| Summary of Significant Accounting Policies | Basis of
Presentation The accompanying unaudited consolidated
financial statements of the Company as of January 31, 2017, and for the three and six months ended January 31, 2017 and 2016,
have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP")
for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. In the opinion of
management, such financial information includes all adjustments considered necessary for a fair presentation of the Company's
financial position at such date and the operating results and cash flows for such periods. Operating results for the interim period
ended January 31, 2017 are not necessarily indicative of the results that may be expected for the entire year. Certain information and footnote disclosure
normally included in financial statements in accordance with GAAP have been omitted pursuant to the rules of the United States
Securities and Exchange Commission ("SEC"). These unaudited financial statements should be read in conjunction with
our audited financial statements and accompanying notes for the years ended July 31, 2016 and 2015 included in the Company's Form
10-K filed on November 8, 2016. Principles of Consolidation The accompanying consolidated financial
statements include the accounts of Grand Perfecta and its wholly-owned subsidiaries LinkBit, Umajin HK, and Sports Perfecta. All
intercompany balances and transactions have been eliminated in consolidation. 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. Financial Statement Reclassification Certain account balances from prior
periods have been reclassified in these consolidated financial statements to conform to current period classifications. 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. Foreign Exchange The Company’s primary operations
are conducted in Japan and performed by its wholly owned subsidiaries LinkBit and Umajin HK. The Company also conducts operations
through Sports Perfecta, and its Malaysian subsidiary SPT. LinkBit’s functional currency is the Japanese Yen and Umajin
HK’s functional currency is the Hong Kong Dollar. SPT’s functional currency is the Malaysian Ringgit. 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’ deficit 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 Company’s
stockholders’ deficit. The following rates were used to translate
the accounts of LinkBit, Umajin HK and SPT into USD at the following balance sheet dates.
Balance
Sheet Dates
January 31, July 31,
2017 2016
Japanese Yen to USD 0.0088 0.0098
Hong Kong Dollars to USD 0.1289 0.1289
Malaysian Ringgit to USD 0.2256 0.2485 The following
rates were used to translate the accounts of LinkBit, Umajin HK and SPT into USD for the following operating periods.
For
the Six Months Ended
January 31, January 31,
2017 2016
Japanese Yen to USD 0.0093 0.0083
Hong Kong Dollars to USD 0.1289 0.1289
Malaysian Ringgit to USD 0.2348 0.2347 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 January 31, 2017 (unaudited) or July 31, 2016. 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 January 31, 2017 (unaudited) or July 31, 2016. 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 Goodwill The Company’s goodwill 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. As of July 31, 2016, the assessment for impairment
found that the goodwill recorded for the acquisition of Umajin HK was impaired due to the ongoing and projected future losses
of Umajin HK. As a result, an impairment charge of $99,502 was recorded during the year ended July 31, 2016. There was no impairment
recorded during the three or six months ended January 31, 2017 or 2016. 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 long-lived assets identified during the three or six months ended January 31, 2017 or 2016. 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 Company’s 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 Company’s 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 January 31, 2017 (unaudited) and July 31, 2016 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, Hong Kong, Malaysia and the United States in financial institutions
with high credit ratings. Substantially all of the Company’s 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, other than the $1,312,276 loss on settlement
of note receivable that was recorded during the six months ended January 31, 2016 (see Note 11). Revenue Recognition The Company’s 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, 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 Company’s 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. Basic and Diluted Earnings Per
Share In accordance with ASC 260, Earnings
Per Share, the basic loss per common share is computed by dividing the net loss available to common stockholders by the weighted
average common shares outstanding during the period. Diluted loss 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 loss per share because their impact was anti-dilutive. During the six months ended January 31, 2017
and 2016, the Company had total options of 3,000,000 which were excluded from the computation of net loss per share because they
are anti-dilutive. During the six months ended January 31, 2017 and 2016, the Company had convertible notes convertible into 240,000
and 1,472,727, respectively, shares of common stock which were excluded from the computation because they are anti-dilutive. As
a result, the basic and diluted loss 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 Company’s consolidated financial
statements. In February 2016, the FASB issued
ASU No. 2016-02, Leases (Topic 842). The standard requires that lessees will be required to recognize assets and liabilities on
the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU No. 2016-02 also
will require disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash
flows arising from leases. These disclosures include qualitative and quantitative information. The standard will take effect for
fiscal years and interim periods within those fiscal years beginning after December 15, 2018 with earlier adoption permitted.
The Company is assessing the impact of adopting ASU No. 2016-02 on the Company’s consolidated financial statements. In March
2016, the FASB issued ASU No. 2016-09 ("ASU 2016-09"), Compensation—Stock Compensation (Topic 718): Improvements
to Employee Share-Based Payment Accounting. |
