UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 1
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)
8 Tiaojiayuan Street, Suite 1402, Chaoyang District, Beijing, China 100020
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
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:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date
Class | Outstanding as of January 7, 2021 | |
Common Stock: $0.001 |
Explanatory Note
A loan made by the Company to Zhejiang Malai E-commerce Co., Ltd. (“Zhejiang Malai”) on Oct 28, 2020, was previously not disclosed as a related party transaction, and was recorded as a loan receivable. Given the fact that Zhejiang Malai is a related party, the Financial Statements will be revised to properly record the loan as a loan receivable to a related party. Notwithstanding the prior error in recording this transaction, the amount of the loan will not change.
In addition, income generated from the Company’s sales to Zhejiang Malai was previously recorded in the Financial Statements as revenue. Given the fact that Zhejiang Malai is a related party, the Financial Statements will be revised to properly record revenue generated from sales to Zhejiang Malai as revenue from a related party. Notwithstanding the prior error in recording these transactions, the total amount of the Company’s revenues will not change.
The Company will file amended reports with the Commission for each of the periods effected by the above error as soon as practicable. The Company does not expect that the above-described revisions will affect the Company’s previously reported pre-tax income (loss), net income (loss), earning per share, or total revenue as reflected in the Financial Statements.
Management discussed the matters disclosed in the Form 8-K filed with the Commission on October 27, 2022 with the Company’s independent registered public accounting firm and provided them with a copy of these disclosures.
TABLE OF CONTENTS
2 |
Shengda Network Technologies Inc. and Subsidiaries
INDEX
PART I - FINANCIAL INFORMATION
Item1. Financial Statements (Unaudited)
F-1 |
SHENGDA NETWORK TECHNOLOGY INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2020 | June 30, 2020 | |||||||
(Restated) | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Accounts receivable | ||||||||
Account receivable - related party | ||||||||
Advance to suppliers | ||||||||
Other receivable | ||||||||
Prepaid expense | ||||||||
Total Current Assets | ||||||||
Property And Equipment, Net | ||||||||
Total Assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | $ | ||||||
Related party loans | ||||||||
Payroll payable | ||||||||
Tax payable | ||||||||
Advances and deposits | ||||||||
Advances and deposits - Related party | ||||||||
Other payable | ||||||||
Other payable - Related party | ||||||||
Total Liabilities | ||||||||
Stockholders’ Equity (deficit) | ||||||||
Preferred Stock, $ par value, shares authorized; | ||||||||
Common Stock, $ par value, shares authorized; and shares issued and outstanding at September 30, 2020 and June 30, 2020, respectively | ||||||||
Additional paid-in capital | ||||||||
Retained earnings (Accumulated loss) | ( | ) | ||||||
Accumulated other comprehensive income (loss) | ( | ) | ||||||
Total stockholders’ equity (deficit) | ( | ) | ||||||
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 (LOSS)
For
the three months ended September 30, | ||||||||
2020 (Restated) | 2019 | |||||||
Revenue | $ | $ | ||||||
Revenue – related party | ||||||||
Total Revenue | ||||||||
Cost of Revenue | ||||||||
Gross Profit | ||||||||
Expenses | ||||||||
Professional expenses | ||||||||
General and administrative expenses | ||||||||
Total expenses | ||||||||
Income (loss) from operations | ( | ) | ||||||
Other income (expense) | ||||||||
Interest income | ||||||||
Bank charges | ( | ) | ||||||
Other income, net | ||||||||
Income (loss) before income taxes | ( | ) | ||||||
Income Tax Expense | ||||||||
Net income (loss) after tax | $ | $ | ( | ) | ||||
Other comprehensive income | ||||||||
Foreign currency translation gain | ||||||||
Total Comprehensive Income (loss) | $ | $ | ( | ) | ||||
Basic and diluted net income (loss) per common share | $ | $ | ( | ) | ||||
Weighted-average number of common shared 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 STATEMENT OF STOCKHOLDERS’ EQUITY
Additional | Accumulated Other | Total | ||||||||||||||||||||||
Common Stock | Paid-in | Retained | Comprehensive | Stockholders’ | ||||||||||||||||||||
Shares | Amount | Capital | Earnings | Income | Equity | |||||||||||||||||||
Balance June 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
Net income | - | |||||||||||||||||||||||
Foreign currency translation adjustment | - | |||||||||||||||||||||||
Balance September 30, 2020 | $ | $ | $ | $ | $ |
Additional | Accumulated Other | Total | ||||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
Balance June 30, 2019 | $ | $ | $ | ( | ) | $ | $ | | ||||||||||||||||
Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
Balance September 30, 2019 | $ | $ | $ | ( | ) | $ | $ | ( | ) |
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 three months ended September 30, | ||||||||
2020(Restated) | 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income (loss) | $ | $ | ( | ) | ||||
Changes in Operating Assets and Liabilities: | ||||||||
Account receivable | ( | ) | ||||||
Account receivable - related party | ( | ) | ||||||
Advance to suppliers | ( | ) | ||||||
Other receivable | ( | ) | ||||||
Prepaid expenses | ||||||||
Accounts payable | ( | ) | ||||||
Payroll payable | ||||||||
Tax payable | ||||||||
Other payable | ||||||||
Other payable - Related party | ( | ) | ||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Acquisition of plant and equipment | ( | ) | ||||||
Net cash used in investing activities | ( | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Advance Proceeds for sales of common stock to related party | ||||||||
Advance Proceeds for sales of common stock | ||||||||
Net cash provided by financing activities | ||||||||
Effect of exchange rate fluctuation on cash and cash equivalents | ||||||||
Net increase (decrease) in cash | ( | ) | ||||||
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
Shengda
Network Technology Inc. (formerly known as “Soltrest Inc.” or the “Company”), was incorporated on
On
April 20, 2020, the Company purchased
On May 15, 2020, Peaker set up a Company Zhejiang Jingmai Electronic Commerce Ltd., in China of which, Peaker is the sole shareholder.
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.
Note 2 - Restatement for Correction of an Error
During
the three months end September 30, 2020, the Company had sales amounting to $
F-6 |
In the Affected Reports, the Company corrected the disclosure by reporting the above as related party transactions and balances.
Consequently, Management has identified a material weakness in understanding and knowledge of US GAAP.
Comparison of restated financial statements to financial statements as previously reported:
Unaudited Condensed Consolidated Balance Sheets | As of September 30, 2020 | |||||||||||
As Previously Reported | Restatement Adjustment | As Restated | ||||||||||
Current Assets: | ||||||||||||
Account receivable | $ | $ | ( | ) | $ | |||||||
Account receivable - related party | ||||||||||||
Total Current Assets |
Unaudited Condensed Consolidated Statement of Operations | Three Months ended September 30, 2020 | |||||||||||
As Previously Reported | Restatement Adjustment | As Restated | ||||||||||
Revenue | $ | $ | ( | ) | $ | |||||||
Revenue – Related Party | ||||||||||||
Total Revenue |
Unaudited Condensed Consolidated Statements of Cash Flows | Three Months ended September 30, 2020 | |||||||||||
As Previously Reported | Restatement Adjustment | As Restated | ||||||||||
Account receivable | $ | ( | ) | $ | $ | ( | ) | |||||
Account receivable - related party | ( | ) | ( | ) | ||||||||
Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||||||
Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||||||
Net Cash Provided by Financing Activities |
Consolidated Statement of Operations | Year ended June 30, 2020 | |||||||||||
As Previously Reported | Restatement Adjustment | As Restated | ||||||||||
Revenue | $ | $ | ( | ) | $ | |||||||
Revenue – Related Party | ||||||||||||
Total Revenue |
As a result of the restatement as of September 30, 2020 and June 30, 2020, there is no change in the total balances of assets, liabilities, net loss or loss per share.
Note 3 – 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. 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, 2020, filed with the SEC on November 13, 2020.
F-7 |
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
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.
Principle 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.
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 September 30, 2020 and June 30, 2020, the Company’s
bank account in the United States had no balances exceeding FDIC insurance of $
The
Company’s bank account in PRC is protected by FSD insurance. As of September 30, 2020 and June 30, 2020, the Company’s bank
account in PRC had $
F-8 |
Major Customer
The
Company has one major customer that accounted for
Major Vendor
The
Company has one major vendor that accounted for
Cash Equivalents
The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents.
Revenue Recognition
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, 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.
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 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. |
F-9 |
Our other current financial assets and current financial liabilities have fair values that approximate their carrying values.
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 September 30, 2020, the Company doesn’t have any finance lease.
Commitment and Contingencies
None
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.
F-10 |
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).
Note 4 - Recent Accounting Pronouncements
In December 2019, the FASB issued 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 is evaluating the impact that adoption of ASU 2019-12 will have on its consolidated financial statements.
Note 5 - Accounts Payable
As
of September 30, 2020 and June 30, 2020, accounts payable amounted to $
Note 6 – Leases
The
Company has an operating lease for the rental of office space. Rent expense for the operating lease for the three months ended September
30, 2020 and 2019, was $
Note 7 – Advances and Deposits
Advances
and deposits amounted to $
As
of September 30, 2020, the advances and deposits comprise of the proceeds from the sale of
F-11 |
Note 8 – Other Payable
As
of September 30, 2020 and June 30, 2020, other payable amounted to $
Note 9 – Stockholders’ Equity
Shares Authorized
On
March 30, 2020, the Company filed a Certificate of Amendment with the State of Nevada, increasing the number of authorized shares to
Common Stock
On
March 14, 2018 the Company exchanged
Pursuant
to a Form S-1 Registration Statement, in June, 2020, the Company sold
Note 10 – Related Party Transactions
Related parties with whom the Company had transactions are:
Related Parties | Relationship | |
HangJin Chin | ||
Youcheng Chin | ||
Li Weiwei | ||
Zhejiang Malai Electronic Commerce Co., Ltd |
On
June 16, 2020, the Company issued
On
June 20, 2020, the Company issued
On
July 1, 2020, the Company received a deposit of $
Sales
were $
Loan
from related party represent the advances to the Company by former President and Director in the amount of $
Note 11 – Subsequent Events
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to September 30, 2020 to the date these consolidated financial statements were available to be issued and has determined that there were no significant subsequent events or transactions that would require recognition or disclosure in the consolidated financial statements.
On
November 2, 2020, the Company issued
F-12 |
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 principal business is the development of internet and PC security software products.
Restatement of Correction of an Error
For the three months ended September 30, 2020, the Company had sales and had an accounts receivable balance as of September 30, 2020 with a customer. In preparing the financial statements, management failed to identify and disclose the fact that the customer being a related party to the Company within the definition of ASC 850. The Company also failed to disclose this fact to the auditors of the Company.
Management has identified a material weakness in understanding and knowledge of US GAAP.
This Amendment No. 1 (“Amendment No. 1”) on Form 10-Q/A amends the Quarterly Report on Form 10-Q of Shengda Network Technology, Inc. for the three months ended September 30, 2020, as filed with the Securities and Exchange Commission (“SEC”) on January 11, 2021 (the “Original Filing”). Management concluded that the Original Filing, should be restated due to the missing disclosure of the related party transactions.
The financial statement misstatements reflected in the table below did not impact cash flows from operations, investing, or financing activities in the Company’s statements of cash flows for any period previously presented.
Results of Operations
Three Months Ended September 30, 2020 Compared to September 30, 2019
The following table summarizes the results of our operations during the three months ended September 30, 2020 and 2019, respectively, and provides information regarding the dollar and percentage increase or (decrease) from the current three-month period to the prior three-month period:
Line Item | 9/30/20 | 9/30/19 | Increase (Decrease) |
Percentage Increase (Decrease) |
||||||||||||
(Restated) | ||||||||||||||||
Revenues | $ | 5,143,578 | $ | - | $ | 5,143,578 | n/a | |||||||||
Operating expenses | 42,447 | 4,404 | 38,043 | 864 | % | |||||||||||
Net income (loss) | 959,808 | (4,404 | ) | 964,212 | 2,189 | % | ||||||||||
Income (Loss) per share of common stock | 0.14 | (0.00 | ) | - | n/a |
We recorded net income of $959,808 for the three months ended September 30, 2020 as compared with a net loss of $4,404 for the three months ended September 30, 2019 due primarily to the commencement of operations in the current quarter.
Liquidity and Capital Resources
As of September 30, 2020, we had total assets of $13,042,522, working capital of $1,171,718 and an accumulated stockholders’ equity of $1,247,692. Our operating activities used $1,456,401 in cash for the three months ended September 30, 2020, while our operations used $5,159 cash in the three months ended September 30, 2019. We had $5,143,578 in revenues in the three months ended September 30, 2020, while we had no revenues in the three months ended September 30, 2019.
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.
3 |
At September 30, 2020, the Company had loans and advances from a related party shareholder in the aggregate amount of $323,974, which represents amounts loaned to the Company to pay the Company’s expenses of operation. These advances are payable on demand.
Off Balance Sheet Arrangements
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 or capital expenditures or capital resources that is material to an investor in our securities.
Seasonality
Our operating results are not affected by seasonality.
Inflation
Our business and operating results are not affected in any material way by inflation.
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.
4 |
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 September 30, 2020. 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 September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
5 |
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 section 302 of the Sarbanes-Oxley act of 2002 | |
31.2 | Certification of Chief Financial Officer Pursuant To 18 U.S.C. Section 1350 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002 | |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant Section 906 of the Sarbanes-Oxley Act | |
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
6 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Beijing, China on November 21, 2022.
SHENGDA NETWORK TECHNOLOGY, INC. | ||
By: | /s/ HangJin Chin | |
Name: | HangJin Chin | |
Title: | President, Secretary and Director | |
(Principal Executive, Financial and Accounting Officer) |
In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.
Signature | Title | Date | ||
/s/ HangJin Chin | ||||
HangJin Chin | ||||
President, Secretary and Director (Principal Executive, Financial and Accounting Officer) |
November 21, 2022 |
7 |