NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
For the nine months ended September 30,
2017
(Unaudited)
Note 1. Nature of Operations
IGS Capital Group Limited ("IGS",
or "the Company", or "we", or "us"), formerly known as Sancon Resources Recovery, Inc., is registered
in the State of Nevada.
On April 26, 2017, the Company filed a
certificate of amendment to its articles of incorporation with the Secretary of State of the State of Nevada (the “Amendment”)
changing the Company’s name from “Sancon Resources Recovery, Inc.” to “IGS Capital Group Limited”.
The name change became effective with FINRA on June 8, 2017.
On
August 22, 2017, the Company and Tan Kok Beng (the “Seller”), entered into a Sale and Purchase Agreement (the "Agreement").
The Seller is the owner of all of the issued and outstanding capital stock (the “Stock”) of IGS Mart SDN BHD, a Malaysia
company (“IGS Mart”). Pursuant to the Agreement, the Company purchased the Stock from the Seller for a purchase price
of US$60,000. On completion of the transaction on September 16, 2017, IGS Mart became a wholly-owned subsidiary of the Company.
IGS Mart is a company incorporated in Malaysia
on June 2, 2017. It currently operates one convenient store named Like Mart at G-3A Tiara Mutiara 139, Jalan Puchong, 58200 Kuala
Lumpur, Malaysia. IGS Mart intends to open an additional 5 convenient stores in Malaysia over the next 15 months. Although there
is no assurance of success, the Company believes that there is a good opportunity for expansion of many more outlets after the
brand is established.
Note 2. Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared by management in conformity with both accounting principles generally accepted in the United
States of America (“GAAP”), and the instructions of Form 10-Q and Rule 10-01 of Regulations S-X.. However, certain
information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted
or condensed, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion
of IGS’s management, all adjustments of a normal recurring nature necessary for a fair presentation have been included. The
results for the period ended September 30, 2017 are not necessarily indicative of the results to be expected for the entire fiscal
year ending December 31, 2017 or for any future period. These unaudited condensed consolidated financial statements and accompanying
notes should be read in conjunction with our annual financial statements and the notes thereto for the year ended December 31,
2016, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission.
Note 3. Summary of Significant
Accounting Policies
Use of Estimates
These unaudited condensed consolidated
financial statements are prepared in accordance with accounting principles accepted generally in the USA. These principles require
management to use its best judgment in determining estimates and assumptions that: affect the reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and
expenses during the reporting period. Management makes its best estimate of the ultimate outcome for such items based on historical
trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance
with the relevant accounting rules, typically in the period when new information becomes available to management. Actual results
in the future could differ from the estimates made in the prior and current periods.
Earnings Per Share
Basic earnings per share ("EPS")
is calculated using net earnings (the numerator) divided by the weighted-average number of shares outstanding (the denominator)
during the reporting period. Diluted EPS includes the effect from potentially dilutive securities.
Fair Value Measurements and Disclosures
ASC 820 "Fair Value Measurements
and Disclosures" codified SFAS No. 107, "Disclosures about Fair Value of Financial Instruments". ASC 820 applies
to all entities, transactions, and instruments that require or permit fair value measurements, with specific exceptions and qualifications.
The Company is required to disclose estimated fair values of financial instruments. Unless otherwise indicated, the fair values
of all reported assets and liabilities, which represent financial instruments, none of which are held for trading purposes, approximate
their respective carrying values of such amounts.
Cash and Cash Equivalent
The Company considers all liquid investments
with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents.
Property, Plant and Equipment
Property, plant and equipment are stated
at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line
basis over the following expected useful lives from the date on which they become fully operational and after taking into account
their estimated residual values:
|
|
|
|
Expected useful life
|
Leasehold improvement
|
|
|
|
10 years
|
Furniture, fixture and equipment
|
|
|
|
10 years
|
Computer and software
|
|
|
|
10 years
|
Expenditure for repairs and maintenance
is expensed as incurred. When assets have retired or sold, the cost and related accumulated depreciation are removed from the accounts
and any resulting gain or loss is recognized in the results of operations.
Depreciation expenses for the three and
nine months ended September 30, 2017 and 2016 was $617 and $0, respectively.
Impairment of long-lived assets
In accordance with the provisions of ASC
Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as property, plant and equipment
held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying
amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the
fair value of the assets. There has been no impairment charge for the three and nine months ended September 30, 2017.
Revenue
The Company recognizes its revenue in accordance
with the ASC Topic 605, “Revenue Recognition”. Revenue is recognized when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. The recognition of revenues
involves certain management judgments. The amount and timing of our revenues could be materially different for any period if management
made different judgments or utilized different estimates.
Revenue is measured at the fair value of
the consideration received or receivable, net of discounts and taxes applicable to the revenue.
Income Taxes
The Company recognizes deferred tax assets
and liabilities for the expected future tax consequences of events that have been included in the financial statement or tax returns.
Under this method, deferred tax assets and liabilities are determined based on the difference between financial statements and
tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
The Company operates in several countries.
As a result, we are subject to numerous domestic and foreign tax jurisdictions and tax agreements and treaties among the various
taxing authorities. Our operations in these jurisdictions are taxed on various bases: income before taxes, deemed profits and withholding
taxes based on revenue. The calculation of our tax liabilities involves consideration of uncertainties in the application and interpretation
of complex tax regulations in a multitude of jurisdictions across our global operations.
We regularly assess our position with regard
to individual tax exposures and record liabilities for our uncertain tax positions and related interest and penalties. These accruals
reflect management's view of the likely outcomes of current and future audits. The future resolution of these uncertain tax positions
may be different from the amounts currently accrued and therefore could impact future tax period expense.
Changes in tax laws, regulations, agreements
and treaties, foreign currency exchange restrictions or our level of operations or profitability in each taxing jurisdiction could
have an impact upon the amount of income taxes that we provide during any given year.
Related parties
Parties, which can be a corporation or individual, are
considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Companies are also considered to be related if they
are subject to common control or common significant influence.
Recent pronouncements
The Company has considered all new accounting
pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations,
financial condition, or cash flows, based on current information.
Foreign currencies translation
Transactions denominated in currencies
other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of
the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into
the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are
recorded in the statement of operations.
The reporting currency of the Company is
the United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. In addition,
the Company maintains its books and record in a local currency, Malaysian Ringgit (“MYR”), which is functional currency
as being the primary currency of the economic environment in which the entity operates.
In general, for consolidation purposes,
assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC
Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and
expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial
statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statement
of stockholders’ equity. The gains and losses are recorded as a separate component of accumulated other comprehensive income
within the statement of stockholders’ equity.
Translation of amounts from the local currency
of the Company into US$1 has been made at the following exchange rates for the respective periods:
|
As of and for the period ended September 30,
|
|
2017
|
|
2016
|
Period-end MYR : US$1 exchange rate
|
4.2373
|
|
–
|
Period-average MYR : US$1 exchange rate
|
4.2373
|
|
–
|
Note 4. Going Concern Uncertainties
The accompanying condensed consolidated
financial statements have been prepared using the going concern basis of accounting, which contemplate the realization assets and
the satisfaction of liabilities in the normal course of business. The Company has the stockholders’ earnings of $307,196
as of September 30, 2017 and the stockholders’ deficits of $102,110 as of December 31, 2016 respectively. These factors raise
substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise
any necessary additional funds not provided by operations through loans, additional sales of its common stock or through a possible
business combination. There is no assurance that the Company will be successful in raising this additional capital or in achieving
profitable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Note 5. Business Combination
On August 23, 2017, the Company acquired
100% of the share capital of IGS Mart SDN. BHD. for a consideration of $60,000.
The following table summarises the consideration
paid for IGS Mart SDN. BHD., the fair value of assets acquired and liabilities assumed at the acquisition date.
At August 23, 2017
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US$
|
|
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|
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Total purchase price for the acquisition
|
|
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60,000
|
|
|
|
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Less: Recognized amounts of identifiable assets acquired and liabilities assumed
|
|
|
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Property, plant and equipment
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|
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35,765
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Inventories
|
|
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26,987
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Trade and other receivables
|
|
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11,883
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|
Cash and cash equivalents
|
|
|
22,015
|
|
Trade and other payables
|
|
|
(110,500
|
)
|
|
|
|
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Total identifiable net assets
|
|
|
(13,850
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)
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|
|
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Goodwill
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|
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73,850
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|
Note 6. Related Party Transactions
As of September 30, 2017, the Company owed
$102,554 and $96,579 to a director and related companies respectively, $322,747 and $89,970 from a director and related companies
respectively.
As of December 31, 2016, the Company owed
$17,400 and $82,737 to a director and a shareholder respectively.
On May 4, 2016, (i) 42,582,858 shares of
our common stock, valued at $138,000 were issued in lieu of cash compensation for director and secretarial services from March
13, 2014 through June 30, 2016; and (ii) 9,288,400 shares of our common stock, valued at $23,221 were issued in lieu of cash compensation
for accounting services from December 22, 2013 through June 30, 2016.
During the period, the Company advanced
$237,593 to a director, Kok Seng Yeap, Eddy.
Note 7. Stockholders’ equity
Common stock
On July 10, 2017, 234,000 new shares issued. The total
number of shares issued and outstanding increased from 3,242,815 shares to 3,476,815 shares.
On July 20, 2017, 74,703 new shares issued.
The total number of shares issued and outstanding increased from 3,476,815 shares to 3,551,518 shares.
On August 1, 2017, 12,830 new shares issued. The total number
of shares issued and outstanding increased from 3,551,518 shares to 3,564,348 shares.
On September 22, 2017, 10,579 new shares
issued. The total number of shares issued and outstanding increased from 3,564,348 shares to 3,574,927 shares.
For the new issuance of shares, please
refer to Item 2. UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS of PART II. OTHER INFORMATION.
Stock options
On December 5, 2012, the Company entered
into a settlement agreement with Dragon Wings for the settlement of the claim by Dragon Wings. In consideration of IGS's agreement
to make the payments in the form of common shares and share options listed in the settlement agreement. The Company would give
the option to Dragon Wings to purchase 6,000,000 common shares; the option may be exercised by Dragon Wings in whole or in part,
at any time within 5 years from the date of this settlement agreement with the exercise price at US$0.01 per share, with dilution
protection and subject to share split adjustment.
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As at
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September 30,
2017
|
|
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December 31,
2016
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|
|
|
|
|
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Loan settled by share option
|
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$
|
149,015
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|
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$
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149,015
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Par value of the common shares
|
|
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60,000
|
|
|
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60,000
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Fair value of share option
|
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$
|
89,015
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|
|
$
|
89,015
|
|
Note 8. Income Taxes
The Company has U.S. federal net operating
loss carry forwards that if unused could expire in varying amounts in the years through 2020 to 2026. However, as a result of the
acquisition, the amount of net operating loss carry forward available to be utilized in reduction of future taxable income was
reduced pursuant to the change in control provisions of Section 382 of the Internal Revenue Code.
The Company’s subsidiary operating
in Malaysia subject to the Malaysia Corporate Tax Laws at a tax rate of 24% on the assessable income for its tax year. Any unutilized
losses can be carried forward indefinitely to be utilized against income from any business source.
A 100% valuation allowance has been established
as a reserve against the deferred tax assets arising from the net operating losses and other net temporary differences since it
cannot, at this time, be considered more likely than not that their benefit will be realized in the future.
Note 9. Commitments and contingencies
As of September 30, 2017, the Company does
not have any significant commitments.
Note 10. Subsequent events
On November 1, 2017, the Board of Directors
of the Company approved the subscription of the Company’s shares with details as follows were tabled.
No.
|
Name of Applicant
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Number of shares
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Price (USD)
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Date of Application
|
1
|
KIM JUNG HWAN
|
400
|
500.00
|
October 26, 2017
|
2
|
PARK ANSUK
|
1,344
|
1,680.00
|
October 26, 2017
|
3
|
WOO DONGHWAN
|
6,504
|
8,130.00
|
October 26, 2017
|
According to the issuance of total 8,248
shares of common stock, the total number of share outstanding increased from 3,574,927 shares to 3,583,175 shares.