NOTES
TO UNAUDITED FINANCIAL STATEMENTS
NOTE
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Summit
Networks Inc. (together with its subsidiary, the “Company”) was incorporated under the laws of the State of Nevada
on July 8, 2014. Originally, 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. On May 8, 2018, the Company acquired Real Capital Limited, a Hong Kong company (“Real
Capital”), to seek opportunities in the food and beverage industry. On March 31, 2019, the Company entered into a Share
Purchase Agreement (the “Real Capital SPA”) pursuant to which it sold its interests in Real Capital. The closing of
the Real Capital SPA occurred on April 10, 2019.
On
April 9, 2019, the Company entered into a Share Exchange Agreement (the “MoralArrival Share Exchange Agreement”) with
MoralArrival Environmental and Blockchain Technology Services Limited, a British Virgin Islands company (“MoralArrival”),
and the sole shareholder of MoralArrival, which was Shuhua Liu, Ms. Liu. The acquisition of MoralArrival was with a related party
as Ms. Liu controls The Hass Group, Inc., the Company’s largest stockholder, and it was accounted for as acquisition of
entity under common control. Under the terms of the MoralArrival Share Exchange Agreement, the Company agreed to exchange 3,000,000
shares of its common stock for all the outstanding shares of common stock of MoralArrival. As a result of this transaction, MoralArrival
has become a wholly-owned subsidiary of the Company. MoralArrival had no business activity as of the date of acquisition.
Currently,
we are in the early stage of development of our new business plan involves acting as an international agent through our wholly-owned
subsidiary, MoralArrival, for a Chinese environmental company to market its environmental technologies, equipment and products
and to develop projects utilizing its environmental technologies, equipment and products in worldwide markets. However, to date,
our activities to have been limited to capital formation, organization and development of a business plan.
On
July 17, 2019, the Company received FINRA approval to effect a 10-for-1 stock dividend to holders of its common stock as of June
1, 2019, the record date for the dividend. As a result, common stock figures, share capital, additional paid in capital, and earnings
per share information have been retroactively adjusted to reflect the stock dividend.
Management
has evaluated the effect of the recent and ongoing outbreak of the coronavirus disease 2019 (the “COVID-19”), which
was declared a pandemic by the World Health Organization in March 2020. Although the ultimate disruption caused by the outbreak
is uncertain, it may not have significant impact on the Company’s financial position, operations and cash flows.
NOTE
2. GOING CONCERN
The
accompanying consolidated 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 April 30, 2020, resulting in accumulated
deficit of $592,594 and has not generated any revenue. There is no guarantee that Company will generate revenue and net income
in the future.
At
April 30, 2020, the Company had no cash and there was a working capital deficiency of $166,677. These conditions, among others,
raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements
do not include adjustments that might result from the outcome of this uncertainty. Management does not believe that the company’s
current cash position is sufficient to cover the expenses they will incur during the next twelve months.
The
Company actively looks for new business opportunities, and its operating expenses are solely relied on loans from the shareholders.
NOTE
3. Summary of significant accounting policies
Basis
of Presentation
The
accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form
10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”). Accordingly,
they do not contain all information and footnotes required by accounting principles generally accepted in the United States of
America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated
financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial
position of the Company as of April 30, 2020, and the results of operations and cash flows for the periods presented. The results
of operations for the three and six months ended April 30, 2020, are not necessarily indicative of the operating results for the
full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with consolidated
financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended July 31,
2019, filed with the SEC on December 9, 2019 and as amended on December 27, 2019.
The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances
and transactions have been eliminated.
Use
of Estimates
The
preparation of condensed consolidated interim financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities at the date of consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent
Accounting Pronouncements
The
Company adopts new pronouncements relating to generally accepted accounting principles applicable to the Company as they are issued,
which may be in advance of their effective date. The Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact
on its financial condition or the results of its operations.
The
Company amended the consolidated statements of operations, stockholders’ deficit and cash flows for the nine months ended
April 31, 2019 to reflect the correction of accounting for related party debt forgiveness. The forgiveness of debt from related
parties is a non-cash transaction and should be treated as contributions to additional paid-in capital instead of recognizing
gain in consolidated statement of operations.
NOTE
4. RELATED PARTY TRANSACTIONS
As
of April 30, 2020, the amount due to Ms. Shuhua Liu, a director and shareholder of the Company, was $168,082, which was unsecured,
non-interest bearing with no specific repayment terms. The amount has been increased from $52,642 since July 31, 2019.
During
the nine months period ended April 30, 2020, the company has borrowed amount of $115,440 from Ms. Shuhua Liu to pay certain expenses.
During
the nine-month period ended April 30, 2019, the Company has borrowed amount of $276,640 from a related party and recognized debt
forgiveness of $348,767, which was recorded as additional paid-in capital.
On
April 9, 2019, the Company entered into MoralArrival Share Exchange Agreement with MoralArrival, a British Virgin Islands company,
and the sole shareholder of MoralArrival was Shuhua Liu. The acquisition of MoralArrival was with a related party, as Ms. Liu
controls The Hass Group, Inc., the Company’s largest stockholder and it was accounted for as acquisition of entity under
common control. Under the terms of that MoralArival Share Exchange Agreement, the Company agreed to exchange 3,000,000 shares
of its common stock for all the outstanding shares of common stock of MoralArrival. As a result of this transaction, MoralArrival
has become a wholly-owned subsidiary of the Company. The Company issued 3,000,000 shares of common stock to Ms. Liu in January
2020. See Note 1.
NOTE
5. 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.
On
July 8, 2019, the Company filed an Amended and Restated Articles of Incorporation (the “Restated Charter”) with the
Secretary of State of the State of Nevada. Pursuant to the Restated Charter, the Company’s capital stock consists of 510,000,000
shares, of which 500,000,000 are designated common stock and 10,000,000 are designated as preferred stock.
On
July 17, 2019, the Company received FINRA approval to effect a 10-for-1 stock dividend to holders of its common stock as of June
1, 2019, the record date for the dividend. As a result, common stock figures, share capital, additional paid in capital, and earnings
per share information have been retroactively adjusted to reflect the stock dividend.
In
connection with the MoralArrival Share Exchange Agreement, the Company issued 3,000,000 shares of common stock to Ms. Liu on January
7, 2020. See Note 1 and Note 4 above.
As
of April 30, 2020, the Company had 64,049,990 shares of common stock issued and outstanding.
NOTE
6. Subsequent events
Management
has evaluated subsequent events through the date these financial statements were available to be issued and there were no material
events requires the disclosure.