Item 1. Financial Statements
KING RESOURCES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2022 AND MARCH 31, 2022
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
| |
| | | |
| | |
| |
September 30, 2022 | | |
March 31, 2022 | |
| |
| | |
(Audited) | |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 40,377 | | |
$ | 14,864 | |
Accounts receivable | |
| 2,889 | | |
| – | |
Inventories | |
| 18,373 | | |
| 17,617 | |
Deferred financing cost, net | |
| 477,847 | | |
| – | |
Deposits, prepayments and other receivables | |
| 152,317 | | |
| 58,788 | |
Amount due from related parties | |
| 48,712 | | |
| – | |
| |
| | | |
| | |
Total current assets | |
| 740,515 | | |
| 91,269 | |
| |
| | | |
| | |
Non-current assets: | |
| | | |
| | |
Property and equipment, net | |
| 6,385 | | |
| 5,208 | |
Right-of-use assets, net | |
| 52,328 | | |
| 72,129 | |
Intangible assets | |
| 17,178 | | |
| 19,469 | |
| |
| | | |
| | |
Total non-current assets | |
| 75,891 | | |
| 96,806 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 816,406 | | |
$ | 188,075 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payables | |
$ | 3,715 | | |
$ | – | |
Accrued liabilities and other payables | |
| 406,306 | | |
| 165,392 | |
Accrued consulting and service fees | |
| 300,000 | | |
| – | |
Amounts due to related parties | |
| 1,828,102 | | |
| 1,683,063 | |
Lease liabilities | |
| 29,606 | | |
| 38,697 | |
| |
| | | |
| | |
Total current liabilities | |
| 2,567,729 | | |
| 1,887,152 | |
| |
| | | |
| | |
Non-current liability: | |
| | | |
| | |
Lease liabilities | |
| 23,568 | | |
| 33,721 | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
| 2,591,297 | | |
| 1,920,873 | |
| |
| | | |
| | |
Commitments and contingencies | |
| – | | |
| – | |
| |
| | | |
| | |
STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
Preferred Stock, par value $0.001, 85,000,000 shares authorized, 35,000,000 shares undesignated as of September 30, 2022 and March 31, 2022 | |
| – | | |
| – | |
Preferred Stock, Series C, par value $0.001, 50,000,000 shares designated, 30,000,000 shares issued and outstanding as of September 30, 2022 and March 31, 2022, respectively | |
| 30,000 | | |
| 30,000 | |
Common stock, par value $0.001, 6,000,000,000 shares authorized, 5,484,167,213 and 4,807,802,061 shares issued and outstanding as of September 30, 2022 and March 31, 2022, respectively | |
| 5,484,167 | | |
| 4,807,802 | |
Additional paid-in capital | |
| 48,635 | | |
| – | |
Accumulated other comprehensive income (loss) | |
| 4,837 | | |
| (2,107 | ) |
Accumulated deficit | |
| (7,342,530 | ) | |
| (6,568,493 | ) |
| |
| | | |
| | |
Stockholders’ deficit | |
| (1,774,891 | ) | |
| (1,732,798 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
$ | 816,406 | | |
$ | 188,075 | |
See accompanying notes to unaudited condensed
consolidated financial statements.
KING RESOURCES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND
COMPREHENSIVE LOSS
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER
30, 2022 AND 2021
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
| |
| | | |
| | | |
| | | |
| | |
| |
Three Months ended September 30, | | |
Six Months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Revenue, net | |
$ | 2,872 | | |
$ | 64,332 | | |
$ | 162,189 | | |
$ | 64,332 | |
Cost of revenue | |
| (2,634 | ) | |
| (34,864 | ) | |
| (19,120 | ) | |
| (34,864 | ) |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 238 | | |
| 29,468 | | |
| 143,069 | | |
| 29,468 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Research and development expenses | |
| 171,545 | | |
| 10,090 | | |
| 234,156 | | |
| 38,509 | |
Sales and marketing expenses | |
| 198,908 | | |
| – | | |
| 347,908 | | |
| – | |
General and administrative expenses | |
| 193,743 | | |
| 24,983 | | |
| 295,397 | | |
| 48,548 | |
Total operating expenses | |
| 564,196 | | |
| 35,073 | | |
| 877,461 | | |
| 87,057 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operation | |
| (563,958 | ) | |
| (5,605 | ) | |
| (734,392 | ) | |
| (57,589 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Government subsidy | |
| 5,199 | | |
| – | | |
| 8,258 | | |
| – | |
Interest expense | |
| (32,569 | ) | |
| – | | |
| (47,153 | ) | |
| – | |
Loss on impairment of inventories | |
| (750 | ) | |
| – | | |
| (750 | ) | |
| – | |
Total other expense, net | |
| (28,120 | ) | |
| – | | |
| (39,645 | ) | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
LOSS BEFORE INCOME TAXES | |
| (592,078 | ) | |
| (5,605 | ) | |
| (774,037 | ) | |
| (57,589 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income tax expense | |
| – | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS | |
| (592,078 | ) | |
| (5,605 | ) | |
| (774,037 | ) | |
| (57,589 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other comprehensive income: | |
| | | |
| | | |
| | | |
| | |
– Foreign currency adjustment gain | |
| 2,113 | | |
| 4,768 | | |
| 6,944 | | |
| 2,777 | |
| |
| | | |
| | | |
| | | |
| | |
COMPREHENSIVE LOSS | |
$ | (589,965 | ) | |
$ | (837 | ) | |
$ | (767,093 | ) | |
$ | (54,812 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share – Basic and Diluted* | |
| | | |
| | | |
| | | |
| | |
– Basic | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
– Diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average outstanding shares | |
| | | |
| | | |
| | | |
| | |
– Basic | |
| 5,413,500,348 | | |
| 4,807,802,061 | | |
| 5,129,519,233 | | |
| 4,807,802,061 | |
– Diluted | |
| 5,413,500,348 | | |
| 4,807,802,061 | | |
| 5,129,519,233 | | |
| 4,807,802,061 | |
*Less than $0.01
See accompanying notes to unaudited condensed
consolidated financial statements.
KING RESOURCES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2022
AND 2021
(Currency expressed in United States Dollars
(“US$”))
| |
| | | |
| | |
| |
Six months ended September 30, | |
| |
2022 | | |
2021 | |
Cash flows from operating activities: | |
| | | |
| | |
Net loss | |
$ | (774,037 | ) | |
$ | (57,589 | ) |
| |
| | | |
| | |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation | |
| 20,657 | | |
| 19,084 | |
Amortization | |
| 2,243 | | |
| 2,136 | |
Non-cash lease expenses | |
| 1,573 | | |
| 602 | |
Amortization of deferred financing cost | |
| 47,153 | | |
| – | |
Share issued for services rendered | |
| 200,000 | | |
| – | |
| |
| | | |
| | |
Change in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (2,889 | ) | |
| (64,149 | ) |
Inventories | |
| (800 | ) | |
| – | |
Deposit, prepayments and other receivables | |
| (93,674 | ) | |
| 3,486 | |
Accrued liabilities and other payables | |
| 240,969 | | |
| (1,889 | ) |
Accrued consulting and service fees | |
| 300,000 | | |
| – | |
Accounts payables | |
| 3,715 | | |
| – | |
Right-of-use assets and lease liabilities | |
| (19,065 | ) | |
| (20,072 | ) |
| |
| | | |
| | |
Net cash used in operating activities | |
| (74,155 | ) | |
| (118,391 | ) |
| |
| | | |
| | |
Cash flows from investing activity: | |
| | | |
| | |
Purchase of property and equipment | |
| (2,216 | ) | |
| – | |
| |
| | | |
| | |
Net cash used in financing activity | |
| (2,216 | ) | |
| – | |
| |
| | | |
| | |
Cash flows from financing activity: | |
| | | |
| | |
Advances from related parties | |
| 100,399 | | |
| 94,047 | |
| |
| | | |
| | |
Net cash provided by financing activity | |
| 100,399 | | |
| 94,047 | |
| |
| | | |
| | |
Foreign currency translation adjustment | |
| 1,485 | | |
| 2,821 | |
| |
| | | |
| | |
Net change in cash and cash equivalents | |
| 25,513 | | |
| (21,523 | ) |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | |
| 14,864 | | |
| 42,463 | |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS, END OF PERIOD | |
$ | 40,377 | | |
$ | 20,940 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid for income taxes | |
$ | – | | |
$ | – | |
Cash paid for interest | |
$ | – | | |
$ | – | |
See accompanying notes to unaudited condensed consolidated
financial statements.
KING RESOURCES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER
30, 2022 AND 2021
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Preferred stock Series C | | |
Common stock | | |
Additional paid-in | | |
Accumulated other comprehensive income | | |
Accumulated | | |
Total stockholders’ | |
| |
No. of Shares | | |
Amount | | |
No. of Shares | | |
Amount | | |
capital | | |
(loss) | | |
losses | | |
deficit | |
Balance as of April 1, 2021 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 4,807,802,061 | | |
$ | 4,807,802 | | |
$ | – | | |
$ | (13,411 | ) | |
$ | (6,508,327 | ) | |
$ | (1,683,936 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation adjustment | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (1,991 | ) | |
| – | | |
| (1,991 | ) |
Net loss for the period | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (51,984 | ) | |
| (51,984 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of June 30, 2021 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 4,807,802,061 | | |
$ | 4,807,802 | | |
$ | – | | |
$ | (15,402 | ) | |
$ | (6,560,311 | ) | |
$ | (1,737,911 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation adjustment | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
$ | – | | |
$ | 4,768 | | |
$ | – | | |
$ | 4,768 | |
Net loss for the period | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (5,605 | ) | |
| (5,605 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of September 30, 2021 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 4,807,802,061 | | |
$ | 4,807,802 | | |
$ | – | | |
$ | (10,634 | ) | |
$ | (6,565,916 | ) | |
$ | (1,738,748 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of April 1, 2022 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 4,807,802,061 | | |
$ | 4,807,802 | | |
$ | – | | |
$ | (2,107 | ) | |
$ | (6,568,493 | ) | |
$ | (1,732,798 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation adjustment | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 4,831 | | |
| – | | |
| 4,831 | |
Commitment shares issued for private placement | |
| – | | |
| – | | |
| 525,000,000 | | |
| 525,000 | | |
| – | | |
| – | | |
| – | | |
| 525,000 | |
Net loss for the period | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (181,959 | ) | |
| (181,959 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of June 30, 2022 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 5,332,802,061 | | |
$ | 5,332,802 | | |
$ | – | | |
$ | 2,724 | | |
$ | (6,750,452 | ) | |
$ | (1,384,926 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Share issued for services rendered | |
| – | | |
$ | – | | |
| 151,515,152 | | |
$ | 151,515 | | |
$ | 48,485 | | |
$ | – | | |
$ | – | | |
$ | 200,000 | |
Cancellation of shares | |
| – | | |
| – | | |
| (150,000 | ) | |
| (150 | ) | |
| 150 | | |
| – | | |
| – | | |
| – | |
Foreign currency translation adjustment | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 2,113 | | |
| – | | |
| 2,113 | |
Net loss for the period | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (592,078 | ) | |
| (592,078 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of September 30, 2022 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 5,484,167,213 | | |
$ | 5,484,167 | | |
$ | 48,635 | | |
$ | 4,837 | | |
$ | (7,342,530 | ) | |
$ | (1,774,891 | ) |
See accompanying notes to unaudited condensed consolidated
financial statements.
KING RESOURCES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER
30, 2022 AND 2021
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
NOTE –1 DESCRIPTION OF BUSINESS AND ORGANIZATION
King Resources, Inc. (the “Company”)
was incorporated in the State of Delaware on September 8, 1995 under the name of ARXA International Energy, Inc. On June 4, 2001, the
Company changed its name to King Resources, Inc. Currently, the Company through its subsidiaries, is engaged primarily in the development
of smart power supply solutions and products in Hong Kong.
The Company is currently preparing to launch own
brand products on online store and acting as distributor to sell several brands in Hong Kong.
Description of subsidiaries
Description of subsidiaries |
|
|
|
|
|
|
|
|
|
|
Name |
|
Place of incorporation and kind of legal entity |
|
Principal activities
and place of operation |
|
Particulars of registered/paid up share capital |
|
Effective interest
held |
|
Powertech Management Limited |
|
British Virgin Islands |
|
Investment holding |
|
50,000 ordinary shares at par value of US$1 |
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
Powertech Corporation Limited |
|
Hong Kong |
|
Provision of information technology services |
|
10,000 ordinary shares for HK$10,000 |
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
OneSolution Holdings Limited |
|
British Virgin Islands |
|
Investment holding |
|
50,000 ordinary shares at par value of US$1 |
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
OneSolution Management Limited |
|
British Virgin Islands |
|
Investment holding |
|
50,000 ordinary shares at par value of US$1 |
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
OneSolution Innotech Limited |
|
Hong Kong |
|
Product development and trading |
|
10,000 ordinary shares for HK$10,000 |
|
|
100% |
|
The Company and its subsidiaries are hereinafter
referred to as the “Company”.
NOTE – 2 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The accompanying unaudited condensed consolidated
financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the
accompanying unaudited condensed consolidated financial statements and notes.
These accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US
GAAP”).
· |
Use of estimates and assumptions |
In preparing these unaudited condensed consolidated
financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance
sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates. If actual results significantly
differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted.
Significant estimates in the period include the valuation and useful lives of intangible assets and deferred tax valuation allowance.
The unaudited condensed consolidated financial
statements include the accounts of KRFG and its subsidiaries. All significant inter-company balances and transactions within the Company
have been eliminated upon consolidation.
ASC Topic 280, “Segment Reporting”
establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization
structure as well as information about geographical areas, business segments and major customers in unaudited condensed consolidated financial
statements. For the three and six months ended September 30, 2022 and 2021, the Company operates in one reportable operating segment in
Hong Kong.
· |
Cash and cash equivalents |
Cash and cash equivalents are carried at cost
and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an
original maturity of three months or less as of the purchase date of such investments.
Accounts receivables are recorded at the
invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of
service. Credit is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their
payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due
balances over 90 days and over a specified amount are reviewed individually for collectability. At the end of fiscal year, the
Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions
to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for
any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due
or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including
seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit
exposure related to its customers. During the three and six months ended September 30, 2022 and 2021, there was no
allowance for doubtful accounts.
Inventories are stated at the lower of cost
or market value (net realizable value), cost being determined on a first-in-first-out method. Costs include material costs. The
Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. During the
three and six months ended September 30, 2022 and 2021, the Company recorded an impairment loss for obsolete
inventories of $750
and $0,
respectively.
Intangible assets consist of trademarks and trade
names. The intangible assets are stated at the purchase cost and are amortized based on their economic benefits expected to be realized
and assessed for impairment annually. There was no impairment of intangible assets identified for the three and six months ended September
30, 2022 and 2021.
Property and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following
expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
Schedule of estimated useful lives |
|
|
|
|
Expected useful lives |
Office equipment |
|
3 years |
Furniture and fixtures |
|
3 years |
Computer equipment |
|
3 years |
Expenditures for repair and maintenance are expensed
as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any
resulting gain or loss is recognized in the results of operations.
· |
Website development costs |
The Company accounts for its website development
costs in accordance with ASC 350-50, Website Development Costs. These costs, if any, are included in intangible assets in the accompanying
unaudited condensed consolidated financial statements. Upgrades or enhancements that add functionality are capitalized while other costs
during the operating stage are expensed as incurred. The Company amortizes the capitalized website development costs over an estimated
useful life of five years.
· |
Impairment of long-lived assets |
In accordance with the provisions of ASC Topic
360, Impairment or Disposal of Long-Lived Assets, all long-lived assets such as property and equipment owned and held by the Company
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted
cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for
the three and six months ended September 30, 2022 and 2021.
The Company adopted Accounting Standards Update
("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”) using the full retrospective
transition method. The Company's adoption of ASU 2014-09 did not have a material impact on the amount and timing of revenue recognized
in its unaudited condensed consolidated financial statements.
Under ASU 2014-09, the Company recognizes revenue
when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects
to be entitled to in exchange for those goods or services.
The Company applies the following five steps in
order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
· |
identify the contract with a customer; |
· |
identify the performance obligations in the contract; |
· |
determine the transaction price; |
· |
allocate the transaction price to performance obligations in the contract; and |
· |
recognize revenue as the performance obligation is satisfied. |
The Company’s services revenue is derived
from performing the research and development and technology development for the customers under fixed-price contracts. On fixed-price
contracts that are expected not more than one year in duration, revenue is recognized pursuant to the proportional performance method
based upon the proportion of actual costs incurred to the total estimated costs for the contract. The Company receives periodic progress
payments.
Costs incurred in connection with the research
and development, are included in cost of revenue. Product development costs charged to billable projects are recorded as cost of revenue,
which consist primarily of costs associated with personnel, supplies and materials.
The Company’s trading revenue is recognized
when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains
control of the product and collection is reasonably assured. A performance obligation is a promise in a contract to transfer a distinct
product to a customer.
A government subsidy is not recognized until there
is reasonable assurance that: (a) the enterprise will comply with the conditions attached to the grant; and (b) the grant will be received.
When the Company receives government subsidies but the conditions attached to the grants have not been fulfilled, such government subsidies
are deferred and recorded under other payables and accrued expenses, and other long-term liability. The classification of short-term or
long-term liabilities is depended on the management’s expectation of when the conditions attached to the grant can be fulfilled.
For the three months ended September 30, 2022 and 2021, the Company received government subsidies of $5,199 and $0. For the six months
ended September 30, 2022 and 2021, the Company received government subsidies of $8,258 and $0.
The Company adopted the ASC 740 Income tax
provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a
tax return should be recorded in the unaudited condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company
may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained
on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the unaudited
condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than
fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition,
classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company
had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary
differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs
and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides
valuation allowances as management deems necessary.
· |
Uncertain tax positions |
The Company did not take any uncertain tax positions
and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the three
and six months ended September 30, 2022 and 2021.
The Company calculates net loss per share in accordance
with ASC Topic 260, “Earnings per Share.” Basic income 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.
· |
Foreign currencies translation |
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 transaction.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency
using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the unaudited condensed
consolidated statement of operations.
The reporting currency of the Company is United
States Dollar ("US$") and the accompanying unaudited condensed consolidated financial statements have been expressed in US$.
In addition, the Company is operating in Hong Kong and maintains its books and record in its local currency, Hong Kong Dollars (“HKD”),
which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general,
for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in
accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet
date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation
of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within
the statements of changes in stockholder’s equity.
Translation of amounts from HKD into US$ has
been made at the following exchange rates for the period ended September 30, 2022 and 2021:
Schedule of translation rates |
|
|
|
|
|
|
|
|
|
|
September 30,
2022 |
|
|
September 30,
2021 |
|
Period-end HKD:US$ exchange rate |
|
|
0.1274 |
|
|
|
0.1284 |
|
Annualized average HKD:US$ exchange rate |
|
|
0.1274 |
|
|
|
0.1287 |
|
ASC Topic 220, “Comprehensive Income”,
establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income
as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented
in the accompanying unaudited condensed consolidated statements of changes in stockholders’ equity, consists of changes in unrealized
gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense
or benefit.
At the inception of an arrangement, the Company
determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater
than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and long-term lease liabilities. The Company
has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding
right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain
adjustments to the right-of-use assets may be required for items such as prepaid or accrued lease payments. The interest rate implicit
in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are
the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic
environment.
In accordance with the guidance in ASC Topic 842,
components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g.
common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance
fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values
to the lease components and non-lease components.
The Company made the policy election to not separate
lease and non-lease components. Each lease component and the related non-lease components are accounted for together as a single component.
The Company follows the ASC 850-10, Related
Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties
include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the
election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the
equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed
by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which
the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent
that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that
can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one
of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be
prevented from fully pursuing its own separate interests.
The unaudited condensed consolidated financial
statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances,
and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation
of unaudited condensed consolidated or combined financial statements is not required in those statements. The disclosures shall include:
a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or
nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary
to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each
of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that
used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if
not otherwise apparent, the terms and manner of settlement.
· |
Commitments and contingencies |
The Company follows the ASC 450-20, Commitments
to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result
in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such
contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal
proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the
perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected
to be sought therein.
If the assessment of a contingency indicates that
it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would
be accrued in the Company’s unaudited condensed consolidated financial statements. If the assessment indicates that a potentially
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent
liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally
not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon
information available at this time that these matters will have a material adverse effect on the Company’s financial position, results
of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s
business, financial position, and results of operations or cash flows.
· |
Fair value of financial instruments |
The Company follows paragraph 825-10-50-10 of
the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments.
Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted
accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair
value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value
hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value
hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting
Standards Codification are described below:
Level 1 |
|
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
|
|
|
Level 2 |
|
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
|
|
|
Level 3 |
|
Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their
fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant
model assumption or input is unobservable.
The fair value hierarchy gives the highest priority
to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If
the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is
based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial
assets and liabilities, such as cash and cash equivalents, approximate their fair values because of the short maturity of these instruments.
· |
Recent accounting pronouncements |
The Company has reviewed all recently issued,
but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to
cause a material impact on its financial condition or the results of its operations.
NOTE – 3 GOING CONCERN UNCERTAINTIES
The accompanying unaudited condensed consolidated
financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business.
The Company incurred recurring losses from prior
years and suffered from an accumulated deficit of $7,342,530 at September 30, 2022. In addition, with respect to the ongoing and evolving
coronavirus (COVID-19) outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, the outbreak has
caused substantial disruption in international economies and global trades and if repercussions of the outbreak are prolonged, could have
a significant adverse impact on the Company’s business.
The continuation of the Company as a going concern
in the next twelve months is dependent upon the continued financial support from its stockholders. The Company is currently pursuing additional
financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain
the operations.
These and other factors raise substantial doubt
about the Company’s ability to continue as a going concern. These unaudited 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.
NOTE – 4 DEPOSITS, PREPAYMENTS AND OTHER
RECEIVABLES
Deposits, prepayments and other receivables consisted
of the following:
Schedule of deposits, prepayments and other receivables | |
September 30, | | |
March 31, | |
| |
2022 | | |
2022 | |
| |
| | |
| |
Prepaid expenses | |
$ | 43,773 | | |
$ | 50,226 | |
Prepayment for goods | |
| 100,047 | | |
| – | |
Rental and utilities deposit | |
| 8,497 | | |
| 8,518 | |
Other receivables | |
| – | | |
| 44 | |
Deposits, prepayments and other receivables | |
$ | 152,317 | | |
$ | 58,788 | |
Prepaid expenses represents the administrative
and operational expenses that are prepaid for the next twelve months.
Prepayment for goods represents the payment for
production and delivery of goods in advance. The prepayment will be charged to inventories when the goods are received from the vendor.
NOTE – 5 DEFERRED FINANCING COST, NET
Deferred financing cost, net is as follows:
| |
September 30, 2022 | | |
March 31, 2022 | |
| |
| | |
| |
Deferred financing cost | |
| 525,000 | | |
| – | |
Less: amortization | |
| (47,153 | ) | |
| – | |
Deferred financing cost, net | |
$ | 477,847 | | |
$ | – | |
On June 24, 2022, the Company issued 525,000,000
shares of its common stock as Commitment Shares to Williamsburg Venture Holdings, LLC (the “Investor”), under an Equity Purchase
Agreement dated June 21, 2022 (the “Agreement”), in consideration for the Investor’s execution and delivery of, and
performance under the Agreement, which was deferred to be amortized over the financing period.
NOTE – 6 PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
Schedule of property and equipment | |
| | |
| |
| |
September 30, | | |
March 31, | |
| |
2022 | | |
2022 | |
| |
| | |
| |
Office equipment | |
$ | 15,706 | | |
$ | 15,779 | |
Furniture and fixtures | |
| 12,037 | | |
| 12,123 | |
Computer equipment | |
| 26,999 | | |
| 24,961 | |
Foreign translation difference | |
| (129 | ) | |
| (337 | ) |
| |
| 54,613 | | |
| 52,526 | |
Less: accumulated depreciation | |
| (48,345 | ) | |
| (47,659 | ) |
Less: foreign translation difference | |
| 117 | | |
| 341 | |
| |
$ | 6,385 | | |
$ | 5,208 | |
Depreciation expense for the three months ended
September 30, 2022 and 2021 were $567 and $0, respectively.
Depreciation expense for the six months ended
September 30, 2022 and 2021 were $1,027 and $0,
respectively.
NOTE –
7 INTANGIBLE ASSETS, NET
As of September
30, 2022 and March 31, 2022, intangible assets consisted of the following:
Schedule of intangible assets | |
| |
| | | |
| | |
| |
Useful life | |
September 30, 2022 | | |
March 31, 2022 | |
At cost: | |
| |
| | |
| |
Website development cost | |
5 years | |
$ | 21,200 | | |
$ | 21,352 | |
Trademarks | |
10 years | |
| 2,552 | | |
| 2,552 | |
Less: accumulated amortization | |
| |
| (6,525 | ) | |
| (4,308 | ) |
Foreign translation adjustment | |
| |
| (49 | ) | |
| (127 | ) |
| |
| |
$ | 17,178 | | |
$ | 19,469 | |
Amortization of intangible assets for the three
months ended September 30, 2022 and 2021 were $1,121 and $1,067, respectively.
Amortization of intangible assets for the six
months ended September 30, 2022 and 2021 were $2,243 and $2,136, respectively.
As of September 30, 2022, the estimated amortization
expense for intangible assets for each of the succeeding five years and thereafter is as follows:
Schedule of intangible assets future amortization expense | |
| | |
Year ending September 30: | |
Amount | |
2023 | |
$ | 4,484 | |
2024 | |
| 4,484 | |
2025 | |
| 4,484 | |
2026 | |
| 2,369 | |
2027 | |
| 255 | |
Thereafter | |
| 1,102 | |
Total | |
$ | 17,178 | |
NOTE – 8 AMOUNTS DUE TO RELATED PARTIES
The amounts represented temporary advances for
working capital purpose. The amounts are from the Company’s shareholders and their controlling companies, which were unsecured,
interest-free with no fixed term of repayment. The related parties balance was $1,828,102 and $1,683,063, as of September 30, 2022 and
March 31, 2022, respectively.
NOTE –9
LEASE
As of September 30, 2022, the Company entered
into an operating lease with a lease term of 2 years, commencing from February 22, 2022.
Right of use assets and lease liability –
right of use are as follows:
Lease information | |
| | |
| |
| |
September 30,
2022 | | |
March 31,
2022 | |
| |
| | |
| |
Right-of-use assets | |
$ | 52,328 | | |
$ | 72,129 | |
The lease liability – right of use is as
follows:
| |
September 30, 2022 | | |
March 31, 2022 | |
| |
| | |
| |
Current portion | |
$ | 29,606 | | |
$ | 38,697 | |
Non-current portion | |
| 23,568 | | |
| 33,721 | |
| |
| | | |
| | |
Total | |
$ | 53,174 | | |
$ | 72,418 | |
The weighted average discount rate for the operating
lease is 5%.
As of September 30, 2022, the operating lease
payment of $29,606 will mature in the next 12 months.
NOTE – 10 STOCKHOLDERS’ DEFICIT
The Company is authorized to issue two classes
of capital stock, up to 6,085,000,000 shares.
The Company is authorized to issue 85,000,000
shares of preferred stock, with a par value of $0.001. The Company has one class of Preferred Stock designated with 50,000,000 shares
authorized as Series C Preferred Stock, with a par value of $0.001 per share.
The Company is authorized to issue 6,000,000,000
shares of common stock, with a par value of $0.001.
Series C Preferred Stock
The Company has designated 50,000,000 shares of
Series C Preferred Stock. Each one share of Series C Convertible Preferred Stock converts into 100 shares of common stock of the Company
at the election of the holder, subject to equitable adjustments.
As of September 30, 2022 and March 31, 2022, the
Company had 30,000,000 shares of Series C Preferred Stock issued and outstanding.
Common Stock
On June 24, 2022, the Company issued 525,000,000
shares of its common stock as Commitment Shares to Williamsburg Venture Holdings, LLC (the “Investor”), under an Equity Purchase
Agreement dated June 21, 2022 (the “Agreement”), in consideration for the Investor’s execution and delivery of, and
performance under the Agreement, which was deferred to be amortized over the financing period.
On August 12, 2022, the Company issued 151,515,152
shares of its common stock to settle the accrued consulting and service fee to consultants who have provided services to the Company.
On September 30, 2022, the Company cancelled 150,000
shares of its common stock due to an error noted from previous transfer agent’s record.
As of September 30, 2022 and March 31, 2022,
the Company had a total of 5,484,167,213 shares
and 4,807,802,061 shares of common stock issued
and outstanding, respectively.
NOTE – 11 NET LOSS PER SHARE
The following table sets forth the computation
of basic and diluted net loss per share for the six months ended September 30, 2022 and 2021:
Computation of basic and diluted net loss per share | |
| | | |
| | |
| |
Six months ended September 30, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Net loss attributable to common shareholders | |
$ | (774,037 | ) | |
$ | (57,589 | ) |
| |
| | | |
| | |
Weighted average common shares outstanding: | |
| | | |
| | |
– Basic | |
| 5,129,519,233 | | |
| 4,807,802,061 | |
– Diluted | |
| 5,129,519,233 | | |
| 4,807,802,061 | |
| |
| | | |
| | |
Net loss per share:* | |
| | | |
| | |
– Basic | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
– Diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
*
Less than $0.01
For the six months ended September 30, 2022 and
2021, diluted weighted-average common shares outstanding is equal to basic weighted-average common shares, due to the Company’s
net loss position. Hence, no common stock equivalents were included in the computation of diluted net loss per share
since such inclusion would have been antidilutive.
NOTE –
12 INCOME TAX EXPENSE
For the six months ended September 30, 2022 and
2021, the local (“United States of America”) and foreign components of income (loss) before income taxes were comprised of
the following:
Schedule of Income before Income Tax, Domestic and Foreign | |
| | | |
| | |
| |
Six months ended September 30, | |
| |
2022 | | |
2021 | |
Tax jurisdiction from: | |
| | | |
| | |
- Local | |
$ | (205,304 | ) | |
$ | – | |
- Foreign, including | |
| | | |
| | |
British Virgin Islands | |
| (504,163 | ) | |
| – | |
Hong Kong | |
| (64,570 | ) | |
| (57,589 | ) |
| |
| | | |
| | |
Loss before income taxes | |
$ | (774,037 | ) | |
$ | (57,589 | ) |
The provision for income taxes consisted of the
following:
Provision for income taxes | |
| | | |
| | |
| |
Six months ended September 30, | |
| |
2022 | | |
2021 | |
Current tax: | |
| | | |
| | |
- Local | |
$ | – | | |
$ | – | |
- Foreign | |
| – | | |
| – | |
| |
| | | |
| | |
Deferred tax | |
| | | |
| | |
- Local | |
| – | | |
| – | |
- Foreign | |
| – | | |
| – | |
| |
| | | |
| | |
Income tax expense | |
$ | – | | |
$ | – | |
The effective tax rate in the periods presented
is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company mainly
operates in Hong Kong that is subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
KRFG is registered in the State of Delaware and
is subject to tax laws of the United States of America. The U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into
law. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate
tax rate from 35% to 21% effective January 1, 2018. The Company’s policy is to recognize accrued interest and penalties related
to unrecognized tax benefits in its income tax provision. The Company has not accrued or paid interest or penalties which were not material
to its results of operations for the periods presented. The Company has provided for a full valuation allowance against the deferred tax
assets as the tax losses may not be able to carry forward after a change in substantial ownership of the Company.
For the six months ended September 30, 2022 and
2021, there were no operating income in the U.S. tax regime.
BVI
Under the current BVI law, the Company is not
subject to tax on income.
Hong Kong
The Company’s subsidiary operating in Hong
Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from 8.25% to 16.5% on the estimated assessable profits
arising in Hong Kong during the current period after deducting a tax concession for the tax year. The reconciliation of income tax rate
to the effective income tax rate for the six months ended September 30, 2022 and 2021 is as follows:
Reconciliation of tax effective rate |
|
|
|
|
|
|
|
|
|
|
Six months ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
Income (Loss) before income taxes |
|
$ |
(64,570 |
) |
|
$ |
(57,589 |
) |
Statutory income tax rate |
|
|
16.5% |
|
|
|
16.5% |
|
Income tax expense at statutory rate |
|
|
(10,654 |
) |
|
|
(9,502 |
) |
Tax effect of non-deductible items |
|
|
645 |
|
|
|
– |
|
Tax effect of non-taxable items |
|
|
(1,891 |
) |
|
|
– |
|
Net operating income (loss) |
|
|
(11,900 |
) |
|
|
(9,502 |
) |
Valuation allowance |
|
|
11,900 |
|
|
|
9,502 |
|
Income tax expense (benefit) |
|
$ |
– |
|
|
$ |
– |
|
The following table sets forth the significant
components of the deferred tax assets and liabilities of the Company as of September 30, 2022 and March 31, 2022:
Schedule of deferred income taxes | |
| | | |
| | |
| |
September 30, | | |
March 31, | |
| |
2022 | | |
2022 | |
| |
| | |
| |
Deferred tax assets: | |
| | | |
| | |
Net operating loss carryforward, from | |
| | | |
| | |
US tax regime | |
$ | 80,868 | | |
$ | – | |
Hong Kong tax regime | |
| 270,524 | | |
| 285,609 | |
Less: valuation allowance | |
| (351,392 | ) | |
| (285,609 | ) |
Deferred tax assets, net | |
$ | – | | |
$ | – | |
As of September 30, 2022, the operations in the
United States of America incurred $385,086 of cumulative net operating losses which can be carried forward indefinitely to offset future
taxable income. The Company has provided for a full valuation allowance against the deferred tax assets of $80,868 on the expected future
tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not
be realized in the future.
As of September 30, 2022, the operations in Hong
Kong incurred $1,639,540 of cumulative net operating losses which can be carried forward to offset future taxable income. There is no
expiry in net operating loss carryforwards under Hong Kong tax regime. the Company has provided for a full valuation allowance against
the deferred tax assets of $270,524 on the expected future tax benefits from the net operating loss carryforwards as the management believes
it is more likely than not that these assets will not be realized in the future.
The Company filed income tax returns in the United
States federal tax jurisdiction and the Delaware state tax jurisdiction. Since the Company is in a loss carryforward position, it is generally
subject to examination by federal and state tax authority for all tax years in which a loss carryforward is available.
NOTE – 13 RELATED PARTY TRANSACTIONS
From time to time, the Company’s related
companies and director advanced working capital funds to the Company for working capital purpose. Those advances are unsecured, non-interest
bearing and had no fixed terms of repayment.
Apart from the transactions and balances detailed
elsewhere in these accompanying unaudited condensed consolidated financial statements, the Company has no other significant or material
related party transactions during the periods presented.
NOTE – 14 COMMITMENTS AND CONTINGENCIES
As of September 30, 2022, the Company is committed
to the below contractual arrangement.
On June 21, 2022, the Company entered into an
Equity Purchase Agreement with Williamsburg Venture Holdings, LLC (“Investor”), a Nevada limited liability company, pursuant
to which the Investor has committed to invest up to Twenty Million Dollars ($20,000,000) in the Company’s common stock over a 36-month
period in accordance with the terms and conditions of that certain Equity Purchase Agreement dated June 21, 2022. During the term, the
Company shall be entitled to put to the Investor, and the Investor shall be obligated to purchase, such number of shares of the Company’s
common stock and at such prices as are determined in accordance with the Equity Purchase Agreement. The per share purchase price for the
Williamsburg Put Shares will be equal to 88% of the lowest traded price of the Common Stock on the principal market during the five (5)
consecutive trading days immediately preceding the date which Williamsburg received the Williamsburg Put Shares as DWAC Shares in its
brokerage account (as reported by Bloomberg Finance L.P., Quotestream, or other reputable source). In connection with the Equity Purchase
Agreement, both parties also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to
which the Company agreed to register with the SEC the common stock issuable under the Equity Purchase Agreement, among other securities.
As of September 30,2022, the remaining balance for Equity Purchase from the Investor was $20,000,000.
NOTE – 15 SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”,
which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before unaudited
condensed consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after September
30, 2022, up through the date the Company issued the unaudited condensed consolidated financial statements. The Company had no material
recognizable subsequent events since September 30, 2022.
ITEM 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion and analysis of our Company’s financial condition and results of operations should be read in conjunction with
our unaudited condensed consolidated financial statements and the related notes included elsewhere in the report. This discussion contains
forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially
from those anticipated in these forward-looking statements as a result of various factors. See “Cautionary Note Concerning Forward-Looking
Statements” on page ii.
Unless
otherwise noted, all currency figures quoted as “U.S. dollars”, “dollars” or “$” refer to the legal
currency of the United States. Throughout this report, assets and liabilities of the Company’s subsidiaries are translated into
U.S. dollars using the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates prevailing during
the period. The gains and losses resulting from the translation of financial statements of foreign subsidiaries are recorded as a separate
component of accumulated other comprehensive income within the statement of stockholders’ equity.
Our Mission
Our mission is to create value
for our shareholders through innovative solutions and products with Healthcare, Lifestyles, and Mobility elements.
Overview
We were incorporated in the
state of Delaware on September 8, 1995, under the name ARXA International Energy, Inc. On June 4, 2001, we changed our name to King Resources,
Inc., our current name.
On April 2, 2018, a
change of control occurred with respect to the Company. On October 18, 2018, Brian Kistler, the then sole director and executive
resigned from his position as the Chairman of the Board, and Junrong Yin was appointed to fill the vacancy caused by his
resignation. On May 3, 2021, Mr. Kistler resigned from his positions as CEO with the Company and appointed Caren Currier to fill the
vacancies caused by his resignation.
On October 25, 2021,
Caren Currier entered into a Stock Purchase Agreement with Dr. Lee Ying Chiu Herbert (“Dr. Lee”) pursuant to which Ms.
Currier agreed to sell to Dr. Lee all 30 million shares of Series C Preferred Stock of the Company held by her for aggregate
consideration of Four Hundred Ten Thousand Dollars ($410,000). This transaction was consummated on November 10, 2021. In connection
with the acquisition, Ms. Currier resigned from all her positions with the Company and the following persons were appointed to serve
in the positions set forth next to their names:
Name |
|
Position |
FU Wah |
|
Chief Executive Officer, Secretary, Director |
LAU Ping Kee |
|
Chief Financial Officer, Director |
Acquisition of Powertech
On December 15, 2021, we acquired
50,000 shares of Powertech Management Limited, a limited liability company organized under the laws of the British Virgin Islands (“Powertech”),
representing all of its issued and outstanding securities, from its shareholders Silver Bloom Properties Limited and FU Wah in exchange
for 2,835,820,896 shares of our Common Stock (“Share Exchange”). In connection with the acquisition, each of Silver Bloom
Properties Limited and FU Wah received 2,126,865,672 and 708,955,224 shares of our Common Stock, respectively. Powertech operates its
smart power supply business through its wholly owned subsidiary Powertech Corporation Limited, a limited liability company organized under
the laws of Hong Kong. The Company relied on the exemption from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation
S promulgated under the Act in selling the Company’s securities to the shareholders of Powertech.
Prior to the Share Exchange,
the Company was considered as a shell company due to its nominal assets and limited operation. The transaction was treated as a recapitalization
of the Company.
The Share Exchange between
the Company and Powertech on December 15, 2021 is deemed a merger of entities under common control for which FU Wah is the common director
and shareholder of both the Company and Powertech. Under the guidance in ASC 805 for transactions between entities under common control,
the assets, liabilities and results of operations, are recognized at their carrying amounts on the date of the Share Exchange, which required
the retrospective combination of the Company and Powertech for all periods presented.
Recent developments of the Company
On June 27, 2022, the board of directors of King
Resources, Inc., a Delaware corporation, and certain stockholders holding a majority of the voting rights of our common stock approved
by written consent in lieu of a special meeting the taking of all steps necessary to effect the following corporate actions:
|
1. |
Amend the Company’s Certificate of Incorporation filed with the Delaware Secretary of State (the “Certificate of Incorporation”) to change the Company’s name to OneSolution Technology Inc.; |
|
2 |
Amend the Company’s Certificate of Incorporation to increase the authorized capital stock from 6,085,000,000, consisting of 6,000,000,000 shares of common stock, par value $0.001, and 85,000,000 shares of preferred stock, to 36,100,000,000 consisting of 36,000,000,000 shares of common stock, par value $0.001, and 100,000,000 shares of preferred stock, par value $0.001; |
|
3. |
Elect not to be governed by Section 203 of the Delaware General Corporation Law; and |
|
4. |
Adopt the Amended and Restated Certificate of Incorporation for the purpose of consolidating the amendments to the Company’s Certificate of Incorporation and to conform the par values of the preferred stock. |
We expect that such
corporate actions to become effective on occurrence of the the later of: (i) the date on which the Corporate Actions are
approved by the Financial Industry Regulatory Authority; or (ii) no earlier than August 22, 2022. As of the date of this report, the
Corporate Actions have not been approved by the Financial Industry Regulatory Authority.
On August 8, 2022, the Company
filed a registration statement on Form S-8, which authorized the issuance of the Company’s common stock as the compensation for
the consultants who have provided services for the Company. On August 12, 2022, 151,515,152 shares of the Company’s common stock
have been issued to the consultants.
On August 30, 2022, the Company
appointed the following individuals to serve as independent directors of the Company:
Name | |
Age | |
Office(s) |
Wong Kan Tat Frederick | |
58 | |
Independent Director |
Lo Mei Fan Pauline | |
51 | |
Independent Director |
None of the foregoing persons
has a direct family relationship with any of the Corporation’s directors or executive officers, or any person nominated or chosen
by the Corporation to become a director or executive officer.
None of the foregoing officers
and directors will receive compensation in connection with their service on our Board of Directors or as an executive officer.
The Company adopted an Insider
Trading Compliance Program, established an audit committee, a compensation committee and a nomination and governance committee, and adopted
charters to govern the governance of such audit, compensation, nomination and governance committees. The audit and compensation committees
consist of Mr. Wong Kan Tat Frederick and Ms. Lo Mei Fan Pauline, our independent directors, and Mr. Lau Ping Kee, our Chief Financial
Officer and Director. Mr. Lau is the chair of our audit committee and compensation committee. Our nomination and governance committee
consists of Mr. Wong Kan Tat Frederick, Ms. Lo Mei Fan Pauline, and Mr. Fu Wah, our Chief Executive Officer, Secretary and Director. Mr.
Fu is the chair of our nomination and governance committee.
The Company believes that
the above actions are the first step for the Company to establish good corporate governance which could lead to corporate success
and growth in the future.
During the three months ended
September 30, 2022, the Company recorded a revenue of $2,872 and a net loss of $592,078. The significant drop in revenue was mainly attributable
to the global economic downturn. During this period, the Company started the distribution business, however, the material supply and
logistic of final products are still impacted by the effect of COVID-19. The pace of implementation of distribution business was hindered
and only a few sales were made as a result. The Company has tried its best to overcome the challenges in this tough situation and successfully
secured the supply chain subsequent to the quarter ended September 30, 2022. The management expects a sales rebound will occur in the
next quarter, together with the seasonal effect brought by Christmas and New Year Holiday, and expand to the oversea market when opportunity
permits.
Our Organization Structure
The following corporate organization
chart illustrates the current corporate structure of King Resources, Inc., including the jurisdiction of incorporation and ownership
interest of each of its subsidiaries:
King Resources, Inc. is a
holding company with no operations. It operates solely through its subsidiaries by providing innovative solutions and products with Healthcare,
Lifestyles, and Mobility elements.
We have five wholly-owned
subsidiaries: (i) OneSolution Holdings Limited (“OSH”), a BVI limited liability company formed in August 2022; (ii) Powertech
Management Limited (“Powertech”), a BVI limited liability company formed in December 2021; (iii) Powertech Corporation Limited
(“Powertech Corp”), a Hong Kong limited liability company formed in January 2015; (iv) OneSolution Management Limited (“OSM”),
a BVI limited liability company formed in August 2022; and (v) OneSolution Innotech Limited (“OSIL”), a Hong Kong limited
liability company formed in September 2022, and we have two business focuses:
| · | Powertech Corp focuses on (i) research and development solutions; (ii) sales of own brand smart power
supply products, and (iii) development of IoT products across our smart home, smart office and smart fitness ecosystem; |
| | |
| · | OSIL has entered into several partnership agreements with brands selling innovative and lifestyle products.
Currently, OSIL acts as the distributor of five brands, namely Aqigo, Brusheva, Qivation, Paudin and Team Cuisine. |
We are currently preparing
to launch the Powertech Corp’s own brand smart power supply products on online store, and launching the sales of OSIL’s product
with channel partners by the end of 2022. For the six months ended September 30, 2022 and 2021, we reported a net loss of $774,037 and
$57,589, respectively. As of September 30, 2022, we had current assets of $740,515 and current liabilities of $2,567,729. As of March
31, 2022, we had current assets of $91,269 and current liabilities of $1,887,152.
Our Business
We currently operate in Hong
Kong, and we seek to expand distribution of our products to Asia Pacific (“APAC”), Europe, Middle East and Africa (“EMEA”)
and USA markets as opportunities permit. Our products are currently manufactured in China on a purchase order basis. As our distribution
increases, we expect to sub-contract our products elsewhere in Asia as pricing and coordination dictate. We have no intention of expanding
operations or our physical presence into China currently.
Products and Services
Currently, we are currently
preparing to launch the Powertech Corp’s own brand of smart power supply products on an online store. Meanwhile, the newly established
subsidiary, OSIL, acts as distributor in Hong Kong and has concluded several partnerships with five brands. We are building up our sales
channels for the following brands in retails and online store in Hong Kong and categorized the products into “Healthcare”,
“Lifestyle” and “Mobility”:
Healthcare
Aqigo
Aqigo is a Hong Kong brand
that offers both home-use and commercial-use air purifiers to consumers. By leveraging the Paco Nanotech, a patented technology co-developed
by ASA Innovation & Technology Limited and City University of Hong Kong, which can kill or decompose 99.9% of bacteria & virus,
including the COVID-19 virus. Paco Nanotech has obtained the ISO 18184 standard. Aqigo products purify up to 3 times faster than traditional
purifiers, which could bring cleaner and fresher air for consumers.
Brusheva
Brusheva offers sonic rechargeable
electric toothbrush for users to maintain their teeth’s health. The sonic rechargeable electric toothbrush is available to vibrate
at more than 25,000 strokes per minute, with the application of smaller brush head and softer bristles, it allows the users to reach all
parts of their mouth easily, including all nooks and crannies, without damaging the gum when they are brushing their teeth. We hope the
Brusheva’s toothbrush could improve the oral health for users and bring the users a healthier smile.
Qivation
Qivation offers innovative,
safe and convenient to use products which integrate as part of our home living. Qivation applies the Nano Photocatalyst technology approved
by Photocatalysis Industry Association of Japan (“PIAJ”) on its products which combined self-antibacterial and purification
function together with lighting. The use of TiO2 technology allows Qivation products to initiate an antimicrobial effect for sanitization
and air purification. It does not require any solvent, binders or alcohol, and can initiate the purifying process with visible light.
This technological breakthrough creates a giant leap in making use of TiO2 sanitization technology.
Other than self-antibacterial
and purification function, Qivation adopted the lighting software solutions by WiZ Connected under Signify (formerly known as Philips
Lighting) combined with the Nano Photocatalyst technology. The lighting products are adjustable shades of lightness up to 64,000 and up
to 16 million colors with preset well-being modes. We hope the Qivation products could reduce domestic health risks and creates a comforting
lifestyle setting at home or at office.
Lifestyle
Paudin
Paudin is a kitchen knives
brand that offers a wide selection of high-quality cutlery lines to suit all purposes and budgets for users, including chef’s knives,
bread knives, steak knives and Japanese knives etc. The sharp, comfortable and durable kitchen knives with a wide collection of designs
allow users to enjoy preparing and having their meals.
Team Cuisine
Team Cuisine offers smart
kitchen appliances that connect to their application, which allows users to perform precise cooking remotely. Team Cuisine products can
help users to cook with convenience and healthy fashion. It has an in-app recipe library as cooking guidance for each of the users. We
are authorized to distribute Team Cuisine’s smart kitchen appliances, including smart cooking machine, smart pressure cooker, smart
convention oven, smart air fryer etc. in Hong Kong. We hope Team Cuisine’s products could bring users a lifestyle and enjoyable
cooking experience with the multi-function appliances.
Mobility
Powertech
The Company’s own brand
“Powertech” is self-developing and distributing smart power supply products, including smart power chargers, wireless charging
power banks, charging cables and Type C multi hub. These products will be launched both in our online store and local retail stores by
the end of 2022. We hope the Powertech’s portable products could bring the users convenient in supporting the use of their mobile
devices.
Future IoT Technology and Lifestyle Products
– The Smart Home Ecosystem
We believe that the smart
home ecosystem has become both in concept and reality a part of the common culture around the world. When homeowners or buyers consider
renovation or new construction, many of them are considering the possibility of implementing smart home ecosystem devices to their homes
due to increasing awareness of the importance of energy efficiency and lifestyle improvement of smart home products. According to International
Data Corporation (“IDC”) Worldwide Quarterly Smart Home Device Tracker, in 2021, the global market for smart home device increased
by 11.7% from 2020, with more than 895 million devices shipped. The Asia and the Pacific region is the second largest smart home device
region in terms of shipment volume. It accounts for 31% of shipment and has a year-on-year growth rate of 10.8%. Our research indicates
that more users are looking to purchase higher price smart devices such as smart TV and lighting fixtures in order to save energy and
increase controllability and convenience. We believe that as 5G technology becomes more stable and popular throughout the world, more
and more smart home appliances will become available in the market. We believe that smart home appliances with IoT and AI technology can
improve our users’ living standards and lifestyles dramatically.
Smart home appliances are
generally easily adopted and accessed through mobile phones or tablets via Apps. Users can easily manage multiple smart home appliances
in just one device by their fingertip in the App: the status of all the appliances connected such as power levels, power consumed, air
pollution, and room humidity will be displayed on their screen. Moreover, users will be able to control and manage every single appliance
in large size homes with multiple floors by using the smart home ecosystem without the need access each individual appliance.
We established an IoT Technology
and Lifestyle product team during the quarter ended September 30, 2022, and are in the process of developing a series of IoT home automation
products. We expect to initially distribute the IoT products in Hong Kong and Southeast Asia and hope to expand to other countries as
opportunities permit.
Use of Capital Funds
On June 21, 2022, the Company
has entered into an Equity Purchase Agreement with Williamsburg Venture Holdings, LLC (“Investor”), a Nevada venture capital
company, pursuant to which the Investor has committed to invest up to Twenty Million Dollars ($20,000,000) in the Company’s common
stock over a 36-month period. In light of the Company’s latest strategic plan to tackle the Smart Home segment with products enhanced
with Healthcare, Lifestyles, and Mobility elements, the Company will use the proceeds to establish a sustainable smart home ecosystem
through in-house development of smart home appliances, target acquisition of smart home sector companies, and establish strategic partnerships
with ESG promote companies.
Research and Development
During the quarter ended September
30, 2022, our research and development expenses are mainly incurred for the maintenance cost of our product development team. We expect
to allocate our research and development funding towards product innovation of smart home appliances, and the recruitment of product development
talents.
Sales and Marketing
We believe the demand for
smart home appliances will continue to increase especially as the technological improvements such as AI are integrated into products to
enhance user experience. We expect to distribute our current and future power supply and IoT products as follows:
|
· |
Hong Kong – through our e-commerce channels, and leverage on our networks to distribute to prominent retailers, collaborate distribution channels with sales solution and promotion campaign. |
|
|
|
|
· |
APAC – through third party authorized dealers and channel partners. |
|
|
|
|
· |
USA/EMEA – through third party authorized distributors (which we expect to be wholesalers that sell to end retailers). |
Recently, we signed an arrangement
with local retail chain store to sell our brands. We believe this arrangement will enhance market recognition of our brand. In the near
future, we intend to enhance our sales channels in Hong Kong and other regions.
Results of Operations
Comparison of the three months ended September
30, 2022 and 2021
The following table sets forth
certain operational data for the periods indicated:
| |
Three months ended September 30, | |
| |
2022 | | |
2021 | |
Revenue, net | |
$ | 2,872 | | |
$ | 64,332 | |
Cost of revenue | |
| (2,634 | ) | |
| (34,864 | ) |
Gross profit | |
| 238 | | |
| 29,468 | |
Operating expenses: | |
| | | |
| | |
Research and development expenses | |
| (171,545 | ) | |
| (10,090 | ) |
Sales and marketing expenses | |
| (198,908 | ) | |
| – | |
General and administrative expenses | |
| (193,743 | ) | |
| (24,983 | ) |
Loss from operation | |
| (563,958 | ) | |
| (5,605 | ) |
Other expense, net | |
| (28,120 | ) | |
| – | |
Loss before income taxes | |
| (592,078 | ) | |
| (5,605 | ) |
Income tax expense | |
| – | | |
| – | |
Net loss | |
$ | (592,078 | ) | |
$ | (5,605 | ) |
Revenue
During the three months ended
September 30, 2022, the following customer accounted for 10% or more of our total net revenues:
| |
Three months ended September 30, 2022 | | |
September 30, 2022 | |
Customer | |
Revenues | | |
Percentage of revenues | | |
Accounts receivable | |
Evangelical Lutheran Church Hong Kong | |
$ | 2,872 | | |
| 100% | | |
$ | 2,889 | |
During the three months September
30, 2021, the following customer accounted for 10% or more of our total net revenues:
| |
Three months ended September 30, 2021 | | |
September 30, 2021 | |
Customer | |
Revenues | | |
Percentage of revenues | | |
Accounts receivable | |
TLD Optoelectronic Technology Company Limited | |
$ | 64,332 | | |
| 100% | | |
$ | 64,210 | |
Cost of Revenue
Cost of revenue for the three
months ended September 30, 2022 and 2021, was $2,634 and $34,864, respectively. The decrease was primarily attributable to the decrease
in revenue from our research businesses.
Gross Profit
We achieved a gross profit
of $238 and $29,468 for the three months ended September 30, 2022 and 2021, respectively. The decrease in gross profit was attributable
to an decrease in revenue from our research businesses.
Research and Development Expenses (“R&D”)
Research and development expenses
was $171,545 and $10,090 for the three months ended September 30, 2022 and 2021, respectively. The increase in expenses was primarily
attributable to the increase in R&D expenses associated with our smart chargers, power banks and other products development.
Sales and Marketing Expenses
Sales and marketing expenses
was $198,908 and $0 for the three months ended September 30, 2022 and 2021, respectively. The expenses primarily include consulting fees
incurred in relation to public relations and promotional expenses.
General and Administrative Expenses (“G&A”)
General and administrative
expenses was $193,743 and $24,983 for the three months ended September 30, 2022 and 2021, respectively. These expenses primarily include
consulting fees, personnel related expenses, as well as costs incurred on other professional fees incurred in connection with general
operations of the Company. The G&A expenses increased by approximately $168,760 in the three months ended September 30, 2022 from
$24,983 in the three months ended September 30, 2021. The increase was primarily attributable to the increase in professional fees and
salaries.
Other expense, net
Other expense, net was $28,120
and $0 for the three months ended September 30, 2022 and 2021, respectively. The increase was attributable to interest expense on capital
funding and loss on impairment of inventories offset by government subsidy.
Income Tax Expense
No income tax expense incurred
during the three months ended September 30, 2022 and 2021.
Net loss
As a result of the above,
we reported net loss of $592,078 for the three months ended September 30, 2022, as compared to $5,605 for the three months ended September
30 ,2021. The increase in net loss was mainly attributable to decrease in research revenue, increase in sales and marketing cost
associated with sales channel development, research and development expenses associated with new products development and general and
administrative expense.
Comparison of the six months ended September
30, 2022 and 2021
The following table sets forth
certain operational data for the periods indicated:
| |
Six months ended September 30, | |
| |
2022 | | |
2021 | |
Revenue, net | |
$ | 162,189 | | |
$ | 64,332 | |
Cost of revenue | |
| (19,120 | ) | |
| (34,864 | ) |
Gross profit | |
| 143,069 | | |
| 29,468 | |
Operating expenses: | |
| | | |
| | |
Research and development expenses | |
| (234,156 | ) | |
| (38,509 | ) |
Sales and marketing expenses | |
| (347,908 | ) | |
| – | |
General and administrative expenses | |
| (295,397 | ) | |
| (48,548 | ) |
Loss from operation | |
| (734,392 | ) | |
| (57,589 | ) |
Other expense, net | |
| (39,645 | ) | |
| – | |
Loss before income taxes | |
| (774,037 | ) | |
| (57,589 | ) |
Income tax expense | |
| – | | |
| – | |
Net loss | |
$ | (774,037 | ) | |
$ | (57,589 | ) |
Revenue
During the six months ended
September 30, 2022, the following customer accounted for 10% or more of our total net revenues:
| |
Six months ended September 30, 2022 | | |
September 30, 2022 | |
Customer | |
Revenues | | |
Percentage of revenues | | |
Accounts receivable | |
Mirum Digital Media Ltd. | |
$ | 159,317 | | |
| 98.2% | | |
$ | – | |
During the six months ended
September 30, 2021, the following customer accounted for 10% or more of our total net revenues:
| |
Six months ended September 30, 2021 | | |
September 30, 2021 | |
Customer | |
Revenues | | |
Percentage of revenues | | |
Accounts receivable | |
TLD Optoelectronic Technology Company Limited | |
$ | 64,332 | | |
| 100% | | |
$ | 64,210 | |
Cost of Revenue
Cost of revenue for the six
months ended September 30, 2022 and 2021, was $19,120 and $34,864, respectively. The decrease was primarily attributable to the early
completion of the research project that led to a reduced research manpower involved in the research project.
Gross Profit
We achieved a gross profit
of $143,069 and $29,468 for the six months ended September 30, 2022 and 2021, respectively. The increase in gross profit was attributable
to the decrease in cost incurred from our research businesses.
Research and Development Expenses (“R&D”)
Research and development expenses
was $234,156 and $38,509 for the six months ended September 30, 2022 and 2021, respectively. The increase in expenses was primarily attributable
to the increase in R&D expenses associated with our smart chargers, power banks and IoT products development.
Sales and Marketing Expenses
Sales and marketing expenses
was $347,908 and $0 for the six months ended September 30, 2022 and 2021, respectively. The expenses primarily included consulting fees
incurred in relation to public relations and promotional expenses.
General and Administrative Expenses (“G&A”)
General and administrative
expenses was $295,397 and $48,548 for the six months ended September 30, 2022 and 2021, respectively. These expenses primarily include
consulting fees, personnel related expenses, as well as costs incurred on other professional fees incurred in connection with general
operations of the Company. The G&A expenses increased by approximately $246,849 in the six months ended September 30, 2022 from $48,548
in the six months ended September 30, 2021. The increase was primarily attributable to the increase in professional fees and salaries.
Other expense, net
Other expense, net was $39,645
and $0 for the six months ended September 30, 2022 and 2021, respectively. The increase was attributable to interest expense on capital
funding and loss on impairment of inventories offset by government subsidy.
Income Tax Expense
No income tax expense incurred
during the six months ended September 30, 2022 and 2021.
Net loss
As a result of the above,
we reported net loss of $774,037 for the six months ended September 30, 2022, as compared to $57,589 for the six months ended September
30 ,2021. The increase in net loss was mainly attributable to sales and marketing cost associated with sales channel development,
research and development expenses associated with new products development and general and administrative expense
Liquidity and Capital Resources
The following table summarizes
the key components of our cash flows for the six months ended September 30, 2022 and 2021.
| |
Six months ended September 30, | |
| |
2022 | | |
2021 | |
Net cash used in operating activities | |
$ | (74,155 | ) | |
$ | (118,391 | ) |
Net cash used in investing activities | |
$ | (2,216 | ) | |
$ | – | |
Net cash provided by financing activities | |
$ | 100,399 | | |
$ | 94,047 | |
Net Cash Used In Operating Activities
For the six months ended September
30, 2022, net cash used in operating activities was $74,155, which consisted primarily of a net loss of $774,037, an increase in inventories
of $800, an increase in accounts receivables of $2,889, an increase in deposits, prepayments and other receivables of $93,674, and a decrease
of lease liabilities of $19,065, offset by an increase in accounts payables of $3,715, an increase in accrued liabilities and other payables
of $240,969, an increase in accrued consulting and service fee of $300,000, plus non-cash items such as, depreciation of $20,657, amortization
of $2,243, non-cash lease expenses of $1,573, amortization of deferred financing cost of $47,153 and share issued for services rendered
of $200,000.
For the six months ended September
30, 2021, net cash used in operating activities was $118,391, which consisted primarily of a net loss of $57,589, an increase in accounts
receivables of $64,149, a decrease in accrued liabilities and other payables of $1,889, a decrease of lease liabilities of $20,072, offset
by a decrease in deposit, prepayment and other receivables of $3,486, plus non-cash items such as, depreciation of $19,084, amortization
of $2,136 and non-cash lease expenses of $602.
We expect to continue to rely
on cash generated through financing from our existing shareholders and private placements of our securities to finance our operations
and future acquisitions.
Net Cash Used In Investing Activities
For the six months ended September
30, 2022, net cash used in investing activity was $2,216, which consisted of addition of property and equipment.
For the six months ended September
30, 2021, no net cash was generated from investing activities.
Net Cash Provided by Financing Activities
For the six months ended September
30, 2022, net cash provided by financing activity was $100,399, which consisted of advances from related parties.
For the six months ended September
30, 2021, net cash provided by financing activity was $94,047, which consisted of advances from related parties.
Going Concern
Our continuation as a going
concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital
may include the sale of equity securities, which include common stock sold in private transactions, capital leases and short-term and
long-term debts. While we believe that we will obtain external financing and the existing shareholders will continue to provide the additional
cash to meet our obligations as they become due, there can be no assurance that we will be able to raise such additional capital resources
on satisfactory terms. We believe that our current cash and other sources of liquidity discussed below are adequate to support operations
for at least the next 12 months.
Material Cash Requirements
We have not achieved profitability
since our inception, and we expect to continue to incur net losses for the foreseeable future. We expect net cash expended in 2023 to
be significantly higher than 2022. As of September 30, 2022, we had an accumulated deficit of $7,342,530. Our material cash requirements
are highly dependent upon the additional financial support from our major shareholders in the next 12 - 18 months.
We had the following contractual
obligations and commercial commitments as of September 30, 2022:
Contractual Obligations | |
Total | | |
Less than 1 Year | | |
1-3 Years | | |
3-5 Years | | |
More than 5 Years | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
Amounts due to related parties | |
| 1,828,102 | | |
| 1,828,102 | | |
| – | | |
| – | | |
| – | |
Accounts payables | |
| 3,715 | | |
| 3,715 | | |
| – | | |
| – | | |
| – | |
Operating lease liability | |
| 53,174 | | |
| 29,606 | | |
| 23,568 | | |
| – | | |
| – | |
Other contractual liabilities (1) | |
| 706,306 | | |
| 706,306 | | |
| – | | |
| – | | |
| – | |
Total obligations | |
| 2,591,297 | | |
| 2,567,729 | | |
| 23,568 | | |
| – | | |
| – | |
(1) Includes all obligations included in “Accrued
liabilities and other payables” and “Accrued consulting and service fee” in current liabilities in the “Unaudited
Condensed Consolidated Balance Sheet” that are contractually fixed as to timing and amount.
Off-Balance Sheet Arrangements
We are not party to any off-balance
sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.
Critical Accounting Policies and Estimates
For a detailed description
of the Critical Accounting Policies and Estimates of the Company, please refer to Part II, ITEM 7 “MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” in our Annual Report Form 10-K for the year ended March 31, 2022
filed with the SEC on June 24, 2022.