Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(Unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Axiom Holdings, Inc. (the “Company”) is a Nevada corporation incorporated on August 7, 2013, as At Play Vacations, Inc. It is based in Kowloon, Hong Kong. The Company incorporated wholly-owned subsidiaries, Quality Resort Hotels, Inc. (“QRH”) in Florida on August 8, 2013 and Horizon Resources Co. Ltd (“Horizon”) in the Cayman Islands on September 7, 2015. On June 23, 2016, QRH was legally dissolved with the state of FL (see note 5). The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and The Company’s fiscal year end is December 31.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year. The accompanying unaudited financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-KT, for the year ended December 31, 2015, as filed with the SEC on March 30, 2016.
Basis of Presentation
The Consolidated Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.
On October 1, 2015, we changed our fiscal year from September 30 to December 31, effective beginning with the year ended December 31, 2015.
Basis of Consolidation
These financial statements include the accounts of the Company and the wholly-owned subsidiary, Horizon Resources Co. Ltd. All material intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had no cash and cash equivalents as of September 30, 2016 and December 31, 2015.
Due to Related Party
The Company follows ASC 850,
“Related Party Disclosures,”
for the identification of related parties and disclosure of related party transactions.
Financial Instruments
The Company follows ASC 820,
“Fair Value Measurements and Disclosures”,
which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, prepaid expenses, and accounts payable and accrued liabilities and amounts due to related parties. Pursuant to ASC 820, the fair value of the Company’s cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of the Company’s other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Revenue Recognition
The Company recognizes revenue when it is earned and realizable based on the following criteria: persuasive evidence that an arrangement exists, services have been rendered, the price is fixed or determinable and collectability is reasonably assured.
Net Loss per Share of Common Stock
The Company has adopted ASC Topic 260,
“Earnings per Share,”
(“EPS”) which requires presentation of basic EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
Discontinued Operations
The Company follows ASC 205-20,
“Discontinued Operations,”
to report for disposed or discontinued operations.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company has a net loss from operations of $29,817 for the nine months ended September 30, 2016 and an accumulated deficit of $189,220 as of September 30, 2016. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending December 31, 2016.
The ability of the Company to emerge from the development stage is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 - DUE TO RELATED PARTY
As of September 30, 2016, and December 31, 2015, the Company was obligated to our then Chief Executive Officer, who is also a significant stockholder, for a non-interest bearing demand loan with a balance of $66,560 and $39,443, respectively. This officer subsequently resigned in February 2016, but still remains a significant shareholder in the Company.
NOTE 5 - DISCONTINUED OPERATIONS
The Company originally intended to be involved in the business of on-line travel and vacation booking. Based on management’s analysis of the current operations, expected growth, and opportunities in the sector, in April, 2016, the Company has determined to discontinue operations related to on-line travel booking which was performed under the Company’s subsidiary Quality Resort Hotels, Inc. Effective June 23, 2016, Quality Resort Hotels, Inc., was legally dissolved with the State of Florida.
As the operations of Quality Resort Hotels, Inc. have been discontinued and the company legally dissolved, the Company has excluded results of the operations from its Consolidated Statement of Operations.
The discontinued operations did not have any assets or liabilities as of September 30, 2016 or December 31, 2015. During the nine month period ended September 30, 2016 and 2015, the discontinued operations consisted of the following:
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Nine Months Ended
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September 30,
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2016
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2015
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Revenues
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$
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-
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$
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16,305
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Cost of sales
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-
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6,715
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Gross Profit
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-
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9,590
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Operating Expenses
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Selling, general and administrative
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-
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15,250
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Professional
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-
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900
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Total operating expenses
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-
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16,150
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Loss from Discontinued Operations
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$
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-
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$
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(6,560
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)
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NOTE 6 - SUBSEQUENT EVENTS
As filed in a Form 8K on October 10, 2016, with the Securities and Exchange Commission:
On October 10, 2016, the Company appointed Curtis Riley as the Company’s Chief Executive Officer and Chief Financial Officer to succeed Low Tuan Lee who resigned those positions with the Company. In addition, Mr. Riley has been appointed as a member of the Company’s Board of Directors. Mr. Lee had no disagreements with the Company.
Share Exchange Agreement
On October 10, 2016, the Company entered into a Share Exchange Agreement (the “Agreement”) with CJC Holdings, Ltd., a Hong Kong corporation (together with its subsidiaries, “CJC”) and the two shareholders of CJC, Hu Dengyang and Yang Chuan (the “CJC Shareholders”). CJC, through its subsidiaries, operates and constructs hydropower electric generation stations located in China with two in operation, a third under construction and a fourth in the planning stage and slated for operation in 2019. In addition, CJC, through its subsidiaries, operates two hotels in China. A more general discussion of CJC’s operations is included below.
Pursuant to the Agreement, the Company has agreed to acquire all of the issued and outstanding shares of CJC from the CJC Shareholders in exchange for the issuance to the CJC Shareholders of 200,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”).
In connection with the transactions contemplated under the Agreement, the Company will cancel 200,000,000 shares of its Common Stock currently outstanding prior to the closing of the transactions, and therefore the shares of Common Stock issued to the CJC Shareholders in the transactions pursuant to the Agreement will represent approximately 58.8% of the issued and outstanding shares of the Company’s Common Stock at the closing of such transactions. As of October 10, 2016, the Company has 340,000,000 shares of Common stock issued and outstanding. The acquisition of the shares of CJC and the cancellation of the shares of Company’s Common Stock as described herein, together with the other transactions described in the Agreement, are collectively referred to herein as the “Transactions.” Upon completion of the closing of the Transactions, CJC will become a subsidiary of the Company.
Any party may terminate the Agreement if the closing of the Transactions does not occur by February 15, 2017 (unless such failure was due to a breach of the Agreement by such party). The Company’s obligation to close is conditioned upon, among other items, (i) certain, limited customary representations and warranties of CJC and the CJC Shareholders remaining true and correct; (ii) CJC and the CJC Shareholders having complied in all material respects with all covenants and conditions required by the Agreement; (iii) no order of any governmental authority being in place which prohibits the Transactions; (iv) receipt of any consents or approvals required for the closing of the Transactions under any contracts, permits, trademarks or intangibles; (v) the completion by the Company, to its satisfaction in its sole discretion, of its due diligence investigation of CJC and its operations; (vi) CJC having provided the Company with certain financial statements and (vii) no material adverse effect having occurred with respect to CJC.
CJC and the CJC Shareholders’ obligations to close are conditioned upon, among other items, (i) certain, limited customary representations and warranties of the Company remaining true and correct; (ii) the Company having complied in all material respects with all covenants and conditions required by the Agreement; (iii) no order of any governmental authority being in place which prohibits the Transactions; (iv) no more than 340,000,000 shares of Common Stock being outstanding; (v) the completion by counsel for the CJC Shareholders, to its satisfaction in its sole discretion, of its due diligence investigation of the Company; and (vi) no material adverse effect having occurred with respect to the Company.
As of the closing of the Transactions, the parties have agreed to execute such documents and undertake such actions as required to cause the Board of Directors of the Company following the closing to consist of one current director of the Company and two directors appointed by the CJC Shareholders.
The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to such Agreement, which is filed as Exhibit 10.1 to the Company’s Form 8-K filed on October 14, 2016, and is incorporated herein by reference.
Operations of CJC and its Subsidiaries
The following is a general description of CJC’s operating subsidiaries:
Xiaojin County Jitai Power Investment Company Limited operates a hydropower electric generation station located in Xiaojin, Sichuan, China, which commenced operations in September 2009. The station has an annual average output of 125.664 million kW.h.
Xiaojin County Xin Hong Electric Power Development Company Limited operates, or is completing, the Jiesigou I, II and III hydropower stations located in Xiaojin, Sichuan, China. The Jiesigou II hydropower station began operations in September, 2016 with an installed electricity capacity of 24,000 kw, and an average annual output of 112.5548 million kW.h. The Jiesigou I a Jiesigou III hydropower stations are currently expected to be on-line in 2019.
Xiao Jin County En Ze Hotel Management Company Limited owns and operates a hotel located at 47 Government Street, Mei Xin Town, Xiaojin County, China, which is across the street from the Hongjun Huishi Square. The hotel has 190 guest rooms, 178 luxury guest rooms, and 12 deluxe suites, and covers a total of over 114,000 square feet. The hotel includes a shopping area, business center, the 600-seat En Ze Restaurant, a tea house in the lobby, a 7-room spa, 5 conference rooms, 3 large meeting rooms, and two multi-function halls which can accommodate up to 800 people. The hotel is currently under construction and is expected to open in June 2017.
Xiao Jin County SiGuNiang Mountain Hotel Management Company Limited owns and operates the SiGuNiang Mountain Hotel, located in SiGuNiang Mountain Town, Xiaojin County, Sichuan Province, China. The front of the hotel adjacent to the provincial highway S303, and the back is facing the Siguniangs Mountain town government center. This area is the center of tourism, entertainment and catering services in SiGuNiang Mountain Town, and is approximately 143 miles from Chengdu, the capital city of Sichuan and approximately 112 miles from Maerkang, the capital of Aba Autonomous Region. The hotel has 90 guest room over 6 floors, and comprises over 71,000 square feet in total, and is mainly in the Jiarong Tibetan style. The hotel includes a 120-seat restaurant, tea house, meeting rooms, and 13 street shops. The hotel also offers a catering department. The hotel is expected to open for business in June 2017.
Following the closing of the Transactions, we intend to continue the historical businesses of CJC and its subsidiaries, as discussed above.