ITEM 1. BUSINESS
Overview
Xiamen Lutong International Travel Agency Co. Ltd. (the “Company”, “we”, “us”, “our” and similar terminology) was incorporated under the name “Highlight Networks, Inc.” in the state of Nevada on June 21, 2007. Our original plan was to engage in the business of planning, development and operation of both private and public access wireless broadband networks using WiFi (IEEE 802.11) and WiMAX (IEEE 802.16) wireless technologies. In 2013, the Company commenced a new business venture in recycling, refining, metals trading and assisting in metal recovery, with a focus on precious metals refining from electronic waste.
On June 5, 2015, the Company experienced a change of control as a result of the purchase of 98% of its issued and outstanding capital stock from Infanto Holding Corp. by Legacy International Holdings Group, LLC and Allied Crown Enterprises Limited. The Company’s then operating subsidiary, EZ Recycling, Inc., was spun off and as a result the Company reverted to the shell company status.
On January 29, 2018, pursuant to a stock purchase agreement dated January 26, 2018, Xiamen Lutong International Travel Agency Co., Ltd. (an entity controlled by Qiyi Zheng, the Company’s Chairman of the Board) purchased 57,000,000 shares of common stock of the Company, representing 98% of the outstanding voting securities of the Company. Following this change of control, the Company changed its name to Xiamen Lutong International Travel Agency Co., Ltd. and changed its business plan to engage in travel businesses in the People’s Republic of China. Such 98% interest in our company was subsequently transferred to Longhai Yougoubao Network Technology Co. Ltd., a related party also controlled by Mr. Zheng (“Longhai”).
From June 2015 to date of this Report, the Company has not commenced its planned business and presently has no business operations, revenues or assets and thus is and has been a “shell company” as defined by Rule 405 of the Securities Act of 1993, as amended (the “Securities Act”).
Plan of Operation
We plan 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 our 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. We plan to offer our travel products and services through our travel service stores as well as our website.
We also plan 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. We will earn a commission or service fee on these services.
We are presently evaluating the optimal corporate and legal structures in China necessary to establish our business there and as a U.S. publicly listed and reporting company. We do not have an established timetable to implement these plans, and until we do, we will remain a shell company.
ITEM 1A.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
ITEM 2. PROPERTIES
The Company’s principal executive offices are located at 20F, Longhai Fortune Center, 42 Ziwei Road, Shima Town, Zhangzhou City, Fujian Province, China.
We do not own or lease any property.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
(a)Market Information
Our common stock is quoted on OTC Pink market operated by the OTC Markets under the symbol “LTGJ.” There has been very limited trading in our shares of common stock. We cannot assure you that there will be an active market in the future for our common stock.
(b)Stockholders of Record
Based upon information furnished by our transfer agent, as of October 11, 2019, the Company had approximately 74 stockholders of record. Because some of our common stock is held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial stockholders.
(c)Dividends
We have never paid or declared any dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.
(d)Securities Authorized for Issuance under Equity Compensation Plans
We currently do not have any equity compensation plans.
(e)Recent Sales of Unregistered Securities
None.
(f)Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our results of operations and financial condition should be read together with our audited financial statements and the notes thereto, which are included elsewhere in this report and our Annual Report on Form 10-K for the year ended June 30, 2019 (the “Annual Report”) filed with SEC. Our financial statements have been prepared in accordance with U.S. GAAP. In addition, our financial statements and the financial information included in this report reflect our organizational transactions and have been prepared as if our current corporate structure had been in place throughout the relevant periods.
Overview
We were incorporated under the name “Highlight Networks, Inc.” in the state of Nevada on June 21, 2007. Our original business plan was to engage in the business of planning, development and operation of both private and public access wireless broadband networks using WiFi (IEEE 802.11) and WiMAX (IEEE 802.16) wireless technologies. In 2013, we commenced a new business venture in recycling, refining, metals trading and assisting in metal recovery, with a focus on precious metals refining from electronic waste.
On June 5, 2015, we experienced a change of control as a result of the purchase of 98% of our issued and outstanding capital stock from Infanto Holding Corp. by Legacy International Holdings Group, LLC and Allied Crown Enterprises Limited. Our then operating subsidiary, EZ Recycling, Inc., was spun off and as a result we reverted to the shell company status.
On January 29, 2018, pursuant to a stock purchase agreement dated January 26, 2018, Xiamen Lutong International Travel Agency Co., Ltd. purchased 57,000,000 shares of our common stock from our then majority shareholder, Jose R. Mayorquin, representing 98% of the voting securities of our company. Following this change of control, we changed our name to Xiamen Lutong International Travel Agency Co., Ltd. and changed our business plan to engage in travel businesses in the People’s Republic of China.
From June 2015 to date, we had no business operations, revenues or assets and has been a shell company as defined by Rule 405 of the Securities Act of 1933, as amended.
We plan 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 our 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. We plan to offer our travel products and services through our travel service stores as well as our website.
We also plan 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. We will earn a commission or service fee on these services.
We are presently evaluating the optimal corporate and legal structures in China necessary to establish our business there and as a U.S. publicly listed and reporting company. We do not have an established timetable to implement these plans, and until we do, we will remain a shell company.
Results of Operations for the Year Ended June 30, 2019 Compared to Same Period of 2018.
Revenues
There were no revenues generated for the years ended June 30, 2019 and 2018, respectively.
General and Administrative Expenses
During the years ended June 30, 2019 and 2018, we incurred $40,477 and $81,915 of general and administrative expenses, respectively. Our general and administrative expenses primarily consisted of audit fees, accounting fees, legal fee and filing fees, which are routine costs associated with a public company. The decrease in 2019 compared to 2018 was mainly due to less business activity in 2019. In 2018, we incurred $30K legal fee on a proposed private offering, whereas there was no such activity in 2019. In addition, we changed certain service vendors, which offered us lower service fees.
Other Expenses
During the years ended June 30, 2019 and 2018 we incurred $25,612 and $25,613 of interest expenses, respectively. The interest expenses were solely related to the note payable due to a related party.
Net Loss
For the years ended June 30, 2019 and 2018, we had a net loss of $66,089 and $107,528, respectively. The decrease in 2019 was due to the decrease in our general and administrative expenses as discussed above.
Liquidity and Capital Resources
Net cash used in operating activities was $40,950 for the year ended June 30, 2019, compared to net cash used in operating activities of $63,220 for the same period ended June 30, 2018, represented a decrease of $22,270 in the net cash outflow in operating activities. Cash used in operating activities was fully funded by our controlling shareholder.
As of June 30, 2019 and 2018, we had a total outstanding principal and accrued interest of $256,132 and $104,347, and $256,132 and $78,734, respectively, due to a note payable due to a related party. The unsecured promissory note bears an interest of 10% per annum and is payable on demand.
Commitments and Capital Expenditures
We presently have no material commitments for capital expenditures.
Critical Accounting Policies Involving Management Estimates and Assumptions
Our discussion and analysis of our financial condition and results of operations is based on our financial statements. In preparing our financial statements in conformity with U.S. GAAP, we are required to disclose significant accounting estimates that affect the reported amounts and related disclosures. The Company currently does not have significant estimates and assumptions.
Deferred Tax Valuation Allowance
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements 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. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Income tax expense is the total of tax payable for the period and the change during the period in deferred tax assets and liabilities.
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet financial arrangements.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Jetton Road, 3rd Floor
Cornelius, NC 28031
Tel: 704-897-8336
Fax: 704-919-5089
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, 2019 and 2018 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, 2019 and 2018. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2019 and 2018, 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 15, 2019
We have served as the Company's auditor since November 2017.
Xiamen Lutong International Travel Agency Co. Ltd.
Balance Sheets
(US$, except share data and per share data, or otherwise noted)
The accompanying notes are an integral part of these financial statements.
Xiamen Lutong International Travel Agency Co. Ltd.
Statement of Operations
(US$, except share data and per share data, or otherwise noted)
* Less than $0.01
The accompanying notes are an integral part of these financial statements.
Xiamen Lutong International Travel Agency Co. Ltd.
Statement of Cash Flows
(US$, except share data and per share data, or otherwise noted)
Supplemental cash flow information
The accompanying notes are an integral part of these financial statements.
Xiamen Lutong International Travel Agency Co. Ltd.
Statements of Changes in Shareholders’ Equity
For the Years ended June 30, 2019 and 2018
(US$, except share data and per share data, or otherwise noted)
The accompanying notes form an integral part of these consolidated financial statements.
Xiamen Lutong International Travel Agency Co. Ltd.
Notes to the Financial Statements
June 30, 2019
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. Due to the failure to maintain its Exchange Act filing obligations timely, the Company began being quoted on OTC Pink Sheets since 2015.
On January 29, 2018, pursuant to a Stock Purchase Agreement (the “SPA”), the Company’s majority shareholder, 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 shareholder and related party of the Company (“2018 Change of Control”).
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 is presently evaluating the optimal corporate and legal structures in China necessary to establish its business there and as a U.S. publicly listed and reporting company. The Company does not have an established timetable to implement these plans, and until it does, 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 adopted an equity incentive plan, the 2013 Equity Incentive Plan. The Company has not granted any stock options and equity incentives according to this 2013 Equity Incentive Plan for the years ended June 30, 2019 and 2018.
Xiamen Lutong International Travel Agency Co. Ltd.
Notes to the Financial Statements
June 30, 2019
Loss per Share
Net loss per share is computed pursuant to ASC 260-10-45. Basic and diluted net loss per share has been calculated by dividing the net income for the period by the basic and diluted weighted average number of shares of common stock outstanding. There were no dilutive shares outstanding as of June 30, 2019 and 2018.
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, 2019 and 2018 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 Standards
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”). An entity has the option to apply the provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this standard recognized at the date of initial application. ASU 2014-09 is effective for fiscal years and interim periods within those years beginning after December 15, 2017, and early adoption is permitted but not earlier than the original effective date of December 15, 2016. The most significant aspect of our evaluation of Topic 606 relates to ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). This implementation guidance discusses principal versus agent considerations and gross versus net revenue reporting, including specific indicators to assist in the determination of whether we control a specified good or service before it is transferred to the customer. The new standard is not applicable to the Company since the Company is still a shell and does not generate revenue.
Xiamen Lutong International Travel Agency Co. Ltd.
Notes to the Financial Statements
June 30, 2019
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40)-Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 provides guidance regarding management’s responsibility to (i) evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and (ii) provide related footnote disclosures. ASU 2014-15 is effective for fiscal years and interim periods within those years beginning after December 15, 2016. We adopted ASU 2014-15 as of January 1, 2017. The adoption of ASU 2014-15 does not have an impact on the Company’s financial statements.
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. We adopted this standard as of July 1, 2018, the adoption of the standard does not have an impact on the Company’s financial statements.
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 August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. We adopted this standard as of July 1, 2018. The adoption of the standard does not 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 September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EIFT Meeting and Rescission of Prior SEC Staff Announcement and Observer Comments. 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.
NOTE 3 - RELATED PARTY TRANSACTIONS
As of June 30, 2019 and 2018, the Company had a total outstanding principal and accrued interest of $256,132 and $104,347, and $256,132 and $78,734, 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, 2019 and 2018 were recorded and included in “Accounts Payable and Accrued Expenses” on the balance sheets.
Xiamen Lutong International Travel Agency Co. Ltd.
Notes to the Financial Statements
June 30, 2019
During the year ended June 30, 2019, the Company also received total capital contributions in the amount of $40,950 from its major shareholder and the current substantial shareholder 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 $9,144,181, 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 major shareholder 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 major shareholder will support the Company 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 stock, warrants and stock options during the years ended June 30, 2019 and 2018, 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.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our Certifying Officer or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision of our Chief Executive Officer and Chief Financial Officer (the “Certifying Officer”), the Company has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report due to the material weakness in our internal control over financial reporting discussed below.
Management’s Report on Internal Controls over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. A material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The Company has identified the following material weaknesses, which are indicative of many small companies with small staff, as of June 30, 2019: (i) lack of proper segregation of duties and risk assessment process; (ii) lack of formal documentation in internal controls over financial reporting; and (iii) lack of independent directors and an audit committee.
Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of June 30, 2019, based on the criteria established in “2013 Internal Control-Integrated Framework” issued by COSO.
This annual report does not include an attestation report of the company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the company to provide only management’s report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The name, age and titles of our executive officer and director are as follows:
Qiyi Zheng. Mr. Zheng has served as the Chairman of the Board of the Company since January 2018. He has also been serving as the Chairman of China Xiamen Lutong since January 2014. Prior to that, he was the Chairman of Shenzhen Junfu Travel Agency Co., Ltd. from January 2010 to January 2014. Mr. Zheng obtained his junior college diploma in electronics from Fujian Nan’an Practical Art Secondary Vocational School.
Zhenhui Huang. Mr. Huang has served as our President, Chief Executive Officer, Chief Financial Officer, Treasurer, and Secretary since January 2018. He has also been serving as a director of China Xiamen Lutong since January 2014. From January 2009 to January 2014, he was the general manager of Zhangzhou Baihui Business Service Co., Ltd., an online e-commerce company. Mr. Huang obtained his junior college diploma in medicine from Chinese People’s Liberation Army Fuzhou Medical College. Mr. Huang will serve as the Company’s officer for a term of three years.
Board of Directors and Committees
We do not have any independent directors. We are not required to maintain a majority of independent directors or the foregoing committees under the rules applicable to companies that do not have securities listed or quoted on a national securities exchange. Our board of directors does not maintain a separate audit, nominating, or compensation committee. Functions customarily performed by such committees are performed by our board of directors as a whole.
Family Relationships
There are no family relationships between our directors and executive officers.
Legal Proceedings
To the Company’s knowledge, there are no material proceedings to which any director, officer or affiliate of the Company is a party adverse to the Company or has a material interest adverse to the Company.
Code of Ethics
We intend at some point to adopt a code of ethics that applies to our officers, directors and employees. We will file copies of our code of ethics in a current report on Form 8-K. You will be able to review these documents by accessing our public filings at the SEC’s website at www.sec.gov. In addition, a copy of the code of ethics will be provided without charge upon request to us. We intend to disclose any amendments to or waivers of certain provisions of our code of ethics in a current report on Form 8-K.
ITEM 11.
ITEM 11.
EXECUTIVE COMPENSATION
There are no current employment agreements between the Company and its officer. We have never paid any compensation to any of our executive officers or directors. Our officer has agreed to work with no remuneration until such time as the company receives sufficient revenues necessary to provide management salaries. At this time, we cannot accurately estimate when sufficient revenues will occur to implement this compensation, or what the amount of the compensation will be. There are no annuity, pension or retirement benefits proposed to be paid to the officer or director or employees in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the company or any of its subsidiaries, if any.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information, regarding the beneficial ownership of the Company’s common stock as of October 11, 2019 by (i) each stockholder known by the Company to be the beneficial owner of more than 5% of its common stock, (ii) by each director and executive officer of the Company and (iii) by all executive officers and directors of the Company as a group. Each of the persons named in the table has sole voting and investment power with respect to common stock beneficially owned.
The business address of each person listed below is 20F, Longhai Fortune Center, 42 Ziwei Road, Shima Town, Zhangzhou City, Fujian Province, China 363199.
(1) Qiyi Zheng is the Chairman of Longhai Yougoubao Network Technology Co., Ltd. and has the voting and dispositive power over shares of common stock held by this stockholder.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
As of June 30, 2019 and 2018, the Company had a total outstanding principal and accrued interest of $256,132 and $104,347, and $256,132 and $78,734, 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, 2019 and 2018 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 $40,950 from its substantial shareholder and the current substantial shareholder for working capital uses.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Our board of directors approves all services provided by our independent registered public accounting firm. The following table shows the fees that we paid or accrued for the audit and other services provided by our independent registered public accounting firms for the fiscal years ended June 30, 2019 and 2018.
(1) This category consists of fees for professional services rendered by our principal independent registered public accountants for the audit of our annual financial statements, review of financial statements included in our quarterly reports and services that are normally provided by the independent registered public accounting firms in connection with statutory and regulatory filings or engagements for those fiscal years.
(2) This category consists of fees for assurance and related services by our independent registered public accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultations concerning financial accounting and reporting standards.
(3) This category consists of fees for professional services rendered by our independent registered public accountant for tax compliance, tax advice, and tax planning.
(4) This category consists of fees for services provided by our independent registered public accountants other than the services described above.
PART IV
Item 15.
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Report:	
(1) Financial Statements
(2) Financial Statements Schedule
All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes thereto in is Item 15 of Part IV below.
(3)
Exhibits
We hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be retrieved from SEC website at www.sec.gov.
Item 16. FORM 10-K SUMMARY
Not applicable.
EXHIBIT INDEX
* Filed herewith.
** Furnished herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Name
Position
Date
/s/ Qiyi Zheng
Chairman of the Board
October 15, 2019
Qiyi Zheng
/s/ Zhenhui Huang
President, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary
October 15, 2019
Zhenhui Huang