NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.
ORGANIZATION AND DESCRIPTION OF BUSINESS
Summit Networks Inc. (the Company) was incorporated under the laws of the State of Nevada on July 8, 2014. The Company was formed to engage in the development and operation of a business engaged in the distribution of glass craft products produced in China. We are also actively looking to expand our business operations into the food and beverage industry, and other possible opportunities via our new subsidiary Real Capital Limited (a Hong Kong company) which was acquired on May 8, 2018.
The Company is in the development stage. Its activities to date have been limited to capital formation, organization, development of its business plan and minimal sales. The Company has commenced limited operations. As such, the Company is subject to all risks inherent to the establishment of a start-up business enterprise.
NOTE 2.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP).
The Company, on May 8, 2018, the Company acquired all the shares of Real Capital Limited, a Hong Kong registered company. The purchase consideration in cash for all the outstanding shares of Real Capital Limited is total of US$1,910 (HK$15,000). After the completion, Real Capital Limited is 100% wholly owned by the Company.
The accompanying consolidated financial statements includes the accounts of the company, and its wholly owned subsidiary Real Capital Limited. All inter-company balances and transactions have been eliminated on consolidation.
The Company has a July 31, year-end.
NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. There were no significant estimates in the current reporting period.
Due to the limited level of operations, the Company has not had to make material assumptions or estimates other than the assumption that the Company is a going concern.
b.
Fair value of financial instruments
ASC 825, Disclosures about Fair Value of Financial Instruments, requires disclosure of fair value information about financial instruments. ASC 820, Fair Value Measurements defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of October 31, 2018.
Fair values were assumed to approximate carrying values of on-balance-sheet financial instruments since they are short term in nature. These financial instruments include cash and related party loan payable.
-7-
SUMMIT NETWORKS INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c.
Earnings per Share
ASC No. 260, Earnings Per Share, specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. The Company has adopted the provisions of ASC No. 260.
Basic net loss per share amounts is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted earnings per share are the same as basic earnings per share due to the lack of dilutive items in the Company.
d.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
e.
Income Taxes
Income taxes are provided in accordance with ASC No. 740, Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
f.
Revenue Recognition
The Company will recognize revenue in accordance with ASC topic 605 Revenue Recognition - when all goods and services have been performed and delivered, the amounts are readily determinable, and collection is reasonably assured. The Company has generated $223,910 in revenue since its inception.
g.
Cost of Sales
Amounts that will be recorded as cost of sales relate to direct expenses incurred in order to fulfill orders of our customers. Such costs are recorded and allocated as incurred. Our cost of sales will consist primarily of the cost of product and shipping expenses.
h.
Advertising
The Company expenses its advertising when incurred. There has been $12,498 in advertising expense since inception.
i.
Fixed Assets
Fixed assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, (if any). The Company utilizes straight-line depreciation over the estimated useful life of the asset.
Property 40 years
Office Equipment 7 years
-8-
SUMMIT NETWORKS INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
j.
Recently Issued Accounting Guidance
The Company has evaluated all the recent accounting pronouncements through the date the financial statements were issued and filed with the Securities and Exchange Commission and believe that none of them will have a material effect on the companys financial statements.
NOTE 4.
CONCENTRATIONS
Initial sales are concentrated with limited client. Sales are made without collateral and the credit-related losses are insignificant or non-existent. Accordingly, there is no provision made to include an allowance for doubtful accounts.
NOTE 5.
GOING CONCERN
The accompanying financial statements and notes have been prepared assuming that the Company will continue as a going concern.
The Company had limited operations during the period from July 8, 2014 (date of inception) to October 31, 2018 resulting in net loss of $373,771. There is no guarantee that Company will continue to generate revenues. At October 31, 2018, Company had $5,297 in cash and there were outstanding liabilities of $310,117. This condition raises substantial doubt about the Companys ability to continue as a going concern. Even though the Company is currently in the development stage, management does not believe that the companys current cash of $5,297 is sufficient to cover the expenses they will incur during the next twelve months.
NOTE 6.
WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional shares of common.
NOTE 7.
RELATED PARTY TRANSACTIONS
The director of the Company, Mr. Riggs Cheung, may, in the future, become involved in other business opportunities as they become available, he may face a conflict in selecting between the Company and his other business opportunities. The Company has not formulated a policy for the resolution of such conflicts.
As of October 31, 2018, amount due to the directors of the Company was $21,192, and amount due to shareholders was $256,682, which were unsecured, non-interest bearing with no specific repayment terms.
During the three months period ended October 31, 2018, and during the period from July 8, 2014 (date of inception), payroll expense of $15,000 and $51,000 were charged with respect to director fee, respectively.
-9-
SUMMIT NETWORKS INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8.
INCOME TAXES
We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, Income Taxes. Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entitys financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.
There was no income tax expense for the nine months period ended October 31, 2018 and 2017. The rate was as follow:
|
|
|
|
|
|
|
|
|
October 31, 2018
|
October 31, 2017
|
|
US Federal Statutory Tax Rate *
|
21.0%
|
15.0%
|
|
Nevada State & Local Tax Rate
|
0.0%
|
0.0%
|
|
Net Operating Loss Carryforward
|
(0.0)%
|
(0.0)%
|
|
Effective Tax Rate
|
21.0%
|
15.0%
|
|
|
|
|
|
|
|
*for the Financial year 2018 and onward will reduce to 21%
-10-
SUMMIT NETWORKS INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9.
STOCKHOLDERS EQUITY
Transactions, other than employees stock issuance, are in accordance with ASC No. 505. Thus issuances shall be accounted for based on the fair value of the consideration received. Transactions with employees stock issuance are in accordance with ASC No. 718. These issuances shall be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, or whichever is more readily determinable.
As of August 1, 2017, the stockholders equity section of the Company contains Common stock, $ 0.001 par value: 75,000,000 shares authorized; 5,000,000 shares issued and outstanding.
On November 28, 2017 and on March 15, 2018, the Company issued a total of 649,999 shares of common stock to one independent investor and two shareholders for cash consideration totally of $19,500. The purchase price for the common stocks was $0.03 per common share.
On July 24, 2018, the Company issued a total of 455,000 shares of common stock to one independent investor and two shareholders for cash consideration totally of $13,650. The purchase price for the common stocks was $0.03 per common share.
As of October 31, 2018, and July 31, 2018, the Company had 6,104,999 shares of common stock issued and outstanding, respectively.
NOTE 10.
PROPERTY AND EQUIPMENT
During the period ended October 31, 2018, the Company has made impairment of $11,172 for the property consisting of an office and shop located in Latvia and office equipment thereof due to no revenue being generated from the operation.
NOTE 11.
COMMITMENTS AND CONTINGENCIES
The Company has no commitments and contingencies liabilities to be disclosed.
NOTE 12.
LEGAL MATTERS
The Company has no known legal issues pending.
NOTE 13.
SUBSEQUENT EVENTS
The Company has evaluated events subsequent through the date these financial statements have been issued to assess the need for potential recognition or disclosure in this report. Such events were evaluated through the date these financial statements were available to be issued. Based upon this evaluation, except the issued disclosed above, it was determined that no other subsequent events occurred that require recognition or disclosure in the financial statements.
-11-