NOTE 2 – MANAGEMENT PLANS
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. Although Beijing Clancy started business
operation and had generated revenue for the three months ended October 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.
Mr. Meng, the major stockholder, Chief Executive Officer and sole
director of Company, verbally has agreed to provide continued financial support to the Company.
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 and Beijing Clancy operations are
limited to Beijing, PRC. The impact on the result of operation and the financial statements was immaterial as of October 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 in the United States of America (“US
GAAP”) and include the accounts of Clancy 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 July 31.
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.
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 $23,693 as of October 31, 2020. The Company has not experienced any losses in such accounts
in the PRC.
Leases
The Company determines if an arrangement
is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating
lease liabilities in the consolidated balance sheets. Finance leases are included in finance lease ROU assets and finance lease
liabilities in the consolidated balance sheets.
ROU assets represent the Company’s
right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease
payments arising from the lease. Operating lease and finance lease ROU assets and liabilities recognized at October 31, 2020 based
on the present value of lease payments over the lease term discounted using the rate implicit in the lease. In cases where the
implicit rate is not readily determinable, the Company uses its incremental borrowing rate based on the information available at
commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line
basis over the lease term.
The Company has elected not to recognize
operating lease ROU assets and liabilities arising from short-term leases.
Reporting Currency and Translation
The financial statements of the Company’s
foreign subsidiaries are measured using the local currency, Renminbi (“RMB”), as the functional currency; whereas the
functional currency of Clancy Corp. and reporting currency of the Company is the United States dollar (“USD” or “$”).
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 in China 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 outside the 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 into U.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 ended October 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
On July 29, 2020, the Company entered into
three-year service maintenance agreements with three customers. The three service maintenance agreements total 1,188,000 RMB to
be received over the three-year period. The contracts require three months of upfront payments each quarter, totaling 99,000 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 ended October 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 of Beijing Clancy and thus is deemed to be a related party. The total
value of this service maintenance agreement is 540,000 RMB, payable quarterly with upfront quarterly payments of 45,000 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 ended October 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 ended October 31, 2020
compared to $0 for the three months ended October 31, 2019.
CLANCY CORP.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
October 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 October 31, 2020 and for the period
then ended, there were no recently adopted accounting standards that had a material effect on the Company’s financial statements.
Recently Issued Accounting Pronouncements
Not Yet Adopted
As of October 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 October 31, 2020, the total operating
lease Right of Use assets was $153,212. The total operating lease cost was $15,437 and $1,381 for the three-month period ended
October 31, 2020 and 2019.
NOTE 5 - LEASE
LIABILITIES- OPERATING LEASE
Future minimum lease
payments under the operating lease as of October 31, 2020 are:
12 months ended October 31, 2021
|
|
$
|
38,496
|
|
12 months ended October 31, 2022
|
|
|
63,879
|
|
12 months ended October 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 of October 31, 2020 and July 31, 2020, the balance owing to a
related party was $213,355 and $263,037, respectively. As of October 31, 2020 and October 31, 2019, the loan was interest free
and unsecured and had no stated terms of repayment.
NOTE 7 - RESEARCH AND DEVELOPMENT
EXPENSE
As of October 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 ended October 31, 2020 and 2019.
CLANCY CORP.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
October 31, 2020
NOTE 8 - CONTRACT
LIABILITY
$14,798 of service prepayment including
$6,726 from a related party was received as of October 31, 2020 compared to $14,143 including $6, 426 received from a related party
as of July 31, 2020.
NOTE 9 - INCOME
TAXES
Income tax expense was $0 for the three months ended October 31,
2020 and 2019.
As of July 31, 2020, the Company had no unrecognized tax benefits
and, accordingly, the Company did not recognize interest or penalties during the three months ended October 31, 2020 related to
unrecognized tax benefits. There was no accrual for uncertain tax positions as of October 31, 2020.
There is no income tax benefit for the losses for the three months
ended October 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.
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
July 31, 2020, filed with the Securities and Exchange Commission (“Commission”) on November 12, 2020. More broadly,
these factors include, but are not limited to:
|
●
|
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
Clancy Corp. (the “Company”) was
incorporated under the laws of the State of Nevada on March 22, 2016.
Effective June 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.
On January 15, 2020, the Company filed a Certificate of Amendment
to Articles of Incorporation with the Nevada Secretary of State (the “Amendment”) which effectuated the following corporate
actions (“Corporate Actions”):
●
|
The forward split of the Company’s issued
and outstanding common stock, $0.001 par value, on thirty (30)
post-split shares for a one (1) pre-split
share basis applicable to stockholders of record as of January 2, 2020, and
|
●
|
The increase of the Company’s authorized
shares of common stock, $0.001 par value, from 75,000,000 to
345,000,000.
|
The Corporate Actions were adopted by written consent of our sole
Director, Mr. Gaoyang Liu, on January 2, 2020, and the sole Director recommended the Corporate Actions be presented to our shareholders
for approval. On January 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 set January 2, 2020 as the record date of such action.
On March 31, 2020, a change of control occurred with respect to the
Company. Pursuant to a Stock Purchase Agreement entered into by and among the Clancy Corp. (“Company”), Gaoyang Liu
(“Seller”), and Xiangying 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 and Mr. 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 July 6, 2020, the Nevada Secretary of State
approved the Company’s Certificate of Amendment to Articles of Incorporation which effectuated the following corporate action
(“Corporate Action”):
|
●
|
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 April 24, 2020, Shanghai
Clancy registered Beijing Clancy Information Technology Co., Ltd. (Beijing Clancy) in Beijing as a wholly-owned subsidiary. Beijing Clancy
had no business activity from inception through April 30, 2020.
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 ended October 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 ended October 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 ended October 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 ended October 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 in May 2020.
Net Loss.
For the three months ended October 31, 2020 and 2019,
the Company had a net loss of $69,524 and $14,118, respectively, for the reasons discussed above.
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 $34,473 in cash and equivalents as
of October 31, 2020.
Liquidity and Capital Resource
The Company had $34,473 and $21,821, respectively
in cash and cash equivalents as of October 31, 2020 and July 31, 2020.
As of October 31, 2020 and July 31, 2020, the Company
had working capital deficit of $205,589 and $19,409, respectively. The increase in working capital deficit was due to net loss
for the current period.
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 October 31, 2020 and 2019:
|
|
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
|
)
|
|
$
|
—
|
|
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 ended October 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 ended October 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.
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.