Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2020
Note 1 - Organization and Operations
First Priority Tax Solutions, Inc. (“First Priority” or the “Company”) was incorporated on March 31, 2014 under the laws of the State of Delaware.
On May 8, 2018, First Priority Tax Solutions, Inc. entered into an Asset Purchase Agreement with Silverlight International Limited., the Company owned by the owner of Zshoppers, Inc., whereby First Priority Tax Solutions, Inc. has agreed to acquire the net assets of Zshoppers, Inc.
On October 1, 2018, First Priority Tax Solutions, Inc. disposed of Zshoppers, Inc.
On December 3,2019, a majority of shareholders and board of directors approved a resolution to change the name of the Company to Fritzy Tech Inc. (“Fritzy Tech” or the “Company”).
The Company is currently seeking for a new business plan.
Note 2 - Significant and Critical Accounting Policies and Practices
The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.
Basis of Presentation - Unaudited Interim Financial Information
The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These condensed unaudited consolidated financial statements should be read in conjunction with the financial statements of the Company for the reporting period ended June 30, 2019 and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on September 30, 2019.
Basis of Consolidation
These consolidated financial statements include the accounts of the Company and the acquired assets of Zshoppers, Inc. All material intercompany balances and transactions have been eliminated.
Fiscal Year End
The Company elected June 30th as its fiscal year end date upon its formation.
Change of Control
On December 1, 2017, as a result of a private transaction, the control block of voting stock of the Company, represented by 4,000,000 shares of common stock (representing approximately 70% of issued and outstanding common shares of the Company), has been transferred from its Chief Executive Officer to an unaffiliated corporation, and a change of control of the Company has occurred. Upon the change of control of the Company, the existing directors and officers resigned immediately, and the Company has appointed a new director and officer. The Company entered into an agreement to transfer to its primary shareholder all its assets and liabilities which include real estate properties for generating rental income and liabilities consists of vendor payables and notes payable.
Discontinued Operations
On December 1, 2017, as a result of the change of control of the Company, the Company transferred all its assets and liabilities to its primary shareholder. Please refer to Note 5 and 6.
On October 1, 2018, the Company disposed of Zshoppers, Inc. for which the Company acquired their net assets on May 8, 2018. Please refer to Note 6.
Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:
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(i)
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Assumption as a going concern:
Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
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(ii)
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Fair value of long-lived assets:
Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
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(iii)
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Valuation allowance for deferred tax assets:
Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.
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These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the 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.
Actual results could differ from those estimates.
Cash Equivalents
For the purpose of the accompanying financial statements, all highly liquid investments with a maturity of six months or less are considered to be cash equivalents.
Real Estate
Effective December 1, 2017, Real Estate reflected on the balance sheet was transferred to the principal shareholder of the Company.
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the related parties include a. affiliates (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act) of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitment and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
Revenue Recognition
The Company recognizes revenue from the sale of products and services in accordance with ASC 606,”
Revenue Recognition
” following the five steps procedure:
Step 1: Identify the contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue when the entity satisfies a performance obligation
The Company recognizes revenue when it satisfies its obligation by transferring control of the good or service to the customer. A performance obligation is satisfied over time if one of the following criteria are met:
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a.
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the customer simultaneously receives and consumes the benefits as the entity performs;
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b.
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the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
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c.
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the entity’s performance does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to date.
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The Company’s sales are completed through an online marketplace providing coupons and on-line discounts for products and services provided by third parties.
Cost of services include all expenses directly incurred to generate revenue, which include costs such as products purchases, processing fees, chargebacks and disputes, and shipping costs.
Earnings per Share
Earnings per share (“EPS”) are the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.
Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260–10–55–23). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation.
For the nine months ended March 31,2020 and 2019, respectively, the following convertible notes were excluded from the computation of diluted net loss per shares as the result of the computation was anti-dilutive:
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March 31,
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March 31,
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2020
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2019
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(Shares)
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(Shares)
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Convertible notes payable
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37,495,640
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-
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Cash Flows Reporting
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605).” This ASU requires an entity to recognize revenue when goods are transferred, or services are provided to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. This ASU also requires disclosures enabling users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606), deferral of the Effective Date.” With the issuance of ASU 2015-14, the new revenue guidance ASU 2014-09 will be effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, using one of two prescribed retrospective methods. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customer (Topic 606), Identifying Performance Obligations and Licensing.” The guidance is applicable from the date of applicability of ASU 2014-09. This ASU finalizes the amendments to the guidance on the new revenue standard on the identification of performance obligations and accounting for licenses of intellectual property. In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements (Topic 606)” which is applicable from the date of applicability of ASU 2014-09. This guidance provides optional exemptions from the disclosure requirement for remaining performance obligations for specific situations in which an entity need not estimate variable consideration to recognize revenue. In May 2016, FASB issued ASU No. 2016-12, “Narrow-Scope Improvements and Practical Expedients”. This amendment clarified certain aspects of Topic 606 and will be applicable from the date of applicability of ASU 2014-09. The Company is in process of evaluating the impact of the foregoing updates.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. This new standard replaces the existing guidance on leases and requires the lessee to recognize a right-of-use asset and a lease liability for all leases with lease terms equal to or greater than twelve months. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize total lease expense on a straight-line basis. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2018. Upon adoption, entities will be required to use a modified retrospective transition which provides for certain practical expedients. Entities are required to apply the new standard at the beginning of the earliest comparative period presented. Early adoption of this new standard is permitted. The Company is currently evaluating the effect this new standard will have on its consolidated financial statements and related disclosures. The Company does not expect the requirement to recognize a right-of-use asset and a lease liability for operating leases to have a material impact on the presentation of its consolidated statements of financial position.
Note 3 – Going Concern
The Company has elected to adopt early application of Accounting Standards Update No. 2014-15,
” Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”)
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financials at March 31, 2020 and June 30, 2019, the Company had an accumulated deficit of $361,057 and $248,451 of continuing operations, respectively, and retained earnings of $109,905 and $109,905 from discontinued operations, as of March 31, 2020 and June 30, 2019, respectively. The Company has a working capital deficit (total current liabilities exceeded total current assets) of $101,638 and $64,023, at March 31, 2020 and June 30, 2019, respectively. The Company’s cash balance and revenues generated are not currently sufficient and cannot be projected to cover its operating expenses for the next twelve months from the filing date of this report. These factors among others raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.
The Company’s existence is dependent upon management’s ability to develop profitable operations. Management is devoting substantially all of its efforts to developing its business and raising capital and there can be no assurance that the Company’s efforts will be successful. No assurance can be given that management’s actions will result in profitable operations or the resolution of its liquidity problems. The accompanying consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
In order to improve the Company’s liquidity, the Company’s management is actively pursuing additional equity financing through discussions with investment bankers and private investors. There can be no assurance that the Company will be successful in its effort to secure additional equity financing.
Note 4 – Contribution of Assets
On May 8, 2018, the Company entered into a Capital Contribution Agreement with our principal shareholder, Silverlight International Limited. Under the terms of the Capital Contribution Agreement, Silverlight contributed the assets of Zshoppers.com, an electronics and general products ecommerce website, valued at $100,000 to the Company, in exchange for the issuance of an additional 333 shares of common stock (pre-reverse stock split of 20,000 shares, see Note 7) to Silverlight at $5 per share. The assets contributed to our Company consist of all assets used in the operation of the Zshoppers.com business, including, but not limited to Zshoppers domain names, social media accounts and email lists. In connection with the capital contribution, our Company pay the former owner of Zshoppers.com 25% profit share for one year from the date of acquisition, plus $1,000 per month for the Payment Period.
The acquisition of Zshoppers, Inc. met the definition of a business in accordance with FASB ASC Topic 805,”
Business Combinations”.
As such, the Company accounted for the acquisition as a business combination.
The net assets (liabilities) acquired by First Priority Tax Solutions, Inc. from Zshoppers, Inc. on May 8, 2018 is summarized as follows:
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Net Assets (Liabilities) Acquisition
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Cash and cash equivalents
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$
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951
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Accounts payable
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(2,461
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)
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$
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(1,510
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)
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Revenues of $5,917 and net loss of $2,968 since the acquisition date are included in the consolidated statements of operations for the year ended June 30, 2018.
Note 5 – Disposal of Net Liabilities
On December 1, 2017, as a result of the change of control of the Company, the Company transferred all its assets and liabilities to its primary shareholder summarized as follows:
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Net Liabilities Disposition
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Deferred rent asset
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$
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7,293
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Due from shareholders
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39,657
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Building, net
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53,000
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Land
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15,000
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Bank indebtedness
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(942
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)
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Accrued expenses
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(19,340
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)
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Accrued Interest
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(11,346
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)
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Lease deposits from customers
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(4,500
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)
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Note payable
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(85,000
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)
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Note payable - related party
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(10,000
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)
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$
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(16,178
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)
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Note 6 – Discontinued Operations
On December 1, 2017, as a result of the change of control of the Company, the Company transferred to its primary shareholder all its assets and liabilities which include real estate properties for generating rental income.
On October 1, 2018, the Company disposed of Zshoppers, Inc. for which the Company acquired their net assets on May 8, 2018.
The sales of net liabilities qualified as a discontinued operation of the Company and accordingly, the Company has excluded results of the operations from its Condensed Statements of Operations to present the revenue and cost of revenue from the real estate activity in discontinued operations.
For nine months ended March 31, 2020 and 2019, the Company had net loss from discontinued operations results of $0 and $2,327, respectively.
Note 7 – Equity Transactions
Preferred Stock
The Company has authorized 8,000,000 preferred shares with a par value of $0.000001 per share. No shares of preferred stock have been issued.
Common Stock
The Company has authorized 92,000,000 common shares with a par value of $0.000001 per share, and 5,760,000 shares of common stock issued and outstanding
On May 8, 2018, the Company issued 333 shares of common stock (pre-reverse stock split of 20,000 shares) to acquire the net assets from Zshoppers.
On December 3, 2019, a majority of the Company’s shareholders and board of directors approved a reverse stock split of the Company’s issued and outstanding shares of common stock on a one (1) new for 60 old basis. The reverse stock split was approved by Financial Industry Regulatory Authority ( FINRA ) with an effective date of December 23, 2019. As a result of the reverse split, the Company’s issued and outstanding common stock decreased from 5,760,000 shares to 96,000 shares, all with a par value of $0.000001. The Company’s authorized shares remain unchanged.
As of March, 31, 2020 and June 30, 2019, the issued and outstanding common stock was 96,000 shares and 96,000 shares, respectively.
Note 8 – Related Party Transactions
On May 8, 2018, the Company entered into a Capital Contribution Agreement with our principal shareholder, Silverlight International Limited. Under the terms of the Capital Contribution Agreement, Silverlight contributed the assets of Zshoppers.com, an electronics and general products ecommerce website, valued at $100,000 to the Company, in exchange for the issuance of an additional 333 shares of common stock (pre-reverse stock split of 20,000 shares) to Silverlight at $5 per share. The assets contributed to our Company consist of all assets used in the operation of the Zshoppers.com business, including, but not limited to Zshoppers domain names, social media accounts and email lists. In connection with the capital contribution, our Company pay the former owner of Zshoppers.com 25% profit share for one year from the date of acquisition, plus $1,000 per month for the payment period.
On December 30, 2019, the Company issued convertible notes to two un-affiliated parties for an aggregate amount of $68,772 to replace the full amount of related party advances that had been provided to the Company through December 31, 2019.
Note 9 – Convertible Notes
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March 31,
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June 30,
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2020
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2019
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Convert Notes - December 2019
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$
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68,772
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$
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-
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Convert Note - March 2020
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6,219
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Less current portion of convertible notes payable
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(74,991
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)
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-
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Long-term convertible notes payable
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$
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-
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$
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-
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On December 30, 2019, the Company issued convertible notes to two un-affiliated parties for an aggregate amount of $68,772 to replace the full amount of related party advances that had been provided to the Company through December 31, 2019. The convertible notes are due on demand, bear interest at 35% per annum and are convertible at $0.002 per share for the Company common stock.
On March 31, 2020, the Company issued a convertible note to an un-affiliated party of $6,219 for payment of operation expenses. The convertible note is due on demand, bear interest at 35% per annum and is convertible at $0.002 per share for the Company common stock.
The discount on convertible notes from beneficial conversion feature of $74,991 was fully amortized during the nine months ended March 31, 2020.
During the nine months ended March 31, 2020, the Company incurred note interest expense of 6,291.
As of March 31, 2020, the convertible note payable and accrued interest from the convertible notes was $74,991 and $6,291, respectively.
Note 10 – Subsequent Events
Management has evaluated subsequent events through the date these unaudited condensed consolidated financial statements were available to be issued. Based on our evaluation, no material events have occurred that require disclosure.