The following discussion of our plan of operation, financial condition and
results of operations should be read in conjunction with the Company's condensed
consolidated financial statements, and notes thereto, included elsewhere herein.
This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of various factors including,
but not limited to, those discussed in this Annual Report.
12
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The SEC defines critical accounting policies as those that are, in management's
view, most important to the portrayal of our financial condition and results of
operations and those that require significant judgments and estimates.
The discussion and analysis of our financial condition and results of operations
is based upon our financial statements that have been prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets and liabilities. On an
on-going basis, we evaluate our estimates including the allowance for doubtful
accounts, the salability and recoverability of inventory, income taxes and
contingencies. We base our estimates on historical experience and on other
assumptions that we believe to be reasonable under the circumstances, the
results of which form our basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.
We cannot predict what future laws and regulations might be passed that could
have a material effect on our results of operations. We assess the impact of
significant changes in laws and regulations on a regular basis and update the
assumptions and estimates used to prepare our financial statements when we deem
it necessary.
Revenue recognition of contracts with customers:
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with
Customers (Topic 606), to update the financial reporting requirements for
revenue recognition. Topic 606 outlines a single comprehensive model for
entities to use in accounting for revenue arising from contracts with customers.
It supersedes most current revenue recognition guidance, including
industry-specific guidance. The guidance is based on the principle that an
entity should recognize revenue to depict the transfer of goods or services to
customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The guidance
also requires additional disclosure about the nature, amount, timing and
uncertainty of revenue and cash flows arising from customer contracts, including
significant judgments and changes in judgments and assets recognized from costs
incurred to fulfill a contract. This guidance became effective for the Company
beginning on July 1, 2018, and entities have the option of using either a full
retrospective or a modified retrospective approach for the adoption of the new
standard. We adopted this standard using the modified retrospective approach on
July 1, 2018.
In preparation for adoption of the standard, we have implemented internal
controls and completed our impact assessment of implementing this guidance. We
have evaluated each of the five steps in Topic 606, which are as follows: 1)
identify the contract with the customer; 2) identify the performance obligations
in the contract; 3) determine the transaction price; 4) allocate the transaction
price to the performance obligations; and 5) recognize revenue when (or as)
performance obligations are satisfied.
Revenue was not affected materially in any period due to the adoption of ASC
Topic 606 because: (1) we identified similar performance obligations under ASC
Topic 606 as compared with deliverables and separate units of account previously
identified; our performance obligation is to provide the land; (2) we determined
the transaction price to be consistent; the lease agreement with the customer
specifies the transaction price; and (3) we recorded revenue at the same point
in time, upon delivery under both ASC Topic 605 and ASC Topic 606, as applicable
under the terms of the contract with the customer. Additionally, the accounting
for fulfillment costs or costs incurred to obtain a contract were not affected
materially in any period due to the adoption of Topic 606.
There are also certain considerations related to accounting policies, business
processes and internal control over financial reporting that are associated with
implementing Topic 606. We have evaluated our policies, processes, and control
framework for revenue recognition, and identified and implemented the changes
needed in response to the new guidance.
Lastly, disclosure requirements under the new guidance in Topic 606 have been
significantly expanded in comparison to the disclosure requirements under the
current guidance, including disclosures related to disaggregation of revenue
into appropriate categories, performance obligations, the judgments made in
revenue recognition determinations, adjustments to revenue which relate to
activities from previous quarters or years, any significant reversals of
revenue, and costs to obtain or fulfill contracts. We have designed and
implemented the appropriate controls over gathering and reporting the
information as required under Topic 606, in order to support the expanded
disclosure requirements.
Property Plant and Equipment:
Land and buildings are recognized at cost. Land is carried at cost less
accumulated impairment losses.
Foreign Currency Translation:
Foreign currency transactions are translated applying the current rate method.
Assets and liabilities are translated at current rates. Stockholders' equity
accounts are translated at the appropriate historical rates and revenue and
expenses are translated at weighted average rates for the year. Exchange rate
differences that arise between the rate at the transaction date and the one in
effect at the payment date, or at the balance sheet date, are recognized in the
income statement.
13
Income Taxes:
The Company accounts for income taxes under the asset and liability method of
accounting. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. A valuation
allowance is required when it is less likely than not that the Company will be
able to realize all or a portion of its deferred tax assets. Because it is
doubtful that the net operating losses of recent years will ever be used, a
valuation allowance has been recognized equal to the tax benefit of net
operating losses generated.
Stock-Based Compensation:
The Company records stock-based compensation in accordance with ASC 718,
Compensation. All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the
fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable. Equity instruments
issued to employees and the cost of the services received as consideration are
measured and recognized based on the fair value of the equity instruments issued
and are recognized over the employees required service period, which is
generally the vesting period.
Net Earnings per Share:
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted-average number of common shares available. Diluted
earnings per share is computed similar to basic earnings 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. As of June 30, 2020 and June
30, 2019 there were 10,000 and 10,000, potential dilutive shares that need to be
considered as common share equivalents and because of the net loss, the effect
of these potential common shares is anti-dilutive for twelve-months ended June
30, 2020 and dilutive for the twelve months ended June 30, 2019.
Cash and Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all
highly-liquid investments purchased with original maturities of twelve-months or
less to be cash equivalents.
The Company maintains its cash in bank deposit accounts which, at June 30, 2020
did not exceed federally insured limits. The Company has not experienced any
losses in such accounts and believes that it is not exposed to any significant
credit risk on such amounts.
Estimates:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles 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 the consolidated
financial statements, as well as the reported amounts of revenue and expenses
during the reported period. Actual results could differ from those estimates.
Concentrations of Credit Risk:
Financial instruments that potentially subject the Company to major credit risk
consist principally of a single subsidiary of Anton Nielsen Vojens ApS.
14
Recently Issued Accounting Standards:
In February 2016, the FASB issued ASU No. 2016-02 - Leases (Topic 842), which
sets out the principles for the recognition, measurement, presentation and
disclosure of leases for both parties to a contract (i.e. lessees and lessors).
The new standard requires lessees to apply a dual approach, classifying leases
as either financing or operating leases based on the principle of whether or not
the lease is effectively a financed purchase by the lessee. This classification
will determine whether lease expense is recognized based on an effective
interest method or on a straight-line basis over the term of the lease,
respectively. A lessee is also required to record a right-of-use asset and a
lease liability for all leases with a term of greater than 12 months regardless
of their classification. Leases with a term of 12 months or less will be
accounted for similar to existing guidance for operating leases today. The new
standard requires lessors to account for leases using an approach that is
substantially equivalent to existing guidance for sales-type leases, direct
financing leases and operating leases. The standard is effective on January 1,
2019, however early adoption is permitted. effective January 1, 2019. On July 1,
2019 the Company adopted the requirements of Financial Accounting Standards
Board ("FASB") Accounting Standards Update ("ASU") No. 2016-02 (Topic 842),
Leases ("ASU 2016-02") using modified retrospective approach. Amounts and
disclosures set forth in this Form 10-K reflect this change.
In June 2018, the FASB issued ASU No. 2018-07. The ASU expands the scope of ASU
No. 2018-07 to include share-based payment transactions for acquiring goods and
services from nonemployees. An entity should apply ASU No. 2018-07 to
nonemployee awards except with respect to option pricing models and the
attribution of cost (that is, the period of time over which share-based payment
awards vest and the pattern of cost recognition over that period). The
amendments specify that ASU No. 2018-07 applies to all share-based payment
transactions in which a grantor acquires goods or services to be used or
consumed in a grantor's own operations by issuing share-based payment awards.
ASU No. 2018-07 is effective for fiscal years beginning after December 15, 2018,
or July 1, 2019 for the Company, and interim periods within those fiscal years
with early adoption permitted. The Company adopted the new standard as of July
1, 2019, and the new standard had no material impact on its consolidated
financial statements.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations:
Clarifying the Definition of a Business . ASU No. 2017-01 most significantly
revises guidance specific to the definition of a business related to accounting
for acquisitions. Additionally, ASU No. 2017-01 also affects other areas of US
GAAP, such as the definition of a business related to the consolidation of
variable interest entities, the consolidation of a subsidiary or group of
assets, components of an operating segment, and disposals of reporting units and
the impact on goodwill. This ASU became effective for public entities for annual
and interim periods beginning after December 15, 2017. The Company adopted this
standard on January 1, 2018. The adoption of this standard did not have a
material impact on the Company's condensed consolidated financial statements or
related disclosures.
New Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic
740)-Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to
simplify accounting for income taxes. It removes certain exceptions to the
general principles in Topic 740 and amends existing guidance to improve
consistent application. ASU 2019-12 is effective for fiscal years beginning
after December 15, 2020 and interim periods within those fiscal years, which is
fiscal 2022 for us, with early adoption permitted. We do not expect adoption of
the new guidance to have a significant impact on our financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820),
Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurements. This ASU includes additional disclosures requirements for
recurring Level 3 fair value measurements including disclosure of changes in
unrealized gains and losses for the period included in other comprehensive
income, disclosure of the range and weighted average of significant unobservable
inputs used to develop Level 3 fair value measurements and narrative description
of measurement uncertainty related to Level 3 measurements. Early adoption is
permitted. This ASU will be effective for us on July 1, 2020. We are evaluating
the impact of the adoption of this ASU on our financial condition, results of
operations and cash flows, and, as such, we are not able to estimate the effect
the adoption of the new standard will have on our financial statements.
Other recent accounting pronouncements issued by the FASB did not or are not
believed by management to have a material impact on the Company's present or
future financial statements.
RESULTS OF OPERATIONS 2020 COMPARED TO 2019
REVENUES. Revenues from operations were $43,154 in 2020 compared to $38,408 in
2019. The increase was attributable to the commissions from the sales of cargo
security products from the Company's subsidiary Sharx. The following table
summarizes the Company's revenue allocations:
Year ending June 30, 2020 2019
Subsidiary ANV Lease Revenues $ 37,280 $ 38,408
Subsidiary Sharx commissions from the sales of cargo
security products 5,874 -
Total $ 43,154 $ 38,408
SALARY AND WAGES EXPENSES. Salary and wages expenses were $113,000 in 2020
compared to $0 in 2019. The increase was due to a one-time stock grant to an
officer of the Company.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. G&A expenses were $6,562 in 2020
compared to $3,634 in 2019. The expenses are attributable to ANV's deferred
revenues expense, the Company's SEC compliance, the disbursement of stock-based
compensation, and accounting costs.
PROFESSIONAL EXPENSES. The professional expenses were $15,600 in 2020 compared
to $15,600 in 2019. The expenses were attributable to the ordinary audit of
$13,500 and $2,100 attributable to transfer agent fees for 2020, and 2019.
NET LOSS. Net loss attributed to common stockholders was $(103,101) or $(0.034)
per share for 2020 as compared to $8,111 or $0.003 per share for 2019 and the
2020 result was less and mainly attributable to the disbursement of stock-based
compensation.
15
LIQUIDITY AND CAPITAL RESOURCES. As of June 30, 2020 the Company had $43,603 of
cash and cash equivalents and working capital deficit of $258,858 compared to
June 30, 2019 the Company had $43,098 of cash and cash equivalents and working
capital deficit of $251,829. The change in cash is primarily due to the ANV'S
payment of debt and normal operations. The increase in the working capital is
primarily related to the operations of the Subsidiary.
Net cash provided by operating activities for 2020 and 2019 was $36,333 and
$17,411 respectively. The increase was primarily the revenues generated from the
commission from the sales of cargo security products from the Company's
subsidiary Sharx DK, ApS and the stock-based compensation to an officer, which
is a non-cash activity.
Net cash (used for) investing activities for 2020 and 2019 was $(125) and $0
respectively. Net cash provided from or used for investing activities is related
to the Company's incorporating Sharx Inc. and Sharx DK ApS.
Net cash (used for) financing activities for 2020 and 2019 was $35,383 and
$(26,282) respectively. Net cash provided from or used for financing activities
for both periods is related to the company's borrowings from banks, officers and
directors, and the repayment of debt.
OFF BALANCE SHEET ARRANGEMENTS
We do not currently have any off-balance sheet arrangements.
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