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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 Operations. (form 10-K)

03/30/2020 | 05:26pm EDT

Forward Looking Statements

Some of the statements contained in this Form 10-K that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 10-K, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties, and other factors affecting our operations, market growth, services, products, and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:


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     1.   Our ability to attract and retain management, and to integrate and
          maintain technical information and management information systems;

     2.   Our ability to generate customer demand for our services;

     3.   The intensity of competition; and

     4.   General economic conditions.

All written and oral forward-looking statements made in connection with this Form 10-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements. This MD&A should also be read in conjunction with the Item 1.A. "Risk Factors."

Overview

The Company, through Omphalos Corp. - Taiwan, is in the business of supplying a wide range of equipment and parts including reflow soldering ovens and Automated Optical Inspection (AOI) machines to printed circuit board (PCB) manufacturers in Taiwan and China. The clients are mainly Taiwanese and Chinese electronics manufacturing companies, including EPCiS Technology Co., Ltd., Delta Electronics (Jiangsu) Ltd., and Wistron Corporation.

The major equipment manufacturer Omphalos represents is TAMURA, which has complete technical support licensed from the original manufacturers.

The Company operates in an industry characterized by rapid technological changes. It will need additional investments to complete the development and improvement necessary for the development and production of the testing equipment and parts for PCB assembly processes.

The Company's business strategy is to increase its market share by expanding into other industries. Since PCB has a vast application range, the Company is currently researching and developing many additional uses for testing equipment and parts.

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principle generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Basis of Consolidation - The consolidated financial statements include the accounts of Omphalos Corp. and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated.

Going Concern - The Company has incurred net losses during the past two years and had an accumulated deficit of $2,447,010 and $2,220,140 as of December 31, 2019 and 2018, 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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There can be no assurances that there will be adequate financing available to the Company and the consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

The Company has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included: (1) Tightly budgeting and controlling all expenses; (2) Expanding product lines and recruiting a strong sales team to significantly increase sales revenue and profit; (3) The Company plans to continue actively seeing additional funding opportunities to improve and expand upon its product lines.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents - Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less.

Accounts Receivable - Accounts receivable are carried at original invoice amount less estimates made for doubtful receivables. Management determines the allowance for doubtful accounts on a quarterly basis based on a review of the current status of existing receivables, account aging, historical collection experience, subsequent collections, management's evaluation of the effect of existing economic conditions, and other known factors. The provision is provided for the above estimates made for all doubtful receivables. Account balances are charged off against the allowance only when the Company considers it is probable that a receivable will not be recovered. Recoveries of trade receivables previously written off are recorded when received. Allowance for doubtful debts amounted to $0 as of December 31, 2019 and 2018, respectively.

Inventory - Inventory is carried at the lower of cost or market. Cost is determined by using the specific identification method. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and charges to operations for known and anticipated inventory obsolescence. Inventory consists substantially of finished goods. Allowance for slow-moving inventory amounted to $414,498 and $436,409 at December 31, 2019 and 2018, respectively.

Property and Equipment - Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets as follows:

Furniture and fixtures         3 years
Machinery and equipment   3 to 5 years
Leasehold improvements        55 years

Expenditures for major renewals and betterment that extend the useful lives of property and equipment are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting profit or loss is reflected in the statement of income for the period. The accumulated depreciation was $97,751 and $121,865 at December 31, 2019 and 2018, respectively. Depreciation expense was $864 and $2,687 for the years ended December 31, 2019 and 2018, respectively.


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Intangible Assets - Include cost of patent applications that are deferred and charged to operations over their useful lives. The accumulated amortization is $40,938 and $36,778 at December 31, 2019 and 2018, respectively. Amortization expense was $3,237 and $3,316 for the years ended December 31, 2019 and 2018, respectively.

Impairment of Long-Lived Assets - The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment ("ASC 360-10"). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. Management has determined that no impairments of long-lived assets currently exist.

Revenue Recognition - During the fiscal year 2018, the Company has adopted Accounting Standards Codification ("ASC"), Topic 606 (ASC 606), Revenue from Contracts with Customers, using the modified retrospective method to all contracts that were not completed as of January 1, 2018. The Company recognized the cumulative effect of applying the new revenue standard as an adjustment to the opening balance of accumulated deficit at the beginning of 2018. The results for the Company's reporting periods beginning on and after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. Based on the Company's review of existing sales contracts as of January 1, 2018, the Company concluded that the adoption of the new guidance did not have a significant change on the Company's revenue during all periods presented.

Pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the Company transfers to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Merchandise Sales: The Company recognizes net revenues from machinery product sales when customers obtain control of the Company's products, which typically occurs upon delivery to customer. Product revenues are recorded at the net sales price, or "transaction price," which includes applicable reserves for variable consideration, including discounts, allowances, and returns.

Trade discount and allowances: The Company generally provides invoice discounts on product sales to its customers for prompt payment. The Company estimates that, based on its experience, its customers will earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized.

Product returns: The Company estimates the amount of each product that will be returned and deducts these estimated amounts from its gross revenues at the time the revenues are recognized. For special ordered and customized machinery, no sales returns were allowed.


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To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.

The following tables provide details of revenue by major products and by geography.

Revenue by Major Products


                          For the year ended
                December 31, 2019     December 31, 2018
Laser Machine $           129,460   $           439,972
Machine Parts              56,839                87,661
Total         $           186,299   $           527,633


Revenue by Geography

                         For the year ended
               December 31, 2019     December 31, 2018
Asia Pacific $           186,299   $           527,633
Total        $           186,299   $           527,633


Leases - The Company adopted FASB Accounting Standards Codification, Topic 842, Leases ("ASC 842") using the modified retrospective approach, electing the practical expedient that allows the Company not to restate its comparative periods prior to the adoption of the standard on January 1, 2019. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption. For the comparative periods prior to adoption, the Company presented the disclosures which were required under ASC 840.

The Company applied the following practical expedients in the transition to the new standard and allowed under ASC 842:


 Practical                               Description

Expedient

Reassessment The Company elected not to reassess, at the application date, of expired whether any expired or existing contracts contained leases, the or existing lease classification for any expired or existing leases, and the contracts accounting for initial direct costs for any existing leases. Use of The Company elected to use hindsight in determining the lease term hindsight (that is, when considering options to extend or terminate the lease

             and to purchase the underlying asset) and in assessing impairment of
             right-to-use assets.
Reassessment The Company elected not to evaluate existing or expired land
of existing  easements that were not previously accounted for as leases under ASC
or expired   840, as allowed under the transition practical expedient. Going
land         forward, new or modified land easements will be evaluated under ASU
easements    No. 2016-02.
Separation   Lease agreements that contain both lease and non-lease components
of lease and are generally accounted for separately.
non- lease
components
Short-term   The Company also elected the short-term lease recognition exemption
lease        and will not recognize ROU assets or lease liabilities for leases
recognition  with a term less than 12 months.
exemption


The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use ("ROU") assets and lease liabilities. ROU assets represent the Company's right to use underlying assets for the lease terms and lease liabilities represent the Company's obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. The Company's future minimum based payments used to determine the Company's lease liabilities mainly include minimum based rent payments. As most of Company's leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.


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The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months as of January 1, 2019. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, unamortized lease incentives provided by lessors, and restructuring liabilities.

The adoption of ASC 842 had a substantial impact on the Company's consolidated balance sheets. The most significant impact was the recognition of the operating lease right-of-use assets and the liability for operating leases. Accordingly, adoption of this standard resulted in the recognition of operating lease right-of-use assets of $85,704 and operating lease liabilities of $85,704 comprised of $33,019 of current operating lease liabilities and $52,685 of non-current operating lease liabilities on the consolidated balance sheet as of January 1, 2019. The adoption of ASC 842 did not result in a cumulative-effect adjustment to the opening balance of accumulated deficit.

In addition, the adoption of the standard did not have a material impact on the Company's results of operations or cash flows. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur.

Research and Development Expenses - Research and development costs are generally expensed as incurred. The Company did not incur any significant research and development expenses during the years ended December 31, 2019 and 2018.

Income Taxes - The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.

Loss Per Share - The Company has adopted Accounting Standards Codification subtopic 260-10, Earnings Per Share ("ASC 260-10") which specifies the computation, presentation and disclosure requirements of earnings per share information. Basic earnings per share have been calculated based upon the weighted average number of common shares outstanding. Common equivalent shares are excluded from the computation of the diluted loss per share if their effect would be anti-dilutive. For the years ended December 31, 2019 and 2018, the Company did not have any common equivalent shares.

Fair Value Measurements - FASB ASC 820, "Fair Value Measurements" defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its financial instruments to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable inputs to determine the exit price. It establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:


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     •    Level 1 - Inputs are quoted prices in active markets for identical
          assets or liabilities that the Company has the ability to access at the
          measurement date. Valuation of these instruments does not require a high
          degree of judgment as the valuations are based on quoted prices in
          active markets that are readily and regularly available.

     •    Level 2 - Inputs other than quoted prices in active markets that are
          either directly or indirectly observable as of the measurement date,
          such as quoted prices for similar assets or liabilities; quoted prices
          in markets that are not active; or other inputs that are observable or
          can be corroborated by observable market data for substantially the full
          term of the assets or liabilities.

     •    Level 3 - Valuations based on inputs that are unobservable and not
          corroborated by market data. The fair value for such assets and
          liabilities is generally determined using pricing models, discounted
          cash flow methodologies, or similar techniques that incorporate the
          assumptions a market participant would use in pricing the asset or
          liability.

The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents, accounts receivable, inventory, prepaid expenses, accounts payable, accrued liabilities, and due to related parties, approximate to fair value due to their relatively short maturities. The carrying amounts of the Company's long-term debt approximate to their fair value because of the short maturity and/or interest rates which are comparable to those currently available to the Company on obligations with similar terms.

Foreign-currency Transactions - Foreign-currency transactions are recorded in New Taiwan dollar ("NTD") at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollar, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders' equity (deficit).

Statement of cash flows - Cash flows from the Company's operations are based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

Translation Adjustment - The accounts of the Company were maintained, and its financial statements were expressed, in New Taiwan Dollar ("NTD"). Such financial statements were translated into U.S. Dollars ("$" or "USD") in accordance ASC 830, "Foreign Currency Matters", with the NTD as the functional currency. According to the financial statements, all assets and liabilities are translated at the current exchange rate, stockholders' equity (deficit) are translated at the historical rates, and income statement items are translated at an average exchange rate for the period.

Comprehensive Income (Loss) - Comprehensive income includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income on its statements of stockholders' equity and statements of operations and comprehensive income (loss).

Reclassifications - Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.

Recently Issued Accounting Pronouncements

Fair Value Measurement: In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement ("Topic 820"): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company is currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.


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In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company is currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.

Results of Operations

The following table presents the consolidated results of the Company for the years ended December 31, 2019 and 2018.

                                        Years ended December 31,             Change in
                                         2019              2018            $           %
Net sales                           $     186,299    $      527,633   $ (341,334 )  (64.7 )%
Cost of sales                             132,286           308,996     (176,710 )  (57.2 )%
Gross profit                               54,013           218,637     (164,624 )  (75.3 )%
Selling, general and
administrative expenses                   261,361           386,626     (125,265 )  (32.4 )%
Loss from operations                     (207,348 )        (167,989 )    (39,359 )    23.4 %
Other expenses, net                       (19,522 )         (23,829 )      4,307    (18.1 )%
Loss before provision for income
tax                                      (226,870 )        (191,818 )    (35,052 )    18.3 %
Provision for income taxes                      -                 -            -           -
Net Loss                            $    (226,870 )  $     (191,818 ) $  (35,052 )    18.3 %

Net Sales: Net sales were $186,299 for the year ended December 31, 2019, compared to $527,633 for the year ended December 31, 2018, representing a decrease of $341,334, or 64.7%. Net sales from our laser machine sold were $129,460 and $439,972 for the years ended December 31, 2019 and 2018, respectively. Net sales from our service rendered to customers and parts sold were $56,839 and $87,661 for the years ended December 31, 2019 and 2018, respectively. The decrease in sales was primarily a result of the decrease in the selling quantity of laser machine. Due to the highly competitive market, we sold two pieces and eight pieces of reflow soldering ovens and automated optical inspection machines and laser marking system to printed circuit board (PCB) manufacturers during the years ended December 31, 2019 and 2018, respectively.

Cost of Sales: Cost of sales was $132,286 for the year ended December 31, 2019, as compared to $308,996 for the year ended December 31, 2018, representing a decrease of $176,710, or 57.2%. The decrease in cost of sales during the year ended December 31, 2019 was mainly attributable to the decrease in sales as compared to 2018.

Gross Margin: Gross profit was $54,013 for the year ended December 31, 2019, compared to $218,637 for the year ended December 31, 2018, representing a decrease of $164,624, or 75.3%. Gross profit as a percent of net sales was 29.0% in 2019, compared to 41.4% in 2018. The decrease in gross profit percentage was because we sold automated optical inspection machines with lower margins during the year ended December 31, 2019.

Selling, General and Administrative Expenses: Selling, general and administrative expenses were $261,361 or 140.3% of net sales, for the year ended December 31, 2019, as compared to $386,626 or 73.3% of net sales for the year ended December 31, 2018, representing a decrease of $125,265 or 32.4%. The decrease in selling, general and administrative expenses was primarily due to the decreases in payroll expenses, insurance expenses, traveling expenses, and commission expenses, partially offset by the increase in professional expenses.


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Loss from Operations: Loss from operations has increased by $39,359, or 23.4% to $207,348 for the year ended December 31, 2019 from $167,989 for the year ended December 31, 2018. The increase in loss from operations for the year ended December 31, 2019, compared with loss from operations for the year ended December 31, 2018, was a result of the decrease in net sales.

Other Expenses, net: Other expenses, net was $19,522 for the year ended December 31, 2019, as compared to $23,829 for the year ended December 31, 2018. This change was primarily attributable to the increase in gain on disposal of fixed assets during the year ended December 31, 2019.

Net Loss: Net loss was $226,870 for the year ended December 31, 2019, as compared to $191,818 for the year ended December 31, 2018. The increase in net loss was due to the reasons described above.

Liquidity and Capital Resources

Our consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net losses during the past two years and had an accumulated deficit of $2,447,010 and $2,220,140 as of December 31, 2019 and 2018, 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.

There can be no assurances that there will be adequate financing available to the Company and the consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. These matters raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until it becomes profitable. If we are unable to obtain adequate capital, it could be forced to cease operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Management's Plan to Continue as a Going Concern

The Company has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included: (1) Tightly budgeting and controlling all expenses; (2) Expanding product lines and recruiting a strong sales team to significantly increase sales revenue and profit; (3) The Company plans to continue actively seeking additional funding opportunities to improve and expand upon its product lines.

Our principal sources of liquidity are cash and cash equivalents, and cash flow from operations. As of December 31, 2019, we had working capital deficit of $1,048,555 as compared to working capital deficit of $1,097,896 as of December 31, 2018. Our cash and cash equivalent have decreased from $55,499 at December 31, 2018 to $4,596 at December 31, 2019.


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                                                                   For the
                                                                 Years Ended
                                                                 December 31,
                                                               2019        2018

Net cash provided by (used in) operating activities $ (63,531 ) $ 33,693 Net cash provided by investing activities

                      12,961          -
Net cash provided by (used in) financing activities                 -          -

Effect of exchange rate change on cash and cash equivalents (333 ) (1,245 ) Net (decrease) increase in cash and cash equivalents $ (50,903 ) $ 32,448

Net cash flow used in operating activities was $63,531 during the year ended December 31, 2019, as compared to net cash flow provided by operating activities of $33,693 during the year ended December 31, 2018. The decrease of $97,224 of cash provided by operating activities was primarily due to the increase in net loss and the decrease in due to related parties for working capital purpose, partially offset by the decrease in prepaid and other assets and the increase in accrued expenses during the year ended December 31, 2019.

Net cash provided by investing activities was $12,961 and $0 during the years ended December 31, 2019 and 2018, respectively.

The Company did not have any cash flow used in or provided by financing activities during the years ended December 31, 2019 and 2018.

In light of the significant decreases in our net sales over the past fiscal year and current uncertain market and economic conditions, we are aggressively managing our cost structure and cash position to ensure that we will meet our financial obligations while preserving the ability to make investments that will enable us to respond to customer requirements and achieve long-term profitable growth. We currently believe that our cash and cash equivalents, working capital, and cash generated from operations, will be sufficient to meet our forecasted operating expenses and capital expenditures through 2020.

Capital Expenditures

Total capital expenditures during the years ended December 31, 2019 and 2018 were $0.

Currency Exchange Fluctuations

Translation Adjustment - The accounts of the Company were maintained, and its financial statements were expressed, in New Taiwan Dollar ("NTD"). Such financial statements were translated into U.S. Dollars ("$" or "USD") in accordance ASC 830, "Foreign Currency Matters", with the NTD as the functional currency. According to the financial statements, all assets and liabilities are translated at the current exchange rate, stockholders' equity (deficit) are translated at the historical rates, and income statement items are translated at an average exchange rate for the period.

As of December 31, 2019 and December 31, 2018 the exchange rates between the NTD and the USD ($) were NTD1=$0.0334 and NTD1=$0.03267, respectively. The weighted-average rates of exchange between NTD and USD were NTD1=$0.0324 and NTD1=$0.03319 for the years ended December 31, 2019 and December 31, 2018, respectively. Total translation adjustment recognized as of December 31, 2019 and December 31, 2018 is $472,669 and $516,668, respectively.

Inflation

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


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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 as of December 31, 2019 and December 31, 2018.

© Edgar Online, source Glimpses

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