| 2. Summary of Significant Accounting Policies | Basis of Presentation The accompanying consolidated financial
statements of the Company have been prepared in accordance with principles generally accepted in the United States of America
(GAAP) and include the accounts of Grand Perfecta and its wholly-owned subsidiaries LinkBit and Umajin HK. The Company
has determined that two affiliated entities, Space Cultivation Mobile and Japan Horse Circle, which LinkBit conducts business
with are variable interest entities and that the Company is the primary beneficiary of each entity. As a result, the Company has
consolidated the accounts of these variable interest entities into the accompanying consolidated financial statements. As the
Company does not have any ownership interest in these variable interest entities, the Company has allocated the contributed capital
in these variable interest entities as a component of noncontrolling interest. All intercompany balances and transactions have
been eliminated in consolidation. Use of Estimates The preparation of financial statements
in conformity with GAAP 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 of the financial statements, and the reported amounts of revenues
and expenses during the reported periods. Amounts could materially change in the future. Liquidity As of July 31, 2015, we had cash
of $75,778 and a working capital deficit of $5,929,449 as compared to cash of $1,882,272 and a working capital deficit of $7,089,828
as at July 31, 2014. The decrease in cash as of July 31, 2015 was primarily the result of $2,940,000 in proceeds from sale of
common stock received during the year ended July 31, 2014, of which a portion was used to fund the operating activities of the
Company, as well as to pay down outstanding notes payable with higher interest rates during the year ended July 31, 2015. In March 2015, we issued a convertible
debenture in the face amount of Japanese JPY200,000,000, approximately US$1,620,000 at July 31, 2015, (see Note 9). We intend
to continue to improve our balance sheet by reducing short term liabilities and invest in promoting and expanding our services.
The funds obtained through the debenture placement will facilitate that effort. The funding received in March
2015 notwithstanding, we continue to have a significant working capital deficit that adversely affects our business by limiting
the resources we have available to pursue the promotion of our information services and develop new information service opportunities
for potential users. Historically we have relied on extensions of note payment due dates and new debt financing to repay note
obligations as they came due in order to continue operations. Going forward we will continue to use extensions and new debt financing,
such as the recent debenture offering, to address note obligations that come due, endeavor to gradually reduce obligations with
cash flow provided by operations, and pursue over the next 12 months equity financing that we can apply to debt reduction and
business development. Nevertheless, the shortage of working capital adversely affects our ability to develop, sponsor, or participate
in activities that promote our information services to prospective users and to develop new content, because a substantial portion
of cash flow goes to reduce debt rather than to advance operating activities. There is no assurance that our plans for addressing
our working capital shortages will be successful, and our failure to be reasonably successful should be expected to result in
a significant contraction of our operations and potentially a failure of the business. Foreign Exchange The Companys primary operations
are conducted in Japan and performed by its wholly owned subsidiaries LinkBit and Umajin HK. LinkBits functional currency
is the Japanese Yen and Umajin HKs functional currency is the Hong Kong Dollar. The financial statements of each entity
are prepared using the applicable functional currencies, and have been translated into U.S. dollars (USD). Assets
and liabilities are translated into USD at the applicable exchange rates at period-end. Stockholders equity is translated
using historical exchange rates. Revenue and expenses are translated at the average exchange rates for the period. Any translation
adjustments are included as foreign currency translation adjustments in accumulated other comprehensive income in the Companys
stockholders equity. The following rates were used to translate
the accounts of LinkBit and Umajin HK into USD at the following balance sheet dates.
Balance
Sheet Dates
July 31, July 31,
2015 2014
Japanese Yen to USD 0.0081 0.0098
Hong Kong Dollars to USD 0.1290 0.1290 The
following rates were used to translate the accounts of LinkBit and Umajin HK into USD for the following operating periods.
For
the Year Ended
July 31, July 31,
2015 2014
Japanese Yen to USD 0.0086 0.0099
Hong Kong Dollars to USD 0.1290 0.1290 Cash and Cash Equivalents The Company considers all highly liquid
holdings with maturities of three months or less at the time of purchase to be cash equivalents. The Company had no cash equivalents
as of July 31, 2015 and 2014. Accounts Receivable Accounts receivable are carried at
net realizable value, representing the outstanding balance less an allowance for doubtful accounts based on a review of all outstanding
amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and
considering each customer's financial condition and credit history, as well as current economic conditions. Accounts receivable
are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received.
The Company had no allowance for doubtful accounts as of July 31, 2015 and 2014. Property and Equipment Property and equipment are recorded
at historical cost and depreciated on a straight-line basis over their estimated useful lives once the individual assets are placed
in service. Estimated useful lives for the assets are as follows.
Buildings and fixtures 8 - 43 years
Autos and trucks 2 - 6 years
Tools and equipment 4 - 10 years
Computer software 5 years Intangible Assets The Companys intangible assets
include goodwill, which represents the excess of purchase price over tangible and intangible assets acquired, less liabilities
assumed arising from business acquisitions. Goodwill is not amortized, but is reviewed for potential impairment on
an annual basis at the reporting unit level. As required by Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 350-20, the Company conducted an analysis of the goodwill on its single
reporting unit using the Company. For the fiscal years ending July 31, 2015 and 2014, the assessment for impairment found that
there is no impairment of goodwill. The Company has no accumulated impairment losses on goodwill. Long-Lived Assets In accordance with ASC 360-10, the
Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value
may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash
flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying
amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available,
or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. There was
no impairment of assets identified during the years ended July 31, 2015 and 2014. Fair Value
of Financial Instruments Fair value is
defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, based on the Companys principal or, in the absence of a principal, most advantageous
market for the specific asset or liability. GAAP provides
for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:
Level 1 Inputs that are quoted prices
(unadjusted) for identical assets or liabilities in active markets that the entity can access.
Level 2 Inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the
full term of the asset or liability, including:
Quoted prices for similar assets or liabilities
in active markets
Quoted prices for identical or similar assets
or liabilities in markets that are not active
Inputs other than quoted prices that are observable
for the asset or liability
Inputs that are derived principally from or corroborated
by observable market data by correlation or other means
Level 3 Inputs that are unobservable
and reflect the Companys own assumptions about the assumptions market participants would use in pricing the asset or
liability based on the best information available in the circumstances (e.g., internally derived assumptions surrounding the
timing and amount of expected cash flows). The Company has determined that the
book value of its outstanding financial instruments as of July 31, 2015 and 2014 approximates the fair value. Concentration
of Credit Risk Financial instruments that potentially
expose the Company to concentration of credit risk include cash, accounts receivable, notes receivable, and amounts due from related
parties. The Company maintains its cash in banks located in Japan and Hong Kong in financial institutions with high credit ratings.
Substantially all of the Companys revenues are generated from customers in Japan. The Company conducts periodic reviews
of the financial condition and payment practices of its customers and note receivable holders. The Company has not experienced
significant losses relating to these concentrations in the past. Revenue Recognition The Companys
revenue consists primarily of sales of comprehensive horse racing information through multiple websites focusing on all aspects
of the horse racing industry in Japan. Publication of horse racing digital magazines, providing support for print publications,
and participating in other public events and media programs related to the horse racing industry do not generate significant revenue
directly. These activities are undertaken for the purpose of increasing the number of horse racing fans and driving potential
customers to our websites so as to hopefully eventually convert them to paying customers. The Company recognizes revenue on
arrangements in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed and determinable,
persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably
assured. The majority of the Companys revenue is generated by per-item sales. For all users, payment is received at the
time of purchase. The Company recognizes revenue for per-item sales when the requested information is supplied to the user. For
information packages that span a period of time, the Company recognizes revenue over the term of the package. Revenues are presented
net of refunds, credits and known and estimated credit card chargebacks. The Company reports revenue net of any required taxes
collected from customers and remitted to government authorities, with the collected taxes recorded as current liabilities until
remitted to the relevant government authority. Rights to content purchased by customers in advance of the content being provided
are recorded as deferred revenue. Income Taxes The Company accounts for income taxes
in accordance with ASC 740, Income Taxes, using the asset and liability method. Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Advertising Costs The Company expenses advertising costs
as incurred. Advertising costs incurred amounted to $911,562 and $1,711,855 for the years ended July 31, 2015 and 2014, respectively. Basic and Diluted Earnings Per
Share In accordance with ASC 260, Earnings
Per Share, the basic income per common share is computed by dividing the net income available to common stockholders by the weighted
average common shares outstanding during the period. Diluted earnings per share reflect per share amounts that would
have resulted if diluted potential common stock had been converted to common stock. No dilutive potential common shares were included
in the computation of diluted net income per share because their impact was anti-dilutive. As of July 31, 2015 and 2014, the Company
had total options of 3,000,000 which were excluded from the computation of net income per share because they are anti-dilutive.
As of July 31, 2015 and 2014, the Company had convertible notes convertible into 1,472,727 and 0, respectively, shares of common
stock which were excluded from the computation because they are anti-dilutive. As a result, the basic and diluted earnings per
share were the same for each of the periods presented. Recent Accounting Pronouncements In May 2014, the FASB issued Accounting
Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 creates a new topic
in the ASC Topic 606 and establishes a new control-based revenue recognition model, changes the basis for deciding when revenue
is recognized over time or at a point in time, provides new and more detailed guidance on specific topics, and expands and improves
disclosures about revenue. In addition, ASU 2014-09 adds a new Subtopic to the Codification, ASC 340-40, Other Assets and Deferred
Costs: Contracts with Customers, to provide guidance on costs related to obtaining a contract with a customer and costs incurred
in fulfilling a contract with a customer that are not in the scope of another ASC Topic. The guidance in ASU 2014-09 is effective
for public entities for annual reporting periods beginning after December 15, 2016, including interim periods therein. Early application
is not permitted. Management is in the process of assessing the impact of ASU 2014-09 on the Companys financial statements. |
