NOTES
TO THE FINANCIAL STATEMENTS
October
31, 2022
(unaudited)
NOTE
1 – ORGANIZATION AND NATURE OF BUSINESS
Clancy
Corp. (“Company”) was incorporated on March 22, 2016 under the laws of the State of Nevada.
On
April 13, 2020, the Company registered Shanghai Clancy Enterprise Management Co., Ltd. (Shanghai Clancy) as a wholly foreign-owned entity
and as a wholly owned subsidiary in Shanghai, China. Shanghai Clancy had no business activity from inception through October 31, 2022.
On
April 24, 2020, Shanghai Clancy registered Beijing Clancy Information Technology Co., Ltd. (Beijing Clancy) in Beijing as its wholly-owned
subsidiary and a second tier subsidiary of the Company.
From
August 1, 2020 to April 30, 2021, the Company business centered on providing IT services to a small number of clients. Beginning in May
2021, the Company terminated its IT services and re-focused its business operations to marketing consulting services to small and median
sized businesses. Management believes their prior business experience will enable them to assist small and medium sized companies improve
their operating efficiencies. The Company will charge its clients based on their performance. Management believes the new business model
will reduce internal overhead costs and potentially provide a larger market for its services.
NOTE
2 – GOING CONCERN
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the
three months ended October 31, 2022, the Company incurred loss, an accumulated deficit and experienced negative cash flow from operations.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Mr.
Meng, the major stockholder, Chief Executive Officer and sole director of the Company, verbally has agreed to provide continued financial
support to the Company.
The
Company’s business objective for the next twelve month and beyond such time will be to expand business operations and increase
revenue. The Company will focus on product management, digital marketing, refined user operations, performance optimization, after-sales
service, etc. to provide customers with more convenient and high- quality service experience.
The
Covid-19 pandemic presents novel challenges and a chaotic business environment globally. The duration and intensity of the impact of
the Covid-19 to business entities differ geographically. Covid-19 has a limited impact on the Company’s activities since Shanghai
Clancy has no activities and Beijing Clancy operations are limited to Beijing, PRC. The impact on the Company’s result of operation
and the financial statements was immaterial as of October 31, 2022.
NOTE
3 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted
in the United States of America (“US GAAP”) and include the accounts of Clancy Corp. and its wholly owned subsidiaries.
All material intercompany balances and transactions have been eliminated in consolidation.
Fiscal
year end
The
Company’s year-end is July 31.
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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Income
Taxes
Income
taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities
are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using
the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on
available evidence, are not expected to be realized.
Revenue
Recognition
The
Company recognizes revenue in accordance with ASC 606, Revenue from Contracts. The core principle of ASC 606 is that an entity recognizes
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. An entity recognizes revenue in accordance with that core principle by
applying the following steps: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5:
Recognize revenue when (or as) the entity satisfies a performance obligation.
Cash
and Cash Equivalents
Cash
and cash equivalents consist of all cash balances and highly liquid investments with original maturities of three months or less. Because
of short maturity of these investments, the carrying amounts approximate their fair values.
Concentration
of Credit Risk
The
Company is exposed to credit risk in the normal course of business, primarily related to cash and cash equivalents. A portion of the
Company’s cash and cash equivalents are deposited with Industrial and Commercial Bank of China Limited and Pingan Bank in the PRC,
which is not insured or otherwise protected. The Company had deposits of $13,295 as of October 31, 2022. The Company has not
experienced any losses in such accounts in the PRC.
Leases
The
Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”)
assets and operating lease liabilities in the consolidated balance sheets. Finance leases are included in finance lease ROU assets and
finance lease liabilities in the consolidated balance sheets.
ROU
assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the
Company’s obligation to make lease payments arising from the lease. Operating lease and finance lease ROU assets and
liabilities recognized at October 31, 2022 based on the present value of lease payments over the lease term discounted using the
rate implicit in the lease. In cases where the implicit rate is not readily determinable, the Company uses its incremental borrowing
rate based on the information available at commencement date in determining the present value of lease payments. Lease expense for
lease payments is recognized on a straight-line basis over the lease term.
The
Company has elected not to recognize operating lease ROU assets and liabilities arising from short-term leases.
Reporting
Currency and Translation
The
financial statements of the Company’s foreign subsidiaries are measured using the local currency, Renminbi (“RMB”),
as the functional currency; whereas the functional currency of Clancy Corp. and reporting currency of the Company is the United States
dollar (“USD” or “$”).
The
Company has operations in China where the local currency of RMB is used to prepare the consolidated financial statements which are translated
into the Company’s reporting currency, U.S. dollars. The local currency of RMB is the functional currency for the operations outside
the United States. Changes in the exchange rates between this currency and the Company’s reporting currency, are partially responsible
for some of the periodic changes in the consolidated financial statements. Assets and liabilities of the Company’s foreign operations
are translated into U.S. dollars at the spot rate in effect at the applicable reporting date. Revenues and expenses of the Company’s
foreign operations are translated at the average exchange rate during the applicable period. The resulting unrealized cumulative translation
adjustment is recorded as a component of accumulated other comprehensive income (loss) in stockholders’ deficit. Realized and unrealized
transaction gains and losses generated by transactions denominated in a currency different from the functional currency of the applicable
entity are recorded in general and administrative expense in the period in which they occur. For the three months period ended October
31, 2022 and 2021, there were no realized or unrealized transaction gains and losses generated by transactions denominated in a currency
different from the functional currency of the applicable entities.
The
exchange rates used to translate amounts in RMB to USD for the purposes of preparing the consolidated financial statements were as follows:
Schedule of exchange rates | |
| | | |
| | |
| |
October 31, 2022 | | |
October 31, 2021 | |
Period end USD: RMB exchange rate | |
| 7.18 | | |
| 6.39 | |
Average USD: RMB exchange rate | |
| 7.06 | | |
| 6.45 | |
Foreign
Operations
All
of the Company’s operations and assets are located in Beijing China. The Company may be adversely affected by possible political
or economic events in this country. The effect of these factors cannot be accurately predicted.
Basic
Income (Loss) Per Share
The
Company computes income (loss) per share in accordance with FASB ASC 260 “Earnings per Share”. Basic income (loss) per
share is computed by dividing net income (loss) available to common stockholders by the weighted average number of outstanding common
shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the
period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. In the three months ended
October 31, 2022 and 2021, respectively, there were no potentially dilutive equity instruments issued or outstanding.
Comprehensive
Income
The
Company follows Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 220,
“Comprehensive Income,” in reporting comprehensive income. Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation
of net income. The Company has one item of other comprehensive loss, consisting of a currency translation adjustment of $23,155 for
the three months ended October 31, 2022 compared to $(1,195) for the three months ended October 31, 2021.
Financial
Instrument
The
carrying value of the Company’s short-term financial instruments, such as accounts payable and advances, approximates their fair
values because of their short maturities.
Stock-Based
Compensation
Stock-based
compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option
plan and has not granted any stock options.
Recently
Adopted Accounting Pronouncements
As
of October 31, 2022 and for the period then ended, there were no recently adopted accounting standards that had a material effect on
the Company’s financial statements.
Recently
Issued Accounting Pronouncements Not Yet Adopted
As
of October 31, 2022, there was no recently issued accounting standards not yet adopted which would have a material effect on the Company’s
consolidated financial statements.
NOTE
4 - OPERATING LEASE RIGHT-OF- USE ASSETS
As
of October 31, 2022, the total operating lease Right of Use assets were $31,212. The total operating lease cost was $14,996 and $16,642
for the three-month period ended October 31, 2022 and 2021.
NOTE
5 - LEASE LIABILITIES- OPERATING LEASE
Future
minimum lease payments under the operating lease as of October 31, 2022 are:
Schedule of future minimum lease payment | |
| | |
12 months ended October 31, 2022 | |
$ | 21,060 | |
12 months ended October 31, 2023 | |
| - | |
12 months ended October 31, 2024 | |
| - | |
Total Lease payments | |
| 21,060 | |
Less Imputed Interest | |
| - | |
Net Lease liability | |
$ | 21,060 | |
NOTE
6 - RELATED PARTY TRANSACTIONS
The
Company’s major shareholder has orally agreed to loan funds to the Company for its operations on an as needed basis. For the three
months ended October 31, 2022, the major shareholder loaned the Company $69,690 and for the three months ended October 31, 2021, the
Company paid back to the major shareholder $41,017.
As
of October 31, 2022 and July 31, 2022, the balance owing to a related party was $584,864 and $541,750, respectively. The loan was interest
free and unsecured and had no stated terms of repayment.
NOTE
7 - RESEARCH AND DEVELOPMENT EXPENSE
The
Company incurred significant expenses in research and development (R&D). For the three months ended October 31, 2022 and 2021, the
R&D expenses were $26,425 and $70,481, respectively.
NOTE
8 - INCOME TAXES
Income
tax expense was $0 for the three months ended October 31, 2022 and 2021.
As
of July 31, 2022, the Company had no unrecognized tax benefits and, accordingly, the Company did not recognize interest or penalties
during the three months ended October 31, 2022 related to unrecognized tax benefits. There was no accrual for uncertain tax positions
as of October 31, 2022.
There
is no income tax benefit for the losses for the three months ended October 31, 2022 and 2021, as management has determined that the realization
of the net tax deferred asset is not assured and has created a valuation allowance for the entire amount of such benefits.
NOTE
9 - SUBSEQUENT EVENTS
Management
has evaluated subsequent events through the date of filing the financial statements with the Securities and Exchange Commission, the
date the financial statements were available to be issued. Management is not aware of any reportable events that occurred subsequent
to the balance sheet date up to the date of filing this report.