NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
1 – Organization and Operations, and Going Concern
Shengda
Network Technology, Inc. (formerly known as “Soltrest, Inc.” or the “Company”), was incorporated
on March 14, 2018 under the laws of the State of Nevada. The Company’s principal business is the development of internet and personal
computer security software products. The Company is engaged in E- Commerce business.
On
April 20, 2020, the Company purchased 10,000 shares of common stock of Peaker International Trade Group Limited (“Peaker”)
for a total consideration of $1,330. These shares comprised of 100% of the then issued and outstanding shares of common stock of Peaker.
Peaker was formed in 2018 in Hong Kong.
On
May 15, 2020, Peaker set up a Company Zhejiang Jingmai Electronic Commerce Ltd., in China of which, Peaker is the sole shareholder.
Risk
and Uncertainty Concerning COVID-19 Pandemic
In
December 2019, an outbreak of a novel strain of coronavirus (COVID-19). On March 11, 2020, the World Health Organization characterized
COVID-19 as a pandemic. The Company is currently monitoring the outbreak of COVID-19 and the related business and travel restrictions
and changes to behavior intended to reduce its spread. While the Company’s operations are principally located outside the United
States, we utilize various consultants located in the United States, we participate in a global supply chain, and the existence of a
worldwide pandemic, the fear associated with COVID-19, or any, pandemic, and the reactions of governments around the world in response
to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact our ability
to conduct normal business operations, which could adversely affect our results of operations and liquidity. Disruptions to our supply
chain and business operations, or to our suppliers’ or customers’ supply chains and business operations, could include disruptions
from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences,
or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects
on our manufacturing output and delivery schedule. Any of these uncertainties could have a material adverse effect on our business, financial
condition or results of operations.
Going
Concern
The
Company demonstrates adverse conditions that raise substantial doubt about the Company’s ability to continue as a going concern.
The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability
of the Company to sell its stock to the investing community and obtain necessary financing to continue operations, and the attainment
of profitable operations. Although the Company recorded a net income of $1,025,050 for the nine months ended March 31, 2021, it has used
net cash flows in operating activities of $2,578,186, and has a net decrease in cash of $3,954,236 for the nine months ended March
31, 2021. These factors, among others, raise a substantial doubt regarding the Company’s ability to continue as a going concern.
If the Company is unable to obtain adequate capital, it could be forced to cease operations. The interim condensed consolidated financial
statements do not include any adjustments to reflect the recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note
2 – Basis of Presentation and Summary of Significant Accounting Policies
Basis
of Presentation
The
unaudited condensed consolidated financial statements included herein have been prepared by Shengda Network Technology Inc. and Subsidiaries,
including its consolidated subsidiaries, the “Company”, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of
America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that
the disclosures are adequate to make the information presented not misleading. For purposes of comparability, certain prior period amounts
have been reclassified to conform to the current year presentation. These unaudited condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report
on Form 10-K for the year ended June 30, 2020, filed with the SEC on November 13, 2020.
The
unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments)
which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations
for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period
or for the fiscal year.
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the
reported amounts of assets; (2) liabilities and disclosure of contingent assets and liabilities at the date of the financial statements;
and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates
Principles
of Consolidation
The
unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Peaker International
Trade Group Limited or “Peaker” and Peaker’s wholly owned subsidiary Zhejiang Jingmai Electronic Commerce Ltd., in
China. All significant inter-company accounts and transactions have been eliminated in consolidation.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash deposited with banks. Substantially
all of the Company’s cash is held in bank accounts in the PRC and is not protected by FDIC insurance or any other similar insurance.
The
Company’s bank account in the United States is protected by FDIC insurance. As of March 31, 2021 and June 30, 2020, the Company’s
bank account in the United States had no balances exceeding FDIC insurance of $250,000.
The
Company’s bank account in PRC is protected by FSD insurance. As of March 31, 2021 and June 30, 2020, the Company’s bank account
in PRC had $237,894 and $4,269,349, respectively, exceeding FSD insurance of RMB 500,000 as of March 31, 2021.
Major
Customer
The
Company has one major customer that accounted for 62% of revenues totaling $5,233,559 for the nine months ended March 31, 2021. The Company
has one major customer that accounted for 19% of revenues totaling $145,293 for the three months ended March 31, 2021.
Major
Vendor
The
Company has two major vendors that accounted for 100% of purchase amount totaling $6,958,811 for the nine months ended March 31, 2021.
The Company has one major vendor that accounted for 100% of purchase amount totaling $658,856 for the three months ended March 31, 2021.
Cash
and Cash Equivalents
The
Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased,
to be cash equivalents.
Revenue
Recognition
The
company is engaged in generating revenue through online networking sales, Shengda Network Technology is neither involved in production
nor hold any inventory. The company mainly sells products to enhance immunity and bedding to prevent mites, help sleep and resist bacteria.
The
Company recognizes revenues when control of the promised goods or services is transferred to the customer, in an amount that reflects
the consideration the Company expects to be entitled to in exchange for those goods or services. In that determination, under ASC 606,
the Company follows a five-step model that includes: (1) determination of whether a contract, an agreement between two or more parties
that creates legally enforceable rights and obligations, exists; (2) identification of the performance obligations in the contract; (3)
determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5)
recognition of revenue when (or as) the performance obligation is satisfied.
Accounts
Receivable
Accounts
receivable are generated primarily through sales to customers and are stated at invoiced amount, net of an allowance for doubtful accounts
and bear no interest. A provision for doubtful accounts is determined based on a specific review of outstanding customer balances and
historical customer write-off amounts and is charged to operations at the time management determines these accounts may become uncollectible.
The
Company establishes an individualized credit and collection policy based on each individual customer’s credit history. The Company
does not have a uniform policy that applies equally to all customers. The collection period usually ranges from three months to twelve
months. The Company grants extended payment terms only when the Company believes that the payment will be collectible at the end of the
term. The Company grants extended payment terms to customers based on the following factors: (a) whether or not the Company views a real
need, from the customer’s perspective, for the extension and (b) how critical the Company’s relationship with the customer
and is the customer the Company’s long-term business.
The
Company reviews the accounts receivable on a periodic basis and based on its reviews, the Company recorded allowance for doubtful accounts
of $0 and $0 as of March 31, 2021 and June 30, 2020, respectively and recorded bad debt expense of $0 and $0 for the nine months ended
March 31, 2021 and 2020.
Fair
Value Measurements
The
Company has established a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure
fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that
is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
●
|
Level
1 – inputs are based upon unadjusted quoted prices for identical instruments in active markets.
|
|
|
●
|
Level
2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets
with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs
are observable or can be derived principally from, or corroborated by, observable market data. If the asset or liability has a specified
(contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
|
|
|
●
|
Level
3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants
would use in pricing the asset or liability.
|
Our
other current financial assets and current financial liabilities have fair values that approximate their carrying values.
Property
and Equipment
Property
and equipment are stated at cost. The straight-line depreciation method is used to compute depreciation over the estimated useful lives
of the assets, as follows:
Items
|
|
Useful
life
|
Vehicles
|
|
5
years
|
Expenditures
for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures
for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated
depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the statement
of income in other income and expenses.
Leases
The
Company determines if an arrangement is a lease or contains a lease at inception. Operating lease right-of-use assets and lease liabilities
are recognized at commencement based on the present value of lease payments over the lease term. As the implicit rate is typically not
readily determinable in the Company’s lease agreements, the Company uses its incremental borrowing rate as of the lease commencement
date to determine the present value of the lease payments. The incremental borrowing rate is based on the Company’s specific rate
of interest to borrow on a collateralized basis, over a similar term and in a similar economic environment as the lease. Lease expense
is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recognized on the
balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Additionally, the
Company accounts for lease and non-lease components as a single lease component for its identified asset classes. As of March 31, 2021,
the Company did not have any finance lease.
Similar
to other long-lived assets, right-of-use assets are tested for impairment when events or conditions indicate that the carrying value
of an asset may not be fully recoverable from future cash flows. See Note 5, “Leases,” for additional information.
Commitment
and Contingencies
In
next one year, the Company will pay operating lease costs of $4,762.
Income
Tax
Income
tax returns are filed in federal, state, local and foreign jurisdictions as applicable. Provisions for current income tax liabilities
are calculated and accrued on income and expense amounts expected to be included in the income tax returns for the current year. Income
taxes reported in earnings also include deferred income tax provisions and provisions for uncertain tax positions.
Deferred
income tax assets and liabilities are computed on differences between the financial statement bases and tax bases of assets and liabilities
at the enacted tax rates. Changes in deferred income tax assets and liabilities associated with components of other comprehensive income
are charged or credited directly to other comprehensive income. Otherwise, changes in deferred income tax assets and liabilities are
included as a component of income tax expense. The effect on deferred income tax assets and liabilities attributable to changes in enacted
tax rates are charged or credited to income tax expense in the period of enactment. Valuation allowances are established for certain
deferred tax assets when realization is less than more likely than not.
Liabilities
are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions, in our
judgment, do not meet a more-likely-than-not threshold based on the technical merits of the positions. Additionally, liabilities may
be established for uncertain tax positions when, in our judgment, the more-likely-than-not threshold is met, but the position does not
rise to the level of highly certain based upon the technical merits of the position. Estimated interest and penalties related to uncertain
tax positions are included as a component of income tax expense.
Currency
Translation
The
assets and liabilities of the Company’s subsidiaries outside the U.S. are translated into U.S. dollars at the rates of exchange
in effect at the balance sheet dates, primarily from RMB. Income and expense items are translated at the average exchange rates prevailing
during the period. Gains and losses resulting from currency transactions are recognized currently in income and those resulting from
translation of consolidated financial statements are included in accumulated other comprehensive income (loss).
Note
3 - Loan Receivable
Loan
receivable amounted $8,242,010 and
$0 as of March 31, 2021 and June 30, 2020, respectively. On October 25, 2020, the Company signed an agreement with the Company’s
major customer. The Company agreed to loan the $9,157,789 (RMB60,000,000) at an annual interest
rate of 7.2%. The actual loan amount shall prevail within the total amount. The loan is guaranteed by the Company’s supplier and
due on October 25, 2021. The Borrower is required to pay all the principal and the relevant interest in full amount on the repayment
date.
The
Company assessed the implication on Revenue Recognition, ASC 606 and determined that the terms of the loan are at the fair market value
and does not impact the revenue recognition of the Company.
Note
4 – Property and Equipment
As
of March 31, 2021 and June 30, 2020, the Company had gross property and equipment of $78,731
and $0 and accumulated depreciation of $7,480 and $0, respectively. Property and equipment consisted of the vehicles. For
the three months ended March 31, 2021 and 2020, and for the nine months ended March 31, 2021 and 2020, depreciation and amortization
expenses amounted to $8,215 and $0, respectively.
Note
5 – Leases
The
Company has an operating lease for the rental of office space. Rent expense for the operating lease for the three and months ended March
31, 2021 and 2020, was $0, respectively, and for nine months ended March 31, 2021 and 2020, rent expense was $3,369 and $0, respectively.
The Company had paid rent up until December 10, 2020, the did not renew this lease.
On
January 5, 2021, Zhejiang Jingmai Electronic Commerce Ltd. leases new office in Zhejiang, China. The lease term of the office space is
from January 5, 2021 to April 5, 2022, and the rent-free period is from January 5, 2021 to April 5, 2021. The monthly rent is approximately
$397 (RMB 2,600). The operating lease is listed as separate line item on the Company’s condensed consolidated financial statements
and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease
payments are also listed as a separate line item on the Company’s condensed consolidated financial statements.
Operating
lease right-of-use assets and liabilities commencing after January 1, 2021 are recognized at commencement date based on the present value
of lease payments over the lease term. For the nine months ended March 31, 2021, the Company recognized approximately $934 in total operating
lease costs.
Because
the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present
value of the lease payments.
Information
related to the Company’s operating ROU assets and related lease liabilities are as follows:
|
|
Nine Months ended
March 31, 2021
|
|
Cash paid for operating lease liabilities
|
|
$
|
-
|
|
Weighted-average remaining lease term
|
|
|
1.0
|
|
Weighted-average discount rate
|
|
|
5
|
%
|
Minimum future lease payments
|
|
$
|
4,636
|
|
The
following table presents the amortization of the Company’s lease liabilities under ASC 842 for each of the following years ending
March 31:
2022
|
|
$
|
4,762
|
|
2023
|
|
|
-
|
|
2024
|
|
|
-
|
|
2025
|
|
|
-
|
|
2026 and thereafter
|
|
|
-
|
|
Total undiscounted lease liabilities
|
|
|
4,762
|
|
Less: Amount representing interest
|
|
|
(126
|
)
|
Total present value of minimum lease payments
|
|
$
|
4,636
|
|
Note
6 – Advances and Deposits
Advances
and deposits amounted to $32,526 and $4,274,500, as of March 31, 2021 and June 30, 2020, respectively, of which $2,000 and $302,000 pertains
to a related party (See Note 9).
Note
7 – Accrued Expenses and Other Payables
As
of March 31, 2021 and June 30, 2020, accrued expenses and other payables amounted to $85,140 and $26,416, respectively. Other payable
as of June 30, 2020 had $1,330 payable to related party (See Note 9). In September 2020, $1,330 payable to related party
has been repaid.
Note
8 – Stockholders’ Equity
Shares
Authorized
On
March 30, 2020, the Company filed a Certificate of Amendment with the State of Nevada, increasing the number of authorized shares to
1,020,000,000 par value $0.001; comprising of 1,000,000,000 of common stock and 20,000,000 of preferred stock.
Common
Stock
On
March 14, 2018 the Company exchanged 5,000,000 shares of common stock to the former President in return of her services valued at $5,000.
Pursuant
to a Form S-1 Registration Statement, in June, 2020, the Company sold 1,960,000 shares of Common Stock, par value of $0.001 per share,
for the total aggregate proceeds of $19,600.
On
November 2, 2020, the Company issued 7,049,945 shares of common stock at the sale price range from $0.06 to $2 per share, to 436 unrelated
and one related party.
As
a result of all common stock issuances, the total issued and outstanding shares of common stock were 14,009,945 shares and 6,960,000
shares as of March 31, 2021 and June 30, 2020, respectively.
Note
9 – Related Party Transactions
Related
parties with whom the Company had transactions are:
Related
Parties
|
|
Relationship
|
HangJin
Chen
|
|
President/CEO/CFO/Secretary/Director
|
Youcheng
Chen
|
|
Father of
CEO HangJin Chen
|
Li Weiwei
|
|
President/CEO/CFO/Secretary/Director
(Former)
|
On
June 16, 2020, the Company issued 300,000 shares of common stock to a related party (the Company’s CEO’s father) at $1.00
per share which was subsequently cancelled on June 30, 2020. The consideration of $300,000 is recorded as advances and deposits under
current liabilities in the consolidated balance sheets. On November 2, 2020, 300,000 shares of common stock were issued.
On
June 20, 2020, the Company issued 10,000,000 shares of common stock to HangJin Chen, the Company’s CEO at $0.0002 per share which
were subsequently cancelled on June 30, 2020. The consideration of $2,000 is recorded as advances and deposits under current liabilities
in the consolidated balance sheets.
On
July 1, 2020, the Company received a deposit of $2,000 from a related party Youcheng Chen. This deposit is recorded as advances and deposits
under current liabilities. On November 2, 2020, the Company issued 33,333 shares of common stock at the sale price $0.06 per share to
a related party Youcheng Chen.
Loan
from related party represent the advances to the Company by former President and Director in the amount of $19,974 as of March 31, 2021
and June 30, 2020, respectively. The loan is unsecured, non-interest bearing and due on demand. The Company has not recorded any imputed
interest expense for the nine months ended March 31, 2021 and 2020.
Note
10 – Subsequent Events
In
accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2021 to the date these condensed consolidated
financial statements were available to be issued and has determined that there were no significant subsequent events or transactions
that would require recognition or disclosure in the consolidated financial statements.