Notes
to Condensed Financial Statements
1.
|
NATURE
OF OPERATION AND ORGANIZATION HISTORY
|
Tianhe
Union Holdings Limited (the “Company”) was incorporated in Nevada on May 9, 2014. The Company currently does not have
any operations.
Reverse
Merger and Share Exchange Agreement
On
March 30, 2015, the Company contemplated a Share Exchange Agreement (the “Share Exchange Agreement”) by and among
GLOBAL INTERNATIONAL HOLDINGS LTD. (“BVI1”), a British Virgin Islands corporation, its wholly owned subsidiary GLOBAL
TECHNOLOGY CO., LTD. (“BVI2”), a British Virgin Islands corporation, which 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.
Pursuant
to the contemplated Share Exchange Agreement, the Company issued to BVI1 and its designees 50,000,000 newly issued shares of the
Company’s common stock, par value $.001 per share (“Common Stock”), and a note convertible into 150,000,000
shares of Common Stock as consideration for ownership in BVI2 and its subsidiaries HGL, THGL, WFOE, and the VIE agreements between
WFOE and Avi-Trip.
As
of December 31, 2015, Avi-Trip had registered and paid in capital of $8,188,707 (RMB 50,000,000). Zhihui Chen was its authorized
representative. Avi-Trip provided business to business software platform for travel agents to transact flight tickets and book
hotel rooms. As of the date of this report Avi-Trip had ceased operations.
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, June 30, 2016, and December 31, 2016, and Form 10-K for the fiscal year ended September 30, 2016.
Tianhe
Union Holdings Limited
(f/k/a
Lissome Trade Corp.)
Notes
to Condensed Financial Statements
Disposition
and Loss
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.
For
the 19,277,500 shares that were issued as part of the Share Exchange Agreement on March 30, 2016, and that were not returned to
the Company for cancellation, valued at $4.95 per share, the closing price of the Company stock on March 30, 2016, an amount of
$95,423,625 was accounted for by the Company as a loss related to the contemplated share exchange transaction; Company management
has determined that it should account for the loss during the quarter ended March 31, 2016, although the termination of the agreement
became effective on August 29, 2016, subsequent to the end of that reporting period. The Company believes that this was a material
subsequent event that affected the presentation of the Company’s financial position at March 31, 2016, and that required
a retroactive adjustment to its financial statements for that reporting period.
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.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
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.
Tianhe
Union Holdings Limited
(f/k/a
Lissome Trade Corp.)
Notes
to Condensed Financial Statements
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 $95,751,849 as of March 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.
The
preparation of financial statements in conformity with generally accepted accounting principles requires Company’s 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 March 31, 2017 the
Company's bank deposits did not exceed the insured amounts.
|
(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 March 31, 2017.
The
Company has not adopted any policies regarding payment of dividends. No dividends have been paid during any of the reported periods.
Tianhe
Union Holdings Limited
(f/k/a
Lissome Trade Corp.)
Notes
to Condensed Financial Statements
|
(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.
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 March 31, 2017, the Company has not issued any stock-based payments to its employees.
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 the 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.
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.
Tianhe
Union Holdings Limited
(f/k/a
Lissome Trade Corp.)
Notes
to Condensed Financial Statements
|
(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, 2017.
The
balance sheets and certain comparative information as of September 30, 2016 are derived from the audited financial statements
and related notes for the year ended September 30, 2016 (“2016 Annual Financial Statements”), included in the Company’s
2016 Annual Report on Form 10-K. These unaudited interim condensed financial statements should be read in conjunction with the
2016 Annual Financial Statements.
|
(n)
|
Recent
accounting pronouncements
|
In
November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes".
The amendments in ASU 2015-17 eliminate the current requirement for organizations to present deferred tax liabilities and assets
as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax
assets and liabilities as noncurrent. The amendments in the ASU are effective for public business entities for financial statements
issued for annual periods beginning after December 15, 2016, and for interim periods within those annual periods. The amendments
may be applied prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.
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.
On
March 15, 2016, the FASB issued ASU 2016-07 “Investments—Equity Method and Joint Ventures (Topic 323): Simplifying
the Transition to the Equity Method of Accounting”, which simplifies the equity method of accounting by eliminating the
requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result
of an increase in the level of ownership interest or degree of influence. Consequently, when an investment qualifies for the equity
method (as a result of an increase in the level of ownership interest or degree of influence), the cost of acquiring the additional
interest in the investee would be added to the current basis of the investor’s previously held interest and the equity method
would be applied subsequently from the date on which the investor obtains the ability to exercise significant influence over the
investee. The ASU further requires that unrealized holding gains or losses in accumulated other comprehensive income related to
an available-for-sale security that becomes eligible for the equity method be recognized in earnings as of the date on which the
investment qualifies for the equity method.
Tianhe
Union Holdings Limited
(f/k/a
Lissome Trade Corp.)
Notes
to Condensed Financial Statements
The
guidance in the ASU is effective for all entities for fiscal years beginning after December 15, 2016, including interim periods
within those fiscal years; early adoption is permitted for all entities. Entities are required to apply the guidance prospectively
to increases in the level of ownership interest or degree of influence occurring after the ASU’s effective date. Additional
transition disclosures are not required upon adoption.
The
new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017.
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.
3.
|
RELATED
PARTY TRANSACTIONS
|
A
certain former director of the Company was owed $8,542 at September 30, 2015; however, the Company underwent a change of control
when majority ownership was transferred to a new majority shareholder. Pursuant to the agreement between the previous majority
shareholder and new majority shareholder, the previous majority shareholder would assume all obligations owed by the Company up
until the date of the ownership is transferred, including payables owed to the former director. Accordingly, the debt owed to
the former director was written off and the Company recognized a one-time gain of $8,542, which is included as gain on change
of control in the Company’s results of operations during the year ended September 30, 2015.
As
of December 31, 2016, another 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.
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.
As
of March 31, 2017, the Company had 28,807,500 shares of Common Stock issued and outstanding.
Tianhe
Union Holdings Limited
(f/k/a
Lissome Trade Corp.)
Notes
to Condensed Financial Statements
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 March 31, 2017, and September 30, 2016, the Company has accumulated net losses of $95,427,849 and $95,627,657, 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 six month ended
March 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Net loss before income tax
|
|
$
|
(124,192
|
)
|
|
$
|
(36,878
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Tax expenses (benefit) at the statutory tax rate
|
|
|
42,225
|
|
|
|
12,538
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax effects of:
|
|
|
|
|
|
|
|
|
|
(Deferred tax asset utilized)/ Valuation allowance
|
|
|
(42,225
|
)
|
|
|
(12,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
March 31,
2017
|
|
|
September 30,
2016
|
|
|
Deferred tax asset:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating losses (NOLs ) carryforwards:
|
|
|
32,555,629
|
|
|
|
32,513,403
|
|
|
Valuation allowance
|
|
|
(32,555,629
|
)
|
|
|
(32,513,403
|
)
|
|
Deferred tax assets, net:
|
|
|
-
|
|
|
|
-
|
|
Tianhe
Union Holdings Limited
(f/k/a
Lissome Trade Corp.)
Notes
to Condensed Financial Statements
6.
|
INCOME/(LOSS)
PER SHARE
|
|
|
|
For the six months ended
March 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Loss per share numerator
|
|
|
|
|
|
|
|
Loss attributable to owners of the Company
|
|
$
|
(124,192
|
)
|
|
$
|
(36,878
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share numerator
|
|
|
|
|
|
|
|
|
|
Income/(loss) for the year attributable to owners of the Company
|
|
$
|
(124,192
|
)
|
|
$
|
(36,878
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share denominator
|
|
|
|
|
|
|
|
|
|
Original shares:
|
|
|
9,530,000
|
|
|
|
28,807,500
|
|
|
Additions from actual events:
|
|
|
|
|
|
|
|
|
|
- Issuance of common stock, weighted
|
|
|
105,630
|
|
|
|
-
|
|
|
Basic weighted average shares outstanding
|
|
|
9,635,630
|
|
|
|
28,807,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share denominator
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
9,635,630
|
|
|
|
28,807,500
|
|
|
Diluted weighted average shares outstanding
|
|
|
9,635,630
|
|
|
|
28,807,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
- Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
|
9,635,630
|
|
|
|
28,807,500
|
|
|
- Diluted
|
|
|
9,635,630
|
|
|
|
28,807,500
|
|
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.
The
Company has evaluated subsequent events from March 31, 2017, through the date the financial statements were available to be issued
and has determined that there were no subsequent events after March 31, 2017 which disclosure is required.