Item 1. Financial Statements
Our unaudited interim consolidated financial statements for the three months ended July 31, 2013 form part of this quarterly report. All currency references in this report are to Canadian dollars unless otherwise noted.
3
Fuhuiyuan International Holdings
Limited
(Formerly KWest Investment International Ltd.)
INTERIM
CONSOLIDATED BALANCE SHEETS
As at July 31, 2013 and April 30,
2013
(Unaudited)
Stated in Canadian dollars
|
|
July 31,
|
|
|
April 30,
|
|
|
|
2013
|
|
|
2013
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
603
|
|
$
|
24,398
|
|
Income taxes
receivable
|
|
46,193
|
|
|
49,395
|
|
Prepaid expense
|
|
5,000
|
|
|
2,500
|
|
|
|
51,796
|
|
|
76,293
|
|
Property, plant and equipment
|
|
2,584
|
|
|
3,445
|
|
Land for development
|
|
30,000
|
|
|
30,000
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
84,380
|
|
$
|
109,738
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
$
|
503,196
|
|
$
|
459,501
|
|
Due to related
parties Note 4
|
|
133,544
|
|
|
148,955
|
|
|
|
636,740
|
|
|
608,456
|
|
Due to related parties - Note 4
|
|
274,074
|
|
|
274,074
|
|
Total Liabilities
|
|
910,814
|
|
|
882,530
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized
100,000,000
common shares, voting, par value $.0001
each
90,000,000
preferred shares, par value $.0001
each
Issued
15,000,000
common shares
|
|
1,500
|
|
|
1,500
|
|
Additional paid
in capital
|
|
73,261
|
|
|
73,261
|
|
Accumulated retained earnings
|
|
(924,695
|
)
|
|
(879,053
|
)
|
|
|
(849,934
|
)
|
|
(804,292
|
)
|
Equity attributable to noncontrolling interest
|
|
23,500
|
|
|
31,500
|
|
Total Stockholders' Equity
|
|
(826,434
|
)
|
|
(772,792
|
)
|
|
|
|
|
|
|
|
Total Liabilites and Stockholders' Equity
|
$
|
84,380
|
|
$
|
109,738
|
|
Page 1
Fuhuiyuan International Holdings
Limited
(Formerly KWest Investment International Ltd.)
INTERIM
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended July 31,
2013 and 2012
(Unaudited)
Stated in Canadian dollars
|
|
3 months
|
|
|
3 months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
Administration
fees
|
$
|
1,313
|
|
$
|
-
|
|
Depreciation
|
|
861
|
|
|
862
|
|
Office and
general
|
|
28,642
|
|
|
1,057
|
|
Professional fees
|
|
6,666
|
|
|
1,355
|
|
Rent
|
|
7,498
|
|
|
7,498
|
|
|
|
(44,980
|
)
|
|
(10,772
|
)
|
Net loss
|
|
(44,980
|
)
|
|
(10,772
|
)
|
|
|
|
|
|
|
|
Dividend attributable to noncontrolling
interest
|
|
662
|
|
|
605
|
|
|
|
|
|
|
|
|
Net loss attributable to equity
shareholders
|
$
|
(45,642
|
)
|
$
|
(11,377
|
)
|
|
|
|
|
|
|
|
Basic and diluted income (loss) per share
|
$
|
(0.003
|
)
|
$
|
(0.001
|
)
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding
|
|
15,000,000
|
|
|
15,000,000
|
|
Page 2
Fuhuiyuan International Holdings Limited
(Formerly KWest Investment
International Ltd.)
INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY
For the period from May 1, 2012 to July 31,
2013
(Unaudited)
Stated in Canadian dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
attributable to
|
|
|
attributable to
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid in
|
|
|
Retained
|
|
|
KWest
|
|
|
noncontrollin
|
|
|
Shareholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
shareholders
|
|
|
g
interest
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 1, 2012
|
|
15,000,000
|
|
$
|
1,500
|
|
$
|
73,261
|
|
$
|
(57,445
|
)
|
$
|
17,316
|
|
$
|
36,500
|
|
$
|
53,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of preferred
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
(5,000
|
)
|
|
(5,000
|
)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income for the period ended April 30,
2013
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(818,750
|
)
|
|
(818,750
|
)
|
|
-
|
|
|
(818,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
(2,858
|
)
|
|
(2,858
|
)
|
|
-
|
|
|
(2,858
|
)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2013
|
|
15,000,000
|
|
$
|
1,500
|
|
$
|
73,261
|
|
$
|
(879,053
|
)
|
$
|
(804,292
|
)
|
$
|
31,500
|
|
$
|
(772,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of preferred
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
(8,000
|
)
|
|
(8,000
|
)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income for the period ended July 31, 2013
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(44,980
|
)
|
|
(44,980
|
)
|
|
-
|
|
|
(44,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
(662
|
)
|
|
(662
|
)
|
|
-
|
|
|
(662
|
)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 31, 2013
|
|
15,000,000
|
|
$
|
1,500
|
|
$
|
73,261
|
|
$
|
(924,695
|
)
|
$
|
(849,934
|
)
|
$
|
23,500
|
|
$
|
(826,434
|
)
|
Page 3
Fuhuiyuan International Holdings
Limited
(Formerly KWest Investment International
Ltd.)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months
ended July 31, 2013 and 2012
(Unaudited)
Stated in Canadian dollars
|
|
3 months ended
|
|
|
3 months ended
|
|
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
Net loss for period
|
$
|
(44,980
|
)
|
$
|
(10,772
|
)
|
Item not requiring outlay of
cash
|
|
|
|
|
|
|
Deferred tax expense
|
|
-
|
|
|
-
|
|
Depreciation
|
|
861
|
|
|
862
|
|
Changes in non-cash working capital balances
|
|
|
|
|
|
|
Accounts payable
|
|
45,695
|
|
|
1,846
|
|
Income taxes payable
|
|
3,202
|
|
|
-
|
|
Due to (from)
related parties
|
|
(17,911
|
)
|
|
8,400
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
|
(13,133
|
)
|
|
336
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
Redemption of preferred shares
|
|
(10,000
|
)
|
|
-
|
|
Dividend
|
|
(662
|
)
|
|
(605
|
)
|
|
|
|
|
|
|
|
Net cash proved by financing
activities
|
|
(10,662
|
)
|
|
(605
|
)
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents during the period
|
|
(23,795
|
)
|
|
(269
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of the
period
|
|
24,398
|
|
|
4,874
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of the
period
|
$
|
603
|
|
$
|
4,605
|
|
|
|
|
|
|
|
|
Supplemental information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Income taxes paid
|
$
|
-
|
|
$
|
-
|
|
Page 4
FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED
|
(Formerly KWest Investment International Ltd.)
|
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
|
JULY 31, 2013
|
(UNAUDITED)
|
|
Stated in
Canadian dollars
|
NOTE 1
NATURE AND CONTINUANCE OF
OPERATIONS
KWest Investment International Ltd., (KWest or the
Corporation) was incorporated in the state of Nevada, United States on
December 8, 2009. On June 7, 2010, KWest acquired KWest Investments &
Development Inc. (KWest Alberta) of Edmonton, Alberta, Canada as its wholly
owned subsidiary. KWest Alberta. was incorporated on September 29, 2008 with its
head office located in Edmonton, Alberta, Canada and is specialized in real
estate syndication.
The Corporation issued 9,555,000 shares of common stock in
exchange for 100% of the outstanding common shares of KWest Alberta. Although
the Corporation was the legal acquirer, the transaction was accounted for as a
recapitalization of KWest Alberta in the form of a reverse merger, whereby KWest
Alberta becomes the accounting acquirer and was deemed to have retroactively
adopted the capital structure of the Corporation. Accordingly, the accompanying
consolidated financial statements reflect the historical consolidated financial
statements of KWest Alberta for all periods presented, and do not include the
historical financial statements of the Corporation. All costs associated with
the reverse merger transaction were expensed as incurred.
Effective August 7, 2013, KWest changed its name to Fuhuiyuan
International Holdings Limited, (Fuhuiyuan).
NOTE 2
INTERIM REPORTING
While the information presented in the accompanying interim
three months consolidated financial statements is unaudited, it includes all
adjustments, which are, in the opinion of management, necessary to present
fairly the financial position, results of operations and cash flows for the
interim periods presented in accordance with accounting principles generally
accepted in the United States of America. These interim financial statements
follow the same accounting policies and methods of their application as the
Corporations April 30, 2013 annual consolidated financial statements. All
adjustments are of a normal recurring nature. It is suggested that these interim
consolidated financial statements be read in conjunction with the Corporations
April 30, 2013 annual consolidated financial statements. Operating results for
the three months ended July 31, 2013 are not necessarily indicative of the
results that can be expected for the year ended April 30, 2014.
The consolidated financial statements, which include the
Corporation and its subsidiary, KWest Investments & Development Inc. are
prepared under the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America. All significant
inter-company accounts and transactions have been eliminated. The consolidated
financial statements include 100% of the assets, liabilities, and net income or
loss of its wholly-owned subsidiary.
Page 1
NOTE 3
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
There have been no changes in accounting policies from those
disclosed in the notes to the audited consolidated financial statements for the
year ended April 30, 2013.
Functional Currency
The Corporations functional currency is the Canadian dollar.
All amounts shown on these statements are stated in Canadian dollars.
Revenue Recognition and Deferred Revenue
The Corporation recognizes revenue when persuasive evidence of
an arrangement exists, shipment has occurred or services rendered, the price is
fixed or determinable and payment is reasonably assured. Customers take
ownership at point of sale and bear the costs and risks of delivery. In
accounting for the purchase and gain on sale of land which occurred between
related parties, the Corporation followed the following US GAAP policies -
The carrying value of the asset purchased from a related party
was recorded at the transferors carrying value. No step up in value was
recorded. The difference between the contracted price and the transferors
carrying value was been recorded as a charge to equity and noted as Excess of
cost over fair value of assets received
When the asset was sold to another related party, the gain was
initially deferred and was recognized only when the related party sells the
assets to third parties and collects the funds for that sale.
Fair Value Measurements
The Corporation follows FASB ASC 820, Fair Value Measurements
and Disclosures, for all financial instruments and non-financial instruments
accounted for at fair value on a recurring basis. This new accounting standard
establishes a single definition of fair value and a framework for measuring fair
value, sets out a fair value hierarchy to be used to classify the source of
information used in fair value measurement and expands disclosures about fair
value measurements required under other accounting pronouncements. It does not
change existing guidance as to whether or not an instrument is carried at fair
value. The Corporation defines fair value as the price that would be received
from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
When determining the fair value measurements for assets and
liabilities, which are required to be recorded at fair value, the Corporation
considers the principal or most advantageous market in which the Corporation
would transact and the market-based risk measurements or assumptions that market
participants would use in pricing the asset or liability, such as inherent risk,
transfer restrictions and credit risk.
Page 2
NOTE 3
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(CONTINUED)
The Corporation has adopted FASB ASC 825, Financial
Instruments, which allows companies to choose to measure eligible financial
instruments and certain other items at fair value that are not required to be
measured at fair value. The Corporation has not elected the fair value option
for any eligible financial instruments.
Financial Instruments
Fair Value
The fair value of financial instruments consisting of cash and
cash equivalents, accrued liabilities to related party and notes payable to
related party were estimated to approximate their carrying values based on the
short-term maturity of these instruments. Unless otherwise noted, it is
managements opinion that the Corporation is not exposed to significant interest
or credit risks arising from these financial instruments.
Risks
Financial instruments that potentially subject the Corporation
to credit risk consist principally of cash. Management does not believe the
Corporation is exposed to significant credit risk. Management, as well, does not
believe the Corporation is exposed to significant interest rate risks during the
period presented in these financial statements.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, management
considers liquid investments with an original maturity of three months or less
to be cash equivalents.
Environmental Costs
Environmental expenditures that relate to current operations
are expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations, and which do not contribute to
current or future revenue generation, are expensed. Liabilities are recorded
when environmental assessments and/or remedial efforts are probable, and the
cost can be reasonably estimated. Generally, the timing of these accruals
coincides with the earlier of:
|
i)
|
completion of a feasibility study; or
|
|
ii)
|
the Corporations commitment to a plan of action based on
the then known facts.
|
Page 3
NOTE 3
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(CONTINUED)
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 disclosures of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. The financial statements above reflect all of the costs of
doing business.
Derivative Instruments
The Corporation accounts for derivative instruments according
to FASB ASC topic 815 Derivative and Hedging. This standard establish accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and also for hedging activities.
If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of gain or
loss recognition on the hedging derivative with the recognition of:
|
(i)
|
the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or
|
|
(ii)
|
the earnings effect of the hedged forecasted
transaction.
|
For a derivative not designated as a hedging instrument, the
gain or loss is recognized in income in the period of change. The Corporation
has not entered into derivatives contracts to hedge existing risks or for
speculative purposes.
During the period ended July 31, 2013, the Corporation does not
possess a derivative instrument, which the Corporation accounts for under this
FASB ASC topic.
Net Income per Common Share
FASB ASC 260 requires dual presentation of basic and diluted
earnings per share (EPS) with a reconciliation of the numerator and denominator
of the EPS computations. Basic earnings per share amounts are based on the
weighted average shares of common stock outstanding. If applicable, diluted
earnings per share would assume the conversion, exercise or issuance of all
potential common stock instruments such as options, warrants and convertible
securities, unless the effect is to reduce a loss or increase earnings per
share. Diluted net income (loss) per share on the potential exercise of the
equity-based financial instruments is not presented where anti-dilutive. There
were no adjustments required to net income for the period presented in the
computation of diluted earnings per share.
Page 4
NOTE 3
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(CONTINUED)
Equipment
Equipment is recorded at cost. Amortization is calculated at
the following annual rates:
-
Furniture and computer equipment 60 month straight line
-
Leasehold improvements - 21 month straight line
Impairment of Long-Lived Assets
Impairment losses on long-lived assets are recognized when
events or changes in circumstances indicate that the undiscounted cash flows
estimated to be generated by such assets are less than their carrying value and,
accordingly, all or a portion of such carrying value may not be recoverable.
Impairment losses are then measured by comparing the fair value of assets to
their carrying amounts. No impairments of these types of assets were recognized
during the period ended July 31, 2013.
Income Taxes
The Corporation follows FASB ASC Topic 820, Income Taxes
which requires the use of the asset and liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities are
recognized for future tax consequences attributable to temporary differences
between the financial statements carrying amounts of existing assets and
liabilities and loss carry forwards and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the year in which those temporary differences are expected to
be recovered or settled.
Deferred Taxes
A deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting and net operating loss-carry
forwards. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that, some portion or all of
the deferred tax asset will not be realized. Deferred tax assets and liabilities
are adjusted for the effect of changes in tax laws and rates on the date of
enactment.
Comprehensive Income (Loss)
The Corporation adopted Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) 220, Reporting Comprehensive
Income, which establishes standards for the reporting and display of
comprehensive income and its components in the financial statements.
Comprehensive income consists of net income and other gains and losses affecting
stockholder's equity that are excluded from net income, such as unrealized gains
and losses on investments available for sale, foreign currency translation gains
and losses and minimum pension liability. Since inception, the Corporations
other comprehensive income represents foreign currency translation adjustments.
Page 5
NOTE 3
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(CONTINUED)
Recent Accounting Pronouncements
The Corporation adopts new pronouncements relating to generally
accepted accounting principles applicable to the Corporation as they are issued,
which may be in advance of their effective date. Management does not believe
that any recently issued, but not yet effective accounting standards, if
currently adopted, would have a material effect on the accompanying financial
statements.
NOTE 4
EQUIPMENT
|
|
|
|
|
|
|
|
July
31, 2013
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
Furniture and computers
|
$
|
17,227
|
|
$
|
14,643
|
|
$
|
2,584
|
|
Leasehold improvements
|
|
15,506
|
|
|
15,506
|
|
|
-
|
|
|
$
|
32,733
|
|
$
|
30,149
|
|
$
|
2,584
|
|
|
|
|
|
|
|
|
|
April
30, 2013
|
|
Furniture and computers
|
|
|
|
|
Accumulated
|
|
|
|
|
Leasehold improvement
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
|
$
|
17,227
|
|
$
|
13,782
|
|
$
|
3,445
|
|
Furniture and computers
|
|
15,506
|
|
|
15,506
|
|
|
-
|
|
Leasehold improvement
|
$
|
32,733
|
|
$
|
29,288
|
|
$
|
3,445
|
|
NOTE 5
RELATED PARTY TRANSACTIONS AND
BALANCES
The following are related transaction balances with related
parties for the period ended July 31, 2013:
|
|
|
|
|
July
31, 2013
|
|
|
|
|
|
April
30, 2013
|
|
|
|
Current
|
|
|
Non-Current
|
|
|
Current
|
|
|
Non-Current
|
|
Due from related party
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Due to related party
|
$
|
133,544
|
|
$
|
274,074
|
|
$
|
148,955
|
|
$
|
274,074
|
|
Current advances from (to) related parties represent advances
from (to) a shareholder, advances from a Corporation with common management and
advances from a party related to a shareholder. The advances are without
interest and have no specified repayment terms.
There were no related party transactions for the three months
ended July 31, 2013 or July 31, 2012.
Page 6
NOTE 6 -
CAPITAL STOCK
On April 28, 2010, the Corporation issued 5,445,000 common
shares of the Corporation for gross proceed of $92,817 by way of private
placement.
On June 7, 2010, the Corporation issued 9,555,000 common shares
of the Corporation in exchange for 100% of the outstanding common shares of
KWest Investments & Development Inc. As described in Note 3, the transaction
was accounted for as a reverse merger and a retroactive recapitalization.
As at July 31, 2013, there were no warrants or options
outstanding.
NOTE 7
PREFERRED SHARES
On January 13, 2011, the Corporations subsidiary, KWest
Investments and Development Inc., closed a private placement of 160,000
preferred shares at $0.125 per share for a gross proceed of $20,000.
During February, 2011, the Corporations subsidiary, KWest
Investments and Development Inc., closed a private placement of 80,000 preferred
shares at $0.125 per share for a gross proceed of $10,000.
During the quarter ended January 31, 2012, the Corporations
subsidiary, KWest Investments and Development Inc., closed a private placement
of 68,000 preferred shares at $0.125 per share for a gross proceed of $8,500.
These shares bear a cumulative dividend of 8% per annum and are
redeemable at the option of the Corporation on or before the second year
anniversary from the date of closing.
On March 15, 2013, $5,000 of preferred shares was redeemed.
On July 25, 2013, $10,000 of preferred shares was redeemed.
NOTE 8
COMMITMENT
The Corporation entered into an agreement to lease office space
that expires September 1, 2013. The monthly commitment is $2,499.43 ($29,993 per
year.)
NOTE 9
SUBSEQUENT EVENT
On August 15, 2013, further to the letter of intent dated July
19, 2013, the Corporation entered into a share exchange agreement (the
Definitive Agreement) with Fuhuiyuan International Group (Holdings) Limited
(Fuhuiyuan International). The Definitive Agreement contemplates that, in
exchange for all the outstanding shares of common stock of Fuhuiyuan
International, the Corporation shall issue to Fuhuiyuan Internationals
shareholders an aggregate of 7,500,000 shares of common stock of the Corporation
(the Acquisition).
The completion of the Acquisition is subject to a number of
conditions precedent, including, but not limited to: (i) completion of
satisfactory due diligence by each of the Corporation and Fuhuiyuan
International; (ii) the approval of the Acquisition by each of the Corporations
and Fuhuiyuan Internationals respective board of directors and shareholders, if
required; (iii) the absence of any material change or change in a material fact
which might reasonably be expected to have a material adverse effect on the
financial and operational conditions or the assets of each of the parties to the
Definitive Agreement; and (iv) certain other conditions typical in a transaction
of this nature.
Page 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
This report on Form 10-Q contains certain forward-looking
statements. All statements other than statements of historical fact are
forward-looking statements for purposes of these provisions, including any
projections of earnings, revenues, or other financial items; any statements of
the plans, strategies, and objectives of management for future operation; any
statements concerning proposed new products, services, or developments; any
statements regarding future economic conditions or performance; statements of
belief; and any statement of assumptions underlying any of the foregoing. Such
forward-looking statements are subject to inherent risks and uncertainties, and
actual results could differ materially from those anticipated by the
forward-looking statements.
These forward-looking statements involve significant risks and
uncertainties, including, but not limited to, the following: competition,
promotional costs and the risk of declining revenues. Our actual results could
differ materially from those anticipated in such forward-looking statements as a
result of a number of factors. These forward-looking statements are made as of
the date of this filing, and we assume no obligation to update such
forward-looking statements. The following discusses our financial condition and
results of operations based upon our unaudited financial statements which have
been prepared in conformity with accounting principles generally accepted in the
United States. It should be read in conjunction with our financial statements
and the notes thereto included elsewhere herein.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Our consolidated financial statements are stated in Canadian
Dollars (CDN$) and are prepared in accordance with United States Generally
Accepted Accounting Principles.
In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in Canadian Dollars (CDN$) and all references to
common shares refer to the common shares in our capital stock.
As used in this quarterly report, the terms we, us, our
and our company mean KWest Investment International Ltd. and our wholly-owned
subsidiary, Fuhuiyuan International Holdings Limited, an Alberta, Canada
corporation, unless otherwise indicated.
General Overview
We were incorporated on December 8, 2009 under the laws of the
State of Nevada. We have a wholly-owned subsidiary, KWest Investments &
Development Inc., incorporated under the laws of Alberta (KWest Alberta). Our
principal executive offices are located at Suite 204, 15615 102 Avenue,
Edmonton, Alberta, T5P 4X7. Our telephone number is 780.756.1668. Our fiscal
year end is April 30.
On July 16, 2013, our board of directors and a majority of our
stockholders approved a change of name of our company from Kwest Investment
International Ltd. to Fuhuiyuan International Holdings Limited. A Certificate of
Amendment was filed with the Nevada Secretary of State on July 29, 2013, with an
effective date of August 7, 2013. The amendment was approved by Financial
Industry Regulatory Authority (FINRA) with an effective date of August 7, 2013.
Our trading symbol KWIT. Our CUSIP number is 359535 101.
4
Our Current Business
On June 7, 2010 we entered into a share exchange agreement with
KWest Alberta and all of its shareholders whereby we acquired KWest Alberta and
its 10% ownership in the Sturgeon County Property in Alberta for 9,555,000
shares of our common stock.
We specialize in land banking, real estate syndication and
management. We sold a 90% ownership of our first parcel of land, consisting of
75 acres located in Sturgeon County, Alberta, to Kimura Lake Estate Inc. We
maintain a 10% ownership and manage this 75 acre parcel of land for Kimura Lake
Estate. The land is located in Sturgeon County, Alberta, about 2 miles east of
Redwater, Alberta and 3¾ miles north of the Alberta Industrial Heartland which
is targeted to be the future site for oil sand upgraders in Alberta.
As a management company, we assist Kimura Lake Estate in
syndicating the land through our sales team by splitting the full parcel into
separate half acre (1 unit) and one acre (2 units) units of undivided interest
with individual land titles issued by the Alberta Government Land Title Office
and sold off to land investors. Our 10% interest provides us with 15 units of
undivided interest not for syndication and Kimura Lake Estate has 135 units
(90%) of undivided interest to syndicate. After land is syndicated, we work with
engineers, planners and architects to get all the approvals and plans required,
thereby increasing the value of the land.
We generate revenue through management fees derived from
managing syndicated land as well as the sale of subdivided land parcels. We
purchased the Sturgeon County Property from a company which has management in
common with our company. We consequently sold the Sturgeon County Property to
another company with shared management.
On August 22, 2013 we entered into a share exchange agreement
dated August 15, 2013 with Fuhuiyuan International Group (Holdings) Limited, a
British Virgin Island corporation and the sole shareholder of Fuhuiyuan BVI,
pursuant to which we agreed to purchase 100% of the issued and outstanding
securities of Fuhuiyuan BVI in consideration of the issuance of 7,500,000 shares
of our common stock (being 33.33% of our issued and outstanding voting
securities). Closing of the transaction is subject to a number of conditions
precedent, including but not limited to satisfactory completion of due diligence
by the parties, and the appointment of two nominees of Fuhuiyuan BVI to our
board of directors. Fuhuiyuan BVI is a newly formed trading company which holds
certain sales agency rights to act as international sales agent for Qingdao
Fuhuiyuan Investment Co. Ltd., a China based purveyor of cosmetics, footwear,
clothing and fashion accessories.
Results of Operations
The following summary of our results of operations should be
read in conjunction with our consolidated financial statements for the quarter
ended July 31, 2013, which are included herein.
Our operating results for the three months ended July 31, 2013
and 2012 are summarized as follows:
|
|
Three Months Ended
|
|
|
|
July 31,
|
|
|
|
2013
|
|
|
2012
|
|
Revenue
|
$
|
0
|
|
$
|
0
|
|
Administration fees
|
$
|
1,313
|
|
$
|
0
|
|
Commission fees
|
$
|
0
|
|
$
|
0
|
|
Consulting fees
|
$
|
0
|
|
$
|
0
|
|
Depreciation
|
$
|
861
|
|
$
|
862
|
|
Office and general
|
$
|
28,462
|
|
$
|
1,057
|
|
Professional fees
|
$
|
6,666
|
|
$
|
1,355
|
|
Rent
|
$
|
7,498
|
|
$
|
7,498
|
|
Net Income (Loss)
|
$
|
(44,980
|
)
|
$
|
(10,772
|
)
|
5
For the three months ended July 31, 2013, our net loss
increased by $34,208 as compared to the three months ended July 31, 2012. Our
expenses increased primarily due to increase in office and general expenses,
including filing fees and other miscellaneous expenses.
Liquidity and Financial Condition
Working Capital
|
|
At
|
|
|
At
|
|
|
|
July 31,
|
|
|
April 30,
|
|
|
|
2013
|
|
|
2013
|
|
Current Assets
|
$
|
51,796
|
|
$
|
76,293
|
|
Current Liabilities
|
$
|
636,740
|
|
$
|
608,456
|
|
Working Capital (Deficit)
|
$
|
(584,944
|
)
|
$
|
(498,718
|
)
|
Our total current assets as of July 31, 2013 were $51,796 as
compared to total current assets of $76,293 as of April 30, 2013. The decrease
was primarily due to the decrease of cash and cash equivalent asset. Our total
current liabilities as of July 31, 2013 were $636,740 as compared to total
current liabilities of $608,456 as of April 30, 2013. The increase in current
liabilities was attributed to the increase of account payables and accrued
liabilities.
Cash Flows
|
|
Three Months Ended
|
|
|
|
July 31,
|
|
|
|
2013
|
|
|
2012
|
|
Net Cash Provided by (Used in) Operating
Activities
|
$
|
(13,133
|
)
|
$
|
336
|
|
Net Cash Provided by (Used in) Investing Activities
|
$
|
0
|
|
$
|
0
|
|
Net Cash Provided by (Used in) Financing
Activities
|
$
|
(10,662
|
)
|
$
|
(605
|
)
|
Increase (Decrease) in Cash and Cash Equivalents During the
Period
|
$
|
(23,795
|
)
|
$
|
(269
|
)
|
Operating Activities
Cash used in operating activities increased from $336 to
$13,133 which was primarily due to the increase in account payable.
Investing Activities
We did not have any investing activities during the three
months ended July 31, 2013 and July 31, 2012.
Financing Activities
The decrease in cash provided by financing activities during
the three month period ended July 31, 2013 is primarily a result of the
redemption of a number of preferred shares.
We will require additional funds to fund our budgeted expenses
over the next 12 months. These funds may be raised through equity financing,
debt financing, or other sources, which may result in further dilution in the
equity ownership of our shares. There is still no assurance that we will be able
to maintain operations at a level sufficient for an investor to obtain a return
on his investment in our common stock. Further, we may continue to be
unprofitable. We need to raise additional funds in the immediate future in order
to proceed with our budgeted expenses.
Specifically, we estimate our operating expenses and working
capital requirements for the next 12 months to be as follows:
6
Description
|
Estimated
Completion
Date
|
Estimated
Expenses
($)
|
Legal and accounting fees
|
12 months
|
$50,000
|
Management and operating costs
|
12 months
|
$50,000
|
Salaries and consulting fees
|
12 months
|
$50,000
|
General and administrative expenses
|
12 months
|
$25,000
|
Total
|
|
$175,000
|
We plan on using a portion of the funds above, namely the land
acquisition expenses and salaries, to hire more sales staff as well as
consultants who will help us to target more land parcels and increase the sales
in our existing Sturgeon County property. We anticipate that we will complete
the acquisition of Fuhuiyuan International Group (Holdings) Limited of British
Virgin Inlands (Fuhuiyuan BVI) as its wholly owned subsidiary in the fall of
2013 and plan to use a portion of the above funds for expenses related to this
subsidiary.
We intend to meet our cash requirements for the next 12 months
through a combination of debt financing and equity financing by way of private
placements. We currently do not have any arrangements in place to complete any
private placement financings and there is no assurance that we will be
successful in completing any such financings on terms that will be acceptable to
us.
If we are not able to raise the full $175,000 to implement our
business plan as anticipated, we will scale our business development in line
with available capital. Our primary priority will be to retain our reporting
status with the SEC which means that we will first ensure that we have
sufficient capital to cover our legal and accounting expenses. Once these costs
are accounted for, in accordance with how much financing we are able to secure,
we will focus on product acquisition, testing and servicing costs as well as
marketing and advertising of our products. We will likely not expend funds on
the remainder of our planned activities unless we have the required capital.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
stockholders.
Critical Accounting Policies
The discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with the accounting principles generally
accepted in the United States of America. Preparing financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenue, and expenses. These estimates and
assumptions are affected by managements application of accounting policies. We
believe that understanding the basis and nature of the estimates and assumptions
involved with the following aspects of our financial statements is critical to
an understanding of our financial statements.
The company has adopted FASB ASC 825, Financial Instruments,
which allows companies to choose to measure eligible financial instruments and
certain other items at fair value that are not required to be measured at fair
value. The company has not elected the fair value option for any eligible
financial instruments.
7
Financial Instruments
Fair Value
The fair value of financial instruments consisting of cash and
cash equivalents, accrued liabilities to related party and notes payable to
related party were estimated to approximate their carrying values based on the
short-term maturity of these instruments. Unless otherwise noted, it is
managements opinion that the company is not exposed to significant interest or
credit risks arising from these financial instruments.
Risks
Financial instruments that potentially subject the company to
credit risk consist principally of cash. Management does not believe the company
is exposed to significant credit risk. Management, as well, does not believe the
company is exposed to significant interest rate risks during the period
presented in these financial statements.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, management
considers liquid investments with an original maturity of three months or less
to be cash equivalents.
Environmental Costs
Environmental expenditures that relate to current operations
are expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations, and which do not contribute to
current or future revenue generation, are expensed. Liabilities are recorded
when environmental assessments and/or remedial efforts are probable, and the
cost can be reasonably estimated. Generally, the timing of these accruals
coincides with the earlier of:
|
i)
|
completion of a feasibility study; or
|
|
ii)
|
the companys commitment to a plan of action based on the
then known facts.
|
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 disclosures of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. The financial statements above reflect all of the costs of
doing business.
Derivative Instruments
The company accounts for derivative instruments according to
FASB ASC topic 815 Derivative and Hedging. This standard establish accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and also for hedging activities.
If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of gain or
loss recognition on the hedging derivative with the recognition of:
|
(i)
|
the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or
|
|
(ii)
|
the earnings effect of the hedged forecasted
transaction.
|
8
For a derivative not designated as a hedging instrument, the
gain or loss is recognized in income in the period of change. The company has
not entered into derivatives contracts to hedge existing risks or for
speculative purposes.
During the period ended July 31, 2013, the company does not
possess a derivative instrument, which the company accounts for under this FASB
ASC topic.
Net Income per Common Share
FASB ASC 260 requires dual presentation of basic and diluted
earnings per share (EPS) with a reconciliation of the numerator and denominator
of the EPS computations. Basic earnings per share amounts are based on the
weighted average shares of common stock outstanding. If applicable, diluted
earnings per share would assume the conversion, exercise or issuance of all
potential common stock instruments such as options, warrants and convertible
securities, unless the effect is to reduce a loss or increase earnings per
share. Diluted net income (loss) per share on the potential exercise of the
equity-based financial instruments is not presented where anti-dilutive. There
were no adjustments required to net income for the period presented in the
computation of diluted earnings per share.
Equipment
Equipment is recorded at cost. Amortization is calculated at
the following annual rates:
-
Furniture and computer equipment 60 month straight line
-
Leasehold improvements - 21 month straight line
Impairment of Long-Lived Assets
Impairment losses on long-lived assets are recognized when
events or changes in circumstances indicate that the undiscounted cash flows
estimated to be generated by such assets are less than their carrying value and,
accordingly, all or a portion of such carrying value may not be recoverable.
Impairment losses are then measured by comparing the fair value of assets to
their carrying amounts. No impairments of these types of assets were recognized
during the period ended July 31, 2013.
Income Taxes
The company follows FASB ASC Topic 820, Income Taxes which
requires the use of the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are recognized for
future tax consequences attributable to temporary differences between the
financial statements carrying amounts of existing assets and liabilities and
loss carry forwards and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the year in which those temporary differences are expected to be
recovered or settled.
Deferred Taxes
A deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting and net operating loss-carry
forwards. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that, some portion or all of
the deferred tax asset will not be realized. Deferred tax assets and liabilities
are adjusted for the effect of changes in tax laws and rates on the date of
enactment.
9
Comprehensive Income (Loss)
The company adopted Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) 220, Reporting Comprehensive
Income, which establishes standards for the reporting and display of
comprehensive income and its components in the financial statements.
Comprehensive income consists of net income and other gains and losses affecting
stockholder's equity that are excluded from net income, such as unrealized gains
and losses on investments available for sale, foreign currency translation gains
and losses and minimum pension liability. Since inception, the companys other
comprehensive income represents foreign currency translation adjustments.
Recent Accounting Pronouncements
Our company adopts new pronouncements relating to generally
accepted accounting principles applicable to our company as they are issued,
which may be in advance of their effective date. Management does not believe
that any recently issued, but not yet effective accounting standards, if
currently adopted, would have a material effect on the accompanying financial
statements.