ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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:
| ● | risks
related to our ability to identify, pursue and commence a reverse merger and/or a possible
operating business; |
| ● | our
ability to obtain adequate funding to complete a reverse merger or commence a possible
operating business and meet our operating expenses on a current basis; |
| ● | general
economic uncertainty, whether as a result of the COVID-19 pandemic or otherwise; |
| ● | delays
in our ability to obtain any necessary business licenses and permits, and commence business
operations, whether as a result of the COVID-19 pandemic or otherwise; and |
| ● | current
and longer-term economic and other impacts of the COVID-19 pandemic on our operations,
results of operations and financial condition, including without limitation changes in
consumer spending patterns for non-essential products, resulting from the economic crisis
caused by lockdown, shelter-in-place, stay-at-home or similar orders instituted as a
result of the pandemic, or otherwise. |
Overview
We
have no operations or any specific plan to commence any particular business at this time. Our focus will be to consider either
or both of a possible business combination, which may include but not be limited to a reverse merger, with another operating business,
or commencing a business of our own, the industry and nature of which we have not identified. We reserve the right to further
change our business plan at any time.
Regardless
of which overall business strategy we pursue - starting an operating business or engaging in a reverse merger or other business
combination - 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. To do so, we may raise equity, debt, convertible debt or a combination of any of the
foregoing. However, there are no commitments in place to fund our capital requirements 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.
Hukui
Investment
Hukui
Biotechnology Corporation (“Hukui”) and we entered into a Series C Preferred Shares Subscription Agreement dated September 23,
2020 (the “Hukui Agreement”), pursuant to which we agreed to purchase an aggregate 200,000 shares of Hukui’s
Series C Preferred Stock (the “Series C Preferred Shares”) at $10.00 per share, for an aggregate investment of $2,000,000.
The
Hukui Agreement provided that we would purchase the Series C Preferred Shares in three tranches, through a date on or before June 30,
2022, as follows:
| ● | The
first tranche is 80,000 Series C Preferred Shares in the amount of $800,000 (the “First
Tranche Investment”), such shares having been purchased by us on December 15,
2020 (the “First Tranche Closing”); |
| ● | The
second tranche is 60,000 Series C Preferred Shares in the amount of $600,000 (the “Second
Tranche Investment”), such shares having been purchased by us on June 25,
2021 (the “Second Tranche Closing”); and |
| ● | The
third tranche is 60,000 Series C Preferred Shares in the amount of $600,000 (the “Third
Tranche Investment”), such shares to have been purchased on or before June 30,
2022 (the “Third Tranche Closing”). |
An
individual and resident of the Republic of China (the “Purchaser”), Hukui and we entered into a Stock Purchase Agreement
dated as of November 17, 2021 (the “Stock Purchase Agreement”), pursuant to which we agreed to sell the 140,000
shares of Hukui’s Series C Preferred Stock that we had purchased in the First Tranche Closing and the Second Tranche Closing
(the “Hukui Shares”) to the Purchaser for $350,000 in cash, or $2.50 per share. The sale of the Hukui Shares closed
on November 19, 2021.
On December 17, 2021,
Hukui and we entered into an Agreement (the “Termination Agreement”) pursuant to which our obligation to make the Third Tranche
Investment was terminated and the Hukui Agreement was terminated. As a result, we have no continuing contractual obligation to make any
investment in Hukui.
Results
of Operations
Three-Month
Period Ended March 31, 2022 compared to the Three-Month Period Ended March 31, 2021
Revenues
We
did not generate any revenues during the three-month period ended March 31, 2022 and 2021.
Operating
Expenses
We
incurred total operating expenses of $62,085 and $86,875 for the three-month period ended March 31, 2022 and 2021, respectively.
Our operating expenses consist of legal fees, other professional fees, payroll expenses, rent, bank charges, and transfer agent
fees. The decrease in operating expenses for the three-month period ended March 31, 2022 compared to the same period ended
in 2021 was primarily due to decrease in legal fees and other professional fees related to the fundraising and investment.
Other
expense
During
the three-month period ended March 31, 2022, we incurred $1,139 other expenses mainly due to interest incurred for unpaid
penalty from IRS. During the three-month period ended March 31, 2021, we incurred $630 other income mainly due to debt forgiveness
and offsets with interest incurred for amount borrowed to fund operating expenses.
Net
Loss
As
a result of the above, our net loss decreased from $87,045 in the three-month period ended March 31, 2021 to $63,224 in the
same period ended in 2022.
Six-Month
Period Ended March 31, 2022 compared to the Six-Month Period Ended March 31, 2021
Revenues
We
did not generate any revenues during the six-month period ended March 31, 2022 and 2021.
Operating
Expenses
We
incurred total operating expenses of $165,425 and $163,575 for the six-month period ended March 31, 2022 and 2021, 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 six-month period ended March 31, 2022 compared to the same period ended
in 2021 was primarily due to increase in legal fees, payroll expenses, and other professional fees.
Other
expense
During the six-month period
ended March 31, 2022, we incurred $1,886 other expenses mainly due to interest incurred for unpaid penalty from IRS. During the six-month
period ended March 31, 2021, we incurred $553 other expenses mainly due to interest incurred for amounts borrowed to fund operating
expenses.
Net
Loss
As
a result of the above, our net loss increased from $164,928 in the six-month period ended March 31, 2021 to $167,311 in the
same period ended in 2022.
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, these limitations
are unrelated to the COVID-19 pandemic and resulting global economic crisis.
Some of 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.
However, even before an increase in the number of cases of COVID-19 in Taiwan, we experienced delays in obtaining business licenses and
permits, and any other governmental approvals that might have been required for businesses that we previously considered commencing, since
government offices have been working with reduced staff during the pandemic. We expect this situation to continue and possibly become
more challenging depending upon the duration of the pandemic.
Depending upon the extent
and duration of the pandemic in Taiwan and U.S., these conditions may have a prolonged adverse impact on our ability to raise capital
and commence any business we may pursue.
Liquidity
and Capital Resources
Working
Capital
| | |
March 31, | | |
September 30, | |
| | |
2022 | | |
2021 | |
| Current
Assets | |
$ | 263,851 | | |
$ | 35,044 | |
| Current
Liabilities | |
| 149,966 | | |
| 105,346 | |
| Working
Capital (Deficit) | |
$ | 113,885 | | |
$ | (70,302 | ) |
As
of March 31, 2022, we had current assets of $263,851 and a working capital of $113,885. In comparison, as of September 30,
2021, we had current assets of $35,044 and a working capital deficit of $70,302.
As
of March 31, 2022, we had total assets of $263,851, compared with total assets of $385,044 at September 30, 2021. The
decrease in total assets was primarily due to cash spent in operating expenses after selling the 140,000 Hukui Shares for cash.
We had $149,966 in total current
liabilities as of March 31, 2022, consisting of $97,441 in accounts payable and $52,525 in due to related parties, compared to total
current liabilities of $105,346 as of September 30, 2021, consisting of $100,746 in accounts payable, $1,590 in accrued expenses,
and $3,010 in due to related parties. The increase in due to related parties was primarily due to unpaid compensation to officers and
directors.
We
had total stockholders’ equity of $86,159 and an accumulated deficit of $9,690,132 as of March 31, 2022. In comparison,
we had a total stockholders’ equity of $253,472 and an accumulated deficit of $9,522,821 as of September 30, 2021.
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.
Effective
March 31, 2021, we issued an aggregate 6,399,965 shares of our Common Stock to certain of our directors, officers, employees
and independent consultants, who converted accrued and unpaid compensation in the aggregate amount of $94,398. Of this amount,
(i) $37,998 was with respect to amounts accrued during fiscal year 2020 and was converted at a rate of $0.05 per share into an
aggregate 759,965 shares of our Common Stock; and (ii) $56,400 was with respect to amount accrued during fiscal year 2021 through
March 31, 2021 and was converted at a rate of $0.01 per share into an aggregate 5,640,000 shares of our Common Stock.
During
the year ended September 30, 2021, one of our shareholders made a loan to us in the principal amount of $30,000 (the “October 2020
Loan”), primarily to pay our expenses. The October 2020 Loan bore simple interest at a rate of 4% per annum and was
payable as to both principal and interest on the maturity date of April 9, 2021. On the maturity date, the holder of the
note evidencing the October 2020 Loan converted the outstanding principal, together with accrued and unpaid interest of $598,
into 3,059,836 shares of our Common Stock, at the rate of $0.01 per share.
On
June 15, 2021, we sold and issued 63,000,000 shares of our Common Stock to 18 individuals at purchase price of $0.01 per
share from in the Spring 2021 Offering. Gross proceeds were $630,000, before allocating certain expenses associated with the offering
in the amount of $7,230 as adjusted paid-in capital.
On
July 15, 2021, we completed the Spring 2021 Offering of its Common Stock, on which date we sold and issued an additional
10,000,000 shares of its Common Stock to five individuals at a purchase price of $0.01 per share, for gross proceeds of $100,000,
before allocating certain expenses associated with the offering in the amount of $959 as adjusted paid-in-capital.
Cash
Flows
| | |
Six
months
ended
March 31,
2022 | | |
Six
months
ended
March 31,
2021 | |
| Cash
flows used in operating activities | |
$ | (116,306 | ) | |
$ | (132,341 | ) |
| Cash
flows provided by (used in) investing activities | |
| 350,000 | | |
| (800,000 | ) |
| Cash
flows provided by financing activities | |
| - | | |
| 973,738 | |
| Net
increase in cash during period | |
$ | 233,694 | | |
$ | 41,397 | |
During
the six-month period ended March 31, 2022, we used $116,306 of cash in operating activities which was attributable primarily
to our net loss of $167,311 offset by change in operating assets and liabilities of $51,005. In comparison, during the six-month
period ended March 31, 2021, we used $132,341 of cash in operating activities which was attributable to our net loss of $164,928
and the change in operating assets and liabilities of $32,587.
With
respect to our investing activities, we received $350,000 in payment for the sale of the 140,000 Hukui Shares during the six-month
period ended March 31, 2022. During the six-month ended March 31, 2021, we used $800,000 for investment in Hukui.
During the six-month period
ended March 31, 2022, we did not have any financing activity. During the six-month period ended March 31, 2021, we had total
cash inflow of $973,738 from financing activities. We repaid $120,410 to notes payable – related party, which our former President
and Chief Executive Officer, Jui Pin Lin, previously loaned us. We received $30,000 as a loan from a shareholder of the Company. We received
$1,064,148 in net proceeds from a private offering of our Common Stock, which was completed in December 2020. For accounting purposes,
we recorded the net proceeds from the 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. 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. To date, our capital requirements have
primarily been funded by shareholders through the purchase of our Common Stock in private offerings and short-term borrowings
from a former officer and another shareholder.
The
Company sold the 140,000 Hukui Shares for $350,000 cash on November 19, 2021. The proceeds will be used for operation expenses.
Management believes that these funds are sufficient to fund the Company’s expenses for at least the next 12 months.
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 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 six-month
periods ended March 31, 2022 and 2021, 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.
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 0.7381 and 0.7368 as of March 31, 2022 and September 30, 2021, respectively.
Revenue and expenses are translated using average exchange rates prevailing during each reporting period. The 0.7383 and 0.7468
average exchange rates were used to translate revenues and expenses for the six months ended March 31, 2022 and 2021, respectively.
Stockholders’ equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded
as a separate component of accumulated other comprehensive loss in stockholders’ equity.
ITEM 4.
CONTROLS AND PROCEDURES.
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 reports filed with the Securities and Exchange Commission (the “SEC”)
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.
Comingling
of funds: We do not have adequate control of our petty cash, resulting in the comingling of our petty cash with the nominal
account holder’s personal funds.
Lack of Adequate Staffing:
We do not have adequate in-house accounting personnel and expertise in key positions, which resulted in overly relying on outside
consultants in preparing financial statements and other required disclosures by the Securities and Exchange Commission.
Ineffective
oversight: We do not exercise effective oversight and monitoring procedures designed and implemented to certain control activities.
Overly
relied on outside professionals: We are unable to prepare internally financial statements and relied on outside professional
consultants to prepare financial statements and adequate disclosures.
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, 2022 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 at and for the six-month period ended March 31, 2022.
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, intends to:
| |
● |
increase
the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties
to monitor and review until there are sufficient personnel to segregate duties; |
| |
● |
consider
providing professional courses for our key position personnel; |
| |
● |
hire
additional employees to realize segregation of duties; and |
| |
● |
strengthen
management monitoring control over accounting and financial statements preparation processing. |
However,
due to limitation of funds and personnel, we have so far been unable to begin to implement the plan to remediate the material
weaknesses noted above and it is uncertain when we will be able to begin to implement the plan to remediate these material weaknesses.
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.