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    OMPS   US68216B1026

OMPHALOS, CORP.

(OMPS)
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OMPHALOS : Management's Discussion and Analysis of Financial Condition and Results of Operation. (form 10-Q)

08/13/2020 | 04:08pm EDT

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including this discussion and analysis by management, contains or incorporates forward-looking statements. All statements other than statements of historical fact made in report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as "believes," "estimates," "could," "possibly," "probably," anticipates," "projects," "expects," "may," "will," or "should" or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management's current expectations and are inherently uncertain. Our actual results may differ significantly from management's expectations. The potential risks and uncertainties that could cause our actual results to differ materially from those expressed or implied herein are set forth in our Annual Report on Form 10-K for the year ended December 31, 2019.

The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

Results of Operations -Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019

Net sales were $4,989 for the three months ended June 30, 2020 as compared to $144,938 for the three months ended June 30, 2019. This represented a decrease of $139,949 or 96.6% compared to the prior year period. The decrease in net sales was primarily the result of a weaker demand in laser marking machine sales.

Cost of sales decreased by $111,306 or 96.8% to $3,709 for the three months ended June 30, 2020, as compared to $115,015 for the three months ended June 30, 2019. Gross profit was $1,280 for the three months ended June 30, 2020, compared $29,923 for the same period in 2019. Gross profit as a percentage of net sales was approximately 25.7% for the three months ended June 30, 2020, compared to approximately 20.6% in the same period in 2019. The change in gross margin was primarily due to higher margin on the products sold in the three months ended June 30, 2020.

For the three months ended June 30, 2020, selling, general and administrative expenses totaled $46,089, represented a decrease of $26,664, or 36.7%, as compared to $72,753 for the same period in 2019. The decrease in selling, general and administrative expenses was primarily attributable to the decrease in salary, professional, entertainment, traveling and repair and maintenance expenses.

For the three months ended June 30, 2020, loss from operations increased to $44,809 as compared to $42,830 for the three months ended June 30, 2019. This represented an increased loss of $1,979, or 4.6% comparing the two periods. The increase in loss from operations was mainly due to the decrease in net sales, partially offset by the decrease in selling, general and administrative expenses for the three months ended June 30, 2020.

Other income (expenses) were $(4,231) and $3,284 for the three months ended June 30, 2020 and 2019, respectively. This represented an increased loss of $7,515 or 228.8%. The main reason for the increased other expenses was primarily due to the decreased gain on disposal of fixed assets.

Our net loss was $49,040 for the three months ended June 30, 2020, compared to a net loss of $39,546 for the three months ended June 30, 2019. The increase in net loss for the three months ended June 30, 2020 was due to the reasons described above.

Results of Operations -Six months Ended June 30, 2020 Compared to the Six months Ended June 30, 2019

Net sales were $14,256 for the six months ended June 30, 2020 as compared to $145,958 for the six months ended June 30, 2019. This represented a decrease of $131,702 or 90.2% compared to the prior year period. The decrease in net sales was primarily the result of a weaker demand in laser marking machine sales.

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Cost of sales decreased by $114,128 or 94.9% to $6,169 for the six months ended June 30, 2020, as compared to $120,297 for the six months ended June 30, 2019. Gross profit was $8,087 for the six months ended June 30, 2020, compared to $25,661 for the same period in 2019. Gross profit as a percentage of net sales was approximately 56.7% for the six months ended June 30, 2020, compared to approximately 17.6% in the same period in 2019. The change in gross margin was primarily due to higher margin on the products sold in the six months ended June 30, 2020.

For the six months ended June 30, 2020, selling, general and administrative expenses totaled $82,027, represented a decrease of $54,544, or 39.9%, as compared to $136,571 for the same period in 2019. The decrease in selling, general and administrative expenses was primarily attributable to the decrease in salary, professional, entertainment, rent, and repair and maintenance expenses.

For the six months ended June 30, 2020, loss from operations decreased to $73,940 as compared to $110,910 for the six months ended June 30, 2019. This represented a decreased loss of $36,970, or 33.3% comparing the two periods. The decrease in loss from operations was mainly due to the decrease in selling, general and administrative expenses for the six months ended June 30, 2020.

Other expenses were $10,340 and $3,898 for the six months ended June 30, 2020 and 2019, respectively. This represented an increased loss of $6,442 or 165.3%. The main reason for the increased other expenses was primarily due to the decreased gain on disposal of fixed assets, partially offset by the increased rent income.

Our net loss was $84,280 for the six months ended June 30, 2020, compared to a net loss of $114,808 for the six months ended June 30, 2019. The decrease in net loss for the six months ended June 30, 2020 was due to the reasons described above.

Liquidity and Capital Resources

Cash and cash equivalents were $8,722 on June 30, 2020 and $4,596 on December 31, 2019. Our total current assets were $116,835 on June 30, 2020, as compared to $95,906 on December 31, 2019. Our total current liabilities were $1,603,144 on June 30, 2020, as compared to $1,144,461 on December 31, 2019.

We had working capital deficiency of $1,486,309 on June 30, 2019 compared with working capital deficiency of $1,048,555 on December 31, 2019. This increase in working capital deficiency was primarily due to the increased accrued expenses, due to related parties and current portion of loan from shareholders, which was partially offset by the increased cash and cash equivalents, accounts receivables, inventories, and prepaid and other current assets, and the decreased accounts payables and the current portion of lease liability.

Net cash flows provided in operating activities was $3,969 during the six months ended June 30, 2020, an increase of $14,273, compared to net cash flows used in operating activities of $10,304 during the six months ended June 30, 2019. The increase in net cash flow provided by operating activities during the six months ended June 30, 2020 was primarily due to the decrease of inventories, and the increase of accrued expenses and due to related parties, partially offset by net loss, the increase in accounts receivables and prepaid and other current assets, and the decrease in accounts payable.

Net cash flows provided by investing activities was $0 and $12,914 during the six months ended June 30, 2020 and 2019, respectively. The decrease was primarily due to the decreased proceeds from disposal of fixed assets.

We did not have net cash flows provided by nor used in financing activities during the six months ended June 30, 2020 and 2019.

Net change in cash and cash equivalents was an increase of $4,126 during the six months ended June 30, 2020. Net change in cash and cash equivalents was an increase of $11,625 during the six months ended June 30, 2019.

Going Concern

The Company had an accumulated deficit of $2,531,290 and $2,447,010 as of June 30, 2020 and December 31, 2019, respectively. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of liabilities in the normal course of business. This presentation presumes funds will be available to finance ongoing research and development, operations and capital expenditures and permit the realization of assets and the payment of liabilities in the normal course of operations for the foreseeable future.

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These factors, among others, raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Future Impact of Covid-19

Our results of operations could be adversely affected by general conditions in the global economy, including conditions that are outside of our control, such as the impact of health and safety concerns from the outbreak of COVID-19. The outbreak in China has resulted in the temporary closures of factories as mandated by the provincial governments in various provinces of China from late January to March, which has adversely affected our ability to supply equipment, services and related products to our customers. Due to the Chinese factories' shutdowns and traffic restrictions during the outbreak in China and potential shutdowns and traffic restrictions in the countries where our suppliers are located, our supply chain and business operations of our suppliers may be affected. Disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of our or our suppliers' or customers' products, could have adverse ripple effects on our manufacturing output and delivery schedule. We also face difficulties in collecting our accounts receivables due to the effects of COVID-19 on our customers and risk gaining a large amount of bad debt. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which we or our suppliers and customers operate.

Although China has already begun to recover from the outbreak of COVID-19, the epidemic continues to spread on a global scale and there is the risk of the epidemic returning to China in the future, thereby causing further business interruption. While the potential economic impact brought by and the duration of COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. If our future sales continue to decline significantly, we may risk facing bankruptcy due to our recurring fixed expenses. The extent to which COVID-19 impacts our results will depend on many factors and future developments, including new information about COVID-19 and any new government regulations which may emerge to contain the virus, among others.

Inflation

Our opinion is that inflation has not had a material effect on our operations and is not expected to have any material effect on our operations.

Climate Change

Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.

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.

© Edgar Online, source Glimpses

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