Genufood Energy Enzymes Corp. - Quarter Report: 2020 March (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 MARCH 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)

601 South Figueroa Street, Suite 4050

Los Angeles, California 90017

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

(213) 330-6770

(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: 9,124,901,879 shares as of May 18, 2020

GENUFOOD ENERGY ENZYMES CORP.

FORM 10-Q FOR THE THREE- AND SIX-MONTH PERIODS ENDED MARCH 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’ DEFICIENCY

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

For the Three And Six Months Ended March 31, 2020 And 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 a start-up company that is engaged in the business of promoting, marketing, distributing and exporting sea water nasal spray for human consumption in Taiwan and USA. The Company plans to set up a subsidiary in Taiwan and explore this market during 2020 once the relevant approval and permits about its nasal spray products are obtained from the Taiwan health authorities. The Company’s strategy is to market its nasal spray product in both Taiwan and USA through online (e.g. internet-based platforms) or offline channels (e.g. both retail and wholesale outlets).

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 operationalize the Company’s current objective of commencing the nasal spray business. 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The accompanying unaudited 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, 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2019.

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 other wholly-owned subsidiary of the Company did not have accounting activities during the six-month periods ended March 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 six-month periods ended March 31, 2020 and 2019, no significant estimates and assumptions have been made in the condensed interim 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 March 31, 2020 and September 30, 2019, the Company did not have cash equivalents. The Company’s cash was denominated in United States Dollars (“US$”) or 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, and due to related parties. 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 US$. The functional currency of GESPL, a wholly owned subsidiary of GEEC, is the 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, US$. Assets and liabilities are translated using the exchange rate on the balance sheet date, which was 0.7034 and 0.7236 as of March 31, 2020 and September 30, 2019, respectively. Revenue and expenses are translated using average exchange rates prevailing during each reporting period. The 0.7278 and 0.7325 average exchange rates were used to translate revenues and expenses for the six-month periods ended March 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 income (loss) per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income (loss) per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income 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 six-month periods ended March 31, 2020 and 2019.

Discounts on Common Stock

Common stocks issued under the Company’s par value are treated as common stocks 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 six-month periods ended March 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 six-month periods ended March 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 May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ASU 606, to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards (“IFRS”). The new guidance establishes the principles to report useful information to users of financial statements about the nature, timing, and uncertainty of revenue from contracts with customers. An entity has the option to apply the provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this standard recognized at the date of initial application. ASU 2014-09 is effective for public business entities for fiscal years and interim periods within those years beginning after December 15, 2017, and early adoption is permitted but not earlier than the original effective date of December 15, 2016. For all other entities, ASU 606 is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The new standard currently is not applicable to the Company since the Company is still in development stage and does not generate revenue.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance will impact the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified the need for a valuation allowance on deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities not under the fair value option is largely unchanged. The standard is effective for public business entities for annual periods (and interim periods within those annual periods) beginning after December 15, 2017. For all other entities, it is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The new guidance does not have impact to the Company’s condensed consolidated financial statements for the six-month periods ended March 31, 2020 and 2019 since the Company does not have equity investments and financial liabilities measured under the fair value option.

In February 2016, FASB issued ASU No. 2016–02, “Leases (Topic 842)”, ASC 842, and subsequently amended the guidance relating largely to transition considerations under the standard in July 2018. The new guidance, which creates new accounting and reporting guidelines for leasing arrangements, requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for public business entities for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early application permitted. In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842) Codification Improvements, which further clarifies the determination of fair value of the underlying asset by lessors that are not manufacturers or dealers and modifies transition disclosure requirements for changes in accounting principles and other technical updates. The amendments in ASU 2019-01 amend Topic 842 and the effective date of those amendments is for fiscal years beginning December 15, 2019, and interim periods within those fiscal years for public business entities. For all other entities, ASC 842 is effective for annual periods beginning after December 15, 2020. The Company is currently evaluating the impact of the new pronouncement on its condensed consolidated financial statements but does not expect it to have a significant impact.

In June 2016, the FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a Group recognizes an allowance based on the estimate of expected credit loss. The Company does not expect that the adoption of the standard to have an impact on the Company’s condensed consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. ASU 2016-15 provides guidance for eight specific cash flow issues with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. The effective date for ASU 2016-15 is for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The new guidance does not have impact to the Company’s condensed consolidated financial statements for the six-month periods ended March 31, 2020 and 2019 since the Company had limited cash flow activities and its cash flow activities were not within the scope of the eight specific cash flow issues under the ASU 2016-15 guidance.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) (“ASU 2016-18”). This ASU affects all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This update will become effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, and early adoption is permitted in any interim or annual period. The adoption of the guidance does not have impact to the Company’s statement of cash flows as the Company currently does not have restricted cash or restricted cash equivalents.

In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, The ASU provides final guidance aligning the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date, which may lower their cost and reduce volatility in the income statement. The guidance allows nonpublic entities to account for nonemployee awards using certain practical expedients that are already available for employee awards, but the same accounting policies must be used for awards to both employees and nonemployees. The guidance is effective for public business entities in annual periods beginning after December 15, 2018, and interim periods within those years. For all other entities, it is effective in annual periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020. Early adoption is permitted, including in an interim period, but not before an entity adopts the new revenue guidance. The new guidance should be applied to all new awards granted after the date of adoption. In addition, all liability-classified awards that have not been settled and equity-classified awards for which a measurement date has not been established under ASC 505-50 by the adoption date should be re-measured. These awards should be re-measured at fair value as of the adoption date, with a cumulative effect adjustment to opening retained earnings in the fiscal year of adoption. The Company is still in the process of evaluation of the impact but does not expect the adoption of the guidance to have an impact to the Company’s condensed consolidated financial statements since the Company currently does not have share-based payments to non-employees.

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 March 31, 2020 and September 30, 2019, the Company had an accumulated deficit of $8,002,179 and $7,847,280, 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 is actively pursuing additional funding, subject to the requirement that the Company increase the number of authorized and unissued shares of its Common Stock before engaging in further capital raising transactions and strategic partners 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.

NOTE 4 – STOCKHOLDERS’ EQUITY

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 six-month periods ended March 31, 2020 and 2019, the Company did not issue any common stock.

Disputed Shares

Pursuant to the Natfresh Exchange Agreement on August 19, 2014, among the shares issued by GEEC to all Natfresh shareholders were 546,460,641 shares of GEEC Common Stock, constituting the Disputed Shares, which were issued by Oliver Lin’s management to Group B. The Company’s current management believes that the Disputed Shares should have been issued to Group A, since Group A, rather than Group B, had paid for the shares in question in the Natfresh Offering. However, the Company’s current management believes also that all shares of Natfresh common stock, including the Disputed Shares, were fully paid at the time of the Natfresh Offering and, therefore, all such shares, including the Disputed Shares, that were issued pursuant to the Natfresh Exchange Agreement were fully paid at the time of their issuance.

The Company’s management has been informed that Group A and Group B have entered into an agreement (the “Group A/Group B Settlement Agreement”) pursuant to which, among other things, (i) Group B transferred all of the Disputed Shares to Group A in proportion to the consideration paid by the individuals comprising Group A during the Natfresh Offering and (ii) both Group A and Group B have indemnified the Company and agreed to hold the Company harmless for all matters arising out of or related in any manner whatsoever to the Disputed Shares.

The Group A/Group B Settlement Agreement has been executed and the transfer of the Disputed Shares was completed on December 16, 2019. Because Taiwan, the jurisdiction in which all Group B members reside, does not have a medallion or other third-party signature guarantee system, upon the request of the Company’s transfer agent, the Company has agreed to indemnify and assume all liability of the Company’s transfer agent and its agents and employees, from any dispute, loss, damage or expense which may arise directly or indirectly by reason thereof.

NOTE 5 – 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 change from $62,883 to $61,127 mainly due to currency translation.

The balances due to James Tsai, Betty Chen and James Hsu were related to unpaid compensations due to these officers and directors. Increase in balances due to James Tsai, Betty Chen and James Hsu were compensations for the six-month periods ended March 31, 2020.

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

NOTE 6 – STOCK-BASED COMPENSATION

On May 6, 2019, the Company’s Board of Directors passed a resolution to allow previously unpaid salaries and car allowance to be settled through conversion to the Company’s common stock at a price of $0.0005 per share. $18,000 and $12,000 are expected to be converted into 36,000,000 and 24,000,000 shares as officers’ compensation for services performed for the six-month period ended March 31, 2020 to James Tsai Kuan Ming and Betty Chen Yi Ling, respectively. $4,200 is expected to be settled through conversion into 8,400,000 shares for director’s fee by James Hsu Chin Ming during the six-month period ended March 31, 2020. However, these conversions cannot take place and the related shares issued until such time as the Company shall have a sufficient number of authorized and unissued shares of Common Stock available for such issuance. The expenses have been reflected in the accompanying condensed consolidated financial statements.

NOTE 7 – 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. On November 30, 2019, the Company filed Form 1120 for the fiscal years ended September 30, 2014 through September 30, 2018.

NOTE 8 – COMMITMENTS AND CONTIGINCIES

Operating lease commitments

The Company has a virtual office agreement in Los Angeles. The Agreement is on a month-to-month basis. One month’s written notification is required by either party to terminate this Agreement. As of March 31, 2020, the Company has no material commitments under operating leases.

NOTE 9 – SUBSEQUENT EVENTS

On April 24, 2020, the Company’s President and Chief Executive Officer, Jui Pin Lin, loaned the Company the principal amount of $25,000 (the “Loan”), primarily to pay certain expenses. The Loan bears simple interest at a rate of 1% per annum, and is payable as to both principal and interest on October 24, 2020 (the “Maturity Date”).

Mr. Lin, as the holder of the promissory note (the “Note”) evidencing the Loan, may, at his sole option, convert (a “Voluntary Conversion”) the outstanding principal and accrued and unpaid interested on the Note into shares of the common stock of the Company (“Common Stock”) at a rate of $0.0005 per share. Notwithstanding the holder’s right of Voluntary Conversion, the holder of the Note may not make such conversion unless and until the Company has a sufficient number of authorized and unissued shares of Common Stock to issue upon a Voluntary Conversion. At the present time, the Company does not have a sufficient number of authorized and unissued shares of its Common Stock to issue upon a Voluntary Conversion but expects to have a sufficient number of authorized and unissued shares of its Common Stock before the Maturity Date.

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”.

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

During our historic period, we were a start-up company whose main focus was to promote, market, distribute and export a range of enzyme products for human and animal consumption, manufactured in the United States, for sale in certain Asian markets, including Taiwan and other nations in the Association of Southeast Asian Nations (“ASEAN”). Our objective was to commence marketing and distribution of American range of enzyme products for human and animal consumption to sole country distributors, wholesalers, dealers and retailers, as well as to the general public following a Multi-Level Marketing – Franchise Investor Dealer Related (MLM-FIDR) concept, to begin with, in Taiwan, and then to China, Hong Kong, Macau, Thailand, Malaysia, Singapore and Sri Lanka.

During our historic period, we were in the development stage with no significant revenues.  The Company’s initial operations included organization, capital formation, target markets identification and developing marketing plans. At some point, which we believe may have commenced beginning approximately mid- to late-2016, previous management ceased operating our original business. We have not had any revenues from operations since that time. 

Highlights

As previously reported, in April 2020 management of our company changed. For the reasons stated in this report, our new management has decided not to restart our enzyme products business. Management’s new plan of operations is set forth below. Notwithstanding the foregoing, management and the Board of Directors may amend or abandon at any time our new plan of operations, which itself in its earliest phase.

Plan of Operations

The following plan of operations is tentative and subject to change. Preliminarily, we estimate that we will need approximately $1,000,000 to fund our new plan of operations over the next 12 months, including without limitation permit applications with the national Food and Drug Administration (“FDA”) in each country where we intend to sell our product, manufacturing costs, marketing expenses and advertising costs. We do not have such funds available and there is no commitment to fund such amount, or any amount, that we need to meet our expenses and pursue our new plan of operations.

As previously reported, we had planned to establish a branch in Taiwan to import enzyme supplements from the United States. The process of applying for supplement import license from Taiwan’s Ministry of Economic Affairs and FDA usually takes approximately over one year. Due to the COVID-19 pandemic, all non COVID-19 related matters 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 management decided to abandon the plan to restart our enzyme products business.

Nasal Spray Product

Management is 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. The spray is a composition of isotonic PH of crystals of sea water diluted in purified water and aerosol cans. The product is market ready and similar products are currently being sold in China.

Saline nasal sprays can be used to moisturize dry sinus cavities and help remove debris or pollens from the nose. The spray is comprised of water and salt or sodium. It is less expensive than other options and be easily applied at home. We believe that Physiological Sea Water Nasal Spray may provide certain relief from common nasal congestion, flush out irritants, and moisturize dry nasal passages related to allergies, colds, flu and sinusitis. However, the product is not a medical treatment for any health condition or illness, including without limitation allergies, colds, flu and sinusitis, and will not be labeled as having a therapeutic purpose.

Manufacturing

We currently do not have our own production plant to make the product. We intend to outsource the production of the product to third party manufacturers, using our label for branding purposes.

We have identified a manufacturer in Shanghai, China to produce the product for us. Because manufacture of the product does not involve complex processes, we believe that we will be able to find additional manufacturers if and when necessary or if the identified manufacturer in Shanghai is not available. Because the ingredients contained in the product are not scarce, we do not believe that we will be subject to scarcity of raw materials or that these raw materials will be subject to inflationary pressures.

Marketing

We plan to distribute the product through online sales platform and distributors in Taiwan to sell our product in retail stores. Subject to FDA approval in the United States, we also plan to market the product to wholesalers in the United States. We will explore the market and sales channels during this pre-operational period. We are still developing a more detailed marketing timeline for the product.

We also intend to establish wholesale distribution channels through distributors of health care products.  Another sales channel for us to pursue is through online retailing.  Our goal is for the product to be sold through wholesale channels to national chain stores as well as online sales platform. We plan to distribute the product to be sold on other stores and platforms. We currently do not plan to have the product sold through our website.

We expect to spend approximately $20,000 to $50,000 for marketing costs, which includes sampling giveaway/testing, on-line marketing and printed marketing materials.

Competition

The nasal spray product, and comparable products to the one we intend to manufacture and market, have an extremely low barrier to entry. Products similar to the product we intend to manufacture and market 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, 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

The product will require certain regulatory compliance, including FDA approval, in each of the countries where we intend to sell the product. The nature and extent of this compliance may vary based on the health and other claims we make. Management is preparing to file import permits in Taiwan and the United State. We are currently in the earliest stage of seeking professional assistance in understanding the requirements and the application process for both Taiwan and the United States to determine all necessary steps required with each country’s FDA in order to properly disclose the ingredients, usage and other related disclosures regarding the product, to to obtain regulatory approval.

Intellectual Property

We do not believe that the ingredients contained in the nasal spray, the formulation of the nasal spray or the spray bottles have any protectable intellectual property, meaning there are no patents we can file on the process of producing the product, the product itself or the container or delivery system of the product. However, we intend to register one or more trademarks under our name for branding purposes.

Results of Operations

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

Revenues

We did not generate any revenues during the three-month period ended March 31, 2020 and March 31, 2019. Our former operating subsidiary, GESPL, ceased operation in 2016. 

Operating Expenses

We incurred total operating expenses of $81,796 and $77,518 for the three-month periods ended March 31, 2020 and 2019, respectively. Our operating expenses consist of professional fees, payroll expenses, rent and miscellaneous overhead, including bank charges, license and permits. The increase in operating expenses for the three-month period ended March 31, 2020 compared to the three-months ended March 31, 2019 was mainly due to an increase in our professional expenses.

Net Loss

As a result of the above, our net loss increased from $77,526 in the three-month period ended March 31, 2019 to $81,795 in the three-month period ended March 31, 2020.

Six-Month Period Ended March 31, 2020 compared to the Six-Month Period Ended March 31, 2019

Revenues

We did not generate any revenues during the six-month periods ended March 31, 2020 and 2019. Our former operating subsidiary, GESPL, ceased operation in 2016. 

Operating Expenses

We incurred total operating expenses of $154,814 and $148,871 for the six-month periods ended March 31, 2020 and 2019, respectively. Our operating expenses consist of professional fees, payroll expenses, rent and miscellaneous overhead, including bank charges, license and permits. The increase in operating expenses for the six-month period ended March 31, 2020 compared to the six-month period ended March 31, 2019 was mainly due to an increase in our professional expenses.

Net Loss

As a result of the above, our net loss increased from $148,770 in the six-month period ended March 31, 2019 to $154,899 in the six-month period ended March 31, 2020.

Effect of the COVID-19 Pandemic on our Business

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, although that decision 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. While our liquidity and capital resources are severely limited and present serious obstacles to our recommencing our enzyme products business, these limitations are unrelated to the pandemic and resulting global economic crisis.

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 our nasal spray product business. 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 when we start to market our nasal spray product.

Liquidity and Capital Resources

Working Capital

As of March 31, 2020, we had cash and cash equivalents of $3,427 and a working capital deficit of $384,542. In comparison, as of September 30, 2019, we had cash and cash equivalents of $121,657 and a working capital deficit of $232,344.

As of March 31, 2020, we had total assets of $3,427, compared with total assets of $121,707 at September 30, 2019. The decrease in total assets was primarily due to decrease in cash and cash equivalents.

We had $387,969 in total current liabilities as of March 31, 2020, consisting of $127,793 in accounts payable, $243,827 due to related parties, and $16,349 in accrued expenses. This is compared to total current liabilities of $354,051 as of September 30, 2019, which included $128,971 in accounts payable, $211,383 due to related parties and $13,697 in accrued expenses. The increase in due to related parties was primarily due to unpaid compensations to officers and directors.

We had a total stockholders’ deficiency of $384,542 and an accumulated deficit of $8,002,179 as of March 31, 2020. In comparison, we had a total stockholders’ deficiency of $232,344 and an accumulated deficit of $7,847,280 as of September 30, 2019

On April 24, 2020, our President and Chief Executive Officer, Jui Pin Lin, loaned us the principal amount of $25,000 (the “Loan”), primarily to pay certain expenses. The Loan bears simple interest at a rate of 1% per annum, and is payable as to both principal and interest on October 24, 2020 (the “Maturity Date”).

Mr. Lin, as the holder of the promissory note (the “Note”) evidencing the Loan, may, at his sole option, convert (a “Voluntary Conversion”) the outstanding principal and accrued and unpaid interested on the Note into shares of the common stock of the Company (“Common Stock”) at a rate of $0.0005 per share. Notwithstanding the holder’s right of Voluntary Conversion, the holder of the Note may not make such conversion unless and until the Company has a sufficient number of authorized and unissued shares of Common Stock to issue upon a Voluntary Conversion. At the present time, the Company does not have a sufficient number of authorized and unissued shares of its Common Stock to issue upon a Voluntary Conversion but expects to have a sufficient number of authorized and unissued shares of its Common Stock before the Maturity Date.

The Note 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 Maturity Date until the Note is paid in full. The Note also contains other terms and conditions typical for a transaction of this type. There is no commitment from Mr. Lin, or anyone else, to continue to fund our expenses.

Cash Flows

During the six-month period ended March 31, 2020, we used $118,230 of cash in operating activities which was attributable primarily to our net loss of $154,899 offset by the change in operating assets and liabilities of $36,669. In comparison, during the six-month period ended March 31, 2019, we used $47,831 of cash in operating activities which was attributable to our net loss of $148,770 and the change in operating assets and liabilities of $100,939.

With respect to our investing activities, we had no cash activity in either period presented and we do not anticipate any significant capital expenditures in the near future as such items are not required by us at this time.

With respect to our financing activities, we had no cash activity in either period presented.

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 restart of our enzyme products 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 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 at least $200,000 to $300,000 to restart our enzyme products business over the next 12 months. We are exploring options of raising additional capital through issuing more Common Stock or other securities, including debt, convertible into Common Stock, subject to the requirement that we must increase the number of authorized and unissued shares of our Common Stock, effect a reverse stock split or recapitalization transaction or series of transactions, before engaging in certain further capital raising transactions.  If and when appropriate, we will also consider raising capital from strategic alliance partners, which will not only provide needed additional capital but also potentially provide additional market access through deepening ties with our strategic partners. 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- and six-month periods ended March 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 our Singapore subsidiary, which are prepared using the Singapore Dollar, 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 0.7034 and 0.7236 as of March 31, 2020 and September 30, 2019, respectively. Revenue and expenses are translated using average exchange rates prevailing during each reporting period. The 0.7278 and 0.7325 average exchange rates were used to translate revenues and expenses for the six-month periods ended March 31, 2020 and 2019. 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 subsidiaries, 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 condensed 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 condensed 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 March 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 condensed consolidated financial statements as of and for the three-month and six-month period ended March 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

Other than any changes noted above, 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.

None.

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.

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