NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY
29, 2020
(UNAUDITED)
NOTE
1 - ORGANIZATION, DESCRIPTION OF BUSINESS
Photozou Holdings, Inc., (the “Company”)
was incorporated under the laws of the State of Delaware on September 29, 2014.
On May 31, 2018,
the Company entered into and consummated a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Koichi Ishizuka,
our President, CEO, and Director. At the closing of the Stock Purchase Agreement, Koichi Ishizuka transferred to the Company,
10,000 shares of common stock of Photozou Koukoku Co., Ltd., a Japan corporation (“Photozou Koukoku”), which represented
all of its issued and outstanding shares, in consideration of 1,000,000 JPY ($9,190 USD as of the exchange rate May 31, 2018).
The Company has since gained a 100% interest in the issued and outstanding shares of Photozou Koukoku’s common stock and
Photozou Koukoku is now a wholly owned subsidiary of the Company. The Company and Photozou Koukoku were under common control at
the time of the acquisition.
Photozou Koukoku was incorporated under the
laws of Japan on March 14, 2017. Currently, Photozou Koukoku is headquartered in Tokyo, Japan. The Company offers advertising
services and sells used cameras.
Our principal executive offices are located
at 4-30-4F, Yotsuya, Shinjuku-ku, Tokyo, 160-0004, Japan.
The Company has elected November 30th as its
fiscal year end.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES
OF CONSOLIDATION
The consolidated financial statements include
the financial statements of its wholly-owned subsidiary, Photozou Koukoku. Intercompany transactions are eliminated.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial
statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC,
including the instructions to Form 10-Q and Regulation S-X. In the opinion of the management of the Company, all adjustments,
which are of a normal recurring nature, necessary for a fair statement of the results for the three months period, have been made.
Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire
fiscal year. When used in these notes, the terms “Company”, “we”, “us” or “our”
mean the Company. Certain information and note disclosure normally included in financial statements prepared in accordance with
generally accepted accounting principles in the United States of America has been omitted from these statements pursuant to such
accounting principles and, accordingly, they do not include all the information and notes necessary for comprehensive financial
statements and should be read in conjunction with our consolidated financial statements for the year ended November 30, 2019,
included in our Form 10-K.
USE OF ESTIMATES
The presentation 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 disclosures of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates and assumptions
made by management include going concern, allowance for doubtful accounts, valuation allowance on deferred income tax, inventory
obsolescence and sales allowance. Operating results in the future could vary from the amounts derived from management's estimates
and assumptions.
RELATED PARTY TRANSACTION
The Company accounts for related party transactions
in accordance with ASC 850 ("Related Party Disclosures"). 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.
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.
FOREIGN CURRENCY TRANSLATION
The Company maintains its books and record
in its local currency, Japanese YEN (“JPY”), which is a functional currency as being the primary currency of the economic
environment in which its operation is conducted. Transactions denominated in currencies other than the functional currency are
translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and
liabilities denominated in currencies other than the functional currency are translated into the functional currency using the
applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of operations.
The reporting
currency of the Company is the United States Dollars (“US$”) and the accompanying consolidated financial statements
have been expressed in US$. In accordance with ASC Topic 830-30, “Translation of Financial Statement”, assets and
liabilities of the Company whose functional currency is not US$ are translated into US$, using the exchange rate on the balance
sheet date. Revenues and expenses are translated at average rates prevailing during the period. Shareholders’ equity is
translated at historical exchange rate at the time of transaction. The
gains and losses resulting from translation of financial statements are recorded as a separate component of accumulated other
comprehensive income within the statements of shareholders’ equity.
Translation of amounts from the local currency
of the Company into US$1 has been made at the following exchange rates:
|
February
29, 2020
|
|
February
28, 2019
|
Current JPY: US$1 exchange rate
|
108.07
|
|
111.37
|
Average JPY: US$1 exchange rate
|
109.45
|
|
110.48
|
COMPREHENSIVE INCOME OR LOSS
ASC Topic 220, “Comprehensive Income”,
establishes standards for reporting and display of comprehensive income or loss, its components and accumulated balances. Comprehensive
income or loss as defined includes all changes in equity during a period from non-owner sources. Accumulated comprehensive income,
as presented in the accompanying consolidated statements of shareholders’ equity consists of changes in unrealized gains
and losses on foreign currency translation.
REVENUE RECOGNITION AND
DEFERRED REVENUE
Starting December 1, 2018 the Company adopted
ASC 606 - Revenue from contracts with Customers: (1) identify the contract with a customer; (2) identify the performance obligations
in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the
contract; and (5) recognize revenue when each performance obligation is satisfied.
Revenue for used cameras is recognized when
the cameras are delivered to the customer. In case of the service for the photo contest, the Company applies the percentage of
completion method and unfinished part of collected cash is accounted as a deferred revenue. There is no deferred revenue as of
February 29, 2020 or November 30, 2019.
Disaggregated revenue of the Company is as
follows:
|
|
For the three months
|
Percentage of
|
For
the three months
|
Percentage
of
|
|
|
ended
|
total revenues
|
ended
|
total
revenues
|
|
|
February 29, 2020
|
|
February
28, 2019
|
|
Revenue from cameras
sold
|
$
|
58,343
|
95.7%
|
60,532
|
87.6%
|
Service
revenues
|
|
2,611
|
4.3%
|
8,602
|
12.4%
|
Total
|
|
60,954
|
100%
|
69,134
|
100%
|
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2016, the FASB issued ASU 2016-02,
“Leases (Topic 842)” and issued subsequent amendments to the initial guidance or implementation guidance including
ASU 2017-13, 2018-01, 2018-10, 2018-11, 2018-20 and 2019-01 (collectively, including ASU 2016-02, “ASC 842”). Under
ASC 842, lessees will be required to recognize all leases at the commencement date including a lease liability, which is a lessee’s
obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use (ROU) asset, which
is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
The Company
adopted the standard on December 1, 2019 on a modified retrospective basis and did not restate comparable periods. The Company
elected the package of practical expedients permitted under the transition guidance, which allows the Company to carry forward
the historical lease classification, the assessment whether a contract is or contains a lease and initial direct costs for any
leases that exist prior to adoption of the new standard. The Company also elected the practical expedient not to separate lease
and non-lease components for certain classes of underlying assets and the short-term lease exemption for contracts with lease
terms of 12 months or less. The Company does not have any operating lease over 12 months. The adoption of this standard did not
impact the Company’s consolidated financial statements.
-F6-
Table of Contents
NOTE
3 - GOING CONCERN
The accompanying consolidated financial statements
are prepared on a basis of accounting assuming that the Company is a going concern that contemplates realization of assets and
satisfaction of liabilities in the normal course of business. The Company is in the early stage of operations and has reoccurring
net losses and negative cash flows from operating activities. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. The Company will offer noncash consideration and seek equity lines as a means of financing
its operations. If the Company is unable to obtain revenue-producing contracts or financing or if the revenue or financing it
does obtain is insufficient to cover any operating losses it may incur, it may substantially curtail or terminate its operations
or seek other business opportunities through strategic alliances, acquisitions or other arrangements that may dilute the interests
of existing stockholders. However, management cannot provide any assurances that the Company will be successful in accomplishing
any of its plans. The accompanying financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
NOTE
4 - RELATED-PARTY TRANSACTIONS
For the three months ended February 29, 2020,
Photozou Co., Ltd., a company controlled by Koichi Ishizuka, CEO, advanced to the Company $82,232 and paid expense on behalf of
the Company in an amount of $26,187. The total due to related party as of February 29, 2020 and November 30, 2019 were $433,391
and $319,336, respectively, and are unsecured, due on demand and non-interest bearing.
For the three
months ended February 28, 2019, the Company borrowed $22,359 from Photozou Co., Ltd.
For the three months ended February 29, 2020
and February 28, 2019, the Company rented office space and storage space from the Company’s officer free of charge.
NOTE
5 - SHAREHOLDER EQUITY
Preferred Stock
The authorized preferred stock of the Company
consists of 20,000,000 shares with a par value of $0.0001. The Company has not issued any shares for the three months ended February
29, 2020 and February 28, 2019.
Common Stock
The authorized common stock of the Company
consists of 500,000,000 shares with a par value of $0.0001. There were 8,000,000 shares of common stock issued and outstanding
as of February 29, 2020 and November 30, 2019.
Pertinent Rights and Privileges
Holders of shares of common stock are entitled
to one vote for each share held to be used at all stockholders’ meetings and for all purposes including the election of
directors. Common stock does not have cumulative voting rights. Nor does it have preemptive or preferential rights to acquire
or subscribe for any unissued shares of any class of stock.
NOTE 6 - CONCENTRATION
Financial instruments, which potentially subject
the Company to concentrations of credit risk, consist primarily of purchases of inventory, accounts receivable and revenue.
Concentration of Purchases
Net
purchases from suppliers accounting for 10% or more of total purchases are as follows:
For
the three months ended February 29, 2020, 100% of the inventories of cameras were purchased from one supplier whose name was Digital
Reuse in the amount of $132,432. For the three months ended February 28, 2019, 98.3% of the inventories of cameras were purchased
from one supplier whose name was Digital Reuse in the amount of $72,125. For the three months ended February 29, 2020 and February
28, 2019, 100% of the purchase of inventory was handled by Mr. Takaharu Ogami who the Company has a service agreement with to
sell and buy used cameras on behalf of the Company.
Concentration of Revenues
Net
revenues from customers accounting for 10% or more of total revenues are as follows:
For
the three months ended February 29, 2020, 67.0% of the revenue from the sale of cameras was generated from Amazon in the amount
of $39,088. For the three months ended February 28, 2019, 85.9% of the revenue from the sale of cameras was generated from one
customer whose name was Hiroshi Funada in the amount of $51,985. Mr. Funada is an independent businessman for resale business.
For the three
months ended February 29, 2020 and February 28, 2019, 100% of the revenue from the sale of cameras was handled by Takaharu Ogami
who the Company has a service agreement with to sell and buy used cameras on behalf of the Company.
NOTE 7 – COMMITMENTS
On May 1, 2017, the Company entered into an
agreement with Mr. Takahara Ogami, whereas he is to act as an independent contractor to Photozou Koukoku. The services he is to
provide include, but are not limited to, handling the operations of Photozou Koukoku's used camera retail business through purchasing,
selling and delivery of cameras by Mr. Ogami. He is compensated JPY 400,000 ($3,600) a month. Unless either party expresses, in
writing, their intention to terminate the agreement then it shall run another three months automatically.
Mr. Ogami is responsible for the sale and shipping of the cameras at the expense of Photozou Koukoku. Photozou Koukoku is
the legal owner of the camera(s) until the point of sale to the purchaser(s).
NOTE 8 - SUBSEQUENT EVENTS
From March 1,
2020 through the current date, the Company borrowed $11,915 from Photozou Co., Ltd., a Company controlled by Koichi Ishizuka,
CEO. This debt is non-interest bearing, unsecured, and due on demand.
-F7-
Table of Contents