Shengda Network Technology, Inc. - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 000-05576

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files.) Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 ☒

As of May 19, 2022, there were 14,009,945 shares of the Company’s common stock issued and outstanding.

SHENGDA NETWORK TECHNOLOGIES, INC.

Form 10-Q

For the Quarter Ended March 31, 2022

Index

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

SHENGDA NETWORK TECHNOLOGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of unaudited condensed consolidated financial statements.

SHENGDA NETWORK TECHNOLOGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

The accompanying notes are an integral part of unaudited condensed consolidated financial statements.

SHENGDA NETWORK TECHNOLOGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

The accompanying notes are an integral part of unaudited condensed consolidated financial statements.

SHENGDA NETWORK TECHNOLOGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of unaudited condensed consolidated financial statements.

SHENGDA NETWORK TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Organization and Operations, and Going Concern

In these notes, the terms “us”, “we”, “it”, “its”, “Shengda”, the “Company” or “our” refer to Shengda Network Technology, Inc. and Subsidiaries. Shengda was incorporated under the laws of the State of Nevada on March 14, 2018 under the name Soltrest, Inc. and changed its name to Shengda Network Technology Inc.

The Company’s principal business is to provide portal for the sale of products offered by reliable manufacturers and merchants at competitive prices. Products run the gamut from electronics to daily consumable products, food and clothing.

On April 20, 2020, the Company purchased 10,000 shares of common stock of Peaker International Trade Group Limited (“Peaker”) for a total consideration of $1,330. These shares comprised of 100% of the then issued and outstanding shares of common stock of Peaker. Peaker was formed in 2018 in Hong Kong. On May 15, 2020, Peaker formed a Company in China Zhejiang Jingmai Electronic Commerce Ltd., of which Peaker is the sole shareholder.

Risk and Uncertainty Concerning COVID-19 Pandemic

In December 2019, an outbreak of a novel strain of coronavirus (COVID-19). On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. The Company is currently monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread. While the Company’s operations are principally located outside the United States, we utilize various consultants located in the United States, we participate in a global supply chain, and the existence of a worldwide pandemic, the fear associated with COVID-19, or any, pandemic, and the reactions of governments around the world in response to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity. Disruptions to our supply chain and business operations, or to our suppliers’ or customers’ supply chains and business operations, could include disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects on our manufacturing output and delivery schedule. Any of these uncertainties could have a material adverse effect on our business, financial condition or results of operations.

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements included herein have been prepared by Shengda Network Technology Inc. and Subsidiaries, including its consolidated subsidiaries, the “Company”, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021, filed with the SEC on September 28, 2021.

The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets; (2) liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net income or loss.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Peaker International Trade Group Limited or “Peaker” and Peaker’s wholly owned subsidiary Zhejiang Jingmai Electronic Commerce Ltd., in China. All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP 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 dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the consolidated financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Cash

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company did not have any cash equivalents at March 31, 2022 and June 30, 2021, respectively.

Accounts Receivable

Accounts receivable are generated primarily through sales to customers and are stated at invoiced amount, net of an allowance for doubtful accounts, and bear no interest. A provision for doubtful accounts is determined based on a specific review of outstanding customer balances and historical customer write-off amounts and is charged to operations at the time management determines these accounts may become uncollectible.

The Company establishes an individualized credit and collection policy based on each individual customer’s credit history. The Company does not have a uniform policy that applies equally to all customers. The collection period usually ranges from three months to twelve months. The Company grants extended payment terms only when the Company believes that the payment will be collectible at the end of the term. The Company grants extended payment terms to customers based on the following factors: (a) whether or not the Company views a real need, from the customer’s perspective for the extension, and (b) the Company’s relationship with the customer, and the Company’s long-term business prospects.

The Company reviews the accounts receivable on a periodic basis and based on its reviews, the Company recorded an allowance for doubtful accounts of $685,725 and $1,640,389 as of March 31, 2022 and June 30, 2021, respectively.

Inventories

Inventory is valued at the lower of cost or market. Inventories consist of finished goods. The Company reviews its inventories regularly for possible obsolete goods and establishes reserves when determined necessary. As of March 31, 2022 and June 30, 2021, the Company had no reserve for obsolete goods

Property and Equipment

Property and equipment are stated at cost. The straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows:

 Schedule of Estimated Useful Lives Of Assets

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the statement of income in other income and expenses.

Long-lived Assets

The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset compared to the estimated future undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss equal to the excess of the carrying value over the assets fair market value is recognized when the carrying amount exceeds the undiscounted cash flows. The impairment loss is recorded as an expense and a direct write-down of the asset. No impairment loss was recorded during the nine months ended March 31, 2022 and 2021, respectively.

Leases

The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease right-of-use assets and lease liabilities are recognized at commencement based on the present value of lease payments over the lease term. As the implicit rate is typically not readily determinable in the Company’s lease agreements, the Company uses its incremental borrowing rate as of the lease commencement date to determine the present value of the lease payments. The incremental borrowing rate is based on the Company’s specific rate of interest to borrow on a collateralized basis, over a similar term and in a similar economic environment as the lease. Lease expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recognized on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Additionally, the Company accounts for lease and non-lease components as a single lease component for its identified asset classes. As of March 31, 2022, the Company did not have any finance lease.

Similar to other long-lived assets, right-of-use assets are tested for impairment when events or conditions indicate that the carrying value of an asset may not be fully recoverable from future cash flows. See Note 5, “Leases,” for additional information.

Revenue Recognition

The Company is engaged in generating revenue through online networking sales. Shengda Network Technology is neither involved in production nor holding any inventory. The Company mainly sells products through a significant number of registered companies to members of its sales portal. The Company intends to offer products through offline stores and customer service centers.

The Company recognizes revenues when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. In that determination, under ASC 606, Revenue From Contracts With Customers, the Company follows a five-step model that includes: (1) determination of whether a contract, an agreement between two or more parties that creates legally enforceable rights and obligations, exists; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when (or as) the performance obligation is satisfied. The Company records the revenue once all the above steps are completed.

Fair Value Measurements

The Company has established a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 Fair Value Measurement, prioritizes the inputs into three levels that may be used to measure fair value:

The Company’s other current financial assets and current financial liabilities have fair values that approximate their carrying values.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash deposited with banks. Substantially all of the Company’s cash is held in bank accounts in the PRC and is not protected by FDIC insurance or any other similar insurance.

The Company’s bank account in the United States is protected by FDIC insurance. As of March 31, 2022 and June 30, 2021, the Company’s bank account in the United States had no balances exceeding FDIC insurance of $250,000.

The Company’s bank account in People’s Republic of China (“PRC”) is protected by FSD insurance. As of March 31, 2022 and June 30, 2021, the Company’s bank account in PRC had $0 and $140,277, balances exceeding FSD insurance of RMB 500,000.

Major Customer

The Company has three major customers that accounted for 37% of revenues totaling $1,015,827 for the nine months ended March 31, 2022. The Company has no major customer that accounted for more than 10% of revenues for the three months ended March 31, 2022.

The Company has one major customer that accounted for 62% of revenues totaling $5,233,559 for the nine months ended March 31, 2021. The Company has one major customer that accounted for 19% of revenues totaling $145,293 for the three months ended March 31, 2021.

Major Vendor

The Company has three major vendors that accounted for 92% of purchase amount totaling $2,343,379 for the nine months ended March 31, 2022. The Company has two major vendors that accounted for 95% of purchase amount totaling $1,229,789 for the three months ended March 31, 2022.

The Company has two major vendors that accounted for 100% of purchase amount totaling $6,958,811 for the nine months ended March 31, 2021. The Company has one major vendor that accounted for around 100% of purchase amount totaling around $658,856 for the three months ended March 31, 2021.

Commitment and Contingencies

The Company is committed to pay operating lease costs of $4,607 during the next twelve months.

Income Tax

Income tax returns are filed in federal, state, local and foreign jurisdictions as applicable. Provisions for current income tax liabilities are calculated and accrued on income and expense amounts expected to be included in the income tax returns for the current year. Income taxes reported in earnings also include deferred income tax provisions and provisions for uncertain tax positions.

Deferred income tax assets and liabilities are computed on differences between the financial statement bases and tax bases of assets and liabilities at the enacted tax rates. Changes in deferred income tax assets and liabilities associated with components of other comprehensive income are charged or credited directly to other comprehensive income. Otherwise, changes in deferred income tax assets and liabilities are included as a component of income tax expense. The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax expense in the period of enactment. Valuation allowances are established for certain deferred tax assets when realization is less than more likely than not.

Liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions, in our judgment, do not meet a more-likely-than-not threshold based on the technical merits of the positions. Additionally, liabilities may be established for uncertain tax positions when, in our judgment, the more-likely-than-not threshold is met, but the position does not rise to the level of highly certain based upon the technical merits of the position. Estimated interest and penalties related to uncertain tax positions are included as a component of income tax expense.

Currency Translation

The assets and liabilities of the Company’s subsidiaries outside the U.S. are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates, primarily from RMB. Income and expense items are translated at the average exchange rates prevailing during the period. Gains and losses resulting from currency transactions are recognized currently in income and those resulting from translation of consolidated financial statements are included in accumulated other comprehensive income (loss).

Earnings (Loss) Per Share

The Company computes net earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”), ASU 2019-12, “Simplifying the Accounting for Income Taxes.” ASU 2019-12 eliminates certain exceptions within ASC 740, “Income Taxes,” and clarifies certain aspects of ASC 740 to promote consistency among reporting entities. ASU 2019-12 is effective for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company evaluated the impact that with the adoption of ASU 2019-12, and it did not have any impact on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain areas. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2023, although early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its financial statements.

Note 3 - Advance to Suppliers

Advance to suppliers – current, net of allowance amounted $3,097,902 and $0 as of March 31, 2022 and June 30, 2021, respectively. The Company has recorded an allowance for uncollectible amount of $1,017,490 as of March 31, 2022. Advance to suppliers – non-current amounted $6,257,263 and $0 as of March 31, 2022 and June 30, 2021, respectively. Advance to suppliers are mainly prepayment for suppliers. On February 2, 2022, the Company entered into a purchase agreement with an unrelated party, which is also the Company’s major supplier. The Company agreed to purchase $28,394,302 (RMB 18,000 million) from the unrelated party over next three years. As of March 31, 2022, the Company has made advance payment of $9,385,894 (RMB 5,950 million) to the unrelated party, of which $6,257,263 (RMB 39,666,667) are recorded as advance to suppliers – non-current. The payment is interest free and without collateral. The reasons for making such advance are that the Company started to provide products to clients who are in the internet live broadcasting business. The company has no inventory, and the supplier directly delivers the goods to customers according to the order.

Note 4 - Loan Receivable

On October 25, 2020, the Company signed an agreement with an unrelated party, which is also the Company’s major customer. The Company agreed to loan the customer the $9,415,309 (RMB60,000,000) at an annual interest rate of 7.2%. The actual loan amount shall prevail within the total amount. The loan is guaranteed by a Company’s supplier and due on October 25, 2021. The borrower is required to pay all the principal and the relevant interest in full amount on the due date. The Company has recorded an allowance for uncollectible amount of $0 as of March 31, 2022. The total loan receivable, net of allowance amounted $0 and $6,417,350 as of March 31, 2022 and June 30, 2021, respectively. The principal and the relevant interest in full amount have been paid off in February 2022.

The Company assessed the implication on ASC 606, Revenue from Contracts with Customers, and determined that the terms of the loan are at the fair market value and does not impact the revenue recognition of the Company.

Note 5 – Property and Equipment

Property and equipment consisted of the cost of a vehicle. As of March 31, 2022 and June 30, 2021, property and equipment costs were $81,370 and $79,892, and accumulated depreciation of $23,191 and $11,384, respectively. For the nine months ended March 31, 2022 and 2021, depreciation expense including amortization of right of use assets amounted to $14,341 and $8,215, respectively.

Note 6 – Leases

The Company has an operating lease for the rental of office space. Rent expense for the operating lease amounted to $0 and $3,321 for nine months ended March 31, 2022 and 2021, respectively. The lease term was from May 11, 2020 and expired on December 10, 2020. The Company had paid rent up until December 10, 2020.

On January 5, 2021, Zhejiang Jingmai Electronic Commerce Ltd. leased an office in Zhejiang, China. The lease term of the office is from January 5, 2021 to April 5, 2022. There is rent-free period which is from January 5, 2021 to April 5, 2021. On March 20, 2022, the company renewed the one-year lease contract until March 30, 2023. The monthly rent is approximately $394.

The operating lease is listed as a separate line item on the Company’s consolidated financial statements. The operating lease represents the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are also listed as a separate line item on the Company’s consolidated financial statements.

Operating lease right-of-use assets and liabilities commencing after January 1, 2021 are recognized at commencement date based on the present value of lease payments over the lease term. For the nine months ended March 31, 2022, the Company recorded $2,923 in total lease operating costs. The Company had paid rent up until April 5, 2022.

Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments.

Information related to the Company’s operating right of use assets and related lease liabilities are as follows:

 Schedule of Operating ROU Assets and Lease Liability

The following table presents the amortization of the Company’s lease liabilities under ASC 842 for each of the following years ending March 31:

SCHEDULE OF AMORTIZATION OF LEASE LIABILITIES 

Note 7 – Advances and Deposits

Advances and deposits amounted to $0 and $30,976 as of March 31, 2022 and June 30, 2021, respectively. Advances are received from the customers for the sale of products in the normal course of business and adjusted against the payments due to them.

Note 8 – Accrued Expenses and Other Payables

As of March 31, 2022 and June 30, 2021, accrued expenses and other payables amounted to $269,069 and $98,354, respectively.

Note 9 – Stockholders’ Equity

The Company’s capitalization at March 31, 2022 was 1,000,000,000 authorized common shares with a par value of $0.001 per share, and 20,000,000 authorized preferred shares with a par value of $0.001 per share.

Common Stock

On July 1, 2021, the former President and Director of the Company agreed to forgive the working capital advance of $19,974 given to the Company as a loan on March 20, 2020 (Note 9). The forgiveness of loan was credited to the additional paid in capital as of March 31, 2022.

The Company did not issue any common stock during the nine months ended March 31, 2022. The total issued and outstanding shares of common stock were 14,009,945 shares and 14,009,945 shares as of March 31, 2022 and June 30, 2021, respectively.

Preferred Stock

On November 10, 2020, the Company adopted a resolution to designate 1,000,000 shares as Series A Preferred Stock. The original issue price of each share of Series A preferred Stock shall be $1.00.

Right to Receive Dividends

The holders of Series A Preferred Stock shall be entitled to receive dividends when, as and if declared by the Board of Directors of the corporation. The right to dividends on shares of Series A Preferred Stock shall be non-cumulative and no right shall accrue to holders of Series A Preferred Stock by reason of the fact that dividends on said shares are not declared in any prior period.

Liquidation Preference

In the event of any liquidation, dissolution, or winding up of the corporation, either voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Junior Securities but after distribution of such assets among, or payment thereof to holders of any Senior Preferred Stock, an amount equal to the Series A original issue price for each share of Series A Preferred Stock plus an amount equal to all declared but unpaid dividends on Series A Preferred Stock (the “Series A Liquidation Preference”).

After the payment of the full Series A Liquidation Preference, the remaining assets of the corporation legally available for distribution, if any, shall be distributed ratably to the holders of the Common Stock in an amount equal to the Series A Liquidation Preference; after such distribution to the holders of the Common Stock, the remaining assets of the corporation legally available for distribution, if any, shall be distributed ratably among the Series A Preferred Stock and the Common Stock. If the assets and funds legally available for distribution among the holders of Series A Preferred Stock shall be insufficient to permit the payment to the holders of the full Series A Liquidation Preference, then the assets and funds shall be distributed ratably among holders of Series A Preferred Stock in proportion to the number of shares of Series A Preferred Stock owned by each holder.

Voting Rights

Except as otherwise provided in the Certificate of Designation or required by law, the holders of the Series A Preferred Stock shall be entitled to vote, in the same manner and with the same effect as the holders of Common Stock, voting together with the holders of Common Stock as a single class. For this purpose, the holders of Series A Preferred Stock shall be given notice of any meeting of stockholders as to which the holders of Common Stock are given notice in accordance with the bylaws of the Corporation. As to any matter on which the holders of Series A Preferred Stock shall be entitled to vote, the holders of the outstanding Series A Preferred Stock shall have voting rights equal to an aggregate of seventy-five percent (75%) of the total shares entitled to vote by both (i) the holders of all of the then outstanding shares of Common Stock (whether or not such holders vote) and (ii) the holders of all of the then outstanding shares of voting shares of the Company.

Redemption

The Company shall have the right to redeem the Series A Preferred Stock, plus any accrued and unpaid dividends, in whole but not in part, at any time or from time to time (the “Redemption”), at a cash redemption price equal to the aggregate Series A original issue price the Series A Preferred Stock being redeemed (the “Redemption Amount”) plus an amount equal to the amount of the accrued and unpaid dividend thereon.

The total issued and outstanding shares of Preferred Stock were 50,000 shares and 50,000 shares, at March 31, 2022 and June 30, 2021, respectively.

Note 10 – Related Party Transactions

Related parties with whom the Company had transactions are:

 Schedule of Related Party Transaction

Related party loans represent working capital advances to the Company by former President and Director in the amount of $0 and $19,974 as of March 31, 2022 and June 30, 2021, respectively. The loan is unsecured, non-interest bearing and due on demand. The Company has not recorded any imputed interest expense for the nine months ended March 31, 2022 and 2021. On July 1, 2021, the former President and Director agreed to forgive the working capital advance of $19,974 given to the Company on March 20, 2020 (Note 9).

Note 11 – Subsequent Events

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2022 to the date these condensed consolidated financial statements were available to be issued and has determined that the following subsequent events or transactions that would require recognition or disclosure in the consolidated financial statements.

On April 22, 2022, the Company acquired 99% ownership of Yiwu Tianqi Enterprise Management Co., Ltd for no consideration.

On April 22, 2022, the Company acquired 99% ownership of Zhejiang Jingmai e-commerce Co., Ltd for no consideration.

On April 22, 2022, the Company acquired 99% ownership of Zhejiang Jingtao Supply Chain Co., Ltd for no consideration.

On August 28, 2020, the Company set up a 99% owned subsidiary Zhejiang Xiaojing e-commerce Co., Ltd.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

You should read this discussion together with the Financial Statements, related Notes and other financial information included elsewhere in this Form 10-Q. The following discussion contains assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties. These risks could cause our actual results to differ materially from those anticipated in these forward-looking statements. All references to “we,” “us,” “our” and the “Company” refer to Shengda Network Technology Inc., a Nevada corporation, and its consolidated subsidiaries unless the context requires otherwise.

Overview

Shengda Network Technology, Inc., formerly known as Soltrest, Inc., was incorporated on March 14, 2018 under the laws of the State of Nevada. On March 30, 2020, the Company filed an amendment to its Articles of Incorporation changing its name to Shengda Network Technology, Inc. (the “Company”).

On April 20, 2020, we purchased 100% of the shares of Peaker International Trade Group Limited, (“Peaker”), located in Hong Kong, for a total purchase price of US$1,330. Thereafter, on May 15, 2020, Peaker incorporated its wholly-owned subsidiary, Zhejiang Jingmai Electronic Commerce Ltd., (“Jingmai Electronic”) located in Zhejiang province, China, which serves as the operating company for our activities in China.

Description of Our Business

The Company’s principal business, through Jingmai Electronic, is providing an e-commerce portal (similar to Amazon or Wish) for the sale of products. We purchase goods according to market demand, directly from manufacturers that we have standing relationships with. The goods we source include, but are not limited to, electronic products, daily consumer goods such as shampoo and toothpaste, and various other items.

We then sell the goods we purchase, as well as products from other reliable merchants, to our various customers. Our Company is similar to a wholesaler in that our customers purchase goods from us bulk. We aim to effectively organize suppliers, manufacturers and distributors in order to minimize the costs of the whole supply chain system and offer competitive prices. Our Company does not warehouse or store any of the good we purchase. If the manufacturer we purchase from is not able to ship the goods directly to our customers, then our Company manages the logistics and arranges for a third-party shipping company.

Our Company actively cooperates with other listed or state-owned enterprises. We currently have a commodity purchase contract with Kunming Pharmaceutical Group. We also engage with companies whose products we feel are of good quality and that also need new channels, specifically social e-commerce. We cooperate with these companies so that they can expand their sales and supplies by offering our products and services on their sites

Target Market and Clients/Potential Clients

Our current target market is China, where we engage in e-commerce services. In recent years, with the rapid rise of social e-commerce, the Company began to diversify. Our sales channels have gradually changed from offline to online and from a single product sales business into a more comprehensive business of supply chain management.

Other Events

In April 2022, Jingmai Electronic incorporated three (3) wholly owned subsidiaries. Jingmai Electronic has begun to supply goods to various social e-commerce platforms and merchants. Social e-commerce refers to the process of engaging customers at every point of their buying journey.

Jingmai Electronic is designed to provide high-quality supply chain resources and is quicky moving into live broadcast management services in order to provide sustainable development for the Company. Jingmai Electronic, and its subsidiaries, also intend to provide comprehensive services, such as supply chain management and live broadcasting resources to TikTok and other social e-commerce platforms.

Covid-19 Pandemic

On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. The Company is currently monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread.

While the Company’s operations are principally located outside the United States, we utilize various consultants located in the United States, we participate in a global supply chain, and the existence of a worldwide pandemic, the fear associated with COVID-19, or any, pandemic, and the reactions of governments around the world in response to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity. Disruptions to our supply chain and business operations, or to our suppliers’ or customers’ supply chains and business operations, could include disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects on our manufacturing output and delivery schedule. Any of these uncertainties could have a material adverse effect on our business, financial condition or results of operations.

Results of Operations

Three months ended March 31, 2022 compared to the three months ended March 31, 2021

Revenue and Cost of Sales

Total revenues for the three months ended March 31, 2022 were $1,412,849  compared to $765,616 during the three months ended March 31, 2021. This increase was mainly due to some relief of the COVID-19 pandemic in China during the first quarter of 2022.

Operating expenses

Operating expenses were $1,078,606 for the three months ended March 31, 2022, compared to $53,669 during the three months ended March 31, 2021. This increase was due to the Company’s increased products supply to clients who are in the online live broadcasting business and the corresponding increased personnel.

Net Income

As a result of the forgoing, the net income for the three months ended March 31, 2021 was $2,771,749 as compared to net income of $45,207 for same period ended March 31, 2021. This increase was due to interest income.

Comparison of Results of Operations for the nine months ended March 31, 2022 and 2021

Revenue

Total revenues for the nine months ended March 31, 2021 were $2,759,820 compared to $8,499,788 during the nine months ended March 31, 2021. This decrease was due to the impact of the pandemic and the transition of the Company supplying products to clients in the internet live broadcasting business and e-commerce platforms, which caused reduced offline sales.

Operating expenses

Operating expenses were $1,210,298 for the nine months ended March 31, 2022, compared to $148,509 during the nine months ended March 31, 2021. This increase was due to increased labor costs and expenditures required for revenue channel expansion.

Net Income

As a result of the forgoing, the net income for the period ended March 31, 2022 was $2,754,473 compared to net income of $1,025,050 for same period ended March 31, 2021. This decrease was due to the Company’s shift from offline sales to online sales.

Liquidity and Capital Resources

As of March 31, 2022, we had $43,636 in cash and cash equivalents.

As of March 31, 2022, we had total assets of $11,805,580, working capital of $5,195,811 and an accumulated stockholders’ equity of $11,515,861. As of June 30, 2021, we had total assets of $9,234,996, working capital of $8,482,903 and an accumulated stockholders’ equity of $8,554,224

We believe that our Company’s cash on hand will be sufficient to fund all Company obligations and commitments for the next twelve months.

Off-Balance Sheet Arrangements.

None.

Critical Accounting Policies

The Securities and Exchange Commission issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” suggesting that companies provide additional disclosure and commentary on their most critical accounting policies. In Financial Reporting Release No. 60, the Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The nature of our business generally does not call for the preparation or use of estimates. Due to the fact that the Company does not have any operating business, we do not believe that we do not have any such critical accounting policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

With respect to the quarter ended March 31, 2022, under the supervision and with the participation of principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, it was concluded that our disclosure controls and procedures were not effective as of March 31, 2022 due to the material weaknesses in our internal controls over financial reporting. The matters involving internal controls and procedures that we considered to be material weaknesses were: (1) lack of a functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) ineffective controls over period end financial disclosure and reporting processes and (4) lack of timely communications with vendors and proper accrual of expenses.

Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

Changes in Internal Control over Financial Reporting:

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended March 31, 2022 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

Other than ordinary routine litigation incidental to the business, we know of no material, active or pending legal proceedings against us.

Item 1A. Risk Factors

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Signatures

Pursuant to the requirements of the Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.