NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE
OF OPERATIONS
JS
Beauty Land Network Technology Inc. (the “Company” or “JS” or “We’ or “Us”) is a Nevada
corporation incorporated on May 8, 2018. The Company was formed as a US corporation to use as a vehicle for raising equity both in the
United States and abroad.
On
August 6, 2018, the Company and an unrelated party established a subsidiary company, Jiangsu Meiyunmei Technology Inc. (“MYM”),
in China. The Company owns 99% of the common shares of MYM. MYM’s business plan is to operate jewelry manufacturing facilities
and retailers in China, particularly dealing in fine emerald and jade jewelry. MYM intends to offer jewelry both in a retail setting
and through online channels. MYM intends to target high-end jewelry consumers and investors and collectors of fine jade jewelry. In the
longer term, MYM intends to operate a franchising business for retail sales of fine jewelry. MYM started jewelry retail sales in November
2018.
The
outbreak of COVID19 coronavirus in China starting from the beginning of 2020 has resulted reduction of working hours for the Company.
The Company followed the restrictive measures implemented in China, by suspending operation and having employees’ work remotely
during February and March 2020. The Company gradually resumed operation and production starting in April 2020. The demand for our products
decreased in February and March 2020. The recent developments of COVID 19 are expected to result in lower sales and gross margin in 2020.
Other financial impact could occur though such potential impact is unknown at this time.
BASIS
OF PRESENTATION
The
consolidated financial statements include the financial statements of JS and its subsidiary MYM. All significant intercompany balances
and transactions have been eliminated in consolidation. In the opinion of management, all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation of the consolidated financial statements have been included.
The
summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements.
Such financial statements and accompanying notes are the representations of the Company’s management, who are responsible for their
integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America
(“GAAP”) in all material respects and have been consistently applied in preparing the accompanying financial statements.
Non-controlling
interests
Non-controlling
interests represents the individual shareholder’s proportionate share of 1% of equity interest in Jiangsu Meiyunmei Technology
Inc.
USE
OF ESTIMATES
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
CASH
AND CASH EQUIVALENTS
Cash
and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments
with original maturities of 90 days or less.
INVENTORIES
Inventories
are stated at the lower of cost or net realizable value. Costs include the cost of purchasing of finished goods. The cost of inventories
is calculated using the weighted average method. Any excess of the cost over the net realizable value of each item of inventories is
recognized as a provision for diminution in the value of inventories.
Net
realizable value is the estimated selling price in the normal course of business less any costs to complete and sell products.
PROPERTY,
PLANT AND EQUIPMENT
Property
and equipment are stated at cost. The straight-line depreciation method is used to compute depreciation over the estimated useful lives
of the assets, as follows:
Items
|
|
Useful
life
|
Office
equipment
|
|
3–5
years
|
Expenditures
for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures
for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated
depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the statement
of income in other income and expenses.
INTANGIBLE
ASSETS
Intangible
assets consist primarily of trademarks and APP software. Intangible assets are amortized using the straight-line method with the following
estimated useful lives:
Items
|
|
Useful
life
|
APP
software
|
|
10
years
|
Trademarks
|
|
10
years
|
IMPAIRMENT
OF LONG-LIVED ASSETS
The Company
reviews the carrying value of intangible assets for impairment whenever events and circumstances indicate that the carrying value of
an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases
where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by
which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include
current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition
and other economic factors. Based on this assessment, the Company recorded an impairment expense of $262,549 and $0 for the years
ended December 31, 2020 and 2019, respectively.
CONCENTRATION
OF RISK
The
Company incurs expense transactions that are denominated in RMB. A portion of the Company’s subsidiary’s assets and liabilities
are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are
required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China
(“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China
foreign exchange regulatory bodies that require certain supporting documentation in order to affect the remittance.
As
of December 31, 2020 and 2019, $617,810 and $110,151 of the Company’s cash were on deposit at financial institutions in the PRC
where there currently is a rule or regulation requiring such financial institutions to maintain insurance to cover bank deposits in the
event of bank failure. The Company’s bank account in the PRC is protected by deposit insurance up to RMB500,000.
Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and other receivable. Cash
in bank amounted to $721,529 and $121,198 as of December 31, 2020 and 2019, respectively. Other receivable amounted to $19,782 and $22,657
as of December 31, 2020 and 2019, respectively.
REVENUE
RECOGNITION
The
Company adopted Accounting Standards Codification (“ASC”) 606. ASC 606, Revenue from Contracts with Customers, establishes
principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s
contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer
of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange
for those goods or services recognized as performance obligations are satisfied.
The
Company has assessed the impact of the guidance by performing the following five steps analysis:
Step
1: Identify the contract
Step
2: Identify the performance obligations
Step
3: Determine the transaction price
Step
4: Allocate the transaction price
Step
5: Recognize revenue
The
Company recognizes revenue from the sale of jewelry, food, daily necessities and household appliances through its retail shops for the
years ended December 31, 2020 and 2019. Customer makes full payment and picks up their purchases at time of purchase. The Company does
not offer customers right of return.
Sales
represent the invoiced value of goods, net of surcharges and value added tax (“VAT”), if any, and are recognized upon delivery
of goods and passage of title.
The
Company had net revenue of $461,154 and $115,323 for the year ended December 31, 2020 and 2019, respectively.
INCOME
TAXES
Under
ASC 740, “Income Taxes,” deferred tax assets and liabilities are recognized for the future tax consequences attributable
to temporary 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. Valuation allowances are established when it is more likely than
not that some or all of the deferred tax assets will not be realized. As of December 31, 2020 and 2019, there were no deferred taxes
due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.
INCOME(LOSS)
PER COMMON SHARE
Basic
income(loss) per common share excludes dilution and is computed by dividing net income(loss) by the weighted average number of common
shares outstanding during the period. Diluted loss per common share reflect the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that
then shared in the loss of the entity. As of December 31, 2020, there are no outstanding dilutive securities. For years ended December
31, 2020 and 2019, the Company had net income(loss) per common share, basic and diluted of $(0.15) and $(0.27), respectively.
FOREIGN
CURRENCY TRANSLATION
The
Company’s principal country of operations is the PRC. The financial position and results of its operations are determined using
RMB, the local currency, as the functional currency. Our financial statements are reported using U.S. Dollars. The results of operations
and the statement of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period.
Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange
in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time
of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities
reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Translation
adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated
other comprehensive income included in statement of changes in equity. Gains and losses from foreign currency transactions are included
in the consolidated statement of income and comprehensive income.
The
value of RMB against US$ and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political
and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of
US$ reporting. The following table outlines the currency exchange rates that were used in creating the consolidated financial statements
in this report:
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Period-end spot rate
|
|
|
US
$1=RMB 6.5250
|
|
|
|
US
$1=RMB 6.9618
|
|
|
|
|
|
|
|
|
|
|
Average rate
|
|
|
US
$1=RMB 6.9042
|
|
|
|
US
$1=RMB 6.9081
|
|
FAIR
VALUE OF FINANCIAL INSTRUMENTS
The
Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value
measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Additionally,
the Company adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value
in the financial statements on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value.
The
hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)
and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair
value hierarchy are as follows:
Level
1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access
at the measurement date.
Level
2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly.
Level
3 inputs are unobservable inputs for the asset or liability. The carrying amounts of financial assets such as cash, prepaid expenses,
and other receivable approximate their fair values because of the short maturity of these instruments.
LEASE
Effective January 1, 2020, the Company adopted
the new lease accounting standard using a modified retrospective transition method which allowed the Company not to recast comparative
periods presented in its consolidated financial statements. In addition, the Company elected the package of practical expedients, which
allowed the Company to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as
operating or finance leases, and to not reassess initial direct costs. The Company has not elected the practical expedient to use hindsight
to determine the lease term for its leases at transition. The Company combines the lease and non-lease components in determining the
ROU assets and related lease obligation. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding
operating lease liabilities as disclosed below and had no impact on accumulated deficit as of December 31, 2020. ROU assets and related
lease obligations are recognized at commencement date based on the present value of remaining lease payments over the lease term.
Because
the Company sells only jewelry products in China, it has only one business segment.
RECENT
ACCOUNTING PRONOUNCEMENTS
Other
recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the United States Securities and Exchange
Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
NOTE
2 - GOING CONCERN
The
Company has generated revenue since inception to date and has sustained operating loss of $346,575 during the year ended December
31, 2020. The Company had a working capital of $304,288 and a negative accumulated deficit of $967,401 as of December 31,
2020 and a working capital deficit of $32,425 and a negative accumulated deficit of $623,311 as of December 31, 2019. The Company’s
continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations
and/or obtaining additional financing from its shareholders or other sources, as may be required.
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition
raises substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that
may result should the Company be unable to continue as a going concern.
In
order to maintain its current level of operations, the Company will require additional working capital from either cash flow from operations
or from the sale of its equity. However, the Company currently has no commitments from any third parties for the purchase of its equity.
If the Company is unable to acquire additional working capital, it will be required to significantly reduce its current level of operations.
NOTE
3 – INVENTORY
As
of December 31, 2020 and 2019, the Company had inventory of finished goods $0 and $89,029, respectively.
NOTE
4 – PROPERTY AND EQUIPMENT
As
of December 31, 2020 and 2019, the Company had gross property and equipment of $12,291 and $11,520 and accumulated depreciation of $5,531
and $2,880, respectively. Property and equipment consisted of the office equipment. For the years ended December 31, 2020 and 2019, depreciation
expenses amounted to $2,323 and $2,304, respectively.
NOTE
5 – INTANGIBLE ASSETS
As
of December 31, 2020 and 2019, the Company had intangible assets of $0 and $277,004, respectively.
Intangible assets consisted of the following:
As
of December 31, 2019
|
|
Software
|
|
|
Trademark
|
|
|
Total
|
|
Cost
|
|
$
|
255,681
|
|
|
$
|
21,546
|
|
|
$
|
277,227
|
|
Accumulated
Amortization
|
|
|
|
|
|
|
223
|
|
|
|
223
|
|
Net
|
|
$
|
255,681
|
|
|
$
|
21,323
|
|
|
$
|
277,004
|
|
For
the years ended December 31, 2020 and 2019, amortization expenses amounted to $16,766 and $223, respectively.
The Company recorded an impairment expense of $262,549
and $0 for the years ended December 31, 2020 and 2019, respectively.
NOTE
6 - RELATED PARTIES
Due
from a related party amounted to $3,975 and $3,727 as of December 31, 2020 and 2019, respectively. The amount due from a related
party, chairman of MYM, Yang Yang.
Due
to related parties amounted to $106,452 and $99,867 as of December 31, 2020 and 2019, respectively. The amount due to two related
parties, director of the Company, Faxian Qian, and director of MYM, Zhaojin Xu, are loans made by related parties, which
are unsecured, non-interest bearing, and due on demand. The Company accrued imputed interest with 6% per annum. Imputed interest
amounted $6,387 and $4,844 for the years ended December 31, 2020 and 2019, and was recorded as paid in capital.
Our
directors have not been compensated for the services.
NOTE
7 – OTHER PAYABLE
Other
payable amounted to $131,750 and $130,745 as of December 31, 2020 and 2019, respectively. Other payable are payments for general
and administrative expenses made by an unrelated party on behalf of the Company. The balance of other payable is unsecured, non-interest
bearing, and due on demand. Other payable is primarily payments for incorporation fees, audit fees, and professional fees.
NOTE
8 – SHARES TO BE ISSUED
In
October 2019, the Company sold 66,000 shares of common stock at $1.0 per share for total of $66,000 to 24 unrelated parties. 63,000 shares
of these 66,000 shares were issued in January 2020. In June 2020, investment of $3,000 was returned to 1 unrelated party
In
November 2019, the Company sold 17,000 shares of common stock at $1.0 per share for total of $17,000 to 10 unrelated parties. These shares
were issued in January 2020.
In
January 2020, the Company sold 4,000 shares of common stock at $1.0 per share for total of $4,000 to 2 unrelated parties. These shares
were issued in July 2020.
In
June 2020, the Company sold 104,000 shares of common stock at $1.0 per share for total of $104,000 to 50 unrelated parties. These shares
were issued in July 2020.
In
October 2020, the Company sold 39,000 shares of common stock at $1.0 per share for total of $39,000 to 24 unrelated parties. These
shares have not been issued as of December 31, 2020.
In
November 2020, the Company sold 50,000 shares of common stock at $1.0 per share for total of $50,000 to 50 unrelated parties. These
shares have not been issued as of December 31, 2020.
In
December 2020, the Company sold 9,000 shares of common stock at $1.0 per share for total of $9,000 to 9 unrelated parties. These shares
have not been issued as of December 31, 2020.
NOTE
9 – INCOME TAX
United
States
The
Company is incorporated in United States, and is subject to corporate income tax rate of 21%.
The
People’s Republic of China (PRC)
Under
the Provisional Regulations of The People’s Republic of China Concerning Income Tax on Enterprises promulgated by the PRC, which
took effect on January 1, 2008, domestic and foreign companies pay a unified corporate income tax of 25%, except for a 15% corporate
income tax rate for qualified high technology and science enterprises.
The
new EIT Law also imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise to its immediate holding
company outside of China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place
within China or if the received dividends have no connection with the establishment or place of such immediate holding company within
China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different
withholding arrangement. Such withholding income tax was exempted under the previous income tax regulations.
Income(Loss)
before income taxes consists of:
|
|
For the Year
ended December 31,
2020
|
|
|
For the Year
ended December 31,
2019
|
|
Non-PRC
|
|
$
|
(98,049
|
)
|
|
$
|
(65,873
|
)
|
PRC
|
|
|
(248,526
|
)
|
|
|
(434,164
|
)
|
|
|
$
|
(346,575
|
)
|
|
$
|
(500,037
|
)
|
The
components of deferred taxes are as follows at December 31, 2020 and 2019:
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
Fixed assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Net operating
losses
|
|
|
203,154
|
|
|
|
130,895
|
|
Valuation
allowance
|
|
|
(203,154
|
)
|
|
|
(130,895
|
)
|
Deferred tax assets,
non-current portion, net
|
|
$
|
-
|
|
|
$
|
-
|
|
As
of December 31, 2020, MYM had a net operating loss of $722,720 that can be carried forward to offset future net profit for income
tax purposes under the PR China tax law. The net operating loss carry forwards as of December 31, 2020 will expire in years 2021 to 2025
if not utilized.
JS
Beauty Land Network Technology Inc. is subject to United States of America tax law. As of December 31, 2020, the operations in the United
States of America incurred approximately $244,681 of cumulative net operating losses that may be available to reduce future years’
taxable income indefinitely. The Company has provided
full valuation allowance for the deferred tax assets on the expected future tax benefits from the net operating loss carry forwards as
the management believes it is more likely than not that these assets will not be realized in the future.
A
reconciliation between the income tax computed at the U.S. statutory rate and the Company’s provision for income tax in the PRC
is as follows:
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
Tax expense at statutory rate -
US
|
|
|
21
|
%
|
|
|
21
|
%
|
Foreign income not recognized in the U.S.
|
|
|
(21
|
)%
|
|
|
(21
|
)%
|
PRC enterprise income tax rate
|
|
|
25
|
%
|
|
|
25
|
%
|
Loss not subject to
income tax
|
|
|
(25
|
)%
|
|
|
(25
|
)%
|
Effective income tax
rates
|
|
|
-
|
%
|
|
|
-
|
%
|
NOTE
10 - STOCKHOLDERS’ EQUITY
The
Company is authorized to issue 100,000,000 shares of common stock and 10,000,000 shares of preferred stock. There is no preferred stock
issued and outstanding as of December 31, 2020 and 2019. There are 2,556,428 and 2,136,428 shares of common stock issued and outstanding
as of December 31, 2020 and 2019, respectively.
In
May 2019, the Company sold 765,000 shares of common stock at $1.0 per share for total of $765,000 to 44 unrelated parties.
In
October 2019, the Company sold 66,000 shares of common stock at $1.0 per share for total of $66,000 to 24 unrelated parties. 63,000
shares of these 66,000 shares were issued in January 2020.
In
November 2019, the Company sold 17,000 shares of common stock at $1.0 per share for total of $17,000 to 10 unrelated parties. These shares
were issued in January 2020.
In
January 2020, the Company issued 63,000 shares and 17,000 shares of common stock that were sold in October 2019 and November 2019, respectively.
In
July 2020, the Company issued 4,000 shares and 104,000 shares of common stock that were sold in January 2020 and June 2020, respectively.
In
July 2020, the Company sold 62,000 shares of common stock at $1.0 per share for total of $62,000 to 25 unrelated parties. These shares
were issued in September 2020.
In
August 2020, the Company sold 91,000 shares of common stock at $1.0 per share for total of $91,000 to 42 unrelated parties. These shares
were issued in September 2020.
In
September 2020, the Company sold 79,000 shares of common stock at $1.0 per share for total of $79,000 to 75 unrelated parties. These
shares were issued in September 2020.
NOTE
11 – LEASE
MYM
has entered into a operating leases agreement with Nanjing Dongfang Shihua Real Estate Co., Ltd. The lease term of the office space is
from November 1, 2019 to October 31, 2022. The current monthly rent including monthly management fee is approximately $5,839 (RMB 39,647).
The operating lease is listed as separate line item on the Company’s condensed consolidated financial statements and represent
the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are also
listed as a separate line item on the Company’s condensed consolidated financial statements.
Operating
lease right-of-use assets and liabilities commencing after November 1, 2019 are recognized at commencement date based on the present
value of lease payments over the lease term. For the year ended December 31, 2020, the Company recognized approximately $68,909 in total
lease costs.
Because
the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present
value of the lease payments.
Information
related to the Company’s operating ROU assets and related lease liabilities are as follows:
|
|
Year
Ended
December
31, 2020
|
|
Cash paid for operating lease liabilities
|
|
$
|
68,909
|
|
Weighted-average remaining lease term
|
|
|
1.83
|
|
Weighted-average discount rate
|
|
|
4.75
|
%
|
Minimum future lease payments
|
|
$
|
127,778
|
|
The
following table presents the amortization of the Company’s lease liabilities under ASC 842 for each of the following years ending
December 31:
2021
|
|
$
|
68,319
|
|
2022
|
|
|
59,459
|
|
2023
|
|
|
-
|
|
2024
|
|
|
-
|
|
2025 and thereafter
|
|
|
-
|
|
Total
|
|
$
|
127,778
|
|
NOTE
12 – SUBSEQUENT EVENTS
In
accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2020 to the date these financial statements
were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.