UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Mark One
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR
THE QUARTERLY PERIOD ENDED
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission
File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or Organization |
(IRS Employment Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
1-
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: N/A
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such fling requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer. ☐ | 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. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of March 9, 2022, there were shares of the issuer’s common stock outstanding.
TABLE OF CONTENTS
| 2 |
Shengda Network Technologies Inc. and Subsidiaries
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
| F-1 |
SHENGDA NETWORK TECHNOLOGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, 2021 | June 30, 2021 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Account receivable, net | ||||||||
| Inventories | - | |||||||
| Loan receivable, net | ||||||||
| Total Current Assets | ||||||||
| Right of use asset - operating | ||||||||
| Property and equipment, net | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Related party loans | - | |||||||
| Accrued expenses and other payables | ||||||||
| Advances and deposits | - | |||||||
| Operating lease liabilities | - | |||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred Stock, $ par value, shares authorized; shares and shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively | ||||||||
| Common Stock, $ par value, shares authorized; shares and shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings (Accumulated loss) | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of unaudited condensed consolidated financial statements.
| F-2 |
SHENGDA NETWORK TECHNOLOGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| For the three months ended December 31, | For the six months ended December 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Revenue | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Professional expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Income (Loss) from Operations | ( | ) | ( | ) | ||||||||||||
| Other Income (Expense) | ||||||||||||||||
| Interest expense | ( | ) | - | ( | ) | - | ||||||||||
| Interest income | ||||||||||||||||
| Other income | - | - | ||||||||||||||
| Bank charges | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Other Income (Expense) | ||||||||||||||||
| Income (Loss) before Income Taxes | ( | ) | ||||||||||||||
| Income Tax Expense | ||||||||||||||||
| Net Income (Loss) after Tax | $ | $ | $ | ( | ) | $ | ||||||||||
| Other comprehensive income | ||||||||||||||||
| Foreign currency translation gain | ||||||||||||||||
| Total Comprehensive Income | $ | $ | $ | $ | ||||||||||||
| Basic and Diluted Net Income (Loss) per Common Share | $ | $ | $ | ( | ) | $ | ||||||||||
| Weighted-average Number of Common Shares Outstanding | ||||||||||||||||
The accompanying notes are an integral part of unaudited condensed consolidated financial statements.
| F-3 |
SHENGDA NETWORK TECHNOLOGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
| Preferred Stock | Common Stock | Accumulated | ||||||||||||||||||||||||||||||
Three Months Ended December 31, 2021 | Shares | Amount | Shares | Amount | Additional Paid-in Capital | Retained Earnings (Deficit) | Other Comprehensive Income (Loss) | Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||
| Balance - September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||
| Balance - December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Preferred Stock | Common Stock | Accumulated | ||||||||||||||||||||||||||||||
| Six Months Ended December 31, 2021 | Shares | Amount | Shares | Amount | Additional Paid-in Capital | Retained Earnings (Deficit) | Other Comprehensive Income (Loss) | Stockholders’ Equity
(Deficit) | ||||||||||||||||||||||||
| Balance - June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Forgiveness of debt | - | - | ||||||||||||||||||||||||||||||
| Net income | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||
| Balance - December 31, 2021 | $ | $ | $ | $ | - | $ | $ | |||||||||||||||||||||||||
| Preferred Stock | Common Stock | Accumulated | ||||||||||||||||||||||||||||||
| Three Months Ended December 31, 2020 | Shares | Amount | Shares | Amount | Additional Paid-in Capital | Retained Earnings (Deficit) | Other Comprehensive Income (Loss) | Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||
| Balance - September 30, 2020 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
| Issuance of common shares for cash | - | |||||||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||||||||||||||||||||
| Balance - December 31, 2020 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional | Retained | Accumulated Other | Stockholders’ | |||||||||||||||||||||||||||
| Six Months Ended December 31, 2020 | Shares | Amount | Shares | Amount | Paid-in Capital | Earnings (Deficit) | Comprehensive Income (Loss) | Equity (Deficit) | ||||||||||||||||||||||||
| Balance - June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Issuance of common shares for cash | - | |||||||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||
| Balance - December 31, 2020 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
The accompanying notes are an integral part of unaudited condensed consolidated financial statements.
| F-4 |
SHENGDA NETWORK TECHNOLOGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the six months ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net (Loss) Income | $ | ( |
) | $ | ||||
| Adjustments to Reconcile Net Cash Provided by (Used In) Operating Activities | ||||||||
| Depreciation and amortization | ||||||||
| Forgiveness of debt | ( |
) | - | |||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Decrease (Increase) in account receivable | ( |
) | ||||||
| (Increase) in inventories | ( |
) | - | |||||
| (Increase) in advance to suppliers | - | ( |
) | |||||
| Decrease in prepaid expenses | - | |||||||
| (Decrease) increase in accounts payable | ( |
) | ||||||
| (Decrease) increase in accrued expenses and other payables | ( |
) | ||||||
| (Decrease) in advances and deposits | ( |
) | - | |||||
| (Decrease) in other payable - related party | - | ( |
) | |||||
| Net Cash Provided by (Used in) Operating Activities | ( |
) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Loan receivable | - | ( |
) | |||||
| Acquisition of plant and equipment | - | ( |
) | |||||
| Net Cash Used in Investing Activities | - | ( |
) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds for sale of common stock to related party | - | |||||||
| Proceeds for sale of common stock | - | |||||||
| Net Cash Provided by Financing Activities | - | |||||||
| Effect of Exchange Rate Fluctuation on Cash and Cash Equivalents | ||||||||
| Net (Decrease) Increase in Cash and Cash Equivalents | ( |
) | ||||||
| Cash - Beginning of Period | ||||||||
| Cash - End of Period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the period for: | ||||||||
| Income tax | $ | $ | ||||||
| Interest | $ | $ | ||||||
The accompanying notes are an integral part of unaudited condensed consolidated financial statements.
| F-5 |
SHENGDA NETWORK TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization and Operations, and Going Concern
In these notes, the terms “us”, “we”, “it”, “its”, “Shengda”, the “Company” or “our” refer to Shengda Network Technology, Inc. and Subsidiaries. Shengda was incorporated under the laws of the State of Nevada on March 14, 2018 under the name Soltrest, Inc. and changed its name to Shengda Network Technology Inc.
The Company’s principal business is to provide portal for the sale of products offered by reliable manufacturers and merchants at competitive prices. Products run the gamut from electronics to daily consumable products, food and clothing.
On
April 20, 2020, the Company purchased shares of common stock of Peaker International Trade Group Limited (“Peaker”)
for a total consideration of $
Risk and Uncertainty Concerning COVID-19 Pandemic
In December 2019, an outbreak of a novel strain of coronavirus (COVID-19). On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. The Company is currently monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread. While the Company’s operations are principally located outside the United States, we utilize various consultants located in the United States, we participate in a global supply chain, and the existence of a worldwide pandemic, the fear associated with COVID-19, or any, pandemic, and the reactions of governments around the world in response to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity. Disruptions to our supply chain and business operations, or to our suppliers’ or customers’ supply chains and business operations, could include disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects on our manufacturing output and delivery schedule. Any of these uncertainties could have a material adverse effect on our business, financial condition or results of operations.
| F-6 |
Going Concern
The
Company demonstrates adverse conditions that raise substantial doubt about the Company’s ability to continue as a going concern.
The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability
of the Company to sell its stock to the investing community and obtain necessary financing to continue operations, and the attainment
of profitable operations. The Company recorded a net loss of $
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements included herein have been prepared by Shengda Network Technology Inc. and Subsidiaries, including its consolidated subsidiaries, the “Company”, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021, filed with the SEC on September 28, 2021.
The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets; (2) liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
| F-7 |
Reclassifications
Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net income or loss.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Peaker International Trade Group Limited or “Peaker” and Peaker’s wholly owned subsidiary Zhejiang Jingmai Electronic Commerce Ltd., in China. All significant inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the consolidated financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company did not have any cash equivalents at December 31, 2021 and June 30, 2021, respectively.
Accounts Receivable
Accounts receivable are generated primarily through sales to customers and are stated at invoiced amount, net of an allowance for doubtful accounts, and bear no interest. A provision for doubtful accounts is determined based on a specific review of outstanding customer balances and historical customer write-off amounts and is charged to operations at the time management determines these accounts may become uncollectible.
The Company establishes an individualized credit and collection policy based on each individual customer’s credit history. The Company does not have a uniform policy that applies equally to all customers. The collection period usually ranges from three months to twelve months. The Company grants extended payment terms only when the Company believes that the payment will be collectible at the end of the term. The Company grants extended payment terms to customers based on the following factors: (a) whether or not the Company views a real need, from the customer’s perspective for the extension, and (b) the Company’s relationship with the customer, and the Company’s long-term business prospects.
| F-8 |
The
Company reviews the accounts receivable on a periodic basis and based on its reviews, the Company recorded an allowance for doubtful
accounts of $
Inventories
Inventory is valued at the lower of cost or market. Inventories consist of finished goods. The Company reviews its inventories regularly for possible obsolete goods and establishes reserves when determined necessary. As of December 31, 2021, and 2020, the Company had no reserve for obsolete goods
Property and Equipment
Property and equipment are stated at cost. The straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows:
| Items | Useful life | |
| Vehicles |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the statement of income in other income and expenses.
Long-lived Assets
The
Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying
amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the
market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly
in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses
combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that
the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. Recoverability
is assessed based on the carrying amount of the asset compared to the estimated future undiscounted cash flows expected to result from
the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss equal to the excess
of the carrying value over the assets fair market value is recognized when the carrying amount exceeds the undiscounted cash flows. The
impairment loss is recorded as an expense and a direct write-down of the asset.
Leases
The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease right-of-use assets and lease liabilities are recognized at commencement based on the present value of lease payments over the lease term. As the implicit rate is typically not readily determinable in the Company’s lease agreements, the Company uses its incremental borrowing rate as of the lease commencement date to determine the present value of the lease payments. The incremental borrowing rate is based on the Company’s specific rate of interest to borrow on a collateralized basis, over a similar term and in a similar economic environment as the lease. Lease expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recognized on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Additionally, the Company accounts for lease and non-lease components as a single lease component for its identified asset classes. As of December 31, 2021, the Company did not have any finance lease.
| F-9 |
Similar to other long-lived assets, right-of-use assets are tested for impairment when events or conditions indicate that the carrying value of an asset may not be fully recoverable from future cash flows. See Note 5, “Leases,” for additional information.
Revenue Recognition
The Company is engaged in generating revenue through online networking sales. Shengda Network Technology is neither involved in production nor holding any inventory. The Company mainly sells products through a significant number of registered companies to members of its sales portal. The Company intends to offer products through offline stores and customer service centers.
The Company recognizes revenues when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. In that determination, under ASC 606, Revenue From Contracts With Customers, the Company follows a five-step model that includes: (1) determination of whether a contract, an agreement between two or more parties that creates legally enforceable rights and obligations, exists; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when (or as) the performance obligation is satisfied. The Company records the revenue once all the above steps are completed.
Fair Value Measurements
The Company has established a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 Fair Value Measurement, prioritizes the inputs into three levels that may be used to measure fair value:
| ● | Level 1 – inputs are based upon unadjusted quoted prices for identical instruments in active markets. |
| ● | Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. |
| ● | Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. |
The Company’s other current financial assets and current financial liabilities have fair values that approximate their carrying values.
| F-10 |
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash deposited with banks. Substantially all of the Company’s cash is held in bank accounts in the PRC and is not protected by FDIC insurance or any other similar insurance.
The
Company’s bank account in the United States is protected by FDIC insurance. As of December 31, 2021 and June 30, 2021, the Company’s
bank account in the United States had no balances exceeding FDIC insurance of $
The
Company’s bank account in People’s Republic of China (“PRC”) is protected by FSD insurance. As of December 31,
2021 and June 30, 2021, the Company’s bank account in PRC had $
Major Customer
The
Company has four major customers that accounted for
The
Company has one major customer that accounted for
Major Vendor
The
Company has two major vendors that accounted for
The
Company has two major vendors that accounted for
| F-11 |
Commitment and Contingencies
The
Company is committed to pay operating lease costs of $
Income Tax
Income tax returns are filed in federal, state, local and foreign jurisdictions as applicable. Provisions for current income tax liabilities are calculated and accrued on income and expense amounts expected to be included in the income tax returns for the current year. Income taxes reported in earnings also include deferred income tax provisions and provisions for uncertain tax positions.
Deferred income tax assets and liabilities are computed on differences between the financial statement bases and tax bases of assets and liabilities at the enacted tax rates. Changes in deferred income tax assets and liabilities associated with components of other comprehensive income are charged or credited directly to other comprehensive income. Otherwise, changes in deferred income tax assets and liabilities are included as a component of income tax expense. The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax expense in the period of enactment. Valuation allowances are established for certain deferred tax assets when realization is less than more likely than not.
Liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions, in our judgment, do not meet a more-likely-than-not threshold based on the technical merits of the positions. Additionally, liabilities may be established for uncertain tax positions when, in our judgment, the more-likely-than-not threshold is met, but the position does not rise to the level of highly certain based upon the technical merits of the position. Estimated interest and penalties related to uncertain tax positions are included as a component of income tax expense.
Currency Translation
The assets and liabilities of the Company’s subsidiaries outside the U.S. are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates, primarily from RMB. Income and expense items are translated at the average exchange rates prevailing during the period. Gains and losses resulting from currency transactions are recognized currently in income and those resulting from translation of consolidated financial statements are included in accumulated other comprehensive income (loss).
The Company computes net earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
| F-12 |
Recent Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”), ASU 2019-12, “Simplifying the Accounting for Income Taxes.” ASU 2019-12 eliminates certain exceptions within ASC 740, “Income Taxes,” and clarifies certain aspects of ASC 740 to promote consistency among reporting entities. ASU 2019-12 is effective for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company evaluated the impact that with the adoption of ASU 2019-12, and it did not have any impact on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain areas. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2023, although early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its financial statements.
Note 3 - Loan Receivable
On
October 25, 2020, the Company signed an agreement with an unrelated party, which is also the Company’s major customer. The Company
agreed to loan the customer the $
The Company assessed the implication on ASC 606, Revenue from Contracts with Customers, and determined that the terms of the loan are at the fair market value and does not impact the revenue recognition of the Company.
Note 4 – Property and Equipment
Property
and equipment consisted of the cost of a vehicle. As of December 31, 2021 and June 30, 2021, property and equipment costs were $
| F-13 |
Note 5 – Leases
The
Company has an operating lease for the rental of office space. Rent expense for the operating lease amounted to $
On
January 5, 2021, Zhejiang Jingmai Electronic Commerce Ltd. leased an office in Zhejiang, China.
The operating lease is listed as a separate line item on the Company’s consolidated financial statements. The operating lease represents the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are also listed as a separate line item on the Company’s consolidated financial statements.
Operating
lease right-of-use assets and liabilities commencing after January 1, 2021 are recognized at commencement date based on the present value
of lease payments over the lease term. For the six months ended December 31, 2021, the Company recorded $
Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments.
Information related to the Company’s operating right of use assets and related lease liabilities are as follows:
Six months ended December 31, | ||||
| Cash paid for operating lease liabilities | $ | |||
| Weighted-average remaining lease term | ||||
| Weighted-average discount rate | % | |||
| Minimum future lease payments | $ | |||
Note 6 – Advances and Deposits
Advances
and deposits amounted to $
| F-14 |
Note 7 – Accrued Expenses and Other Payables
As
of December 31, 2021 and June 30, 2021, accrued expenses and other payables amounted to $
Note 8 – Stockholders’ Equity
The Company’s capitalization at December 31, 2021 was authorized common shares with a par value of $ per share, and authorized preferred shares with a par value of $ per share.
Common Stock
On
July 1, 2021, the former President and Director of the Company agreed to forgive the working capital advance of $
The Company did not issue any common stock during the six months ended December 31, 2021. The total issued and outstanding shares of common stock were shares and shares as of December 31, 2021 and June 30, 2021, respectively.
Preferred Stock
On November 10, 2020, the Company adopted a resolution to designate shares as Series A Preferred Stock. The original issue price of each share of Series A preferred Stock shall be $.
Right to Receive Dividends
The holders of Series A Preferred Stock shall be entitled to receive dividends when, as and if declared by the Board of Directors of the corporation. The right to dividends on shares of Series A Preferred Stock shall be non-cumulative and no right shall accrue to holders of Series A Preferred Stock by reason of the fact that dividends on said shares are not declared in any prior period.
Liquidation Preference
In the event of any liquidation, dissolution, or winding up of the corporation, either voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Junior Securities but after distribution of such assets among, or payment thereof to holders of any Senior Preferred Stock, an amount equal to the Series A original issue price for each share of Series A Preferred Stock plus an amount equal to all declared but unpaid dividends on Series A Preferred Stock (the “Series A Liquidation Preference”).
| F-15 |
After the payment of the full Series A Liquidation Preference, the remaining assets of the corporation legally available for distribution, if any, shall be distributed ratably to the holders of the Common Stock in an amount equal to the Series A Liquidation Preference; after such distribution to the holders of the Common Stock, the remaining assets of the corporation legally available for distribution, if any, shall be distributed ratably among the Series A Preferred Stock and the Common Stock. If the assets and funds legally available for distribution among the holders of Series A Preferred Stock shall be insufficient to permit the payment to the holders of the full Series A Liquidation Preference, then the assets and funds shall be distributed ratably among holders of Series A Preferred Stock in proportion to the number of shares of Series A Preferred Stock owned by each holder.
Voting Rights
Except
as otherwise provided in the Certificate of Designation or required by law, the holders of the Series A Preferred Stock shall be entitled
to vote, in the same manner and with the same effect as the holders of Common Stock, voting together with the holders of Common Stock
as a single class. For this purpose, the holders of Series A Preferred Stock shall be given notice of any meeting of stockholders as
to which the holders of Common Stock are given notice in accordance with the bylaws of the Corporation. As to any matter on which
Redemption
The Company shall have the right to redeem the Series A Preferred Stock, plus any accrued and unpaid dividends, in whole but not in part, at any time or from time to time (the “Redemption”), at a cash redemption price equal to the aggregate Series A original issue price the Series A Preferred Stock being redeemed (the “Redemption Amount”) plus an amount equal to the amount of the accrued and unpaid dividend thereon.
The total issued and outstanding shares of Preferred Stock were shares and shares, at December 31, 2021 and June 30, 2021, respectively.
Note 9 – Related Party Transactions
Related parties with whom the Company had transactions are:
| Related Parties | Relationship | |
| HangJin Chen | ||
| Youcheng Chen | ||
| Li Weiwei |
Related
party loans represent working capital advances to the Company by former President and Director in the amount of $
Note 10 – Subsequent Events
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2021 to the date these consolidated financial statements were available to be issued, and has determined that the following subsequent events or transactions would require recognition or disclosure in the consolidated financial statements.
Loan receivable and the relevant interest in full amount have been paid off in February 2022.
| F-16 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD LOOKING STATEMENTS
Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the “Act”) and Section 21E of the Securities Exchange Act of 1934. 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 intend that such forward-looking statements be subject to the safe harbors for such statements. 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.
Overview of the Business
The Company was incorporated on March 14, 2018 under the laws of the State of Nevada. The Company’s main business is commodity procurement, with supply chain system and cloud warehouse. There are high-quality manufacturers in the upstream and more than 400 physical stores in the downstream as business partners.
In 2021, due to the impact of the Covid-19 pandemic, the concept of mass consumption changed, resulting in the loss of business, which directly affected the daily operations of the Company.
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Covid-19 Pandemic
On March 11, 2020, the World Health Organization declared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and many countries have issued policies intended to stop or slow the further spread of the disease.
Covid-19 and the U.S’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations.
Results of Operations
Comparison of Results of Operations for the Three Months Ended December 31, 2021 Compared to the three months ended December 31, 2020
The following table summarizes the results of our operations during the three months ended December 31, 2021 and 2020, respectively, and provides information regarding the dollar and percentage increase or (decrease) from the period ended December 31, 2021 to the corresponding three-month period ending December 31, 2020:
| 12/31/21 | 12/31/20 | Increase (Decrease) | Percentage Increase (Decrease) | |||||||||||||
| Revenues | $ | 603,294 | $ | 2,590,394 | $ | (1,987,100 | ) | (76.71 | ) | |||||||
| Operating expenses | 64,367 | 52,393 | 11,974 | 22.85 | ||||||||||||
| Net income | 12,097 | 20,034 | 7,937 | (39.62 | ) | |||||||||||
| Income (Loss) per share of common stock | 0.00 | 0.00 | - | - | ||||||||||||
Revenue and Cost of Sales
Total revenues for the three months ended December 31, 2021 were $603,294 compared to $2,590,594 during the three months ended December 31, 2020.
Operating expenses
Operating expenses were $64,367 for the three months ended December 31, 2021, compared to $52,392 during the three months ended December 31, 2020.
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Net Income
As a result of the forgoing, the net income for the three-month period ended December 31, 2021 was $12,097 as compared to net income of $20,034 for same period ended December 31, 2020.
Comparison of Results of Operations for the six months ended December 30, 2021 and 2020
Revenue
Total revenues for the six months ended December 30, 2021 were $1,346,971 compared to $7,734,172 during the six months ended December 31, 2020.
Operating expenses
Operating expenses were $131,692 for the six months ended December 31, 2021, compared to $94,840 during the six months ended December 31, 2020.
Net Income
As a result of the forgoing, the net income for the period ended December 31, 2021 was $(17,276) compared to net income of $979,843 for same period ended December 31, 2020.
Liquidity and Capital Resources
On December 31, 2021, we had $797,917 in cash and cash equivalents.
As of December 31, 2021, we had total assets of $8,996,272, working capital of $8,547,460 and an accumulated stockholders’ equity of $8,610,160. As of December 31, 2020, we had total assets of $13,489,468, working capital of $12,158,374 and an accumulated stockholders’ equity of $12,233,674.
Management believes that the Company’s cash on hand will be sufficient to fund all Company obligations and commitments for the next twelve months. Historically, we have depended on loans from our principal shareholders and their affiliated companies to augment our working capital as required. There is no guarantee that such funding will be available when required and there can be no assurance that our stockholders, or any of them, will continue making loans or advances to us in the future.
At December 31, 2021, the Company had no loans and advances from related party shareholders.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies
The Securities and Exchange Commission issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” suggesting that companies provide additional disclosure and commentary on their most critical accounting policies. In Financial Reporting Release No. 60, the Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The nature of our business generally does not call for the preparation or use of estimates. Due to the fact that the Company does not have any operating business, we do not believe that we do not have any such critical accounting policies.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of December 31, 2021. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are not effective to ensure that 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 Securities and Exchange Commission’s rules and forms and that our disclosure and controls are not designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) ineffective controls over period end financial disclosure and reporting processes and (4) lack of timely communications with vendors and proper accrual of expenses.
Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
Changes in Internal Control Over Financial Reporting
There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the three months ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
No report required.
Item 3. Default Upon Senior Securities
No report required.
Item 4. Mine Safety Disclosures
No report required.
Item 5. Other Information
No report required.
Item 6. Exhibits
Exhibit Number |
Description of Exhibit | |
| 31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14 or Rule 15d-14 of Securities Exchange Act of 1934. | |
| 32.1** | Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350). | |
| 101* | Inline XBRL Document Set for the condensed consolidated financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q. | |
| 104* | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. |
*Filed herewith.
**Furnished herewith.
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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.
| SHENGDA NETWORK TECHNOLOGY, INC. | ||
| Dated: March 9, 2022 | ||
| By: | /s/ HangJin Chin | |
| Name: | HangJin Chin | |
| Title: | President, Secretary and Director (Principal Executive Officer and Principal Financial Officer) | |
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