This discussion should be read in conjunction with the Company's consolidated
financial statements, including the Notes thereto, for the years ended September
30, 2019 and September 30, 2020, beginning on Page F-1.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Overview
During our historic period, we were a start-up company whose main focus was to
promote, market, distribute and export a range of enzyme products manufactured
in the United States for sale for human and animal consumption in certain Asian
markets, including the Association of Southeast Asian Nations ("ASEAN"). Our
objective was to commence marketing and distribution of a range of enzyme
products for human and animal consumption to sole country distributors,
wholesalers, dealers and retailers, as well as to the general public following a
Multi-Level Marketing - Franchise Investor Dealer Related (MLM-FIDR) concept,
beginning in Taiwan, and then China, Hong Kong, Macau, Thailand, Malaysia,
Singapore and Sri Lanka.
At some point, which we believe may have occurred approximately mid- to
late-2016, previous management ceased operating our original business. We have
not generated any revenue from operations since that time.
In 2019 and through early 2020, as previously reported, we had planned to import
enzyme supplements from the United States for sale in Taiwan. However, due to
the COVID-19 pandemic, all non COVID-19 related matters, including obtaining an
import license from Taiwan's Ministry of Economic Affairs and the Taiwan Food
and Drug Administration ("FDA"), have been delayed or are taking longer than
usual in Taiwan since late-January 2020. For various reasons, including the fact
that without a reasonably foreseeable end of the pandemic and Taiwan government
resources being shifted to dealing with the pandemic, our current management,
which took office in March 2020, we decided to abandon the plan to restart our
enzyme products business.
In May 2020, we announced that we were in the preliminary stage of developing a
new business plan to sell and distribute physiological sea water and nasal spray
in Taiwan and the United States. However, after exploring this possible business
as a result of several factors, including but not limited to difficulties in
commencing a new business during the ongoing COVID-19 pandemic, in September
2020 we announced that we will not pursue the nasal spray business.
Over the course of the next several months, we intend to develop a plan of
operations for a business that we would operate. While we are considering a
business in the healthcare or a related industry, there is no guarantee that we
will develop a plan for such a business, or any business. If we are able to
develop such a plan of operations, we will need to raise capital to pursue such
a business. There are no commitments in place to fund any such business and no
guarantee can be given that we will be able to secure such funding on terms that
are favorable to us, or at all.
Either alone, or in combination with our current intent to develop a plan of
operations for a business that we would operate, we will also consider
opportunities to engage in a reverse merger with another company.
While we consider our future plans for a possible business combination and/or an
operating business that we would pursue on our own, in September 2020 we
announced that Hukui and we had entered into the Hukui Agreement, pursuant to
which we have agreed to purchase an aggregate 200,000 shares of Hukui's Series C
Preferred Shares at $10.00 per share, for an aggregate investment of
$2,000,000.
6
We will purchase the Series C Preferred Shares in three tranches, through a date
on or before June 30, 2022, as follows:
? The First Tranche Investment is 80,000 Series C Preferred Shares in the amount
of $800,000, such shares having been purchased by us at the First Tranche
Closing on December 15, 2020;
? The Second Tranche Investment is 60,000 Series C Preferred Shares in the
amount of $600,000, such shares to be purchased at the Second Tranche Closing
on or before June 30, 2021; and
? The Third Tranche Investment is 60,000 Series C Preferred Shares in the amount
of $600,000, such shares to be purchased at the Third Tranche Closing on or
before June 30, 2022.
After the First Tranche Closing, if Hukui does not achieve further milestones or
meet further conditions, we will have the option either to (i) abandon the
Second Tranche Investment and/or the Third Tranche Investment, or (ii) waive the
failure of Hukui to meet such conditions and proceed with the Second Tranche
Investment and/or the Third Tranche Investment.
Regardless of which overall business strategy we pursue - reverse merger,
starting our own operating business or being an investment company - we will
continue to need capital to meet our expenses, primarily overhead and the
professional fees related to the cost of compliance as a reporting company. We
must also raise funds to meet our obligation to invest $1.4 million in Hukui on
or before June 30, 2021.
For the fiscal year ended September 30, 2020, Jui Pin (John) Lin, our President
and Chief Executive Officer, has provided such capital periodically in the form
of loans in the aggregate principal amount of $120,410, the principal and
accrued and unpaid interest of which are convertible, at his option, into shares
of our Common Stock at $0.05 per share. On December 28, 2020, we repaid Mr. Lin
$65,410 of the principal amount of loans due and payable plus accrued interest
in the amount of $1,162, for a total of $66,572. On January 5, 2021, we repaid
Mr. Lin $20,000 of the principal amount of another such loan due and payable
plus accrued interest in the amount of $403, for a total of $20,403.
Subsequent to the end of the fiscal year ended September 30, 2020, another
stockholder loaned us $30,000, on substantially the same terms as the terms of
the loans from Mr. Lin. We may also raise equity, debt, convertible debt or a
combination of any of the foregoing, from other parties for the capital we may
need for any of the purposes specified in this report. There is no agreement in
place between the Company and Mr. Lin, or anyone else, for such capital to
continue to be made available to us as needed, and we cannot guarantee that any
such capital will continue to be available to us on favorable terms, or at all,
in the future.
Results of Operations
Year Ended September 30, 2020 compared to the Year Ended September 30, 2019
Revenues
We did not generate any revenues during the years ended September 30, 2020 and
2019.
Operating Expenses
We incurred total operating expenses of $309,907 and $303,509 for the years
ended September 30, 2020 and 2019, respectively. Our operating expenses consist
of professional fees, payroll expenses, rent, miscellaneous overhead, bank
charges, license and permits. The increase in operating expenses for the year
ended September 30, 2020 compared to the year ended September 30, 2019 was
primarily due to increase in officers' compensation for our new officers, who
took office in March 2020, as well as legal fees.
7
Net Loss
As a result of the above, our net loss increased from $303,576 in the year ended
September 30, 2019 to $311,109 in the year ended September 30, 2020.
Effect of the COVID-19 Pandemic on our Business
We have been affected by the COVID-19 pandemic to the extent that it was one of
a number of contributing factors in our decision to change our plan of
operations from restarting our enzyme products business to selling the nasal
spray product and then deciding not to pursue the nasal spray product business,
although the first of those two decisions was largely made prior to the full
impact of the COVID-19 pandemic. Our personnel are in Taiwan, which has been
relatively less affected by the pandemic compared to many other countries in
Asia, Europe and the United States. Nonetheless, we expect to experience delays
in obtaining business licenses and permits, and any other governmental approvals
that may be required for a future business, since government offices are
continuing to work with reduced staff during the pandemic.
Nonetheless, depending upon the extent and duration of the pandemic and the
resulting global economic crisis, these conditions may have an adverse impact on
our ability to raise capital and commence any other business we may pursue.
Depending upon possible changes in consumer demand, shopping and spending habits
as a result of the pandemic and the resulting global economic crisis, we may
also face challenges of consumer acceptance if and when we start to market any
products.
Liquidity and Capital Resources
Working Capital
September 30, September 30,
2020 2019
Current Assets $ 18,092 $ 121,707
Current Liabilities 371,035 354,051
Working Capital Deficit $ (352,943 ) $ (232,344 )As of September 30, 2020, we had cash and cash equivalents of $18,092 and a
working capital deficit of $352,943. By comparison, as of September 30, 2019, we
had cash and cash equivalents of $121,657 and a working capital deficit of
$232,344.
As of September 30, 2020, we had total assets of $18,092, compared with total
assets of $121,707 at September 30, 2019. The decrease in total assets was
primarily due to decrease in cash and cash equivalents.
We had $371,035 in total current liabilities as of September 30, 2020,
consisting of $129,154 in accounts payable, $96,035 due to related parties,
$120,410 in notes payable - related party, and $25,436 in accrued expenses. This
is compared to total current liabilities of $354,051 as of September 30, 2019,
which included $128,971 in accounts payable, $211,383 due to related parties and
$13,697 in accrued expenses. The increase in total current liabilities is mainly
due to an increase in notes payable - related party, which is partially offset
by the decrease in amount due to related parties due to the conversion of
officers' compensation to shares of our Common Stock.
We had a total stockholders' deficiency of $352,943 and an accumulated deficit
of $8,158,389 as of September 30, 2020. By comparison, we had a total
stockholders' deficiency of $232,344 and an accumulated deficit of $7,847,280 as
of September 30, 2019
During the year ended September 30, 2020, our President and Chief Executive
Officer, Jui Pin Lin, loaned us the aggregate principal amount of $120,410,
primarily to pay our expenses. On April 24, 2020, Mr. Lin loaned us the
principal amount of $25,000 (the "April 2020 Loan"). The April 2020 Loan bears
simple interest at a rate of 1% per annum and is payable as to both principal
and interest on October 24, 2020.
8
On May 18, 2020, Mr. Lin loaned us the additional principal amount of $40,410
(the "May 2020 Loan"). The May 2020 Loan bears simple interest at a rate of 4%
per annum and is payable as to both principal and interest on November 18, 2020.
On July 3, 2020, Mr. Lin loaned us the additional principal amount of $20,000
(the "July 2020 Loan"). The July 2020 Loan bears simple interest at a rate of 4%
per annum and is payable as to both principal and interest on January 3, 2021.
On August 26, 2020, Mr. Lin loaned us the principal amount of $35,000 (the
"August 2020 Loan"). The August 2020 Loan bears simple interest at a rate of 4%
per annum and is payable as to both principal and interest on February 26, 2021.
On October 13, 2020, another shareholder loaned us the principal amount of
$30,000 (the "October 2020 Loan"). The October 2020 Loan bears simple interest
at a rate of 4% per annum and is payable as to both principal and interest on
April 13, 2021.
Mr. Lin, as the holder of the promissory notes evidencing the April 2020 Loan,
the May 2020 Loan, the July 2020 Loan and the August Loan (collectively, the
"Lin Notes"), may, at his sole option, convert (a "Voluntary Conversion") the
outstanding principal and accrued and unpaid interested on the Notes into shares
of our Common Stock at a rate of $0.05 per share. The holder of the promissory
note evidencing the October 2020 Loan (the "Shareholder Note and, together with
the Lin Notes, the "Notes") has similar rights.
The Notes also provide for events of default and remedies in such event,
including without limitation interest at a rate equal to the lesser of 10% per
annum or the maximum interest rate allowed under usury or other similar laws
from the respective maturity date of the April 2020 Loan, the May 2020 Loan, the
July 2020 Loan, the August 2020 Loan and the October 2020 Loan, until the
related Note is paid in full. The Notes also contain other terms and conditions
typical for a transaction of this type. There is no commitment from Mr. Lin, the
shareholder who provided the October 2020 Loan, or anyone else, to continue to
lend us any amount to fund our expenses. On December 28, 2020, we repaid Mr. Lin
$65,410 of the principal amount of loans due and payable plus accrued interest
in the amount of $1,162, for a total of $66,572, with respect to the April 2020
Loan and the May 2020 Loan. On January 5, 2021, we repaid Mr. Lin $20,000 of the
principal amount of another such loan due and payable plus accrued interest in
the amount of $403, for a total of $20,403, with respect to the July 2020 Loan.
Reverse Stock Split
On June 23, 2020, our Board of Directors approved a reverse stock split of our
Common Stock, at a ratio of 1-for-100 (the "Reverse Stock Split"), as of the
Effective Date. The Effective Date of the Reverse Stock Split with the Secretary
of State of the State of Nevada was 9:00 a.m. on July 6, 2020 and July 23, 2020
with the Financial Industry Regulatory Authority and in the marketplace.
On the Effective Date, the total number of shares of our Common Stock held by
each shareholder was converted automatically into the number of whole shares of
Common Stock equal to (i) the number of issued and outstanding shares of Common
Stock held by such shareholder immediately prior to the Reverse Stock Split,
divided by (ii) 100.
No fractional shares were issued in connection with the Reverse Stock Split, and
no cash or other consideration was be paid. Instead, we issued one whole share
of the post-Reverse Stock Split Common Stock to any shareholder who otherwise
would have received a fractional share as a result of the Reverse Stock Split.
We are authorized to issue 10,000,000,000 shares of Common Stock and that number
did not change as a result of the Reverse Stock Split.
9
The Reverse Stock Split did not have any effect on the stated par value of our
Common Stock. The rights and privileges of the holders of shares of Common Stock
are unaffected by the Reverse Stock Split. All of our options, warrants and
convertible securities outstanding immediately prior to the Reverse Stock Split
will be appropriately adjusted by dividing the number of shares of Common Stock
into which the options, warrants and convertible securities are exercisable or
convertible by 100 and multiplying the exercise or conversion price thereof by
100.
Cash Flows
Year ended Year ended
September 30, September 30,
2020 2019
Cash flows used in provided by operating activities $ (223,974 ) $ (189,627 )
Cash flows provided by financing activities 120,410 179,586
Effect of exchange rate changes on cash (1 ) (22 )
Net decrease in cash during period $ (103,565 ) $ (10,063 )During the year ended September 30, 2020, we used $223,974 of cash in operating
activities which was attributable primarily to our net loss of $311,109 offset
by the change in operating assets and liabilities of $87,135. In comparison,
during the year ended September 30, 2019, we used $189,627 of cash in operating
activities which was attributable to our net loss of $303,576 and the change in
operating assets and liabilities of $113,949.
With respect to our investing activities, we had no cash activity in either
period presented and we do not anticipate any significant capital expenditures
in the near future as such items are not required by us at this time.
During the year ended September 30, 2020, we received $120,410 from notes
payable - related party. Our President and Chief Executive Officer, Jui Pin Lin,
loaned us the aggregate principal amount of $120,410, primarily to pay our
expenses. In October 2020, another shareholder loaned us the aggregate principal
amount of $30,000, primarily to pay our expenses.
There is substantial doubt that we can continue as an ongoing business for the
next twelve months unless we obtain additional capital to pay our expenses as
they become due. We do not anticipate any significant additional revenue until
and unless we begin to execute on a plan of operations involving the start of a
new operating business, and/or effect a reverse merger with another company.
There is no assurance that we will ever reach that stage. The consolidated
financial statements presented herein do not include any adjustments relating to
the recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event that we
cannot continue as a going concern.
Our ability to continue as a going concern is dependent upon our ability to
successfully execute our business plan and generate profitable operations in the
future, and, until and unless we achieve that, to obtain the necessary financing
to meet our obligations and repay our liabilities arising from normal business
operation as and when they become due. Management intends to finance operating
costs for the foreseeable future with the issuance of equity and/or debt. While
we have received certain loans from our President and Chief Executive Officer,
Jui Pin (John) Lin and another shareholder, there is no standing commitment from
Mr. Lin, or any other person, for any such capital and there can be no
assurances that capital will be available to us on favorable terms, or at all.
Our failure to obtain adequate funding would be detrimental to us and result in
the inability to execute our plan of operations, or even having to cease
operations completely.
To date, our capital requirements have primarily been funded by shareholders
through the purchase of our Common Stock in private offerings. Over the next 12
months, we currently estimate that we will need to raise additional capital of
approximately $0.6 million, to meet our obligation for the Second Tranche
Investment with Hukui, plus approximately $0.2 million to meet other corporate
expenses.. We are exploring options of raising additional capital through
issuing more Common Stock or other securities, including debt, convertible into
Common Stock At this time, we do not know what additional amount we might need
to raise if we were to start a new operating business and/or pay our expenses in
the event of a reverse merger, but such amounts would be in addition to the
amounts mentioned above and could be substantial. There are no agreements,
arrangements or understandings in place with respect to raising any additional
capital from any person. There can be no assurance that we will be able to raise
such capital when and as needed on terms that are favorable to us, or at all.
10
Contractual Obligations
We do not have material contractual obligations and commitments. We only have
one lease, which is for office space, and that is renewed on a month-to-month
basis.
Off-Balance Sheet Arrangements
We have not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
shareholder's equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.
Critical accounting policies and estimates
Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these consolidated financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. We continually evaluate our estimates, including those related
to bad debts, inventories, recovery of long-lived assets, income taxes, and the
valuation of equity transactions. We base our estimates on historical experience
and on various other assumptions that we believed to be reasonable 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. Any future changes to these estimates and assumptions could cause
a material change to our reported amounts of revenues, expenses, assets and
liabilities. Actual results may differ from these estimates under different
assumptions or conditions. For the years ended September 30, 2020 and 2019, no
significant estimates and assumptions have been made in the consolidated
financial statements. The following are some of the critical accounting policies
in relation to the preparation of the consolidated financial statements. For a
full summary of our critical accounting policies, please refer to Note 2 of
Notes to Consolidated Financial Statements.
Foreign currency translation
The financial statements of our subsidiary denominated in currencies other than
the U.S. Dollar ("USD") are translated into USD using the closing rate method.
The balance sheet items are translated into USD using the exchange rates at the
respective balance sheet dates. The capital and various reserves are translated
at historical exchange rates prevailing at the time of the transactions while
income and expenses items are translated at the average exchange rate for the
period. All exchange differences are recorded in stockholders' equity
(deficiency).
Stock-Based Compensation
We account for stock-based compensation in which we obtain employee services in
share-based payment transactions under FASB ASC Topic 718, Compensation - Stock
Compensation, which requires us to expense the cost of employee services
received in exchange for an award of equity instruments based on the grant date
fair value of such instruments over the vesting period.
We also adopted FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees,
to account for equity instruments issued to parties other than employees for
acquiring goods or services. Such awards for services are recorded at either the
fair value of the consideration received or the fair value of the instruments
issued in exchange for such services, whichever is more reliably measurable.
11
Recent accounting pronouncements
We do not expect that the adoption of recently issued accounting pronouncements
will have a material impact on its financial position, results of operations, or
cash flows. For a full summary of recent accounting pronouncements, please refer
to Note 2 of Notes to Consolidated Financial Statements.
Currency exchange rates
Our functional currency is the USD, and the functional currency of our
operations is the New Taiwan Dollar ("TWD"). We anticipate that all of our
sales, if any, will be denominated in TWD. As a result, changes in the relative
values of USD and TWD affect our reported amounts of revenues and profit (or
loss) as the results of our operations are translated into USD for reporting
purposes. In particular, fluctuations in currency exchange rates could have a
significant impact on our financial stability. Fluctuations in exchange rates
between the USD and the TWD would also affect our gross and net profit margins
and could result in foreign exchange and operating losses.
Our exposure to foreign exchange risk primarily relates to currency gains or
losses resulting from timing differences between the signing of sales contracts
and the settling of these contracts. Furthermore, we translate monetary assets
and liabilities denominated in other currencies into TWD, the functional
currency of our operations. Our results of operations and cash flow are
translated at average exchange rates during the period, and assets and
liabilities are translated at the unified exchange rate at the end of the
period. Translation adjustments resulting from this process are included in
accumulated other comprehensive income in our statement of shareholders' equity.
We have not used any forward contracts, currency options or borrowings to hedge
our exposure to foreign currency exchange risk. We cannot predict the impact of
future exchange rate fluctuations on our results of operations and may incur net
foreign currency losses in the future.
To the extent that we hold assets denominated in USD, any appreciation of the
TWD against the USD could result in a charge in our statement of operations and
a reduction in the value of our USD-denominated assets. On the other hand, a
decline in the value of the TWD against the USD could reduce the USD equivalent
amounts of our financial results.
For financial reporting purposes, the financial statements of our Singapore
subsidiary, which are prepared using the Singapore Dollar, are translated into
the Company's reporting currency, USD. Assets and liabilities are translated
using the exchange rate on the balance sheet date, which was 0.7325 and 0.7236
as of September 30, 2020 and 2019, respectively. Revenue and expenses are
translated using average exchange rates prevailing during each reporting period.
The 0.7228 and 0.7315 average exchange rates were used to translate revenues and
expenses for the years ended September 30, 2020 and 2019. Stockholders' equity
(deficiency) is translated at historical exchange rates. Adjustments resulting
from the translation are recorded as a separate component of accumulated other
comprehensive income (loss) in stockholders' equity (deficiency).
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