ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2022 AND 2021
NOTE 1 – ORGANIZATION AND BUSINESS
ARION GROUP CORP. (“we”, “our”,
the “Company”) is a corporation established under the corporation laws in the State of Nevada on November 7, 2016. The Company
has adopted January 31 as its fiscal year end.
On November 21, 2018, a change in control of the
Company occurred, pursuant to which Mr. Mingyong Huang acquired a total of 5,000,000 shares of the Company’s common stock (or approximately
65.53% of the total issued and outstanding shares of the Company as of the date of acquisition) from Ms. Nataliia Kriukova, a former principal
stockholder of the Company. Pursuant to the Stock Purchase Agreement (the “SPA”) and other related agreements, Ms. Kriukova
resigned from all management and Board positions. The Company also paid off stockholder loan owed to Ms. Kriukova in the amount of $2,663
with cash and inventory on hand pursuant to the SPA on November 21, 2018.
On May 5, 2020, Mr. Hui Song, a former member
of the Board of Directors of the Company, resigned as a director. On June 3, 2020, Mr. Mingyong Huang entered into another Stock Purchase
Agreement (the “2020 SPA”), pursuant to which Mr. Huang sold all of his 5,000,000 shares of the Company’s common stock
to Mr. Jay Hamilton, who becomes the Company’s majority and controlling stockholder. On June 4, 2020, Ms. Maria Itzel Torres Siegrist
resigned as Secretary of the Company. In connection with the change of control as of June 17, 2020 the Board appointed Mr. Hamilton to
the Company’s Board of Directors. Also, on June 17, 2020, the Board appointed Mr. Hamilton as President/CEO and Ms. Brenda Bin Wang
as CFO and Mr. Huang as Secretary. Mr. Huang remains a director of the Company.
Prior to November 21, 2018, we distributed an
assortment of cedar phyto barrels in the USA and Europe. The business of distribution of cedar phyto barrels was discontinued after November
21, 2018. We
are currently a start-up company exploring various manufacturing and distribution business opportunities in the dietary ingredient and
nutritional supplement industry. However, as of the filling date, no definitive agreement has been entered into in connection with our
business plan related to the above targeted industry.
NOTE 2 – GOING CONCERN
The Company’s financial statements as of
and for the year ended January 31, 2022 have been prepared using generally accepted accounting principles in the United States of America
applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs, incurred a net loss in fiscal
year 2022 and has a working capital deficit as of January 31, 2022. These factors, among others, raise substantial doubt about the ability
of the Company to continue as a going concern for a reasonable period of time.
In order to continue as a going concern, the Company
will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining
capital from management and significant stockholders sufficient to meet its minimal operating expenses and seeking third party equity
and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its
plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts
and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Use of Estimates
The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. The Company bases its estimates and judgments on historical experience and on various other assumptions and information
that are believed to be reasonable under the circumstances. Estimates and assumptions of future events and their effects cannot be perceived
with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information
is obtained and as our operating environment changes. Significant estimates and assumptions by management include, among others, going
concern and income taxes including the valuation allowance for deferred tax assets. While the Company believes that the estimates and
assumptions used in the preparation of the financial statements are appropriate, actual results could differ from those estimates. Estimates
and assumptions are periodically reviewed and the effects of revisions are reflected in the financial statements in the period they are
determined to be necessary. The current COVID-19 pandemic and general economic environment also increase the degree of uncertainty
inherent in these estimates and assumptions.
Related Parties Transactions
A related party is generally defined as (i) any
person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii)
someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly
influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there
is a transfer of resources or obligations between related parties. The Company conducts business with its related parties in the ordinary
course of business. Related parties may be individuals or corporate entities.
Transactions involving related parties cannot
be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not
exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated
on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not,
however, practical to determine the fair value of amounts due from/to related parties due to their related party nature.
Income Taxes
The Company accounts for income taxes using the
asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provide that deferred
tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting
and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company
records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. The Company
recognizes the tax effects of uncertain tax positions only if the position is more likely than not to be sustained upon audit, based on
the technical merits of the position. The Company has not identified any material uncertain tax positions and recognizes interest and
penalties in income tax expense, if applicable.
Cash and Cash Equivalents
Cash and cash equivalents are maintained with
financial institutions. Deposits held with banks may exceed the federally insured limits. These deposits are maintained with reputable
financial institutions and are redeemable upon demand. We have not experienced any losses in such accounts.
Loss
Per Share
Basic loss per common share is computed by
dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the year.
Diluted loss per share is computed by dividing net loss attributable to common stockholders by the sum of the weighted average number
of common stock outstanding and dilutive potential common stock during the year.
Property and Equipment and Depreciation Policy
Property and equipment are stated at cost and
depreciated on the straight-line method over the estimated life of the asset, which is 3 years.
Long-Lived Assets
The Company evaluates the recoverability of its
long-lived assets whenever events or changes in circumstances have indicated that and asset may not be recoverable. The long-lived asset
is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other
groups of assets and liabilities. If the sum of the projected undiscounted cash flows is less than the carrying value of the assets, the
assets are written down to the estimated fair value.
New Accounting Pronouncements
There were various accounting standards and interpretations
issued recently, none of which are expected to a have a material impact on our financial position, operations or cash flows.
NOTE 4 – RELATED PARTY TRANSACTIONS
The Company may rely on advances from related
parties in support of the Company’s efforts and cash requirements until such time that the Company can support its operations or
attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued
support by officers, directors, or stockholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances
are considered temporary in nature and have not been formalized by a promissory note.
During
the year ended January 31, 2022, the Company’s controlling stockholder Mr. Jay Hamilton loaned the Company $61,000 to cover the
Company’s operating expenses. The loans are unsecured, non-interest bearing and due on demand. As of January 31, 2022, the total
outstanding balance of loan from stockholder was $141,001.
During the year ended January 31, 2021, the Company’s
controlling stockholder Mr. Jay Hamilton loaned the Company $80,001 and the Company’s former controlling stockholder Mr. Mingyong
Huang loaned the Company $10,000 to cover the Company’s operating expenses. The loans are unsecured, non-interest bearing and due
on demand. On June 3, 2020, in connection with the sale of his shares of the Company, Mr. Huang agreed to forgive $67,432 he had previously
loaned to the Company. The Company has recorded the amount of loan forgiven by Mr. Huang as capital contribution due to forgiveness of
debt from former stockholder as of January 31, 2021. On July 16, 2020, the Company repaid the entire remaining balance of $3,000 to Mr.
Huang. As of January 31, 2021, the total outstanding balance of loan from stockholder was $80,001.
The Company’s office at 16839 Gale Ave.,
#210, City of Industry, CA 91745 is a warehouse-office solely owned by Mr. Mingyong Huang. Given that the Company had only minimal operations
as of January 31, 2022, Mr. Huang does not charge the Company any fee for using the office at this time.
NOTE 5 – INCOME TAXES
The Company uses the asset and liability method
of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is
recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences
resulting from matters that have been recognized in an entity’s consolidated financial statements or tax returns. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled.
Arion Group Corp. was registered in the State
of Nevada and has been subject to the tax laws of the United States of America and, beginning in January 2019, the state of California,
where the Company’s executive office is now located. The federal corporate statutory tax rate of 21% is effective January 1, 2018.
California’s statutory tax rate is 8.84%. The Company’s income tax returns have not been audited by U.S. Internal Revenue
Service and any state tax authorities and all of its tax returns for prior years, including the initial tax year ended January 31, 2017,
could be subject to examination. The Company believes that an adequate provision has been made for any adjustments that may result from
tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s
tax audits are resolved in a manner inconsistent with its expectations, the Company could be required to adjust its provision for income
taxes in the period such resolution occurs.
The provision for income taxes consists of the
following:
| |
Year Ended
| | |
Year Ended
| |
| |
January 31
| | |
January 31
| |
| |
2022 | | |
2021 | |
Current | |
| | |
| |
Federal | |
$ | - | | |
$ | - | |
State | |
| 800 | | |
| 800 | |
Deferred | |
| | | |
| | |
Federal | |
| - | | |
| - | |
State | |
| - | | |
| - | |
Income Tax Provisions | |
$ | 800 | | |
$ | 800 | |
The reconciliation of the difference between the
Company’s statutory tax rates and effective tax rates for the years ended January 31, 2022 and 2021 consists of the following:
| |
Year Ended | | |
Year Ended | |
| |
January 31 | | |
January 31 | |
| |
2022 | | |
2021 | |
Loss before Income Taxes | |
$ | (71,830 | ) | |
$ | (71,246 | ) |
Provision for Income Taxes | |
| 800 | | |
| 800 | |
Effective Tax Rate | |
| (1.11 | )% | |
| (1.12 | )% |
| |
| | | |
| | |
Reconciliation of Statutory Tax Rates to Effective Tax Rates | |
| | | |
| | |
Federal Statutory Rate | |
| 21.00 | % | |
| 21.00 | % |
State Statutory Rate | |
| 8.84 | % | |
| 8.84 | % |
Total Statutory Rates | |
| 29.84 | % | |
| 29.84 | % |
Less: Valuation Allowance | |
| (29.84 | )% | |
| (29.84 | )% |
Add: CA State Minimum Tax | |
| (1.11 | )% | |
| (1.12 | )% |
Effective Tax Rate | |
| (1.11 | )% | |
| (1.12 | )% |
As
of January 31, 2022, the Company had net operating loss (“NOL”) carry forwards of approximately $243,541 and $241,141 for
Federal and California state income tax purposes that may be available to reduce future years’ taxable income. The U.S. Congress
enacted the CARES Act in March 2020 with provisions providing tax reliefs to businesses and individuals, including a new rule to allow
federal NOL carryback to each of the five taxable years in which the NOL arises. As of January 31, 2022, California has temporarily suspended
NOL carryback but generally allows the NOL to be carried forward for 20 years. As of January 31, 2022, all of the $243,541 of Federal
NOL is carried forward indefinitely, while the $241,141 California NOL is being carried forward into the next 20 years and will start
expiring on January 31, 2039 if not fully utilized. Future tax
benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is
determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to
these tax loss carry-forwards.
The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance
is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more
likely than not some portion or all of the deferred tax assets will not be realized. ASC Topic 740-10-30 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC
Topic 740-10-40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure,
and transition. We have no material uncertain tax positions for any of the reporting periods presented.
Realization of deferred tax assets is dependent
upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are expected to be available
to reduce taxable income. As the achievement of required future taxable income is uncertain, the Company recorded a 100% valuation allowance.
| |
Year
Ended
| | |
Year
Ended
| |
| |
January 31
| | |
January 31
| |
| |
2022 | | |
2021 | |
Deferred tax assets: | |
| | |
| |
Net operating loss carryforward | |
$ | 68,152 | | |
$ | 47,816 | |
Valuation allowance | |
| (68,152 | ) | |
| (47,816 | ) |
Net deferred tax assets | |
$ | - | | |
$ | - | |
NOTE 6 – SUBSEQUENT EVENT
In
March and May 2022, Mr. Jay Hamilton loaned the Company a total of
$31,999 to cover the Company’s operating expenses. The loans
are unsecured, non-interest bearing and due on demand.