NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED OCTOBER 31, 2017
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
NOTE
1 - BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting
principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes
that the disclosures made are adequate to make the information not misleading.
In
the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation
of the financial information for the interim periods reported have been made. Results of operations for the six months ended October
31, 2017 are not necessarily indicative of the results for the year ending April 30, 2018 or any period thereafter.
These
unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s
Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year
ended April 30, 2017.
NOTE
2 - ORGANIZATION AND BUSINESS BACKGROUND
Gushen, Inc. (the
“Company”) was incorporated on March 9, 2015 in the state of Nevada. The Company is a development stage company with
nominal operations. The principal activity of the Company is the provision of managerial assistance services including administrative
and IT support services for small and medium enterprises (“SMEs”) in their early stage of operations through its subsidiary,
Gushen Holding Limited, which is incorporated in the Republic of Seychelles. The Company attempts to assist the SMEs which
are recently established and at an early stage of operations, but will not participate in the board of the SMEs or making business
decision. The primary purpose behind focusing on providing services to companies at this early stage of development will be for
the Company to establish and nurture long-term relationships with clients during their growth and development.
Gushen,
Inc. and its subsidiary are hereinafter referred to as the “Company”.
Going
Concern
These
financial statements have been prepared on a going concern basis. The Company has incurred accumulated losses amounting of $72,847
at October 31, 2017 and further losses are anticipated in the development of its business raising substantial doubt about the
Company’s ability to continue as a going concern. Its ability to continue as a going concern is dependent upon the ability
of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations
and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional
capital through a private placement of its Common Stock or further director loans as needed. These financial statements do not
include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification
of liabilities that might be necessary in the event the Company cannot continue.
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as
described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.
Basis
of presentation
The
accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles
in the United States of America (“US GAAP”).
Basis
of consolidation
The
condensed consolidated financial statements include the accounts of the Company and its subsidiary. All inter-company balances
and transactions within the Company have been eliminated upon consolidation.
Use
of estimates
Management
uses estimates and assumptions in preparing these condensed consolidated financial statements in accordance with US GAAP. Those
estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities
in the balance sheet, and the reported revenues and expenses during the periods reported. Actual results may differ from these
estimates.
GUSHEN,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED OCTOBER 31, 2017
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
Cash
and cash equivalents
Cash
and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions
and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Revenue
recognition
In
accordance with the Accounting Standard Codification Topic 605
“Revenue Recognition”
(“ASC 605”),
the Company recognizes revenue when the following four criteria are met: (1) delivery has occurred or services rendered; (2) persuasive
evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4) the collection of related
accounts receivable is probable.
Revenue
is measured at the fair value of the consideration received or receivable, net of discounts and taxes applicable to the revenue.
The
Company derives its revenue from provision of IT consulting and support service based upon the customer’s specifications.
The services are billed either on a fixed-fee basis or on a time-and-material basis. Generally, the Company recognizes revenue
when services are performed and accepted by the customers.
Cost
of revenues
Cost
of revenues represented the purchase costs of computer hardware for re-sale to customer.
Income
taxes
Income
taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC Topic 740”).
Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax
assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the periods in which
those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment date.
ASC
740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements
uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized
in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.
Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant
facts.
The
Company did not have any unrecognized tax positions or benefits and there was no effect on the financial condition or results
of operations for the six months ended October 31, 2017. The Company and its subsidiary are subject to local and foreign tax jurisdictions.
The Company’s tax returns remain open subject to examination by major tax jurisdictions.
Net
loss per share
The
Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share”. Basic loss per share
is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted loss
per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional
common shares were dilutive.
Foreign
currencies translation
Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates
prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional
currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting
exchange differences are recorded in the statements of operations.
The
reporting currency of the Company is United States Dollars (“US$”) and the accompanying condensed consolidated financial
statements have been expressed in US$. In addition, the Company’s subsidiary in Seychelles maintains its books and records
in Hong Kong Dollars (“HK$”), which is functional currency as being the primary currency of the economic environment
in which the entity operates.
In
general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not US$ are translated
into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the
balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting
from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive
income within the statement of stockholders’ equity.
GUSHEN,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED OCTOBER 31, 2017
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
Translation
of amounts from HK$ into US$1 has been made at the following exchange rates for the respective periods:
|
|
As
of and for the six
months ended October 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Period-end
/ average period HK$:US$1 exchange rate
|
|
|
7.75
|
|
|
|
7.75
|
|
Related
parties
Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making financial and operating decisions.
Companies are also considered to be related if they are subject to common control or common significant influence.
Fair
value of financial instruments:
The
carrying value of the Company’s financial instruments: cash and cash equivalents, amount due from a related company, accounts
payable and accrued liabilities, and amount due to a director approximate at their fair values because of the short-term nature
of these financial instruments.
The
Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”),
with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value
hierarchy that prioritizes the inputs used in measuring fair value as follows:
Level
1: Observable inputs such as quoted prices in active markets;
Level
2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level
3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Recent
accounting pronouncements
In
May 2014, the FASB issued Accounting Standards Update No. 2014-09, “
Revenue from Contracts with Customers
”
(“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic
605)”, and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09
is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.
Early adoption is not permitted. In August 2016, the FASB issued an Accounting Standards Update to defer by one year the effective
dates of its new revenue recognition standard until annual reporting periods beginning after December 15, 2017 (2018 for calendar-year
public entities) and interim periods therein. Management is currently assessing the impact of the adoption of ASU 2014-09 and
has not determined the effect of the standard on our ongoing financial reporting.
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption
of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations
GUSHEN,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED OCTOBER 31, 2017
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
NOTE
4 - AMOUNT DUE FROM A DIRECTOR
As
of October 31, 2017 and April 30, 2017, the Company advanced to a director of the Company $56,493 and $57,693, respectively, which
is unsecured, interest-free with no fixed repayment term. The director expected to repay the amount by the end of third quarter.
NOTE
5 - INCOME TAXES
For
the six months ended October 31, 2017 and 2016, the local (United States) and foreign components of loss before income taxes were
comprised of the following:
|
|
Six
months ended
October 31,
2017
|
|
|
Six
months ended
October 31,
2016
|
|
|
|
$
|
|
|
$
|
|
Tax
jurisdictions from:
|
|
|
|
|
|
|
|
|
-
Local
|
|
|
(4,247
|
)
|
|
|
(14,348
|
)
|
-
Foreign, representing Seychelles
|
|
|
(355
|
)
|
|
|
(316
|
)
|
|
|
|
|
|
|
|
|
|
Loss
before income tax
|
|
|
(4,602
|
)
|
|
|
(14,664
|
)
|
The
provision for income taxes consisted of the following:
|
|
|
Six
months ended
|
|
|
|
Six
months ended
|
|
|
|
|
October
31, 2017
|
|
|
|
October
31, 2016
|
|
|
|
|
$
|
|
|
|
$
|
|
Current:
|
|
|
|
|
|
|
|
|
-
Local
|
|
|
-
|
|
|
|
-
|
|
-
Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
-
Local
|
|
|
-
|
|
|
|
-
|
|
-
Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
-
|
|
|
|
-
|
|
The
effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply
a broad range of income tax rates. The Company and its subsidiary operate in various countries: United States and Seychelles that
are subject to taxes in the jurisdictions in which they operate, as follows:
United
States of America
The
Company is registered in the State of Nevada and is subject to the tax laws of the United States of America. As of October 31,
2017, the operation in the United States of America incurred $71,362 of cumulative net operating losses which can be carried forward
to offset future taxable income. The net operating loss carryforwards begin to expire in 2037, if unutilized. The Company has
provided for a full valuation allowance of $24,977 against the deferred tax assets on the expected future tax benefits from the
net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized
in the future.
GUSHEN,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED OCTOBER 31, 2017
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
Seychelles
Under
the current laws of the Republic of Seychelles (“Seychelles”), Gushen Holding Limited is registered as an international
business company which governs by the International Business Companies Act of Seychelles. A company is subject to Seychelles income
tax if it does business in Seychelles. A company that incorporated in Seychelles, but does not do business in Seychelles, is not
subject to income tax there. Gushen Holding Limited did not do business in Seychelles for the six months ended October 31, 2017,
and it does not intend to do business in Seychelles in the future. For the six months ended October 31, 2017 and 2016, Gushen
Holding Limited had a net operating loss of $355 and $316, respectively
NOTE
6 - COMMITMENTS AND CONTINGENCIES
For
the six months ended October 31, 2017, the Company utilized office space of a director and stockholder at no charge. Such costs
are immaterial to the condensed financial statements and accordingly are not reflected herein.
NOTE
7 - SUBSEQUENT EVENTS
In
accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events
or transactions that occurred after October 31, 2017 up through the date the Company presented these condensed consolidated financial
statements. During the period, the Company did not have any material recognizable subsequent event.