31, 2018 decreased 45.8% to $1,080,180 compared to $1,994,053 for the same period in 2017.
·
Net Loss for the year ended December 31, 2018 decreased 19.1% to $1,362,122 compared to $1,683,170 for the same period in 2017.
Results of Operations for the Years Ended December 31, 2108 and 2017
The following table sets forth the comparison of the audited consolidated statements of operations data for the year ended December 31, 2018 and 2017 and should be read in conjunction with our financial statements and the related notes appearing elsewhere in this document.
Results of Operations
Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue our operation.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Result of Operations for the Years ended December 31, 2018 and 2017
Revenue was $99,595 for the year ended December 31, 2018 (“the FY 2018”), decreased by $35,531, or 26.3% from $135,126 for the year ended December 31, 2017 (“the Comparable Year”). The decrease in revenue during the FY2018 as compared to the Comparable Year was the result of the restrictions on our production capacity as a result of the enforcement on new environmental regulations over industrial production by coal-fired boilers by local authorities in Shanxi. In this year, our company has conducted various field trials in Guangxi, Heilongjiang, and Yunnan in order to promote our products.
Cost of sales was decreased by $3,688, or 4.5% from $81,871 in the Comparable Year to $78,183 in the FY2018. The decrease was due to the decrease in production corresponding with the decrease in the sales revenue. In terms of percentage of revenue, cost of sales was 78.5% in the FY2018 as compared to 60.6% in the Comparable Year. The decrease in cost of sales with the increase in percentage to revenue, was due to the significant decrease in the production level which worsen the mass of production effect.
Gross profit was decreased by $31,843, or 59.8% from $53,255 in the Comparable Year to $21,412 in the FY2018. The decrease reflected the correlation in reduction of revenue. In terms of percentage of revenue, the gross profit percentage was decreased to 21.5% for the FY2018 as compared to 39.4% for the Comparable Year. The decrease was primarily due to the significant drop in the sales revenue with resulted to the decrease in the production level.
Selling expenses were decreased by $23,559, or 45.2%, to $28,564 in the FY2018 from $52,123 in the Comparable Year. In terms of percentage of revenue, the rates were 28.7% in the FY2018 compared to 38.6% in the Comparable Year. The decrease is primarily due to the decrease of testing expenses and shipping and transportation expenses which were correlated to the decrease in sales.
General and administrative expenses were decreased by $890,314, or 45.8% to $1,051,616 in the FY2018 from $1,941,930 in the Comparable Year. The decrease is primarily due to the provision for doubtful debts of $274,294 (including bad debt reversal of negative $272) in the FY2018 compared to $865,942 in the Comparable Year, and offset the increase of Inventory provision of $230,372 in the FY2018. Excluding these factors, there was a decrease of $298,666 compared to the Comparable Year.
The following is a summary of general and administrative expenses for the years ended December 31, 2018, and 2017.
Consulting fees were decreased by $68,596 or 44.1%, to $86,884 in the FY2018, from $155,480 in Comparable Year, owing to the engagement of external consultants to improve the Company’s operating activities in the Comparable Year.
Our salary and payroll expenses were decreased to $162,917 in the FY2018, as compared to $226,418 in the Comparable Year. We anticipate that salary and payroll expenses will rise in future periods as it becomes necessary to increase our staff in order to enhance our management quality for the listing requirement and to increase our production activities.
Professional fees were decreased by $51,941, or 36.0%, from $144,426 in Comparable Year to $92,485 in the FY2018.
Travel and entertainment expenses were decreased by $49,210, or 42.7%, from $115,227 in Comparable Year to $66,017 in FY2018. The decrease of travel and entertainment expenses is primarily due to the slowdown of the commercial activities.
Research and Development expenses were decreased to $Nil in the FY2018 from $49,788 in the Comparable Year.
Provision for doubtful debts was decreased to $43,922 (including bad debt reversal of negative $272) in the FY2018 from $865,942 in Comparable Year. The decrease was due to the doubtful allowance to the accounts receivable of one major customer provided in the FY2107. The Company is taking all possible action to collect the overdue receivable in the coming year.
Provision for inventory was increased to $230,372 in the FY2018 from $Nil in Comparable Year. The increase in provision was due to the inventory turnover slow down resulted by the sales decline in the FY2018.
Depreciation and amortization expenses were increased by $16,400, or 6.8%, from $242,401 in Comparable Year to $258,801 in the FY2018.
Other expenses include items such as office expenses, software related costs, impairment of property, plant and equipment, telephone and a variety of other miscellaneous expenses. None of these expenses alone changed significantly and the difference was $32,030, or 22.5% reduction from $142,248 in Comparable Year to $110,218 in the FY2018.
We anticipate that we will incur higher general and administrative expenses as a public company. We expect that our professional fees, cost of transfer agent, investor relations costs and other stock related costs will increase.
We also anticipate that selling, general and administrative expenses will concurrently increase with our increased activity in the future but will not increase in the same proportion to that of revenue.
Our loss from operations was narrowed down significantly by $882,030 or 45.4%, to negative $1,058,768 in the FY2018, from negative $1,940,798 in Comparable Year.
Non-operating income (expenses) decreased by $560,982, or 217.7% to expenses of negative $303,354 in the FY2018, from income of $257,628 in Comparable Year, of which mainly due to the other income decrease $225,708 from $263,983 in Comparable Year to $38,275 in the of FY2018, and due to the other expenses increased $335,125 form negative $3,552 in Comparable Year to negative $338,677 in the of FY2018.
The net loss attributed to the Company further decreased by $321,048, or 19.1% to negative $1,362,122 in the FY2018, as compare to negative $1,683,170 in Comparable Year.
Liquidity and Capital Resources
The Company’s liquidity and capital is dependent on whether the Company is capable of generating its revenues and increasing its capital for the development and expansion of its business.
Management plans to support the Company’s operation and its business strategy by raising funds through public and private offerings and relying on officers and directors to perform essential management functions with minimal compensation. If we do not raise all of the money we need from a public offering, we will have to find alternative sources, such as a private placement of securities, or loans from our officers, directors or others. The loans are likely to be unsecured, non-interest bearing and repayable at demand.
Moreover, management has actively taken steps to revise its operating and financial needs. Management believes that the Company’s current and available capital resources will allow it to continue its operations throughout this fiscal year.
Working capital
At December 31, 2018, we had a working capital deficit of $9,596,914, as compared to a working capital deficit of $9,029,045 at December 31, 2017. Of the working capital deficit at December 31, 2018, $9,361,322 was amount due to related parties and shareholder. Excluding the amounts due to related parties and shareholder, we would have had a negative working capital of $235,592 at December 31, 2018. As comparison, for the working capital deficit at December 31, 2018, $9,196,762 was amount due to related parties and holding. Excluding the amounts due to related parties and holding company, we would have had a working capital surplus of $167,717 at December 31, 2017. The amounts due to related parties and shareholder are unsecured, interest free and repayable on demand.
Operating activities
During the year ended December 31, 2018, operating activities used cash in operations of $314,565, and for the comparable year ended December 31, 2017, operating activities used cash in operations of $279,609. The use of cash in operating activities for the year ended December 31, 2018 was mainly derived from a net loss of $1,362,122 with non-cash items of $250,556 ($226,187 plus $24,369) in depreciation and amortization, $230,372 in provision of inventory, $333,956 in impairment of fixed assets, $1,419 in impairment of constriction in progress, $44,194 in bad debt provision and $272 in bad debt reversal; moreover, there was an increase in cash of $26,922 in other receivables; an increased in cash of of $48,321 in inventory and an increase in cash of $44,577 in amount due to related parties, which were offset by a decrease in cash of $10,177 in accounts receivables; a decrease in cash of $2,028 in accounts payables; and a decrease in cash of $8,038 in other payables. As comparison, the use of cash in operating activities for the comparable year ended December 31, 2017 was mainly derived from a net loss of $1,683,170 with non-cash items of $264,526 ($240,526 plus $24,000) in depreciation and amortization, and $865,942 in provision of doubtful debt; moreover, there was an increase in cash of $63,585 in other receivables; and a net increase in cash of $577,449 ($2,067,646 minus $1,490,197) in amount due from/to related parties, which were offset by a decrease in cash of $67,568 in accounts receivables; a decrease in cash of $33,869 in inventories; a decrease in cash of $119,634 in accounts payables; and a decrease in cash of $142,081 in other payables.
Investing Activities
During the year ended December 31, 2018, investing activities used cash of $613 in property, plant and equipment; and for the comparable year ended December 31, 2017, investing activities used cash of $1,936 in property, plant and equipment. The change in cash used was due to the decrease in investment on purchases of property, plant and equipment.
Financing Activities:
During the year ended December 31, 2018, financing activities provided cash of $293,603; and for the comparable year ended December 31, 2017, financing activities provided cash of $198,516. The change in cash provided by financing activities was derived from the changes in the amounts due to our shareholder.
As at December 31, 2018, net cash and cash equivalents balance was $9,114 as compared to balance $38,931 as at December 31, 2017.
As of December 31, 2018, stockholder’s equity was negative $6,405,098, compared to a negative equity of $5,092,072 at December 31, 2017.
In the current operation, the source of fund was provided by loans from directors and shareholders. In the event the directors and shareholders do not continue to support the operation, the Company could be short of funds and may not be able to operate any longer. The amounts due to related parties and director are interest-free loans. These loans are unsecured and have no fixed repayment terms.
Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through a combination of our existing funds, loans from third parties, other debt facilities, or further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.
Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to fund our operations over the next three months. We have no lines of credit or other bank financing arrangements. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a growing business; and (ii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to the shareholdings of our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. We will have to raise additional funds in the next twelve months in order to sustain and expand our operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock. We have and will continue to seek to obtain short-term loans from our directors, although no future arrangement for additional loans has been made. We do not have any agreements with our directors concerning these loans. We do not have any arrangements in place for any future equity financing.
Since 2017, local government of Jinzhong City, Shanxi Province, China (where Shanxi Lutu and our production plant is located) has promulgated a new set of environmental regulations restricting the use of coal-fired boilers in factories. Since coal-powered generators were used in our production plant, our production activities in 2018 were restricted to a certain extent.
We cannot ensure that we can comply with the new environmental regulations in time. If that is the case, our production and our production capacity may be reduced as a result. This will affect our ability to generate income and to meet the demand of our customers, which in turn could have a material adverse effect on our financial condition and results of operations.
Due to the enforcement on new environmental regulations over industrial production by coal-fired boilers by local authorities in Shanxi, the Company’s production was restricted to a certain extent in 2017. In order to fully comply with the new environmental regulations in place, management of the Company had planned to carry our rectification work and expected that the rectification work could be completed by mid of 2018 and full-scale production might resume in the second half of 2018. However, due to the shortage of funding to carry out the rectification work on our coal-powered generators, our production activities were restricted since second quarter in 2018. Our production and our production capacity was reduced as a result, significantly affected our ability to generate income and to meet the demand of our customers, which in turn had a material adverse effect on our financial condition and results of operations. The management had decided to maintain our business by way of sub-contracting or assignment of the production. Furthermore, the management had further researched for other business opportunity to utilize the reduced capacity of the property and equipment, in order to make better the worsened revenue.
Off-Balance Sheet Arrangements
As of the date of this Annual Report, the Company does not have any off-balance sheet arrangements, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors, as of December 31, 2018 and 2017.
Going Concern
The independent auditors' report accompanying our December 31, 2018 financial statements filed in this Form 10-K contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
Critical Accounting Policies
The U.S. Securities and Exchange Commission (“SEC”) recently issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR 60”), suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the SEC defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our most critical accounting policies include: inventory valuation, which affects cost of sales and gross margin; policies for revenue recognition, allowance for doubtful accounts, and stock-based compensation. The methods, estimates and judgments we use in applying these most critical accounting policies have a significant impact on our results we report in our consolidated financial statements.
Impairment of Long-Lived Assets
We account for impairment of property, plant and equipment in accordance with FASB ASC 360. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost to dispose. During the reporting years, there was no impairment loss incurred. Competitive pricing pressure and changes in interest rates, could materially and adversely affect our estimates of future net cash flows to be generated by our long-lived assets.
Subsequent Events
On July 30, 2019, the Company cancelled 89,000,000 shares of common stock, par value $.001 per share, and re-issued them to Able Lead Holdings Limited. The issuance was done pursuant to Section 4(a)(2) of the Securities Act of 1933. as it was a non-public offering. On May 12, 2017, the Company had placed the 89,000,000 shares into escrow with Booth Udall Fuller PLC, pending repayment of a loan and discharge of shares of Lutu International by Able Lead Holdings Limited. Full repayment of such was made on February 27, 2019. Therefore, the 89,000,000 shares were returned from escrow and cancelled. Then they were re-issued to Able Lead Holdings Limited.
On September 26, 2019, the Company has resolved to discontinue the operation of the subsidiary company, Shenzhen Qianhai Lutu Supply Chain Management Company Limited. According to the PRC Company Law and related regulation required, a de-registration committee has been properly formed and the de-registration procedures are undergoing accordingly. On November 11, 2019, the Shenzhen taxation bureau has released the taxation completion certificate, and on December 11, 2019, the Shenzhen market supervision administration has released the notice that the de-registration of Shenzhen Qianhai Lutu Supply Chain Management Company Limited is in process. On April 7, 2020, the Company received notice that the de-registration of Shenzhen Qianhai Lutu Supply Chain Management Company Limited had been completed.
Other than as described, management has evaluated all activities and concluded that there was no other subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements.
All subsequent events are being disclosed in the Company’s periodic reports that are currently in preparation for filing. Such events shall be described in detail therein.
Off-Balance Sheet Arrangements
The Company does not have off-balance sheet arrangements as of December 31, 2018 and 2017.
New Accounting Pronouncements
See Note 4 to consolidated financial statements included in Item 8, Financial Statements, of this Annual Report on Form 10-K
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 8.
Item 8. Financial Statements and Supplementary Data
Attached hereto and filed as part of this Annual Report on Form 10-K are our Consolidated Financial Statements, beginning on page.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934, the Company’s principal executive officer and principal financial officer have evaluated the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by the Annual Report on Form 10-K. Based on this evaluation, these officers have concluded that as of the end of the period covered by the Annual Report on Form 10-K, our disclosure controls and procedures were effective and were adequate to insure that the information required to be disclosed by the Company in reports it files or submits under the Exchange Act were recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms.
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting is supported by written policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations which may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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 conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018. In making this assessment, management used the framework set forth in the report entitled “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission, or (“COSO”). The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was ineffective as of December 31, 2018.
In order to improve the existing internal control especially on the control over assurance regarding prevention and timely detection of unauthorized usage and disposition of the Company’s assets, GVBT top management has reviewed and updated the existing company chop access policy and Delegation of Authority (DOA) for approval process. GVBT management has reviewed all key processes to establish adequate segregation of duties based on the roles and responsibilities. The Delegation of Authority table is reviewed and updated to ensure that transactions are approved properly before processing.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.
Regulatory Statement
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. As a “Smaller Reporting Company” management’s report was not subject to attestation by the Company’s registered public accounting firm.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
The following table sets forth the name, age, and position of our directors and our executive officers as of December 31, 2018. Each director holds office (subject to our By-Laws) until the next annual meeting of shareholders and until such director’s successor has been elected and qualified. Each executive officer holds his office until he resigns, is removed by the board of directors, or his successor is elected and qualified, subject to applicable employment agreements.
Significant Employees
As of December 31, 2018, we have 21 full time employees.
Family Relationships
There are no family relationships between any of our directors and executive officers. There have been no events under any bankruptcy act, no criminal proceedings and no judgments, orders or decrees material to the evaluation of the ability and integrity of any director or executive officer of the Company during the past five years.
Involvement in Certain Legal Proceedings
Civil case with Mr. Yao Gui Mu
Yao Gui Mu (“the Plaintiff”), former operation manager of the subsidiary in Shanxi, Shanxi Green Biotechnology Industry Company Limited (“the Shanxi Subsidiary”), brought a lawsuit against the Shanxi Subsidiary, in the District People’s Court of Jin Zhong City, Yu Ci District. The subject dispute of the lawsuit concerns an unsettled current account balance of $141,550 (RMB900,000) which was claimed to be a loan advanced to the Company by the Plaintiff. Together with the subject dispute, the Plaintiff also claimed the relevant interest was RMB513,100 calculated from November 6, 2012 to August 15, 2017 with 1% monthly interest rate. The Company’s PRC lawyer had submitted a Statement of Defense on November 23, 2017 to The District People’s Court of Yuci District, Jin Zhong City (“the Court”). A court hearing was held on December 5, 2017. Upon the request by the Court, Shanxi Subsidiary provided supplemental evidence to the Court on 16 January 2018. The second hearing was held on September 19, 2018.
The District People’s Court of Jin Zhong City, Yu Ci District released the civil judgement decision (2017) 晋0702 民初3879号, that there were not sufficient evidence provided by the Plaintiff for the dispute, and the Court did not support for the claim of loan and related interest against the Shanxi Subsidiary. The judgement decision dated on August 31, 2018.
Yao Gui Mu (“the Appealer”) appeal for the decision to the Intermediate People’s Court of Shanxi Province, Jin Zhong City. On May 10, 2019, the Intermediate People’s Court of Shanxi Province, Jin Zhong City released civil judgement decision (2019) 晋07民終355号, that due to the fact that there was a second hearing held on September 19, 2018 after the judgement decision made on August 31, 2018, which was a severe disorder of procedures. Therefore, the civil judgement decision (2017) 晋0702 民初3879号 was revoked and the case was put to re-trial, which was subsequently carried out on October 16, 2019.
On December 16, 2019, the Court released the civil judgement decision (2019) 晋0702 民初3543号之一, that the related dispute loan was being a criminal case under police investigation. Before the police formed a decision, the Court could not confirm that the civil case was under the district court’s judgement jurisdiction. Therefore, the lawsuit against the Shanxi Subsidiary was rejected.
For the relevant interest of RMB513,100 claimed by the Plaintiff, there is no evidence showing that it is more likely than not that the Company will be liable for the said interest. Hence, no provision was made as at December 31, 2018.
Criminal investigation regarding a potential fraud with one of its former customers
Management of the Company suspects that there was a potential fraud committed in the sales made to one of its previous customers. Management reported to the local police of Yuci District, Jinzhong City, Shanxi Province, China about the said potential fraud. The Bureau of Public Security of Yuci District officially undertook the case and initiated investigation procedures on 11 September 2017. Management has been informed that the case is currently still under criminal investigation by relevant authorities.
Criminal investigation against one of GVBT’s former employee
Management of the Company suspects that one of its former senior staff may have committed the offence of “unlawfully taking possession of company property through taking advantage of his position” under his employment with the Company. Management reported to the local police of Yuci District, Jinzhong City, Shanxi Province, China about the said potential fraud on 10 October, 2017. The Bureau of Public Security of Yuci District officially undertook its case and initiated investigation procedures on 28 January 2018. Management has been informed that the case is currently still under criminal investigation by relevant authorities in China.
Compliance with Section 16(A) of The Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our Directors and executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of change in ownership of common stock and other equity securities of the Company. Officers, Directors and greater than ten percent shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. While the filings that are required to be made under Section 16(a) are currently deficient, the Company understands that the applicable officers, directors and shareholders are working to submit the filings as soon as possible.
Code of Business Conduct and Ethics
Our board of directors adopted an informal Code of Business Conduct and Ethics that applies to, all our officers, directors, employees and agents. Certain provisions of the Code apply specifically to our president and secretary (being our principle executive officer, principle financial officer and principle accounting officer, controller), as well as persons performing similar functions. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote the following:
1.
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
2.
Full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;
3.
Compliance with applicable governmental laws, rules and regulations;
4.
The prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person identified in our Code of Business Conduct and Ethics; and
5.
Accountability for adherence to the Code of Business Conduct and Ethics.
Our Code of Business Conduct and Ethics requires, among other things, that all of our Company’s senior officers commit to timely, accurate and consistent disclosure of information; that they maintain confidential information; and that they act with honesty and integrity.
In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly senior officers, have a responsibility for maintaining financial integrity within our Company, consistent with generally accepted accounting principles, and federal and state securities laws. Any senior officer who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to our management.
Committees of the Board of Directors
We do not presently have a separately designated standing audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board of Directors. The functions of those committees are currently undertaken by our Board of Directors. Because we have only one Director, we believe that the creation of these committees, at this time, would be cumbersome and constitute more form over substance.
Audit Committee
We have not established a separately designated standing audit committee nor do we have an audit committee financial expert serving on our Board of Directors. However, the Company intends to establish a new audit committee of the Board of Directors that shall consist of independent Directors. The audit committee’s duties will be to recommend to the Company’s Board of Directors the engagement of an independent registered public accounting firm to audit the Company’s financial statements and to review the Company’s accounting and auditing principles. The audit committee will review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent registered public accounting firm, including their recommendations to improve the system of accounting and internal controls. The audit committee shall at all times be composed exclusively of Directors who are, in the opinion of the Company’s Board of Directors, free from any relationship which would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.
Item 11.
Item 11. Executive Compensation
The following table sets forth the annual and long-term compensation of our Named Executive Officers for services rendered in all capacities to the Company for the years ended December 31, 2018 and December 31, 2017.
Summary Compensation Table
Narrative Disclosure to Summary Compensation Table
There are no employment contracts, compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or its subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.
Outstanding Equity Awards at Fiscal Year-End
There are no current outstanding equity awards to our executive officers as of December 31, 2018.
Long-Term Incentive Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for Directors or executive officers.
Compensation Committee
We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.
Compensation of Directors
Directors receive no extra compensation for their services to our Board of Directors.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information regarding the beneficial ownership of our Common Stock as of December 31, 2018: by (i) each person who is known by us to own beneficially more than 5% of our outstanding Common Stock, (ii) by each of our directors, (iii) by each of our executive officers and (iv) by all our directors and executive officers as a group. On such date, we had 160,790,000 shares of Common Stock outstanding.
As used in the table below, the term beneficial ownership with respect to a security consists of sole or shared voting power, including the power to vote or direct the vote, and/or sole or shared investment power, including the power to dispose or direct the disposition, with respect to the security through any contract, arrangement, understanding, relationship, or otherwise, including a right to acquire such power(s) during the 60 days immediately following December 31, 2018. Except as otherwise indicated, the stockholders listed in the table have sole voting and investment powers with respect to the shares indicated
(1)
Dr. Leung Kwong Tak, Michael is the controlling shareholder of Able Lead Holdings Limited. Able Lead is majority owner of Lutu International. Pursuant to the Contractual Arrangement discussed above under Item 1.01 Entry Into Material Definitive Agreement, Able Lead agreed to exchange its shares of Lutu Group to the Company in exchange for 89 million shares of the Company’s common stock. Pursuant to the Contractual Arrangements, such 89 million shares are being held in escrow pending removal of a lien against Able Lead’s shares of Lutu International and delivery of the same to the Company. Able Lead therefore is currently unable to sell or dispose of these 89 million shares. Moreover, Able Lead has granted to the Board of Directors of GVBT the sole right to vote such shares while they remain in escrow. Therefore, Dr. Leung currently is deemed not to be a beneficial owner of these shares, however, he will become the beneficial owner of these shares upon Able Lead’s delivery of the shares of Lutu Group to the Company, which will cause these 89 million shares to be released from escrow to Able Lead.
(2)
Mr. Lam Ching Wan, William holds the shares in the name of Harcourt Capital Limited.
(a) Changes in Control
We do not anticipate at this time any changes in control of the Company. There are no arrangements either in place or contemplated which may result in a change of control of the Company. There are no provisions within the Articles or the Bylaws of the Company that would delay or prevent a change of control.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Except as described below, during the year ended December 31, 2018 and 2017, there have been no transactions, whether directly or indirectly, between the Company and any of its officers, directors or their family members.
The details for amount due to related parties were as follows:
(a) Common director, LEUNG Kwong Tak of operating subsidiary Lutu International Biotechnology Limited
(b)
Common shareholder, LEUNG Kwong Tak of operating subsidiary Lutu International Biotechnology Limited
The Board must approve all related party transactions. All material related party transactions will be made or entered into on terms that are no less favorable to the Company than can be obtained from unaffiliated third parties.
The following table lists the transaction with related party in 2018 and 2017:
Mr. Ma Wai Kin, Chief Operation Officer and Director of the Company, has a 100% ownership interest in KM International Property Consultants Limited (“KM”). The main transaction between the Company and KM is the consulting service regarding the marketing activities of GVBT provided by KM.
Board Independence
We currently have three directors serving on our board of directors. Our Board of Directors has adopted the definition of “independence” as described in NASDAQ Rules 4200 and 4350. Independent directors would not include anyone who, within the past three years, be employed by us or any of our parent or subsidiary or any of their family members; or any director who is, or who has a family member who is, a controlling shareholder. Our board of directors has determined that no directors meet the independence requirements.
Item 14.
Item 14. Principal Accounting Fees and Services
The following table presents aggregate fees, including professional audit services and other services rendered by our independent registered public accounting firm Centurion ZD CPA & Co during the years ended December 31, 2018, and Centurion ZD CPA Limited during the years ended December 31, 2017.
________
(1)
Audit Fees consist of fees billed for professional services rendered for the audit of the Company’s consolidated annual financial statements and review of the interim consolidated financial statements included in quarterly reports.
(2)
Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees.” There were no such fees in fiscal year 2018 and 2017.
(3)
Tax Fees consist of fees billed for professional services rendered for tax compliance, tax advice and tax planning. There were no such fees in fiscal year 2018 and 2017.
(4)
All Other Fees consist of fees for products and services other than the services reported above. There were no such fees in fiscal year 2018 or 2017.
PART IV
Item 15.
Item 15. Exhibits and Financial Statement Schedules
(a)
Documents filed as part of this Report
(1)
The financial statements listed in the Index to Consolidated Financial Statements are filed as part of this report
(2)
The financial statements listed in the Index are filed as part of this report.
Schedule II - Valuation and Qualifying Accounts and Reserves. Schedule II on page S-1 is filed as part of this report.
(3)
List of Exhibits
See Index to Exhibits in paragraph (b) below.
The Exhibits are filed with or incorporated by reference in this report.
(b)
Exhibits required by Item 601 of Regulation S-K.
* Filed herewith
(c)
Financial statements required by Regulation S-X which are excluded from the annual report to shareholders by Rule 14a-3(b).
SIGNATURE
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.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Lam Ching Wan, William Chief Executive Officer and Director May 15, 2020
Lam Ching Wan, William (Principal Executive Officer)
/s/ Lo Kwok Leung Chief Financial Officer May 15, 2020
Lo Kwok Leung (Principal Financial and Accounting Officer)
/s/ Leung Kwong Tak, Michael Chairman of the Board and Director May 15, 2020
Leung Kwong Tak, Michael
/s/ Ma Wai Kin
Chief Operating Officer and Director
May 15, 2020
Ma Wai Kin
Green Vision Biotechnology Corp. and Subsidiaries
Consolidated Financial Statements
As of December 31, 2018 and December 31, 2017 and
For the Years Ended December 31, 2018 and 2017
With Report of Independent Registered Public Accounting Firm
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Green Vision Biotechnology Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Green Vision Biotechnology Corp. and its subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations, changes in shareholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Centurion ZD CPA & Co.
Centurion ZD CPA & Co.
(as successor to Centurion ZD CPA Limited)
We have served as the Company's auditor since 2016.
Hong Kong, SAR
May 14, 2020
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
CONSOLIDATED BALANCE SHEETS
As at December 31, 2018 and 2017
(Stated in US Dollars)
The accompanying notes are an integral part of the financial statements
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2018 and 2017
(Stated in US Dollars)
The accompanying notes are an integral part of the financial statements
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’DEFICIT AND COMPREHENSIVE INCOME
(Stated in US Dollars)
The accompanying notes are an integral part of the financial statements
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in US Dollars)
The accompanying notes are an integral part of the financial statements
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND NATURE OF BUSINESS
Green Vision Biotechnology Corp. (formerly known as Vibe Wireless Corp., originally known as Any Translation Corp.), (the “Company”, “GVBT”), was incorporated under the laws of the State of Nevada on July 5, 2012. The Company was founded to be in the business of translation and interpretation. On November 12, 2015, the Company changed its name from Any Translation Corp. to Vibe Wireless Corp. On September 30, 2016, we changed our name from Vibe Wireless Corp. to Green Vision Biotechnology Corp.
On September 30, 2016, the Company filed a Certificate of Amendment with the Nevada Secretary of State (the “Nevada SOS”) whereby it amended its Articles of Incorporation to increase the Company’s authorized number of shares of common stock from 75 million to 750 million and forward stock split all of its issued and outstanding shares of common stock at a ratio of ten (10) shares for every one (1) share held. The Company’s Board of Directors approved this amendment on September 30, 2016. This stock split has been retroactively applied to the financial statements.
On the same date, September 30, 2016, the Company filed Articles of Merger with the Nevada SOS whereby it entered into a statutory merger with its wholly-owned subsidiary, Green Vision Biotechnology Corp. pursuant to Nevada Revised Statutes 92A.200 et. seq. The effect of such merger is that the Company is the sole surviving entity and changed its name to “Green Vision Biotechnology Corp.”
The investment transaction under the share exchange agreements and contractual agreements as described below (collectively the “Transaction Agreements”) was entered into, between each of the Shareholders of Lutu International Biotechnology Limited (“Lutu International”), a company incorporated under the laws of Cayman Islands and GVBT (the “Investment Transaction”) on May 12, 2017. As a result of closing the Investment Transaction, GVBT acquired part of the shares of Lutu International and assumed management of Lutu International and all its direct and indirect subsidiaries (“the Lutu Group”).
On May 12, 2017, GVBT entered into a share exchange agreement with Harcourt Capital Limited (“Harcourt”), a limited company incorporated in the British Virgin Islands, which holds 6% of the issued and outstanding shares of Lutu International; and Woodhead Investments Limited (“Woodhead”), a limited company incorporated in the British Virgin Islands, which holds 5% of the issued and outstanding shares of Lutu International (the “Minority Interest Exchange Agreement”). Under the Minority Interest Exchange Agreement, Woodhead agreed to transfer GVBT a total of 5% of the issued and outstanding shares of Lutu International. In consideration, GVBT agreed to grant Woodhead, or persons designated by Woodhead, a right to receive a total of 5 million shares of GVBT’s common stock. Under the Minority Interest Exchange Agreement, Harcourt agreed to transfer to GVBT a total of 6% of the issued and outstanding shares of Lutu International. In consideration, GVBT agreed to grant Harcourt, or persons designated by Harcourt, a right to receive a total of 6 million shares of GVBT’s common stock. The transactions under the Minority Interest Exchange Agreement were completed on May 12, 2017.
Able Lead, an 89% shareholder of Lutu International, has an outstanding loan of $4.43 million denominated in Renminbi (“RMB”) owed to an unrelated third party with its maturity date on January 22, 2018 (the “Outstanding Loan”). Able Lead is negotiating an extension of the Outstanding Loan to 2019 with the third party creditor. Shares of Lutu International held by Able Lead were offered by Able Lead as collateral to secure repayment of the Outstanding Loan (the “Security”).
On May 12, 2017, GVBT entered into a share exchange agreement (the “Majority Interest Exchange Agreement”) with Able Lead, the 89% shareholder of Lutu International. Under the Majority Interest Exchange Agreement, Able Lead agreed to enter into a series of contractual arrangements with GVBT (collectively, the “Contractual Arrangements”) (as described below), in which GVBT assumed management control of the Lutu Group. Able Lead further agreed to deliver the shares of Lutu International to GVBT once the Outstanding Loan is fully repaid. In consideration, GVBT agreed to issue and deliver a total of 89 million shares of GVBT’s common stock to an escrow agent (issued in the name of the escrow agent or its nominee) (the “Escrow Shares “). The Escrow Shares are held in escrow for a period of one year or such period of time to be agreed by GVBT and Able Lead upon the execution of the Majority Interest Exchange Agreement. Conditional upon the full repayment of the Outstanding Loan and the release of the Security, the Escrow Shares shall be released to Able Lead in exchange for the delivery of a total of 89% of the issued and outstanding shares of Lutu International by Able Lead to GVBT. In the event that Able Lead fully repays the Outstanding Loan and causes the release of the Security, then the Escrow Shares shall be delivered to Able Lead. In the event that Able Lead cannot fully repay the Outstanding Loan (within a period of one year, or such period of time to be agreed by GVBT and Able Lead) and cause the release of the Security, then the Escrow Shares shall be delivered to transfer agent for cancellation. Unless otherwise expressly agreed in writing by GVBT and Able Lead, the Majority Interest Exchange Agreement shall be automatically terminated upon the termination of any of the agreements in the Contractual Arrangements described as below. The transactions under the Majority Interest Exchange Agreement were completed on May 12, 2017.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND NATURE OF BUSINESS (CONTINUED)
Pursuant to an escrow agreement (the “Escrow Agreement”) entered into between Booth Udall Fuller, PLC (the “Escrow Agent”) and GVBT on May 12, 2017, the Escrow Shares shall be held by Booth Udall Fuller, PLC for a year following the execution of the Majority Interest Exchange Agreement. The Escrow Shares shall not be subject to any lien, attachment, or any other judicial process of any creditor of GVBT, and shall be held and disbursed solely for the purposes and in accordance with the terms of the Majority Interest Exchange Agreement.
On May 12, 2017, GVBT entered into the Contractual Agreements with Lutu International and/or Able Lead. Upon execution of the Contractual Arrangements, GVBT assumed management of Lutu International and its subsidiaries (the “Lutu Group”) and received economic benefits which includes the right to receive the expected residual returns and and/or obligation to absorb expected loss from the Lutu Group. Each agreement in the Contractual Arrangements constitutes valid and binding obligations of the parties of such agreements and is enforceable and valid in accordance with the laws of Cayman Islands. All agreements executed by Lutu International were duly approved by its board of directors and the Shareholders of Lutu International.
Consulting Services Agreement
Pursuant to the exclusive consulting services agreement entered into between GVBT and Lutu International on May 12, 2017, GVBT has the exclusive right to provide to the Lutu Group general business operation services, including advice and strategic planning, as well as consulting services related to the technological research and development of bio-fertilizers. Further, GVBT owns the intellectual property rights developed or discovered through research and development, in the course of providing the consulting services, or derived from the provision of the consulting services. In consideration, Lutu International pays an annual consulting service fees to GVBT in the amount equivalent to all of Lutu International’s net profits for the relevant financial year. The term of this consulting service agreement is five (5) years from its effective date and may be terminated upon GVBT’s written confirmation prior to the expiration of this agreement.
Unless otherwise expressly agreed in writing by GVBT and Able Lead, the Consulting Services Agreement shall be automatically terminated upon the termination of any of the agreements in the Contractual Arrangements or the Majority Interest Exchange Agreement.
Operating Agreement
Pursuant to the operating agreement entered into between GVBT, Lutu International and Able Lead on May 12, 2017, GVBT agreed to provide guidance and instructions on the Lutu Group’s daily operations, financial management and employment issues. Able Lead agreed to designate candidates recommended by GVBT as their representatives on the boards of directors of each member of the Lutu Group. GVBT has the right to appoint senior executives of each member of the Lutu Group. In addition, GVBT agreed to guarantee the Lutu Group’s performance under any agreements or arrangements relating to the Lutu Group’s business arrangements with any third party. In consideration, Lutu International agrees that it will not, and will cause the Lutu Group not to, without the prior consent of GVBT, engage in any transactions that could materially affect their respective assets, liabilities, rights or operations, including but not limited to, incurrence or assumption of any indebtedness, sale or purchase of any assets or rights, incurrence of any encumbrance on any of their assets or intellectual property rights in favor of a third party or transfer of any agreements relating to their business operation to any third party. The term of this operating agreement is five (5) years from its effective date and may be extended and terminated only upon GVBT’s written confirmation prior to the expiration of this agreement.
Unless otherwise expressly agreed in writing by GVBT and Able Lead, the Operating Agreement shall be automatically terminated upon the termination of any of the agreements in the Contractual Arrangements or the Majority Interest Exchange Agreement.
Proxy Agreement
Pursuant to the proxy agreement entered into between Able Lead, Lutu International, and GVBT on May 12, 2017, Able Lead agreed to irrevocably grant a person to be designated by GVBT the right to exercise its voting rights and other rights, including the attendance of, and the voting at the shareholders’ meetings of Lutu International for and on behalf of Able Lead (or the signing of written resolutions in lieu of such meetings) in accordance with applicable laws and its articles of association, including but not limited to the appointment and voting for the directors and chairman of the board as the authorized representative of Able Lead to exercise controlling power in the Lutu Group. The proxy agreement may be terminated by joint consent of the parties or upon 7-day written notice from GVBT.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND NATURE OF BUSINESS (CONTINUED)
Changes Resulting from the Investment Transaction
change of control of GVBT. Prior to closing of the Investment Transaction, GVBT had a total of 60,790,000 shares of common stock issued and outstanding. As a result of the closing of the Investment Transaction, GVBT now has a total of 160,790,000 shares of its common stock issued and outstanding, of which 60,790,000 shares, or approximately 37.8%, are owned by the previous existing shareholders of GVBT, with the balance of 100,000,000 shares, or approximately 62.2%, owned by the previous shareholders of Lutu International, with certain shares held in escrow pursuant to the Escrow Agreement.
Following the closing of the Investment Transaction, GVBT began carrying on the business of the Lutu Group. The Lutu Group, with its operation primarily located in the Shanxi Province of China, is engaged in the biotechnology industry, in particular, the production and distribution of bio-fertilizers. Revenues of the Lutu Group are currently generated from China.
Changes to the Board of Directors and Officers
Simultaneous with the closing of the Investment Transaction, there was a change in the officers and directors of GVBT. As authorized by the bylaws, the existing director of GVBT, Mr. Ma Wai Kin, appointed two (2) additional members to the Board of GVBT. Such members are Mr. Lam Ching Wan (also known as William Lam) and Mr. Leung Kwong Tak (also known as Dr. Michael Leung). Mr. Ma also appointed Mr. William Lam as GVBT’s Chief Executive Officer and Mr. Lo Kwok Leung as GVBT’s Chief Financial Officer. Mr. Lo Kwok Leung is not related to Dr. Michael Leung.
All members of the Board shall hold their respective offices for a term of one year from their respective dates of appointment, or until the election and qualification of their successors, and thereafter to resign as a director of GVBT. In accordance with the bylaws, officers are elected by the board of directors and serve at the discretion of the board of directors.
Accounting Treatment
The Investment Transaction was accounted for as a reverse-merger and recapitalization. For financial reporting purposes, Lutu International is the acquirer and GVBT is the acquired company. After completion of the transaction, the assets, liabilities, operations results and cash flow of GVBT that will be reflected in the historical consolidated financial statements prior to the Investment Transaction will be those of Lutu International and its subsidiaries and will be recorded at the historical cost basis of Lutu International and its subsidiaries. Number of shares deemed to be outstanding for the period from January 1, 2018 to the acquisition date will be reflected in the balance of the common stock and paid in capital. The Company changed its fiscal year ended from January 31 to December 31.
Tax Treatment and SEC Filer Status: Small Business Issuer
The Investment Transaction is intended to constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), or such other tax free reorganization exemptions that may be available under the Code. Immediately following the Investment Transaction, the filer status of GVBT will be a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K, as promulgated by SEC.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for consolidated financial reporting.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Presentation
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The historical presentation of the consolidated financial statements includes the financial statements of LUTU INTERNATIONAL BIOTECHNOLOGY LIMITED, and its wholly-owned subsidiaries (collectively referred to herein as the “Company”). All intercompany accounts, transactions, and profits have been eliminated upon consolidation.
Note:
(1)
Wholly owned subsidiary of Green Vision Biotechnology Corp.
(2)
Wholly owned subsidiary of Lutu International Biotechnology Limited
(3)
Wholly owned subsidiary of Light Raise Limited
(4)
Wholly owned subsidiary of Hong Kong Prolific Mineral Resources Holdings Limited
(5)
Wholly owned subsidiary of Shanxi Green Biotechnology Industry Company Limited
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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
Significant estimates and judgments inherent in the preparation of these consolidated financial statements include, among other things, accounting for asset impairments, allowances for doubtful accounts, depreciation and amortization, the collection of revenues from the Agricultural Cooperative.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Economic and political risks
The Company’s operations are mainly conducted in the Hong Kong Special Administrative Region (“Hong Kong”) and the People’s Republic of China (“China”) (for the purpose of this Current Report on Form 10-Q, China does not include Hong Kong, Macau Special Administrative Region of the People's Republic of China and Taiwan (The Republic of China) and a large number of customers are located in northern China. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in Hong Kong and China, and by the general state of the economy in Hong Kong and China.
The Company’s operations and customers in Hong Kong and China are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments, and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in Hong Kong and China, 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, among other things.
Foreign Currency Translation
The Company’s financial statements are presented in the U.S. dollar ($), which is the Company’s reporting currency, while its functional currency are Chinese Renminbi (RMB) and Hong Kong Dollar (HKD). Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of income. Monetary assets and liabilities denominated in foreign currency are translated at the functional currency rate of exchange ruling at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in the statements of income.
In accordance with ASC 830, Foreign Currency Matters, the Company translated the assets and liabilities into US $ using the rate of exchange prevailing at the applicable balance sheet date and the statements of income and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation are recorded in shareholders’ equity as part of accumulated other comprehensive income.
Below is a table with foreign exchange rates used for translation:
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
The Company earns revenue by selling merchandise to end using customers primarily through distribution agent and directly to customers.
Revenue is recognized when merchandise is purchased by and delivered to the customer and confirmed and collectability is reasonably assured. Revenue from wholesale agent is recognized after goods delivered, amount fixed or determined and collectability is reasonably assured.
All revenues are shown net of estimated returns during the relevant period represented by estimated allowance for sales returns based upon historical experience.
The Company records sales tax collected from its customers on a net basis, and therefore excludes it from revenue as defined in ASC 605, Revenue Recognition.
During the year ended December 31, 2018 and 2017, the provision of sales return were $ Nil respectively.
Cost of Goods Sold
Cost of goods sold includes the cost of materials, labor, and relevant manufacturing expenses.
Selling Expenses
Selling expenses include packaging and shipping costs, as well as advertising and certain expenses associated with operating the Company’s corporate headquarters.
Advertising Costs
The Company expensed all advertising costs as incurred. Advertising expense, net of reimbursement from suppliers, amounted to $Nil and $10,432 for the year ended December 31, 2018 and 2017 respectively. Advertising expense is included in selling expense and general and administrative expenses in the accompanying consolidated statements of income.
Leases
The Company accounts for its leases under the provisions of ASC 840, Leases. Certain of the Company’s operating leases provide for minimum annual payments that change over the life of the lease. The aggregate minimum annual payments are expensed on the straight-line basis over the minimum lease term. The Company recognizes a deferred rent liability for minimum step rents when the amount of rent expense exceeds the actual lease payments and it reduces the deferred rent liability when the actual lease payments exceeds the amount of straight-line rent expense. Rent holidays and tenant improvement allowances for office remodels are amortized on the straight-line basis over the initial term of the lease and any option period that is reasonably assured of being exercised.
The Company did not have a lease that met the criteria of a capital lease. Leases that do not qualify as a capital lease are classified as an operating lease. Operating lease rental expenses included in selling, general and administrative expenses for year ended December 31, 2018 and 2017 were $15,382 and $17,986 respectively.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounts Receivable
Accounts receivable is recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is maintained for all customers based on a variety of factors, including the industry practice, the length of time the receivables are past due, significant one-time events and historical experience. The Company is selling products delivered to certain customers which are closed to Agriculture Cooperatives as defined by ASC 905 “Agriculture”. The collection cycle may be varied and depended on the growing crops cycle.
Management reviews and adjusts this allowance periodically based on historical experience and its evaluation of the collectability of outstanding accounts receivable. The Company evaluates the credit risk of its customers utilizing historical data and estimates of future performance. Bad debts are written off as incurred.
Outstanding accounts balances are reviewed individually for collectability. The Company does not charge any interest income on trade receivables. Accounts balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To date, the Company has not charged off any balances as it has yet to exhaust all means of collection.
During the year ended December 31, 2018 and 2017, the provision of doubtful debts were $26,619 and $865,942 respectively.
Inventories
Inventories primarily consist of merchandise inventories and are stated at lower of cost or market and net realizable value. Cost of inventories is calculated on the weighted average basis which approximates cost.
Management regularly reviews inventories and records valuation reserves for damaged and defective returns, inventories with slow-moving or obsolescence exposure and inventories with carrying value that exceeds market value. Because of its product mix, the Company has not historically experienced significant occurrences of obsolescence.
Inventory shrinkage is accrued as a percentage of revenues based on historical inventory shrinkage trends. The Company performs physical inventory count of its stores once per quarter and cycle counts inventories at its distribution centers once per quarter throughout the year. The reserve for inventory shrinkage represents an estimate for inventory shrinkage for each store since the last physical inventory date through the reporting date.
These reserves are estimates, which could vary significantly, either favorably or unfavorably, from actual results if future economic conditions, consumer demand and competitive environments differ from expectations.
During the year ended December 31, 2018 and 2017, the provision of inventory were $230,372 and $Nil respectively.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation is provided over the estimated useful lives, using the straight-line method with 5% scrape value as follows:
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Land Use Rights
According to the laws of the PRC, the government owns all the land in the PRC. Companies or individuals are authorized to possess and use the land only through the land use rights granted by the government. The land use rights represent cost of the rights to use the land in respect of properties located in the PRC. Land use rights are carried at cost and amortized on a straight-line basis over the period of rights of 50 years.
Goodwill
Goodwill represents the excess of purchase price over fair value of net assets acquired. Under ASC 350, Intangibles - Goodwill and Other, goodwill is not amortized but evaluated for impairment annually or whenever events or changes in circumstances indicate that the value may not be recoverable.
The Company performed an annual impairment test as of the end of fiscal year 2018, and determined that an impairment loss in the amount of $Nil were recorded in 2018.
Long-lived Assets
The Company reviews long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Long-lived assets are reviewed for recoverability at the lowest level in which there are identifiable cash flows, usually at the store level. The carrying amount of a long-lived asset is not considered recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. If the asset is determined not to be recoverable, then it is considered to be impaired and the impairment to be recognized is the amount by which the carrying amount of the asset exceeds the fair value of the asset, determined using discounted cash flow valuation techniques, as defined in ASC 360, Property, Plant, and Equipment.
The Company determined the sum of the undiscounted cash flows expected to result from the use of the asset by projecting future revenue and operating expense for each store under consideration for impairment. The estimates of future cash flows involve management judgment and are based upon assumptions about expected future operating performance. The actual cash flows could differ from management’s estimates due to changes in business conditions, operating performance and economic conditions.
During the reporting periods, the Company performed the evaluation and impairment loss of $333,956 was recorded.
Cash and Concentration of Credit Risk
The Company maintains cash in bank deposit accounts in Hong Kong and PRC, and considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company performs ongoing evaluations of the institution to limit its concentration risk exposure.
The Company’s customers are mainly located in the northeastern China. Because of this, the Company is subject to regional risks, such as the economy, regional financial conditions and unemployment, weather conditions, power outages, and other natural disasters specific to the region in which the Company operates.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Retirement Benefit Plans
Full time employees of the Company in China participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Company to make contributions to the government for these benefits based on certain percentages of the employees’ salaries. The Company accounts the mandated defined contribution plan under the vested benefit obligations approach based on the guidance of ASC 715, Compensation-Retirement Benefits.
The total amounts for such employee benefits which were expensed were $18,586 and $15,136 for the year ended December 31, 2018 and 2017 respectively.
Income Taxes
The Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for 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. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.
Comprehensive income
Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other consolidated financial statements. The Company’s current component of comprehensive income is the net income and foreign currency translation adjustment.
Segment Reporting
The Company operates in one industry segment, operating manufacturing and selling of organic bio-fertilizer. ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Given the economic characteristics of the similar nature of the products sold, the type of customer and the method of distribution, the Company operates as one reportable segment as defined by ASC 280, Segment Reporting.
Basic and diluted earnings (loss) per share
In accordance with ASC No. 260 “Earnings Per Share”, the basic earnings (loss) per common share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per common share is computed similarly to basic earnings (loss) per common 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.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Guidance
FASB Simplifies Adoption of New Leases Standard for Certain Land Easements. The FASB has issued Accounting Standards Update (ASU) No. 2018-01, Leases (Topic 842):Land Easement Practical Expedient for Transition to Topic 842, which clarifies the application of the new leases guidance to land easements and eases adoption efforts for some land easements.
ASU 2018-01 is expected to reduce the cost of adopting the new leases standard for certain land easements. It is also an attempt to help ensure that companies can make a successful transition to the standard without compromising the quality of information provided to investors about these transactions.
Land easements (also commonly referred to as rights of way) represent the right to use, access, or cross another entity’s land for a specified purpose. Land easements are used by utility and telecommunications companies, for example, when they need to take a small strip of land, or easement, to bury wires. Not all companies have historically accounted for them as leases.
Stakeholders pointed out that the requirement to evaluate all old and existing land easements, sometimes numbering in the tens of thousands, to determine if they meet the definition of a lease under the new standard could be very costly. They also noted there would be limited benefit to applying this requirement, as many of their land easements would not meet the definition of a lease, or even if they met that definition, many of their easements are prepaid and, therefore, already are recognized on the balance sheet.
The land easements ASU addresses this by:
·
Providing an optional transition practical expedient that, if elected, would not require an organization to reconsider their accounting for existing land easements that are not currently accounted for under the old leases standard; and
·
Clarifying that new or modified land easements should be evaluated under the new leases standard, once an entity has adopted the new standard.
The FASB issued an Accounting Standards Update (ASU) that helps organizations address certain stranded income tax effects in accumulated other comprehensive income (AOCI) resulting from the Tax Cuts and Jobs Act.
ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.
The ASU requires financial statement preparers to disclose:
·
A description of the accounting policy for releasing income tax effects from AOCI;
·
Whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act; and
·
Information about the other income tax effects that are reclassified.
The amendments affect any organization that is required to apply the provisions of Topic 220, Income Statement-Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP.
The amendments are effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Guidance (continued)
FASB Issues Corrections and Improvements to Financial Instruments. The FASB has issued Accounting Standards Update (ASU) No. 2018-03, Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, that clarifies the guidance in ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10), as follows:
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Issue 1: Equity Securities without a Readily Determinable Fair Value- Discontinuation. The amendment clarifies that an entity measuring an equity security using the measurement alternative may change its measurement approach to a fair value method in accordance with Topic 820,Fair Value Measurement, through an irrevocable election that would apply to that security and all identical or similar investments of the same issuer. Once an entity makes this election, the entity should measure all future purchases of identical or similar investments of the same issuer using a fair value method in accordance with Topic 820.
·
Issue 2: Equity Securities without a Readily Determinable Fair Value- Adjustments. The amendment clarifies that the adjustments made under the measurement alternative are intended to reflect the fair value of the security as of the date that the observable transaction for a similar security took place.
·
Issue 3: Forward Contracts and Purchased Options. The amendment clarifies that remeasuring the entire value of forward contracts and purchased options is required when observable transactions occur on the underlying equity securities.
·
Issue 4: Presentation Requirements for Certain Fair Value Option Liabilities. The amendment clarifies that when the fair value option is elected for a financial liability, the guidance in paragraph 825-10- 45-5 should be applied, regardless of whether the fair value option was elected under either Subtopic 815-15,Derivatives and Hedging- Embedded Derivatives, or 825-10,Financial Instruments- Overall.
·
Issue 5: Fair Value Option Liabilities Denominated in a Foreign Currency. The amendments clarify that for financial liabilities for which the fair value option is elected, the amount of change in fair value that relates to the instrument-specific credit risk should first be measured in the currency of denomination when presented separately from the total change in fair value of the financial liability. Then, both components of the change in the fair value of the liability should be remeasured into the functional currency of the reporting entity using end-of-period spot rates.
·
Issue 6: Transition Guidance for Equity Securities without a Readily Determinable Fair Value. The amendment clarifies that the prospective transition approach for equity securities without a readily determinable fair value in the amendments in ASU No. 2016-01 is meant only for instances in which the measurement alternative is applied. An insurance entity subject to the guidance in Topic 944,Financial Services- Insurance, should apply a prospective transition method when applying the amendments related to equity securities without readily determinable fair values. An insurance entity should apply the selected prospective transition method consistently to the entity’s entire population of equity securities for which the measurement alternative is elected.
For public business entities, ASU 2018-03 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Public business entities with fiscal years beginning between December 15, 2017, and June 15, 2018, are not required to adopt ASU 2018-03 until the interim period beginning after June 15, 2018, and public business entities with fiscal years beginning between June 15, 2018, and December 15, 2018, are not required to adopt these amendments before adopting the amendments in ASU 2016-01. For all other entities, the effective date is the same as the effective date in ASU 2016-01.
All entities may early adopt ASU 2018-03 for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, as long as they have adopted ASU 2016-01.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Guidance (continued)
FASB Adds SEC Guidance to the Codification on the Tax Cuts and Jobs Act. The FASB has issued Accounting Standards Update (ASU) No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. ASU 2018-05 amends certain SEC material in Topic 740 for the income tax accounting implications of the recently issued Tax Cuts and Jobs Act (Act).
ASU 2018-05 adds the following guidance, among other things, to the FASB Accounting Standards Codification™ regarding the Act:
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Question 1:If the accounting for certain income tax effects of the Act is not completed by the time a company issues its financial statements that include the reporting period in which the Act was enacted, what amounts should a company include in its financial statements for those income tax effects for which the accounting under Topic 740 is incomplete?
·
Answer 1:In a company’s financial statements that include the reporting period in which the Act was enacted, a company must first reflect the income tax effects of the Act in which the accounting under Topic 740 is complete. These completed amounts would not be provisional amounts. The company would then also report provisional amounts for those specific income tax effects of the Act for which the accounting under Topic 740 will be incomplete but a reasonable estimate can be determined. For any specific income tax effects of the Act for which a reasonable estimate cannot be determined, the company would not report provisional amounts and would continue to apply Topic 740 based on the provisions of the tax laws that were in effect immediately prior to the Act being enacted. For those income tax effects for which a company was not able to determine a reasonable estimate (such that no related provisional amount was reported for the reporting period in which the Act was enacted), the company would report provisional amounts in the first reporting period in which a reasonable estimate can be determined.
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Question 2: If an entity accounts for certain income tax effects of the Act under a measurement period approach, what disclosures should be provided?
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Answer 2:The staff believes an entity should include financial statement disclosures to provide information about the material financial reporting impacts of the Act for which the accounting under Topic 740 is incomplete, including:
a)
Qualitative disclosures of the income tax effects of the Act for which the accounting is incomplete;
b)
Disclosures of items reported as provisional amounts;
c)
Disclosures of existing current or deferred tax amounts for which the income tax effects of the Act have not been completed;
d)
The reason why the initial accounting is incomplete;
e)
The additional information that is needed to be obtained, prepared, or analyzed in order to complete the accounting requirements under Topic 740;
f)
The nature and amount of any measurement period adjustments recognized during the reporting period;
g)
The effect of measurement period adjustments on the effective tax rate; and
h)
When the accounting for the income tax effects of the Act has been completed.
ASU 2018-05 is effective upon inclusion in the FASB Codification.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. GOING CONCERN
As of December 31, 2018 and 2017, the Company has an accumulated deficit of $6,245,242 and $4,883,120 respectively, and its current liabilities exceed its current assets resulting in negative working capital of $9,596,914 and $9,029,045 respectively. In view of the matters described above, recoverability of a major portion of the recorded asset amounts and realization of the portion of current liabilities into revenue shown in the accompanying balance sheets are dependent upon continued operations of the Company, which in turn are dependent upon the Company's ability to raise additional financing and to succeed in its future operations. The Company may need additional cash resources to operate during the upcoming 12 months, and the continuation of the Company may be dependent upon the continuing financial support of investors and/or stockholders of the Company. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The Company is actively pursuing (i) additional funding which would enhance capital employed; and (ii) strategic partners which would increase revenue bases or reduce operation expenses. Management believes that the above actions will allow the Company to continue its operations throughout this fiscal year.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. OTHER RECEIVABLES
Other receivables consisted of the following:
NOTE 5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consisted of the following:
The depreciation expenses for the year ended December 31, 2018 and 2017 were $226,187 and $240,526 respectively.
NOTE 6. INTANGIBLE ASSETS
Intangible assets consisted of the following:
The amortization expenses of land use rights and software systems for the year ended December 31, 2018 and 2017 were $24,369 and $24,000 respectively.
Future amortization of land use rights and software systems is as follows:
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. INVENTORIES
Inventories consisted of the following:
The provision of inventory for the year ended December 31, 2018 and 2017 were $230,372 and $Nil respectively.
NOTE 8. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Sales:
Purchases:
NOTE 9. OTHER PAYABLES
Other payables consisted of the following:
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. LOSS PER SHARE
The Company calculates earnings per share in accordance with ASC 260, Earnings Per Share, which requires a dual presentation of basic and diluted earnings per share. Basic earnings per share are computed using the weighted average number of shares outstanding during the fiscal year. Potentially dilutive common shares consist of convertible preferred stock (using the if-converted method) and exercisable warrants and stock options outstanding (using the treasury method). The following table sets forth the computation of basic and diluted net income per common share:
The following table sets forth the computation of basic and diluted net income per common share:
NOTE 11. AMOUNT DUE TO RELATED PARTIES
The details for amount due to related parties were as follows:
(a)
Common director, LEUNG Kwong Tak of operating subsidiary Lutu International Biotechnology Limited
(b)
Common shareholder, LEUNG Kwong Tak of operating subsidiary Lutu International Biotechnology Limited
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. INCOME TAXES
The Company and its subsidiaries have no operation in United States, Cayman Islands and British Virgin Islands, and are not subject to any domestic income tax. Therefore, no domestic income tax of United States, Cayman Islands and British Virgin Islands are paid in the year ended December 31, 2018 and 2017 respectively.
Hong Kong Prolific Mineral Resources Holdings Limited was incorporated in Hong Kong and is subjected to Hong Kong profits tax rate of 16.5% for the year ended December 31, 2018 and 2017. Income tax (reversal) expense amounted to $Nil for the year ended December 31, 2018 and 2017.
A reconciliation of the provision for income taxes with amounts determined by applying the Hong Kong profit rate of 16.5% to income before income taxes is as follows:
No deferred tax has been provided as there are no material temporary differences arising during the year ended December 31, 2018 and 2017.
Shanxi Green Biotechnology Industry Company Limited and Shenzhen Qianhai Lutu Supply Chain Management Company Limited were incorporated in the PRC and are subjected to income taxes under the current laws of the PRC. The EIT rate of PRC was 25% for the year ended December 31, 2018 and 2017.
Profit (loss) before income tax of $(1,152,274) and $(1,272,919) for the year ended December 31, 2018 and 2017 respectively, were attributed to operations in China. The income tax expenses consisted of the following:
No deferred tax has been provided as there are no material temporary differences arising during the year ended December 31, 2018 and 2017.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. SEGMENT INFORMATION
FASB Accounting Standard Codification Topic 280 (ASC 280) “Segment Reporting” establishes standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.
In the year ended December 31, 2018 and 2017, the Company is regarded as a single operating segment, being engaged in the manufacturing of bio-fertilizer. This principal activity and geographical market are substantially based in China, accordingly, no operating or geographical segment information are presented.
NOTE 14. COMPREHENSIVE INCOME
Total comprehensive income includes, in addition to net income, changes in equity that are excluded from the consolidated statements of income and are recorded directly into a separate section of shareholders’ equity on the consolidated balance sheets. Comprehensive income and its components consist of the following:
NOTE 15. COMMITMENTS AND CONTINGENCIES
Operating Leases
Certain of our real properties are operated under lease agreements. Rental expense under operating leases was as follows:
Annual minimum payments under operating leases are as follows:
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. RELATED PARTY TRANSACTIONS
The Board must approve all related party transactions. All material related party transactions will be made or entered into on terms that are no less favorable to the Company than can be obtained from unaffiliated third parties.
The following table lists the transaction with related party in 2018 and 2017:
Mr. Ma Wai Kin, Chief Operation Officer and Director of the Company, has a 100% ownership interest in KM International Property Consultants Limited (“KM”). The main transaction between the Company and KM is the consulting service regarding the marketing activities of GVBT provided by KM.
NOTE 17. LEGAL PROCEEDINGS
Civil case with Mr. Yao Gui Mu
Yao Gui Mu (“the Plaintiff”), former operation manager of the subsidiary in Shanxi, Shanxi Green Biotechnology Industry Company Limited (“the Shanxi Subsidiary”), brought a lawsuit against the Shanxi Subsidiary, in the District People’s Court of Jin Zhong City, Yu Ci District. The subject dispute of the lawsuit concerns an unsettled current account balance of $141,550 (RMB900,000) which was claimed to be a loan advanced to the Company by the Plaintiff. Together with the subject dispute, the Plaintiff also claimed the relevant interest was RMB513,100 calculated from November 6, 2012 to August 15, 2017 with 1% monthly interest rate. The Company’s PRC lawyer had submitted a Statement of Defense on November 23, 2017 to The District People’s Court of Yuci District, Jin Zhong City (“the Court”). A court hearing was held on December 5, 2017. Upon the request by the Court, Shanxi Subsidiary provided supplemental evidence to the Court on 16 January 2018. The second hearing was held on September 19, 2018.
The District People’s Court of Jin Zhong City, Yu Ci District released the civil judgement decision (2017) 晋0702 民初3879号, that there were not sufficient evidence provided by the Plaintiff for the dispute, and the Court did not support for the claim of loan and related interest against the Shanxi Subsidiary. The judgement decision dated on August 31, 2018.
Yao Gui Mu (“the Appealer”) appeal for the decision to the Intermediate People’s Court of Shanxi Province, Jin Zhong City. On May 10, 2019, the Intermediate People’s Court of Shanxi Province, Jin Zhong City released civil judgement decision (2019) 晋07民終355号, that due to the fact that there was a second hearing held on September 19, 2018 after the judgement decision made on August 31, 2018, which was a severe disorder of procedures. Therefore, the civil judgement decision (2017) 晋0702 民初3879号 was revoked and the case was put to re-trial, which was subsequently carried out on October 16, 2019.
On December 16, 2019, the Court released the civil judgement decision (2019) 晋0702 民初3543号之一, that the related dispute loan was being a criminal case under police investigation. Before the police formed a decision, the Court could not confirm that the civil case was under the district court’s judgement jurisdiction. Therefore, the lawsuit against the Shanxi Subsidiary was rejected.
For the relevant interest of RMB513,100 claimed by the Plaintiff, there is no evidence showing that it is more likely than not that the Company will be liable for the said interest. Hence, no provision was made as at December 31, 2018.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
(F/K/A VIBE WIRELESS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. LEGAL PROCEEDINGS(CONTINUED)
Criminal investigation regarding a potential fraud with one of its former customers
Management of the Company suspects that there was a potential fraud committed in the sales made to one of its previous customers. Management reported to the local police of Yuci District, Jinzhong City, Shanxi Province, China about the said potential fraud. The Bureau of Public Security of Yuci District officially undertook the case and initiated investigation procedures on 11 September 2017. Management has been informed that the case is currently under criminal investigation by relevant authorities.
Criminal investigation against one of GVBT’s former employee
Management of the Company suspects that one of its former senior staff may have committed the offence of “unlawfully taking possession of company property through taking advantage of his position” under his employment with the Company. Management reported to the local police of Yuci District, Jinzhong City, Shanxi Province, China about the said potential fraud on 10 October, 2017. The Bureau of Public Security of Yuci District officially undertook its case and initiated investigation procedures on 28 January 2018. Management has been informed that the case is currently under criminal investigation by relevant authorities in China.
NOTE 18. COMMON STOCK
On July 30, 2019, the Company cancelled 89,000,000 shares of common stock, par value $.001 per share, and re-issued them to Able Lead Holdings Limited. The issuance was done pursuant to Section 4(a)(2) of the Securities Act of 1933. as it was a non-public offering. On May 12, 2017, the Company had placed the 89,000,000 shares into escrow with Booth Udall Fuller PLC, pending repayment of a loan and discharge of shares of Lutu International by Able Lead Holdings Limited. Full repayment of such was made on February 27, 2019. Therefore, the 89,000,000 shares were returned from escrow and cancelled. Then they were re-issued to Able Lead Holdings Limited.
NOTE 19. SUBSEQUENT EVENT
On September 26, 2019, the Company has resolved to discontinue the operation of the subsidiary company, Shenzhen Qianhai Lutu Supply Chain Management Company Limited. According to the PRC Company Law and related regulation required, a de-registration committee has been properly formed and the de-registration procedures are undergoing accordingly. On November 11, 2019, the Shenzhen taxation bureau has released the taxation completion certificate, and on December 11, 2019, the Shenzhen market supervision administration has released the notice that the de-registration of Shenzhen Qianhai Lutu Supply Chain Management Company Limited is in process. On April 7, 2020, the Company received notice that the de-registration of Shenzhen Qianhai Lutu Supply Chain Management Company Limited had been completed.
Other than as described on Note 17, Note 18 and above, management has evaluated all activities and concluded that there was no other subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements.
All subsequent events are being disclosed in the Company’s periodic reports that are currently in preparation for filing. Such events shall be described in detail therein.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
SCHEDULE III
QUARTERLY INFORMATION (UNAUDITED)
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.