BRILLIANT N.E.V. CORP. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. AlthoughBeijing Clancy started business operation and had generated revenue for the three months endedOctober 31, 2020 , the Company incurred loss, an accumulated deficit and experienced negative cash flow from operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The company's business objective for the next twelve month and beyond such time will be to expand business operations and increase revenue. The company will focus on product management, digital marketing, refined user operations, performance optimization, after-sales service, etc. to provide customers with more convenient and high- quality service experience. The Covid-19 pandemic presents novel challenges and a chaotic business environment globally. The duration and intensity of the impact of the Covid-19 to business entities differ geographically. Covid-19 has a limited impact on the Company's activities since Shanghai Clancy has no activities andBeijing Clancy operations are limited to Beijing, PRC. The impact on the result of operation and the financial statements was immaterial as ofOctober 31, 2020 .
NOTE 3 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation The consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted inthe United States of America ("US GAAP") and include the accounts ofClancy Corp. and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
Fiscal year end
The Company's year end is
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date the financial statements and the
reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
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CLANCY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020 NOTE 3 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws.
A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts. The core principle of ASC 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognizes revenue in accordance with that core principle by applying the following steps: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. Cash and Cash Equivalents
Cash and cash equivalents consist of all cash balances and highly liquid investments with original maturities of three months or less. Because of short maturity of these investments, the carrying amounts approximate their fair values.
Concentration of Credit Risk The Company is exposed to credit risk in the normal course of business, primarily related to cash and cash equivalents. A portion of the Company's cash and cash equivalents are deposited with Industrial and Commercial Bank of China Limited in the PRC, which is not insured or otherwise protected. The Company had deposits of$23,693 as ofOctober 31, 2020 . The Company has not experienced any losses in such accounts in the PRC.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") assets and operating lease liabilities in the consolidated balance sheets. Finance leases are included in finance lease ROU assets and finance lease liabilities in the consolidated balance sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease and finance lease ROU assets and liabilities recognized atOctober 31, 2020 based on the present value of lease payments over the lease term discounted using the rate implicit in the lease. In cases where the implicit rate is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the
lease term.
The Company has elected not to recognize operating lease ROU assets and liabilities arising from short-term leases.
Reporting Currency and Translation
The financial statements of the Company's foreign subsidiaries are measured
using the local currency, Renminbi ("RMB"), as the functional currency; whereas
the functional currency of Clancy Corp. and reporting currency of the Company is
the United States dollar ("USD" or "$").
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CLANCY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020 NOTE 3 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company has operations inChina where the local currency of RMB is used to prepare the consolidated financial statements which are translated into the Company's reporting currency,U.S. dollars. The local currency of RMB is the functional currency for the operations outsidethe United States . Changes in the exchange rates between this currency and the Company's reporting currency, are partially responsible for some of the periodic changes in the consolidated financial statements. Assets and liabilities of the Company's foreign operations are translated intoU.S. dollars at the spot rate in effect at the applicable reporting date. Revenues and expenses of the Company's foreign operations are translated at the average exchange rate during the applicable period. The resulting unrealized cumulative translation adjustment is recorded as a component of accumulated other comprehensive income (loss) in stockholders' deficit. Realized and unrealized transaction gains and losses generated by transactions denominated in a currency different from the functional currency of the applicable entity are recorded in general and administrative expense in the period in which they occur. For the three months period endedOctober 31, 2020 and 2019 there were no realized or unrealized transaction gains and losses generated by transactions denominated in a currency different from the functional currency of the applicable entities.
The exchange rates used to translate amounts in RMB to USD for the purposes of preparing the consolidated financial statements were as follows:
October 31, 2020 October 31, 2019
Period end USD: RMB exchange rate 6.69 7.04
Average USD: RMB exchange rate 6.83 7.09
Foreign Operations
All of the Company's operations and assets are located in Beijing China . The
Company may be adversely affected by possible political or economic events in
this country. The effect of these factors cannot be accurately predicted.
Contract Liabilities Need USD in below amounts
OnJuly 29, 2020 , the Company entered into three-year service maintenance agreements with three customers. The three service maintenance agreements total1,188,000 RMB to be received over the three-year period. The contracts require three months of upfront payments each quarter, totaling99,000 RMB per quarter. The Company's performance obligation will be satisfied on a monthly basis and the upfront payments will be recognized as revenue, pro rata on a monthly basis, over each fiscal quarter. For the three month period endedOctober 31, 2020 , the company recognized revenue of$14,495 . One of the service maintenance agreements is with a company that is controlled by a supervising officer ofBeijing Clancy and thus is deemed to be a related party. The total value of this service maintenance agreement is540,000 RMB , payable quarterly with upfront quarterly payments of45,000 RMB .
Basic Income (Loss) Per Share
The Company computes income (loss) per share in accordance with FASB ASC 260 "Earnings per Share". Basic income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. In the three months endedOctober 31, 2020 and 2019, there were no potentially dilutive equity instruments issued or outstanding. Comprehensive Income The Company follows Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") 220, "Comprehensive Income," in reporting comprehensive income. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. The Company has one item of other comprehensive loss, consisting of a currency translation adjustment of$1,824 for the three months endedOctober 31, 2020 compared to$0 for the three months endedOctober 31, 2019 . F-7 Table of ContentsCLANCY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOctober 31, 2020
NOTE 3 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial Instrument The carrying value of the Company's short-term financial instruments, such as accounts payable and advances, approximates their fair values because of their short maturities. Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Recently Adopted Accounting Pronouncements
As of
Recently Issued Accounting Pronouncements Not Yet Adopted
As ofOctober 31, 2020 , there was no recently issued accounting standards not yet adopted which would have a material effect on the Company's consolidated financial statements.
NOTE 4 - OPERATING LEASE RIGHT-OF- USE ASSETS
As of
NOTE 5 - LEASE LIABILITIES- OPERATING LEASE
Future minimum lease payments under the operating lease as of
12 months endedOctober 31, 2021 $ 38,496 12 months endedOctober 31, 2022 63,879 12 months endedOctober 31, 2023 33,483 Total Lease payments 135,858 Less Imputed Interest (9,444 )Net Lease liability$ 126,414
NOTE 6 - RELATED PARTY TRANSACTIONS
As ofOctober 31, 2020 andJuly 31, 2020 , the balance owing to a related party was$213,355 and$263,037 , respectively. As ofOctober 31, 2020 andOctober 31, 2019 , the loan was interest free and unsecured and had no stated terms of repayment.
NOTE 7 - RESEARCH AND DEVELOPMENT EXPENSE
As ofOctober 31, 2020 , the company fully expensed the cost of development of software prepaid to a third party in the amount of$39,531 . The research and development expense - software development was$39,531 and 0 for the three months endedOctober 31, 2020 and 2019. F-8 Table of ContentsCLANCY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOctober 31, 2020 NOTE 8 - CONTRACT LIABILITY$14,798 of service prepayment including$6,726 from a related party was received as ofOctober 31, 2020 compared to$14,143 including$6 , 426 received from a related party as ofJuly 31, 2020 . NOTE 9 - INCOME TAXES
Income tax expense was
As of
There is no income tax benefit for the losses for the three months endedOctober 31, 2020 and 2019, since management has determined that the realization of the net tax deferred asset is not assured and has created a valuation allowance for the entire amount of such benefits. F-9 Table of Contents
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements Certain statements made in this quarterly report on Form 10-Q are "forward-looking statements" in regard to the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the registrant to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this quarterly report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the registrant or any other person that the objectives and plans of the registrant will be achieved.
Substantial risks exist with respect to an investment in the Company. These
risks include but are not limited to, those factors discussed in our Annual
Report on Form 10-K for the fiscal year ended
? We have incurred significant losses and expect to incur future losses;
? Our current financial condition and immediate need for capital;
? Potential significant dilution resulting from the issuance of new
securities for any funding, debt conversion
or any business combination; and
? We are a "penny stock" company.
Description of Business
EffectiveJune 28, 2019 ("Effective Date"), a change of control occurred with respect to the Company. Pursuant to the terms of Stock Purchase Agreement, Gaoyang Liu purchased 2,000,000 shares of Company issued and outstanding common stock from Iryna Kologrim, the then sole officer, director, and majority shareholder of the Company. The 2,000,000 shares represented 64.4% of the shares of outstanding common stock of the Company. In connection with the transaction,Mr. Liu became the sole officer and director of the Company and Ms. Kologrim resigned in all capacities with respect to the Company. In addition, as of the Effective Date, the Company assigned all of the assets to Ms. Kologrim and she waived all liabilities, including any outstanding loans, and claims against the Company. In connection with the change of control, the Company ceased its business operation and is now a "shell company" as defined under Rule 405 promulgated under the Securities Act of 1933, as amended (the "Act"). Prior to such time, the Company produced and sold organic soaps. -2- Table of Contents
On
? The forward split of the Company's issued and outstanding common stock,
post-split shares for a one (1) pre-split share basis applicable to
stockholders of record as of
? The increase of the Company's authorized shares of common stock,
value, from 75,000,000 to
345,000,000.
The Corporate Actions were adopted by written consent of our sole Director, Mr. Gaoyang Liu, onJanuary 2, 2020 , and the sole Director recommended the Corporate Actions be presented to our shareholders for approval. OnJanuary 3, 2020 ,Mr. Liu , the Company's majority stockholder, holding 64.4% of the company's outstanding voting securities executed written consent approving the Corporate Actions. For purposes of the forward stock split described above, the sole Director also setJanuary 2, 2020 as the record date of such action. OnMarch 31, 2020 , a change of control occurred with respect to the Company. Pursuant to a Stock Purchase Agreement entered into by and among theClancy Corp. ("Company"), Gaoyang Liu ("Seller"), andXiangying Meng ("Buyer") (the "Purchase Agreement"), Seller assigned, transferred and conveyed to Buyer 60,000,000 shares of common stock of Company ("Common Stock"), which represents 64.4% of the total issued and outstanding shares of the Company, for the sum of$285,000 . In addition, Seller assigned his rights and interest to outstanding loans made by Seller to the Company in the amount of$55,609 for the face value of such loans. As a result of the transaction,Mr. Meng owned 67,500,000 shares of common stock of the Company or 72.5% of the issued and outstanding shares of common stock of the Company. In connection with the transaction,Mr. Liu , the then sole officer and director of the Company resigned in all officer and director capacities from the Company andMr. Meng was appointed Chief Executive Officer and Chief Financial Officer of the Company. In addition,Mr. Meng was appointed the sole director of the Company.
On
? The reverse split of our issued and outstanding common stock,$0.001 par
value, on thirty (30) pre-split shares to one (1) post-split share basis.
Fractional shares resulting from the action will be rounded up to the
nearest whole share.
The above corporate action was adopted by written consent of our sole Director
on June 11, 2020 , and the sole Director recommended the corporate action be
presented to our shareholders for approval. For purposes of the reverse stock
split described above, the sole Director also set June 12, 2020 as the record
date of such action. On June 12, 2020 , our majority stockholder, holding 91.885%
of our outstanding voting securities, executed written consent in lieu of a
shareholder meeting approving the corporate action.
On April 13, 2020 , the Company registered Shanghai Clancy Enterprise Management
Co., Ltd. (Shanghai Clancy) as a wholly foreign-owned entity and as a wholly
owned subsidiary in Shanghai, China . Shanghai Clancy had no business activity
from inception through October 31, 2020 .
On
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Results of Operations
While we commenced limited operations during the first fiscal quarter of this
year, at the present time, the Company still is considered a shell company as
defined in Rule 504 of the Act. One of our principal business objective for the
next 12 months and beyond such time will be to achieve meaningful business
operations. Alternatively, if we are unable to successfully develop our
business, we may seek a combination with a business rather than immediate,
short-term earnings. The Company will not restrict our potential candidate
target companies to any specific business, industry or geographical location
and, thus, may acquire any type of business.
Revenues.
For the three months endedOctober 31, 2020 and 2019, the company had revenues of$14,516 and 0, respectively. The revenues are from our technology related business conducted through our WOFE, Shanghai Clancy and its subsidiary, Beijing Clancy. Cost of Goods Sold For the three month endedOctober 31, 2020 and 2019, the Company had cost of goods sold$19,255 and 0, respectively. Cost of goods sold includes salaries and benefits of IT technicians. The increase in cost of goods sold is due to the commencement of our technology driven business in the first quarter of this current fiscal year. We did not have any business operations during the same period of the last fiscal year.
Operating Expenses.
For the three months endedOctober 31, 2020 , the Company had total operating expenses of$64,785 , consisting of$15,437 in lease expense,$9,817 in general and administrative expenses and$39,531 in research and development expense. These amounts compare with total operating expenses of$14,118 consisting of lease expense of$1,381 and general and administrative expense of$12,737 recorded in the three months endedOctober 31, 2019 . The increase of$50,667 was due in large part to research and develop costs associated with our recent business developments, along with the three year lease which we entered into inMay 2020 . -4- Table of Contents Net Loss.
For the three months ended
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original
maturities of three months or less to be cash equivalents. The Company had
Liquidity and Capital Resource
The Company had
As of
The Company can provide no assurances that it can continue to satisfy its cash requirements for at least the next twelve months.
The following is a summary of the Company's cash flows from operating and
financing activities for the three months ended
Three Month Ended Three Month Ended
October 31, 2020 October 31, 2019
Total Net Cash Used by Operating Activities $ (14,230 ) $ (12,737 )
Total Net Cash Provided by Financing Activities 26,142 12,737
Effects of Exchange rate Changes on Cash 740
-
Net Change in Cash $ (12,652 ) $ -
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Operating Activities
During the three month ended October 31, 2020 , the Company had a net loss of
$69,524 and after adjusting for lease expense, research and development expense,
prepaid expense and increase in accounts payable, a net cash used in operating
activities of $14,230 was recorded. By comparison, during the three month period
ended October 31, 2019 , the Company incurred a net cash used in operating
activities of $12,737 .
Financing Activities
During the three months endedOctober 31, 2020 , the Company repaid$57,206 in advances from the Company's majority shareholder offset by$83,348 in advances returned from two non-affiliates, which resulted in$26,142 in total net cash provided by financing activities for the period. By comparison, during the three months endedOctober 31, 2019 , the Company received$12,737 in advances from the Company's majority shareholder resulting in$12,737 in total net cash provided by financing activities for the period. Our financial statements reflect the fact that we do not have enough revenue to cover expenses. We are at present under-capitalized. The Company is dependent upon the receipt of capital investment or other financing to fund its ongoing operations and to execute its business plan of seeking a combination with a private operating company. In addition, the Company is dependent upon certain related parties to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, the Company may not be able to implement its plan of operations. -6- Table of Contents
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Contractual Obligations None.
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