NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JANUARY 31, 2022 AND THE SIX MONTHS ENDED JANUARY 31, 2021
NOTE
1. DESCRIPTION OF THE BUSINESS AND ORGANIZATION
Mu
Yan Technology Group Co., Limited, formerly Lepota Inc. (“MYTG” or the “Company”), is a US holding company incorporated
in Nevada on December 9, 2013. Our primary business originally was in the import of cosmetics into the Russian Federation and distribution
of the products through shops and drugstores. However, since August 12, 2020, we have been engaged in the mobile advertisement backpack
business. The Company’s current address is Room 1703B, Zhongzhou Building, No. 3088, Jintian
Road, Futian District, Shenzhen City, Guangdong Province, People’s Republic of China
518000.
On
February 18, 2020, as a result of a private transaction, 5,000,000 shares of our common stock (the “Shares”) were transferred
from Rene Lawrence to certain purchasers, including Zhao Lixin who became a 53.8% holder of the voting rights of the Company at the time.
The consideration paid for the Shares, which represented 67.3% of the issued and outstanding share capital of the Company on a fully-diluted
basis, was $257,160. The source of the cash consideration for the Shares was personal funds of the Purchasers.
On
April 14, 2020, the Company filed a Certificate of Amendment with the Secretary of State of the State of Nevada to amend the Articles
of Incorporation of the Company by increasing the authorized common stock of the Company from 75,000,000 shares to 500,000,000 shares.
Mu
Yan Technology Holding Co., Ltd (“Mu Yan Samoa”) was incorporated in the Independent State of Samoa on April 2, 2020. Mu
Yan Samoa, together with its subsidiaries, is engaged in the mobile advertisement backpack business.
Mu
Yan (Hong Kong) Technology Co., Limited, (“Mu Yan HK”), a wholly-owned subsidiary of Mu Yan Samoa, was incorporated in Hong
Kong on January 10, 2020. On June 1, 2020, Mu Yan Samoa entered into an equity transfer agreement with the shareholder of Mu Yan HK,
under which Mu Yan Samoa agreed to pay total consideration of HKD 1,000 (approximately $128.21) in cash in exchange for a 100% ownership
interest in Mu Yan HK.
Mu
Yan (Shenzhen) Media Technology Co., Ltd. (“Mu Yan WFOE”), a wholly-owned subsidiary of Mu Yan HK, was incorporated in the
PRC on June 10, 2020.
Mu
Yan (Shenzhen) Digital Technology Co., Ltd. (“Mu Yan Shenzhen”) was incorporated in the PRC on September 30, 2019 and became
a wholly-owned subsidiary of Mu Yan WFOE on July 1, 2020. Mu Yan Shenzhen sells its mobile advertisement backpacks to consumers in the
PRC and worldwide and operates primarily out of the PRC. Mu Yan Shenzhen was controlled by the same owner immediately prior to its acquisition
by Mu Yan HK. As these transactions are between entities under common control, the Company has reported the results of operations for
the periods in a manner similar to a pooling of interests and has consolidated financial results since the initial date in which the
above companies were under common control. Assets and liabilities were combined on their carrying values and no recognition of goodwill
was made.
On
August 12, 2020, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”), with Mu Yan Samoa and shareholders
who together own shares constituting 100% of the issued and outstanding shares of Mu Yan Samoa and who are listed in Annex I to the Exchange
Agreement (the “Sellers”). Pursuant to the terms of the Exchange Agreement, the Sellers transferred to the Company all of
their shares of Mu Yan Samoa in exchange for the issuance of 300,000,000 shares (the “Shares”) of the Company’s common
stock (representing approximately 98% of the Company’s outstanding common stock upon issuance) (the “Acquisition”).
The Acquisition is accounted for as a reverse merger because on a post-merger basis, the former shareholders of Mu Yan Samoa held a majority
of our outstanding ordinary shares on a voting and fully diluted basis.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying consolidated financial statements include the balances and results of operations of the Company. The consolidated financial
statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”)
and in conformity with generally accepted accounting principles in the U.S. (“US GAAP”).
The
accompanying consolidated financial statements are presented on the basis that the Company is a going concern. The going concern assumption
contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
Basis
of Consolidation
The
consolidated financial statements include the financial statements of the Company and its subsidiaries. Subsidiaries are all entities
over which the Company has control. Control exists when the Company has the power over the entity, exposure or rights to variable returns
from involvement in the entity and the ability to use power over the entity to affect returns through its power over the entity. In assessing
control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control commences until the date that control ceases.
Economic
and Political Risks
The
Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations
may be influenced by the political, economic and legal environment in the PRC and by the general state of the PRC economy. Because all
of our operations are conducted in the PRC through our wholly-owned subsidiaries, the Chinese government may exercise significant oversight
and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a
material change in our operations and/or the value of our shares.
The
Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies
in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment
and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions
in the PRC and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion,
remittances abroad and rates and methods of taxation.
Foreign
Currency Translation
The
Company’s reporting currency is the U.S. dollar and the functional currency is the Chinese Renminbi (“RMB”). All assets
and liabilities are translated at exchange rates at the balance sheet date, revenue and expenses are translated at the average yearly
exchange rates and equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining
net income but are included in foreign exchange adjustment to other comprehensive income, a component of equity.
Transactions
in currencies other than the functional currencies during the period are converted into the applicable functional currencies at the applicable
rates of exchange prevailing at the dates of the transactions. Exchange gains and losses are recognized in the statements of operations.
The exchange rates utilized are as follows:
SCHEDULE OF FOREIGN CURRENCY TRANSLATION
| |
As of and
for the six
months ended
January 31, 2022 | | |
As of and
for the six
months ended
January 31, 2021 | |
Period-end RMB : US$1 exchange rate | |
| 6.37 | | |
| 6.47 | |
Period-average RMB : US$1 exchange rate | |
| 6.41 | | |
| 6.66 | |
No
representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, related disclosures of contingent liabilities at the balance sheet date and revenue
and expenses in the consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Company’s
financial statements include the valuation allowance for deferred tax assets, economic lives and impairment of property, plant and equipment,
allowance for doubtful accounts, etc. Actual results could differ from those estimates and such differences could affect the results
of operations reported in future periods.
Fair
Value Measurement
Accounting
Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures,” which defines fair value, establishes
a framework for measuring fair value and expands disclosures about fair value measurements. The statement clarifies that the exchange
price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in
which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset
or liability. It also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and that market participant
assumptions include assumptions about risk and effect of a restriction on the sale or use of an asset.
This
ASC establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and
the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level
1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level
2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the
full term of the asset or liability; and
Level
3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported
by little or no market activity).
At
January 31, 2022, the Company has no financial assets or liabilities subject to recurring fair value measurements. The Company’s
financial instruments include cash, accounts receivable, advances to suppliers, other receivables, held for sale assets, accounts payable,
other payables, taxes payable and related party receivables or payables. Management estimates that the carrying amounts of financial
instruments approximate their fair values due to their short-term nature. The fair value of amounts with related parties is not practicable
to estimate due to the related party nature of the underlying transactions.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. All
cash and cash equivalents relate to cash on hand and cash at the bank as of January 31, 2022 and July 31, 2021.
The
RMB is not freely convertible into foreign currencies. Under the PRC Foreign Exchange Control Regulations and Administration of Settlement,
Sales and Payment of Foreign Exchange Regulations, the Company is permitted to exchange RMB for foreign currencies through banks that
are authorized to conduct foreign exchange business.
Accounts
Receivable
Financial
instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. The Company
extends credit to its customers in the normal course of business and generally does not require collateral. The Company’s credit
terms are dependent upon the segment, and the customer. The Company assesses the probability of collection from each customer at the
outset of the arrangement based on a number of factors, including the customer’s payment history and its current creditworthiness.
If in management’s judgment collection is not probable, the Company does not record revenue until the uncertainty is removed.
Management
performs ongoing credit evaluations, and the Company maintains an allowance for potential credit losses based upon its loss history and
its aging analysis. The allowance for doubtful accounts is the Company’s best estimate of the amount of credit losses in existing
accounts receivable. Management reviews the allowance for doubtful accounts each reporting period based on a detailed analysis of trade
receivables. In the analysis, management primarily considers the age of the customer’s receivable, and also considers the creditworthiness
of the customer, the economic conditions of the customer’s industry, general economic conditions and trends, and the business relationship
and history with its customers, among other factors. If any of these factors change, the Company may also change its original estimates,
which could impact the level of the Company’s future allowance for doubtful accounts. If judgments regarding the collectability
of receivables were incorrect, adjustments to the allowance may be required, which would reduce profitability.
Accounts
receivable are recognized and carried at the original invoice amount less an allowance for any uncollectible amounts. An estimate for
doubtful accounts receivable is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.
No allowance for doubtful accounts was made as of January 31, 2022 and July 31, 2021.
Inventories
Inventories
consist of raw materials and finished goods and are stated at the lower of cost, determined on a weighted average basis, or net realizable
value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and
the estimated costs necessary to make the sale. When inventories are sold, their carrying amount is charged to expense in the period
in which the revenue is recognized. Write-downs for declines in net realizable value or for losses of inventories are recognized as an
expense in the period the impairment or loss occurs. The Company made no allowance for obsolete finished goods for the six months ended
January 31, 2022 and the year ended July 31, 2021.
Held
for sale assets
Held
for sale assets are stated at the lower of their cost or fair value less cost to sell. A gain is recognized for any subsequent increase
in fair value less cost to sell, but recognized gains may not exceed the cumulative losses previously recognized.
Property,
plant and equipment
Property,
plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over the assets’ estimated useful
lives, using the straight-line method. Estimated useful lives of the property, plant and equipment are as follows:
SCHEDULE
OF ESTIMATED USEFUL LIVES PROPERTY PLANT AND EQUIPMENT
Motor vehicles | |
4 to 10 years |
Office equipment | |
3 years |
The
cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is
included in the statement of income. The cost of maintenance and repairs is charged to the statement of income as incurred, whereas significant
renewals and betterments are capitalized.
Impairment
of long-lived assets
The
Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may no longer be recoverable. Whenever there is an indication showing a permanent decrease in the amount of property, plant
and equipment, such as an evidence of obsolescence or physical damage of an asset or significant changes in the manner in which an asset
is used or is expected to be used, the Company shall recognize loss on decrease in value of property, plant and equipment in the statement
of income where the carrying amount of the asset is higher than the recoverable amount. The Company measures impairment by comparing
the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets
and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the
Company would recognize an impairment loss based on the fair value of the assets. The Company did not record any impairment losses on
long-lived assets during the six months ended January 31, 2022 and the year ended July 31, 2021.
Operating
leases
The
Company determines if an arrangement contains a lease at inception. The Company elected the practical expedient, for all asset classes,
to account for each lease component of a contract and its associated non-lease components as a single lease component, rather than allocating
a standalone value to each component of a lease. For purposes of calculating operating lease obligations under the standard, the Company’s
lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such option.
The Company’s leases do not contain material residual value guarantees or material restrictive covenants. Operating lease expense
is recognized on a straight-line basis over the lease terms. The discount rate used to measure a lease obligation is usually the rate
implicit in the lease; however, the Company’s operating leases generally do not provide an implicit rate. Accordingly, the Company
uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing
rate is an entity-specific rate that represents the rate of interest a lessee would pay to borrow on a collateralized basis over a similar
term with similar payments.
Revenue
recognition
Recognition
of revenue
Revenue
is generated through the sale of goods and rendering services. Revenue is recognized when a customer obtains control of promised goods
or services and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those
goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows
arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to
receive in exchange for those goods and services. The Company applies the following five-step model in order to determine this amount:
|
(i) |
identification
of the promised goods and services in the contract; |
|
(ii) |
determination
of whether the promised goods and services are performance obligations, including whether they are distinct in the context of the
contract; |
|
(iii) |
measurement
of the transaction price, including the constraint on variable consideration; |
|
(iv) |
allocation
of the transaction price to the performance obligations; and |
|
(v) |
recognition
of revenue when (or as) the Company satisfies each performance obligation. |
The
Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled
to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606
at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which
of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated
to the respective performance obligations when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s
performance obligations are transferred to customers at a point in time, typically upon delivery.
Contract
liabilities
A
contract liability is the obligation to transfer goods to a customer for which the Company has received consideration (or an amount of
consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer,
a contract liability is recognized when the payment is made or the payment is due (whichever is earlier). The Company’s contract
liabilities comprise advances from customers, which are recognized as revenue when the Company performs under the contract. The balances
of advances from customers as of January 31, 2022 and July 31, 2021 are $Nil and $176,465, respectively.
For
all reporting periods, the Company has not disclosed the value of unsatisfied performance obligations for all service revenue contracts
with an original expected length of one year or less, which is an optional exemption that is permitted under the adopted rules.
Other
income and other expenses
Other
income and other expenses are recognized on an accrual basis in accordance with the substance of the relevant agreements.
Research
and development expenses
Research
and development expenses include payroll, employee benefits and other operating expenses associated with research and platform development.
To date, expenditures incurred between when the application has reached the development stage and when it is substantially complete and
ready for its intended use have been inconsequential and, as a result, the Company did not capitalize any qualifying development costs
in the accompanying consolidated financial statements.
Earnings
per share
The
Company reports earnings per share in accordance with ASC 260 “Earnings Per Share,” which requires presentation of basic
and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic
earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common
shares outstanding during the reporting period. Diluted earnings per share takes into account the potential dilution that could occur
if securities or other contracts to issue common stock were exercised and converted into common stock. Further, if the number of common
shares outstanding increases as a result of a stock dividend or stock split or decreases as a result of a reverse stock split, the computations
of a basic and diluted earnings per share shall be adjusted retrospectively for all periods presented to reflect that change in capital
structure.
The
Company’s basic earnings per share is computed by dividing the net income available to holders by the weighted average number of
the Company’s ordinary shares outstanding. Diluted earnings per share reflects the amount of net income available to each ordinary
share outstanding during the period plus the number of additional shares that would have been outstanding if potentially dilutive securities
had been issued. The Company had no potentially dilutive shares as of January 31, 2022.
Share
capital
Incremental
costs directly attributable to the issue of shares are recognized as a deduction from equity.
Related
party balances and transactions
A
related party is generally defined as:
(i)
any person that holds the Company’s securities, including such person’s immediate family,
(ii)
the Company’s management,
(iii)
someone that directly or indirectly controls, is controlled by or is under common control with the Company, or
(iv)
anyone who can significantly influence the consolidated financial and operating decisions of the Company.
A
transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
Income
taxes
The
Company accounts for income taxes using the asset and liability method prescribed by ASC 740 “Income Taxes.” Under this method,
deferred tax assets and liabilities are determined based on the difference between the consolidated financial reporting and tax bases
of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse.
The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not
that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is
recognized as income or loss in the period that includes the enactment date.
The
Company does not have any material unrecognized tax benefits.
The
Company is governed by the Income Tax Laws of the PRC. The PRC federal statutory tax rate is 25%. The Company files income tax returns
with the relevant government authorities in the PRC. The Company does not believe there will be any material changes in its unrecognized
tax positions over the next 12 months.
The
Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
The Company does not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense
recognized during the six months ended January 31, 2022 and the six months ended January 31, 2021. The Company’s effective tax
rate differs from the PRC federal statutory rate primarily due to non-deductible expenses, temporary differences and preferential tax
treatment.
Recently
issued and adopted accounting pronouncements
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses
on Financial Statements.” This ASU requires a financial asset (or group of financial assets) measured at amortized cost basis to
be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from
the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial
asset. This Accounting Standards Update affects entities holding financial assets and net investment in leases that are not accounted
for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off
balance sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual
right to receive cash. For public business entities, the amendments in this Update are effective for fiscal years beginning after December
15, 2022, including interim periods within those fiscal years. All entities may adopt the amendments in this Update through a cumulative-effect
adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective
approach). The Company is in the process of evaluating the impact of the adoption of this pronouncement on its financial statements.
The
Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have
a significant impact on the Company’s financial statements.
NOTE
3. OTHER RECEIVABLES
Other
receivables consisted of the following:
SUMMARY OF OTHER RECEIVABLES
| |
January 31, 2022 | | |
July 31, 2021 | |
Rental deposit | |
$ | 54,714 | | |
$ | 53,989 | |
Pending input VAT | |
$ | 17,000 | | |
$ | 74,340 | |
Prepaid legal service fee | |
$ | 35,000 | | |
$ | 5,250 | |
Advance for R&D service fee | |
$ | - | | |
$ | 292,064 | |
Others | |
$ | 41,725 | | |
$ | 54,096 | |
Total | |
$ | 148,439 | | |
$ | 479,739 | |
The
Company leases an office and paid an amount equal to two months’ rent as a security deposit.
NOTE
4. INVENTORIES
Inventories
consist of the following:
SCHEDULE OF INVENTORY
| |
January 31, 2022 | | |
July 31, 2021 | |
Raw materials | |
$ | 325,442 | | |
$ | 138,852 | |
Finished goods | |
$ | 196,755 | | |
$ | 97,194 | |
Total inventories | |
$ | 522,197 | | |
$ | 236,046 | |
There
is no inventory allowance for the six months ended January 31, 2022 and the year ended July 31, 2021.
NOTE
5. HELD FOR SALE ASSETS
Held
for sale assets relate to IT servers acquired during the year ended July 31, 2021. On May 10, 2021, the Company entered into a contract
with Mr. Zhao Lixin, the Company’s CEO, to sell these IT servers to him for $2,554,100. The IT servers were delivered to Mr. Zhao
on August 10, 2021.
NOTE
6. DOWN PAYMENTS TO SUPPLIERS
The
Company has made advances to third-party suppliers. These advances are down payments according to the purchase agreements made to expedite
the delivery and preferential prices for the materials and the parts for the goods that the Company sells.
NOTE
7. PROPERTY, PLANT AND EQUIPMENT
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT
| |
January 31, 2022 | | |
July 31, 2021 | |
Motor vehicles | |
$ | 2,092,161 | | |
$ | 402,957 | |
Office equipment | |
$ | 52,093 | | |
$ | 50,534 | |
Less: accumulated depreciation | |
$ | (234,337 | ) | |
$ | (115,610 | ) |
Total | |
$ | 1,909,918 | | |
$ | 337,881 | |
During
the six months ended January 31, 2022, the Company acquired a motor vehicle costing $1,689,204 and office equipment consisting of 1 desktop
computer costing $1,559, for a total cost of $1,690,763. Depreciation expense for the six months ended January 31, 2022 and the year
ended July 31, 2021 was $116,486 and $83,134, respectively.
NOTE
8. INCOME TAXES
Enterprise
income tax (“EIT”)
The
Company was incorporated under the laws of the State of Nevada and is subject to the United States federal income tax. No provision for
income taxes in the United States has been made as the Company had no United States taxable income for the six months ended January 31,
2022 and the year ended July 31, 2021.
The
Company operates in the PRC and files tax returns in PRC jurisdictions.
The
Company’s subsidiary formed in the Independent State of Samoa is not subject to tax on its income or capital gains. In addition,
upon payment of dividends by the Company to its shareholders, no withholding tax is imposed.
The
Company’s subsidiary formed in Hong Kong is subject to a profits tax rate of 16.5% for income generated and operation in the special
administrative region.
The
Company operates in the PRC and files tax returns in PRC jurisdictions. Income generated and operations in the PRC are subject to a tax
rate of 25%.
The
full realization of the tax benefit associated with a carry forward depends predominantly upon the Company’s ability to generate
taxable income during the carry forward period.
In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of
the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. A valuation allowance
is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize
their benefits, or that future deductibility is uncertain.
The
reconciliation of income taxes computed at the PRC federal statutory tax rate applicable in the PRC, to income tax expenses are as follows:
SCHEDULE OF FEDERAL STATUTORY TAX RATE INCOME TAX EXPENSES
| |
For the six
months ended
January 31, 2022 | | |
For the
year ended
July 31, 2021 | |
PRC statutory tax rate | |
| 25 | % | |
| 25 | % |
Expenses not deductible | |
| - | % | |
| 3 | % |
Valuation allowance | |
| (24 | )% | |
| 46 | % |
Income tax expense | |
| 1 | % | |
| 74 | % |
| |
For the six
months ended
January 31, 2022 | | |
For the
year ended
July 31, 2021 | |
PRC statutory tax rate | |
| 25 | % | |
| 25 | % |
Computed expected (expenses)/benefits | |
$ | (215,997 | ) | |
$ | 153,926 | |
Expenses not deductible | |
$ | 847 | | |
$ | 18,190 | |
Valuation allowance | |
$ | 215,997 | | |
$ | 282,959 | |
Income tax expense | |
$ | 847 | | |
$ | 455,075 | |
Value
added tax (“VAT”)
Pursuant
to the Provisional Regulations on Value-Added Tax of the PRC and its implementation regulations, unless otherwise stipulated by relevant
laws and regulations, any entity or individual engaged in the sales of goods, provision of processing, repairs and replacement services
and importation of goods into China is generally required to pay a value-added tax, or VAT, for revenues generated from sales of products,
while qualified input VAT paid on taxable purchases can be offset against such output VAT.
According
to the Announcement on Relevant Policies for Deepening Value-added Tax Reform jointly promulgated by the Chinese Ministry of Finance,
the State Administration of Taxation and the General Administration of Customs, which became effective on April 1, 2019, the taxable
goods previously subject to VAT rates of 16% and 10%, respectively, become subject to lower VAT rates of 13% and 9% respectively starting
from April 1, 2019. Our sales of goods are subject to VAT rates of 13%.
NOTE
9. RELATED PARTIES TRANSACTIONS
The
Company had the following balances with related parties:
SCHEDULE OF AMOUNT DUE FROM RELATED PARTIES
(a)
Amount due from related parties
| |
Relationship | |
For the
six months
ended
January 31, 2022 | | |
For the
year ended
July 31, 2021 | |
Hang Zhou Huo Bao Bao AD and Media Co. Ltd. | |
Common shareholder of Winning Match Int’l Co., Ltd which is one of the shareholders of Mu Yan Samoa | |
$ | 140,830 | | |
$ | 139,315 | |
Bang Bi Tuo (Shen Zhen) Technology Co., LTD. | |
Mr Zhao Lixin, CEO of this entity | |
$ | 169,773 | | |
$ | 232,158 | |
The
balances with related parties are unsecured, non-interest bearing and repayable on demand.
SCHEDULE OF AMOUNT DUE TO A RELATED PARTY
(b)
Amount due to a related party
| |
For the
six months ended
January 31, 2022 | | |
For the
year ended
July 31, 2021 | |
Zhao Lixin | |
Mr Zhao Lixin, CEO of this entity | |
$ | - | | |
$ | 2,554,100 | |
| |
| |
| | | |
| | |
SCHEDULE
OF RELATED PARTY TRANSACTION
The
balance with related party is unsecured, non-interest bearing and repayable on demand.
(c)
Transactions
Trade in nature | |
For the
six months ended
January 31, 2022 | | |
For the
year ended
July 31, 2021 | |
Service provided by Hang Zhou Huo Bao Bao AD and Media Co. Ltd. | |
$ | - | | |
$ | 91,410 | |
| |
| | | |
| | |
Cash advance to related parties | |
| | | |
| | |
Bang Bi Tuo (Shen Zhen) Technology Co., Ltd. | |
$ | 22,516 | | |
$ | 228,493 | |
| |
| | | |
| | |
Repayment from related parties | |
| | | |
| | |
Bang Bi Tuo (Shen Zhen) Technology Co., Ltd. | |
$ | 86,849 | | |
$ | 914,099 | |
NOTE
10. RESERVES
Statutory
reserve
In
accordance with the relevant laws and regulations of the PRC, the company established in the PRC is required to transfer 10% of its annual
profit after taxation prepared in accordance with the accounting regulations of the PRC to the statutory reserve until the reserve balance
reaches 50% of the company’s paid-up capital. Such reserves may be used to offset accumulated losses or increase the registered
capital of the company, subject to the approval from the PRC authorities, and are not available for dividend distribution to the shareholders.
There is $485,415 and $485,415 reserve provided for the six months ended January 31, 2022 and the year ended July 31, 2021, respectively.
Currency
translation reserve
The
currency translation reserve represents translation differences arising from translation of foreign currency financial statements into
the Company’s functional currency.
NOTE
11. LEASES
In
February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The guidance supersedes existing guidance on accounting
for leases with the main difference being that operating leases are to be recorded in the statement of financial position as right-of-use
assets and lease liabilities, initially measured at the present value of the lease payments. For operating leases with a term of 12 months
or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. For public business
entities, the guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years. Early application of the guidance is permitted. In transition, entities are required to recognize and measure leases at the beginning
of the earliest period presented using a modified retrospective approach. Effective July 1, 2020, the Company adopted this standard,
resulting in the recognition of right-of-use assets of $129,911 and operating lease liabilities of $129,911.
The
adoption of the new lease guidance did not have a material impact on the Company’s results of operations or liquidity, but resulted
in the recognition of operating lease liabilities and operating lease right-of-use assets on its balance sheets. Right-of-use (“ROU”)
assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease
payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present
value of lease payments over the lease term. The Company has a lease for the office in Shenzhen, PRC, under an operating lease expiring
in June 2022, which is classified as an operating lease. There are no residual value guarantees and no restrictions or covenants imposed
by the lease. Rent expense for the six months ended January 31, 2022 and the six months ended January 31, 2021 were $160,172 and $144,306,
respectively. Cash paid for the operating lease was included in the operating cash flows.
There
are no residual value guarantees and no restrictions or covenants imposed by the lease. As of January 31, 2022, the Company has $129,911
of right-of-use assets, $129,911 in current operating lease liabilities and $Nil in non-current operating lease liabilities.
Significant
assumptions and judgments made as part of the adoption of this new lease standard include determining (i) whether a contract contains
a lease, (ii) whether a contract involves an identified asset, and (iii) which party to the contract directs the use of the asset. The
discount rates used to calculate the present value of lease payments were determined based on hypothetical borrowing rates available
to the Company over terms similar to the lease terms.
The
Company’s future minimum payments under long-term non-cancelable operating leases are as follows:
SCHEDULE OF LONG TERM NON CANCELABLE OPERATING LEASES
| |
January 31,2022 | |
Within 1 year | |
$ | 131,458 | |
After 1 year but within 5 years | |
$ | - | |
Total lease payments | |
$ | 131,458 | |
Less: imputed interest | |
$ | (1,547 | ) |
Total lease obligations | |
$ | 129,911 | |
Less: current obligations | |
$ | (129,911 | ) |
Long-term lease obligations | |
$ | - | |
Other
information:
SCHEDULE OF MEASUREMENT OF LEASE LIABILITIES
| |
January 31, 2022 | | |
January 31, 2021 | |
| |
For the six months ended | |
| |
January 31, 2022 | | |
January 31, 2021 | |
Cash paid for amounts included in the measurement of lease liabilities: | |
| | |
| |
Operating cash flow from operating lease | |
$ | 157,749 | | |
$ | 148,820 | |
Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow from operating lease | |
$ | 157,749 | | |
$ | 148,820 | |
Right-of-use assets obtained in exchange for operating lease liabilities | |
$ | 129,911 | | |
$ | 419,584 | |
Remaining lease term for operating lease (years) | |
| 1 | | |
| 1 | |
Weighted average discount rate for operating lease | |
| 4.75 | % | |
| 4.75 | % |
NOTE
12. SUBSEQUENT EVENTS
No
subsequent events.