ARGC Arion Group Corporation (CE)

NOTES TO THE FINANCIAL STATEMENTS

JANUARY 31, 2020 AND 2019

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 shareholder 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 shareholder 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 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. Mr. Huang remains the Company’s Director and officer after the sale.

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 have classified the results of the cedar phyto barrels business as discontinued operations in our financial statements. 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 June 15, 2020, 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, 2020 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 2020 and has a working capital deficit as of January 31, 2020. 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 shareholders 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, useful lives and impairment of long-lived assets 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.

Earnings (Loss) Per Share

Basic earnings per common share is computed by dividing net earnings attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to common shareholders by the sum of the weighted average number of common stock outstanding and dilutive potential common stock during the period.

Revenue Recognition

We have adopted Accounting Standards Update No. 2014-09 (Topic 606, or ASC 606) “Revenue from Contracts with Customers” and related amendments. ASC 606’s core principle is that an entity will recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring good or services to a customer. The principles in the standard are applied in five steps: 1) Identify the contract(s) with a customer; 2) Identify the performance obligations in the contract; 3) Determine the transaction price; 4) Allocate the transaction price to the performance obligations in the contract; and 5) Recognize revenue when (or as) the entity satisfies a performance obligation. The Company recognizes revenue over time based on the transfer of control of the promised goods or services to the customer. This transfer occurs over time when the Company has an enforceable right to payment for performance completed to date, and our performance does not create an asset that has an alternative use to the Company. Otherwise, control to the promised goods or services transfers to customers at a point in time.

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 shareholders. 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.  

Since the Company’s inception on November 7, 2016 through November 21, 2018, the Company’s previous sole officer, shareholder and director loaned the Company $2,663 to pay for incorporation costs and operating expenses. As of January 31, 2019, the entire balance of the loan was paid off.

During the year ended January 31, 2019, the Company’s former major shareholder Mr. Mingyong Huang (see Note 6, Change of Control, for the 2020 ownership change) loaned the Company $20,432 to cover the Company’s operating expenses. During the year ended January 31, 2020, Mr. Mingyong Huang loaned the Company $40,000 to cover the company’s operating expenses. As of January 31, 2020, the amount outstanding was $60,432. The loan is non-interest bearing, unsecured, and is due upon demand.

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 and essentially no employee except Mr. Huang himself, Mr. Huang is not charging 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:

The reconciliation of the difference between the Company’s statutory tax rates and effective tax rates for the years ended January 31, 2020 and 2019 consists of the following:

As of January 31, 2020, the Company had net operating loss (“NOL”) carry forwards of approximately $98,602 and $52,971 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, 2020, California has temporarily suspended NOL carryback but generally allows the NOL to be carried forward for 20 years. As of January 31, 2020, all of the $98,602 of Federal NOL is carried forward indefinitely, while the $52,971 California NOL is being carried forward into the next 20 years and will be expired on January 31, 2040 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.

NOTE 6 – CHANGE OF CONTROL

On November 21, 2018, Ms. Nataliia Kriukova, a former principal shareholder of the Company (the “Seller”), entered into a Stock Purchase Agreement (the “SPA”) dated October 25, 2018 and amendments thereto, with Mingyong Huang, an individual (the “Buyer”), pursuant to which, among other things, the Seller agreed to sell to the Buyer, and the Buyer agreed to purchase from the Seller, a total of 5,000,000 shares of Common Stock owned of record and beneficially by the Seller (the “Purchased Shares”). The Purchased Shares represented approximately 65.53% of the Company’s issued and outstanding shares of Common Stock. In connection with the closing of the transaction and in accordance with the agreement, the Board appointed Mingyong Huang, Benson Liao and Hui Song to fill vacancies on the Company’s Board of Directors caused by the resignation of Ms. Nataliia Kriukova. In addition, Mr. Huang was appointed CEO, President and CFO of the Company and Ms. Maria Itzel Torres Siegrist was appointed Secretary of the Company.

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. Mr. Huang remains the Company’s Director and officer after the sale of stock.