REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders
of
Summit Networks, Inc.
Opinion on the Consolidated Financial
Statements
We have audited the accompanying consolidated
balance sheet of Summit Networks, Inc. (the Company) as of July 31, 2020, and the related consolidated statement of operations,
stockholders’ deficit, and cash flows for year ending July 31, 2020, and the related notes (collectively referred to as the
financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of July 31, 2020, and the results of its operations and its cash flows for the year ended July 31, 2020, in conformity
with accounting principles generally accepted in the United States of America.
Going Concern
As discussed in Note 2 to the consolidated
financial statements 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
July 31, 2020, resulting in accumulated deficit of $643,783 and has not generated any revenue. There is no guarantee that Company
will generate revenue and net income in the future. At July 31, 2020, the Company had a working capital deficiency of $217,866.
These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. Management’s
plans in regards to these matters are also described in Note 2 to the accompanying financial statements. The accompanying financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required
to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.
/s/ Prager Metis CPA’s LLC
We have served as the Company’s auditor since 2020
Hackensack, New Jersey
November 13, 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2020
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. MoralArrival changed its name to Goodwill Motion Enterprises, Inc. (“Goodwill”) on May 4, 2020.
On May 8, 2020, Sumnet (Canada) Inc. (“Sumnet
(Canada)”) was incorporated in Canada. Sumnet (Canada) issued all its ordinary shares to the Company on May 8, 2020 so that
Sumnet (Canada) became the wholly owned subsidiary of Company. On July 29, 2020, Smith Barney Enterprises Limited (“Smith
Barney”) was incorporated in the British Virgin Islands. Smith Barney issued all its ordinary shares to the Company on July
29, 2020 so that Smith Barney became the wholly owned subsidiary of Company. On August 28, 2020, Green Energy (HK) Limited (“Green
Energy”) was incorporated in Hong Kong. Green Energy issued all its ordinary shares to Smith Barney on August 28, 2020 so
that Green Energy became the wholly owned subsidiary of Smith Barney. On September 27, 2020, Beijing Asian League Wins Technology
Co., Ltd. (“Beijing ALW”) was incorporated in People’s Republic of China. Green Energy subscribed all capital
stock of Beijing ALW on September 27, 2020 so that Beijing ALW became the wholly owned subsidiary of Green Energy.
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 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 July 31, 2020, resulting in accumulated deficit of $643,783
and has not generated any revenue. There is no guarantee that Company will generate revenue and net income in the future.
At July 31, 2020, the
Company had a working capital deficiency of $217,866. 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.
The Company’s
operations may be affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020 was
declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain;
however it may result in a material adverse impact on the Company’s financial position, operations and cash flows. Possible
areas that may be affected include, but are not limited to, disruption to the Company’s potential customers, unavailability
of products and supplies used in operations, and the unavailability of capital.
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 and Consolidation
The accounting and reporting policies of
the Company conform to accounting principles generally accepted in the United States of America (GAAP).
Use of Estimates
The preparation of
condensed consolidated 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.
Income Taxes
The Company accounts
for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The
asset and liability method provide that deferred tax assets and liabilities are recognized for the expected future tax consequences
of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax
credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will
be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets
to the amount that is believed more likely than not to be realized.
Fair Value
ASC 740 provides guidance
for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. If the
Company determines that an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate
whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities.
A liability for uncertain tax positions would then be recorded if the Company determined it is more likely than not that a position
would not be sustained upon examination or if a payment would have to be made to a taxing authority and the amount is reasonably
estimable. The Company does not believe any uncertain tax positions exist that would result in the Company having a liability to
the taxing authorities. The Company classifies interest and penalties related to unrecognized tax benefits, if and when required,
as part of interest expense and other expense in the statements of operations. As of July 31, 2020 and 2019, the Company did not
have any amounts recorded pertaining to uncertain tax positions.
Fair Value Measurements
The Company adopted
the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous
accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair
value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates
their fair values because of the short-term nature of these instruments.
ASC 820 defines fair
value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure
fair value:
Level 1 — quoted
prices in active markets for identical assets or liabilities
Level 2 — quoted
prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs
that are unobservable (for example cash flow modeling inputs based on assumptions)
The Company has no
assets or liabilities valued at fair value on a recurring basis.
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.
NOTE
4. RELATED PARTY TRANSACTIONS
As of July 31, 2020,
the amount due to its shareholders of the Company was $518,607, 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 year period
ended July 31, 2020, the company has borrowed amount of $465,965 from its shareholders to pay certain expenses.
During the year ended
July 31, 2019, the Company has borrowed amount of $276,640 from a related party and recognized debt forgiveness of $348,767 from
related parties, 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
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 for all periods presented 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 July 31, 2020,
the Company had 64,049,990 shares of common stock issued and outstanding.
NOTE
6 - INCOME TAXES
The reconciliation
of income tax benefit at the U.S. statutory rate of 21% for the years ended July 31, 2020 and 2019 to the Company’s effective
tax rate is as follows:
|
|
Year Ended July 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
21
|
%
|
|
|
21
|
%
|
Income tax benefit at statutory rate
|
|
$
|
(25,755
|
)
|
|
$
|
(78,958
|
)
|
Change in valuation allowance
|
|
|
25,755
|
|
|
|
78,958
|
|
Income tax expense
|
|
$
|
—
|
|
|
$
|
—
|
|
The tax effects of
temporary differences that give rise to the Company’s net deferred tax assets as of July 31, 2020 and 2019 are as follows:
|
|
July 31
|
|
|
July 31
|
|
|
|
2020
|
|
|
2019
|
|
Net operating loss carryforward
|
|
$
|
134,399
|
|
|
$
|
108,643
|
|
Valuation allowance
|
|
|
(134,399
|
)
|
|
|
(108,643
|
)
|
Net deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
As of July 31, 2020,
the Company has approximately $639,993 of net operating losses (“NOL”) carryovers to offset taxable income, if any,
in future years. Of the net operating loss from the Company’s operations, $141,356 can be carried forward for a period of
twenty years from the year of the initial loss and $498,637 can be carried forward with no time limit from the year of the initial
loss pursuant to relevant US laws and regulations. In assessing the realization of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all
of the deferred tax assets relating to the NOL period because it is more likely than not that all of the deferred tax assets will
not be realized.
On December 22, 2017,
legislation commonly known as the Tax Cuts and Jobs Act, or the Tax Act, was signed into law. The Tax Act, among other changes,
reduces the U.S. federal corporate tax rate from 35% to 21%, requires taxpayers to pay a one-time transition tax on earnings of
certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. The Company
did not have any earnings from foreign subsidiaries, and, as such, the international aspects of the Tax Act are not applicable.
NOTE
7. Subsequent events
Management has evaluated
subsequent events through the date these financial statements were available to be issued and concluded the following subsequent
event need to be disclosed:
On November 11, 2020,
the Company entered into a Mutual Rescission Agreement (the “Goodwill Rescission Agreement”) with Goodwill and Shuhua
Liu, the shareholder of Goodwill. Under the Goodwill Rescission Agreement, Shuhua Liu agreed to deliver to the Company 3,000,000
shares of its common stock that were issued to Liu under the MoralArrival Share Exchange Agreement, which the Company agreed to
cancel upon such delivery by Shuhua Liu. Under the terms of the Goodwill Rescission Agreement, the obligations of all parties to
the MoralArrival Share Exchange Agreement shall be terminated and the transactions contemplated thereby unwound and voided as if
the MoralArrival Share Exchange Agreement was never entered into and the transactions contemplated thereby never occurred.
Currently, the Company
is in the early stage of development of its new business plan which involves acting as an international agent through our wholly-owned
subsidiaries, Smith Barney, Green Energy and Beijing ALW, for a Chinese environmental company, Hengshui Jingzhen Environmental
Technology Company Limited of Hebei, China (“Hengshui”), 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,
the Company’s activities have been limited to capital formation, organization and development of a business plan.”