NOTES
TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of accounting policies for Mercari Communications Group, Ltd. (the “Company”) is presented to assist in understanding
the Company’s financial statements. The accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Interim
Reporting
The
unaudited financial statements as of February 28, 2017 and for the nine months then ended reflect, in the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results
of operations for the six months. Operating results for interim periods are not necessarily indicative of the results which can
be expected for full years.
Nature
of Operations and Going Concern
The
accompanying financial statements have been prepared on the basis of accounting principles applicable to a “going concern”,
which assume that the Company will continue in operation for at least one year and will be able to realize its assets and discharge
its liabilities in the normal course of operations.
Several
conditions and events cast doubt about the Company’s ability to continue as a “going concern.” The Company has
incurred net losses of approximately $[335,540] from inception to February 28, 2017, has no revenues and requires additional financing
in order to finance its business activities on an ongoing basis. The Company’s future capital requirements will depend on
numerous factors including, but not limited to, continued progress in finding a merger candidate and the pursuit of business opportunities.
The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments
have been obtained. In the interim, shareholders of the Company have been contributing capital to the Company to meet its ordinary
and normal operating expenses. Management believes that actions presently being taken to revise the Company’s operating
and financial requirements provide them with the opportunity to continue as a “going concern”.
These
financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a “going
concern”. While management believes that the actions already taken or planned, will mitigate the adverse conditions and
events which raise doubt about the validity of the “going concern” assumption used in preparing these financial statements,
there can be no assurance that these actions will be successful. If the Company were unable to continue as a “going concern,”
then substantial adjustments would be necessary to the carrying values of assets, the reported amounts of its liabilities, the
reported revenues and expenses, and the balance sheet classifications used.
Organization
and Basis of Presentation
The
Company was incorporated under the laws of the State of Colorado on December 30, 1987. From 1988 until early in 1990, the Company
was engaged in the business of providing educational products, counseling, seminar programs, and publications such as newsletters
to adults aged 30 to 50. The Company financed its business with private offerings of securities, obtaining shareholder loans,
and with an underwritten initial public offering of securities registered with the Securities and Exchange Commission (“SEC”).
The Company’s business failed in early 1990. The Company ceased all operating activities during the period from June 1,
1990 to November 30, 2001 and was considered dormant. During this period that the Company was dormant, it did not file required
reports with the SEC under the Securities Exchange Act of 1934, as amended (“Exchange Act”). From November 30, 2001
to March 1, 2004, the Company was in the development stage. On August 3, 2004, the shareholders of the Company approved a plan
of quasi-reorganization which called for a restatement of accounts to eliminate the accumulated deficit and related capital accounts
on the Company’s balance sheet. The quasi-reorganization was effective March 1, 2004. Since March 1, 2004, the Company is
in the development stage, and has not commenced planned principal operations.
MERCARI
COMMUNICATIONS GROUP, LTD.
NOTES
TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
Nature
of Business
The
Company has no products or services as of February 28, 2017.
Cash
and Cash Equivalents
For
purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
Pervasiveness
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles required management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Income
Taxes
The
Company accounts for income taxes under the provisions of ASC 740-10 & 740-30 (formerly SFAS No.109, “Accounting for
Income Taxes”). ASC 740 requires recognition of deferred income tax assets and liabilities for the expected future income
tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets
and liabilities.
Loss
per Share
Basic
loss per share has been computed by dividing the loss for the period applicable to the common shareholders by the weighted average
number of common shares during the years. There are no outstanding common stock equivalents for February 28, 2017 and February
29, 2016 and they are thus not considered.
Concentration
of Credit Risk
The
Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts
or other foreign hedging arrangements.
Fair
Value of Financial Instruments
The
carrying value of cash and accrued expenses, if applicable, approximate their fair values based on the short-term maturity of
these instruments. The carrying amounts of debt were also estimated to approximate fair value.
The
Company utilizes the methods of fair value measurement as described in ASC 820 to value its financial assets and liabilities.
As defined in ASC 820, fair value is based on the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability
in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used
to measure fair value into three broad levels, which are described below:
Level
1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair
value hierarchy gives the highest priority to Level 1 inputs.
Level
2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
MERCARI
COMMUNICATIONS GROUP, LTD.
NOTES
TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Level
3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority
to Level 3 inputs.
New
Accounting Pronouncements
In
August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements
Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”
(the “Update”). Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether
there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures.
The amendments in the Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing
and content of footnote disclosures. 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 public and nonpublic entities for annual periods ending after December 15, 2016.
The
Company has reviewed all other recently issued but not yet effective accounting pronouncements and have determined that these
new accounting pronouncements are either not applicable or would not have a material impact on the results of operations or changes
in the financial position.
NOTE
2 - COMMITMENTS
Until
January 20, 2017, when Algodon Wines & Luxury Development Group, Inc. (“Algodon”), the majority shareholder of
the Company sold all of its shares in the Company to China Concentric Capital Group Ltd (“China Concentric”), the
office space, telephone and office supplies consumed by the Company were provided by Algodon at an annual cost of $12,000. To
date, the Company has yet to enter into an agreement to replace the agreement it formerly had with Algodon.
NOTE
3 - RELATED PARTY TRANSACTIONS
For
the nine months ended February 28, 2017, the Company received additional shareholder advances totaling $40,690 of which $38,890
was from Algodon, the Company’s parent until the sale of its shares to China Concentric on January 20, 2017, which advances,
as of that date were in the aggregate amount of $164,877. This total advance, which was assigned to China Concentric, carried
no interest and is intended to be converted to equity in the future. Since completion of the acquisition by China Concentric,
there has been $1,800 advanced to the Company by Mr. Zhu, a shareholder of the Company.
MERCARI
COMMUNICATIONS GROUP, LTD.
NOTES
TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
NOTE
4– CHANGE IN CONTROL
On
January 20, 2017, Algodon Wines & Luxury Development Group, Inc. (“Algodon”), the owner of at least 43,822,001
shares (the “Algodon Shares”), representing approximately 96.5%, of the outstanding common stock of Mercari Communications
Group, Ltd. (the “Company”), sold the Algodon Shares to China Concentric Capital Group Ltd., a British Virgin Islands
company (“China Concentric”), for a total purchase price of $260,000 pursuant to a Stock Purchase Agreement dated
December 20, 2016, as amended. Algodon also assigned to China Concentric all its right, title and interest to amounts payable
to Algodon for non-interest bearing advances to the Company, which advances, as of January 20, 2017 were in the aggregate amount
of $150,087.
On
February 2, 2017, China Concentric sold to Mr. Quanzhong Lin, an entrepreneur resident in the People’s Republic of China,
29,521,410 of the shares it purchased from Algodon, representing approximately 65% of the outstanding shares of the Company’s
common stock, for a purchase price of $300,000, pursuant to a Stock Purchase Agreement dated December 21, 2016.
Mr.
Lin has indicated that he is purchasing a controlling interest in the Company with the intention of acquiring an operating business
in a reverse acquisition transaction through a share exchange. There can be no assurance that an acquisition of any particular
business will be consummated.
NOTE
6– SUBSEQUENT EVENTS
The
Company adopted ASC 855, and has evaluated all events occurring after February 28, 2017, the date of the most recent balance sheet,
for possible adjustment to the financial statements or disclosures through April 19, 2017, which is the date on which the financial
statements were issued.
