REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Shareholders:
Xiamen Lutong
International Travel Agency Co. Ltd. (FKA Highlight Networks, Inc.)
Opinion on
the Financial Statements
We have audited
the accompanying consolidated balance sheet of Xiamen Lutong International Travel Agency Co. Ltd. (FKA Highlight Networks, Inc.)
(“the Company”) as of June 30, 2020 and 2019 and the related consolidated statements of operations, stockholders’
deficit, and consolidated cash flows and cash flows and the related notes to consolidated financial statements (collectively referred
to as the consolidated financial statements) for the years ended June 30, 2020 and 2019. In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at June 30, 2020 and 2019, and the results
of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required
to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the consolidated
financial statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses, and has
stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation
of the events and conditions and management’s plans regarding these matters are also described in Note 4. The consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ L&L CPAS, PA
L&L CPAS, PA
Certified Public Accountants
Plantation, FL
The United States of America
October 13, 2020
We have served as the Company's auditor since November 2017.
www.llcpas.net
Xiamen Lutong International Travel Agency Co. Ltd.
Balance Sheets
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June 30,
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June 30,
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2020
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2019
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ASSETS
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Current Assets:
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|
|
|
|
|
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|
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Cash
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$
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—
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|
|
$
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—
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|
|
|
|
|
|
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Total Current Assets
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|
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—
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|
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—
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Total Assets
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$
|
—
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$
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—
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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Accounts payable and accrued expenses
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$
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147,077
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$
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123,443
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Note payable to related party
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|
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256,132
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256,132
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Due to related party
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—
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|
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—
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Total Liabilities
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403,209
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379,575
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Stockholders' Deficit:
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Preferred stock, $0.001 par value; 20,000,000 shares authorized;
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no shares outstanding and outstanding
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—
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—
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Common stock, $0.001 par value; 150,000,000 shares authorized;
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58,167,600 and 58,167,600 shares issued and outstanding, respectively
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58,168
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58,168
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Additional paid-in capital
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8,749,016
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8,706,438
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Accumulated deficit
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(9,210,393
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)
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(9,144,181
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)
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Total Stockholders’ Deficit
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(403,209
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)
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(379,575
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)
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Total Liabilities and Stockholders' Equity
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$
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—
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$
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—
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The
accompanying notes are an integral part of these financial statements.
Xiamen
Lutong International Travel Agency Co. Ltd.
Statements
of Operations
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For The Year Ended
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June 30,
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2020
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2019
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Revenue
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$
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—
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$
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—
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Operating expenses:
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General and administrative expenses
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40,600
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40,477
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Total operating expenses
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40,600
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40,477
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|
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Loss from operations
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(40,600
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)
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(40,477
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)
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Other expenses:
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Interest expenses
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(25,612
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)
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|
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(25,612
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)
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Total other expenses
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|
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(25,612
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)
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|
|
(25,612
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)
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|
|
|
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Loss before provision for income taxes
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|
(66,212
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)
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|
|
(66,089
|
)
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|
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Income taxes expense
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$
|
—
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$
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—
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Net loss
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|
(66,212
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)
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|
|
(66,089
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)
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Basic & diluted net income per share
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$
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*
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$
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*
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Weighted average number of ordinary shares-basic and diluted
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58,167,600
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58,167,600
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*
Less than $0.01
The
accompanying notes are an integral part of these financial statements.
Xiamen Lutong International Travel Agency Co. Ltd.
Statements of Cash Flows
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For The Year Ended
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June 30,
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2020
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2019
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Cash flows from operating activities:
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|
|
|
|
|
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Net loss
|
|
$
|
(66,612
|
)
|
|
$
|
(66,089
|
)
|
Adjustments to reconcile net loss to net cash used
in operating activities:
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Changes in assets and liabilities:
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Accounts payable
|
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23,634
|
|
|
|
25,139
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|
Net cash used in operating activities
|
|
|
(42,578
|
)
|
|
|
(40,950
|
)
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|
|
|
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Cash flows from investing activities:
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|
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—
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|
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—
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Cash flows from financing activities:
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Advances from related parties
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—
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|
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—
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Capital contributions from stockholder
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|
42,578
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|
|
|
40,950
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|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
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42,578
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|
|
|
40,950
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|
|
|
|
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Net decrease in cash
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|
|
—
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|
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—
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Cash, beginning of period
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—
|
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|
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—
|
|
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|
|
|
|
|
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Cash, end of period
|
|
$
|
—
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these financial statements.
Xiamen
Lutong International Travel Agency Co. Ltd.
Statements
of Changes in Stockholders’ Deficit
For
the Year Ended June 30, 2020 and 2019
(US$,
except share data and per share data, or otherwise noted)
|
|
Shares
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Shares amount
|
|
Additional paid-in capital
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|
Accumulated Deficit
|
|
Total deficit
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of July 1, 2018
|
|
|
58,167,600
|
|
|
|
58,168
|
|
|
|
8,665,488
|
|
|
|
(9,078,092
|
)
|
|
|
(354,436
|
)
|
Net loss
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
(66,089
|
)
|
|
|
(66,089
|
)
|
Share issuance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Contributions from stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(66,089
|
)
|
|
|
(66,089
|
|
Balance as of June 30, 2019
|
|
|
58,167,600
|
|
|
|
58,168
|
|
|
|
8,706,438
|
|
|
|
(9,144,181
|
)
|
|
|
(379,575
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(66,612
|
)
|
|
|
(66,612
|
)
|
Share issuance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Contributions from stockholders
|
|
|
|
|
|
|
|
|
|
|
42,578
|
|
|
|
|
|
|
|
42,578
|
|
Balance as of June 30, 2020
|
|
|
58,167,600
|
|
|
|
58,168
|
|
|
|
8,749,016
|
|
|
|
(9,210,393
|
)
|
|
|
(403,209
|
)
|
The
accompanying notes form an integral part of these consolidated financial statements.
Xiamen
Lutong International Travel Agency Co. Ltd.
Notes to the Financial Statements
NOTE
1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Xiamen
Lutong International Travel Agency Co., Ltd. (formerly Highlight Networks, Inc., the “Company”) was formed on June
21, 2007 as a Nevada corporation. The Company has a June 30 year-end. The Company has been a shell company since June 18, 2015
as disclosed on its Form 8-K filed on January 27, 2017. The Company currently does not have operations, revenue, and any assets.
For the period from June 18, 2015 to the date of this filing, the Company did not have any operating activities.
On
January 29, 2018, pursuant to a Stock Purchase Agreement (the “SPA”), the Company’s majority stockholder, Jose
R. Mayorquin sold 57,000,000 shares of common stock of the Company to a Chinese entity, Xiamen Lutong International Travel Agency
Co., Ltd. (“China Xiamen Lutong”). China Xiamen Lutong subsequently transferred the 98% ownership to Longhai Yougoubao
Network Technology Co. Ltd. (“Longhai”). China Xiamen Lutong and Longhai are companies commonly controlled by the
Company’s new director, Qiyi Zheng. After the transaction, Longhai holds 98% of the voting interest of the Company, based
on 58,167,600 shares outstanding as of the date hereof. The transaction has resulted in a change in control of the Company and
Longhai became a majority stockholder and related party of the Company.
On
March 8, 2018, the Company incorporated a wholly-owned subsidiary, Xiamen Lutong International Travel Agency Co., Ltd. in the
State of Nevada (“Nevada Xiamen Lutong Sub”) for the sole purpose of changing the Company’s name to Xiamen Lutong
International Travel Agency Co., Ltd. There are no financial transactions and balances on the book on Nevada Xiamen Lutiong Sub
during the quartered ended March 31, 2018. Pursuant to an agreement and plan of merger, dated March 29, 2018, between the Company
and the Nevada Xiamen Lutiong Sub (“Plan of Merger”), the Nevada Xiamen Lutong Sub was merged with and into the Company
and the Company’s name was changed to “Xiamen Lutong International Travel Agency Co., Ltd.”. On April 12, 2018,
the Company filed the Articles of Merger with the Secretary of State of Nevada. The market effective date for such name change
was May 14, 2018.
The
Company plans to offer packaged tours and other travel-related services in the People’s Republic of China, initially in
Fujian province, with a focus on developing, promoting and executing organized tours through its travel service stores. The packaged
tours offer the benefits of pre-arranged itineraries, transportations, accommodations, entertainments, meals and tour guide services
and cover domestic as well as international destinations.
The
Company plans to offer its travel products and services through its travel service stores as well as its website. The Company
also plans to offer other travel-related services comprised mainly of sales of tourist attraction tickets, visa application services,
financial services, hotel booking services, air ticketing services, train ticketing services, bus ticketing services, car rental
services and insurance services. The Company will earn a commission or service fee on these services.
The
Company has been evaluating the optimal approaches to implement these plans, including through mergers and acquisitions of other
travel agencies in China. The Company was assessing a number of potential merger targets in China during late 2019 and early 2020.
This work has been suspended due to the COVID-19 pandemic outbreak as travel agencies throughout the world have been significantly
impacted by this pandemic. The extent of the impact of COVID-19 pandemic on the Company’s ability to execute on its business
plans and initiatives will depend upon the developments of the pandemic, including the duration and spread of the COVID-19 and
lockdown restrictions imposed by the respective global governments and oversight bodies, and tourists’ confidence over local
and oversea travels after the pandemic. All of these are factors are uncertain and cannot be easily estimated given the novelty
of the coronavirus and the facts and the world is still going through the pandemic. Given the dynamic nature of pandemic situation,
Company cannot reasonably estimate the impacts the COVID-19 on the timeline to implement its business plan. Until the Company
is able to implement its business plan, the Company will remain a shell company.
The
Company’s principal executive offices are located at 20F, Longhai Fortune Center, 42 Ziwei Road, Shima Town, Zhangzhou City,
Fujian Province, China.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Company’s financial statements have been prepared in accordance with generally accepted accounting principles in the United
States of America (“U.S. GAAP”).
Use
of Estimates and Assumptions
Preparation
of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from those estimates. The Company has adopted the provisions
of ASC 260. The Company currently does not have significant estimates and assumptions.
Stock-Based
Compensation
The
Company will follow Accounting Standards Codification (“ASC”) 718-10, Stock Compensation, which addresses the
accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on
transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement
of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of
the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the
grant date must be recognized. The Company has not adopted a stock option plan and has not granted any stock options.
Loss
per Share
Net
loss per common share is computed pursuant to ASC 260-10-45. Basic and diluted net loss per common share has been calculated by
dividing the net income for the period by the basic and diluted weighted average number of common shares outstanding. There were
no dilutive shares outstanding as of June 30, 2020 and 2019.
Taxation
Current
income taxes are provided on the basis of net profit for financial reporting purposes, adjusted for income and expense items which
are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions.
Deferred
income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts
in the consolidated financial statements, net operating loss carry forwards and credits. 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
assets will not be realized. Current income taxes are provided in accordance with the laws of the relevant taxing authorities.
Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in which temporary differences
are expected to be reversed or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized
in the statement of comprehensive income in the period of the enactment of the change.
The
Company considers positive and negative evidence when determining whether a portion or all of its deferred tax assets will more
likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and
cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax
attributes expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon
its ability to generate sufficient future taxable income within the carry-forward periods provided for in the tax law and during
the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, the Company
has considered possible sources of taxable income including (i) future reversals of existing taxable temporary differences,
(ii) future taxable income exclusive of reversing temporary differences and carry-forwards, (iii) future taxable income
arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected within
the industry.
The
Company recognizes a tax benefit associated with an uncertain tax position when, in its judgment, it is more likely than not that
the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not
recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company
judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The Company’s
liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress
of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in
which they are identified. The Company’s effective tax rate includes the net impact of changes in the liability for unrecognized
tax benefits and subsequent adjustments as considered appropriate by management. The Company classifies interest and penalties
recognized on the liability for unrecognized tax benefits as income tax expense.
There
were no current and future income tax provision recorded for the years ended June 30, 2020 and 2019 since the Company is a shell
company and did not generate any revenues in the two fiscal periods.
Subsequent
Events
The
Company follows the guidance in ASC 855-10-50 for the disclosure of subsequent events. The Company evaluates subsequent events
from the date of the balance sheet through the date when the financial statements are issued. Pursuant to Accounting Standards
Update (“ASU”) 2010-09 of the Financial Accounting Standards Board (“FASB”) ASC, the Company as an SEC
filer considers its financial statements issued when they are widely distributed to users, such as through filing them with the
SEC on the EDGAR system.
Recent
Accounting Pronouncements
The
Company has reviewed the following recent accounting pronouncements and concluded that they were either not applicable or had
no impact to the Company’s financial statements:
In
May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), to clarify the principles of recognizing
revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards (“IFRS”).
The transition provisions in ASC Topic 606 require that a public business entity and certain other specified entities adopt ASC
Topic 606 for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting
period. All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018,
and interim reporting periods within annual reporting periods beginning after December 15, 2019. The amendment is not applicable
to the Company since the Company is still a shell company and does not generate revenue.
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize
the assets and liabilities that arise from leases. A lessee should recognize in the balance sheet a liability to make lease payments
(the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases
with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not
to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases
generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years and interim periods within those
years beginning after December 15, 2018. Early adoption is permitted. The Company does not expect that the adoption of the
standard to have an impact on the Company’s financial statements.
In
June 2016, the FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13 Financial Instruments—Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective January 1, 2020. The guidance
replaces the incurred loss impairment methodology with an expected credit loss model for which a Group recognizes an allowance
based on the estimate of expected credit loss. The Company does not expect that the adoption of the standard to have an impact
on the Company’s financial statements.
In
November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) (“ASU 2016-18”). This ASU affects
all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under
Topic 230. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash
equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This update will become effective
for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15,
2019, and early adoption is permitted in any interim or annual period. The adoption of the guidance does not have impact to the
Company’s statement of cash flows as the Company does not have restricted cash or restricted cash equivalents.
In
January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial
Assets and Financial Liabilities. The new guidance will impact the accounting for equity investments, financial liabilities under
the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified
the need for a valuation allowance on deferred tax assets resulting from unrealized losses on available-for-sale debt securities.
The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities not under
the fair value option is largely unchanged. The standard is effective for public business entities for annual periods (and interim
periods within those annual periods) beginning after December 15, 2017. For all other entities, it is effective for fiscal
years beginning after 15 December 2018, and interim periods within fiscal years beginning after 15 December 2019. The Company
adopted the guidance from its fiscal year beginning on April 1, 2019 and the adoption of the standard did not have significant
impact on the Company’s financial statements.
In
February 2016, FASB issued ASU No. 2016–02, “Leases (Topic 842)”, ASC 842, and subsequently amended the guidance
relating largely to transition considerations under the standard in July 2018. The new guidance, which creates new accounting
and reporting guidelines for leasing arrangements, requires organizations that lease assets to recognize assets and liabilities
on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified
as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and
cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also
requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows
arising from leases. The new standard is effective for public business entities for annual reporting periods beginning after December
15, 2018, including interim periods within that reporting period, with early application permitted. In March 2019, the FASB issued ASU
2019-01, Leases (Topic 842) Codification Improvements, which further clarifies the determination of fair value of the underlying
asset by lessors that are not manufacturers or dealers and modifies transition disclosure requirements for changes in accounting
principles and other technical updates. The amendments in ASU 2019-01 amend Topic 842 and the effective date of those amendments
is for fiscal years beginning December 15, 2019, and interim periods within those fiscal years for public business entities. For
all other entities, ASC 842 is effective for annual periods beginning after December 15, 2020. The Company is currently evaluating
the impact of the new pronouncement on its financial statements but does not expect it to have as impact upon adoption since the
company does not currently have any leases.
NOTE
3 - RELATED PARTY TRANSACTIONS
As
of June 30, 2020 and 2019, the Company had a total outstanding principal and accrued interest of $256,132 and $129,958, and $256,132
and $104,347, respectively, due to Longhai. The unsecured promissory note bears an interest of 10% per annum and is payable on
demand. The accrued interests as of June 30, 2020 and 2019 were recorded and included in “Accounts
Payable and Accrued Expenses” on the balance sheets.
During the year, the Company also received
total capital contributions in the amount of $42,578 from its former principal stockholder and current principal stockholder for
working capital uses.
NOTE
4 - GOING CONCERN
The
accompanying financial statements have been prepared on the basis of accounting principles applicable to a “going concern,”
which assumes 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 raise substantial doubt as to the Company’s ability to continue as a “going concern.”
The Company has an accumulated deficit of $9,210,393 as of June 30, 2020, a working capital deficit and does not have revenues.
The Company 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 the pursuit of
business opportunities. The Company is depending on financing from its principal stockholder to meet its minimal operating expenses.
As the Company is a shell company, its operating expenses are limited. Management believes that the financing from its principal
stockholder will provide it 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 reported amounts of its liabilities, the reported expenses and the balance
sheet classifications used.
NOTE
5 – SHARE CAPITAL
There
are no transactions of common shares, warrants and stock options during the years ended June 30, 2020 and 2019, respectively.
NOTE
6 – SUBSEQUENT EVENTS
Management
has evaluated subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the
financial statements were issued, and determined that no subsequent events occurred that would require adjustment to or disclosure
in the financial statements.