This discussion should be read in conjunction with the Company's consolidated
financial statements, including the Notes thereto, for the years ended September
30, 2020 and September 30, 2021, 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 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, Oliver Lin's management ceased operating our original business. We
have not generated any revenue from operations since that time.
In 2019 and through the end of fiscal 2021, we explored plans to restart our
enzyme products business or develop a new business. In 2019 and through early
2020, we had planned to restart our original enzyme products business, by
importing 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 FDA, were delayed or were taking longer than usual in Taiwan beginning in
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, we decided to abandon the plan to restart
our enzyme products business.
During fiscal year 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,
we decided not to pursue the nasal spray business.
In September 2020, we announced that we were exploring business opportunities
for medical mask, medical-grade gloves and possibly other PPE. During fiscal
2021, due to lack of sufficient funding, we decided not to pursue the PPE
business. We continued to explore other products with high demand since the
advent of the COVID-19 pandemic, specifically rapid test kits. However, due to
lack of funding and other factors, including the size of enterprise needed to
successfully carry out such a business, we no longer intend to pursue this
business.
At this time, we have no specific plan to commence any particular new business.
Our focus will be to consider either or both of a possible business combination,
which may include but not be limited to a reverse merger, with another operating
business, or commencing a business of our own. However, we reserve the right to
further change our business plan at any time.
Hukui Investment
In late September 2020, we announced that Hukui and we had entered into the
Hukui Agreement, pursuant to which we 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.
The Hukui Agreement provided that we would 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 on December 15, 2020 in
the First Tranche Closing;
? The Second Tranche Investment is 60,000 Series C Preferred Shares in the
amount of $600,000, such shares having been purchased by us on June 25, 2021
in the Second Tranche Closing; and
? The Third Tranche Investment is 60,000 Series C Preferred Shares in the amount
of $600,000, such shares to have been purchased on or before June 30, 2022 in
the Third Tranche Closing.
5
Following the end of our 2021 fiscal year, the Purchaser, Hukui and we entered
into the Stock Purchase Agreement, pursuant to which we agreed to sell the
140,000 Hukui Shares that we had purchased in the First Tranche Closing and the
Second Tranche Closing to the Purchaser for $350,000 in cash, or $2.50 per
share. The sale of the Hukui Shares closed on November 19, 2021.
We had purchased the Hukui Shares in two tranches, on December 15, 2020 and June
30, 2021, pursuant to the Hukui Agreement, at $10.00 per share, for an aggregate
purchase price of $1,400,000. We sold the Hukui Shares at $2.50 per share, for
a total price of $350,000, resulting in loss of $1,050,000. We recognized
impairment loss of the market value of the shares of $1,050,000 for the year
ended September 30, 2021. See Note 4 to Notes to Consolidated Financial
Statements.
On December 17, 2021, Hukui and we entered into the Termination Agreement,
pursuant to which our obligation to make the Third Tranche Investment was
terminated and the Hukui Agreement was terminated. As a result, we have no
continuing contractual obligation to make any investment in Hukui.
If we decide to develop a plan of operations for a new business, 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.
For the fiscal year ended September 30, 2020, Jui Pin (John) Lin, our former
President and Chief Executive Officer, periodically provided the capital we
needed to operate 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.
On August 26, 2020, Jui Pin (John) Lin loaned us $35,000 at 4% interest rate and
six months' maturity. The loan was repaid on February 26, 2021 in the principal
amount of $35,000, together with interest in the amount of of $706, for a total
of $35,706.
On October 9, 2020, another stockholder loaned us $30,000 (the "October 2020
Loan"), on substantially the same terms as the terms of the loans from Mr. Lin.
On April 9, 2021, the lender converted the outstanding principal, together with
accrued and unpaid interest in the amount of $598, into 3,059,836 shares of the
Company's Common Stock, at a rate of $0.01 per share.
During the fiscal year ended September 30, 2021, we raised an aggregate $1.8
million in two private offerings, the Fall 2020 Offering and the Spring 2021
Offering, to raise the capital needed to fund our operations and make the First
Tranche Investment and Second Tranche Investment in Hukui.
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 anyone 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, 2021 compared to the Year Ended September 30, 2020
Revenues
We did not generate any revenues during the years ended September 30, 2021 and
2020.
Operating expenses
We incurred total operating expenses of $363,637 and $309,907 for the years
ended September 30, 2021 and 2020, respectively. Our operating expenses consist
of legal fees, other professional fees, payroll expenses, rent, bank charges,
and transfer agent fees. The increase in operating expenses for the year ended
September 30, 2021 compared to the same period ended in 2020 was primarily due
to increase in legal fees and consultant fees.
Other income (expense)
During the year ended September 30, 2021, we had a net other income of $52,250,
which included incurred $78,476 of other income due to liabilities written off,
partially offset by a $25,000 penalty plus interest of $1,226 from the IRS for
failing to file Form 5472 timely. We did not have other income during the year
ended September 30, 2020. During the year ended September 30, 2021 we incurred
$1,050,000 impairment loss of investment. We invested $1,400,000 in Hukui's
Series C Preferred stock, which is sold on November 17, 2021 for $350,000,
resulting in loss of $1,050,000. We wrote down the investment on September 30,
2021 to reflect fair market value of the investment.
Investment impairment loss
Pursuant to the Stock Purchase Agreement, we sold the Hukui Shares on November
19, 2021 for $350,000 in cash, or $2.50 per share. The sale of the Hukui Shares
resulted in loss of $1,050,000. We recognized impairment loss of the market
value of the shares of $1,050,000 for the year ended September 30, 2021. See
Note 4 to Notes to Consolidated Financial Statements.
6
Contingent liability
During the fiscal year ended September 30, 2021, we received a $25,000 penalty
from the Internal Revenue Service (the "IRS") for failure to file Form 5472,
Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign
Corporation Engaged in a U.S. Trade or Business, for the year ended September
30, 2020. We are currently seeking forgiveness of the penalty and interest
thereon in the amount of $1,226, for a total of $26,226, which was still pending
as of September 30, 2021.
Net Loss
As a result of the above, our net loss increased from $311,109 in the year ended
September 30, 2020 to $1,364,432 in the same period ended in 2021.
Effect of the COVID-19 Pandemic on our Business
While our liquidity and capital resources are severely limited and present
serious obstacles to starting a business or continuing to meet or obligations to
invest in Hukui, these limitations are unrelated to the COVID-19 pandemic and
resulting global economic crisis.
We have been affected by the 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, until recently, has been
relatively less affected by the pandemic compared to many other countries in
Asia, Europe and the United States. Even before an increase in the number of
cases of COVID-19 in Taiwan, we expected 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. With the recent increase in the number
of COVID-19 cases in Taiwan, we expect this situation to continue and possibly
become more challenging.
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 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,
2021 2020
Current Assets $ 35,044 $ 18,092
Current Liabilities 105,346 371,035
Working Capital Deficit $ (70,302 ) $ (352,943 )As of September 30, 2021, we had current assets of $35,044 and a working capital
deficit of $70,302. In comparison, as of September 30, 2020, we had cash and
cash equivalents of $18,092 and a working capital deficit of $352,943.
As of September 30, 2021, we had total assets of $385,044, compared with total
assets of $18,092 at September 30, 2020. The increase in total assets was
primarily due to increase in prepayment and investment in Hukui.
We had $105,346 in total current liabilities as of September 30, 2021,
consisting of $100,746 in accounts payable, $1,590 in accrued expenses, and
$3,010 due to related parties. This is compared to total current liabilities of
$371,035 as of September 30, 2020, which included $129,154 in accounts payable,
$25,436 in accrued expenses, $96,035 due to related parties and $120,410 in
notes payable - related party. The decrease of liability was because of decrease
in due to related parties which was primarily due to some unpaid compensation to
officers and directors. The liability was mainly paid off in the form of
conversion of accrued compensation into shares of our Common Stock. Effective
March 31, 2021, we issued an aggregate 6,399,965 shares of our Common Stock to
certain of our directors, officers, employees and a consultant, who converted
accrued and unpaid compensation in the aggregate amount of $94,398. Of this
amount, (i) $37,998 was with respect to amounts accrued during fiscal year 2020
and was converted at a rate of $0.05 per share into an aggregate 759,965 shares
of our Common Stock; and (ii) $56,400 was with respect to amount accrued during
fiscal year 2021 through March 31, 2021 and was converted at a rate of $0.01 per
share into an aggregate 5,640,000 shares of our Common Stock. Effective
September 30, 2021, the Company issued an aggregate 6,144,000 shares of its
Common Stock to certain of its directors, officers, employees and a consultant,
who converted accrued and unpaid compensation in the aggregate amount of $61,440
at a rate of $0.01 per share of its Common Stock.
7
During the year ended September 30, 2021, one of our shareholders made the
October 2020 Loan to us in the principal amount of $30,000, primarily to pay our
expenses. The October 2020 Loan bore simple interest at a rate of 4% per annum
and was payable as to both principal and interest on the Maturity Date of April
9, 2021. On the Maturity Date, the holder of the note evidencing the October
2020 Loan(the "October 2020 Note") converted the outstanding principal, together
with accrued and unpaid interest of $598, into 3,059,836 shares of the Company's
Common Stock at the rate of $0.01 per share.
We had total stockholders' equity of $253,473 and an accumulated deficit of
$9,522,821 as of September 30, 2021. In comparison, we had a total stockholders'
deficiency of $352,943 and an accumulated deficit of $8,158,389 as of September
30, 2020
On December 15, 2020, we completed the Fall 2020 Offering. We sold 107,000,000
shares of our Common Stock to 34 individuals at a purchase price of $0.01 per
share, for gross proceeds of $1,070,000 before allocating certain expenses
associated with the offering in the amount of $5,852 as adjusted paid-in
capital.
On April 9, 2021, we issued 3,059,836 shares of our Common Stock to repay the
principal and interest accrued upon the maturity of the October 2020 Note.
On June 15, 2021, we sold and issued 63,000,000 shares of our Common Stock to 18
individuals at purchase price of $0.01 per share in the Spring 2021 Offering.
Gross proceeds were $630,000, before allocating certain expenses associated with
the offering in the amount of $7,230 as adjusted paid-in capital.
On July 15, 2021, the Company completed the Spring 2021 Offering of its Common
Stock, on which date it sold and issued additional 10,000,000 shares of its
Common Stock to five individuals at a purchase price of $0.01 per share, for
gross proceeds of $100,000, before allocating certain expenses associated with
the offering in the amount of $959 as adjusted paid-in-capital.
Reverse Stock Split
On June 23, 2020, our Board of Directors approved the Reverse Stock Split of our
Common Stock, at a ratio of 1-for-100, 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.
Cash Flows
Year ended Year ended
September 30, September 30,
2021 2020
Cash flows used in operating activities $ (304,588 ) $ (223,974 )
Cash flows used in investing activities
(1,400,000 ) -
Cash flows provided by financing activities 1,695,549 120,410
Effect of exchange rate changes on cash 218 (1 )
Net decrease in cash during period $ (8,821 ) $ (103,565 )During the year ended September 30, 2021, we used $304,588 of cash in operating
activities which was attributable primarily to our net loss of $1,364,432 offset
by impairment of $1,050,000 to investment and change in operating assets and
liabilities of $9,844. In comparison, during the year ended September 30, 2020,
we used $223,974 of cash in operating activities which was attributable to our
net loss of $311,109 and the change in operating assets and liabilities of
$87,135.
With respect to our investing activities, we used $1,400,000 in payment for
investment made to Hukui during the year ended September 30, 2021. We did not
have cash inflow from investing activities for the year ended September 30,
2020.
During the year ended September 30, 2021, we had total cash inflow of $1,695,549
from financing activities. We received $30,000 from the October 2020 Loan. We
repaid $120,410 to the notes from related party, who was our then President and
Chief Executive Officer, Jui Pin Lin. We received $1,785,959, net of directly
associated expenses, including legal, transfer agent, and printing and delivery
expenses, from two private offerings of our Common Stock, which were completed
in December 2020 and July 2021, respectively. For accounting purpose, we
recorded the net proceeds from private offering instead of the gross amount of
$1,800,000.
8
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 our plan of operations involving the start of
our new nasal spray business. 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 former President and Chief Executive
Officer, Jui Pin (John) Lin, there is no standing commitment from any 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 and short-term
borrowings from a former officer and another shareholder. We likely will need to
raise additional capital for corporate expenses during the next 12 months. We
are exploring options of raising additional capital through issuing more Common
Stock or other securities, including debt and debt convertible into Common
Stock. 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.
Contractual Obligations
We do not have material contractual obligations and commitments. We only have
one lease 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, 2021 and 2020, 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 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).
9
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.
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 TWD. It is anticipated that all of our sales 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 the Company's
Singapore subsidiary, which are prepared using the SGD, 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 0.7368 and 0.7325 as of
September 30, 2021 and 2020, respectively. Revenue and expenses are translated
using average exchange rates prevailing during each reporting period. The 0.7458
and 0.7228 average exchange rates were used to translate revenues and expenses
for the years ended September 30, 2021 and 2020, respectively. Stockholders'
equity (deficiency) is translated at historical exchange rates. Adjustments
resulting from the translation are recorded as a separate component of
accumulated other comprehensive loss in stockholders' equity (deficiency).
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