Summit Networks Inc. - Quarter Report: 2017 April (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Commission file number 333-199108

Nevada

(State or other jurisdiction of incorporation or organization)

Jaunciema gatve 40,

Ziemeļu rajons, Rīga,

LV-1023, Latvia

(Address of principal executive offices, including zip code.)

(775)572-8824

(Telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 last 90 days. YES x NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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 and post such files). YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer, "accelerated filer," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 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 o NO x

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 5,000,000 shares as of May 8, 2017.

ITEM 1. FINANCIAL STATEMENTS

SUMMIT NETWORKS INC.  

Balance Sheet  

See Notes to Financial Statements.

See Notes to Financial Statements.

See Notes to Financial Statements.

SUMMIT NETWORKS INC.

Notes to Financial Statements

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Summit Networks Inc. (the “Company”) was incorporated under the laws of the State of Nevada on July 8, 2014. The Company was formed to engage in the development and operation of a business engaged in the distribution of glass craft products produced in China.

The Company is in the development stage. Its activities to date have been limited to capital formation, organization, development of its business plan and minimal sales. The Company has commenced limited operations.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of Presentation

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles (“US GAAP”).

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.” This ASU removes the definition of a development stage entity from the ASC, thereby removing the financial reporting distinction between development stage entities and other reporting entities from GAAP. In addition, the ASU eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of operations, cash flows, and shareholders’ deficit, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. Early adoption is permitted. The Company has adopted this ASU and, accordingly, no inception to date financial information is disclosed and the accompanying financial statements are not labeled as those of a development stage entity.

The Company has a July 31, year-end.

b. Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported net income or losses.

c. Earnings per Share

ASC No. 260, “Earnings Per Share”, specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock.

SUMMIT NETWORKS INC.

Notes to Financial Statements

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company has adopted the provisions of ASC No. 260.

Basic net loss per share amounts is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted earnings per share are the same as basic earnings per share due to the lack of dilutive items in the Company.

d. Cash and Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

e. Use of Estimates and Assumptions

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 of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. There were no significant estimates in the current reporting period.

f. Income Taxes

Income taxes are provided in accordance with ASC No. 740, Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

g. Revenue Recognition

The Company records revenue on the accrual basis when all goods and services have been performed and delivered, the amounts are readily determinable, and collection is reasonably assured. The Company has generated $223,911 in revenue from the sales of glass products since its inception.

h. Allowances

All orders from customers are prepaid prior to shipment and delivery so no allowance is necessary.

SUMMIT NETWORKS INC.

Notes to Financial Statements

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

i. Warranties

Summit, and its customers, has the right to inspect the goods upon receipt and notify the Supplier of any claim for damages. If any defect or damages is identified the Supplier will replace or repair the goods or refund the purchase price at the Suppliers option. The Supplier is liable for all damages and repairs and not the company so no warranty liability is booked.

j. Advertising

The Company expenses its advertising when incurred. There has been $12,498 in advertising expense since inception.

k. Fixed Assets

Fixed assets are stated at cost. The Company utilizes straight-line depreciation over the estimated useful life of the asset. Assets are tested for impairment annually and no impairment was found for the period ended April 30, 2017.

l. New Accounting Pronouncements

ASC 842 was added by ASU 2016-02 on February 25, 2016. It is effective for public business entities for annual periods beginning after December 15, 2018 (i.e., calendar periods beginning on January 1, 2019) and interim periods therein. For all other entities, ASC 842 will be effective for annual periods beginning after December 15, 2019 (i.e., calendar periods beginning on January 1, 2020) and interim periods thereafter. Early adoption will be permitted for all entities.

The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The Board ultimately reached the conclusion that the economics of leases can vary for a lessee and that those economics should be reflected in the financial statements; therefore, Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in the statement of comprehensive income and the statement of cash flows is largely unchanged from previous GAAP.

SUMMIT NETWORKS INC.

Notes to Financial Statements

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company is currently evaluating whether ASC 842 will have a material effect on the Company’s financial statements and if so whether to early adopt the accounting standard.

The Company has evaluated all the recent accounting pronouncements through the date the financial statements were issued and filed with the Securities and Exchange Commission and other than noted above believe that none of them will have a material effect on the company’s financial statements. The Company will continue to evaluate accounting pronouncements as they are issued to determine whether they will have a material effect on the company’s financial statements.

NOTE 3. GOING CONCERN

The accompanying financial statements are presented on a going concern basis. The Company had limited operations during the period from July 8, 2014 (date of inception) to April 30, 2017 resulting in net loss of $29,889. This condition raises substantial doubt about the Company’s ability to continue as a going concern. Even though the Company is currently in the development stage and has minimal expenses, management does not believe that the company’s current cash of $902 is sufficient to cover the expenses they will incur during the next twelve months.

NOTE 4. WARRANTS AND OPTIONS

There are no warrants or options outstanding to acquire any additional shares of common.

NOTE 5. RELATED PARTY TRANSACTIONS

The sole officer and director of the Company may, in the future, become involved in other business opportunities as they become available, he may face a conflict in selecting between the Company and his other business opportunities. The Company has not formulated a policy for the resolution of such conflicts.

As of April 30, 2017, an amount due to Mr. Andris Berzins, CEO of the Company, was $458 which is non-interest bearing with no specific repayment terms.

NOTE 6. INCOME TAXES

SUMMIT NETWORKS INC.

Notes to Financial Statements

NOTE 7. STOCKHOLDERS’ EQUITY

Transactions, other than employees’ stock issuance, are in accordance with ASC No. 505. Thus issuances shall be accounted for based on the fair value of the consideration received. Transactions with employees’ stock issuance are in accordance with ASC No. 718. These issuances shall be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, or whichever is more readily determinable.

As of April 30, 2017 the stockholders’ equity section of the Company contains Common stock, $0.001 par value: 75,000,000 shares authorized; 5,000,000 shares issued and outstanding.

On July 23, 2014 the Company issued a total of 4,000,000 shares of common stock to a director for cash in the amount of $0.001 per share for a total of $4,000.

On January 29, 2015 the Company issued a total of 1,000,000 shares of common stock to 30 independent investors for cash in the amount of $0.04 per share for a total of $40,000.

As of April 30, 2017, the Company had 5,000,000 shares of common stock issued and outstanding.

NOTE 8: PROPERTY AND EQUIPMENT

The Company currently has property consisting of an office and shop for $8,000 located at Jaunciema gatve 40, Ziemeļu rajons, Rīga, LV-1023, Latvia. The Company has also leases executive offices at 8153 Finch Feather St., Las Vegas, NV 89143. Office Equipment is of value $9,750. Depreciation expense for the Latvia property and office equipment for the period ended April 30, 2017 was $50 and $349 respectively.

NOTE 9: COMMITMENT & CONTINGENCIES

On July 30, 2014, the Company entered into Commercial Lease Agreement for three years that expires July 30, 2017 for $1,000 a month as the Company’s office space. The rent expense for the years ended July 31, 2017, 2016 and 2015 was $0 due to a free rent promotion offered by the property manager based upon the Company committing to a new lease beginning in August 2018, which has not been signed or agreed upon yet.

NOTE 10: CONCENTRATIONS

The Company’s revenue to date has been concentrated with one client. The Company’s orders to date have been from one vendor, based upon the product requirements of our client. This raises a substantial risk for the Company if we lost either the current customer or current vendor.

NOTE 11: SUBSEQUENT EVENTS

The Company has evaluated events subsequent to the date these financial statements have been issued to assess the need for potential recognition or disclosure in this report. Such events were evaluated through the date these financial statements were available to be issued. Based upon this evaluation, it was determined that no subsequent events occurred that require recognition or disclosure in the financial statements.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The information contained in this report, including in the documents incorporated by reference into this report, includes some statements that are not purely historical and that are “forward-looking statements.” Such forward-looking statements include, but are not limited to, statements regarding our Company and management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition, results of operations, and financial performance. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this report are based on current expectations and beliefs concerning future developments and the potential effects on the parties and the transaction. There can be no assurance that future developments actually affecting us will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the parties’ control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.

Results of Operations

We have generated $223,911 in revenues since our inception on July 8, 2014. Our cost of goods sold was $163,258 resulting in a gross profit of $60,653. During the period from inception to April 30, 2017, our operating expenses were comprised of selling, general and administrative expenses of $92,021, resulting in a net loss of $29,889. Our selling, general and administrative expenses consist of mainly professional fees.

During the three months ended April 30, 2017 and 2016, we generated $8,010 and $6,869, respectively, in revenues with cost of goods sold being $6,349 and $5,693, resulting in gross profits of $1,661 and $1,176. Our operating expenses for the same three month periods were comprised of selling, general and administrative expenses of $1,320 and $1,600, respectively, resulting in net gain (loss) of $341 and $(424). Our selling, general and administrative expenses for the period consisted of mainly professional fees.

During the nine months ended April 30, 2017 and 2016, we generated $28,193 and $36,247, respectively, in revenues with cost of goods sold being $21,266 and $21,831, resulting in gross profits of $6,927 and $14,416. Our operating expenses for the same nine month periods were comprised of selling, general and administrative expenses of $9,559 and $23,927, respectively, resulting in net losses of $2,632 and $9,511. Our selling, general and administrative expenses for the period consisted of mainly professional fees.

Our total assets at April 30, 2017 were $15,069, which was $902 in cash, $1,000 in other assets and $13,167 in property and equipment. We currently anticipate that our legal and accounting fees over the next 12 months as a result of being a reporting company with the SEC, and will be approximately $9,000.

We received the initial equity funding of $4,000 from our sole officer and director who purchased 4,000,000 shares of our common stock at $0.001 per share.

On January 29, 2015 the Company issued a total of 1,000,000 shares of common stock to 30 independent investors for cash in the amount of $0.04 per share for a total of $40,000.

As of April 30, 2017 the Company had 5,000,000 shares of common stock issued and outstanding.

As of April 30, 2017, there is a total of $458 in a note payable that is owed by the company to an officer and director for expenses that he has paid on behalf of the company. The note payable is interest free and payable on demand.

Plan of Operation for the next 12 months

We closed our Offering pursuant to a Registration Statement on Form S-1. The Offering was for the sale of a total of 2,000,000 shares of common stock at a fixed price of $.04 per share. We were only able to sell 50% of the offering, 1,000,000 shares for proceeds of $40,000. Proceeds from the sale of the shares were used to fund the initial stages of our business development. Because we were not able to raise sufficient capital to execute our full business plan, we are now engaged in discussions with third parties regarding alternative directions for the Company that could enhance shareholder value. The business plan of our company below assumes that we will continue with our business as originally planned. However, as mentioned above, we are in discussions that could lead to another direction for the Company.

The following table sets forth the use of proceeds based on the sale of 50% of the securities offered for sale by the Company.

________

The figures above represent only estimated costs and may be adjusted based upon revenues.

We are in the early stages of developing our plan to distribute glass craft products, in forms including but not limited to glass crafts, novelties, knobs, trophies, vases, glasses, boxes, bowls, trays, plates. We currently have some operating history which includes revenues and cost of sales. Our plan of operations over the next 12 month period is as follows:

Set up Office.

Time Frame: 1st to 3rd months

Now that our Offering has closed we plan to acquire the necessary office equipment to expand operations. We have budgeted a cost of $2,000 to obtain the necessary office equipment. Andris Berzins, our sole officer and director will handle our administrative duties.

Develop Our Website.

Time Frame: 3rd to 5th months

When our equipment is obtained, we intend to begin developing our website. Our sole officer and director, Andris Berzins will be in charge of registering our web domain. Once we register our web domain, we plan to hire a web designer to help us design and develop our website. We do not have any written agreements with any web designers at current time. We have budgeted a cost of $3,500 for the website. It will take up to 90 days to develop our website. There will be information about us, the variety of glass craft products we will offer, information on how to order our product and other information. Updating and improving our website will continue throughout the lifetime of our operations.

Commence Marketing Campaign.

Time Frame: 6th to 12th months

Once our website is operational, we will begin to market our product. We intend to use marketing strategies, such as web advertisements, direct mailing, and phone calls to acquire potential customers. We also expect to get new clients from “word of mouth” advertising where our new clients will refer their friend and colleagues to us. We plan to attend trade shows in our industry to showcase our product with a view to find new customers. We also will use internet promotion tools on Facebook and Twitter to advertise our products and company. We intend to spend $15,000 on marketing efforts during the first year. Marketing is an ongoing matter that will continue during the life of our operations.

Negotiate service agreements with potential wholesale customers.

Time Frame: 6th to 12th months

At the same time we start our marketing campaign, we plan to contact and start negotiations with potential wholesale customers, such as glass craft distributors. Initially, our sole officer and director, Mr. Berzins, will look for potential wholesale customers. We will negotiate terms and conditions of collaboration. Even though the negotiation with potential wholesale customers will be ongoing during the life of our operations, we cannot guarantee that we will be able to establish successful agreements.

Even if we are able to obtain sufficient number of service agreements at the end of the twelve month period, there is no guarantee that we will be able to attract and more importantly retain enough customers to justify our expenditures. If we are unable to generate a significant amount of revenue and to successfully protect ourselves against those risks, then it would materially affect our financial condition.

Based on our current operating plan, we believe that we will increase our revenue from selling our glass craft products by mid-2017. We may need to obtain additional financing to operate our business for the next twelve months. Additional financing, whether through public or private equity or debt financing, arrangements with the security holder or other sources to fund operations, may not be available, or if available, may be on terms unacceptable to us.

Liquidity and Capital Resources

At April 30, 2017 we had $902 in cash and there were outstanding liabilities of $958. Our director has verbally agreed to continue to loan the company funds for operating expenses in a limited scenario, but he has no legal obligation to do so.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Management maintains “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of April 30, 2017.

Based on that evaluation, management concluded, as of the end of the period covered by this report, that our disclosure controls and procedures were effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Controls over Financial Reporting

As of the end of the period covered by this report, there have been no changes in the internal controls over financial reporting during the quarter ended April 30, 2017, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting subsequent to the date of management’s last evaluation.

PART II. OTHER INFORMATION

ITEM 5. OTHER INFORMATION

ITEM 4.01. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT

(a) On November 23, 2016 the Board of Directors of Summit Networks Inc terminated the services of Monte C. Waldman, CPA, the company’s independent registered public account firm. The decision to terminate the services of Monte C. Waldman was made because of a letter the company received from the U.S. Securities and Exchange Commission. The audit report of Monte C. Waldman, CPA on the Company's financial statements for the year ended July 31, 2016 did not contain an adverse opinion.

There were no disagreements with Monte C. Waldman, CPA whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Monte C. Waldman, CPA's satisfaction, would have caused it to make reference to the subject matter of the disagreement in connection with its report on the registrant's financial statements.

The registrant requested that Monte C. Waldman, CPA furnish it with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the above statements, and Monte C. Waldman declined the company’s request for the letter because the firm is challenging the contents of the letter the company received from the U.S. Securities and Exchange Commission.

(b) The Company’s Board of Directors engaged BF Borgers CPA of 5400 W. Cedar Avenue, Lakewood, CO 80226 to serve as the Company's independent registered public accounting firm effective December 8, 2016.

(c) On March 9, 2017, the Board of Directors of the Registrant received the resignation of BF Borgers, CPA PC as the company’s independent auditor.

There were no disagreements with BF Borgers, CPA PC whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to BF Borgers, CPA PC's satisfaction, would have caused it to make reference to the subject matter of the disagreement in connection with its report on the registrant's financial statements.

The registrant requested that BF Borgers, CPA PC furnish it with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the above statements. The letter has been included as Exhibit 16 to the company’s recently filed 8-K.

(d) The Company’s Board of Directors has engaged Zia Masood Kiani and Co to serve as the Company's independent registered public accounting firm effective March 13, 2017.

ITEM 6. EXHIBITS.

The following exhibits are included with this quarterly filing. Those marked with an asterisk and required to be filed hereunder, are incorporated by reference and can be found in their entirety in our Registration Statement on Form S-1, filed under SEC File Number 333-199108, at the SEC website at www.sec.gov:

SIGNATURES

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