☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
PART
I
FORWARD
LOOKING STATEMENTS
There
are statements in this registration statement that are not historical facts. These “forward-looking statements” can
be identified by use of terminology such as “believe,” “hope,” “may,” “anticipate,”
“should,” “intend,” “plan,” “will,” “expect,” “estimate,”
“project,” “positioned,” “strategy” and similar expressions. You should be aware that these
forward-looking statements are subject to risks and uncertainties that are beyond our control. For a discussion of
these risks, you should read this entire registration statement carefully, especially the risks discussed under the section entitled
“Risk Factors.” Although management believes that the assumptions underlying the forward looking statements included
in this registration statement are reasonable, they do not guarantee our future performance, and actual results could differ from
those contemplated by these forward looking statements. The assumptions used for purposes of the forward-looking statements specified
in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic,
legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information
and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment.
To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results,
and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. In light of these
risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements
contained in this registration statement will in fact transpire. You are cautioned to not place undue reliance on these forward-looking
statements, which speak only as of their dates. We do not undertake any obligation to update or revise any forward-looking statements.
As
used in this Annual Report, unless otherwise noted, references to the “Company”, “we”, “our”
or “us” means China Herb Group Holdings Corporation unless the context clearly requires otherwise.
Item
1. Business
Overview
of Our Business
Recent
History
We
were incorporated on June 28, 2010 in the State of Nevada under the name “Island Radio, Inc.” and changed our name
to “China Herb Group Holdings Corporation” effective July 17, 2012.
On
June 27, 2012, Eric R. Boyer and Nina Edstrom (collectively, the “Sellers”), who were then the major shareholders
of the Company, entered into a Share Purchase Agreement with Chin Yung Kong, Qiuping Lu and Fumin Feng (collectively, the “Purchasers”),
pursuant to which the Sellers sold to the Purchasers an aggregate 4,000,000 shares of the common stock of the Company, which represented
approximately 93% of the then total issued and outstanding stock of the Company, for a total purchase price of $159,970 (the “Change
in Control”). As result of this share purchase transaction, Chin Yung Kong, Qiuping Lu and Fumin Feng became the controlling
shareholders of the Company.
Our
original business plan was to become a commercial FM radio broadcaster. Subsequently, following the Change in Control, we changed
our business plan and intended to become a medical and spa company with a focus on Asia. However, after consultation with our
professional and business advisors in the United States and the People’s Republic of China (“China or the “PRC”),
our management decided during the third quarter of 2014 that this would no longer be our plan of operations. No agreements had
been entered into by us with any party in connection with such plan of operations.
Business
Model
We
currently have no business operations. We currently intend to evaluate new industry, geographic and market opportunities. Our
entry into a new business may take the form of acquiring a business or being acquired by an existing business or, least likely,
developing a business organically. Any such efforts may require significant capital, which we currently lack. There is no assurance
that any such opportunity will become available. There is also no assurance that, if any opportunity becomes available, we will
have the financial and other resources available to take advantage of such opportunity, since we have extremely limited liquidity.
We
will look for potential target companies in a broad range of industries and we may engage in a business combination with any type
of business. We intend to focus on target companies that are located or operate exclusively or primarily in China, although, under
certain circumstances, we would consider a business combination with a company located or operating in a different country. The
circumstances under which we would consider a business combination with a company located or operating in a country other than
China would be primarily those situations where we are unable to locate a suitable business combination candidate in the China
or in response to a change in interest on the part of U.S. investors in investing in China such that such a business combination
would no longer be considered advantageous to us.
The
analysis of target companies and the business opportunities they may present to us will be undertaken by or under the supervision
of the Company’s sole officer and director, Qiuping Lu. As of this date, we have not entered into any definitive
agreement with any target company or any other party. No assurance can be given that we will consummate a transaction with any
target company. We have unrestricted flexibility in seeking and analyzing target companies, and structuring and negotiating a
business combination. In our efforts to analyze potential target companies, we consider numerous factors, including the following:
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Potential for
growth, indicated by new technology, existing brand name recognition, market penetration,
anticipated market expansion and/or new products;
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Competitive
position as compared to other businesses of similar size and experience within the industry
segment as well as within the industry as a whole;
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Strength
and diversity of the target company’s management, either in place or scheduled
for recruitment;
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Capital
requirements and anticipated availability of required funds, to be provided by the Company,
from operations of the target company, through the sale of additional securities, through
joint ventures or similar arrangements or from other sources;
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The
cost of participation by the Company as compared to the perceived tangible and intangible
values and potentials;
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The
extent to which the target company’s business opportunity can be advanced by means
of the business combination;
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The
accessibility of required management expertise, personnel, raw materials, services, professional
assistance and other required items; and
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Other
relevant factors based on industry, geopolitical, market and other considerations.
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In
applying the foregoing criteria, no one of which will be controlling, we will attempt to analyze all facts and circumstances and
make a determination based upon reasonable investigative measures, due diligence and available data. Potentially available business
opportunities may occur in many different industries, and target companies may be at various stages of development, all of which
will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. However,
due to our limited capital available for investigation and due diligence, we may not discover or adequately evaluate adverse facts
about a target company. In addition, we will be competing against other entities that possess greater financial, technical and
managerial capabilities for identifying and completing business combinations.
In
evaluating a target company and potential business combination, we will conduct as extensive a due diligence review of potential
target companies as is reasonably possible given the relative lack of information which may be available regarding private
companies, our limited personnel and financial resources and the inexperience of our management with respect to such endeavors.
We expect that our due diligence will encompass, among other things, meetings with the potential target company’s incumbent
management and inspection of its facilities, as necessary, as well as a review of financial and other information, and agreements,
to the extent they are made available to us.
This
due diligence review will be conducted by our management and/or unaffiliated third parties, including professionals, who we may
engage. Despite such efforts, our limited funds and the lack of our having full-time management will likely make it impracticable
to conduct a complete and exhaustive investigation and analysis of a target company before we consummate a business combination.
Management decisions, therefore, will likely be made without detailed feasibility studies, independent analysis, market surveys
and the like which, if we had more funds and personnel available to us, would be suitable in analyzing a target company. We will
be particularly dependent in making decisions upon information provided by the promoters, owners, sponsors, directors and officers
or other affiliates or agents of the target company, and we may not be able to ascertain the accuracy or completeness of all such
information that is provided to us. We will also face competitive pressures in identifying target companies and negotiating and
consummating a business combination.
Form of Business Combination
The
manner in which we structure a business combination will depend upon numerous factors, including the nature of the opportunity,
the respective needs and desires of the Company and the target company, the relative negotiating strength of the Company and the
target company, and certain legal and regulatory considerations. Typical forms of business combinations include statutory mergers,
stock purchases, share exchanges and asset purchase transactions. However, it is likely that, in engaging in a business combination
with a target company, we will issue shares of our Common Stock or other securities to the stockholders of the target company
as sole or partial consideration.
Although
the terms of any business combination cannot be predicted, it should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called “tax free” reorganization under Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the “Code”) depends upon whether the owners of the acquired business (the target company)
own 80% or more of the voting stock of the surviving entity at the conclusion of the transaction. If a business combination were
structured to take advantage of these provisions rather than other “tax free” provisions provided under the Code,
our then-existing stockholders in the aggregate would in such circumstances retain 20% or less of the total issued and outstanding
shares of the Company upon the consummation of the business combination. Depending upon the relative negotiating strength of the
parties, our then-existing stockholders may retain substantially less than 20% of the total issued and outstanding shares of the
Company upon the consummation of the business combination. It is likely that as a result of a business combination, however it
is structure, our then-existing stockholders would incur substantial additional dilution in their percentage ownership of the
Company compared to their ownership percentage prior to the business combination.
Depending
upon the way the business combination is structured, it may be accomplished upon the sole determination of our then-serving directors
without any vote or approval by our stockholders. However, in the case of a statutory merger or consolidation directly involving
the Company, it will likely be necessary under Delaware law to call a stockholders’ meeting and obtain the approval of the
holders of a majority of our voting securities outstanding on the record date. Should it be necessary to obtain such stockholder
approval, there could be a delay and additional expense involved in approving the proposed business combination. Additionally,
such a structure will also likely give rise to certain appraisal rights to dissenting stockholders under Delaware law. For these
and other reasons, our management will likely seek to structure any business combination so as not to require stockholder approval
or trigger appraisal rights in favor of dissenting stockholders.
The
time and costs required to identify, select and conduct due diligence on a target company and to structure, negotiate, document
and consummate a business combination cannot presently be ascertained with any degree of certainty. However, such efforts
will require substantial management time and attention and substantial cost for accountants, attorneys and others. Any costs incurred
with respect to the identification and evaluation of a target company and potential business combination that is not ultimately
completed will result in unrecoverable expenses to us. Finally, there can be no assurance that any business combination
which is consummated will be on terms that are favorable to us and our stockholders.
Competition
We
are in a highly competitive market for a relatively small number of business opportunities which could reduce the likelihood of
consummating a successful business combination. We are, and will continue to be, a minor participant in the business of seeking
business combinations with target companies. A large number of established and well-financed entities, including small public
companies, private equity firms, hedge funds and venture capital firms, are active in mergers and acquisitions of companies that
may be suitable target companies for us. Nearly all of these entities with which we would compete for target companies have
significantly greater financial resources, technical expertise and managerial capabilities than we do. Additionally, we
will be competing with other companies who have a similar business model to ours, including special purpose acquisition companies
(SPACs) and other strategic acquirers. Consequently, we will face stiff competition and may be at a competitive disadvantage
in identifying possible business opportunities and successfully completing a business combination with a target company. These
competitive factors may reduce the likelihood of our identifying and consummating a successful business combination on favorable
terms or at all.
Certain
Regulatory Matters
Based
on the current and proposed business activities described above, the Company is a “blank check” company. The Securities
and Exchange Commission (the “SEC”) defines a blank check company as “any development stage company that is
issuing a penny stock, within the meaning of Section 3 (a)(51) of the Securities Exchange Act of 1934 (the {“Exchange Act”),
and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company
or companies.”
Pursuant
to Rule 12b-2 under the Exchange Act, the Company is also a “shell company” because it has no or nominal assets (other
than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities
of “blank check” companies in their respective jurisdictions.
We
intend to comply with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements.
Our
offices are located at 77 Las Tunas Drive, Suite 203, Arcadia, California 91007, and our telephone number is (626) 608-0958.
Employees
As
of December 31, 2014, we had no employees. All functions, including development, strategy, negotiations and administration,
are currently being provided by our sole director and officer, Qiuping Lu. Ms. Lu is engaged in outside business activities
and anticipates that she will devote very limited time to our business until a successful business opportunity has been identified.
We currently expect no significant changes in the number of our employees other than such changes, if any, incidental to a business
combination.
Item
1A. Risk Factors
As
a “smaller reporting company”, as defined in Rule 12b-2 under the Exchange Act, we are not required to provide the
information required by this Item.
Item
1B. Unresolved Staff Comments
None.
Item
2. Properties
The
Company does not own any office space or equipment. The Company pays a comprehensive service fee in the amount of $100 per month
on a month-to-month basis for its offices located at 77 Las Tunas Drive, Suite 203, Arcadia, California 91007.
Item
3. Legal Proceedings
There are
presently no material pending legal proceedings to which the Company is a party or as to which any of its property is subject,
and no such proceedings are known to the Company to be threatened or contemplated against it.
Item
4. Mine Safety Disclosure
Not
applicable.
PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Prior
to April 19, 2011, our common stock was quoted on the OTC Markets under the symbol “ISLD”, from April 19, 2011 to
July 17, 2012, our common stock was quoted on the OTC Bulletin Board under the symbol “ISLD” and from July 17, 2012
to July 17, 2014, our common stock was quoted on the OTC Bulletin Board under the symbol “CHGH’, although the first
posted quote for our common stock was on May 28, 2014. Since July 17, 2014, our common stock has been quoted on the OTCQB under
the trading symbol “CHGH”. For the periods indicated, the following table sets forth the high and low
bid prices per share of common stock. The below prices represent inter-dealer quotations without retail markup, markdown,
or commission and may not necessarily represent actual transactions:
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Fiscal 2014
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Fiscal 2013
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High
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Low
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High
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Low
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First Quarter ended March 31
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N/A
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N/A
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N/A
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N/A
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Second Quarter ended June 30
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$
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3.60
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$
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3.60
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N/A
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N/A
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Third Quarter ended September 31
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$
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3.60
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$
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3.60
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N/A
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N/A
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Fourth Quarter ended December 31
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$
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3.75
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$
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3.60
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N/A
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N/A
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As
of April 6, 2015, there were 47 registered holders of our common stock.
Dividend
Policy
We
have never declared or paid cash dividends. We currently intend to retain all future earnings for the operation of our business
and do not anticipate paying cash dividends on the common stock in the foreseeable future. Any payment of cash dividends
in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital
requirements, contractual restrictions and other factors deemed relevant by our directors.
Securities
Authorized for Issuance under Equity Compensation Plans
As
of April 6, 2015, we have not adopted an equity compensation plan and have not granted any stock options.
Recent
Sales of Unregistered Securities
On
August 16, 2013, we issued 125,000 shares of common stock to six individuals at a price of $0.001 per share. On Nov 20,
2013, we issued 16,018,119 shares of common stock to 35 individuals at the price of $0.001 per share.
On
Nov 21, 2013, we issued 16,000,000 shares of common stock to Chin Yung Kong, Qiuping Lu and Fumin Feng at the price of $0.001
per share.
In
connection with these issuances, we relied upon the exemption from the registration requirements pursuant to the provisions of
Section 4(2) of the Securities Act of 1933 (the “Securities Act”), as a transaction by an issuer not involving any
public offering and/or Regulation S under the Securities Act.
Issuer
Purchases of Equity Securities
We
have not repurchased any of our equity securities during the period covered by this report.
Item
6. Selected Financial Data
Not
applicable.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion of our consolidated results of operations and cash flows for the years ended December 31, 2014 and 2013
and consolidated financial condition as of December 31, 2014 should be read in conjunction with our consolidated financial
statements and the related notes included elsewhere in this report.
We have no business operations and are not
currently generating any revenue. Our independent registered public accounting firm has issued a going concern opinion.
This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next
12 months. We do not anticipate generating revenue until we engage in a merger or other business combination with an operating
business. Accordingly, we must raise additional cash from sources other than operations to meet our expenses.
Plan
of Operations
We
currently have no business operations. We currently intend to evaluate new industry, geographic and market opportunities. Our
entry into a new business may take the form of acquiring a business, being acquired by an existing business or, least likely,
developing a business organically. Any such efforts may require significant capital, which we currently lack. There is no assurance
that any such opportunity will become available. There is also no assurance that, if any opportunity becomes available, we will
have the financial and other resources available to take advantage of such opportunity, since we have extremely limited liquidity.
We
will look for potential target companies in a broad range of industries and we may engage in a business combination with any type
of business. We intend to focus on target companies that are located or operate exclusively or primarily in China, although, under
certain circumstances, we would consider a business combination with a company located or operating in a different country. The
circumstances under which we would consider a business combination with a company located or operating in a country other than
China would be primarily those situations where we are unable to locate a suitable business combination candidate in the China
or in response to a change in interest on the part of U.S. investors in investing in China such that such a business combination
would no longer be considered advantageous to us.
Our
principal strategic objective for the next 12 months and beyond will be to identify and consummate a business combination with
a target company. There are no agreements with any such target company and there can be no assurance that we will engage in a
business combination within the next 12 months or at any time in the future.
During
at least the next 12 months, unless we complete a business combination sooner, we anticipate incurring costs primarily related
to:
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preparing
and filing Exchange Act reports;
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identifying,
investigating and conducting due diligence on target companies; and
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negotiating,
structuring, documenting and consummating a business combination.
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We
believe that we will be able to meet these costs through cash on hand and additional amounts, as may be necessary, to be loaned
by or invested in us by our stockholders, management and/or others. Currently, however, our ability to continue as a going concern
is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations
and repay our liabilities arising from normal business operations when they come due. Our ability to continue as a going
concern is also dependent on our ability to find a suitable target company and enter into a business combination. Management’s
plan includes obtaining additional funds through a combination of sales of our equity securities before, contemporaneously with,
or following, the consummation of a business combination; and borrowings, although we do not believe that we will be eligible
to borrow funds from a bank until at least a business combination is consummated. However, here is no assurance that any
additional funding will be available on terms that are favorable to us or at all.
We
currently rely on loans from our sole director and officer, Qiuping Lu, to meet our expenses. There is no guarantee that Ms. Lu
will continue to lend us funds to meet our expenses in the future. Currently, we do not have any other arrangements for financing.
We have no assurance that future financing will be available to us on acceptable terms, or at all. If financing is
not available to us on satisfactory terms or at all, we may be unable to develop operations or meet our expenses. Additionally,
any equity financing in which we might engage would result in dilution to our existing shareholders.
Year
Ended December 31, 2014 Compared to Year Ended December 31, 2013
Revenues
.
As of December 31, 2014 and December 31, 2013, we had not generated any revenues.
Operating Expenses
.
For the year ended December 31, 2014, total operating expenses amounted to $103,094 as compared to $20,450 for the year
ended December 31, 2013, an increase of $82,644 or 404%. Since inception, our operating expenses primarily consisted of fees and
expenses related to complying with our ongoing SEC reporting requirements, which have consisted of legal, fees, accounting fees,
transfer agents fees, filing fees, and consulting fees.
Other
income (expenses)
. During the year ended December 31, 2014 and 2013, we recorded $5,270 and $864 in imputed interest
expenses related to advances outstanding to related parties. The imputed interest was recorded in Company’s financial statements
under paid-in capital.
Net
Loss
. During the years ended December 31, 2014 and 2013, we had a net loss of $108,364 and $20,314, respectively.
Liquidity
and Capital Resources
As
of December 31, 2014, we had cash of $2,122, had liabilities of $93,623, and had a working capital deficit of $91,401. We expect
to incur continued losses during 2015, possibly even longer.
For the years ended December 31, 2014
and 2013, net cash used in operating activities amounted to $99,798 and $20,000, respectively. We expect to require working capital
of approximately $100,000 over the next 12 months to meet our financial obligations.
For the years ended December 31, 2014
and 2013, net cash provided by financing activities amounted to $69,777 and $52,143, respectively. For the year ended December
31, 2014, we received proceeds from loans from officer of $69,777 for working capital purposes. For the year ended December 31,
2013, we received proceeds from loans from officer of $20,000 and proceeds from the sale of our common stock of $32,143, which
were used for working capital purposes.
We
have not generated any revenues from operations to date. It is not likely that we will generate any revenue until at least a business
combination has been consummated. Even following a business combination, there is no guarantee that any revenues will be generated
or that any revenues will be sufficient to meet our expenses. We may consider a business combination with a target company which
itself has recently commenced operations, is a developing company in need of additional funds for expansion into new products
or markets, is seeking to develop one or more new products or services, or is an established business which may be experiencing
financial or operating difficulties and is in need of additional capital.
Moreover,
any target business that is selected may be financially unstable or in the early stages of development or growth, including businesses
without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business
and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business
combination with a target company in an industry characterized by a high level of risk, and, although our management will endeavor
to evaluate the risks inherent in a particular target company, there can be no assurance that we will properly ascertain or assess
all significant risks.
The foregoing considerations raise substantial
doubt about our ability to continue as a going concern. We are currently planning on devoting the vast majority of our efforts
to identifying, investigating and conducting due diligence on target companies; and negotiating, structuring, documenting and
consummating a business combination. Our long-term ability to continue as a going concern is dependent upon our ability to develop
additional sources of capital, complete a business combination and, thereafter, achieve profitable operations.
We
believe that we will be able to meet these costs through cash on hand and additional amounts, as may be necessary, to be loaned
by or invested in us by our stockholders, management and/or others. Currently, however, our ability to continue as a going concern
is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations
and repay our liabilities arising from normal business operations when they come due. Our ability to continue as a going
concern is also dependent on our ability to find a suitable target company and enter into a business combination. Management’s
plan includes obtaining additional funds through a combination of sales of our equity securities before, contemporaneously with,
or following, the consummation of a business combination; and borrowings, although we do not believe that we will be eligible
to borrow funds from a bank until at least a business combination is consummated. However, here is no assurance that any
additional funding will be available on terms that are favorable to us or at all.
We
currently rely on loans from our sole director and officer, Qiuping Lu, to meet our expenses. There is no guarantee that Ms. Lu
will continue to lend us funds to meet our expenses in the future. Currently, we do not have any other arrangements for financing.
We have no assurance that future financing will be available to us on acceptable terms, or at all. If financing is
not available to us on satisfactory terms or at all, we may be unable to develop operations or meet our expenses. Additionally,
any equity financing in which we might engage would result in dilution to our existing shareholders.
On
June 27, 2012, in connection with the share purchase transaction in which Eric R. Boyer and Nina Edstrom sold to Chin Yung Kong,
Qiuping Lu and Fumin Feng 4,000,000 shares of common stock of the Company (2,000,000 shares to Chin Yung Kong, 1,000,000 shares
to Qiuping Lu and 1,000,000 shares to Fumin Feng), Taurus Financial Partners, LLC forgave the $40,060 total outstanding account
payables that the Company owed to it, which represented all the outstanding liabilities of the Company as of June 27, 2012.
During
the fiscal year ended December 31, 2013, Chin Yung Kong, then a director of the Company, advanced an aggregate $20,000 to the
Company to pay some of its expenses and for working capital purposes. These advances in the aggregate amount of $20,000 are payable
on demand and, at December 31, 2014 and December 31, 2013, reflected as related party loans on the accompanying balance sheets.
During
the fiscal year ended December 31, 2014, Ms. Lu, the sole director and officer of the Company, advanced an aggregate $69,777 to
the Company to pay some of its expenses and for working capital purposes. These advances in the aggregate amount of $69,777 are
payable on demand and, at December 31, 2014, are reflected as related party loans on the accompanying balance sheets.
Imputed
interest of $5,270 and $864 was recorded for the year ended December 31, 2014 and 2013, and recorded as interest expense and an
increase in paid-in capital, respectively.
Going
Concern Consideration
Our
independent auditors included an explanatory paragraph in their report on the accompanying financial statements regarding concerns
about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the
circumstances that lead to this disclosure by our independent auditors.
Contractual
Obligations
On
April 4, 2014, we entered into a memorandum of understanding (the “MOU”) with two business consultants. Under the
MOU, the consultants were to provide certain services to the Company and the Company was to have issued 10% of the issued and
outstanding shares of our common stock to each consultant upon the completion of a reverse merger with a previously identified
operating company, which reverse merger did not and will not take place.
Pursuant
to ASC 505-50, we did not recognize any expense during the period since the issuance of these shares of common stock was contingent
upon the completion of a specific merger. Accordingly, no performance commitment has been reached nor has performance been completed.
As
of December 31, 2014, we had no contractual obligations.
Off –Balance
Sheet Operations
As
of December 31, 2014, we had no off-balance sheet activities or operations.
Critical Accounting Policies
The accompanying financial statements have
been prepared in accordance with United States Generally Accepted Accounting Principles (US GAAP) for financial information and
in accordance with the Securities and Exchange Commission’s (SEC) Regulation S-X. We believe the following critical accounting
policies affect our more significant judgments and estimates used in the preparation of the financial statements.
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the
reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly
from those estimates.
Cash
and Cash Equivalents
For
purposes of the statement of cash flows, we consider highly liquid financial instruments purchased with a maturity of three months
or less to be cash equivalents. As of December 31, 2014 and December 31, 2013, we had no cash equivalents.
Fair
Value of Financial Instruments
ASC
820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the
level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization
within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It
prioritizes the inputs into three levels that may be used to measure fair value:
Level
1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to
the measurement of the fair value of the assets or liabilities.
As
of December 31, 2014 and December 31, 2013 we believe that the recorded values of all of our financial instruments approximate
their current fair values because of their nature and respective maturity dates or durations.
Net Loss
per Share Calculation
Basic
net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted earnings per shares is computed similar to basic loss per share except that
the denominator is increased to include the number of additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive. During the periods presented, we had no dilutive
financial instruments issued or outstanding.
Income
Taxes
We
account for income taxes pursuant to FASB ASC 740, “Income Taxes”. Under FASB ASC 740-10-25, deferred tax assets and
liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and
financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification
of the assets and liabilities generating the differences.
We
maintain a valuation allowance with respect to deferred tax assets. We establish a valuation allowance based upon the potential
likelihood of realizing the deferred tax asset and taking into consideration our financial position and results of operations
for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within
the carry-forward period under the Federal tax laws.
Changes
in circumstances, such as us generating taxable income, could cause a change in judgment about its ability to realize the related
deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
Recently
Issued Accounting Pronouncements
On August 2014, FASB issued Accounting
Standard Update No. 2014-15, Presentation of Financial Statements – Going Concerns (Subtopic 205-40): Disclosures of Uncertainties
about an Entity’s Ability to Continue as a Going Concern. The amendments require management to assess an entity’s ability
to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards.
Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting
period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4)
require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5)
require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for
a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this
Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter.
Early application is permitted.
In June 2014, FASB issued Accounting
Standards Update (“ASU”) 2014-10, “Development Stage Entities”. The amendments in this update remove the
definition of a development stage entity from the Master Glossary of the ASC thereby removing the financial reporting distinction
between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate
the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash
flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description
of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no
longer a development stage entity that in prior years it had been in the development stage. The amendments in this update are applied
retrospectively. The adoption of ASU 2014-10 removed the development stage entity financial reporting requirements from the Company.
We
have implemented all new accounting pronouncements that are in effect and that may impact our financial statements and do not
believe that there are any new accounting pronouncements that have been issued that might have a material impact on our financial
statements.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk
Not
applicable.
Item
8. Financial Statements and Supplementary Data
See
pages F-1 through F-11.
Item
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item
9A. Controls and Procedures
Disclosure
Controls and Procedures
Under
the supervision and with the participation of our officers and directors, we evaluated the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act as of a date ("Evaluation
Date") within ninety (90) days prior to the filing of our Annual Report for the year ended December 31, 2014 on Form 10-K
with the SEC.
Based
upon that evaluation, our management has concluded that, as of December 31, 2014, our disclosure controls and procedures were
not effective in timely alerting management to the material information relating to us required to be included in our periodic
filings with the SEC.
Our
officers and directors have concluded that our disclosure controls and procedures had the following material weaknesses:
|
|
●
|
We
were unable to maintain any segregation of duties within our financial operations due
to our reliance on limited personnel in the finance function. While this control
deficiency did not result in any audit adjustments to our 2014 interim or annual financial
statements, it could have resulted in a material misstatement that might have been prevented
or detected by a segregation of duties;
|
|
|
|
|
|
|
●
|
We
lack sufficient resources to perform the internal audit function and does not have an
Audit Committee;
|
|
|
●
|
We do not have an independent Board of Directors, nor do we have a board member designated as an independent
financial expert. The Board of Directors is comprised of one (1) member who is also our only executive officer. As
a result, there is a lack of independent oversight of the management team, lack of independent review of our operating and financial
results, and lack of independent review of disclosures made by us; and
|
|
|
●
|
Documentation
of all proper accounting procedures is not yet complete.
|
These
weaknesses have existed since our inception on June 28, 2010 and, as of December 31, 2014, have not been remedied. To the extent
reasonably possible given our limited financial and personnel resources, we intend to take measures to cure the aforementioned
material weaknesses, including, but not limited to, the following:
|
|
●
|
Consider
the engagement of consultants to assist in ensuring that accounting policies and procedures
are consistent across the organization and that we have adequate control over financial
statement disclosures;
|
|
|
●
|
Hire
additional qualified financial personnel, including a Chief Financial Officer, on a full-time
basis;
|
|
|
●
|
Expand
our board of directors to include additional independent individuals willing to perform
directorial functions; and
|
|
|
●
|
Increase
our workforce in preparation for commencing revenue
producing operations.
|
Since
the recited remedial actions will require that we hire or engage additional personnel, these material weaknesses may not be overcome
in the near-term due to our limited financial resources. Until such remedial actions can be realized, we will continue to
rely on the limited advice of outside professionals and consultants.
Internal
Control over Financial Reporting
|
|
(a)
|
Management’s
Annual Report on Internal Control Over Financial Reporting
|
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.
A
material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will
not be prevented or detected on a timely basis.
Our
officers assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making
this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
in Internal Control-Integrated Framework. Based on that assessment under such criteria, management concluded that our internal
controls over financial reporting were not effective as of December 31, 2014 due to control deficiencies that constituted material
weaknesses.
Management has identified a lack of sufficient
personnel in the accounting function, due to our limited resources, with appropriate skills, training and experience to perform
the review processes to ensure the complete and proper application of generally accepted accounting principles.
We
are in the process of developing and implementing remediation plans to address our material weaknesses in our internal controls.
Management
has identified specific remedial actions to address the material weaknesses described above:
|
|
●
|
Improve
the effectiveness of the accounting group by augmenting our existing resources with additional
consultants or employees to improve segregation procedures and to assist in the analysis
and recording of complex accounting transactions and preparation of tax disclosures.
We plan to mitigate the segregation of duties issue by hiring additional personnel
in the accounting department once we have achieved positive cash flow from operations
and/or have raised significant additional working capital; and
|
|
|
●
|
Improve
segregation procedures by strengthening cross approval of various functions including
cash disbursements and quarterly internal audit procedures where appropriate.
|
Inherent
Limitations on Effectiveness of Controls
Our
management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls or
our internal control over financial reporting will prevent or detect all errors 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 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.
|
|
(b)
|
Attestation
Report of the Registered Public Accounting Firm
|
This
Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation by our independent registered public accounting
firm pursuant to rules of the SEC that permit us to provide only management's report in this Annual Report. We were not
required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control
over financial reporting pursuant to the rules of the SEC that permit us to provide only management’s report in this Annual
Report.
|
|
(c)
|
Changes
in Controls and Procedures
|
There
were no significant changes made in our internal controls over financial reporting during the year ended December 31, 2014 that
have materially affected or are reasonably likely to materially affect these controls. Thus, no corrective actions with
regard to significant deficiencies or material weaknesses were necessary.
Item
9B. Other Information
None.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance
As
of April 6, 2015, our executive officers and directors were as follows:
|
Name
|
|
Age
|
|
|
Position
|
|
|
|
|
|
|
|
|
|
Qiuping Lu
|
|
|
43
|
|
|
President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and Director
|
Qiuping
Lu, age 43, has served as the Company’s President, Chief Executive Officer, Chief Financial Officer and a director since
June 27, 2012. She has served as the Board Director of Hong Kong Han Fang Zhen Bao Group Holding Company from 2003 to present.
Ms. Lu was the Accounting Director of Jiangsu Jiu Jiu Accounting Firm from 1998 to 2003 and was the Accounting Director of Changzhou
Nonferrous Metal Factory from 1991 to 1998. Ms. Lu graduated from the Accounting Major of Changzhou Industrial Institute in 1991.
As
previously reported by the Company on Current Reports on Form 8-K, (i) on March 26, 2014, Chin Yung Kong resigned as a director
and (ii) o
n April 5, 2014, Feng Fumin and Yubo Zheng resigned as
directors. None of these resignations was as a result of any dispute with the Company.
Involvement
in Certain Legal Proceedings
None
of our directors and officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors,
nor has been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree
or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities
laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction
or settlement. There have been no events under any bankruptcy act, no criminal proceedings, no judgments, injunctions, orders
or decrees material to the evaluation of the ability and integrity of any of our directors, executive officers, promoters or control
persons during the past ten years.
Corporate
Governance
We
are a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act and an “emerging growth company”
as defined in the Jumpstart Our Business Startups Act of 2012.
The
OTC Bulletin Board, where our common stock is quoted under the trading symbol “CHGH”, does not have any director independence
requirements. In determining whether our directors are independent, we refer to Nasdaq Stock Market Rule 4200(a)(15). Based
on these criteria, we have determined that our sole director does not meet the independence requirements of the Nasdaq Stock Market
as currently in effect.
We
do not have standing audit, compensation and corporate governance committees, or committees performing similar functions. Our
Board, as a whole, handles the matters usually addressed by such committees. Our sole director is also the sole executive officer
of the Company. Our Board does not currently have any member who qualifies as an audit committee financial expert. We believe
that the cost of retaining such a financial expert at this time is prohibitive. Additionally, because we have not yet begun
business operations, we believe the services of an audit committee financial expert are not necessary for us at this time.
At
this time, we have not adopted corporate governance guidelines, a code of business conduct, a code of ethics or a related party
transaction policy. We anticipate that as we engage in a business combination and commence operations, we will implement appropriate
corporate governance structures to comply with SEC and/or stock exchange requirements that would be applicable to us at such time.
We
maintain a corporate website and post our SEC filings on a page of that website. The information on our website is not, and shall
not be deemed to be, a part of this report or incorporated by reference into this or any other filing we make with the SEC.
Potential
Conflicts of Interest
Since
we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed
by such committees are performed by our Board as a whole. Therefore, there is a potential conflict of interest in that our
sole director has the authority to determine issues concerning management compensation and audit issues that may affect management
decisions.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Exchange Act requires our Section 16 officers, directors and beneficial owners of more than 10% of our common stock
to file reports of ownership and changes in ownership with the SEC. Copies of these filings must be furnished to us. Based solely
upon a review of the forms filed with the SEC by our Section 16 officers, directors and beneficial owners of more than 10% of
our common stock, regarding their ownership of, and transactions in, our common stock and upon written representations from such
persons that no additional forms were required, we believe that during the 2014 fiscal year all Section 16(a) reports were timely
filed.
Item
11. Executive Compensation
No
compensation has been paid to our officers during the fiscal years 2013 and 2014. We have no current plans to begin paying our
officers any compensation until our business becomes operational.
Director
Compensation
No
compensation has been paid to our directors during the fiscal years 2013 and 2014 during the periods that they served as such.
We have no current plans to begin paying our directors any compensation until our business becomes operational.
Employment
Agreements
We
have not entered into any employment agreements with any of our officers or directors.
Long-Term
Incentive Plan Awards
We
do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The
following table sets forth information regarding beneficial ownership as of April 6, 2015 by (i) each named executive officer;
(ii) each member of our Board of Directors; (iii) each person deemed to be the beneficial owner of more than five percent (5%)
of any class of our common stock; and (iv) all of our named executive officers and directors as a group:
|
Name
of Beneficial Owner
|
|
Shares
of
Common Stock
|
|
|
Percentage
of
Class (1)
|
|
|
|
|
|
|
|
|
|
|
5%
Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chin
Yung Kong
4th Floor, Airport Industrial Park Business Center,
No.35 Changjiang South Road,
New District, Wuxi
City, Jiangsu Province
People’s Republic of China
|
|
|
10,000,000
|
|
|
|
27.44
|
%
|
|
|
|
|
|
|
|
|
|
|
Qiuping
Lu
President, CEO, CFO, Treasurer, Director
4th Floor, Airport Industrial Park Business Center,
No.35 Changjiang
South Road,
New District, Wuxi City, Jiangsu Province
People’s Republic of China
|
|
|
5,000,000
|
|
|
|
13.72
|
%
|
|
|
|
|
|
|
|
|
|
|
Fumin
Feng
4th Floor, Airport Industrial Park Business Center,
No.35 Changjiang South Road,
New District, Wuxi City,
Jiangsu Province
People’s Republic of China
|
|
|
5,000,000
|
|
|
|
13.72
|
%
|
|
|
|
|
|
|
|
|
|
|
Guangyuang
Liu
Room 402, Ding Dan Yuan, 16th Building,
Huai De Yuan, Zhong Lou District
Jiangsu Province
People’s
Republic of China
|
|
|
2,340,000
|
|
|
|
6.42
|
%
|
|
|
|
|
|
|
|
|
|
|
Renliang
Xu
Room102,Bing Dan Yuan,51th Building,
Shun Yuan New Village, Xinbei District
Jiangsu Province
People’s
Republic of China
|
|
|
2,131,432
|
|
|
|
5.85
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Directors
and Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qiuping
Lu
President, CEO, CFO, Treasurer, Director
4th Floor, Airport Industrial Park Business Center,
No.35 Changjiang
South Road,
New District, Wuxi City, Jiangsu Province
People’s Republic of China
|
|
|
5,000,000
|
|
|
|
13.72
|
%
|
|
|
|
|
|
|
|
|
|
|
|
All
directors and named executive officers as a group (1 person)
|
|
|
5
,000,000
|
|
|
|
13.72
|
%
|
(1) Based on 36,443,119 shares of common stock issued and outstanding as of April 6, 2015. Beneficial ownership is determined
in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares
of common stock subject to options, warrants and convertible notes currently exercisable or convertible, or exercisable or
convertible within 60 days, are deemed outstanding for determining the number of shares beneficially owned and for computing
the percentage ownership of the person holding such options, but are not deemed outstanding for computing the percentage ownership
of any other person. Except as indicated by the footnote, and subject to community property laws, where applicable,
the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially
owned by them.
Securities
Authorized for Issuance under Equity Compensation Plans
We
did not have any authorized equity compensation plans nor during the fiscal year ended December 31, 2014.
Item
13. Certain Relationships and Related Transactions, and Director Independence
During
the fiscal year ended December 31, 2013, Chin Yung Kong, then a director of the Company, advanced an aggregate $20,000 to the
Company to pay some of its expenses and for working capital purposes. These advances in the aggregate amount of $20,000 are payable
on demand and, at December 31, 2014 and December 31, 2013, reflected as related party loans on the accompanying balance sheets.
Of these amounts, a total of $20,000 was outstanding on December 31, 2014.
During
the fiscal year ended December 31, 2014, Ms. Lu, then the sole director and officer of the Company, advanced an aggregate $69,777
to the Company to pay some of its expenses and for working capital purposes. These advances in the aggregate amount of $69,777
are payable on demand and, at December 31, 2014, are reflected as related party loans on the accompanying balance sheets. Of these
amounts, a total of $69,777 was outstanding on December 31, 2014.
Imputed interest of $5,270 and $864 was recorded
for the year ended December 31, 2014 and 2013, and recorded interest expense and an increase in paid-in capital.
Director
Independence
No
member of management is required by us to work on a full time basis. Accordingly, certain conflicts of interest may arise
between us and our officers and directors in that they may have other business interests in the future to which they devote their
attention, and they may be expected to continue to do so although management time must also be devoted to our business. As
a result, conflicts of interest may arise that can be resolved only through their exercise of such judgment as is consistent with
each officer's understanding of his or her fiduciary duties to us.
The OTC Markets, where our common stock is
quoted under the trading symbol “CHGH”, does not have any director independence requirements. In determining
whether our directors are independent, we refer to Nasdaq Stock Market Rule 4200(a)(15). Based on these criteria, we have determined
that none of our directors who served in that capacity at any time during 2014 met the independence requirements of the Nasdaq
Stock Market as currently in effect.
Item
14. Principal Accounting Fees and Services
Audit
Fees
The
aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for
the annual audit of our financial statements and review of financial statements included in our quarterly reports and services
that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal
periods were as follows:
|
|
|
For
the fiscal year ended December 31, 2014
|
|
|
For
the fiscal year ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
Audit
Fees
|
|
$
|
6,000
|
|
|
$
|
6,000
|
|
|
Audit
Related Fees
|
|
|
-0-
|
|
|
|
-0-
|
|
|
Tax
Fees
|
|
|
-0-
|
|
|
|
-0-
|
|
|
All
Other Fees
|
|
|
-0-
|
|
|
|
-0-
|
|
Audit
Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
Given
the fact that we currently have only one director, as well as the limited financial resources and operational state of the Company,
our Board acts as our Audit Committee. Our Board pre-approves all audit and permissible non-audit services. These
services may include audit services, audit-related services, tax services and other services. Our Board approves these services
on a case-by-case basis.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014
NOTE
1 -
ORGANIZATION
China
Herb Group Holdings Corporation (the “Company”) was incorporated under the name “Island Radio, Inc” under
the laws of the State of Nevada on June 28, 2010.
On June
27, 2012, Eric R. Boyer and Nina Edstrom (collectively, the “Sellers”), who were then the major shareholders of the
Company, entered into a Share Purchase Agreement with Chin Yung Kong, Qiuping Lu and Fumin Feng (collectively, the “Purchasers”),
pursuant to which the Sellers sold to the Purchasers an aggregate 4,000,000 shares of the common stock of the Company, which represented
approximately 93% of the then total issued and outstanding stock of the Company, for a total purchase price of $159,970 (the “Change
in Control”). As result of this share purchase transaction, Chin Yung Kong, Qiuping Lu and Fumin Feng became the controlling
shareholders of the Company.
The Company’s original business plan was
to become a commercial FM radio broadcaster. Subsequently, following the Change in Control, the Company changed its business plan
and intended to become a medical and spa company with a focus on Asia. However, after consultation with its professional and business
advisors in the United States and the People’s Republic of China, the Company’s management decided during the third
quarter of 2014 that this would no longer be its plan of operations. The Company’s plan of operations is to evaluate various
industries, geographic and market opportunities. This may take the form of acquiring a business, being acquired by an existing
business or developing a business organically. Any such efforts may require significant capital, which the Company currently lacks.
There is no assurance that any such opportunity will become available. There is also no assurance that, if any opportunity becomes
available, the Company will have the financial and other resources available to take advantage of such opportunity, since the
Company’s has extremely limited liquidity. Through December 31, 2014, the Company has no revenues or operation.
NOTE
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements for China Herb Group Holdings Corporation have been prepared in accordance with accounting principles
generally accepted in the United States of America
and
in accordance
with Regulation S-X promulgated by the Securities and Exchange Commission.
Use
of Estimates
The
accompanying financial statements of the Company have been prepared in accordance with generally accepted accounting principles
in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events,
the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful
judgment. Actual results may vary from these estimates.
Fair
Value of Financial Instruments
ASC
820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the
level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization
within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It
prioritizes the inputs into three levels that may be used to measure fair value:
Level
1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
CHINA
HERB GROUP HOLDINGS CORPORATION
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014
NOTE
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair
Value of Financial Instruments (continued)
Level
2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to
the measurement of the fair value of the assets or liabilities.
As
of December 31, 2014 and 2013, the Company believes that the recorded values of all of its financial instruments approximate their
current fair values because of their nature and respective maturity dates or durations.
|
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Realized Loss
|
|
|
December 31, 2014
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
December 31, 2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Totals
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
ASC
825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities
at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable,
unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that
instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value
option to any outstanding instruments.
Cash
and Cash Equivalents
For
purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of
three months or less to be cash equivalents. As of December 31, 2014, and 2013, the Company had no cash equivalents.
Prepaid
Expenses
Prepaid
expenses relates to cash paid in advance for rent. These amounts are recognized as expense over the service period.
Income
Taxes
Deferred
income tax assets and liabilities arise from temporary differences associated with differences between the financial statements
and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences
reverse. Deferred tax assets and liabilities are classified as current or non-current, depending upon the classification of the
asset or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified
as current or non-current depending on the periods in which the temporary differences are expected to reverse. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The
Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10). Certain recognition
thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue
to recognize tax positions that meet a "more-likely-than-not" threshold. As of December 31, 2014 and 2013, the Company
does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying consolidated
financial statements.
CHINA
HERB GROUP HOLDINGS CORPORATION
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014
NOTE
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Loss
per Share Calculation
Basic
net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted earnings per shares is computed similar to basic loss per share except that
the denominator is increased to include the number of additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive. During the years ended December 31, 2014 and
2013, the Company had no dilutive financial instruments issued or outstanding.
Recent
Accounting Pronouncements
On
August 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-15, Presentation of Financial
Statements – Going Concerns (Subtopic 205-40): Disclosures of Uncertainties about an Entity’s Ability to Continue
as a Going Concern. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating
and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide
a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide
principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial
doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures
when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial
statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after
December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.
In
June 2014, FASB issued Accounting Standards Update (“ASU”) 2014-10, “Development Stage Entities”. The
amendments in this update remove the definition of a development stage entity from the Master Glossary of the ASC thereby removing
the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In
addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information
in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development
stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose
in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development
stage. The amendments in this update are applied retrospectively. The adoption of ASU 2014-10 removed the development stage entity
financial reporting requirements from the Company.
The
Company has implemented all new accounting pronouncements that are in effect that may impact its financial statements and does
not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on
its financial statements.
NOTE
3 -
GOING CONCERN
The
Company has minimal operations, and as such has devoted most of its efforts since its inception to developing its business plan,
issuing common stock, attempting to raise capital, establishing its accounting systems and other administrative functions.
As
of December 31, 2014, the Company had $2,122 in cash and has been funding its working capital needs from loans from related parties.
The Company is seeking sources of funding. Without limiting its available options, future equity financings will most likely be
through the sale of additional shares of its common stock. It is possible that the Company could also offer warrants, options
and/or rights in conjunction with any future issuances of its common stock. However, the Company can give no assurance that financing
will be available to it, and if available, in amounts or on terms acceptable to the Company.
CHINA
HERB GROUP HOLDINGS CORPORATION
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014
NOTE
3 -
GOING CONCERN (continued)
The
accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United
State of America, which contemplate continuation of the Company as a going concern. The Company has not established a source of
revenues sufficient to cover its operating costs, and as such, has incurred an operating loss since its inception. Further, as
of December 31, 2014, the Company had an accumulated deficit and stockholders’ deficit of ($232,597) and $(91,401), respectively.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying
financial statements do not include any adjustments or classifications that may result from the possible inability of the Company
to continue as a going concern.
NOTE
4 -
RELATED PARTY TRANSACTIONS
Related
Party Loans
During
the year ended December 31, 2013, Chin Yung Kong, the director and shareholder of the Company, advanced $20,000 to the Company
for working capital purposes. These working capital advances of $20,000 are payable on demand and, at December 31, 2014 and 2013,
reflected as related party loans on the accompanying balance sheets.
During
the year ended December 31, 2014, Qiuping Lu, President, CEO, director and shareholder of the Company, advanced $69,777 to the
Company for working capital purposes. These working capital advances of $69,777 are payable on demand and are reflected as related
party loans on the accompanying balance sheet.
During
the year ended December 31, 2014 and 2013, in connection with these related party loans, the Company imputed interest of $5,270
and $864, respectively, and recorded interest expense and an increase in paid-in capital.
NOTE
5 –
STOCKHOLDERS EQUITY (DEFICIT)
Preferred
Stock
The
total number of preferred shares authorized that may be issued by the Company is 5,000,000 shares with a par value of $0.001 per
share.
As
of December 31, 2014 and 2013, the Company had no shares of its preferred stock issued and outstanding.
Common
Stock
The total number of common shares authorized
that may be issued by the Company is 70,000,000 shares with a par value of $0.001 per share.
On August
30, 2013, the Company issued 125,000 shares of common stock to a group of 6 individuals for the price of $0.001 per share. Total
proceeds $125.
On November
20, 2013, the Company issued 16,018,119 shares of common stock to a group of 35 individuals for the price of $0.001 per share.
Total proceeds $16,018.
On November
21, 2013, the Company issued 16,000,000 shares of common stock to 3 existing majority shareholders for the price of $0.001 per
share. Total proceeds 16,000.
As
of December 31, 2014 and 2013, the Company had 36,443,119 shares of its common stock issued and outstanding.
CHINA
HERB GROUP HOLDINGS CORPORATION
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014
NOTE
6 –
INCOME TAXES
The
Company maintains deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred
tax assets at December 31, 2014 and 2013 consist of net operating loss carryforwards. The net deferred tax asset has been fully
offset by a valuation allowance because of the uncertainty of the attainment of future taxable income. The items accounting for
the difference between income taxes at the effective statutory rate and the provision for income taxes for the years ended December
31, 2014 and 2013 were as follows:
|
|
|
Years Ended December 31,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
Income tax benefit at U.S. statutory rate of 35%
|
|
$
|
(37,927
|
)
|
|
$
|
(7,460
|
)
|
|
Non-deductible interest
|
|
|
1,750
|
|
|
|
302
|
|
|
Change in valuation allowance
|
|
|
36,177
|
|
|
|
7,158
|
|
|
Total provision for income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company’s approximate net deferred tax asset as of December 31, 2014 and 2013 was as follows:
|
Deferred Tax Asset:
|
|
December 31, 2014
|
|
|
December 31, 2013
|
|
|
Net operating loss carryforward
|
|
$
|
72,161
|
|
|
$
|
35,984
|
|
|
Valuation allowance
|
|
|
(72,161
|
)
|
|
|
(35,984
|
)
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The
net operating loss carryforward was $206,174 at December 31, 2014. The Company provided a valuation allowance equal to the deferred
income tax asset for the years ended December 31, 2014 and 2013 because it was not known whether future taxable income will be
sufficient to utilize the loss carryforward. The increase in the allowance was $36,177 in 2014. The potential tax benefit arising
from the loss carryforward will expire in 2034.
Additionally,
the future utilization of the net operating loss carryforward to offset future taxable income may be subject to an annual limitation
as a result of ownership changes that could occur in the future. If necessary, the deferred tax assets will be reduced by any
carryforward that expires prior to utilization as a result of such limitations, with a corresponding reduction of the valuation
allowance.
The
Company does not have any uncertain tax positions or events leading to uncertainty in a tax position.
NOTE
7 -
COMMITMENT
On April 4, 2014 the Company entered into a memorandum
of understanding (the “MOU”) with Dr. Kiril Pandelisev and Yan Lawrence. Under the MOU, Dr. Pandelisev and Ms. Lawrence
were to provide certain services to the Company and the Company was to have issued 10% of the issued and outstanding shares of
the Company’s common stock to each of Dr. Pandelisev and Ms. Lawrence upon the completion of a reverse merger with a previously
identified operating company, which reverse merger did not and will not take place. Pursuant to ASC 505-50, the Company did not
recognize any expense during the period since the issuance of these shares is contingent upon the completion of a specific merger.
Accordingly, no performance commitment has been reached nor has performance been completed.
NOTE
8 -
SUBSEQUENT EVENTS
The
Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and
has determined there are no additional events required to be disclosed.
F-11
