Notes to the Unaudited Financial
Statements
March 31, 2022
Note 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Nhale Inc. (“NHLE” or the “Company”) was organized
under the laws of the State of Nevada on March 8,2021, under Gankit Corporation. The Company was development
stage company as an e-commerce business focused on selling a diverse set of products through
its website Gankit.com.
On May 12, 2014, the control
block of stock, 20,000,000 shares of restricted common stock were purchased resulting in a change of control. The Company then ceased
to operate its e-commerce website and abandoned that business model, and re-focused on the development, branding, and distribution of
non-flame smoking devices. The Company changed its name at this time to Nhale, Inc.
Business operations for Nhale Inc. was abandoned by former management
and a custodianship action, as described in the subsequent paragraph, was commenced in 2020.
On November 24. 2020, the Eighth
District Court of Clark County, Nevada granted the Application for Appointment of Custodian as a result of the absence of a functioning
board of directors and the revocation of the Company’s charter. The order appointed Small Cap Compliance, LLC (“SCC”,
the “Custodian”) custodian with the right to appoint officers and directors, negotiate and compromise debt, execute contracts,
issue stock, and authorize new classes of stock.
Upon appointment as the Custodian of NHLE
and under its duties stipulated by the Nevada court, SCC took initiative to organize the business of the issuer. As Custodian, the duties
were to conduct daily business, hold shareholder meetings, appoint officers and directors, reinstate the company with the Nevada Secretary
of State. SCC also had authority to enter into contracts and find a suitable merger candidate. SCC was compensated for its role as custodian
in the amount of 500,000 shares of Convertible Series A Preferred Stock.
On January 20, 2021, SCC entered into a Stock
Purchase Agreement with Bridgeview Capital Partners, LLC, whereby Bridgeview Capital Partners, LLC purchased 500,000 shares of Convertible
Series A Preferred Stock. These shares represent the controlling block of stock.
Bridgeview Capital Partners, LLC entered into
a Stock Purchas Agreement with Yang Chongyi whereby Yang Chongyi purchased 500,000 shares of Convertible Series A Preferred Stock. Yang
Chongyi was appointed as its CEO, Treasurer, Secretary, and Director of the Company.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s unaudited financial statements
have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”),
and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments,
consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results
of operations and cash flows of the Company as of and for the three month period ending March 31, 2022 and not necessarily indicative
of the results to be expected for the full year ending December 31, 2022. These unaudited financial
statements should be read in conjunction with the financial statements and related notes for the year ended December 31, 2021.
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. Significant estimates include the estimated useful lives of property and equipment.
Actual results could differ from those estimates.
Cash equivalents
The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of
the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of
the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments.
Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States
of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value
measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation
techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels
of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level
1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2: Pricing inputs
other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting
date.
Level 3: Pricing inputs that
are generally unobservable inputs and not corroborated by market data. The carrying amount of the Company’s financial assets and
liabilities, such as prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments.
Income taxes
The Company follow ASC 740-10-30, which requires
recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to
reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the
assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income
in the fiscal 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 Statements of Income in the period that includes the enactment date.
On December 22, 2017, the Tax Cuts and Jobs Act
(TCJA) was signed into law by the President of the United States. TCJA is a tax reform act that among other things, reduced corporate
tax rates to 21 percent effective January 1, 2018. FASB ASC 740, Income Taxes, requires deferred tax assets and liabilities to be adjusted
for the effect of a change in tax laws or rates in the year of enactment, which is the year in which the change was signed into law. Accordingly,
the Company adjusted its deferred tax assets and liabilities at December 31,2017, using the new corporate tax rate of 21 percent.
The Company adopted ASC 740-10-25 (“ASC
740-10-25”) with regard to uncertainty income taxes. ASC 740-10-25 addresses the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10-25, we may recognize the tax benefit
from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position
should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC
740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, and accounting in interim
periods and requires increased disclosures. We had no material adjustments to our liabilities for unrecognized income tax benefits according
to the provisions of ASC 740-10-25.
Net income (loss) per common share
Net income (loss) per common share is computed
pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing
net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per
common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding
shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common
shares assumes that the Company incorporated as of the beginning of the first period presented. As at the beginning and ending of the
quarterly reporting period, there are 30,000,000 outstanding common shares and 500,000,000 potentially dilutive shares, respectively,
from convertible preferred stock; however, these shares have not been considered in the weighted average share calculation as their inclusion
would be anti-dilutive due to the net loss for the year ended.
Related parties
A party is considered to be related to the Company
if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with
the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal
owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly
influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting
parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that
one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Recently issued accounting pronouncements
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise
disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have
a material impact on its financial position or results of operations.
NOTE 3 - GOING CONCERN
The Company’s unaudited financial statements
are prepared using accounting principles generally accepted in the United States of America applicable to a going concern that contemplates
the realization of assets and liquidation of liabilities in the normal course of business. The Company has not established any source
of revenue to cover its operating costs and has an accumulated deficit of $3,341,090 as at March 31, 2022. These conditions raise substantial
doubt about the company’s ability to continue as a going concern.
In addition to operational expenses, as the Company
executes its business plan, it is incurring expenses related to complying with its public reporting requirements. In order to finance
these expenditures, the Company has raised capital in the form of debt, which will have to be repaid, as discussed in detail below. The
Company has depended on loans from private investors and outside investors for most of its operating capital. The Company will need to
raise capital in the next twelve months in order to remain in business.
Management anticipates that significant dilution
will occur as a result of any future sales of the Company’s common stock and this will reduce the value of its outstanding shares.
The Company cannot project the future level of dilution that will be experienced by investors as a result of its future financings, but
it will significantly affect the value of its shares.
The accompanying financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications
of liabilities that may result from the possible inability of the Company to continue as a going concern.
NOTE 4 – PAYABLES AND ACCRUED INTERESTS
| Schedule of payables | |
Mar. 31, 2022 | | |
Dec. 31, 2021 | |
| Payables | |
$ | 489,044 | | |
$ | 489,044 | |
| Accrued Interest | |
| 1,458,796 | | |
| 1,388,558 | |
| Total | |
$ | 1,947,840 | | |
$ | 1,877,602 | |
NOTE 5 – NOTES PAYABLE
During 2013 - 2016 the Company borrowed an aggregate
amount of $1,240,000 and issued 24 promissory notes in total maturing 2015 - 2018. As at March 31, 2022 and December 31, 2021, there were
23 promissory notes with an aggregated amount of $1,190,000 in default.
Weighted average interest rate of default was
23.6%-23.8% during the reporting periods ended March 31, 2022 and 2021. The Company accrued interest expenses of $70,238 for the quarters
ended March 31, 2022 and 2021 respectively.
NOTE
6 – COMMON STOCK AND PREFERRED STOCK
The Company has 100,000,000 shares of common stock
authorized at par value of $0.0001, and 30,000,000 shares of common stock were issued and outstanding at beginning and end of the reporting
period at total par value of $3,000 and an aggregated amount of share premium of $110,250.
The Company has 1,000,000 shares designated Series
A preferred stock at par value of $0.0001, and 500,000 issued as at beginning and end of the reporting period with total par value of
$50 and an aggregated amount of share premium of $89,950.
NOTE 7 – INCOME TAXES
Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred
tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts
of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has evaluated Staff Accounting.
Bulletin No. 118 regarding the impact of the decreased
tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. The U.S. federal income tax rate of 21% is being used due to the new tax law recently enacted.
Deferred income taxes reflect the tax consequences
on future years of differences between the tax bases. Net operating loss carry-forwards and tax benefits arising therefore are as follows:
| Deferred tax assets | |
Mar. 31, 2022 | | |
Dec. 31, 2021 | |
| Net operating loss (NOL) brought forward | |
$ | 3,270,852 | | |
$ | 2,899,902 | |
| Net loss for the period / year | |
| 70,238 | | |
| 370,950 | |
| NOL carried forward | |
$ | 3,341,090 | | |
$ | 3,270,852 | |
| | |
| | | |
| | |
| | |
| | | |
| | |
| Tax benefit from NOL carried forward | |
| 835,273 | | |
| 817,713 | |
| Valuation allowance | |
| (835,273 | ) | |
| (817,713 | ) |
| Deferred tax assets | |
$ | – | | |
$ | – | |
The Company’s tax loss
carried forward will begin to expire in 2030.
NOTE
8 – COMMITMENTS AND CONTINGENCIES
As at the end of the reporting period, the company
has no commitments and contingencies to disclose.
NOTE 9 – RELATED-PARTY
TRANSACTIONS
The company was not engaging in any business activities
during the reporting periods, and has no related party transactions to disclose.
NOTE 10 – SUBSEQUENT
EVENTS
As at the date these financial statements are
ready to be released, the Company has no subsequent events to disclose.
NOTE 11 – IMPACT OF THE COVID-19
PANDEMIC
As the Company is not actively trading in the current reporting period,
there is no impact of the COVID-19 pandemic on financial statements as at and for the quarterly period ended March 31, 2022.