The following discussion and analysis of financial condition and results of
operations should be read in conjunction with our financial statements and
related notes included elsewhere in this report. This discussion contains
forward-looking statements that involve risks, uncertainties and assumptions.
See "Forward-Looking Statements."
Overview
Since January 30, 2017, following a change of control, we have been engaged in
the business of developing and marketing nutritional products that promote
wellness and a healthy lifestyle. Our business to date has involved the purchase
of products from three suppliers in Taiwan and the sale of these products to
four unrelated customers, one of which accounted for all of our sales in the
years ended December 31, 2020 and 2019. We did not have any sales during the
third quarter of 2021, the second, third and fourth quarters of 2020 and the
first three quarters of 2019. We sell product in bulk to companies who may use
our products as ingredients in their products or sell the products they purchase
from us to their own customers.
All of our sales to date have been sales of cordyceps related products except
that, in in the quarter ended June 30, 2018, we sold metallothionein MT-3
elizer, a product that we do not currently sell. Cordyceps is a fungus that is
used in traditional Chinese medicine. Cordyceps sinensis has been described as a
medicine in old Chinese medical books and Tibetan medicine. It is a rare
combination of a caterpillar and a fungus and found at altitudes above 4500m in
Sikkim. We may also seek to market other products which we see as complimentary
to our present products; however, we have not entered into negotiations with
respect to the distribution of other products, and we cannot assure you that we
will be able to market any other products.
All of our revenue for the years ended December 31, 2021 and 2020 represents
sales to three customers and one customer, respectively. During 2021, our three
customers accounted for was 58.5%, 33.2% and 8.3% of our revenue. Our sole
customer for 2020 was the smallest of the three customers for 2021. One of these
customers, which accounted for 33.2% of our revenue in 2021, was our sole
customer in the three months ended March 31, 2022.
We believe that our failure to sell products in the third quarter of 2021 and
second, third and fourth quarters of 2020 resulted substantially from the COVID
- 19 pandemic and actions taken by governments to address the pandemic, as well
as a continuation of downturn in the market in the PRC for cordyseps products as
well as the political conditions in Hong Kong, and we cannot assure you that the
market will improve. We also cannot assure you the political instability in Hong
Kong will not affect our sales, since our customers in 2017 and 2018 were Hong
Kong based customers who sold their products in the PRC and none of these
customers has made purchases from us since the quarter ended December 31, 2018.
We cannot assure you that these factors will not affect our ability to generate
revenues in the future and, to the extent that any of these factors affects our
ability to generate revenue, we may not be able to continue in business.
At present, we have no full-time employees. Our only employee is our chief
executive officer who work for us on a part-time basis. We face significant
risks in implementing our business plan, including, but not limited to, our
ability to raise the necessary financing either through the sale of debt or
equity securities or through a loan facility, our ability to increase our
customer base and supply chain, our ability to increase our gross margins, our
ability to hire and retain qualified research and development, marketing and
administrative personnel, our ability to develop products and to market in the
United States and other western markets any products we may develop, our ability
to comply with any government regulations relating to the manufacture,
distribution and marketing any products we develop. We cannot assure you that we
can or will develop any products or generate revenue or profits in the future.
Our statement of operation reflects the amortization of common stock issued to
consultants in connection with our proposed chicken feed product. We issued a
total of 12,282,000 shares of common stock to consultants as stock grants
pursuant to agreements with the consultants in May and August 2021. The
agreements provide for the consultants to perform services described in the
contracts for the two-year period commencing the date of the agreements. The
shares were valued at $31,424,800, based on the market price of the common stock
on the respective dates of the agreements, and is being amortized over two-year
period starting from the date of the agreement using the straight-line method.
During the year ended December 31, 2021, we recorded stock-based compensation of
$7,651,417 and had deferred stock compensation of $23,773,383 as of December 31,
2021. During the three months ended March 31, 2022, we recorded stock-based
compensation of $3,928,100, and we had deferred stock compensation of
$19,845,283 as of March 31, 2022. The deferred stock compensation will be
recognized over the balance of the terms of the agreements
We require funds for our operations. At March 31, 2022, we had $357,668 in cash
and $298,500 in accounts receivables, and no inventory. Although we may seek to
raise funds in the equity market, we have no agreements or understandings with
respect to any funding and we can give no assurance as to the availability or
terms of any such financing. Because of our financial condition, the lack of
sales in the four out of eight quarters in 2021 and 2020, our reliance of sales
primarily of one product, along with the absence of an active market for our
stock and our market capitalization in relation to our financial performance,
together with risk related to the COVID-19 pandemic and the political and legal
situation in Hong Kong, it may be difficult for us to raise funds in the equity
market, and, if we are able to raise funds our stockholders may suffer
significant dilution.
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To the extent that we implement our business plan, we anticipate that we will
incur marketing and other expenses without any assurance that such expenses will
generate any significant revenue or net income. Because of our cash position, we
may use equity-based compensation for our employees and independent contractors.
Because of our low cash position, we may rely on loans from stockholders or
related parties, although we do not have any agreements or understandings at
this time and we may issue equity to attract employees and consultants to help
us develop our business plan.
Effects of COVID-19
Since our products are purchased by customers in Taiwan and Hong Kong primarily
as one ingredient of a product to be sold to their customers, our business has
been and may continue to be impacted by the effects of the COVID-19 pandemic and
the actions taken by the governments of the PRC, Hong Kong and Taiwan as well as
any other countries in which we may seek to sell products, as they effect
manufacturers and their customers, including the recent lockdowns in cities and
provinces of China.
· The effect of COVID-19 on the ability of our customers and potential
customers to manufacture products.
· The financial health of our potential customers.
· Since our customers may use our products as an ingredient in their
products, the inability of the customer to obtain other ingredients may
affect their willingness or ability to purchase our product.
· The ability of our customers to ship their products to China and the
ability of their customers to distribute product to retail markets.
· The willingness or ability of the ultimate purchasers in the PRC and any
other countries to which our customers sell products to purchase products
with our ingredients and their perception as to whether the products may
have beneficial effects to them.
· The extent to which any quarantine which may be imposed affects the
willingness or ability of consumers to purchase products with our
ingredients.
· The perceived benefit, if any, to consumers of products with our
ingredients.
· The extent to which the purchase of products with our ingredients is a low
priority item for a population whose disposable income may have decreased
as a result of COVID-19 and the steps taken by governments to curb the
spread of infection.
Inflation and Supply Chain Disruption
After years of relatively low inflation, during the past year, countries
throughout the world, including Asia, have be subject to inflation at a rate
significantly higher than in recent years. The slowdown resulting from the
COVID-19 pandemic and steps taken by governments to address the pandemic,
including the recent lockdown in a number of Chinese provinces and cities, have
created major supply chain disruptions. Although we did not purchase any
inventory in 2021 and we purchased modest inventory in the first quarter of
2022, we expect that both the inflationary pressures and supply chain disruption
that affect other industries will affect us. These factors may result in delays
in receipt of products we order, and increased costs which we may not be able to
pass on to consumers. The recent Russian invasion of Ukraine has also
exacerbated the inflationary and supply chain issues. We cannot assure you that
our business will not be materially impair by inflationary and supply chain
disruption.
To the extent that we implement our business plan, we anticipate that we will
incur marketing and other expenses without any assurance that such expenses will
generate any significant revenue or net income. Because of our cash position, we
have used and may continue to use equity-based compensation for our employees
and independent contractors. We issued a total of 12,282,000 shares of common
stock to consultants as stock grants pursuant to agreements with the consultants
in May 2021 and August 2021. The agreements provide for the consultants to
perform services described in the contracts for the two-year period commencing
May 25, 2021 and August 23, 2021. The shares were valued at $31,424,800 and are
being amortized over the two-year terms of the agreements period using the
straight line method. During the three months ended March 31, 2022, we recorded
stock-based compensation of $3,928,100 and had deferred stock compensation of
$19,845,283 as of March 31, 2022, which will be amortized over the balance of
the terms of the agreements. In order to pay cash expenses, we may have to rely
on loans from stockholders or related parties, although we do not have any
agreements or understandings at this time.
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Our research and development has related to our development effort for a
cordyceps-infused chicken feed and the inspection, analysis and comparison of
the nutritional components of eggs that are laid by chickens that are fed
cordyceps-infused chicken feed. We are formulating both the chicken feed and a
marketing plan for cordyceps-based chicken feed. In order to be successful, we
would need to satisfy chicken farmers that the use of cordyceps-infused check
feed is safe, that there is improved nutrition in the chickens and the eggs and
that the cost of the feed is reasonable and that there is a market for eggs laid
by chickens that were feed with cordyceps-infused chicken feed. To date, our
proposed product has not been tested by chicken farmers. We cannot assure you
that we will be successful in developing a marketable product or that we will
generate any significant revenue from this product.
Results of Operations
Three Months Ended March 31, 2022 and 2021
For the three months ended March 31, 2022, we had revenues of $298,500,
representing the sale of cordyceps products to one customer, cost of revenue of
$222,000, a gross profit of $76,500, operating expenses of $4,005,088, of which
$2,520,000 represented research and development expenses related primarily to
the development of cordyceps-infused chicken feed, $1,485,088 represented
selling, general and administrative expenses primarily relating to services
provided by our consultants who received stock grants as compensation and, to a
significantly lesser extent, to expenses and professional fees relating to our
status as a public company. Our operating expenses included stock-based
compensation to our consultants of $3,928,100. We also incurred interest expense
to a related party of $209. As a result, we had a net loss of $3,928,797 or
$(0.07) per share (basic and diluted).
For the three months ended March 31, 2021, we had revenues of $99,500,
representing the sale of cordyceps products to one customer, which is a
different customer from the customer in the first quarter of 2022, cost of
revenue of $70,000, a gross profit of $29,500, operating expenses of $86,491
which represented selling, general and administrative expenses primarily
relating to expenses and professional fees relating to our status as a public
company. We also incurred interest expense to a related party of $2,503. As a
result, we had a net loss of $59,494 or $(0.00) per share (basic and diluted).
Because of our dependence on a few customers, one of which accounted for all of
our sales since in the first quarter of 2022, our revenue in any quarter is
dependent upon both the timing of orders from customers and the delivery of
products from our suppliers.
Liquidity and Capital Resources
The following table summarizes our changes in working capital from December 31,
2021 to March 31, 2022:
March 31 December 31,
2022 2021 Change % Change
Current assets $ 680,018 $ 706,415 $ (26,397 ) (3.7 )%
Current liabilities $ 65,990 $ 91,651 $ (25,661 ) (28.0 )%
Working capital $ 614,028 $ 614,764 $ (736 ) (0.1 )%
The following table summarizes our cash flows for the three months ended March
31, 2022 and 2021:
Three months Ended
March 31,
2022 2021
Cash provided by (used in) operating activities $ 262,132 $ (8,380 )
Cash provided by financing activities
288 14,616
Cash at end of period 357,668 24,359
Cash provided by operating activities of $262,132 for the three months ended
March 31, 2022 reflected primarily our net loss of $3,928,797, increased
primarily by stock-based compensation of $3,928,100, as well as a decrease in
account receivable of $299,500.
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Cash used in operating activities of $8,380 for the three months ended March 31,
2021 reflected primarily our net loss of $59,494 increased primarily by a
decrease in inventory of $70,000 and decreased by an increase in prepaid
expenses of $10,667 and a decrease in accounts payable and accrued expenses of
$10,662.
Cash used in financing activities of $288 for the three months ended March 31,
2022 and $14,616 for the three months ended March 31, 2021 reflected advances
from related parties.
Going Concern
The accompanying financial statements have been prepared assuming that we will
continue as a going concern, which contemplates the realization of assets and
the liquidation of liabilities in the normal course of business. We had limited
gross profit and incurred a loss from operations for the three months ended
March 31, 2022 and for the past few years. These factors, among others, raise
substantial doubt about our ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
We propose to fund operations through sales of products and equity financing
arrangements. However, because of the lack of sales and the absence of any
active trading market for our common stock, our financial condition and our lack
of an operating history, including our dependence upon a limited number of
customers, we may not be able to raise funds for capital expenditures, working
capital and other cash requirements and will have to rely on advances from a
minority stockholder, who is also an unpaid consultant, and our officer. If we
cannot generate revenue from its products, it may not be able to continue in its
business.
Critical Accounting Policy and Estimates
Our critical accounting policies are disclosed in Note 2 of Notes to Financial
Statements.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements. Our management
believes that these recent pronouncements will not have a material effect on our
financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
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