HONG KONG CRYPTOCURRENCY EXCHANGE LIMITED
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2017 AND FOR THE PERIOD FROM INCEPTION (APRIL 19, 2017) THROUGH SEPTEMBER 30, 2017
(UNAUDITED)
HONG KONG CRYPTOCURRENCY EXCHANGE LIMITED
Balance Sheet
(Unaudited)
(Stated in US dollars)
|
|
| September 30, 2017 |
ASSETS |
|
|
|
Current Assets |
|
|
|
Cash and cash equivalents | $ |
| 1,282 |
Total Current Assets |
|
| 1,282 |
Website development costs |
|
| 153,846 |
TOTAL ASSETS | $ |
| 155,128 |
|
|
|
|
LIABILITIES & SHAREHOLDER’S DEFICIT |
|
|
|
Current Liabilities |
|
|
|
Accrued liabilities | $ |
| 5,500 |
Due to related party |
|
| 193,551 |
Total Current Liabilities |
|
| 199,051 |
TOTAL LIABILITIES | $ |
| 199,051 |
|
|
|
|
SHAREHOLDER’S DEFICIT |
|
|
|
Common stock, $0.1282 par value, 10,000 shares authorized, 10,000 shares issued and outstanding at September 30, 2017 |
$ |
|
1,282 |
Accumulated deficit |
|
| (45,205) |
TOTAL SHAREHOLDER’S DEFICIT |
|
| (43,923) |
TOTAL LIABILITIES AND SHAREHOLDER’S DEFICIT | $ |
| 155,128 |
The accompanying notes are an integrated part of these unaudited financial statements
HONG KONG CRYPTOCURRENCY EXCHANGE LIMITED
Statement of Operations
(Unaudited)
(Stated in US dollars)
|
| From Inception (April 19, 2017) Through September 30, 2017 |
|
|
|
Operating Expenses |
|
|
General and administrative expenses | $ | 45,205 |
Total Operating Expenses |
| 45,205 |
Net Loss | $ | (45,205) |
The accompanying notes are an integrated part of these unaudited financial statements
HONG KONG CRYPTOCURRENCY EXCHANGE LIMITED
Statement of Shareholder’s Deficit
From Inception (April 19, 2017) Through September 30, 2017
(Unaudited)
(Stated in US Dollars)
|
Shares |
Common Stock |
|
Amount |
|
Accumulated deficit |
| Total Shareholder’s Deficit | ||||
Balance as of April 19, 2017 (Date of Inception) | 10,000 |
| $ | 1,282 | $ | - | $ | 1,282 | ||||
Net loss for the period | - |
|
| - |
| (45,205) |
| (45,205) | ||||
Balance as of September 30, 2017 | 10,000 |
| $ | 1,282 | $ | (45,205) | $ | (43,923) |
The accompanying notes are an integrated part of these unaudited financial statements
HONG KONG CRYPTOCURRENCY EXCHANGE LIMITED
Statement of Cash Flows
(Unaudited)
(Stated in US dollars)
|
| From Inception (April 19, 2017) Through September 30, 2017 |
CASH FLOW FROM OPERATING ACTIVITIES |
|
|
Net loss | $ | (45,205) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
Changes in operating assets and liabilities: |
|
|
Accrued liabilities |
| 45,205 |
CASH USED IN OPERATING ACTIVITIES | $ | - |
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
Issuance of common shares | $ | 1,282 |
CASH PROVIDED BY FINANCING ACTIVITIES | $ | 1,282 |
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS | $ | 1,282 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD |
| - |
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD | $ | 1,282 |
|
|
|
NON-CASH TRANSACTION |
|
|
Website development costs paid by related party | $ | 153,846 |
Operating expenses paid by related party | $ | 39,705 |
|
|
|
Supplementary Disclosure for Cash Flow Information: |
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|
Income taxes paid | $ | - |
Interest paid | $ | - |
The accompanying notes are an integrated part of these unaudited financial statements
HONG KONG CRYPTOCURRENCY EXCHANGE LIMITED
Notes to Unaudited Financial Statements
(Stated in US dollars)
NOTE 1 – DESCRIPTION OF COMPANY AND BASIS OF PRESENTATION
Hong Kong Cryptocurrency Trading Exchange Limited (the “Company”) was incorporated in Hong Kong Special Administrative Region on April 19, 2017. The Company changed its name to Hong Kong Cryptocurrency Exchange Limited on June 22, 2017. The Company plans to operate a cryptocurrency exchange platform and offer a wide range of tools that improve users’ experience and investment options, including an affiliation with a network of major cryptocurrencies and international trading platforms, real time market quotes, professional statistical analysis and graphs, up to the minute financial news, 72 hours of interest free margin trading, wide range of buy and sell options for cryptocurrency trading, vast portfolio of investment products, and many more financial tools to enrich our users’ experience.
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, the financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2017, or for any subsequent period.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PREPARATION
The unaudited financial statements of the Company are prepared in accordance with generally accepted accounting principles used in the United States of America.
B. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles 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 expenses during the reporting period including useful lives and residual values of website development costs, and provision for income taxes. Actual results when ultimately realized could differ from those estimates.
C. CASH AND CASH EQUIVALENTS
The Company considers cash and cash equivalents to include cash on hand and demand deposits with banks with an original maturity of three months or less.
D. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments including cash and cash equivalents and accrued liabilities, approximates their fair value due to the relatively short-term nature of these instruments.
Management believes it is not practical to determine the fair value of due to related party because the transactions cannot be assumed to have been consummated at arm's length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.
E. WEBSITE DEVELOPMENT COSTS
The Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as incurred. Costs associated with the website consist of website development costs paid to third party. As of September 30, 2017, $192,308 was paid to the website development company, of which $38,462 was recognized as expense and the remaining $153,846 was capitalized.
The Company will place into service its website in 2018 and the website will be fully operational by then. All capitalized costs associated with the website will be subject to straight-line amortization over its expected useful life of three years when the website is ready for its intended use.
The Company reviews its website development costs for impairment whenever events or changes in circumstances indicate that the carrying amount of the website development costs may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the website development costs to the estimated undiscounted future cash flows expected to result from the use of the website development costs and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the website development costs, the Company would recognize an impairment loss based on the fair value of the website development costs.
F. FOREIGN CURRENCY TRANSLATION
The Company maintains its books and accounting records in Hong Kong Dollars with the Hong Kong Dollars being the functional currency. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date.
The financial statements of Hong Kong Cryptocurrency Exchange Limited are prepared in the Company's reporting currency, United States Dollars (“USD”). Balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using the average exchange rate prevailing during the reporting period. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive income (loss) in the shareholder’s equity.
The exchange rates used for the foreign currency translation were as follows (USD$1=HKD):
Period Covered | Balance Sheet Date Rate | Average Rate |
For the period from inception (April 19, 2017) through September 30, 2017 | 7.8 | 7.8 |
The Hong Kong Monetary Authority (“HKMA”), Hong Kong's central bank, maintains a Linked Exchange Rate System since 1983. The HKMA operates Convertibility Undertakings on both the strong side and the weak side of the Linked Rate of USD$1: HKD7.8. In fact, the exchange rate for HKD to US dollars has varied by very little during 2017. Thus, the consistent exchange rate used has been 7.80 HKD per each US dollar. Since there have been no greater fluctuations in the exchange rate, there is no gain or loss from foreign currency translation and no resulting other comprehensive income or loss.
G. INCOME TAXES
Income tax expense is based on reported income before income taxes. The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
H. | RELATED PARTIES |
A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
I. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position and result of operations.
NOTE 3 – GOING CONCERN
The Company is still in the early stage of establishing a market for its services and has not yet generated any revenue as of September 30, 2017. In addition, the Company has a working capital deficit of $197,769 at September 30, 2017 and incurred $45,205 loss from operations for the period from inception through September 30, 2017. The Company is primarily funded by So Ka Yan, the Company’s Chief Executive Officer ("CEO") and sole owner. The Company will have to raise additional capital, including through the sale of equity securities, to support its operations and expansion.
These conditions and uncertainties raise substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 4 – RELATED PARTY TRANSACTIONS
The related party consists of the following:
So Ka Yan, the Company’s sole director and shareholder
Due to Related Party
Due to related party consists of the following:
|
|
|
|
| September 30, 2017 | |
Website development costs paid on behalf of the Company |
|
|
| $ | 153,846 | |
Expenses paid on behalf of the Company |
|
|
|
| 39,705 | |
Amount due to So Ka Yan |
|
|
| $ | 193,551 |
The amounts were paid by So Ka Yan, the Company’s CEO and sole owner, to support the Company’s operation. They are unsecured, non-interest bearing and payable on demand.
Office Furnished by Related Party
The Company’s executive office in Hong Kong is located at 10th Floor, Si Toi Commercial Building, 32 Queen Street, Sheung Wan, Hong Kong. This office is furnished to the Company by a friend of the Chief Executive Officer of Living 3D Holdings, Inc., the spouse of So Ka Yan, at no charge. The Company shares this office with Living 3D Holdings, Inc.
The Company has an authorized capital of 10,000 ordinary shares with $0.1282 par value, 10,000 shares are issued and outstanding at September 30, 2017.
NOTE 6 – INCOME TAXES
The Company is registered in Hong Kong Special Administrative Region and Hong Kong profits tax is calculated at 16.5% of the estimated assessable profit for the period.
No provision for income taxes has been made as the Company has no taxable profits for the period ended September 30, 2017.
As of September 30, 2017, the Company has deferred tax assets of $7,459 arising from the net operating loss of $45,205. The net operating loss carry forwards are available to be utilized against future taxable income. In assessing the reliability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management believes that the net loss is significant negative evidence that deferred tax assets would not be realizable. Therefore, the deferred tax asset is covered by a full valuation allowance.
Accounting for Uncertainty in Income Taxes
The Company has evaluated and concluded that there are no significant uncertain tax positions that require recognition in its financial statements.
The Company may from time to time be assessed interest or penalties by major tax jurisdictions. In the event it receives an assessment for interest and/or penalties, it will be classified in the financial statements as tax expense.
NOTE 7 – SUBSEQUENT EVENTS
On December 4, 2017, the Company entered into a share acquisition and exchange agreement (the "Share Acquisition and Exchange") with Living 3D Holdings, Inc., a company incorporated in the State of Nevada. Under the Share Acquisition and Exchange, Living 3D Holdings, Inc. ("Living 3D") will issue an aggregate of 40,000,000 shares of its common stock at par value of $0.001 each to the sole shareholder of the Company in exchange for all of the issued and outstanding securities of the Company. The Share Acquisition and Exchange was closed on December 28, 2017. As a result of the Share Acquisition and Exchange, the Company became Living 3D's wholly-owned subsidiary.