The following discussion and analysis of our results of operations and financial
condition should be read together with our unaudited condensed financial
statements and the notes thereto, which are included elsewhere in this report
and our Annual Report on Form 10-K for the year ended June 30, 2020 (the "Annual
Report") filed with SEC. Our financial statements have been prepared in
accordance with U.S. GAAP. In addition, our financial statements and the
financial information included in this report reflect our organizational
transactions and have been prepared as if our current corporate structure had
been in place throughout the relevant periods.
Overview
We were incorporated under the name "Highlight Networks, Inc." in the state of
Nevada on June 21, 2007. Our original business plan was to engage in the
business of planning, development and operation of both private and public
access wireless broadband networks using WiFi (IEEE 802.11) and WiMAX (IEEE
802.16) wireless technologies. In 2013, we commenced a new business venture in
recycling, refining, metals trading and assisting in metal recovery, with a
focus on precious metals refining from electronic waste.
On June 5, 2015, we experienced a change of control as a result of the purchase
of 98% of our issued and outstanding capital stock from Infanto Holding Corp. by
Legacy International Holdings Group, LLC and Allied Crown Enterprises Limited.
Our then operating subsidiary, EZ Recycling, Inc., was spun off and as a result
we reverted to the shell company status.
On January 29, 2018, pursuant to a stock purchase agreement dated January 26,
2018, Xiamen Lutong International Travel Agency Co., Ltd. purchased 57,000,000
shares of our common stock from our then majority shareholder, Jose R.
Mayorquin, representing 98% of the voting securities of our company. Following
this change of control, we changed our name to Xiamen Lutong International
Travel Agency Co., Ltd. and changed our business plan to engage in travel
businesses in the People's Republic of China (the "PRC").
From June 2015 to date, we had no business operations, revenues or assets and
have been a shell company as defined by Rule 405 of the Securities Act of 1933,
as amended.
We plan to offer packaged tours and other travel-related services in the PRC,
initially in Fujian province, with a focus on developing, promoting and
executing organized tours through our travel service stores. The packaged tours
offer the benefits of pre-arranged itineraries, transportations, accommodations,
entertainments, meals and tour guide services and cover domestic as well as
international destinations.
We plan to offer our travel products and services through our travel service
stores as well as our website.
We also plan to offer other travel-related services comprised mainly of sales of
tourist attraction tickets, visa application services, financial services, hotel
booking services, air ticketing services, train ticketing services, bus
ticketing services, car rental services and insurance services. We will earn a
commission or service fee on these services.
We are presently evaluating the optimal corporate and legal structures in China
necessary to establish our business there and as a U.S. publicly listed and
reporting company. We are also assessing the impact of the COVID-19 epidemic in
China and globally on our business plans. We may establish our business in whole
or in part by acquiring existing businesses or assets owned by our majority
shareholder or his affiliates. We do not have an established timetable to
implement these plans, and until we do, we will remain a shell company.
9
Results of Operations for the Three Months Ended September 30, 2020 and 2019
Revenues
There was no revenue for the three months ended September 30, 2020 and 2019.
General and Administrative Expense
During the three months ended September 30, 2020 and 2019, we incurred $8,288
and $8,723 of general and administrative expenses, respectively. Our general and
administrative expenses primarily consisted of auditor fees, accounting fees and
legal fees, which are routine costs associated with a public company for
financial reporting requirements.
Other Expense
During the three months ended September 30, 2020 and 2019, we incurred $6,403
and $6,403 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 September 30, 2020 and 2019, we had a net loss of
$14,691 and $15,126, respectively.
Liquidity and Capital Resources
Cash Flows from Operating Activities
Net cash used in operating activities was $17,400 for the three months ended
September 30, 2020, compared to net cash used in operating activities of $16,480
for the same period ended September 30, 2019. Since we are a shell company, cash
used in operating activities were fully funded by our principal stockholder as
is reflected in the accompanying condensed statements of cash flows.
Cash Flows from Financing Activities
Net cash provided by financing activities for the three months ended September
30, 2020 and 2019 was $17,400 and $16,480, respectively, which represented the
amounts contributed by our principal stockholder to support the our operations.
As of September 30, 2020, we had a total outstanding principal and accrued
interest of $256,132 and $136,361, respectively, due to Longhai. The unsecured
promissory note bears an interest of 10% per annum and is payable on demand.
Our future capital requirements will depend on numerous factors, including, but
not limited to, the establishment and development of our travel services in
China. We have relied on financing from our principal stockholder and expect to
continue to depend on financing from our principal stockholder to meet our
current minimal operating expenses. As we are a start-up company, our operating
expenses are limited and discretional based on the availability of its funds.
Management believes that the financing from our principal stockholder will
continue to support our planned operations over the next 12 months.
In connection with our business plan, management anticipates operating expenses
and capital expenditures relating to: (i) developmental expenses associated with
a start-up business and (ii) marketing expenses will be funded primarily by debt
or equity financings from our principal stockholder. However, there is no
assurance that such funds will be available or available on acceptable terms. If
adequate funds are not available or are not available on acceptable terms, we
may not be able to take advantage of prospective new business endeavors or
opportunities, which could significantly and materially restrict our business
operations.
10
Commitments and Capital Expenditures
We presently have 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 U.S. GAAP, 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.
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