U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

☒    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the period ended December 31, 2017

 

☐    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from ___________ to ___________.

 

Commission File Number 333-199967

 

National Art Exchange, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada		47-1549749
(State or other jurisdiction of		(I.R.S. employer
Incorporation or organization)		identification number)

 

200 Vesey Street, 24FL, Unit 24196

New York, NY 10080

(Address of principal executive offices and zip code)

 

+646-512-5855

(Registrant’s telephone number, including area code)

 

____________________________________________________ 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☐    No ☒

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐    No ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐    (Do not check if a smaller reporting company)	Smaller reporting company	☒
		Emerging growth company	☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒     No ☐

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of February 15, 2018, the Company has 100,288,079 issued and outstanding shares of common stock, par value $0.001 per share. 

 

 

 

TIANHE UNION HOLDINGS LIMITED

FORM 10-Q

 

INDEX

 

PART I. FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2
Item 3. Quantitative and Qualitative Disclosures about Market Risk	4
Item 4. Controls and Procedures	4
PART II. OTHER INFORMATION	5
Item 6. Exhibits	5

 

  

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

National Art Exchange, Inc.

 

(formerly known as Tianhe Union Holdings Limited)

 

Financial Statements

 

As of and for the three-month period ended December 31, 2017 and the year ended September 30, 2017

 

Content		Page
Balance Sheets		F-1
Statements of Operations		F-2
Statements of Cash Flows		F-3
Notes to Financial Statements		F-4 – F-10

 

 

National Art Exchange, Inc.

(f/k/a Tianhe Union Holdings Limited)

Condensed Balance Sheets

As of December 31, 2017, and September 30, 2017

(Unaudited)

(Stated in U.S. Dollars)

 

		December 31,				September 30,
		2017				2017
ASSETS
Current assets
Cash and cash equivalents		$	132,151			$	15,150
Related party receivables			8,076				-
Total assets		$	140,227			$	15,150
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current liabilities
Related party payables		$	38,594			$	10,400
Accrued liabilities			-				-
Total liabilities			38,594				10,400
Stockholders’ equity
Common stock, $0.001 par value: 150,000,000 shares authorized, 100,288,079 and 100,288,079 shares issued and outstanding as of December 31, 2017 and September 30, 2017, respectively.			288				288
Additional paid-in capital			95,865,837				95,865,837
Shares to be issued			320,000				120,000
Accumulated deficit			(96,084,492	)			(95,981,375	)
Total stockholders’ equity			101,633				4,750
Total liabilities and stockholders’ equity / (deficiency)		$	140,227			$	15,150

 

See Accompanying Notes to the Financial Statements

 

 

National Art Exchange, Inc.

(f/k/a Tianhe Union Holdings Limited)

Condensed Statements of Operations

For the three-month periods ended December 31, 2017 and 2016

(Unaudited)

(Stated in U.S. Dollars)

 

		For the three-month Periods ended December 31,
		2017				2016
Revenue		$	-			$	-
General and administrative expenses			103,117				78,492
Loss from operations			(103,117	)			(78,492	)
Interest income			2				-
Loss before income tax			(103,115	)			(78,492	)
Income tax			-				-
Net loss		$	(103,115	)		$	(78,492	)
Loss per share
-       Basic		$	(0.00	)		$	(0.27	)
-       Diluted		$	(0.00	)		$	(0.27	)
Weighted average number of shares
-       Basic			100,288,079				288,075
-       Diluted			100,288,079				288,075

 

See Accompanying Notes to the Financial Statements

 

 

National Art Exchange, Inc.

(f/k/a Tianhe Union Holdings Limited)

Condensed Statements of Cash Flows

For the three-month periods ended December 31, 2017 and 2016

(Unaudited)

(Stated in U.S. Dollars)

 

		For the three-month periods ended December 31,
		2017				2016
Cash flows from operating activities
Net loss		$	(103,115	)		$	(78,492	)
Adjustments to reconcile net income to cash generated by operating activities:
Changes in operating assets and liabilities
Increase in related party receivable			(8,076	)			-
Decrease in accrued liabilities			-				(3,481	)
Cash flows used in operating activities			(111,191	)			(81,973	)
Cash flows from financing activities
Advances from related parties			39,068				-
Repayment to related parties			(10,876	)			-
Proceeds from shares to be issued			200,000				-
Cash flows provided by operating activities			228,192				-
(Decrease) Increase in cash and cash equivalents			117,001				(81,973	)
Cash and cash equivalents – Beginning of period			15,150				241,949
Cash and cash equivalents – End of period		$	132,151			$	159,976
Non-cash financing activities
Waiver of debt by related party in the amount of $410,200.
Cash payments for:
Interest expense			-				-
Income tax			-				-

 

See Accompanying Notes to the Financial Statements

 

 

National Art Exchange, Inc.

(f/k/a Tianhe Union Holdings Limited)

Notes to Condensed Financial Statements

 

1.       NATURE OF OPERATION AND ORGANIZATION HISTORY

 

National Art Exchange, Inc. (f/k/a Tianhe Union Holdings Limited) (the “Company”) was incorporated in Nevada on May 9, 2014. The Company currently does not have any operations.

 

Change in Company’s name and reverse stock split

 

On August 8, 2017, the Company filed a certificate of amendment to (i) a change of the Company’s name to National Art Exchange, Inc. (the “Name Change”), (ii) an increase of the number of the Company’s authorized common stock from 75,000,000 to 150,000,000 (the “Increase of Authorized Stock”), par value $0.001 per share (the “Common Stock”), and (iii) a 100 to 1 reverse stock split of the outstanding Common Stock of the Company (the “Reverse Stock Split”). All references in the financial statements to share and per share data have been adjusted, including historical data which have been retroactively adjusted, to give effect to the reverse stock split unless specified otherwise.

 

Enter into a share exchange agreement and subsequently terminated

 

On September 15, 2017, a certain share exchange agreement (the “Agreement”) was entered into by and among the registrant, National Art Exchange, Inc., a Nevada corporation (the “PubCo” or the “Company”), National Art Exchange LLC, a Delaware (the “DECo”), and the members of DECo (collectively, “DECo Members”, together with the Pubco and DECo, the “Parties”), whereby, upon execution of the Agreement, in exchange for the DECo Interests (the “Exchange”), PubCo issued to the DECo Members an aggregate of 100,000,000 newly issued shares of Common Stock (the “Exchange Shares”).

 

On October 31, 2017, the parties entered into a Termination Agreement and Release (the “Termination Agreement”). The Termination Agreement terminates the Agreement and any and all related agreements (collectively, the “Transaction Documents”) and rescinds the Exchange. Pursuant to the Termination Agreement, all of the shares of Exchange Shares issued by the PubCo are cancelled, and all of the DECo Interests received by the PubCo pursuant to the Transaction Documents are cancelled and returned to the DECo Members. The transaction contemplated in the Agreement closed on the same day.

 

Securities Purchase Agreement

 

The Company entered into a Securities Purchase Agreement (the “SPA”) with DECo, a related party of the Company, or its designee(s) (the “Investor”), dated October 31, 2017. Pursuant to the SPA, Investor purchased 100,000,000 shares of the common stock of the Company, par value $0.001 per share, for an aggregate price of $320,000 (the “Shares”) in a private sale transaction (the “Private Sale”). The Private Sale contemplated in the SPA closed on the same day. As of December 31, 2017, the Company has received the consideration for the purchase of shares.

 

The Shares issued in the Private Sale are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act.

 

 

National Art Exchange, Inc.

(f/k/a Tianhe Union Holdings Limited)

Notes to Condensed Financial Statements

 

2.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a)

Method of Accounting

 

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission.

 

(b)

Development Stage Company

 

The Company is a development stage company as defined by section 915-10-20 of the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification. The Company is devoting substantially all of its efforts on establishing its business and its planned principal operations have not yet commenced. All losses accumulated since inception have been considered to be part of the Company's development stage activities.

 

The Company has elected to adopt the early application of Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. Subsequent to adoption, the Company no longer presents or discloses inception-to-date information and other remaining disclosure requirements of Topic 915.

 

(c)

Going Concern

 

The financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since its inception on May 9, 2014, resulting in an accumulated deficit of $95,981,375 as of December 31, 2017, and further losses may be incurred during the continued development of its business. Accordingly, there is substantial doubt regarding the Company’s ability to continue as a going concern.

 

The ability to continue as a going concern is dependent upon the Company generating profitable operations, making investments with positive returns in the future, and/or obtaining the financing necessary to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and/or the private placement of Common Stock. Management has not made adjustments to the financial statements, or used an alternative basis of accounting, such as the liquidation basis, in preparing these financial statements. Management has not performed assessments individually, or in the aggregate, of the factors that give rise to the substantial doubt of the Company continuing as a going concern, or how to mitigate those factors.

 

(d)

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires Company management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

(e)

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.

 

The Company's bank accounts are deposited in insured institutions. The funds are insured up to $250,000. As of December 31, 2017, the Company's bank deposits did not exceed the insured amounts.

 

 

National Art Exchange, Inc.

(f/k/a Tianhe Union Holdings Limited)

Notes to Condensed Financial Statements

  

(f)

Basic and Diluted Income (Loss) Per Share

 

The Company computes loss per share in accordance with ASC-260, “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to holders of our Common Stock by the weighted average number of outstanding shares of Common Stock during the period. Diluted loss per share gives effect to all dilutive potential shares of Common Stock outstanding during the period. Dilutive loss per share excludes all potential issuances of shares of Common Stock if their effect is anti-dilutive. Except for the note that is convertible into 150 million shares of the Company’s Common Stock, there were no potentially dilutive debt or equity securities outstanding during the period from the inception (May 9, 2014) of the Company through December 31, 2017.

 

(g)

Dividends

 

The Company has not adopted any policies regarding payment of dividends. No dividends have been paid during any of the reported periods.

 

(h)

Impairment of Long-Lived Assets

 

The Company, when applicable, continually monitors events and changes in circumstances that could indicate that carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

 

(i)

Revenue Recognition

 

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured. No revenue has been earned since the inception.

 

(j)

Stock-Based Compensation

 

Stock-based compensation is accounted for at fair value in accordance with ASC 718, when applicable. To date, the Company has not adopted a stock option plan and has not granted any stock options.

 

As of December 31, 2017, the Company has not issued any stock-based payments to its employees.

 

 

National Art Exchange, Inc.

(f/k/a Tianhe Union Holdings Limited)

Notes to Condensed Financial Statements

  

(k)

Income Taxes

 

The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

(l)

Comprehensive income

 

The Company uses FASB ASC Topic 220, “Reporting Comprehensive Income”. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. For the periods presented, the Company does not have any item that is required to be presented as a component of comprehensive income. As a result, a statement of comprehensive income is not required to be presented.

 

(m)

Unaudited Interim Financial Information

 

These unaudited interim condensed financial statements have been prepared in accordance with GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending September 30, 2018.

 

The balance sheets and certain comparative information as of September 30, 2017 are derived from the audited financial statements and related notes for the year ended September 30, 2017 (“2017 Annual Financial Statements”), included in the Company’s 2017 Annual Report on Form 10-K. These unaudited interim condensed financial statements should be read in conjunction with the 2017 Annual Financial Statements.

 

(n)

Recent accounting pronouncements

 

On January 5, 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”, which amends U.S. GAAP guidance on the classification and measurement of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

 

The Company has reviewed all the recently issued, but not yet effective, accounting pronouncements and it does not believe that the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

 

 

National Art Exchange, Inc.

(f/k/a Tianhe Union Holdings Limited)

Notes to Condensed Financial Statements

  

3.       RELATED PARTY TRANSACTIONS

 

As of December 31, 2016, a former director had advanced funds in the total amount of $410,200 to the Company to fund general corporate activities. The advances were non-interest bearing, due upon demand and unsecured. On December 31, 2016, the former director agreed to waive his creditor’s right against the company in the full amount of $410,200. Accordingly, the debt owed to the former director was credited to the Company’s additional paid in capital.

 

From January 1, 2017 to September 30, 2017, a current director had advanced funds in the total amount of $10,400 to fund general corporate activities. The advances were non-interest bearing, due upon demand and unsecured.

 

From October 1, 2017 to December 31, 2017, a current director and other related persons had advanced funds in the total amount of $39,068 to fund general corporate activities. During the same period, the Company repaid its related parties in the amount of $10,876. The advances were non-interest bearing, due upon demand and unsecured.

 

From October 1, 2017 to December 31, 2017, the Company prepaid funds to a current director in the total amount of $8,076 to pay certain expenses on behalf of the Company. These amounts are settled shortly after balance sheet date.

 

4.       COMMON STOCK

 

The Company has authorized 75,000,000 shares of Common Stock, par value of $ 0.001 per share. In August 2014, the Company issued 5,000,000 shares of Common Stock at $0.001 per share for total proceeds of $5,000. On September 5, 2014, the Company issued 2,000,000 shares of Common Stock at $0.001 per share for total proceeds of $2,000. In February and March 2015, the Company issued 2,530,000 shares of Common Stock at $0.01 per share for total proceeds of $25,300.

 

On March 30, 2016, the Company issued 50,000,000 shares of Common Stock in connection with the acquisition as discussed in Note 1 and subsequently 30,277,500 were cancelled.

On August 8, 2017, the Company filed a certificate of amendment to increase the number of the Company’s authorized common stock from 75,000,000 to 150,000,000 with par value of $0.001 per share, and executed a 100 to 1 reverse stock split of the outstanding Common Stock of the Company. After the reverse split became effective, the Company’s outstanding common stock decreased from 28,807,500 shares to 288,079 shares.

 

On September 15, 2017, the Company issued to an aggregate of 100,000,000 newly issued shares of Common Stock as a result of a share exchange agreement. The agreement was subsequently terminated on October 31, 2017. The shares are outstanding as of September 30, 2017 but are subsequently terminated after balance sheet date.

 

The Company entered into a Securities Purchase Agreement (the “SPA”) with DECo, a related party of the Company, or its designee(s) (the “Investor”), dated October 31, 2017. Pursuant to the SPA, Investor purchased 100,000,000 shares of the common stock of the Company, par value $0.001 per share, for an aggregate price of $320,000 (the “Shares”) in a private sale transaction (the “Private Sale”). The Private Sale contemplated in the SPA closed on the same day. As of December 31, 2017, the Company has received $320,000 for the purchase of shares.

 

As of December 31, 2017, the Company had 100,288,709 shares of Common Stock issued and outstanding.

 

 

National Art Exchange, Inc.

(f/k/a Tianhe Union Holdings Limited)

Notes to Condensed Financial Statements

  

5.       INCOME TAX

 

The Company is subject to US Federal tax laws. The Company has not recognized an income tax benefit for its operating losses based on uncertainties concerning its ability to generate taxable income in future periods. The tax benefit for the periods presented is offset by a valuation allowance established against deferred tax assets arising from the net operating losses and other temporary differences, the realization of which could not be considered more likely than not. Further, the benefit from utilization of NOL carryforwards could be subject to limitations due to material ownership changes that could occur in the Company as it continues to raise additional capital. Based on such limitations, the Company has significant NOLs for which realization of tax benefits is uncertain. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not.

 

As of December 31, 2017, and September 30, 2017, the Company has accumulated net losses of $96,084,490 and $95,981,375, respectively. The deferred tax assets will begin to expire in 2025. A significant portion of these losses were related to stock issuances. The Company will assess the deductibility of such losses.

 

The net losses before income taxes and its provision for income taxes as follows:

 

		For the three-month ended December 31,
		2017				2016
Net loss before income tax		$	(103,115	)		$	(78,492	)
Tax expenses (benefit) at the statutory tax rate			(35,059	)			(26,687	)
Tax effects of:
Valuation allowance			35,059				26,687
Income tax benefit		$	-			$	-

 

Deferred tax asset is calculated based on the statutory average rate of 34%. A 100% valuation was taken as the realization of the NOL is more likely than not.

 

		As of
		December 31, 2017				September 30, 2016
Deferred tax asset:
Net operating losses (NOLs ) carryforwards:			32,668,727				32,663,667
Valuation allowance			(32,668,727	)			(32,663,667	)
Deferred tax assets, net:			-				-

 

 

National Art Exchange, Inc.

(f/k/a Tianhe Union Holdings Limited)

Notes to Condensed Financial Statements

  

6.       LOSS PER SHARE

 

		For the three months ended December 31,
		2017				2016
Loss per share numerator
Loss for the year attributable to owners of the Company		$	(103,115	)		$	(78,492	)
Diluted loss per share numerator
Loss for the year attributable to owners of the Company		$	(103,115	)		$	(78,492	)
Basic loss per share denominator
Original shares:			100,288,075				288,075
Additions from actual events:
- Issuance of common stock, weighted			-				-
Basic weighted average shares outstanding			100,288,075				288,075
Diluted loss per share denominator
Basic weighted average shares outstanding			100,288,075				288,075
Diluted weighted average shares outstanding			100,288,075				288,075
Loss per share
- Basic		$	(0.00	)		$	(0.27	)
- Diluted		$	(0.00	)		$	(0.27	)
Weighted average shares outstanding
- Basic			10,288,075				288,075
- Diluted			10,288,075				288,075

 

For the periods presented, there is no dilutive securities that could potentially dilute loss per shares that is not included in the computation because the effect was antidilutive.

 

7.       SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events from December 31, 2017 through the date the financial statements were available to be issued and has determined that there were no subsequent events after December 31, 2017 which requires disclosure.

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operation

 

FORWARD LOOKING STATEMENTS

 

Statements made in this Form 10-Q that are not historical or current facts are "forward-looking statements". These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

 

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

General

 

National Art Exchange, Inc., formerly known as Tianhe Union Holdings Limited and Lissome Trade Corp., was incorporated in the State of Nevada on May 9, 2014. We were formed to engage in the distribution of metal cookware made from stainless steel from China to the markets of Europe and Commonwealth of Independent States (CIS) countries. In connection with a change of control transaction that closed on August 28, 2015, we appointed a new executive management team and changed our planned business operations. On March 30, 2016, the Company, GLOBAL INTERNATIONAL HOLDINGS LTD. (“BVI1”), a British Virgin Islands corporation, its wholly owned subsidiary GLOBAL TECHNOLOGY CO., LTD. (“BVI2”), a British Virgin Islands corporation entered into and consummated the Share Exchange Agreement pursuant to which BVI1 (its sole director, who has the voting and dispositive power of the shares of BVI1 is CHOW, Chun Yu Leeds), as the sole shareholder of BVI2, received 50,000,000 newly issued shares of the Company’s Common Stock (84.0% upon the completion of the Share Exchange) and a convertible note issued convertible into 150,000,000 shares of Common Stock upon the Company’s completion of its increase of the authorized shares by September 30, 2016, in exchange for its ownership in BVI2 and its subsidiaries and the control over Avi-Trip formed by the VIE Agreements entered into by and between WFOE and Avi-Trip. BVI2 owns 100% of HUATIAN GLOBAL LIMITED (“HGL”), a Hong Kong corporation, which owns 100% of TIANHE GROUP (HK) LIMITED (“THGL”), a Hong Kong corporation, which owns 100% of JIERUN CONSULTING MANAGEMENT CO., LTD. (“WFOE”) a foreign investment enterprise organized under the laws of the People’s Republic of China (“PRC”), which had entered into various contractual agreements known as variable interest entity (“VIE”) agreements with ANHUI AVI-TRIP TECHNOLOGY CO., LTD. (“Avi-Trip”), a corporation incorporated on October 15, 2014, under the laws of the PRC. The VIE agreements provide WFOE with management control and rights to the profits of Avi-Trip. The VIE agreements include: (1) an Exclusive Service Agreement by and between WFOE and Avi-Trip, entitling WOFE to receive substantially all of the economic benefits of Avi-Trip in consideration for services provided by WFOE to Avi-Trip; (2) a Call Option Agreement by and among the shareholders of Avi-Trip, Jie Wei Wei and Han Yanliang, allowing WFOE to acquire all of Avi-Trip’s shares as permitted by PRC law; (3) a Voting Rights Proxy Agreement providing WFOE with the all of the voting rights of Avi-Trip’s shareholders; and (4) an Equity Pledge Agreement pledging the shares in Avi-Trip to WFOE.

 

 

BVI1 never instructed the secretary and authorized agent to effectuate a change of registered shareholder of BVI2 from BVI1 being the sole shareholder to the Company being the sole shareholder. Additionally, the Company was unable to exercise control over BVI2, HGL, THGL, WFOE, and Avi-Trip subsequent to the execution of the Share Exchange Agreement. Furthermore, the Company was neither able to secure substantive control over the use and disposition of the assets of BVI2, HGL, THGL, WFOE and Avi-Trip nor exercise control over the accounting and finance department of BVI2, HGL, THGL, WFOE, and Avi-Trip in order to procure relevant financial information for financial reporting purposes; accordingly, the Company was unable to timely file Form 10-Qs for the quarters ended March 31, 2016, September 30, 2016, and December 31, 2016, March 31, 2017 and Form 10-K for the fiscal year ended September 30, 2016.

 

As a result of the Company’s inability to exercise control over Avi-Trip, on July 19, 2016, on the recommendation of the Company’s board of directors (the “Board”), a majority of holders of the Company’s Common Stock voted to terminate the VIE agreements between WFOE and Avi-Trip, the termination became effective August 29, 2016. The Company also will not pursue the Directors of BVI1 to effectuate the change of ownership of BVI2 from BVI to the Company. In connection with the termination of the VIE agreements, certain shareholders representing 30,722,500 shares of Common Stock, in connection with the share issuance pursuant to the Share Exchange Agreement, agreed to return their shares of Common Stock to the Company for cancellation and convertible note holders also agreed to return their notes to the Company for cancellation. Concurrently, Mr. Yang Jie resigned from his positions as Chairman of the Board, President and Chief Executive Officer of the Company. Ms. Weiwei Jie and Ms. Fengyu Yi also resigned as members of the Board, which resignations were made in connection with the Company’s termination of the VIE agreements.

 

As of the date of this report, 30,722,500 shares of Common Stock and the note convertible into 150 million shares of Common Stock in connection with the Share Exchange Agreement have been returned and cancelled.

 

As a result of the termination of the VIE agreement, we are currently a shell company. 

 

RESULTS OF OPERATIONS

 

 Three Months ended December 31, 2017 and 2016

 

Total Revenue

 

We did not generate any revenue for the three months ended December 31, 2017. We generated revenue of $0 during the three months ended December 31, 2017.

 

Net Income

 

Our net loss for the three months ended December 31, 2017 was $103,115 compared to $78,492 for the three months ended December 31, 2016. During the three months ended December 31, 2016, we have not generated any revenue.

 

During the three months ended December 31, 2017, we incurred general and administrative expenses and professional fees of $103,117. During the 3 months ended December 31, 2016, we incurred general and administrative expenses of $78,492. General and administrative and professional expenses were generally related to corporate overhead, financial and administrative contracted services, such as legal and accounting costs

  

LIQUIDITY AND CAPITAL RESOURCES

 

As of December 31, 2017

 

As of December 31, 2017, our current assets were $140,227 compared to $15,150 as of September 30, 2017. As of December 31, 2017, our current liabilities were $38,594 compared to $ 10,400 as of September 30, 2017. Current liabilities were composed of related party payables of $410,200.

 

Stockholders’ equity decreased from a deficit of $96,084,492 as of September 30, 2017 to a deficit of $95,981,375 as of December 31, 2017.

 

 

Cash Flows from Operating Activities

 

We have not generated positive cash flows from operating activities. For the three months ended December 31, 2017, net cash flows used in operating activities was $111,191, consisting of increase in related party receivable of $ 8,076.

  

OFF-BALANCE SHEET ARRANGEMENTS

 

As of the date of this Annual Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

GOING CONCERN

 

The independent auditors' report accompanying our audited financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared based on the assumption that we will continue as a going concern, which assumption contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

This Item is not applicable because we are a smaller reporting company.

 

Item 4.

Controls and Procedures

 

a) Evaluation of disclosure controls and procedures

 

At the conclusion of the period ended December 31, 2017 we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, our CEO and CFO concluded that as of December 31, 2017, our disclosure controls and procedures were effective and adequately designed to ensure that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that such information was accumulated and communicated to our management, including our CEO and CFO, in a manner that allowed for timely decisions regarding required disclosure.

 

(b) Changes in internal controls

 

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings.

 

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. 

 

Item 1A.

Risk Factors.

 

We are a smaller reporting company and therefore, we are not required to provide information required by this Item of Form 10-Q.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

None. 

 

Item 3.

Defaults Upon Senior Securities.

 

None. 

 

Item 4.

Mine Safety Disclosures.

 

Not applicable.

 

Item 5.

Other Information

 

None.

 

Item 6.

Exhibits

 

The following exhibits are filed herewith:

 

Exhibit No.		Title of Document
31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: February 20, 2018	By:	/s/ Qingxi Meng
		Qingxi Meng
		President, Chief Executive Officer,  Chairman of the Board of Directors  (principal executive officer)

 

Date: February 20, 2018	By:	/s/ Ming Yi
		Ming Yi
		Chief Financial Officer (principal financial officer and principal accounting officer)

 

 

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