Genufood Energy Enzymes Corp. - Quarter Report: 2020 December (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2020

Commission File Number 000-56112

GENUFOOD ENERGY ENZYMES CORP.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

1108 S. Baldwin Avenue, Suite 107

Arcadia, California 91007

(Address of principal executive offices, including zip code.)

(855) 707-2077

(Telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☒ NO ☐

Securities registered pursuant to Section 12(b) of the Act: None

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 211,083,120 shares as of February 16, 2021

GENUFOOD ENERGY ENZYMES CORP.

FORM 10-Q FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 2020

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

GENUFOOD ENERGY ENZYMES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

(US$, except share data and per share data, or otherwise noted)

See Accompanying Notes to Condensed Consolidated Financial Statements.

GENUFOOD ENERGY ENZYMES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(US$, except share data and per share data, or otherwise noted)

See Accompanying Notes to Condensed Consolidated Financial Statements

GENUFOOD ENERGY ENZYMES CORPORATION
CONDENSED CONSOILDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)

(US$, except share data and per share data, or otherwise noted)

For the Three Months Ended December 31, 2020

For the Three Months Ended December 31, 2019

See Accompanying Notes to Condensed Consolidated Financial Statements

GENUFOOD ENERGY ENZYMES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(US$, except share data and per share data, or otherwise noted)

See Accompanying Notes to Condensed Consolidated Financial Statements

GENUFOOD ENERGY ENZYMES CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – GENERAL ORGANIZATION AND BUSINESS

Genufood Energy Enzymes Corp., USA (the “Company” or “GEEC”) was incorporated under the laws of the State of Nevada on June 21, 2010. The Company is currently a shell Company.

The following is a summary of the history background of the Company:

On May 24, 2011, GEEC Internet Sales (Private) Limited (“GEECIS”), a wholly-owned subsidiary of GEEC, was established in the Democratic Socialist Republic of Sri Lanka. GEECIS was established initially to be responsible for GEEC’s internet sales worldwide, but its role changed to that of a sole country distributor. On August 8, 2013, GEECIS changed the company name from GEEC Internet Sales (Private) Limited to Genufood Enzymes Lanka (Private) Limited (“GELPL”).

On February 13, 2012 GEEC incorporated a wholly-owned subsidiary company, Genufood Enzymes (S) Pte Ltd (“GESPL”) in Singapore with a view to be the sole country distributor for certain enzymes products in Singapore.

In 2014, GEEC incorporated a wholly-owned subsidiary, Genufood Enzymes (Thailand) Co., Ltd. (“GETCL”), in Thailand.

On August 19, 2014, GEEC entered into a share exchange agreement with Natfresh Beverages Corp (“Natfresh”) pursuant to which shareholders of Natfresh were issued one share of GEEC Common Stock for each share of Natfresh stock. As a result of the share exchange, Natfresh became a wholly-owned subsidiary of GEEC.

The Company ceased business operation in mid- to late-2016. All subsidiaries, except for GESPL, were closed or disposed before end of 2016.

Since its inception, the Company has always been in the development stage and never generated significant revenues. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to operate the Company’s proposed medical diagnostics and personal protection equipment (“PPE”) business. 

On December 15, 2020, the Company made the First Tranche Investment in Hukui, by purchasing 80,000 shares of Hukui’s Series C Preferred Stock for $800,000.

The Company is planning to engage in the business of distribution and sales of medical diagnostics and PPE in the United States market.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The accompanying condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending September 30, 2021. These condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2020.

Principle of Consolidation

The condensed consolidated financial statements include the accounts of GEEC and its wholly-owned subsidiary GESPL. All significant inter-company accounts and transactions have been eliminated in consolidation. The wholly-owned subsidiary of the Company did not have business or accounting activities during the three months ended December 31, 2020 and 2019.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with US GAAP 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. For the three months ended December 31, 2020 and 2019, no significant estimates and assumptions have been made in the condensed consolidated financial statements.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consisted primarily of cash, to the extent balances exceeded limits that were insured by the Federal Deposit Insurance Corporation. The Company does not require collateral and maintains reserves for potential credit losses. Such losses have historically been immaterial and have been within management’s expectations.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with original maturities of three months or less when acquired to be cash equivalents. As of December 31, 2020 and September 30, 2020, the Company did not have cash equivalents. The Company’s cash was denominated in United States Dollars (“USD”) or New Taiwan Dollars (“TWD”) and was placed with banks in the United States of America and Taiwan.

Fair Value of Financial Instruments

The Company follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

The Company’s financial instruments consist principally of cash and cash equivalents, accounts payable and accrued expenses, due to related parties, and notes payable. The carrying amounts of such financial instruments in the accompanying condensed consolidated balance sheets approximate their fair values due to their relatively short-term nature. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.

Foreign Currency Translation and Transactions

The reporting and functional currency of GEEC is the USD. The functional currency of GESPL, a wholly owned subsidiary of GEEC, is the Singapore Dollar (“SGD”).

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 0.7571 and 0.7325 as of December 31, 2020 and September 30, 2020, respectively. Revenue and expenses are translated using average exchange rates prevailing during each reporting period. The 0.7431 and 0.7337 average exchange rates were used to translate revenues and expenses for the three months ended December 31, 2020 and 2019, 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 income (loss) in stockholders’ equity (deficiency).

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. The resulting exchange difference, presented as foreign currency transaction gain (loss), is included in the accompanying condensed consolidated statements of operations.

Business Segments

The Company operates in only one segment.

Net Income (Loss) Per Share

The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. There were no potential dilutive debt or equity instruments issued and outstanding at any time during the three months ended December 31, 2020 and 2019.

Discounts on Common Stock

Common stock issued lower than the Company’s par value is treated as common stock issued under discounts. The portion of the discount is shown separately as a deduction from the Company’s account of common stock on the Company’s condensed consolidated financial statements.

Stock-Based Compensation

The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under FASB ASC Topic 718, Compensation – Stock Compensation, which requires the Company 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.

The Company 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.

No stock based compensation was issued or outstanding during the three months ended December 31, 2020 and 2019.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized. 

The Company considers positive and negative evidence when determining whether a portion or all of its deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, the Company has considered possible sources of taxable income including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected within the industry.

The Company recognizes a tax benefit associated with an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The Company’s liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The Company’s effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. The Company classifies interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense.

There were no current and deferred income tax provision recorded for the three months ended December 31, 2020 and 2019 since the Company is in developing stage and did not generate any revenues in the two fiscal periods.

Recent Accounting Pronouncements

The Company has reviewed the following recent accounting pronouncements and concluded that they were either not applicable or had no impact to the Company’s condensed consolidated financial statements:

In August 2020, the FASB issued Accounting Standards Update No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The subtitle is Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This Accounting Standard Update (“ASU”) addresses complex financial instruments that have characteristics of both debt and equity. The application of this ASU would reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models would result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. To date, no such bifurcation has been necessary. Management is evaluating the potential impact. This ASU becomes effective for fiscal years beginning after December 15, 2023.

In March 2020, the FASB issued Accounting Standards Update No. 2020-03, Codification Improvements to Financial Instruments. There are seven issues addressed in this update. Issues 1 through 5 were clarifications and codifications of previous updates. Issue 3 relates only to depository and lending institutions and therefore would not be applicable to the Company. Issue 6 was a clarification on determining the contractual term of a net investment in a lease for purposes of measuring expected credit losses, an issue not applicable to the Company. Issue 7 relates to the regaining control of financial assets sold and the recordation of an allowance for credit losses. The amendment related to issues 1, 2, 4 and 5 become effective immediately upon adoption of the update. Issue 3 becomes effective for fiscal years beginning after December 15, 2019. Issues 6 and 7 become effective on varying dates that relate to the dates of adoption other updates. Management’s initial analysis is that it does not believe the new guidance will substantially impact the Company’s financial statements.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2018-13, “Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”. The amendments in this update apply to all entities that are required, under existing GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company will evaluate the impact of the new standards in the fiscal year when it becomes effective.

NOTE 3 – GOING CONCERN

As of December 31, 2020 and September 30, 2020, the Company had an accumulated deficit of $8,236,180 and $8,158,389, respectively. To date, the Company’s cash flow requirements have been primarily met through proceeds received from sales of Common Stock. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.

The Company intends to pursue additional financing to enable it to implement the Company’s business plan. Management believes that these actions, if successful, will allow the Company to continue its operations through the next 12 months. However, there are no commitments in place for such financing currently.

NOTE 4 – INVESTMENT

On December 15, 2020, the Company purchased 80,000 shares of Series C Preferred Stock (“Series C Preferred Shares”), at $10.00 per share, for a total purchase price of $800,000, from Hukui Biotechnology Corporation (“Hukui”), pursuant to that certain Series C Preferred Shares Subscription Agreement dated September 23, 2020 (the “Hukui Agreement”). As previously reported, pursuant to the Hukui Agreement, the Company has agreed to purchase an aggregate 200,000 Series C Preferred Shares, at $10.00 per share, for an aggregate investment of $2,000,000, in a series of three closings from December 15, 2020 through June 30, 2022. Total investment consists of less than 20% of Hukui’s total equity with no significant control over Hukui. The investment is recorded at cost.

NOTE 5 – NOTES PAYABLE – RELATED PARTY

In April, May, July and August 2020, the Company’s President and Chief Executive Officer, Jui Pin Lin, made loans to the Company primarily to pay the Company’s expenses. The promissory notes the Company issued to evidence these loans are due as to both principal and simple interest in six months from their respective issuance dates.

On December 28, 2020, the Company repaid Mr. Lin $65,410 principal amount of a loan due and payable plus accrued interest in the amount of $1,162, for a total of $66,572. On January 5, 2021, the Company repaid Mr. Lin $20,000 principal amount of a loan due and payable plus accrued interest in the amount of $403, for a total of $20,403. As of December 31, 2020, only the loan made on August 26, 2020 remains outstanding and unpaid. Mr. Lin may, at his sole option, convert any outstanding principal and accrued and unpaid interest into shares of the Common Stock of the Company at a rate of $0.05 per share.

Interest expense incurred from the notes for the three months ended December 31, 2020 amounted to $1,010.

NOTE 6 – NOTES PAYABLE

On October 9, 2020, a Company’s shareholder loaned the Company the principal amount of $30,000 (the “October2020 Loan”), primarily to pay the Company’s expenses. The October 2020 Loan bears simple interest at a rate of 4% per annum, and lesser of 10% or maximum rate allowed by usury or other similar law after maturity date, and is payable as to both principal and interest on April 9, 2021 (the “Maturity Date”).

The holder of the promissory note (the “October 2020 Note”) evidencing the October 2020 Loan, may, at his sole option, convert (a “Voluntary Conversion”) the outstanding principal and accrued and unpaid interested on the October 2020 Note into shares of the Company’s Common Stock at a rate of $0.01 per share.

The October 2020 Note also provides for events of default and remedies in such event, including without limitation interest at a rate equal to the lesser of 4% per annum or the maximum interest rate allowed under usury or other similar laws from the Maturity Date until the October 2020 Note is paid in full. The October 2020 Note also contains other terms and conditions typical for a transaction of this type.

Interest expense incurred from the notes for the three months ended December 31, 2020 amounted to $260.

NOTE 7 – STOCKHOLDERS’ EQUITY (DEFICIENCY)

The Company is authorized under its articles of incorporation, as amended, to issue 10,000,000,000 shares of Common Stock, par value $0.001 per share.

Issuance of Common Stock

During the year ended September 30, 2020 the Company issued 3,834,000 shares of Common Stock to related parties to repay unpaid compensation and 9,000,000 shares of Common Stock to the CEO for stock previous not issued due to limited number of authorized shares. For the year ended September 30, 2019 the Company issued 4,091,720 shares of Common Stock for equity financing and 18,000,000 shares of Common Stock to the CEO for settlement.

On December 15, 2020, the Company completed a private offering of its Common Stock. The Company sold 107,000,000 shares of its 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.

Certain Effects of the Reverse Stock Split

On June 23, 2020, the Company’s Board of Directors approved a reverse stock split of the Company’s Common Stock, at a ratio of 1-for-100 (the “Reverse Stock Split”). The Reverse Stock Split became effective with the Secretary of State of the State of Nevada at 9:00 a.m. on July 6, 2020 (the “Effective Date”), and on July 23, 2020 with the Financial Industry Regulatory Authority and in the marketplace.

The aggregate par value of the outstanding Common Stock was reduced, while the aggregate capital in excess of par value attributable to the outstanding Common Stock for statutory and accounting purposes was correspondingly increased. The Reverse Stock Split will not affect the Company’s total stockholders’ equity. All share and per share information will be retroactively adjusted following the Effective Date to reflect the Reverse Stock Split for all periods presented in future filings. 

On the Effective Date, the total number of shares of the Company’s Common Stock held by each shareholder were 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, the Company 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. The Company is currently authorized to issue 10,000,000,000 shares of Common Stock. As a result of the Reverse Stock Split, the total number of authorized shares did not change.

The Reverse Stock Split did not have any effect on the stated par value of the Company’s Common Stock. The rights and privileges of the holders of shares of Common Stock will be unaffected by the Reverse Stock Split. All options, warrants and convertible securities of the Company outstanding immediately prior to the Reverse Stock Split will be appropriately adjusted by dividing the number of shares of Common Stock into which the options, warrants and convertible securities are exercisable or convertible by 100 and multiplying the exercise or conversion price thereof by 100.

NOTE 8 – RELATED PARTY TRANSACTIONS

Related Parties

Due to related party balance

The Company’s related party balances are as follows:

The balances due to AMCM were carried forward from previous year and related to sharing of office space in Singapore. The balances due to AMCM changed from $63,656 at September 30, 2020 to $65,791 at December 31, 2020, primarily due to the changes in foreign currency translation.

The balances due to James Tsai, Jui Pin (John) Lin, and Shao-Cheng (Will) Wang were related to unpaid compensation due to these current and former officers and director.

The related party balances are unsecured, interest-free and due on demand.

NOTE 9 – STOCK-BASED COMPENSATION

The Company’s Board of Directors has previously authorized unpaid officer salaries and director fees to be settled, at the option of the individual, by conversion of such amounts into shares of the Company’s Common Stock at a price of $0.05 per share. As a result, $27,000, $12,000, and $4,200 may be converted into 540,000, 240,000, and 84,000 shares, respectively, as compensation for services performed for the year ended September 30, 2020 by Kuang Ming Tsai, Yi Ling Chen and Ching Ming Hsu, respectively. Accrued and unpaid compensation for the Company’s current President and Chief Executive Officer, Jui Pin Lin, and Chief Financial Officer, Shao-Cheng Wang, amounted to $21,000 and $11,379, respectively, which may be converted into 420,000 and 227,571 shares, respectively. The expenses have been reflected in the accompanying condensed consolidated financial statements.

NOTE 10 – INCOME TAXES

The Company has not generated any revenue from any source in the United States and had consolidated net loss for all the years since inception in 2010. Management believes GEEC does not have any U.S. income tax liability due. However, even the Company does not have U.S. income tax liability, it may be required to file Form 5471 each year with the Internal Revenue Service (the “IRS”) of Department of Treasury. GEEC falls in the Category Five Filer (as a domestic corporation). The Company used to have subsidiaries: GEECIS in Sri Lanka that was established in May 2011, GESPL in Singapore that was established in February 2012, and GESTL in Thailand that was established in December 2014. The subsidiaries in Sri Lanka and Thailand were disposed in 2014 and 2016, respectively, and the Singapore subsidiary has been inactive since 2016.

Internal Revenue Code (“IRC”) Section 6038(a) requires information reporting with respect to certain foreign corporations (Form 5471) and describes the information required to be reported on this form. IRC Section 6038(b)(1) provides for a monetary penalty of $10,000 for each Form 5471 that is filed after the due date of the income tax return (including extensions) or does not include the complete and accurate information described in Section 6038(a). According to IRS rules, a penalty may apply to each Form 5471 which is filed after the due date of the income tax return. The penalty will be applied whether or not any tax is due on Form 1120.

The Company believes that based on the current information available, it is difficult to determine whether it is probable that the Company will be charged penalties by IRS for the late filing of Form 5471 and even if it will be, it is difficult to reasonably estimate the amount of penalties that may be assessed.

NOTE 11 – COMMITMENTS AND CONTIGINCIES

Operating lease commitments

The Company terminated its virtual office agreement in Los Angeles, California and has established a new virtual office in Arcadia, California. The new arrangement is on a month-to-month basis at a cost of $200 per month. As of December 31, 2020, the Company has no material commitments under operating leases.

NOTE 12 – SUBSEQUENT EVENTS

On January 5, 2021, the Company repaid Mr. Lin $20,000 principal amount of a loan due and payable plus accrued interest in the amount of $403, for a total of $20,403.

GENERAL NOTE

Throughout this report, we refer to our business from the period from inception (June 21, 2010) through approximately mid- to late-2016, as our “historic period”, the business conducted during the historic period as our “original business” and the management of our company during the historic period as “previous management” or “Oliver Lin’s management”.

A 1-for-100 reverse stock split (the “Reverse Stock Split”) of our common stock (the “Common Stock”) became effective with the State of Nevada on July 6, 2020 and with the Financial Industry Regulatory Authority and in the market on July 23, 2020 (the “Effective Date”). Unless expressly stated herein, all share amounts of our common stock (“Common Stock”) presented in this report have been adjusted to reflect the Reverse Stock Split.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect”, “anticipate”, “hope” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. 

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. Some of the key factors impacting these risks and uncertainties include, but are not limited to:

Overview

In 2019 and through early 2020, we had planned to import enzyme supplements from the United States for sale in Taiwan. However, due to the COVID-19 pandemic, all non COVID-19 related matters, including obtaining an import license from Taiwan’s Ministry of Economic Affairs and the Taiwan Food and Drug Administration (“FDA”), have been delayed or are taking longer than usual in Taiwan since late-January 2020. For various reasons, including the fact that without a reasonably foreseeable end of the pandemic and Taiwan government resources being shifted to dealing with the pandemic, our current management, which took office in March 2020, we decided to abandon the plan to restart our enzyme products business.

In May 2020, we announced that we were in the preliminary stage of developing a new business plan to sell and distribute physiological sea water and nasal spray in Taiwan and the United States. However, after exploring this possible business as a result of several factors, including but not limited to difficulties in commencing a new business during the ongoing COVID-19 pandemic, in September 2020 we announced that we will not pursue the nasal spray business.

In late September 2020, we announced that Hukui and we had entered into a Series C Preferred Shares Subscription Agreement dated September 23, 2020 (the “Hukui Agreement”), pursuant to which we have agreed to purchase an aggregate 200,000 shares of Hukui’s Series C Preferred Stock (“Series C Preferred Shares”) at $10.00 per share, for an aggregate investment of $2,000,000. 

We will purchase the Series C Preferred Shares in three tranches, through a date on or before June 30, 2022, as follows:

If Hukui does not achieve further milestones or meet further conditions, we will have the option either to (i) abandon the Second Tranche Investment and/or the Third Tranche Investment, or (ii) waive the failure of Hukui to meet such conditions and proceed with the Second Tranche Investment and/or the Third Tranche Investment.

Notwithstanding the foregoing, management and the Board of Directors may amend or abandon at any time our current intended investment in Hukui. and/or develop a business plan for a new business that we would operate and/or engage in a reverse merger with another company. 

If we do not adopt a plan of operations to operate a business or engaged in a reverse merger with another company, we may be obligated to register and operate as an investment company under the Investment Company Act of 1940 as a result of our investment in Hukui.

Regardless of which overall business strategy we pursue – starting our own operating business, engaging in a reverse merger or being an investment company – we will continue to need capital to meet our expenses, primarily overhead and the professional fees related to the cost of compliance as a reporting company. We must also raise funds to meet our obligation to invest $0.8 million in Hukui in the Second Tranche Investment on or before June 30, 2021. There are no commitments in place to fund any such business or fund the Second Tranche Investment 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 President and Chief Executive Officer, has provided such capital periodically in the form of loans in the aggregate principal amount of $120,410, the principal and accrued and unpaid interest of which are convertible, at his option, into shares of our Common Stock at $0.05 per share. On December 28, 2020, we repaid Mr. Lin $65,410 of the principal amount of loans due and payable plus accrued interest in the amount of $1,162, for a total of $66,572. On January 5, 2021, we repaid Mr. Lin $20,000 of the principal amount of another such loan due and payable plus accrued interest in the amount of $403, for a total of $20,403.

In the quartered ended December 31, 2020, another stockholder loaned us $30,000, on substantially the same terms as the terms of the loans from Mr. Lin. We may also raise equity, debt, convertible debt or a combination of any of the foregoing, from other parties for the capital we may need for any of the purposes specified in this report. There is no agreement in place between the Company and Mr. Lin, the other shareholder or anyone else, for such capital to continue to be made available to us as needed, and we cannot guarantee that any such capital will continue to be available to us on favorable terms, or at all, in the future.

Plan of Operations

The following plan of operations is tentative and subject to change, including but not limited to delays we are facing, and expect to continue to face, dealing with governmental agencies and other regulators as a result of reduced operations resulting from the COVID-19 pandemic. Management and the Board of Directors may amend or abandon at any time our new plan of operations, which itself in an early phase.

We are currently exploring business opportunities for products with high demand since the advent of the COVID-19 pandemic in the areas of medical diagnostics and personal protection equipment (“PPE”). We are exploring marketing two COVID-19 rapid test kits which will be useful during the pandemic period, as well as a medical mask. The primary marketing period for the rapid test kits would be during the pandemic itself, while the medical mask may still be in demand after the pandemic but with lesser demand. The rapid test method and kits are similar to those already on the market. The manufacturers are working on regulatory review and approval to be accepted by the market and potential clients. We plan to initiate the business plan of the distribution and sale of the medical diagnostics and PPE discussed below within the next six months, subject to adequate funding, regulatory approval and other factors, some of which are beyond our control.

Medical Diagnostics

2019-nCoV IgG/IgM Antibody Rapid Test. The 2019-nCoV IgG/IgM Antibody Rapid Test is a rapid immuno-chromatographic assay for the simultaneous detection of IgG and IgM antibodies to 2019-nCoV virus in human whole blood, serum or plasma. The assay is used as a screening test for 2019-nCoV viral infection and as an aid for differential diagnosis of acute phase infections or previous infections. We are currently communicating with one or more manufacturers in Taiwan for distribution of the rapid test in the United States.

Vstrip COVID-19 Antigen Rapid Test. The Vstrip COVID-19 Antigen Rapid Test is a rapid in vitro immunochromatographic assay intended for the qualitative detection of nucleocapsid protein antigen from SARS-CoV-2 in nasopharyngeal swab from individuals who are suspected of COVID-19 by their healthcare provider within the first five days of the onset of symptoms. We are currently communicating with one or more manufacturers in Taiwan for future distribution of the rapid test in the United States.

We do not have any agreement in place at this time with any manufacturer of either the antibody rapid test or the antigen rapid test.

PPE

3-Ply Medical Grade Mask. The medical-grade face mask is intended to be worn to protect against the spread or transmission of infectious germs during surgical interventions in operating theatres and other medical facilities. The main aim is to protect the patient against infectious germs. We are currently communicating with one or more manufacturers in Taiwan for future distribution of the masks in the United States. We do not have any agreement in place at this time with any manufacturer of the masks.

Manufacturing

We do have our own manufacturing plants for the above mentioned products. We have contacted manufacturers with whom our management has previous relations. If we are successful in our negotiations, we will purchase the test kits and/or masks directly from the manufacturers for sale in the United States.

We currently estimate that we may spend up to approximately $1,000,000 to purchase the products that we would sell in the United States.

Marketing

We plan to distribute the PPE through online sales platform and distributors in the United States to sell the products in retail stores. We understand from the manufacturers that the mask has already received U.S. Food and Drug Administration (“FDA”) approval. We understand that the manufacturers of the rapid test kits have applied for, but not yet received, FDA approval. We will explore the market and sales channels beginning in this pre-operational period. We are still developing a more detailed marketing timeline for the PPE.

We currently estimate that we may spend up to approximately $1,200,000 on various operational expenses, including marketing costs, which may include sampling giveaway/testing, on-line marketing and printed marketing materials, in addition to the cost of actual product purchases for a total requirement of up to $2,200,000 to commence this business. We do not have any commitments for such funding at this time.

Competition

The antigen and antibody rapid test kits are relatively new in the market. With vaccines being rolled out worldwide, we believe the demand for test kits will increase, since many businesses, including airlines, and many places, including tourist destinations, will require negative COVID tests, not just proof of vaccination, for the foreseeable future. Nonetheless, we will face significant competition from other manufacturers of rapid antigen and antibody tests, including Abbott Laboratories, Access Bio, Inc. and Babson Diagnostics, Inc., many of which companies have been in business longer than we have and have substantially larger resources than we have.

The mask has an extremely low barrier to entry and is a highly fragmented market. Masks such as the mask we intend to sell are currently being widely sold in the market under many different trade names. Therefore, we will face intense competition in the marketing of the product with many companies, including Honeywell, 3M Company and Kimberley-Clark Corporation, a number of which have been in business much longer than we have and have substantially greater financial and other resources than we have.

Regulation

In order to sell the rapid test kits in the United States, FDA approval is required. We believe that the manufacturers to whom we are speaking have applied for FDA approval for their rapid test kits and are awaiting approval.

In order to sell a medical-grade mask in the United States, FDA approval is required. We believe that the manufacturers to whom we are speaking have received FDA approval for their masks.

Intellectual Property

As distributors of other parties’ products, we do not believe that we have any protectable intellectual property for the test kits or medical masks.

Results of Operations

Three -Month Period Ended December 31, 2020 compared to the Three-Month Period Ended December 31, 2019

Revenues

We did not generate any revenues during the three-month period ended December 31, 2020 and 2019.

Operating Expenses

We incurred total operating expenses of $76,700 and $73,018 for the three-month periods ended December 31, 2020 and 2019, 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 three-month period ended December 31, 2020 compared to the same period ended in 2019 was primarily due to increase in legal fees and payroll expenses.

Net Loss

As a result of the above, our net loss increased from $73,104 in the three-month period ended December 31, 2019 to $77,883 in the same period ended in 2020.

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 pandemic and resulting global economic crisis.

We have been affected by the COVID-19 pandemic to the extent that it was one of a number of contributing factors in our decision to change our plan of operations from restarting our enzyme products business to selling the nasal spray product and then deciding not to pursue the nasal spray product business, although the first of those two decisions was largely made prior to the full impact of the COVID-19 pandemic. Our personnel are in Taiwan, which has been relatively less affected by the pandemic compared to many other countries in Asia, Europe and the United States. Nonetheless, we expect to experience delays in obtaining business licenses and permits, and any other governmental approvals that may be required for a future business, since government offices are continuing to work with reduced staff during the pandemic.

Nonetheless, depending upon the extent and duration of the pandemic and the resulting global economic crisis, these conditions may have an adverse impact on our ability to raise capital and commence any other business we may pursue. Depending upon possible changes in consumer demand, shopping and spending habits as a result of the pandemic and the resulting global economic crisis, we may also face challenges of consumer acceptance if and when we start to market any products.

Liquidity and Capital Resources

Working Capital

As of December 31, 2020, we had cash and cash equivalents of $189,236 and a working capital deficit of $169,961. 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 December 31, 2020, we had total assets of $989,236, compared with total assets of $18,092 at September 30, 2020. The increase in total assets was primarily due to increase in cash and cash equivalent and investment from the private offering of our Common Stock, which was completed in December 2020.

We had $359,197 in total current liabilities as of December 31, 2020, consisting of $131,236 in accounts payable, $21,933 in accrued expenses, $121,028 due to related parties, $55,000 in notes payable – related party, and $30,000 in note payable. 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 increase in due to related parties was primarily due to unpaid compensation to officers and directors.

During the quarter ended December 31, 2020, one of our shareholders loaned us the principal amount of $30,000 (the “October 2020 Loan”), primarily to pay our expenses. The October 2020 Loan bears simple interest at a rate of 4% per annum and is payable as to both principal and interest on April 13, 2021.

There is also outstanding a loan in the principal amount of $35,000, which our President and Chief Executive Officer, Jui Pin Lin, loaned to us on August 26, 2020 (the “August 2020 Loan”). The August 2020 Loan bears simple interest at a rate of 4% per annum and is payable as to both principal and interest on February 26, 2021.

The holders of the promissory notes evidencing the August 2020 Loan (the “August 2020 Note”) and the October 2020 Loan (individually, the “October 2020 Note” and, together with the August 2020 Notes, the “Notes”), may, at the holder’s sole option, convert (a “Voluntary Conversion”) the outstanding principal and accrued and unpaid interested on their note into shares of our Common Stock at a rate of $0.05 per share.

The Notes also provides for events of default and remedies in such event, including without limitation interest at a rate equal to the lesser of 10% per annum or the maximum interest rate allowed under usury or other similar laws from the respective maturity dates of the August 2020 Loan and October 2020 Loan, until the August 2020 Note and October 2020 Note, respectively, are paid in full. The Notes also contains other terms and conditions typical for a transaction of this type. There is no commitment from Mr. Lin, the other lending shareholder or anyone else, to continue to fund our expenses.

We had a total stockholders’ equity of $630,039 and an accumulated deficit of $8,236,272 as of December 31, 2020. 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 a private offering of our Common Stock. 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.

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

During the three-month period ended December 31, 2020, we used $57,594 of cash in operating activities which was attributable primarily to our net loss of $77,883 offset by the change in operating assets and liabilities of $20,289. In comparison, during the three-month period ended December 31, 2019, we used $58,472 of cash in operating activities which was attributable to our net loss of $73,104 and the change in operating assets and liabilities of $14,632.

With respect to our investing activities, we used $800,000 in payment for investment made to Hukui during the three months ended December 31, 2020. We did not have investing cash flow activities for the three months ended December 31, 2019.

During the three-month period ended December 31, 2020, we had total cash inflow of $1,028,738 from financing activities. We repaid $65,410 to notes payable – related party, which our President and Chief Executive Officer, Jui Pin Lin, previously loaned us. We received $30,000 from note payable as loan from a shareholder of the Company. We received $1,064,148, net of directly associated expenses, including legal, transfer agent, and printing and delivery expenses, from private offering of our Common Stock, which was completed in December 2020. For accounting purpose, we recorded the net proceeds from private offering instead of the gross amount of $1,070,000.

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 condensed consolidated financial statements presented herein do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that we cannot continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to successfully execute our business plan and generate profitable operations in the future, and, until and unless we achieve that, to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operation as and when they become due. Management intends to finance operating costs for the foreseeable future with the issuance of equity and/or debt. While we have received certain loans from our President and Chief Executive Officer, Jui Pin (John) Lin, there is no standing commitment from Mr. Lin, or 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. We currently estimate that we will need to raise additional capital of approximately $3,000,000, consisting of up to $2,200,000 to start our new medical diagnostics and PPE business over the next nine months and $800,000 for the Second Tranche Investment in Hukui. We may also need to raise additional capital for corporate expenses. We are exploring options of raising additional capital through issuing more Common Stock or other securities, including 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 condensed 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 condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed 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 three-month periods ended December 31, 2020 and 2019, no significant estimates and assumptions have been made in the condensed consolidated financial statements. The following are some of the critical accounting policies in relation to the preparation of the condensed consolidated financial statements. For a full summary of our critical accounting policies, please refer to Note 2 of Notes to Condensed 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).

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 Condensed 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 0.7571 and 0.7325 as of December 31, 2020 and September 30, 2020, respectively. Revenue and expenses are translated using average exchange rates prevailing during each reporting period. The 0.7431 and 0.7337 average exchange rates were used to translate revenues and expenses for the three months ended December 31, 2020 and 2019, 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 income (loss) in stockholders’ equity (deficiency).

Not required for smaller reporting companies.

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that the information relating to our Company, including our consolidated subsidiary, required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure. We conducted an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this annual report. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of the evaluation date, our disclosure controls and procedures were not effective due to material weaknesses in our internal control over financial reporting, as described below.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of management, including our chief executive officer and chief financial officer, we conducted an evaluation of the design and operating effectiveness of our internal controls over financial reporting based on the framework in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of evaluation date and identified the following material weaknesses:

Inadequate Segregation of Duties: We have an inadequate number of personnel to properly implement control procedures.

Lack of Audit Committee: We do not have a functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. As a result of the material weaknesses in internal control over financial reporting identified above, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2020 based on the criteria set forth in “Internal Control—Integrated Framework” issued by COSO.

Due to the nature of the material weaknesses, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected. The material weaknesses identified above either individually or in aggregation did not result in any identified misstatements or errors in the Company’s consolidated financial statements as at and for the three-month period ended December 31, 2020.

Management’s Plan for Remediation 

Management has discussed the material weaknesses noted above with our independent registered public accounting firm. Management is committed to improving its internal controls and, subject to having adequate financial resources, will (1) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (2) consider appointing outside directors and audit committee members in the future.

Inherent Limitations on Effectiveness of Controls

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all control issues or misstatements. Accordingly, our controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our control system are met. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become adequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

We are not currently a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on us or our business.

Not required of smaller reporting companies.

On December 15, 2020, we completed a private offering of our Common Stock. We sold 107,000,000 shares of our Common Stock to 34 individuals at a purchase price of $0.01 per share, for gross and net proceeds of $1,070,000. The offering was exempt from the registration provisions of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof and Regulation D and/or Regulation S promulgated thereunder.

None.

Not applicable.

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.