UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2018

 

☐ 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: 001-35357

 

Xiamen Lutong International Travel Agency Co. Ltd.

(Exact name of registrant as specified in its charter)

 

Nevada		26-150752
(State or other jurisdiction of  incorporation or organization)		(I.R.S. Employer Identification Number)

 

20F, Longhai Fortune Center 42 Ziwei Road, Shima Town, Zhangzhou City Fujian Province, China		363199
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: +86 596-6565220

 

Highlight Network, Inc.

(Former name or former address, 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 Website, if any, every Interactive Date 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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 ☐

 

As of May 14, 2018, there were 58,167,600 shares of the Company’s common stock issued and outstanding.

 

 

 

 

 

XIAMEN LUTONG INTERNATIONAL TRAVEL AGENCY CO. LTD.

(FORMERLY “HIGHLIGHT NETWORKS, INC.”)

 

TABLE OF CONTENTS

 

		Page
PART I – FINANCIAL INFORMATION:
Item 1.	Financial Statements:	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	14
PART II – OTHER INFORMATION:
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults Upon Senior Securities	14
Item 4.	Mine Safety Disclosures	14
Item 5.	Other Information	14
Item 6.	Exhibits	15
	Signature	16

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1.

Financial Statements

Index to Financial Statements 

	Page
Condensed Balance Sheets as of March 31, 2018 (unaudited) and June 30, 2017	5
Condensed Statements of Operations for the Three and Nine Months Ended March 31, 2018 and 2017 (unaudited)	6
Condensed Statements of Cash Flows for the Nine Months Ended March 31, 2018 and 2017 (unaudited)	7
Notes to the Condensed Financial Statements (unaudited)	8

 

 

 

 

 

 

 

 

 

Xiamen Lutong International Travel Agency Co. Ltd. (formerly “Highlight Networks, Inc.”) Condensed Balance Sheets
		March 31,				June 30,
		2018 (Unaudited)				2017 (Audited)
ASSETS
Current Assets:
Cash		$	-			$		-
Total Current Assets			-					-
Total Assets		$	-			$		-
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued expenses		$	83,843			$		53,996
Note payable to related party			256,132				256,132
Due to related party			-				59,305
Total Liabilities			339,975				369,433
Stockholders' Equity (Deficit):
Preferred stock, $0.001 par value; 20,000,000 shares authorized;
no shares outstanding and outstanding			-				-
Common stock, $0.001 par value; 150,000,000 shares authorized;
58,167,600 and 58,167,600 shares issued and outstanding, respectively			58,168				58,168
Additional paid-in capital			8,624,910				8,542,963
Accumulated deficit			(9,023,053)				(8,970,564)
Total Stockholders’ Deficit			(339,975)				(369,433)
Total Liabilities and Stockholders' Equity		$	-			$	-

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

  

Xiamen Lutong International Travel Agency Co. Ltd. Condensed Statement of Operations (Unaudited)
		For the Three Months Ended								For the Nine Months Ended
		March 31,								March 31,
		2018				2017				2018				2017
Revenue:
Income		$	—			$	—			$	—			$	—
Operating Expenses:
General & administrative expenses			10,430				57,305				33,192				57,305
Total  operating expenses			10,430				57,305				33,192				57,305
Loss from operations			(10,430	)			(57,305	)			(33,192	)			(57,305	)
Other expense:
Interest expense			(6,456	)			(6,315	)			(19,298	)			(19,227	)
Total other expense			(6,456	)			(6,315	)			(19,298	)			(19,227	)
Loss before income taxes			(16,886	)			(63,620	)			(52,490	)			(76,532	)
Provision for income taxes			—				—				—				—
Net loss			(16,886	)			(63,620	)			(52,490	)			(76,532	)
Basic loss per share			(0.00	)			(0.00	)			(0.00	)			(0.00	)
Basic weighted average shares			58,167,600				58,167,600				58,167,600				58,167,600

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

Xiamen Lutong International Travel Agency Co. Ltd. Condensed Statements of Cash Flows (Unaudited)
		For the Nine Months Ended
		March 31,
		2018				2017
Cash flows from operating activities:
Net income (loss)		$	(52,490	)		$	(76,532	)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in assets and liabilities:
Accounts payable			29,847				17,500
Accrued expense			—				19,227
Net cash used in operating activities			(22,643	)			(39,805	)
Cash flows from investing activities:			—				—
Cash flows from financing activities:
Advances from related parties			—				39,805
Capital contributions from shareholder			22,643				—
Net cash provided by financing activities			22,643				39,805
Net decrease in cash			—				—
Cash, beginning of period			—				—
Cash, end of period		$	—			$	—
Supplemental cash flow information
Non-cash transactions			—				—
Conversion of due to related party balance to paid-in-capital		$	59,305			$	—

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

Xiamen Lutong International Travel Agency Co. Ltd.

Notes to the Condensed Financial Statements
March 31, 2018
(Unaudited)

 

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 under the symbol of (“HNET”) 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 will be May 14, 2018.

The Company intends to either retain an equity interest in any private company it engages in a business combination or the Company may receive cash and/or a combination of cash and common stock from any private company it completes a business combination with. The Company’s desire is that the value of such consideration paid to it would be beneficial economically to its shareholders though there is no assurance of that happening.

Management of the Company will seek a suitable candidate for a merger transaction. If the target company chooses to enter into business combination with the Company, a Form 8-K disclosure document will be prepared after such business combination. A combination will normally take the form of a merger, stock-for-stock exchange or stock-for-assets exchange. In most instances the target company will wish to structure the business combination to be within the definition of a tax-free reorganization under Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended.

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 unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending June 30, 2018. These unaudited condensed financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of liabilities and expenses during the reporting period.  Actual results could differ from those estimates. The Company currently does not have significant estimates and assumptions.

Recent Accounting Pronouncements

The Company has reviewed all recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position. 

 

NOTE 3 - RELATED PARTY TRANSACTIONS

The note payable due to related party as of June 30, 2017 was related to an unsecured promissory note payable to Allied Crown Enterprises Limited (“Allied”), a company controlled by the previous substantial shareholder, Jose R. Mayorquin. As of June 30, 2017, the Company had a total outstanding principal and accrued interest of $256,132 and $53,121, respectively, due to Allied. In connection with the 2018 Change of Control, Allied assigned its promissory note with the principal amount of $256,132 plus all accrued interests to Longhai. As of March 31, 2018, the Company had a total outstanding principal and accrued interest of $256,132 and $72,419, 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 March 31, 2018 and June 30, 2017 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 $22,643 from its previous substantial shareholder and the current substantial shareholder for working capital uses. Also, during the quarter ended March 31, 2018, in connection with the 2018 Change of Control, the balance of $59,305 due to the previous shareholder, Jose R. Mayorquin, was waived and converted to additional paid-in-capital.

 

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 $9,023,053, 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 substantial shareholder to meet its minimal operating expenses. As the Company is a shell company and operating expenses are limited. Management believes that the financing from its substantial shareholder and its continued efforts in pursing business combination will provide them with the opportunity to continue as a “going concern.”

These financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a “going concern.” While management believes that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubt about the validity of the “going concern” assumption used in preparing these financial statements, there can be no assurance that these actions will be successful. If the Company were unable to continue as a “going concern,” then substantial adjustments would be necessary to the 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 three and nine months ended March 31, 2018 and 2017, 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 other than the following event, no subsequent events occurred that would require adjustment to or disclosure in the financial statements:

On April 12, 2018, the Company filed an articles of merger with the Secretary of State of Nevada and changed its name from “Highlight Networks, Inc.” to “Xiamen Lutong International Travel Agency Co., Ltd.” through the merger of the Company with its wholly-owned subsidiary, Nevada Xiamen Lutong Sub. The articles of merger were amended on May 4, 2018.

 

 

Item 2.

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

 

 

The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our consolidated financial statements and the notes presented herein. In addition to historical information, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed in this Form 10-Q and our other reports filed with the Securities and Exchange Commssion.

Overview

We currently are a shell company with no operations. Upon execution of the SPA, the Company experienced a change of control in June 2015, when our operating asset, EZ Recycling, Inc. was removed and as a result we reverted to shell company status.

On January 29, 2018, pursuant to a stock purchase agreement (the “Agreement”), the Company majority shareholder, Jose R. Mayorquin sold 57,000,000 shares of common stock of the Company to Xiamen Lutong International Travel Agency Co., Ltd. (“Xiamen Lutong”). Xiamen Lutong subsequently transferred the 98% ownership to Longhai Yougoubao Network Technology Co. Ltd. (“Longhai”). Xiamen and Longhai are companies commonly controlled by the Company’s new director, Qiyi Zheng. After the transaction, Longhai holds 98% of the voting securities 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”). In connection with the 2018 Change of Control, Allied, the company controlled by Jose R. Mayorquin, assigned its promissory note with the principal amount of $256,132.39 issued by the Company to Longhai.

Results of Operations for the three and nine months ended March 31, 2018 compared to the three and nine months ended March 31, 2017. 

Revenues

There was no revenue for either the three and nine months ended March 31, 2018 or 2017. 

General and Administrative expense

During the three months ended March 31, 2018 and 2017, we incurred $10,430 and $57,305 of general and administrative expenses, respectively. The $10,430 primarily consisted of auditor fees, accounting fees, legal fee and filing fees, which are costs associated with a public company.

During the nine months ended March 31, 2018 and 2017, we incurred $33,192 and $57,305 of general and administrative expenses, respectively. The $33,192 primarily consisted of auditor fees, accounting fees, legal fee and filing fees, which are costs associated with a public company.

 

 

Other expense

During the three months ended March 31, 2018 and 2017, we incurred $6,456 and $6,315 of interest expenses, respectively. The interest expenses were solely related to the note payable due to a related party.  

During the nine months ended March 31, 2018 and 2017, we incurred $19,298 and $19,227 of interest expenses, respectively. The interest expenses were solely related to the note payable due to a related party.  

 

Net Loss

For the three months ended March 31, 2018 and 2017, we had a net loss of $16,886 and $63,620, respectively.  

 For the nine months ended March 31, 2018 and 2017, we had a net loss of $52,490 and $76,532, respectively.  

Liquidity and Capital Resources

As of June 30, 2017, we had an unsecured promissory note payable to Allied Crown Enterprises Limited (“Allied”), a company controlled by the previous substantial shareholder, Jose R. Mayorquin. As of June 30, 2017, the outstanding principal and accrued interest payable to Allied are $256,132 and $53,121, respectively. In connection with the 2018 Change of Control, Allied assigned its promissory note with the principal amount of $256,132 plus all accrued interests to Longhai. As of March 31, 2018, the Company had a total outstanding principle and accrued interest of $256,132 and $72,419, respectively due to Longhai. The unsecured promissory note bears an interest of 10% per annum and is payable on demand.  

Commitments and Capital Expenditures

The Company had 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 accounting principles generally accepted in the United States of America, we must make a variety of estimates that affect the reported amounts and related disclosures.

   

 

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 3.

Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

Item 4.

Controls and Procedures]

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (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 company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2018. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective due to the material weakness identified below due to the Company’s limited resources:

 

•

Lack of proper segregation of duties; and

•

Lack of a formal control process that provides for multiple levels of supervision and review.

 

Changes in Internal Control over Financial Reporting

 

During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

None.

 

Item 1A.

Risk Factors

 

Not applicable.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

Item 3.

Defaults Upon Senior Securities

 

None.

 

Item 4.

Mine Safety Disclosures

 

Not Applicable.

 

Item 5.

Other Information

None.

 

  

Item 6.

Exhibits

 

Exhibit Number		Description
31		Certification of the Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32*		Certification of the Principal Executive Officer and Principal Financial Officer required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
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

 

* Furnished herewith

 

 

 

 

 

 

 

SIGNATURES

  

In accordance with the requirements 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.

  

	HIGHLIGHT NETWORKS, INC.
Dated: May 14, 2018	/s/ Zhenhui Huang
	Name: Zhenhui Huang Title: Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Accounting and Financial Officer)