NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEAR ENDED APRIL 30, 2017 AND 2016
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
1.
|
ORGANIZATION
AND BUSINESS BACKGROUND
|
Gushen, Inc. (the “Company”)
was incorporated on March 9, 2015 in the state of Nevada. The Company is a development stage company with nominal operations. The
principal activity of the Company is the provision of managerial assistance services including administrative and IT support services
for small and medium enterprises (“SMEs”) in their early stage of operations through its subsidiary, Gushen Holding
Limited, which incorporated in the Republic of Seychelles. The Company attempts to assist the SMEs which are recently established
and at an early stage of operations, but will not participate in the board of the SMEs or making business decision. The primary
purpose behind focusing on providing services to companies at this early stage of development will be for the Company to establish
and nurture long-term relationships with clients during their growth and development.
Gushen, Inc. and its subsidiary
are hereinafter referred to as the “Company”.
Going Concern
These financial statements have
been prepared on a going concern basis. The Company has incurred accumulated losses amounting of $68,245 at April 30, 2017 and
further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability
to continues as a going concern. Its ability to continue as a going concern is dependent upon the ability of the Company to generate
profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities
arising from normal business operations when they come due. Management has plans to seek additional capital through a private
placement of its Common Stock or further director loans as needed. These financial statements do not include any adjustments relating
to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be
necessary in the event the Company cannot continue.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis
of presentation
These
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“US GAAP”).
Basis
of consolidation
The
consolidated financial statements include the financial statements of Gushen, Inc. and its subsidiary. All significant inter-company
balances and transactions within the Company have been eliminated upon consolidation.
Use
of estimates
In
preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts
of assets and liabilities in the balance sheets, and revenues and expenses during the periods reported. Actual results may differ
from these estimates.
Cash
and cash equivalents
Cash
and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions
and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Revenue
recognition
In
accordance with the Accounting Standard Codification Topic 605
“Revenue Recognition”
(“ASC 605”),
the Company recognizes revenue when the following four criteria are met: (1) delivery has occurred or services rendered; (2) persuasive
evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4) the collection of related
accounts receivable is probable.
Revenue
is measured at the fair value of the consideration received or receivable, net of discounts and taxes applicable to the revenue.
The
Company derives its revenue from provision of IT consulting and support service based upon the customer’s specifications.
The services are billed either on a fixed-fee basis or on a time-and-material basis. Generally, the Company recognizes revenue
when services are performed and accepted by the customers.
GUSHEN,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEAR ENDED APRIL 30, 2017 AND 2016
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
Cost
of revenues
Cost
of revenues represented the purchase costs of computer hardware for re-sale to customer.
Income
taxes
The
provision of income taxes is determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC
740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the periods
in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC
740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements
uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized
in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.
Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant
facts.
The
Company did not have any unrecognized tax positions or benefits and there was no effect on the financial conditions or results
of operations for the year ended April 30, 2017 and 2016. The Company and its subsidiary are subject to local and various foreign
tax jurisdictions. The Company’s tax returns remain open subject to examination by major tax jurisdictions.
Net
loss per share
The
Company calculates net loss per share in accordance with ASC Topic 260 “
Earnings per share
”. Basic loss per
share is computed by dividing the net loss by the weighted average number of common shares
outstanding
during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased
to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had
been issued and if the additional common shares were dilutive.
Foreign
currencies translation
Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates
prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional
currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting
exchange differences are recorded in the statements of operations.
The
reporting currency of the Company is United States Dollars (“US$”). The Company’s subsidiary in Seychelles maintains
its books and record in Hong Kong Dollars (“HK$”), which is functional currency as being the primary currency of the
economic environment in which the entity operates.
In
general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not the US$ are translated
into US$, in accordance with ASC Topic 830-30, “
Translation of Financial Statement
”, using the exchange rate
on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses
resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders’ equity.
GUSHEN,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEAR ENDED APRIL 30, 2017 AND 2016
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
Translation
of amounts from HK$ into US$1 has been made at the following exchange rates for the respective periods:
|
|
As of and for the year ended
April 30, 2017
|
|
|
As of and for the year ended
April 30, 2016
|
|
|
|
|
|
|
|
|
|
|
Year-end / average HK$ : US$1 exchange rate
|
|
|
7.75
|
|
|
|
7.75
|
|
Related
parties
Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making financial and operating decisions.
Companies are also considered to be related if they are subject to common control or common significant influence.
Fair
value of financial instruments
The
carrying value of the Company’s financial instruments: cash and cash equivalents, accounts payable and accrued liabilities,
and amount due to a director approximate at their fair values because of the short-term nature of these financial instruments.
The
Company also follows the guidance of the ASC Topic 820-10, “
Fair Value Measurements and Disclosures
” (“ASC
820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier
fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
|
Level
1: Observable inputs such as quoted prices in active markets;
|
|
|
|
Level
2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
|
|
|
Level
3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
Fair
value estimates are made at a specific point in time based on relevant market information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined
with precision. Changes in assumptions could significantly affect the estimates.
Recent
accounting pronouncements
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption
of such any pronouncements may be expected to cause a material impact on its financial condition or the results of its operations,
as follow:
In
May 2014, the FASB issued Accounting Standards Update No. 2014-09, “
Revenue from Contracts with Customers
” (“ASU
2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)”,
and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective
for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early
adoption is not permitted. In August 2016, the FASB issued an Accounting Standards Update to defer by one year the effective dates
of its new revenue recognition standard until annual reporting periods beginning after December 15, 2017 (2018 for calendar-year
public entities) and interim periods therein. Management is currently assessing the impact of the adoption of ASU 2014-09 and
has not determined the effect of the standard on our ongoing financial reporting.
GUSHEN,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEAR ENDED APRIL 30, 2017 AND 2016
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe 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.
|
AMOUNT
DUE FROM A DIRECTOR
|
As
of April 30, 2017, the Company advanced to a director of the Company $57,693, which is unsecured, interest-free with no fixed
repayment term. The director expected to repay the amount by the end of Second quarter.
4.
|
AMOUNT
DUE TO A DIRECTOR
|
As
of April 30, 2016, a director of the Company advanced $1,408,265 to the Company, which is unsecured, interest-free with no fixed
repayment term, for working capital purpose. Imputed interest is considered insignificant.
For
year ended April 30, 2017 and 2016, the local (United States) and foreign components of (loss) income before income taxes were
comprised of the following:
|
|
For the year ended
April 30, 2017
|
|
|
For the
year ended
April 30, 2016
|
|
|
|
|
|
|
|
|
Tax jurisdictions from:
|
|
|
|
|
|
|
|
|
- Local
|
|
$
|
(33,340
|
)
|
|
$
|
(32,996
|
)
|
- Foreign, representing
|
|
|
|
|
|
|
|
|
Seychelles
|
|
|
(400
|
)
|
|
|
692
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax
|
|
$
|
(33,740
|
)
|
|
$
|
(32,304
|
)
|
The
provision for income taxes consisted of the following:
|
|
For the
year ended
April 30, 2017
|
|
|
For the year ended
April 30, 2016
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
- Local
|
|
$
|
-
|
|
|
$
|
-
|
|
- Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
- Local
|
|
|
-
|
|
|
|
-
|
|
- Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
GUSHEN,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEAR ENDED APRIL 30, 2017 AND 2016
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
The
effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply
a broad range of income tax rates. The Company and its subsidiary that operate in various countries: United States and Seychelles
that are subject to taxes in the jurisdictions in which they operate, as follows:
United
States of America
Gushen,
Inc. is registered in the State of Nevada and is subject to the tax laws of the United States of America. As of April 30, 2017,
the operations in the United States of America incurred $67,115 of cumulative net operating losses which can be carried forward
to offset future taxable income. The net operating loss carryforwards begin to expire in 2037, if unutilized. The Company has
provided for a full valuation allowance of $23,490 against the deferred tax assets on the expected future tax benefits from the
net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized
in the future.
Seychelles
Under
the current laws of the Republic of Seychelles (“Seychelles”), Gushen Holding Limited is registered as an international
business company which governs by the International Business Companies Act of Seychelles. A company is subject to Seychelles income
tax if it does business in Seychelles. A company that incorporated in Seychelles, but does not do business in Seychelles, is not
subject to income tax there. Gushen Holding Limited did not do business in Seychelles for the year ended April 30, 2017, and it
does not intend to do business in Seychelles in the future. For the year ended April 30, 2017 and 2016, Gushen Holding Limited
had a net operating loss of $400 and a net operating income of $692, respectively.
Management
believes that it is more likely than not that the deferred tax assets will not be fully realizable in the future. Accordingly,
the Company provided for a full valuation allowance against its deferred tax assets of $23,490 as of April 30, 2017. During the
year ended April 30, 2017, the valuation allowance increased by $11,669, primarily relating to net operating loss carryforwards
from the various tax regime.
For the year ended April 30,
2016, the Company issued an aggregate of 88,750 shares of its Common Stock at $0.80 per share, for aggregate gross proceeds of
$71,000, for initial public offering.
As
of April 30, 2017 and 2016, the Company had a total of 29,018,750 and 28,930,000 shares of its common stock issued and outstanding.
There are no shares of preferred stock issued and outstanding.
7.
|
CONCENTRATIONS
OF RISKS
|
(a)
Major customers
For
the year ended April 30, 2017, there was no customer who accounted for 10% or more of the Company’s revenues with no accounts
receivable balance at year-end.
For
the year ended April 30, 2016, there was one customer who accounted for 100% of the Company’s revenues with no accounts
receivable balance at year-end.
GUSHEN,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEAR ENDED APRIL 30, 2017 AND 2016
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
(b)
Major vendors
For
the year ended April 30, 2017, there was no vendor who accounted for 10% or more of the Company’s cost of revenues with
no accounts payable balance at year-end.
For
the year ended April 30, 2016, there was one vendor who accounted for 100% of the Company’s cost of revenues with accounts
payable balance of $1,800 at year-end.
8.
|
COMMITMENTS
AND CONTINGENCIES
|
For
the year ended April 30, 2017 and 2016, the Company utilized office space of a director and stockholder at no charge. Such costs
are immaterial to the financial statements and accordingly are not reflected herein.
9.
|
INVESTMENT
AND DIVESTMENT
|
On
August 5, 2016, the Company acquired a Hong Kong company, namely Gushen Credit Limited, with a money lender license registered
according to Cap163 Money Lenders Ordinance of Hong Kong. Due to the keen competition and high rental expense in Hong Kong, on
April 27, 2017, the Company decided to dispose the asset for a consideration of $105,000 and ceased the business in Hong
Kong.
On
April 28, 2017, the Company, through its subsidiary Gushen Holding Limited, sold two (2) ordinary shares of Gushen Credit
Limited to a third party, representing 100% of ownership. The Company, with effect from April 28, 2017, ceased to carry on
money lending business in Hong Kong.
In
accordance with ASC Topic 855, “
Subsequent Events
”, which establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated
all events or transactions that occurred after April 30, 2017 up through the date the Company issued the audited consolidated
financial statements. During the period, there was no subsequent event that required recognition or disclosure.