Summit Networks Inc 10-Q, filed Feb 11, 2022
Summit Networks Inc. (SNTW)
About this 10-Q
Summit Networks Inc filed this 10-Q on February 11, 2022, covering the quarter ended December 31, 2021.
Headline figures
Quarter ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $76.2K
- compared with a net loss of $100.23K a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from ____________________ to _____________________
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares outstanding of each of the issuer’s classes of common stock, as of December 31, 2021 is as follows:
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Class of Securities |
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Common Stock, $0.001 par value |
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SUMMIT NETWORKS INC.
TABLE OF CONTENTS
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PAGE |
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PART I | |
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Item 1.Condensed Consolidated Unaudited Financial Statements |
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3.Quantitative and Qualitative Disclosures About Market Risk |
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Item 4.Controls and Procedures |
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PART II |
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Item 1.Legal Proceedings |
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Item 1A.Risk Factors |
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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 3.Defaults Upon Senior Securities |
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Item 4.Mining Safety Disclosures |
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Item 5.Other Information |
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Item 6.Exhibits |
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Signatures |
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Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the financial position, business strategy and the plans and objectives of management for future operations of Summit Networks Inc. (the “Company”), are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the “Risk Factors” section of the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on January 26, 2021. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SUMMIT NETWORKS INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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December 31, 2021 |
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September 30, 2021 | |||||
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ASSETS |
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Current Assets: | |||||||
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Cash & cash Equivalents |
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$ |
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$ |
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Total Current Assets |
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Fixed assets, net |
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TOTAL ASSETS |
$ |
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$ |
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LIABILITIES & STOCKHOLDERS’ DEFICIT | |||||||
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Current Liabilities: |
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Accounts payable and accrued expenses |
$ |
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$ |
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Accounts payable - related party |
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Due to related party |
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Total Current Liabilities |
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Stockholders’ Deficit: | |||||||
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders’ Deficit |
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TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIT |
$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
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SUMMIT NETWORKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For three months ended December 31 | ||||||
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2021 |
2020 | |||||
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Revenue |
$ |
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$ |
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Operating Expenses: |
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General and administrative expenses |
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Loss from operations |
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Provision for income taxes |
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Net Loss |
$ |
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$ |
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Basic Net loss per share |
$ |
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$ |
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Diluted Net loss per share |
$ |
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$ |
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Weighted average number of common shares outstanding |
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Diluted weighted average number of common shares outstanding |
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The accompanying notes are an integral part of these consolidated financial statements.
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SUMMIT NETWORKS INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(Unaudited)
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Common Stock |
Additional Paid-in |
Accumulated | ||||||||||||||
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Shares |
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Capital |
Deficit |
Total | ||||||||||||
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Balance, September 30, 2021 |
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$ |
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$ |
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Net loss |
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- |
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Balance, December 31, 2021 |
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$ |
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$ |
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$ |
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Balance, September 30, 2020 |
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$ |
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$ |
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$ |
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$ |
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Net loss |
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Balance, December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
The accompanying notes are an integral part of these consolidated financial statements.
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SUMMIT NETWORKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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For three months ended | |||||||
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December 31 | |||||||
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2021 |
2020 | ||||||
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
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Depreciation of fixed assets |
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Changes in operating assets and liabilities: |
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Accounts payable and accrued expenses |
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Accounts payable - related parties |
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Net cash used in operating activities |
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Net decrease in cash |
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Cash at beginning of period |
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Cash at end of period |
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$ |
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$ |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
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Cash paid during the period for : | |||||||
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Interest |
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$ |
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$ |
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Income Taxes |
$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
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SUMMIT NETWORKS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(Unaudited)
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
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, 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
On May 8, 2020, Sumnet (Canada) Inc. (“Sumnet (Canada)”) was incorporated in Canada. Sumnet (Canada) issued all its ordinary shares to the Company 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.
On January 20, 2021, Beijing ALW and Green Energy entered into a series of contractual agreements (the “VIE Agreement”) with Hengshui Jingzhen Environmental Company Limited (“Hengshui Jingzhen”, or the “VIE”), whereby Beijing ALW gained control over Hengshui Jingzhen, a P.R. China company, which provides integrated hazardous waste management services, including collecting, transferring, disposing, and recycling of hazardous waste, primarily in Hebei, China. On March 29, 2021, the board of directors and a majority shareholder of the Company approved the termination of the VIE Agreements with Hengshui Jingzhen. On the same date, Beijing ALW, Hengshui Jingzhen, and Hengshui Jingzhen’s shareholders entered into a Termination Agreement (the “Termination Agreement”) to terminate all existing VIE Agreements signed on January 20, 2021. Pursuant to the Termination Agreement, all of the rights and obligations under the existing VIE Agreements were terminated and the Company no longer had control of Hengshui Jingzhen. See NOTE 4. EXECUTION AND TERMINATION OF VIE AGREEMENTS.
-6-
Currently, we are in the early stage of development of our new business plan that involves acting as an international agent for a Japanese company to market its waste-to-energy technology to develop projects utilizing its technology in Chinese markets. However, to date, our activities have been limited to capital formation, organization, and development of a business plan.
On January 20, 2021, the Company changed its fiscal year-end from July 31 to September 30.
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 and has not generated any revenue since its inception, July 8, 2014, resulting in accumulated deficit of $
At December 31, 2021, the Company had a working capital deficiency of $
Management has evaluated the effect of the ongoing outbreak of the COVID-19, which was declared as a pandemic by the World Health Organization in March 2020. Although the ultimate disruption caused by the outbreak and the timing on a return to more normal operations are still uncertain, it may have a material adverse impact on the Company’s future business plan.
The Company actively looks for new business opportunities, and its operating expenses are paid solely through loans from the shareholders.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
On January 20, 2021, the Company changed its fiscal year-end from July 31 to September 30. Therefore, the consolidated balance sheets as of December 31, 2021 and September 30, 2021, the consolidated statements of operations and stockholders’ deficit for the three months ended December 31, 2021 and 2020, and the consolidated statements of cash flows for the three months ended December 31, 2021 and 2020 were prepared based on the Company’s new fiscal year.
The accompanying unaudited interim consolidated financial statements and information have been prepared in accordance with accounting principles generally accepted in the United States of America, and the applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, these financial statements contain all normal and recurring adjustments considered necessary to present fairly the Company's financial position, results of operations, cash flows, and stockholders’ equity for the periods presented. The results for the three months ended December 31, 2021 are not necessarily indicative of the results to be expected for the full year.
These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended September 30, 2021 filed with the Securities and Exchange Commission on December 29, 2021.
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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.
Fixed Assets
Fixed assets are recorded at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in the year of disposal. All ordinary repair and maintenance costs are expensed as incurred.
Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets:
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Estimated | ||
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Life | ||
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Office furniture |
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Share-Based Compensation
The Company follows the provisions of ASC Topic 718, Compensation - Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, non-employee directors, and consultants. Stock compensation expense, which is based on the grant date’s fair value estimated in accordance with the provisions of ASC 718, is recognized as an expense over the requisite service period, and the Company made a policy election to recognize forfeitures when they occur.
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.
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 December 31, 2021 and September 30, 2021, the Company did not have any amounts recorded pertaining to uncertain tax positions.
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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 carrying values of cash, accounts payable, and accrued liabilities approximate fair value. Pursuant to ASC 820 and 825, the fair value of cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets.
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. EXECUTION AND TERMINATION OF VIE AGREEMENTS
On January 20, 2021, Beijing ALW and Green Energy entered into a series of contractual arrangements, including Equity Pledge Agreement, Exclusive Technology Development, Consulting and Services Agreement, Exclusive Option Agreement, and Irrevocable Power of Attorney (collectively, the “VIE Agreements”) with Hengshui Jingzhen, whereby Beijing ALW gained control over Hengshui Jingzhen, a P.R. China company, which provides integrated hazardous waste management services, including collecting, transferring, disposing, and recycling of hazardous waste, primarily in Hebei, China. This transaction was accounted for as a reverse merger in which the Company was the legal acquirer and Hengshui Jingzhen was the accounting acquirer.
On March 29, 2021, due to changes of the Company’s business plan, the board of directors and a majority shareholder of the Company approved the termination of the VIE Agreements with Hengshui Jingzhen. On the same date, Beijing ALW, Hengshui Jingzhen, and Hengshui Jingzhen’s shareholders entered into a Termination Agreement to terminate all existing VIE Agreements signed on January 20, 2021. Pursuant to the Termination Agreement, all of the rights and obligations under the existing VIE Agreements were terminated and the Company had no control of Hengshui Jingzhen.
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NOTE 5. FIXED ASSETS
Fixed assets consisted of the following:
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December 31, 2021 |
September 30, 2021 | ||||||
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Office furniture |
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$ |
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Less: Accumulated depreciation |
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Property, plant, and equipment, net |
$ |
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$ |
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Depreciation expense for the three months ended December 31, 2021 and 2020 were $
NOTE 6. PREPAID EXPENSES
The Company had prepaid expenses of $
NOTE 7. RELATED PARTY BALANCES AND TRANSACTIONS
Related Party Balances
(i) Accounts payable – related party
On December 31, 2021 and September 30, 2020, accounts payable to related party of $
(ii) Amounts due to related parties:
As of December 31, 2021 and September 30, 2021, the amounts due to the shareholders of the Company, Shuhua Liu and Chiu Kin Wong, were $
Related Party Transactions
(i) MoralArrival Share Exchange Agreement
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,
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(ii) Consulting Service Agreement
On December 9, 2019, the Company signed a consulting service agreement (the “Service Agreement”) with Zenox Enterprises. The agreement lasts until the Company is listed on the NASDAQ. Pursuant to the Service Agreement, Zenox Enterprises provided consulting services with respect to the coordination and management of the Company’s financial reporting and other security listing activities. The Compensation for the consulting services was based on hours and rates agreed-upon by both parties. On March 26, 2021, the Company paid Zenox Enterprises $
The Company rented a third party’s office facilities, including mailbox and office equipment, for the Company’s daily operations. Zenox Enterprises paid $
NOTE 8. STOCKHOLDERS' EQUITY
On January 7, 2020, in connection with the MoralArrival Share Exchange Agreement, the Company issued
On February 3, 2021, the Company issued
On May 13, 2021, the Company issued
As of December 31, 2021, the Company had
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NOTE 9. INCOME TAXES
The reconciliation of income tax benefit at the U.S. statutory rate of
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Three Months Ended December 31, | |||||||
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2020 | ||||||
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US statutory rate |
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Income tax benefit at statutory rate |
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Change in valuation allowance |
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Income tax expense |
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$ |
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The tax effects of temporary differences that give rise to the Company’s net deferred tax assets are as follows:
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December 31, 2021 |
September 30, 2021 | ||||||
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Net operating loss carryforward |
$ |
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$ |
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Valuation allowance |
( |
( | |||||
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Net deferred tax assets |
$ |
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$ |
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NOTE 10. SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date these financial statements were available to be issued and concluded that no subsequent event needs to be disclosed.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following management’s discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. Our financial statements are prepared in U.S. dollars and in accordance with U.S. GAAP.
General Overview
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, we 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 beneficial owner of MoralArrival, which was Shuhua Liu. The acquisition of MoralArrival was with a related party as Ms. Liu, who controls the shares of MoralArrival, also 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. 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 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.
On May 8, 2020, Sumnet (Canada) Inc. (“Sumnet (Canada)”) was incorporated in Canada. Sumnet (Canada) issued all its ordinary shares to the Company 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.
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 were 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. On November 11, 2020, the Company canceled 3,000,000 shares of its common stock issued to Shuhua Liu after she delivered the shares to the Company.
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On January 20, 2021, Beijing ALW and Green Energy entered into a series of contractual arrangements, including Equity Pledge Agreement, Exclusive Technology Development, Consulting and Services Agreement, Exclusive Option Agreement, and Irrevocable Power of Attorney (collectively, the “VIE Agreements”) with Hengshui Jingzhen Environmental Company Limited (“Hengshui Jingzhen”, or the “VIE”), whereby Beijing ALW gained control over Hengshui Jingzhen, a P.R. China company, which provides integrated hazardous waste management services, including collecting, transferring, disposing, and recycling of hazardous waste, primarily in Hebei, China.
On March 29, 2021, due to changes of the Company’s business plan, board of directors and a majority shareholder of the Company approved the termination of the VIE Agreements with Hengshui Jingzhen. On the same date, Beijing ALW, Hengshui Jingzhen, and Hengshui Jingzhen’s shareholders entered into a Termination Agreement (the “Termination Agreement”) to terminate all existing VIE Agreements signed on January 20, 2021. Pursuant to the Termination Agreement, all of the rights and obligations under the existing VIE Agreements were terminated and the Company no longer had control of Hengshui Jingzhen.
Currently, we are in the early stage of development of our new business plan that involves acting as an international agent for a Japanese company to market its technology in producing energy from acidic and alkaline wastes to develop projects utilizing its technologies in Chinese markets. However, to date, our activities have been limited to capital formation, organization and development of a business plan.
Results of Operations
During the three months ended December 31, 2021 and 2020, we generated no revenues. Our operating expenses for the same periods were comprised of general and administrative expenses of $76,204 and $100,232, respectively, resulting in net loss of $76,204 for the three months ended December 31, 2021 compared to a net loss of $100,232 for the three months ended December 31, 2020. Our general and administrative expenses consisted of mainly professional fees for the three months ended December 31, 2021 and 2020, respectively. The decrease of general and administrative expenses was mainly due to a reduced level of legal fees paid during the period.
Our total assets as of December 31, 2021 were $63,996.
On January 7, 2020, in connection with the MoralArrival Share Exchange Agreement, the Company issued 3,000,000 shares of common stock to Ms. Liu. On November 11, 2020, the Share Exchange Agreement with MoralArrival was terminated and the 3,000,000 shares issued to Ms. Liu were cancelled.
On February 3, 2021, the Company issued 500,000 shares of common stock to Catalpa Holdings, Inc., a third party, as compensation for its consulting services in the amount of $15,000.
On May 13, 2021, the Company issued 500,000 shares of common stock to Mr. Jun Du, the Chief Operating Officer, as compensation for its services in the amount of $15,000.
As of December 31, 2021, the Company had 62,049,990 shares of common stock issued and outstanding.
As of December 31, 2021 and September 30, 2021, there were outstanding a total of $579,000 in debts due to related parties and shareholders, for expenses that were paid on behalf of the company and for advances from related parties. These debts were interest free, unsecured and payable on demand.
Because we have not been able to raise sufficient capital to execute our new business plan, we are now engaged in discussions with third parties regarding alternative directions for the Company that could enhance shareholder value.
Based on our current operating plan, we believe there is a possibility we will not be able to generate any revenue in the next quarter or in the coming twelve months. We may need to obtain additional financing to operate our business for the next twelve months. Additional financing, whether through public or private equity or debt financing, arrangements with the security holder or other sources to fund operations, may not be available, or if available, may be on terms unacceptable to us.
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Liquidity and Capital Resources
The Company had negative cash flow of $19,267 for the three months ended December 31, 2021 and negative cash flow of $100,232 for the three months ended December 31, 2020. The Company’s principal sources and uses of funds were as follows:
For the three months ended December 31, 2021, the Company used $19,267 in cash for operations as compared to $100,232 for the three months ended December 31, 2020. The decrease was primarily due to the increase in accounts payable and accrued expenses in the three months ended December 31, 2021 compared to the three months ended December 31, 2020.
The Company’s financial statements have been prepared on a going-concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company’s liquidity and capital needs relate primarily to working capital and other general corporate requirements. The Company’s operations do not currently provide cash flow. The Company had limited operations and has not generated any revenue since its inception, July 8, 2014, resulting in accumulated deficit of $1,186,254 as of December 31, 2021. There is no guarantee that Company will generate revenue and net income in the future. To date, the Company has funded its operations by advances from related parties. The business will require significant amounts of capital in the near term to sustain operations and make the investments it needs to continue operations and execute its longer-term business plan of acquiring an operating business or assets. As of December 31, 2021, we had cash of $61,611 and there were outstanding liabilities of $794,333. As of September 30, 2021, we had $80,878 in cash and the outstanding liabilities were $738,333. The working capital deficits were $730,337 and $654,133 on December 31, 2021 and September 30, 2021, respectively. These factors raise substantial doubt about our ability to continue as a going concern. The Company will be unable to conduct its planned operations unless we obtain financing in the near term to meet the needs of our on-going operations, generate future revenue from operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. In order to implement its business plan and become cash flow positive, management’s plan includes raising capital by equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If we issue equity or equity equivalents to raise additional funds, our existing stockholders will experience substantial dilution and the new holders of securities may have rights, preferences and privileges senior to those of our existing stockholders. Management also cannot provide any assurance that unforeseen circumstances will not increase the need for the Company to raise additional capital on an immediate basis. There can be no assurance that we will be able to continue to raise funds if at all, or on terms acceptable to the Company in which case the Company may be unable to continue its operations or to meet its obligations. If adequate capital is not available when needed, we will be required to significantly modify our business model or cease operations.
Management has evaluated the effect of the ongoing outbreak of the COVID-19, which was declared as a pandemic by the World Health Organization in March 2020. Although the ultimate disruption caused by the outbreak and the timing on a return to more normal operations are still uncertain, it may have a material adverse impact on the Company’s future business plan.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
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ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.
Material Weakness in Internal Control Over Financial Reporting
Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive officer and our chief financial officer. Based upon, and as of the date of this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ineffective as of December 31, 2021 due to the following material weaknesses that our management identified in our internal control over financial reporting as of December 31, 2021:
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1) |
We do not have an Audit Committee — While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities. |
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2) |
We lack internal accounting personnel who possesses U.S GAAP knowledge and working experience. |
We plan to take steps to remediate this material weaknesses as soon as practicable by implementing a plan to improve our internal control over financial reporting including, but not limited to, hiring additional staff who has U.S. GAAP knowledge and working experience and/or maintaining outside consultants experienced in U.S. GAAP financial reporting as well as in SEC reporting requirements. Our management team will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements.
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Evaluation of Changes in Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our president (our principal executive officer and our principal accounting officer and principal financial officer), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our company are being made only in accordance with authorizations of management and directors of our company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has conducted, with the participation of our president (our principal executive officer, our principal accounting officer and our principal financial officer), an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 in accordance with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework. Based on this assessment, management concluded that as of December 31, 2021, our company’s internal control over financial reporting was not effective based on present company activity. Our Company is in the process of adopting specific internal control mechanisms. Future controls, among other things, will include more checks and balances and communication strategies between the management and the board to ensure efficient and effective oversight over company activities as well as more stringent accounting policies to track and update our financial reporting.
Changes in Internal Control over Financial Reporting
Except for the matter described above, there were no changes in our internal controls over financial reporting during the three months ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Please see the “Legal Proceedings” in the current report on Form 8-K filed on January 26, 2021, which is incorporated herein by reference.
ITEM 1A. RISK FACTORS.
As a smaller reporting company, the Company is not required to provide this information.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
There were no sales of unregistered securities of the Company during the quarter ended December 31, 2021.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES.
None.
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ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
The following exhibits are included with this quarterly filing:
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Exhibit No. |
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Description |
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31.1* |
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Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) |
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31.1* |
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Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) |
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31.1* |
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Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350 |
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32.2* |
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Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350 |
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101* |
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Interactive Financial Data XBRL Extensions. |
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* |
Filed herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Summit Networks Inc. | |
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Date: February 11, 2022 |
By |
/s/ Shuhua Liu |
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Shuhua Liu |
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Chief Executive Officer |
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(Principal Executive Officer) |
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