PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issue Purchases of Equity Securities.
Market
Information
Our
common stock is quoted on the OTC Markets (“OTCQB”) under the symbol “ICGL”.
The
table below sets forth the high and low closing prices of the Company’s Common Stock during the periods indicated as reported
by the OTC Markets. The Company’s Common Stock was initially quoted on the OTCQB on January 3, 2015.
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Bid
Price
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HIGH
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LOW
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Period ended April 13, 2017
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5.00
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5.00
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First Quarter ended March 31, 2017
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$
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16.00
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$
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2.00
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FISCAL YEAR 2016:
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|
|
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$
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|
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Fourth Quarter ended December 31, 2016
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$
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13.00
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|
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$
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13.00
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Third Quarter ended September 30, 2016
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$
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20.00
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$
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7.30
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Second Quarter ended June 30, 2016
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$
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9.50
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$
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7.75
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First Quarter ended March 31, 2016
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$
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10.00
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|
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$
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7.00
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FISCAL YEAR 2015:
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|
|
|
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$
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|
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Fourth Quarter ended December 31, 2015
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$
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9.00
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|
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$
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6.99
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Third Quarter ended September 30, 2015
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$
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8.00
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|
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$
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5.00
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Second Quarter ended June 30, 2015
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$
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6.25
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|
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$
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0.55
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First Quarter ended March 31, 2015
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$
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6.25
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|
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$
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0.01
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Holders
As
of the date of this report there were approximately 264 holders of record of Company common stock. This does not include an indeterminate
number of persons who hold our Common Stock in brokerage accounts and otherwise in “street name.”
Dividends
Holders
of common stock are entitled to receive such dividends as may be declared by the Company’s Board of Directors. The Company
did not declare or pay dividends during its fiscal years ended December 31, 2016 or 2015.
To
the extent ICGL has any future earnings, it will likely retain earnings to expand corporate operations and not use such earnings
to pay dividends.
Transfer
Agent and Registrar
The
transfer agent and registrar for ICGL’s common stock is Globex Transfer, LLC, 780 Deltona Blvd., Suite 202, Deltona, FL
32725, telephone 813-344-4490.
Repurchases
of Our Securities
None.
Recent
Sales of Unregistered Securities
None.
Item
6. Selected Financial Data.
Not
applicable.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary
Statements
This
Annual Report on Form 10-K (“Annual Report”) may contain “forward-looking statements,” as that term is
used in federal securities laws, about Image Chain Group Limited, Inc.’s financial condition, results of operations and
business. These statements include, among others:
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●
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statements
concerning the potential benefits that Image Chain Group Limited, Inc. (“ICGL,” “we,” “our,”
“us,” the “Company,” “management”) may experience from its business activities and certain
transactions it contemplates or has completed; and
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|
|
|
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●
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statements
of ICGL’s expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not
historical facts. These statements may be made expressly in this Annual Report. You can find many of these statements by looking
for words such as “believes,” “expects,” “anticipates,” “estimates,” “opines,”
or similar expressions used in this Annual Report. These forward-looking statements are subject to numerous assumptions, risks
and uncertainties that may cause ICGL’s actual results to be materially different from any future results expressed
or implied by ICGL in those statements. The most important facts that could prevent ICGL from achieving its stated goals include,
but are not limited to, the following:
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|
(a)
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volatility
or decline of ICGL’s stock price;
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|
|
|
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(b)
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potential
fluctuation of quarterly results;
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(c)
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failure
of ICGL to earn revenues or profits;
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(d)
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inadequate
capital to continue or expand its business, and inability to raise additional capital or financing to implement its business
plans;
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(e)
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decline
in demand for ICGL’s products and services;
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(f)
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rapid
adverse changes in markets;
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|
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(g)
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litigation
with or legal claims and allegations by outside parties against ICGL, including but not limited to challenges to ICGL’s
intellectual property rights; and
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|
|
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(h)
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insufficient
revenues to cover operating costs.
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There
is no assurance that ICGL will be profitable in the near future, ICGL may not be able to source and consummate attractive acquisitions
and may not successfully develop, manage or market the products and services of future acquired companies, ICGL may not be able
to attract or retain qualified executives and personnel, ICGL may not be able to obtain customers for products or services that
it markets in the future, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares,
warrants and stock options, or the exercise of outstanding warrants and stock options, and other risks inherent in ICGL’s
businesses.
Because
the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by
the forward-looking statements. ICGL cautions you not to place undue reliance on the statements, which speak only as of the date
of this Annual Report. The cautionary statements contained or referred to in this section should be considered in connection with
any subsequent written or oral forward-looking statements that ICGL or persons acting on its behalf may issue. ICGL does not undertake
any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking
statements to reflect events or circumstances after the date of this Annual Report, or to reflect the occurrence of unanticipated
events.
Overview
Image
Chain Group Limited, Inc. (formerly Have Gun Will Travel Entertainment, Inc.) (“ICGL”, “we”, “us”
or the “Company”) was incorporated under the laws of Nevada on December 18, 2013, and initially sought to create reality
television programming. On June 11, 2015, the Company amended its Articles of Incorporation in order to change its name to Image
Chain Group Limited, Inc. and to increase the authorized shares of common stock from 70,000,000 to 400,000,000 (the “Amendments”).
The name change was undertaken in order to more closely align with the operations of the Company’s wholly-owned subsidiary,
Fortune Delight Holdings Group Ltd (“FDHG”). The increase in authorized shares was undertaken to allow the Company
to utilize the newly available shares to raise capital.
On
May 5, 2015, ICGL entered into a share exchange agreement (the “Exchange Agreement”) with FDHG and Wu Jun Rui, on
behalf of himself and certain other individuals who are to receive shares of ICGL pursuant to the Exchange Agreement (the “Shareholders”).
On the terms and subject to the conditions set forth in the Exchange Agreement, on May 5, 2015, Wu Jun Rui transferred all 50,000
shares of FDHG common stock, consisting of all of the issued and outstanding shares of FDHG, to ICGL in exchange for the issuance
to the shareholders of 59,620,000 shares of the Company’s common stock, par value $.001 per share and 5,000,000 shares of
the Company’s preferred stock, par value $.001 per share. On February 13, 2017 the Company filed with the Secretary of State
of the State of Nevada a Certificate of Correction (the “Certificate of Correction”) to correct a mistake made in
the Company’s original Articles of Incorporation with regard to the preferred stock issued in connection with the Exchange
Agreement. The Company also entered into an agreement in which the holder of the preferred stock agreed to retire the preferred
stock in exchange for receiving an equal number of common stock of the Company.
As
a result of the closing of the Exchange Agreement, FDHG became the Company’s wholly owned subsidiary. FDHD, through its
subsidiaries, manufactured and sold “Image Tea”-branded tea products from its tea garden in Yunnan Province.
On
or about November 15, 2016, FDHG disposed of its ownership of all operating assets, and as a result ICGL became a shell company,
as defined by Rule 12b-2 under the Exchange Act (the “Disposition Event”). The Disposition Event is evidenced by a
bought and sold note stamped by the Inland Revenue Department of Hong Kong, which we believe is a legally binding document. Because
ICGL does not currently have any substantial operations, we are currently reviewing potential acquisition targets.
Results
of Operations
As
a result of the Disposition Event, the Company does not currently have any substantial operations and is a shell company, as such
term is defined in Rule 12b-2 under the Exchange Act. Because of the Disposition Event, the Company has restated our 2015 financial
statements to reflect accurate comparable financial data between the period ended December 31, 2016, and 2015. As of December
31, 2016, the Company had accumulated deficits of $59,396,596 due to the substantial losses incurred in operations that have been
discontinued in 2016, and management’s previous plan to support the Company’s operations and maintain its business
strategy by raising additional funds through public and private offerings, or loans from related parties, or to rely on officers
and directors to perform essential functions with minimal compensation was unsuccessful.
Discontinued
Operations Nine month Period Ended September 30, 2016 Compared to Fiscal year Ended December 31, 2015
Note
8 of Notes to the Financial Statements sets forth the financial information of the discontinued operations of the Company, for
the nine months ended September 30, 2016, and for the fiscal year ended December 31, 2015. After taking into account the reduced
time period for reporting the financial information for 2016, from the fiscal year ended December 31, 2015 to the nine month period
ended September 30, 2016, the Company experienced a considerable 77% reduction in net sales, a 55% increase in other payables,
and a 57% increase in inventories. We attribute these considerably divergent numbers to a lack of focus on the part of management
of our operating subsidiaries, deterioration in the quality of inventories from water and moisture damage, and mismanagement of
Company expenses at the operating subsidiary level.
Fiscal
year Ended December 31, 2016 Compared to Fiscal year Ended December 31, 2015
As
a result of the Disposition Event, the Company does not currently have any substantial operations and is a shell company, as such
term is defined in Rule 12b-2 under the Exchange Act.
The
Company’s loss before income taxes from continuing operations was $52,205,941 for the fiscal year ended December 31, 2016,
as compared to $7,101,319 for the same period in 2015. This is mostly attributable to a $41,687,861 write-off of subscription
receivable, as the Company’s management determined that it would no longer pursue payment for shares issued but not yet
paid up.
Liquidity
and Capital Resources
The
Company did not have cash or cash equivalents at December 31, 2016. As a shell company, our operating expenses are minimal, and
we intend to finance future acquisitions by issuing shares of capital stock of the Company.
Critical
Accounting Policies and Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including
the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies
to be those that require the more significant judgments and estimates in the preparation of financial statements, including the
following:
Use
of Estimates
In
preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management
makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the
reporting years. These accounts and estimates include, but are not limited to, the estimation on useful lives of property, plant
and equipment. Actual results could differ from those estimates.
Fair
Value of Financial Instruments
For
certain of the Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts
and other payables, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short
maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial
instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level
valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The
carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments
and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments
and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined
as follows:
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●
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Level
1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
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●
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Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial
instrument.
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|
|
|
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●
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Level
3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
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The
Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities
from Equity,” and ASC 815.
The
Company’s financial instruments include other receivable, and balances due from and due to related parties. Management estimates
the carrying amounts of the related party financial instruments approximate their fair values due to their short-term nature.
Valuation
of Long-Lived Assets
The
Company adopts Accounting Standards Codification (“ASC”) 360, “Accounting for the Impairment or Disposal of
Long-Live Assets”, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets.
The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 360 which
requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that
event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets.
The
long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as
a result of technology or other industry changes. Recoverability of assets to be held and used is determined by comparing the
carrying amount of an asset to future net undiscounted cash flows to be generated by the assets.
If
such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount
or fair value less costs to sell. During the reporting periods, there was no impairment loss.
Recent
Accounting Pronouncements
(See
“Recent Accounting Pronouncements” in Note 2 of Notes to the Financial Statements.)
Item
7A. Quantitative and Qualitative Disclosures About Market Risk.
Not
applicable.
Item
8. Financial Statements and Supplementary Data
The
financial statements required by this item are set forth beginning in Item 15 of this Annual Report on Form 10-K, beginning on
page F-1, and are incorporated herein by reference.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
On
May 18, 2015, the Company and Sadler, Gibb & Associates LLC (“Sadler”) mutually agreed to terminate Sadler’s
engagement as independent accountants to the Company because Sadler does not have an office in China or the ability to translate
Chinese. The termination of Sadler was approved by the Company’s Board of Directors on May 7, 2015. There had been no disagreements
with Sadler on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
On
April 20, 2015, the Company’s subsidiary, FDHG, engaged WWC, Professional Corporation Certified Public Accountants as its
independent accountant to provide auditing services for FDHG for the periods prior to the date of the Exchange Agreement between
the Company and FDHG, and on a going-forward basis for the Company and FDHG following the termination of Sadler’s services
to the Company. Prior to such engagement, the Company had no consultations with WWC, Professional Corporation Certified Public
Accountants. The decision to hire WWC, Professional Corporation Certified Public Accountants was approved by the Company’s
Board of Directors.
Item
9A. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
Disclosure
controls and procedures are controls and other procedures that are designed to ensure that information we are required to disclose
is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Commission. Wenchang
Gu, our Principal Executive Officer and our Principal Financial Officer, is responsible for establishing and maintaining our disclosure
controls and procedures.
Under
the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial
Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule
15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive
Officer and Principal Financial Officer has concluded that, as of December 31, 2016, these disclosure controls and procedures
were not effective in ensuring that all information required to be disclosed by us in the reports that we file or submit under
the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s
rule and forms; and (ii) accumulated and communicated to our management, including our Principal Executive Officer and Principal
Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
The
term “internal control over financial reporting” is defined as a process designed by, or under the supervision of,
the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected
by the registrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures that:
●
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pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of
the assets of the registrant;
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●
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provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in
accordance with authorizations of management and directors of the registrant; and
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●
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provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s
assets that could have a material effect on the financial statements.
|
Management’s
Annual Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting is a process designed by, or under the supervision of, the Principal Executive Officer and Principal
Financial Officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles.
The
framework our management uses to evaluate the effectiveness of our internal control over financial reporting is based on the guidance
provided by the Committee of Sponsoring Organizations of the Treadway Commission in its 1992 report: INTERNAL CONTROL - INTEGRATED
FRAMEWORK. Based on our evaluation under the framework described above, our management has concluded that our internal control
over financial reporting was not effective as of December 31, 2016.
The
Company’s internal control over financial reporting is not effective due to a lack of sufficient resources to hire a support
staff in order to separate duties between different individuals. The Company lacks the appropriate personnel to handle all the
varying recording and reporting tasks on a timely basis.
This
annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation requirements by the company’s
registered public accounting firm.
Inherent
Limitations over Internal Controls
ICGL’s
management does not expect that its disclosure controls or its internal control over financial reporting will prevent or detect
all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute,
assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there
are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or
fraud will not occur or that all control issues and instances of fraud, if any, within ICGL have been detected. These inherent
limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple
error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people,
or management override of the controls. The design of any system of controls is based in part on certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over
time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies
or procedures.
Our
disclosure controls and procedures are designed to provide reasonable assurance of that our reports will be accurate. Our Principal
Executive Officer and Principal Financial Officer concludes that our disclosure controls and procedures were not effective, as
of the end of the period covered by this Form 10-K. Our future reports shall also indicate that our disclosure controls and procedures
are designed for this reason and shall indicate the related conclusion by the Principal Executive Officer and Principal Financial
Officer as to their effectiveness.
Changes
in Internal Control Over Financial Reporting
There
have been no changes in our internal control over financial reporting during the last fiscal quarter of 2016 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item
9B. Other Information.
None
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
ORGANIZATION
AND PRINCIPAL ACTIVITIES
|
Business
Image
Chain Group Limited, Inc. (formerly Have Gun Will Travel Entertainment, Inc.) (“ICGL” or the “Company”)
was incorporated under the laws of Nevada on December 18, 2013. From inception through the date of the Share Exchange as defined
below, the Company was an emerging forward-thinking full-service television pre-production company dedicated to the creation of
original concepts and programming with a bold and innovative edge in the reality television space for sale, option and licensure
to independent producers, cable television networks, syndication companies, and other entities. On June 11, 2015, the Company
amended its Articles of Incorporation with the State of Nevada in order to change its name to Image Chain Group Limited, Inc.
and to increase the authorized shares of common stock from 70,000,000 to 400,000,000 (the “Amendments”). The name
change was undertaken in order to more closely align with the operations of the Company’s wholly-owned subsidiary, Fortune
Delight Holdings Group Ltd (“FDHG”). The increase in authorized shares was undertaken to allow the Company to utilize
the newly available shares to raise capital. The board of directors and the stockholders of the Company approved the Amendments
on May 8, 2015.
FDHG,
through its wholly-owned operating subsidiaries, is in the business of promoting and distributing its own branded teas that are
grown, harvested, cured, and packaged in the People’s Republic of China (“PRC”). The Company’s headquarters
is located in Guangzhou, Guangdong Province, PRC. Currently, the Company’s products are sold in the PRC for domestic consumption.
Share
Exchange
On
May 5, 2015, ICGL entered into a share exchange agreement (the “Exchange Agreement”) with FDHG and Wu Jun Rui, on behalf
of himself and certain other individuals who were to receive shares of ICGL pursuant to the Exchange Agreement (the “Shareholders”).
On the terms and subject to the conditions set forth in the Exchange Agreement, on May 5, 2015, Wu Jun Rui transferred all 50,000
shares of FDHG common stock, consisting of all of the issued and outstanding shares of FDHG, to ICGL in exchange for the issuance
to the shareholders of 59,620,000 shares of the Company’s common stock, par value $.001 per share and 5,000,000 shares of
the Company’s preferred stock, par value $.001 per share. The preferred stock is not convertible nor mandatorily redeemable;
it does not pay dividends or carrying any voting rights.
As
a result of the closing of the Exchange Agreement, FDHG became the Company’s wholly owned subsidiary. FDHG is an investment
holding company incorporated and domiciled in the British Virgin Islands. FDHG wholly owns Silver Channel Industrial Limited,
a limited company incorporated, registered, and domiciled in Hong Kong.
The
securities purchase agreement transaction is referred to hereafter as the “reverse-merger transaction.” The share
exchange transaction has been accounted for as a recapitalization of ICGL where ICGL (the legal acquirer) is considered the accounting
acquiree and FDGH (the legal acquiree) is considered the accounting acquirer. As a result of this transaction, ICGL is deemed
to be a continuation of the business of FDDG.
Accordingly,
the accompanying consolidated financial statements are those of the accounting acquirer, FDGH. The historical stockholders’
equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction
occurred as of the beginning of the first period presented.
Organization
History of Silver Channel Industrial Limited and its subsidiaries
On
January 28, 2011, Silver Channel incorporated Heyuan Image Equipment Import Export Co., Ltd. (“Heyuan Image”) as a
wholly foreign owned enterprise (“WFOE”) registered in Heyuan City, Guangdong Province, PRC. Heyuan Image was dormant
for the year ended December 31, 2015 and 2014. Heyuan Image is wholly owned by Silver Channel. Heyuan Image has a registered capital
of HKD 4,000,000 of which HKD 3,380,000 has been paid up.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On
August 18, 2014, the Company, through its subsidiary Heyuan Image, acquired 100% equity of Guangzhou Image Agricultural Technology
Co., Ltd. (“Guangzhou Image”). Guangzhou Image is a limited liability company registered in Guangzhou City, Guangdong
Province, PRC. Guangzhou Image has not yet engaged in operating activities since its incorporation. Guangzhou Image is wholly
owned by Heyuan Image. Guangzhou Image has a registered capital of RMB 10 million of which is still outstanding.
On
February 16, 2015, Guangzhou Image entered into an equity transfer agreement with all the shareholders of Yunnan Image Tea Industry
Co., Ltd. (“Yunnan Image”). Guangzhou Image paid RMB 3,000,000 to all the shareholders of Yunnan Image for 100% equity
interest in Yunnan Image. Yunnan Image is a limited liability company registered in Xishuangbanna, Yunnan Province PRC. Yunnan
Image was incorporated on August 23, 2013. Yunnan Image is the primary operating entity to carry out the Company’s core
business activities of selling and marketing its own branded teas. Yunnan Image is wholly-owned by Guangzhou Image. Yunnan Image
had a registered capital of RMB 3 million. The capital has been paid up in its entirety.
Disposal
of Silver Channel and its subsidiaries
On
or about November 15, 2016, the Company’s subsidiary FDGH disposed of its ownership in Silver Channel which included all
of the assets and liabilities of Silver Channel, Heiyuan Image, Guangzhou Image, and Yunnan Image. All of the Company’s
substantial operations were conducted through the above four mentioned subsidiaries. The disposition was carried out by, Zheng
Zewu, whom is the Director of both FDGH and Silver Channel. Silver Channel was sold to Hong Kong Private Medical Services Limited
for a nominal value as indicated by the bought and sold note stamped by the Inland Revenue Department of Hong Kong. In conjunction
with the Company’s disposition of Silver Channel and its subsidiaries, the management has recast previously filed financial
statements as of and for the year then ended December 31, 2015 in order to segregate the financial position and results of operations
of discontinued operations.
As
of the date of this report, after the disposal of Silver Channel, the Company does not currently have any substantial operations.
The Company is currently reviewing potential acquisition targets.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
The
Company maintains its general ledger and journals with the accrual method of accounting for financial reporting purposes. The
financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally
accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial
statements.
|
(b)
|
Basis
of Presentation
|
The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America (“US GAAP”).
|
(c)
|
Principles
of Consolidation
|
The
consolidated financial statements include the accounts of the Company, its subsidiaries for which the Company is the primary beneficiary.
All significant inter-company accounts and transactions have been eliminated. The consolidated financial statements include 100%
of assets, liabilities, and net income or loss of those wholly-owned subsidiaries.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
As
of December 31, 2015, the detailed identities of the consolidating subsidiaries are as follows:
Name of company
|
|
Place of incorporation
|
|
Attributable equity interest%
|
|
|
Registered capital
|
|
Fortune Delight Holdings Group Limited
|
|
British Virgin Islands
|
|
|
100
|
%
|
|
$
|
50,000
|
|
Silver Channel Industrial Limited
|
|
Hong Kong
|
|
|
100
|
%
|
|
|
-
|
|
Heyuan Image Equipment Import Export Co., Ltd.
|
|
P.R.C.
|
|
|
100
|
%
|
|
|
515,849
|
|
Guangzhou Image Agricultural Technology Co., Ltd.
|
|
P.R.C.
|
|
|
100
|
%
|
|
|
1,636,902
|
|
Yunnan Image Tea Industry Co., Ltd.
|
|
P.R.C.
|
|
|
100
|
%
|
|
|
491,071
|
|
As
of December 31, 2016, the Company’s only subsidiary was FDHG.
|
(d)
|
Economic
and Political Risks
|
The
Company’s operations in the PRC 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, legal
environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and
social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion, restriction on international remittances, and rates and methods of taxation, among other things.
In
preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management
makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the
reporting years. These accounts and estimates include, but are not limited to, the estimation on useful lives of property, plant
and equipment. Actual results could differ from those estimates.
|
(f)
|
Cash
and Cash Equivalents
|
Cash
and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments
with original maturities of three months or less. As of December 31, 2015, cash and cash equivalents were mainly denominated in
RMB and were placed with banks in the PRC. These cash and cash equivalents may not be freely convertible into foreign currencies
and the remittance of these funds out of the PRC may be subjected to exchange control restrictions imposed by the PRC government.
The Company had no cash or cash equivalents in its continuing operations at December 31, 2016.
The
Company maintains allowances for potential credit losses on accounts receivable. Management reviews the composition of accounts
receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and
changes in customer payment patterns to evaluate the adequacy of these allowances. Terms of sales vary. Allowances are recorded
primarily on a specific identification basis.
As
of December 31, 2015, no provision for allowance for doubtful accounts was provided.
Other
receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance
for doubtful accounts is made when recovery of the full amount is doubtful.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Inventories
are stated at the lower of cost or market value. Cost is computed using the first-in, first-out method and includes all costs
of purchase and other costs incurred in bringing the inventories to their present location and condition. Market value is determined
by reference to the sales proceeds of items sold in the ordinary course of business or estimates based on prevailing market conditions.
|
(j)
|
Property,
Plant and Equipment
|
Property
and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals
and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property
and equipment is provided using the straight-line method for substantially all assets with estimated lives of:
Building
|
20
years
|
Computer
|
3
years
|
Motor
vehicles
|
4
years
|
|
(k)
|
Accounting
for Impairment of Long-Lived Assets
|
The
Company adopts Accounting Standards Codification (“ASC”) 360, “Accounting for the Impairment or Disposal of
Long-Live Assets”, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets.
The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 360 which
requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that
event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets.
The
long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as
a result of technology or other industry changes. Recoverability of assets to be held and used is determined by comparing the
carrying amount of an asset to future net undiscounted cash flows to be generated by the assets.
If
such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount
or fair value less costs to sell. During the reporting periods, there was no impairment loss.
Customer
advance was received from customers in connection with orders of products to be delivered in future periods.
The
Company’s revenue recognition policies are in compliance with Staff Accounting Bulletin (“SAB”) 104, included
in the Codification as ASC 605,
Revenue Recognition
. Sales revenue is recognized at the date of shipment to customers when
a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of
the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue
recognition are satisfied are recorded as unearned revenue.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company does not allow its customers to return products. The Company’s customers can exchange products only if they are
damaged in transportation.
Revenue
reported is net of value added tax.
The
Company’s cost of sales is comprised of the inbound acquisition cost of packaged finished goods for resale, inbound shipping,
value-added tax and business taxes recognized upon sales of goods.
Selling
expenses are comprised of salaries for the sales force, client entertainment, commissions, advertising, and travel and lodging
expenses.
|
(p)
|
General
& Administrative Expenses
|
General
and administrative expenses include executive compensation, general overhead such as the finance department and administrative
staff, depreciation, office rental and utilities.
|
(q)
|
Foreign
Currency Translation
|
The
Company maintains its financial statements in the functional currencies on Chinese Renminbi (RMB) and Hong Kong Dollars (“HKD”).
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional
currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional
currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange
gains or losses arising from foreign currency transactions are included in the determination of net income for the respective
periods.
For
financial reporting purposes, the financial statements of the Company, which are prepared using the functional currency, have
been translated into United States dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates
and revenue and expenses are translated at the average exchange rates and stockholders’ equity is translated at historical
exchange rates. Translation adjustments are not included in determining net loss but are included in foreign exchange adjustment
to other comprehensive loss, a component of stockholders’ equity.
Exchange Rates
|
|
12/31/2016
|
|
|
12/31/2015
|
|
Year end RMB : US$ exchange rate
|
|
|
6.9472
|
|
|
|
6.4907
|
|
Average year RMB : US$ exchange rate
|
|
|
6.6418
|
|
|
|
6.2175
|
|
|
|
|
|
|
|
|
|
|
Year end HKD : US$ exchange rate
|
|
|
7.7617
|
|
|
|
7.7504
|
|
Average year HKD : US$ exchange rate
|
|
|
7.7521
|
|
|
|
7.7521
|
|
RMB
is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions.
No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.
The HKD is freely convertible into other foreign currencies.
The
Company adopts SFAS No. 109, Accounting for Income Taxes, included in the Codification as ASC 740,
Income Taxes,
which
requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences
in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period
end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to
be realized.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On
January 1, 2007, The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes
(“FIN 48”), included in the Codification as ASC 740,
Income Taxes.
The topic addresses the determination of
whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC
740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater
than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition, classification,
interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
Statutory
reserve refers to the amount appropriated from the net income in accordance with PRC laws or regulations, which can be used to
recover losses and increase capital, as approved, and, are to be used to expand production or operations. PRC laws prescribe that
an enterprise operating at a profit, must appropriate, on an annual basis, from its earnings, an amount to the statutory reserve
to be used for future company development. Such an appropriation is made until the reserve reaches a maximum equal to 50% of the
enterprise’s registered capital.
|
(t)
|
Fair
Value of Financial Instruments
|
For
certain of the Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts
and other payables, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short
maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial
instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level
valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The
carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments
and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments
and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined
as follows:
|
●
|
Level
1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
|
|
|
|
|
●
|
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial
instrument.
|
|
|
|
|
●
|
Level
3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
The
Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities
from Equity,” and ASC 815.
The
Company’s financial instruments include other receivable, and balances due from and due to related parties. Management estimates
the carrying amounts of the related party financial instruments approximate their fair values due to their short-term nature.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
(u)
|
Other
Comprehensive Income
|
The
Company’s functional currency is the Renminbi (“RMB”). For financial reporting purposes, RMB were translated
into United States Dollars (“USD” or “$”) as the reporting currency. Assets and liabilities are translated
at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange
prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to
period are included as a component of stockholders’ equity as “Accumulated other comprehensive income”. Gains
and losses resulting from foreign currency transactions are included in income.
The
Company uses FASB ASC Topic 220, “Reporting Comprehensive Income”. Comprehensive loss is comprised of net loss and
all changes to the statements of stockholders’ equity, except for changes in paid-in capital and distributions to stockholders
due to investments by stockholders.
Business
combinations are accounted for under the acquisition method of accounting in accordance with ASC 805,
Business Combinations.
Under the acquisition method the acquiring entity in a business combination recognizes 100 percent of the acquired assets
and assumed liabilities, regardless of the percentage owned, at their estimated fair values as of the date of acquisition. Any
excess of the purchase price over the fair value of net assets and other identifiable intangible assets acquired is recorded as
goodwill. To the extent the fair value of net assets acquired, including other identifiable assets, exceed the purchase price,
a bargain purchase gain is recognized. Assets acquired and liabilities assumed from contingencies must also be recognized at fair
value, if the fair value can be determined during the measurement period. Results of operations of an acquired business are included
in the statement of earnings from the date of acquisition. Acquisition-related costs, including conversion and restructuring charges,
are expensed as incurred.
|
(w)
|
Recent
Accounting Pronouncements
|
On
January 5, 2016, the FASB issued ASU No. 2016-01 “Financial Instruments—Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities”, which amends the guidance in U.S. GAAP on the classification
and measurement of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s
accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain
fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated
with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those
fiscal years beginning after December 15, 2017.
On
February 25, 2016, the FASB issued ASU No. 2016-02 “Leases (Topic 842)”, its new standard on accounting for leases.
ASU 2016-02 introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying
principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related
to evaluating when profit can be recognized).
Furthermore,
the ASU addresses other concerns related to the current leases model. For example, the ASU eliminates the requirement in current
U.S. GAAP for an entity to use bright-line tests in determining lease classification. The standard also requires lessors to increase
the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. The new model
represents a wholesale change to lease accounting. As a result, entities will face significant implementation challenges during
the transition period and beyond, such as those related to:
|
●
|
Applying
judgment and estimating.
|
|
●
|
Managing
the complexities of data collection, storage, and maintenance.
|
|
●
|
Enhancing
information technology systems to ensure their ability to perform the calculations necessary for compliance with reporting
requirements.
|
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
●
|
Refining
internal controls and other business processes related to leases.
|
|
●
|
Determining
whether debt covenants are likely to be affected and, if so, working with lenders to avoid violations.
|
|
●
|
Addressing
any income tax implications.
|
The
new guidance will be effective for public business entities for annual periods beginning after December 15, 2018 (e.g., calendar
periods beginning on January 1, 2019), and interim periods therein.
On
March 15, 2016, the FASB issued ASU No. 2016-07 “Investments—Equity Method and Joint Ventures (Topic 323): Simplifying
the Transition to the Equity Method of Accounting”, which simplifies the equity method of accounting by eliminating the requirement
to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an
increase in the level of ownership interest or degree of influence. Consequently, when an investment qualifies for the equity
method (as a result of an increase in the level of ownership interest or degree of influence), the cost of acquiring the additional
interest in the investee would be added to the current basis of the investor’s previously held interest and the equity method
would be applied subsequently from the date on which the investor obtains the ability to exercise significant influence over the
investee. The ASU further requires that unrealized holding gains or losses in accumulated other comprehensive income related to
an available-for-sale security that becomes eligible for the equity method be recognized in earnings as of the date on which the
investment qualifies for the equity method.
The
guidance in the ASU is effective for all entities for fiscal years beginning after December 15, 2016, including interim periods
within those fiscal years; early adoption is permitted for all entities. Entities are required to apply the guidance prospectively
to increases in the level of ownership interest or degree of influence occurring after the ASU’s effective date. Additional
transition disclosures are not required upon adoption.
On
March 17, 2016, the FASB issued ASU No. 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent
Considerations (Reporting Revenue Gross versus Net)”, which amends the principal-versus-agent implementation guidance and
illustrations in the Board’s new revenue standard (ASU 2014-09). The FASB issued the ASU in response to concerns identified
by stakeholders, including those related to (1) determining the appropriate unit of account under the revenue standard’s
principal-versus-agent guidance and (2) applying the indicators of whether an entity is a principal or an agent in accordance
with the revenue standard’s control principle. Among other things, the ASU clarifies that an entity should evaluate whether
it is the principal or the agent for each specified good or service promised in a contract with a customer. As defined in the
ASU, a specified good or service is “a distinct good or service (or a distinct bundle of goods or services) to be provided
to the customer.” Therefore, for contracts involving more than one specified good or service, the entity may be the principal
for one or more specified goods or services and the agent for others.
The
ASU has the same effective date as the new revenue standard (as amended by the one-year deferral and the early adoption provisions
in ASU 2015-14). In addition, entities are required to adopt the ASU by using the same transition method they used to adopt the
new revenue standard.
On
March 30, 2016, the FASB issued ASU No. 2016-09 “Compensation—Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting”, which simplifies several aspects of the accounting for employee share-based payment transactions
for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding
requirements, as well as classification in the statement of cash flows. The ASU is effective for annual reporting periods beginning
after December 15, 2016, including interim periods within those annual reporting periods.
On
August 26, 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)”. Stakeholders indicated that
there is diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of
cash flows under Topic 230, Statement of Cash Flows, and other Topics. This Update addresses eight specific cash flow issues with
the objective of reducing the existing diversity in practice. The amendments in this Update are effective for public business
entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is
permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments
should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption
must adopt all of the amendments in the same period. As a result, the Company has elected to early adopt this Update prospectively.
As of December 31, 2016, and for prior periods retrospective adjustments have not been applied.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
As
of December 31, 2016, except for the above, there are no recently issued accounting standards not yet adopted that would have
a material effect on the Company’s financial statements.
Certain
conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company
but which will only be resolved when one or more future events occur or fail to occur. The Company’s management assesses
such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies
related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the
Company’s management evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived
merits of the amount of relief sought or expected to be sought.
If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the
assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable
and material would be disclosed.
Loss
contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case
the guarantee would be disclosed.
3.
|
GOING
CONCERN UNCERTAINTIES
|
These
financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization
of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As
of December 31, 2016, and 2015 (restated), the Company had accumulated deficits of $59,396,596 and $8,399,589 due to the substantial
losses incurred in operations that have been discontinued in 2016. There was substantial doubt regarding the Company’s ability
to continue as going concern at December 31, 2016, and management’s previous plan to support the Company’s operations
and maintain its business strategy by raising additional funds through public and private offerings, or loans from related parties,
or to rely on officers and directors to perform essential functions with minimal compensation was unsuccessful.
If
the Company does not raise additional money via public or private offerings or related party loans, the Company may be unable
to continue as going concern. Additional financing may not become available on acceptable terms and there can be no assurance
that any additional financing that the Company does obtain will be sufficient to meet its needs in the long term.
The
accompanying financial statements have been adjusted to the expected recoverable amounts. Management believes no further adjustments
for recoverability and classification of assets or liabilities are necessary.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company is subject to US Income taxes.
The
Company’s subsidiary Fortune Delight Holdings Group Limited was incorporated in the British Virgin Islands. The British
Virgin Islands is an income tax free jurisdiction.
Silver
Channel, the Company former indirectly subsidiary was incorporated in Hong Kong and is subject to the Inland Revenue Ordinance
of Hong Kong. Hong Kong adopted a uniform tax rate of 16.5% for all enterprises.
The
Company’s former indirectly held subsidiaries that were incorporated in the PRC and are governed by the Income Tax Law of
the PRC and various local income tax laws. Effective January 1, 2008, China adopted a uniform tax rate of 25% for all enterprises
including foreign-invested enterprises.
For
the years ended December 31, 2016 and 2015, the Company has not provided for income tax provision as it incurred substantial net
operating loss during the years.
The
Company’s management did not recognize any deferred tax assets at December 31, 2016 and 2015, as a result of the substantial
net operating losses during the years ended December 31, 2016 and 2015 because the management was unable to determine when it
would be able to generate taxable income to make use of such potential future tax assets.
The
following table sets forth the computation of basic and diluted earnings per share of common stock:
|
|
For the years ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
(Restated)
|
|
Basic loss per share:
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss used in computing basic earnings per share
|
|
$
|
(50,997,008
|
)
|
|
$
|
(7,848,047
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
3,950,000
|
|
|
|
2,070,916
|
|
Basic loss per share
|
|
$
|
(12.91
|
)
|
|
$
|
(3.79
|
)
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss used in computing diluted earnings per share
|
|
$
|
(50,997,008
|
)
|
|
$
|
(7,848,047
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
3,950,000
|
|
|
|
2,070,916
|
|
Diluted loss per share
|
|
$
|
(12.91
|
)
|
|
$
|
(3.79
|
)
|
Dilutive
securities having an anti-dilutive effect on diluted loss per share are excluded from the calculation.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
6.
|
RELATED
PARTY TRANSACTIONS
|
Amounts
due from related parties consisted of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Wu Junrui, former director of FDGH
|
|
|
49,328
|
|
|
|
49,328
|
|
Silver Channel, a former subsidiary, to ICGL
|
|
|
-
|
|
|
|
825,010
|
|
|
|
$
|
49,328
|
|
|
$
|
874,338
|
|
The
amounts are unsecured, interest-free and due on demand.
Mr.
Wu repaid $19,300 of the outstanding balance subsequent December 31, 2016 by paying certain professional service providers on
behalf of the Company.
Amounts
due to related parties consisted of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Wu Ping, director of Yunnan Image, former subsidiary
|
|
|
-
|
|
|
|
5,029
|
|
Silver Channel, former subsidiary, by FDGH
|
|
|
-
|
|
|
|
58,825
|
|
|
|
$
|
-
|
|
|
$
|
63,584
|
|
The
amounts are unsecured, interest-free and due on demand.
The
Company’s registered office and principal place of business was provided by Image Industrial Development Ltd., a major shareholder
of the Company. The terms of the lease agreement are for one year from November 1, 2016 through October 31, 2017. There was no
rental deposit paid and the annual rental expense was $90 (HKD $700). These rental rates may differ from fair market rates.
7.
|
CONCENTRATION
OF RISKS
|
The
Company conducts business subsidiary is incorporated in the British Virgin Islands and it intends to conduct physical business
in Hong Kong and the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced
by changes in the political, economic, and legal environments in the British Virgin Islands, Hong Kong, and the PRC. Business
operations conducted in these localities are subject to special considerations and significant risks not typically associated
with companies in North America.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
8.
|
DISCONTINUED
OPERATIONS
|
Financial Position:
At December 31,
|
|
2016
|
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current asset
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
35,228
|
|
|
|
78,753
|
|
Account receivable, net
|
|
|
|
|
|
|
10,389
|
|
Advanced to suppliers
|
|
|
|
|
|
|
680,178
|
|
Inventories
|
|
|
41,679
|
|
|
|
447,972
|
|
Other deposits
|
|
|
|
|
|
|
48,920
|
|
Other receivables, net
|
|
|
|
|
|
|
430,433
|
|
Related party receivable
|
|
|
|
|
|
|
259,800
|
|
Prepaid tax
|
|
|
10,848
|
|
|
|
55
|
|
Total current assets
|
|
|
87,755
|
|
|
|
1,956,500
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
158,251
|
|
|
|
232,180
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
246,006
|
|
|
|
2,188,680
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
421,875
|
|
|
|
491,643
|
|
Tax payable
|
|
|
-
|
|
|
|
1,730
|
|
Other payables
|
|
|
609,122
|
|
|
|
372,374
|
|
Accrued liabilities
|
|
|
-
|
|
|
|
2,321
|
|
Related party payable
|
|
|
117,670
|
|
|
|
888,646
|
|
Customer advances
|
|
|
1,473,464
|
|
|
|
1,563,798
|
|
TOTAL LIABILITIES
|
|
|
2,622,131
|
|
|
|
2,495,501
|
|
NET LIABILITIES
|
|
|
(2,376,125
|
)
|
|
|
(306,821
|
)
|
Results of Discontinued Operations
For the years ended December 31,
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
319,061
|
|
|
|
1,386,968
|
|
Cost of sales
|
|
|
190,743
|
|
|
|
941,748
|
|
Selling, general and administrative expenses
|
|
|
2,320,252
|
|
|
|
1,199,301
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
1,024,751
|
|
|
|
7,353
|
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
|
9
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discounted operations
|
|
|
(1,167,192
|
)
|
|
|
(746,728
|
)
|
As
detailed in Note 1, the Company disposed of Silver Channel and its subsidiaries on November 15, 2016. The values presented above
detail the financial position and results of operations of Silver Channel and its subsidiaries at December 31, 2016 and 2015 and
for the years then ended. Management believes that amounts disclosed at and for the year ended December 31, 2016, fairly approximate
the financial position and results of operations, at, and up through the date of disposal. Silver Channel and its subsidiaries
were in a net liability position at the time of disposal which raised substantial doubt as to whether Silver Channel and its subsidiaries
could continue as a going concern. The figures above have been presented assuming that Silver Channel and its subsidiaries will
continue as going concerns; no adjustments for liquidation value have been applied to those amounts. The financial position of
the discontinued operations as of December 31, 2016 is presented for informational purposes and for the calculation the approximate
gain or loss resulting from the disposal of those subsidiaries; however, the assets and liabilities of those discontinued operations
are not included in the accompanying consolidated balance sheet of the Company at December 31, 2016.
The
Company determined that other receivable, accrued liabilities, sales, and selling expenses were overstated for the year ended
December 31, 2015, and accumulated deficit was understated for that same period. As a result of the figures at December 31, 2015
and for the year then ended being reclassified and restated as a result of the discontinuance of operations during 2016 material
figures are presented in a narrative format, as part of continuing operations, as follows: (1) other receivable, (2) accrued liabilities,
(3) sales, and (4) selling, general, and administrative expenses were previously recorded as: $2,468,538, $387,927, $1,386,968,
and $6,296,461 have been adjusted to be $0, $28,478, $0, and $5,420,343, respectively. Accumulated deficit was increased by $1,680,976.
The reason for the adjustment is that the Company recorded the funds received by a third party on the Company’s behalf,
and related liability, for the commissions payable related to the sale of its shares. The funds were not received by the Company,
but instead paid to the managers of the Company’s prior PRC subsidiaries. Upon discovery of this error, management has determined
that the gross amount of these funds should be netted against commission expenses accrued as liabilities, and the expected net
proceeds that were received by the managers of the PRC subsidiaries are no longer recoverable and should be written to the Company’s
results of operations in 2015. The impact of the Company’s loss per share was an additional loss of $1.00 on post reverse
split basis.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
10.
|
LOSS
ON SUBSCRIPTION RECEIVABLE
|
The
Company’s management determined that it would no longer pursue payment for shares issued, but not yet paid up that have
been accounted for as the equity contra-account subscription receivable. Accordingly, the Company has charged the remaining unpaid
balance of $41,661,015 to its result from operations for the year ended December 31, 2016.
On
February 13, 2017, Xinyuan Yang, whom was transferred the right to the 5,000,000 shares of the Company’s preferred stock
that was originally entitled to Mr. Wu Jun Rui from the share exchange between the Company and FDGH and Mr. Wu, entered into an
agreement with the Company to exchange his right to the preferred stock for common shares of the Company’s stock.
On
August 4, 2017, the Nevada Secretary of State approved the Company’s corporate action to effectuate a reverse stock split
of its stock on a 1-for-100 basis, whereby the Company’s 400,000,000 authorized shares with a par value of $0.001 per share
will become 4,000,000 authorized shares with a par value of $0.001; all fractional shares will be rounded up to the next whole
share. The Company’s historical equity and earnings per share have been retroactively restated to reflect this reverse split.
On
or about September 4, 2017, the Company’s board of directors approved the issuance of 3,320,800 of post-reverse-split shares
of the Company’s common stock to its executives and other outside consultants as compensation for services to be rendered.