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EX-32.2 - CERTIFICATION - National Art Exchange, Inc.f10k2017ex32-2_nationalart.htm
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EX-31.2 - CERTIFICATION - National Art Exchange, Inc.f10k2017ex31-2_nationalart.htm
EX-31.1 - CERTIFICATION - National Art Exchange, Inc.f10k2017ex31-1_nationalart.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

☒   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended September 30, 2017

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

333-199967

Commission file number

 

NATIONAL ART EXCHANGE, INC.

(Exact name registrant as specified in its charter)

 

Nevada   47-1549749
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     

200 Vesey Street, 24th Floor, Unit 24196

New York, NY

  10080
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: +646-512-5855

 

 Securities registered under Section 12(b) of the Exchange Act:

 

Title of each class   Name of each exchange on which registered
None   None
     
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001
(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐   No  ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☒   No ☐

 

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files. Yes ☐  No ☒

 

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

 

Large Accelerated Filer  ☐ Accelerated Filer ☐ 
Non-accelerated Filer  ☐ 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. ☐

 

Aggregate market value of the Common Stock held by non-affiliates of the Company as of March 31, 2015: N/A 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒  No ☐

 

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

 

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ☐  No ☐

 

As of Jan 10, 2018, the registrant had 100,288,079 shares of common stock issued and outstanding.

 

 

 

  

TABLE OF CONTENTS

 

PART I  
     
Item 1. Business. 1
Item 1A. Risk Factors. 3
Item 1B. Unresolved Staff Comments. 3
Item 2. Properties. 3
Item 3. Legal Proceedings. 3
Item 4. Mine Safety Disclosures. 3
     
PART II  
     
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 4
Item 6. Selected Financial Data. 4
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 4
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 7
Item 8. Financial Statements and Supplementary Data. 8
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. 9
Item 9A. Controls and Procedures. 9
Item 9B. Other Information. 9
     
PART III  
     
Item 10. Directors, Executive Officers, and Corporate Governance. 10
Item 11. Executive Compensation. 12
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 12
Item 13. Certain Relationships and Related Transactions, and Director Independence. 13
Item 14. Principal Accounting Fees and Services. 13
     
PART IV  
     
Item 15. Exhibits and Financial Statement Schedules. 14
     
SIGNATURES 16

 

 

 

 

PART I

 

Item 1. Description of Business.

 

Corporate Background

 

We were incorporated in the State of Nevada on May 9, 2014 under the name LISSOME TRADE CORP.

 

We originally planned to engage in the distribution of metal cookware made from stainless steel from China to the markets of Europe and Commonwealth of Independent States (CIS) countries. However, in connection with a change of control transaction that closed on August 28, 2015, we appointed a new executive management team and changed our planned business operations.

 

Corporate Development in Fiscal Year Ended September 30, 2017

 

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.

 

Plan of Operations

 

Our principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through acquisition of a business rather than immediate, short-term earnings.

 

The analysis of new business opportunities will be undertaken by or under the supervision of Qingxi Meng, our Chairman, CEO, & President. Our company has flexibility in seeking, analyzing and participating in potential business opportunities. In our efforts to analyze business opportunities, we will consider the following factors:

  

  Potential for growth, indicated by new technology, anticipated market expansion or new products;

  

  Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;
     
  Strength and diversity of management, either in place or scheduled for recruitment;
     
  Capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;
     
  The cost of participation by our company as compared to the perceived tangible and intangible values and potentials;
     
  The extent to which the business opportunity can be advanced;
     
  The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and
     
  Other relevant factors.

 

We do not currently engage in any business activities that provide cash flow. We intend to sell our common shares to investors to raise funds for our operating and investing cash needs. Prior to us successfully raising funds through selling our common shares, we expect our operating costs will be paid with money to be loaned to or invested in us by our stockholders or management. During the next 12 months we anticipate incurring costs related to filing of Exchange Act reports and consummating an acquisition.

 

We believe we will be able to meet these costs through funds to be loaned by or invested in us by our stockholders, management or other investors.

 

We are in the development stage and have negative working capital, negative stockholders’ equity and have not earned any revenues as of date. These conditions raise substantial doubt about our ability to continue as a going concern. We are currently devoting our efforts to locating new products and acquisition candidates. Our ability to continue as a going concern is dependent upon our ability to develop additional sources of capital, locate and complete a merger with another company, and ultimately, achieve profitable operations.

 

1

 

 

Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business acquisition with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.

 

Our management anticipates that it will likely be able to effect only one business acquisition, primarily due to our limited financing and the dilution of interest for present and prospective shareholders, which is likely to occur as a result of our management’s plan to offer a controlling interest to a target business in order to achieve a tax-free reorganization. This lack of diversification should be considered a substantial risk in investing in us, because it will not permit us to offset potential losses from one venture against gains from another.

 

We anticipate that the process of selection of a business acquisition will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made in some industries and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital which we will have and/or the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business acquisition may occur at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.

 

Competition

 

Our primary goal is the acquisition of a target company or business seeking the perceived advantages of being a publicly held corporation. The Company is in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.

  

Patent and Trademarks

 

We currently do not own any patents, trademarks or licenses of any kind.

 

Government Regulations

 

There are no government approvals necessary to conduct our current business.

 

Employees

 

We presently have no employees apart from our management. Our officers and director are engaged in outside business activities and we anticipate that they will devote to our business very limited time until the acquisition of a successful business opportunity has been identified. We expect no significant changes in the number of our employees other than such changes, if any, incident to a business combination. 

 

2

 

 

Item 1A. Risk Factors.

 

Not applicable.

 

Item 1B. Unresolved Staff Comments.

 

Not applicable.

 

Item 2. Properties.

 

The Company neither rents nor owns any properties. The Company utilizes the office space and equipment of its officers and directors at no cost. The Company currently has no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities.

 

Item 3. Legal Proceedings.

 

Presently, there are not any material pending legal proceedings to which the Company is a party or as to which any of the Company’s property is subject to, and no such proceedings are known to the Company to be threatened or contemplated against it.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

3

 

 

PART II

 

Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

The Company's Common Stock obtained its ticker LSOM on April 23, 2015. On September 22, 2015 in connection with the change in the Company’s name, its ticker was changed to TUAA. On August 15, 2017 in connection with the change in the Company’s name, its ticker was changed to NAEX. Its shares of common stock are currently on OTC Pink. The table below sets forth the reported high and low bid prices for the two-year period ended September 30, 2017 on a quarterly basis. There was no trading record prior to the quarter ended September 30, 2015. No data is available from OTC Markets after June 30, 2016 due to the Company has been delinquent in providing current information.

 

Per Share Common Stock Bid Prices by Quarter*

 

    High*     Low*  
Quarter Ended September 30, 2017   0     0  
Quarter Ended June 30, 2017   0     0  
Quarter Ended March 31, 2017   0     0  
Quarter Ended December 30, 2016   0     0  
Quarter Ended September 30, 2016   $ N/A     $ N/A  
Quarter Ended June 30, 2016     20.00 (1)     2.50  
Quarter Ended March 31, 2016     4.95       1.09  
Quarter Ended December 31, 2015     2.00       0.83  
Quarter Ended September 30, 2015     3.00       0.88  

 

(1) Based on the number from OTC Markets indicates the close price on May 16, 2016.  No trading were made thereafter.

 

Holders

 

As of January 10, 2018, we had 184 stockholders of record.

 

Dividends

 

The Company has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the Company's business.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

None.

 

Recent Sales of Unregistered Securities

 

None.

 

Item 6. Selected Financial Data.

 

Not applicable. 

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

4

 

  

FORWARD-LOOKING STATEMENTS

 

Statements made in this Form 10-K that are not historical or current facts are “forward-looking statements”. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

 

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

General

 

National Art Exchange, Inc., formerly known as Tianhe Union Holdings Limited and Lissome Trade Corp., was incorporated in the State of Nevada on May 9, 2014. We were formed to engage in the distribution of metal cookware made from stainless steel from China to the markets of Europe and Commonwealth of Independent States (CIS) countries. In connection with a change of control transaction that closed on August 28, 2015, we appointed a new executive management team and changed our planned business operations. On March 30, 2016, the Company, GLOBAL INTERNATIONAL HOLDINGS LTD. (“BVI1”), a British Virgin Islands corporation, its wholly owned subsidiary GLOBAL TECHNOLOGY CO., LTD. (“BVI2”), a British Virgin Islands corporation entered into and consummated the Share Exchange Agreement pursuant to which BVI1 (its sole director, who has the voting and dispositive power of the shares of BVI1 is CHOW, Chun Yu Leeds), as the sole shareholder of BVI2, received 50,000,000 newly issued shares of the Company’s Common Stock (84.0% upon the completion of the Share Exchange) and a convertible note issued convertible into 150,000,000 shares of Common Stock upon the Company’s completion of its increase of the authorized shares by September 30, 2016, in exchange for its ownership in BVI2 and its subsidiaries and the control over Avi-Trip formed by the VIE Agreements entered into by and between WFOE and Avi-Trip. BVI2 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.

 

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, September 30, 2016, and December 31, 2016, March 31, 2017 and Form 10-K for the fiscal year ended September 30, 2016.

 

5

 

 

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.

 

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.

 

As a result of the termination of the VIE agreement, we are currently a shell company.

 

 GOING CONCERN

 

The independent auditors’ report accompanying our audited financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared based on the assumption that we will continue as a going concern, which assumption contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business. The quarterly financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. Management believes that the continuing financial support from the existing shareholders will provide the additional cash to meet the Company’s obligations as they become due.

 

RESULTS OF OPERATIONS

 

Results of Operation for the year ended September 30, 2017 compared with the year ended September 30, 2016

 

Total Revenue

 

We did not generate any revenue for the year ended September 30, 2017. We generated revenue of $0 during the year ended September 30, 2016 because there was no operation..

 

Net Income 

 

Our net loss for the year ended September 30, 2017 was $353,718 compared to $95,595,347 for the year ended September 30, 2016 such decrease can be explained by stock issuances. Please refer “Change in Company’s name and reverse stock split” under National Art Exchange, Inc. Notes to Financial Statements for more stock issuance information.

 

During the three months ended September 30, 2017, we incurred general and administrative expenses and professional fees of $353,718. During the three months ended September 30, 2016, we incurred general and administrative expenses of $171,722. General and administrative and professional expenses were generally related to corporate overhead, financial and administrative contracted services, such as legal and accounting costs.

 

6

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of September 30, 2017, we had a working capital surplus of $4,750compared to a working capital deficit of $171,732 as of September 30, 2016. As of September 30, 2017, our current assets were $15,150 compared to $241,949 as of September 30, 2016. As of September 30, 2016, our current liabilities were $10,400compared to $413,681 as of September 30, 2016. Current liabilities were composed of related party payables of $410,200. 

 

Accumulated deficit increased from a deficit of $95,627,657 as of September 30, 2016 to a deficit of $95,981,375 as of September 30, 2017.

 

Cash Flows from Operating Activities

 

We have not generated positive cash flows from operating activities. For the year ended September 30, 2017, net cash flows used in operating activities was $357,199, consisting of decrease in accrued liability of $3,481.

 

Cash Flows from Financing Activities

 

For the year ended September 30, 2017, Non-Cash Financing Activities was $130,400, consisting of $130,400 shares issued and $10,400 loan from director.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

As of the date of this Annual Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

 

This Item is not applicable because we are a smaller reporting company.

 

7

 

Item 8. Financial Statements and Supplementary Data. 

 

 

 

 

 

 

 

 

 

 

 

 

National Art Exchange, Inc.

(formerly known as Tianhe Union Holdings Limited and Lissome Trade Corp.)

Financial Statements

As of September 30, 2017 and 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

Content   Page
     
Report of Independent Registered Public Accounting Firm   F-2
     
Balance Sheets   F-3
     
Statements of Operations   F-4
     
Statements of Changes in Stockholders' Equity/ (Deficiency)   F-5
     
Statements of Cash Flows   F-6
     
Notes to Financial Statements   F-7 - F-16

 

F-1

 

 

To the Board of Directors and
Stockholders of National Art Exchange, Inc. (f/k/a Tianhe Union Holdings Limited)

 

We have audited the accompanying balance sheets of National Art Exchange, Inc. (f/k/a Tianhe Union Holdings Limited) (the “Company”) as of September 30, 2017 and 2016, as well as the related statements of operations, stockholders’ equity /(deficiency), and cash flows for each year in the two-year period ended September 30, 2017. The Company’s management is responsible for the accuracy of these financial statements. Our responsibility is to, based on our audits, express our opinion regarding these financial statements.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). These standards require that we plan and perform audits to obtain reasonable assurances about whether the Company’s financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal controls over the Company’s financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits also included examining, on a test basis, evidence supporting the amounts and disclosures in the Company’s financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Company’s financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the Company’s financial statements for the periods referred to above present fairly, in all material respects, the Company’s financial position as of September 30, 2017 and 2016, and the results of its operations and its cash flows for each year in the two-year period ended September 30, 2017, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared based on the assumption that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company incurred substantial losses in previous years, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are described in Note 2 to the financial statements. The financial statements do not account for possible adjustments resulting from the resolution of these uncertainties.

 

San Mateo, California WWC, P.C.
January 11, 2018 Certified Public Accountants

 

F-2

 

 

National Art Exchange, Inc.

Balance Sheets

As of September 30, 2017 and 2016

(Stated in U.S. Dollars)

 

   September 30,   September 30, 
   2017   2016 
ASSETS        
         
Current assets        
Cash and Cash Equivalents  $15,150   $241,949 
Total assets  $15,150   $241,949 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY          
           
Current liabilities          
Related Party payables  $10,400   $410,200 
Accrued liabilities   -    3,481 
Total liabilities   10,400    413,681 
           
Stockholders’ equity/(deficiency)          
Common stock, $0.001 par value: 150,000,000 shares authorized, 100,288,079 and 288,079 shares issued and outstanding as of September 30, 2017 and 2016, respectively.   288    288 
Additional paid-in capital   95,865,837    95,455,637 
Shares to be issued   120,000    - 
Accumulated deficit   (95,627,657)   (95,627,657)
Total stockholders’ equity/(deficiency)   4,750    (171,732)
           
Total liabilities and stockholders’ deficiency  $15,150   $241,949 

 

The accompanying notes are an integral part of these financial statements

 

F-3

 

  

National Art Exchange, Inc.

Statements of Operations

For the years ended September 30, 2017 and 2016

(Stated in U.S. Dollars)

 

   Year ended   Year ended 
   September 30,   September 30, 
   2017   2016 
         
Revenue  $-   $- 
           
General and administrative expenses   353,718    171,722 
           
Loss from operations   (353,718)   (171,722)
           
Other expense   -    (95,423,625)
           
Loss before income tax   (353,718)   (95,595,347)
           
Income tax   -    - 
           
Net loss  $(353,718)  $(95,595,347)
           
Loss per share          
-       Basic  $(0.08)  $(496.65)
-       Diluted  $(0.08)  $(496.65)
           
Weighted average number of shares          
-       Basic   4,420,310    192,480 
-       Diluted   4,420,310    192,480 

 

The accompanying notes are an integral part of these financial statements

 

F-4

 

  

National Art Exchange, Inc.

Statements of Changes in Stockholders’ Deficiency

For the years ended September 30, 2017 and 2016

(Stated in U.S. Dollars)

 

   Common       Additional   Shares       Total 
   Stock   Common   Paid-in   to be   Accumulated   Stockholders’ 
   Outstanding   Stock   Capital   issued   Deficit   Deficiency 
                         
Balance at October 1, 2015   9,530,000    9,530    22,770    -    (32,310)   (10)
                   -           
100-to-1 Reverse split   (28,519,421)   (28,520)   28,520    -    -    - 
Investment in BVI2 group (note 1)   50,000,000    50,000    247,450,000         -    247,500,000 
Shares cancelled   (30,722,500)   (30,722)   (152,045,653)   -    -    25,300 
Net Loss for the year   -    -    -         (95,595,347)   (95,595,347)
Balance at September 30, 2016   288,079   $288   $95,455,637    -   $(95,627,657)  $(171,732)
                               
Balance at October 1, 2016   288,079    288    95,455,637    -    (95,627,657)   (171,732)
                               
Shares issued for share exchange agreement*   100,000,000    -    -    -    -    - 
Shares to be issued for cash received   -    -    -    120,000    -    120,000 
Forgiveness of debt by related party   -    -    410,200    -    -    410,200 
Net Loss for the year   -    -    -    -    (353,718)   (353,718)
                               
Balance at September 30, 2017   100,288,079   $288   $95,865,837    120,000   $(95,981,375)  $(4,750)

 

The accompanying notes are an integral part of these financial statements

 

*  These shares are subsequently cancelled upon termination of agreement after balance sheet date.

See note 1.

 

F-5

 

 

National Art Exchange, Inc.

Statements of Cash Flows

For the years ended September 30, 2017 and 2016

(Stated in U.S. Dollars)

 

   Year ended   Year ended 
   September 30,   September 30, 
   2017   2015 
         
Cash flows from operating activities        
Net loss  $(353,718)  $(95,595,347)
Adjustments to reconcile net income to cash generated by operating activities:          
Adjustment as a result from investment loss   -    95,423,625 
Changes in operating assets and liabilities          
(Decrease) Increase in accrued liabilities   (3,481)   3,481 
Cash flows used in operating activities   (357,199)   (168,241)
           
Cash flows from financing activities          
Proceeds from shares to be issued   120,000    - 
Proceeds from loan from director   10,400    380,023 
Cash flows provided by financing activities   130,400    380,023 
           
(Decrease) Increase in cash and cash equivalents   (226,799)   211,782 
Cash and cash equivalents – Beginning of period   241,949    30,167 
Cash and cash equivalents – End of period  $15,150   $241,949 

 

Non-cash financing activities

Waiver of debt by related party in the amount of $410,200.

 

The accompanying notes are an integral part of these financial statements

 

F-6

 

  

National Art Exchange, Inc.

Notes to Financial Statements

(Stated in U.S. Dollars)

 

1.            NATURE OF OPERATION AND ORGANIZATION HISTORY

 

National Art Exchange, Inc. (f/k/a 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, 2017.

 

F-7

 

 

National Art Exchange, Inc.

Notes to Financial Statements

(Stated in U.S. Dollars)

 

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.

 

Change in Company’s name and reverse stock split

 

On August 8, 2017, the Company filed a certificate of amendment to (i) a change of the Company’s name to National Art Exchange, Inc. (the “Name Change”), (ii) an increase of the number of the Company’s authorized common stock from 75,000,000 to 150,000,000 (the “Increase of Authorized Stock”), par value $0.001 per share (the “Common Stock”), and (iii) a 100 to 1 reverse stock split of the outstanding Common Stock of the Company (the “Reverse Stock Split”). All references in the financial statements to share and per share data have been adjusted, including historical data which have been retroactively adjusted, to give effect to the reverse stock split unless specified otherwise.

 

Enter into a share exchange agreement and terminated subsequent to balance sheet date

 

On September 15, 2017, a certain share exchange agreement (the “Agreement”) was entered into by and among the registrant, National Art Exchange, Inc., a Nevada corporation (the “PubCo” or the “Company”), National Art Exchange LLC, a Delaware (the “DECo”), and the members of DECo (collectively, “DECo Members”, together with the Pubco and DECo, the “Parties”), whereby, upon execution of the Agreement, in exchange for the DECo Interests (the “Exchange”), PubCo issued to the DECo Members an aggregate of 100,000,000 newly issued shares of Common Stock (the “Exchange Shares”).

 

On October 31, 2017, the parties entered into a Termination Agreement and Release (the “Termination Agreement”). The Termination Agreement terminates the Agreement and any and all related agreements (collectively, the “Transaction Documents”) and rescinds the Exchange. Pursuant to the Termination Agreement, all of the shares of Exchange Shares issued by the PubCo are cancelled, and all of the DECo Interests received by the PubCo pursuant to the Transaction Documents are cancelled and returned to the DECo Members. The transaction contemplated in the Agreement closed on the same day.

 

F-8

 

 

National Art Exchange, Inc.

Notes to Financial Statements

(Stated in U.S. Dollars)

 

Securities Purchase Agreement

 

The Company entered into a Securities Purchase Agreement (the “SPA”) with DECo, a related party of the Company, or its designee(s) (the “Investor”), dated October 31, 2017. Pursuant to the SPA, Investor purchased 100,000,000 shares of the common stock of the Company, par value $0.001 per share, for an aggregate price of $320,000 (the “Shares”) in a private sale transaction (the “Private Sale”). The Private Sale contemplated in the SPA closed on the same day. As of September 30, 2017, the Company has received $120,000 for the purchase of shares.

 

The Shares issued in the Private Sale are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

  (a) Method of Accounting

 

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.

 

F-9

 

 

National Art Exchange, Inc.

Notes to Financial Statements

(Stated in U.S. Dollars)

 

  (c) Going Concern

 

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 $95,981,375 as of September 30, 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. Management has not made adjustments to the financial statements, or used an alternative basis of accounting, such as the liquidation basis, in preparing these financial statements. Management has not performed assessments individually, or in the aggregate, of the factors that give rise to the substantial doubt of the Company continuing as a going concern, or how to mitigate those factors.

 

  (d) Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires Company 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 September 30, 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 September 30, 2017.

 

F-10

 

 

National Art Exchange, Inc.

Notes to Financial Statements

(Stated in U.S. Dollars)

 

  (g) Dividends

 

The Company has not adopted any policies regarding payment of dividends. No dividends have been paid during any of the reported periods.

 

  (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.

 

  (i) Revenue Recognition

 

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 September 30, 2017, the Company has not issued any stock-based payments to its employees.

 

  (k) Income Taxes

 

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 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.

 

  (l) Comprehensive income

 

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.

 

F-11

 

 

National Art Exchange, Inc.

Notes to Financial Statements

(Stated in U.S. Dollars)

 

  (m) 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.

 

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.

 

F-12

 

 

National Art Exchange, Inc.

Notes to Financial Statements

(Stated in U.S. Dollars)

 

3.RELATED PARTY TRANSACTIONS

 

As of December 31, 2016, a 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.

 

From January 1, 2017 to September 30, 2017, a current shareholder had advanced funds in the total amount of $10,400 to fund general corporate activities. The advances were non-interest bearing, due upon demand and unsecured.

 

4.COMMON STOCK

 

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.

 

On August 8, 2017, the Company filed a certificate of amendment to increase the number of the Company’s authorized common stock from 75,000,000 to 150,000,000 with par value of $0.001 per share, and executed a 100 to 1 reverse stock split of the outstanding Common Stock of the Company. After the reverse split became effective, the Company’s outstanding common stock decreased from 28,807,500 shares to 288,079 shares.

 

On September 15, 2017, the Company issued to an aggregate of 100,000,000 newly issued shares of Common Stock as a result of a share exchange agreement. The agreement was subsequently terminated on October 31, 2017. The shares are outstanding as of September 30, 2017 but are subsequently terminated after balance sheet date.

 

The Company entered into a Securities Purchase Agreement (the “SPA”) with DECo, a related party of the Company, or its designee(s) (the “Investor”), dated October 31, 2017. Pursuant to the SPA, Investor purchased 100,000,000 shares of the common stock of the Company, par value $0.001 per share, for an aggregate price of $320,000 (the “Shares”) in a private sale transaction (the “Private Sale”). The Private Sale contemplated in the SPA closed on the same day. As of September 30, 2017, the Company has received $120,000 for the purchase of shares.

 

As of September 30, 2017, the Company had 100,288,709 shares of Common Stock issued and outstanding.

 

F-13

 

 

National Art Exchange, Inc.

Notes to Financial Statements

(Stated in U.S. Dollars)

 

6.INCOME TAX

 

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 September 30, 2017 and 2016, the Company has accumulated net losses of $95,981,375 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 years ended September 30, 
     2017   2016 
           
  Net loss before income tax  $(353,718)  $(95,595,347)
             
  Tax expenses (benefit) at the statutory tax rate   (120,264)   (32,502,418)
             
  Tax effects of:          
  Valuation allowance   120,264    32,502,418 
             
  Income tax benefit  $-   $- 

 

F-14

 

 

National Art Exchange, Inc.

Notes to Financial Statements

(Stated in U.S. Dollars)

 

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 September 30, 
     2017   2016 
  Deferred tax asset:        
           
  Net operating losses (NOLs ) carryforwards:   32,633,667    32,513,403 
  Valuation allowance   (32,633,667)   (32,513,403)
  Deferred tax assets, net:   -    - 

 

7.LOSS PER SHARE

 

     For the years ended
September 30,
 
     2017   2016 
  Loss per share numerator        
  Loss for the year attributable to owners of the Company  $(353,718)  $(95,595,347)
             
  Diluted loss per share numerator          
  Loss for the year attributable to owners of the Company  $(353,718)  $(95,595,347)
             
  Basic loss per share denominator          
  Original shares:   288,079    95,300 
  Additions from actual events:          
  - Issuance of common stock, weighted   4,132,231    97,180 
  Basic weighted average shares outstanding   4,420,310    192,480 
             
  Diluted loss per share denominator          
  Basic weighted average shares outstanding   4,420,310    192,480 
  Diluted weighted average shares outstanding   4,420,310    192,480 
             
  Loss per share          
  - Basic  $(0.08)  $(496.65)
  - Diluted  $(4.97)  $(0.00)
             
  Weighted average shares outstanding          
  - Basic   4,420,310    192,480 
  - Diluted   4,420,310    192,480 

 

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.

 

F-15

 

 

National Art Exchange, Inc.

Notes to Financial Statements

(Stated in U.S. Dollars)

 

8.SUBSEQUENT EVENTS

 

1)Enter into a share exchange agreement and terminated subsequent to balance sheet date

 

On September 15, 2017, a certain share exchange agreement (the “Agreement”) was entered into by and among the registrant, National Art Exchange, Inc., a Nevada corporation (the “PubCo” or the “Company”), National Art Exchange LLC, a Delaware (the “DECo”), and the members of DECo (collectively, “DECo Members”, together with the Pubco and DECo, the “Parties”), whereby, upon execution of the Agreement, in exchange for the DECo Interests (the “Exchange”), PubCo issued to the DECo Members an aggregate of 100,000,000 newly issued shares of Common Stock (the “Exchange Shares”).

 

On October 31, 2017, the parties entered into a Termination Agreement and Release (the “Termination Agreement”). The Termination Agreement terminates the Agreement and any and all related agreements (collectively, the “Transaction Documents”) and rescinds the Exchange. Pursuant to the Termination Agreement, all of the shares of Exchange Shares issued by the PubCo are cancelled, and all of the DECo Interests received by the PubCo pursuant to the Transaction Documents are cancelled and returned to the DECo Members. The transaction contemplated in the Agreement closed on the same day.

 

2)Securities Purchase Agreement

 

The Company entered into a Securities Purchase Agreement (the “SPA”) with DECo, a related party of the Company, or its designee(s) (the “Investor”), dated October 31, 2017. Pursuant to the SPA, Investor purchased 100,000,000 shares of the common stock of the Company, par value $0.001 per share, for an aggregate price of $320,000 (the “Shares”) in a private sale transaction (the “Private Sale”). The Private Sale contemplated in the SPA closed on the same day. As of September 30, 2017, the Company has received $120,000 for the purchase of shares.

 

The Shares issued in the Private Sale are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act.

  

F-16

 

 

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.

 

Item 9A. Controls and Procedures.

 

Evaluation of disclosure controls and procedures

 

At the conclusion of the period ended September 30, 2017 we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, our CEO and CFO concluded that as of September 30, 2017, our disclosure controls and procedures were effective and adequately designed to ensure that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that such information was accumulated and communicated to our management, including our CEO and CFO, in a manner that allowed for timely decisions regarding required disclosure.

  

Changes in Internal Controls.

 

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

None.

 

9

 

 

PART III

 

Item 10. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act.

 

Our directors and executive officers, as well as their ages and the positions they held as of September 30, 2017, are set forth below. Our directors hold office until our next annual meeting of stockholders and until their successors in office are elected and qualified. All of our officers serve at the discretion of our Board of Directors. There are no family relationships among our executive officers and directors.

 

Name   Age   Position
Qingxi Meng   27   Chairman, CEO, & President
Ming Yi   37   Chief Financial Officer & Director
Xinqian Zhang   27   Secretary of the Board & Director
Xingtao Zhou   38   Director
Xue He   30   Director

 

Qingxi Meng, President, Chairman, CEO, & President Mr. Meng has served as the manager assistant of Soooner Technology from December 2014 to August 2016. Soooner Technology is a high-tech company focusing on the development of HD video network. From October 2013 to January 2015, Mr. Meng served as a self-employed overseas purchasing agent. From July 2012 to September 2013, Mr. Meng served as the project manager assistant of MLA Technology Group, an information technology company. Mr. Meng obtained a bachelor degree in Accounting from Queens College in New York.

 

Ming Yi, Chief Financial Officer and Director Mr. Yi has extensive experiences in finance, business administration and public accounting in diverse industries including retail/wholesale distribution, financial services and manufacturing. Mr. Yi has gained tremendous international finance and regulatory experience setting up companies and commercial operations. Mr. Yi has served as an accountant at N.G. Australia Pty Ltd. during 2004 to 2006, and senior accountant at Ernst & Young from 2006-2009. Mr. Yi served as a senior manager at Qi He CPA Ltd., a financial advisory firm, and the chief financial officer at China Bio-Energy Corp. from 2011 to 2015. Start from 2016, Mr. Yi served as the chief financial officer at Anhui Avi-Trip Co., Ltd. Mr. Yi is responsible for establishing stronger financial reporting compliance for the Company’s U.S. capital markets, enhancing cost controls, introducing tax, international credit and collections, developing IR capabilities and multi-company financial accounting and reporting systems.

  

Xinqian Zhang, Director and Secretary of the Board From January 2013 to December 2014, Ms. Zhang served as an accounting research and teaching assistant of the University of Massachusetts, Boston, and the fund administrator of the global service department of State Street, a U.S.-based financial services firm. Ms. Zhang holds a dual B.S. in Business Management from Dongbei University of Finance and Economics and the University of Surrey, and an M.S. in accounting from the University of Massachusetts, Boston.

 

Xingtao Zhou, Director Xingtao Zhou has served as the Curator in Cang Bao Ge Arts Co., Ltd since 2012. From 2009 to 2012, Mr. Zhou served as the president of Yi Hua Cultural Diffusion Co., Ltd. Mr. Zhou served as the curator of the Yin Yuan Min Su Museum from 2003 to 2009 and as the vice curator from 1999 to 2003. Mr. Zhou obtained a bachelor in International Business of Southwestern University of Finance and Economics.

 

Xue He, Director Xue He has served as the sales manager of Happiness Furniture since November 2013. From May 2012 to September 2013, Ms. He served as the administrator of MLA Technology Group. From December 2011 to April 2012, Ms. He served as the manager’s assistant of New York Life, an insurance company. Ms. He served as the sales manager from September 2009 to December 2011and as a salesperson from February 2009 to September 2009 at Rosewood Home Furnishing. Ms. He obtained dual bachelors in Accounting and Economics of Queens College in New York.

 

Employees.

 

As of the date hereof, the Company has no employees.

 

Committees of the Board of Directors

 

We are currently quoted on the OTC Pink under the symbol “NAEX.” The OTCPK does not have any requirements for establishing any committees. For this reason, we have not established any committees. All functions of an audit committee, nominating committee and compensation committee are and have been performed by our board of directors.

 

Our Board believes that, considering our size, decisions relating to director nominations can be made on a case-by-case basis by all members of the Board without the formality of a nominating committee or a nominating committee charter. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right to do so in the future.

 

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The Board does not have an express policy with regard to the consideration of any director candidates recommended by shareholders since the Board believes that it can adequately evaluate any such nominees on a case-by-case basis; however, the Board will evaluate shareholder-recommended candidates under the same criteria as internally generated candidates. Although the Board does not currently have any formal minimum criteria for nominees, substantial relevant business and industry experience would generally be considered important, as would the ability to attend and prepare for board, committee and shareholder meetings. Any candidate must state in advance his or her willingness and interest in serving on the board of directors.

 

The Company has no qualified financial expert at this time because it has not been able to hire a qualified candidate. Further, the Company believes that it has inadequate financial resources at this time to hire such an expert.  

 

Involvement in Certain Legal Proceedings

 

To our knowledge, during the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has been:

 

  the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

 

  convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

  subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

 

  found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.

  

Code of Ethics

 

We have not adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions because of the small number of persons involved in the management of the Company.

 

Compliance with Section 16(a) of the Exchange Act

 

Our directors and executive officers, and persons who beneficially own more than 10% of a registered class of our equity securities are not subject to the reporting obligations under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) because the Company does not have its securities registered under Section 12 of the Exchange Act

 

Board Leadership Structure and Role in Risk Oversight

 

Due to the small size and early stage of the Company, and its status as a shell company, we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined. Mr. Qiliang Zheng serves as our President, Chief Executive Officer and Chairman of the Board.

 

Our board of directors is primarily responsible for overseeing our risk management processes on behalf of our board of directors. The board of directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The board of directors focuses on the most significant risks facing our company and our company’s general risk management strategy, and ensures that risks undertaken by our Company are consistent with the board’s appetite for risk. While the board oversees our company’s risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our board leadership structure supports this approach.

 

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Item 11. Executive Compensation

 

Currently, Mr. Xingtao Zhou has entered into an independent director agreement (the “Zhou Offer Letter”, Exhibits 10.1 from Form 8-K, June 9th, 2017) with the Company, which sets his annual compensation at $36,000 per year and establishes other terms and conditions governing his service on the Company’s Board. Ms. Xue He has entered into an independent director agreement (the “He Offer Letter”, Exhibits 10.2) with the Company, which sets her annual compensation at $36,000 per year and establishes other terms and conditions governing her service on the Company’s Board. Mr. Qingxi Meng has entered into an executive officer agreement (the “Meng Offer Letter”) with the Company, which sets his annual compensation at $40,000 per year and establishes other terms and conditions governing his service as the President, CEO and the Chairman of the Company.

 

Grants of Plan-Based Awards and Outstanding Equity Awards at Fiscal Year-End

 

We do not have any equity incentive plans under which to grant awards.

 

Employment Agreements

 

We do not currently have any written employment agreements with any of our directors and officers.

 

Retirement/Resignation Plans

 

We do not currently have any plans or arrangements in place regarding the payment to any of our executive officers following such person’s retirement or resignation.

 

Director Compensation

 

We have not paid our directors fees in the past for attending board meetings. In the future, we may adopt a policy of paying independent directors a fee for their attendance at board and committee meetings. We reimburse each director for reasonable travel expenses related to such director’s attendance at board of directors and committee meetings.

  

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following tables set forth information on the beneficial ownership of our Common Stock as of January 3, 2018, based on the current beneficial ownership of our Common Stock by the individuals who are our executive officers and directors and greater than 5% stockholders. Beneficial ownership is determined according to rules of the SEC governing the determination of beneficial ownership of securities. A person is deemed to be a beneficial owner of any securities for which that person has a right to acquire beneficial ownership within 60 days.

 

Name and Address of Beneficial Owner(1) 

Number of Shares 

and Nature

of Beneficial

Ownership

  

Percent of

Common

Stock

Outstanding

 
         
Qingxi Meng   65,000,000    65%
Ming Yi   120,000    0.12%
Xinqian Zhang   0    0%
Xingtao Zhou   0    0%
Xue He   0    0%
Hongxia Zhao   5,000,000    5%
Tianyi Wang   5,000,000    5%
Shengnan Lin   5,000,000    5%
All directors and executive officers as a group (4 persons)   65,120,000    65.12%

  

(1) Unless otherwise indicated, the business address of each beneficial owner is c/o 40 Wall Street, 28th Floor, Unit 2851, New York, NY 10005

 

* Less than 1%

 

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Item 13. Certain Relationships and Related Transactions and Director Independence.

 

Certain Relationships and Related Transactions

 

There was one transaction to which we have, or any of our subsidiaries has been a party, in which the amount involved in the transaction exceeded $120,000 and in which any of our directors or executive officers or holders (or immediate family members of holders) of more than five percent of our capital stock had or will have a direct or indirect material interest. Specifically, a 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

 

Director Independence

 

Our securities are quoted on the OTC Pink tier of the OTC Markets Group inter-dealer quotation and trading system, which does not have any director independence requirements. Once we engage further directors and officers, we will develop a definition of independence and examine the composition of our Board of Directors with regard to this definition. 

 

Item 14. Principal Accounting Fees and Services.

 

Audit Fees

 

For the years ended September 30, 2017 and 2016, we were billed approximately $25,000 and $5,000, respectively, for professional services rendered for the audit and reviews of our financial statements. 

 

Other Audit Related Fees

 

For the years ended September 30, 2017 and 2016, we were not billed for professional services rendered to other audit related fees.

 

Tax Fees

 

For the years ended September 30, 2017 and 2016, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.

 

All Other Fees

 

We did not incur any other fees related to services rendered by our principal accountant for the years ended September 30, 2017 and 2016.

 

The Company does not currently have a separate audit committee. Rather, the whole board serves as the audit committee. Our board has reviewed and approved the above fees for all of the services described in items (1), and believes such fees are compatible with the independent registered public accountants’ independence.

 

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Item 15.  Exhibits and Financial Statement Schedules.

 

The following documents are filed as a part of this report or incorporated herein by reference:

 

(1) Our Financial Statements are listed on page F-1 of this Annual Report.

 

(2) Financial Statement Schedules:

 

None

 

(3) Exhibits:

 

The following documents are included as exhibits to this Annual Report:

  

Exhibit No.   Title of Document
     
3.1   Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1, filed with the SEC on November 6, 2014).
     
3.1   Certificate of Amendment Pursuant to Nevada Revised Statutes Section 78.385 and 78.390, as filed with the Secretary of State of the State of Nevada
     
3.2   Certificate of Correction, as filed with the Secretary of State of the State of Nevada
     
3.2   Bylaws (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1, filed with the SEC on November 6, 2014).
     
3.3   Articles of Merger filed with the Secretary of State of Nevada on September 8, 2015 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed with the SEC on September 22, 2015).
     
4.1   Convertible Note (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2016), cancelled as of the date of this report.
     
10.1   Share Exchange Agreement dated March 30, 2016, by and among the Company, Global International Holdings Ltd. and Global Technology Co., Ltd. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2016).
     
10.1   Executive Officer and Director Offer Letter, dated August 24, 2017, by and between the Company and Qingxi Meng
     
10.1   Director Offer Letter, dated June 9, 2017, by and between the Company and Xingtao Zhou.
     
10.1   Termination Agreement and Release, dated October 31, 2017, by and among the Company and National Art Exchange LLC, and members of National Arts Exchange LLC.
     
10.2   Director Offer Letter, dated June 9, 2017, by and between the Company and Xue He.
     
10.2   English translation of the Management and Consulting Service Agreement dated February 16, 2016, by and between Anhui Avi-trip Technology Co., Ltd. and Jierun Consulting Management (Shenzhen) Co., Ltd. (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2016).

 

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10.3   English translation of the Option Agreement dated February 16, 2016, by and among Jierun Consulting Management (Shenzhen) Co., Ltd., Anhui Avi-trip Technology Co., Ltd., and the two shareholders of Anhui Avi-trip Technology Co., Ltd. (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2016).
     
10.4   English translation of the Equity Pledge Agreement dated February 16, 2016, by and among Jierun Consulting Management (Shenzhen) Co., Ltd., Anhui Avi-trip Technology Co., Ltd., and the two shareholders of Anhui Avi-trip Technology Co., Ltd. (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2016).
     
10.5   English translation of the Shareholders Voting Rights Proxy Agreement dated February 16, 2016, by and among Jierun Consulting Management (Shenzhen) Co., Ltd., Anhui Avi-trip Technology Co., Ltd., and the two shareholders of Anhui Avi-trip Technology Co., Ltd. (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2016).
     
10.6   Termination Agreement on Management and Consulting Services Agreement (incorporated by reference to Exhibit A of the Company’s Information Statement on Schedule 14C filed with the SEC on August 9, 2016).
     
10.7   Termination Agreement on Option Agreement (incorporated by reference to Exhibit B of the Company’s Information Statement on Schedule 14C filed with the SEC on August 9, 2016).
     
10.8   Termination Agreement on Voting Right Proxy Agreement (incorporated by reference to Exhibit C of the Company’s Information Statement on Schedule 14C filed with the SEC on August 9, 2016).
     
10.9   Termination Agreement on Equity Pledge Agreement (incorporated by reference to Exhibit D of the Company’s Information Statement on Schedule 14C filed with the SEC on August 9, 2016).
     
31.1   Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
     
31.2   Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
     
32.1   Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
     
32.2   Certification of Principal Financial Officer pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
     
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

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

  NATIONAL ART EXCHANGE, INC.
     
Date: January 11, 2018 By: /s/ Qingxi Meng
    Qingxi Meng
    Chairman, CEO, & President

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name   Position   Date
         
/s/ Qingxi Meng   CEO & President     January 11, 2018
Qingxi Meng   Chairman    
         

/s/ Ming Yi

  Chief Financial Officer (principal financial   January 11, 2018
Ming Yi   officer and principal accounting officer)    
         
/s/ Xinqian Zhang   Director   January 11, 2018
Xinqian Zhang        

 

 

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