NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
Note 1: Organization and Summary of Significant Accounting Policies
Organization
New Asia Holdings, Inc. (previously known as DM Products, Inc., Midwest E.S.W.T. Corp, and Effective Sport Nutrition Corporation) (the “Company,” “we” or “our”) was incorporated in the State of Nevada on March 1, 2001. In December 2014, the Company underwent a change in control where approximately 90% of the issued and outstanding shares of common stock of the Company were acquired by New Asia Holdings, Ltd. (wholly owned by Lin Kok Peng, Ph.D., the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board) (“NAHL”). As a result, Lin Kok Peng is the effective principal stockholder of the Company.
We have been offering trading software solutions to clients based on a “Software as a Service (SaaS)” licensing and delivery model with licensed users availing themselves of service-based contractual arrangements, however, please see the Management Discussion and Analysis regarding these activities and current efforts by the Company to develop new opportunities. In addition, and consistent with the requirements of the United States federal securities laws, we may utilize our in-house proprietary neural trading models to trade our own funds, thus providing added value to our shareholders.
Algorithms were placed into commercial operation in November 2015 upon the execution of a Software Licensing Agreement for the deployment of the proprietary trainable, trading algorithms of Magdallen Quant Pte. Ltd. (“MQL”), with New Asia Momentum Limited (“NAML”), a company owned and controlled by NAHD’s Chairman and CEO, Dr. Lin Kok Peng. Under the terms of the Software License Agreement, NAML agreed to pay MQL a license fee and certain other fixed and time and materials fees. In 2019, Momentum assets under management (“AUM”) were returned to its investors by NAML. The license agreement between MQL and NAML still remains in place.
As a result of poor performance by the Company’s algorithms, over the last several years the Company has been focusing on developing new business opportunities, including exploring potential new technology solutions and/or acquisition.
Basis of Presentation
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Report on Form 10-K as filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Annual Report on Form 10-K for the most recent fiscal year, as filed with the SEC on April 18, 2022, have been omitted.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The extent to which the COVID-19 pandemic may directly or indirectly impact our business, financial condition, and results of operations is highly uncertain and subject to change. We considered the potential impact of the COVID-19 pandemic on our estimates and assumptions and there was not a material impact to our unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2022; however, actual results could differ from those estimates and there may be changes to our estimates in future periods.
Note 2: Going Concern
The accompanying unaudited interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has sustained substantial losses, has a working capital deficit and is in need of additional capital to grow its operations so that it can become profitable. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
In view of these matters, the ability of the Company to continue as a going concern is dependent upon growth of revenues and the ability of the Company to raise additional capital. The unaudited interim consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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NEW ASIA HOLDINGS, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
Note 3: Common Stock
On July 8, 2020, the Company filed a Certificate of Amendment (the “Amendment”) to the Company’s articles of incorporation, as amended, with the Secretary of State of the State of Nevada. The Amendment had the effect of increasing the number of authorized shares of the Company’s common stock from 400,000,000 to 4,000,000,000 and the number of authorized shares of the Company’s preferred stock from 30,000,000 to 400,000,000. As of December 31, 2020, the Company has authorized 4,400,000,000 shares of capital stock, consisting of 4,000,000,000 shares, par value $0.001 per share, of common stock, and 400,000,000 shares, par value $0.001 per share, of “blank check” preferred stock. The Company had 75,288,667 shares of common stock and no shares of preferred stock issued and outstanding as of September 30, 2022 and December 31, 2021.
On September 16, 2020, the Company entered into an Equity Purchase Agreement (the “Global Crypto Equity Purchase Agreement”) with Global Crypto Offering Exchange Ltd. (“Global Crypto”). Pursuant to the terms of the Global Crypto Equity Purchase Agreement, the Company agreed to sell to Global Crypto, and Global Crypto agreed to purchase, an aggregate of 50,000,000 restricted shares of the Company’s common stock at purchase price of $0.01 per share, for an aggregate purchase price of $500,000 (the “Share Purchase”). The Global Crypto Equity Purchase Agreement provides that the Share Purchase would have been implemented in 10 separate blocks (each, a “Block” and collectively, “Blocks”), with the first Block closing on September 18, 2020. In the first Block, Global Crypto purchased 2,000,000 shares for an aggregate purchase price of $20,000. The parties to the Global Crypto Equity Purchase Agreement agreed that each of the remaining nine Blocks would close within 12 months of September 18, 2020.
The Global Crypto Equity Purchase Agreement would have terminated (i) upon the completion of the full Share Purchase, or (ii) on September 18, 2021. Since the completion of the full Share Purchase by Global Crypto was not completed by September 18, 2021, no additional shares could have been purchased under the Global Crypto Share Purchase Agreement and thus the Global Crypto Equity Purchase Agreement was terminated on September 18, 2021, pursuant to its terms. No additional shares may be purchased under the Global Crypto Share Purchase Agreement.
On September 21, 2020, the Company entered into an Equity Purchase Agreement (the “ENJU Equity Purchase Agreement”) with ENJU Planning Pte Ltd. (“ENJU”). Pursuant to the terms of the Equity Purchase Agreement, the Company agreed to sell to the ENJU, and the ENJU agreed to purchase, 1,000,000 restricted shares of the Company’s common stock at purchase price of $0.20 per share, for an aggregate purchase price of $200,000. The total proceeds were received by the Company in October 2020.
As of September 30, 2022, Lin Kok Peng, the Company’s principal shareholder, had not yet acted to exercise its option to convert advances from him to shares of common stock. Accordingly, as of September 30, 2022, and December 31, 2021, the advances remain as an interest-free loan to the Company. See Note 4.
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NEW ASIA HOLDINGS, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
Note 4: Convertible Advances from Shareholder and Other Related Party Transactions
During the nine months ended September 30, 2022 and 2021, Lin Kok Peng, the Company’s principal shareholder, was repaid $3,248 and $38,697 for payments made to vendors on the Company’s behalf, respectively. During the nine months ended September 30, 2022 and 2021, Lin Kok Peng advanced an aggregate of $8,000 and nil to the Company, respectively. The total advances due to Lin Kok Peng amounted to $921,204 and $916,452 as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022 and December 31, 2021, the advances constitute unsecured interest-free loans to the Company.
On August 14, 2020, the Company signed an Agreement with NAHL. Pursuant to the terms of the Agreement, all funds advanced to the Company by NAHL up to August 14, 2020 (the “Prior Advances”) will continue to constitute an interest-free loan to the Company, which was due and payable by the Company to NAHL on or before September 15, 2020 (the “Prior Advance Repayment Date”, which may be extended as set forth below). If the Company does not repay the Prior Advances by the Prior Advance Repayment Date, NAHL, at its sole discretion, will have the option to extend the Prior Advance Repayment Date or convert all or a portion of the Prior Advances into Common Stock at a conversion price of $0.003 per share (the “Prior Advance Conversion Price”), subject to adjustment as set forth in the Agreement. NAHL’s election to extend the Prior Advance Repayment Date or to convert the Prior Advances into Common Stock shall be made on the first business day following the Prior Advance Repayment Date. The Parties acknowledge and agree that the Prior Advances shall not be convertible into common stock prior to the Prior Advance Repayment Date.
Following August 14, 2020, NAHL will endeavor, on a best efforts’ basis, to continue to advance operating funds to the Company as may be required and requested by the Company for its operations, for a period of at least through December 31, 2020 (such additional advances, as funded, the “Additional Advances” and, together with the Prior Advances, the “Advances”). Any such Additional Advances were due and payable by the Company to NAHL on or before January 31, 2021 (the “Additional Advance Repayment Date”, which may be extended as set forth below). In the event that any Additional Advances are made and are not repaid by the Additional Advance Repayment Date, NAHL, at its sole discretion, will have the option to extend the Additional Advance Repayment Date or convert all or a portion of the Additional Advances into Common Stock at a conversion price of $0.003 per share (the “Additional Advance Conversion Price”), subject to adjustment as set forth in the Agreement. NAHL’s election to extend the Additional Advance Repayment Date or to convert the Additional Advances into Common Stock shall be made on the first business day following the Additional Advance Repayment Date. The Parties acknowledge and agree that any Additional Advances shall not be convertible into common stock prior to the Additional Advance Repayment Date.
On January 5, 2021, the shares of the Company’s common stock under the name of NAHL were changed to Lin Kok Peng, as an individual, at the request of the owner of NAHD, Lin Kok Peng and NAHL was closed.
As of September 30, 2022, the Company repaid $3,248 to Lin Kok Peng, and Mr. Lin had not exercised his option to convert the Advances into shares of common stock. Accordingly, the total of $921,204 in advances remained as an unsecured interest-free loan to the Company as of September 30, 2022. Although Lin Kok Peng is expected to continue to advance operating funds to the Company in the future, there can be no assurance that he will continue to do so.
On September 7, 2015, Mr. Jose A. Capote ("Mr. Capote") was appointed to serve as the Company's Secretary and Vice President. There is no family relationship between Mr. Capote and any of the Company's directors or officers. Mr. Capote is currently a shareholder of the Company. The Company has incurred fees due to Mr. Capote for consulting services for acting as the Company’s Secretary and Vice President in the amount of $13,500 and $13,500 during the nine months ended September 30, 2022 and September 30, 2021, respectively. The balance due to Mr. Capote as of September 30, 2022 and December 31, 2021, was $27,750 and $15,000, respectively, and was included in accounts payable and accrued liabilities.
The Company pays New Asia Momentum Pte Ltd (“NAMPL”), a Singapore private company owned and controlled by Dr. Lin Kok Peng, the Company’s Chief Executive Officer and Chairman of the Board and principal shareholder, fees for the rental of office space and for administrative services in its Singapore Headquarters. The Company has incurred fees of $34,565 and $35,624 due to NAMPL during the nine-month period ended September 30, 2022, and September 30, 2021, respectively. As of September 30, 2022, and December 31, 2021, the Company had $185,304 and $150,739 due to NAMPL recorded in accounts payable and accrued liabilities, respectively.
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NEW ASIA HOLDINGS, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
Note 5: Commitments and Contingencies
The Company entered into an agreement with Premier Business Centers (“PBC”) on July 31, 2018. Under the terms of the agreement, PBC granted the Company a license to use the facilities and services of PBC at 15615 Alton Parkway Suite 450, Irvine, CA 92618. This is a month-to-month lease, with monthly fixed fees of $195.
The Company pays NAMPL, a Singapore private company owned and controlled by Dr. Lin Kok Peng, the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board, fees for the rental of office space and for administrative services in its Singapore headquarters. This is a month-to-month lease, with monthly fixed fees of approximately $3,900.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. Such forward-looking statements are based on current expectations, estimates, and projections about our industry, management beliefs, and certain assumptions made by our management. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth in other reports and documents that we file from time to time with the United States Securities and Exchange Commission (the “SEC”), particularly the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K, as the same may be amended from time to time.
The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the unaudited consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q.
Overview
Since December 24, 2014, New Asia Holdings, Inc. (the “Company”) has been developing and deploying its proprietary, neural trading models for the financial community. We offer trading software solutions to clients on the basis of a software-as-a-service (“SaaS”) licensing and delivery models with licensed users availing themselves of service-based contractual arrangements.
The Company's products capitalize the large volume of the 24-hour Forex markets to achieve capital appreciation over a medium- to long-term basis, combined with the usage of a good wealth vehicle designed to control risk, profit from both bull or bear markets, and maximize liquidity and economic resilience.
Our proprietary trading models were developed by a team of professional engineers in communications, electronic circuitry design and financial engineering. This diverse team is the key factor in our successful development of non-traditional and innovative trading models. Our systems were designed to take intelligent positions as the market moves/changes and, upon development, our systems were to bring a rigorously tested track-record.
The Company’s systems were designed to adapt themselves and to take intelligent positions as the market moves/changes. The models were subjected to rigorous testing akin to the volatile trading environment of major financial events/crises that have happened in recent history. These models were also programmed to have the ability to learn and adapt new manners of trading, effectively translating the human behavioral of trading into a predictive science. The Company’s quantitative strategies and proprietary algorithmic trading system were developed to generate risk adjustable returns for its licensees and their clients.
Since 2016, the Company's focus has been to license its algorithm to licensees, regulated funds and banks to capitalize on the large volume of the 24-hour Forex markets to achieve capital appreciation over a medium- to long- term basis, combined with the usage of a good wealth vehicle designed to control risk, profit from both bull or bear markets, and maximize liquidity and economic resilience.
On August 25, 2015, the Company entered into a Sale and Purchase Agreement (the “Purchase Agreement”) with Anthony Ng Zi Qin, pursuant to which the Company acquired Magdallen Quant Pte Ltd (“MQL”). The MQL acquisition was accomplished through a share exchange with Anthony Ng Zi Qin of 7,422,000 restricted shares of common stock of the Company ("Consideration Shares"), with a value of $0.41 per share, and an aggregate fair value of $3,043,020, in exchange for the entire issued and outstanding capital of MQL held by Mr. Anthony Ng Zi Qin, consisting of 8,000,100 shares of stock issued at par value of SGD 1.00 per share, or $0.714 on the acquisition date.
On August 19, 2016, the Company and Anthony Ng Zi Qin entered into an Addendum (the “First MQL Addendum”) to the Purchase Agreement to extend the August 25, 2016, anniversary date for the adjustment of issued shares for an additional period of 12 months. On November 10, 2017, the Company and Anthony Ng Zi Qin signed an Addendum (the “Second MQL Addendum”) to the Purchase Agreement, as amended, pursuant to which the Company agreed to issue an aggregate of 3,339,900 shares of common stock, in satisfaction of the shortfall in the value of the shares issued. These shares were issued on December 12, 2017 in full satisfaction of the aforementioned contingent liability. The Purchase Agreement, as amended, is referred to herein as the “MQL Acquisition Agreement.”
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The algorithms were placed into commercial operation in November 2015 upon the execution of a Software Licensing Agreement (the “MQL License Agreement”) between and New Asia Momentum Limited (“NAML”), a company owned and controlled by Dr. Lin Kok Peng, the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board. Under the terms of the MQL License Agreement, MQL agreed to license its proprietary trainable, trading algorithms to NAML in exchange for payment of a license fee and certain other fixed and time and materials fees. Pursuant to the terms of the MQL License Agreement, MQL licensed its proprietary trainable, trading algorithms. NAML, in turn, offered these proprietary, trainable, algorithm trading software solutions to broker-dealers, banks, funds and other clients based on a SaaS licensing and delivery model, with sub-licensed users availing themselves of service-based contractual arrangements. NAML was required to pay MQL royalty fees equal to 20% of the trading profits achieved by the SaaS contract agreements that NAML executed with its clients. The targeted geographic market was Asia, with an initial emphasis on Singapore, Hong Kong, Indonesia, and Australia. From 2015 to 2017, NAML grew its retail assets under management (“AUM”) from zero to approximately $2.5 million.
In conjunction with the expansion into the regulated fund and bank model, NAML decided to ask its clients to redeem the AUM and as of September 30, 2017, trading on the AUM was terminated.
The Company initiated its focus on the regulated bank and fund model in 2017 with the launch of the Feuris Fund A with AUM of approximately $6.67 million. Because the risk profiles required by these regulated funds and banks reflect a lower level of risk, there was a significantly reduced frequency of trading activities. As of September 30, 2019, due to market conditions that impacted trading frequencies and volumes, NAML liquidated the Feuris Fund A and returned the AUM to the investors.
The MQL License Agreement currently remains in place.
While the Company continues to improve its algorithm products, there are no guarantees that such product improvements will translate to improved financial performance. The Company, in its efforts to expand its business, is currently considering several new business opportunities, including the following:
·The Company may integrate a business solution to not rely on using an application that relies on our algorithms for actual trading, but instead to provide a platform where users can use the algorithms as a tool to obtain information that can assist users in making potential investment decisions.
·NAHD executed a Memorandum of Understanding, dated June 14, 2022, regarding the acquisition of a 40% of the issued and outstanding shares of Asian Fuels Energy Inc (AFEI) and the rights to secure, through a subsequent investment of a majority equity stake in the individual Special Project Corporations (SPC) involved in the production of Renewable Napier Grass fuel in Batangas (first Priority Project) and future projects in Tarlac. NAHD is undertaking a technical, legal, and financial evaluation of Asian Fuels Energy Inc (the “Company”) and its sister Company, Hacienda Asia Plantations Inc. (HAPI). AFEI is a Philippine-based Company, incorporated on June 19, 2009, is a subsidiary company to HAPI of which was incorporated in August 2, 2007, owned by Alfred Joseph S. Araneta with super majority of the both companies. The details are described in an 8K filing made by the Company on June 21, 2022. Currently this potential transaction is under evaluation by the Company and the acquisition has not closed and there is currently no expected date for the closing of this transaction.
·The Company is also evaluating other potential acquisition(s) that may be further detailed in upcoming filings, no information on these potential transactions is currently available.
As of September 30, 2022, the Company has not yet determined which, if any, of the above business opportunities it will implement and is also considering other additional opportunities. There can be no assurance that any of these business opportunities will come to fruition and, if initiated, will be successful. The Company continues to improve its products and has been working to create new products. The Company is doing its best to provide the basis for improved performance in the coming quarters, however, there is no guarantee that such new products and product improvements will translate to improved financial performance.
The Company did not generate any revenue during the nine months ended September 30, 2022 and 2021.
As described above, the commercial business associated with the licensing of the algorithm products has not materialized and the Company is pursuing new applications of the products that would not involve trading and other new business activities.
COVID-19
In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to most countries around the world and infections have been reported globally. The spread of COVID-19 has had a material adverse effect on segments of the global economy.
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Because COVID-19 infections continue to be reported worldwide, certain national, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future. As a result, certain Company internal operations communications and accounting operations have been disrupted by these “stay at home” orders, which have affected the timing of certain new business development activities (the Company had previously liquidated the Feuris Fund A AUM during the third quarter of 2019).
The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but could be anticipated to have a material adverse impact on our business, financial condition and results of operations.
The measures taken to date will impact the Company’s business for the first nine months of 2022 and potentially beyond. Management expects that all of its business segments, across all of its geographies, will be impacted to some degree, but the significance of the impact of the COVID-19 outbreak on the Company’s business and the duration for which it may have an impact cannot be determined at this time.
Results of Operations
Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021
Revenues
We had no revenue during the three months ended September 30, 2022 and 2021, respectively. The MQL License Agreement between MQL and NAML still remains in place and the Company is focusing on the development of expanded new business solutions as described above.
Operating Expenses
Operating expenses were $32,769 for the three months ended September 30, 2022, consisting of $16,500 of general and administrative expenses, $9,700 of outside service expenses, and $6,569 of professional fees. This compares to operating expenses for the three months ended September 30, 2021, of $33,788, consisting of $16,304 of general and administrative expenses, $8,545 of outside service expenses, and $8,939 of professional fees. The operating expenses for the three-month period ended September 30, 2022 were slightly lower than the operating expenses for the corresponding period in 2021 because expenses associated with professional fees were lower.
Net Loss
As a result of the foregoing, we had a net loss of $32,769 for the three months ended September 30, 2022, compared to a net loss of $33,788 for the three months ended September 30, 2021.
We expect to incur net losses through 2022 because we expect to continue to incur expenses, but do not expect to generate significant, or any, revenues. We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the future to cover our expenses. We expect to cover such shortfall in operating margins through advances from our principal shareholder and other fundraising measures, some of which have been conducted, as the Company deems appropriate. There is no assurance that our principal shareholder will continue to advance funds to us or that we will be successful in any other fundraising measures.
Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021
Revenues
We had no revenue during the nine months ended September 30, 2022 and 2021, respectively. The MQL License Agreement between MQL and NAML still remains in place and the Company is focusing on the development of expanded new business solutions as described above.
Operating Expenses
Operating expenses were $121,174 for the nine months ended September 30, 2022, consisting of $54,735 of general and administrative expenses, $26,500 of outside service expenses, and $39,939 of professional fees. This compares to operating expenses for the nine months ended September 30, 2021, of $120,105, consisting of $52,759 of general and administrative expenses, $26,688 of outside service expenses, and $40,658 of professional fees. The operating expenses for the nine-month period ended September 30, 2022, were
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slightly higher than the operating expenses for the corresponding period in 2021 because general and administrative expenses were higher.
Net Loss
As a result of the foregoing, we had a net loss of $121,174 for the nine months ended September 30, 2022, compared to a net loss of $120,105 for the nine months ended September 30, 2021.
We expect to incur net losses through 2022 because we expect to continue to incur expenses, but do not expect to generate significant, or any, revenues. We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the future to cover our expenses. We expect to cover such shortfall in operating margins through advances from our principal shareholder and other fundraising measures, some of which have been conducted, as the Company deems appropriate. There is no assurance that our principal shareholder will continue to advance funds to us or that we will be successful in any other fundraising measures.
Liquidity and Capital Resources
We had cash in the amount of $15,608 and $88,000 at September 30, 2022 and September 30, 2021, respectively. To date, we have funded our operations from private placements concluded in the third and fourth quarter of 2020 and from advances from our principal shareholder, Lin Kok Peng. Dr. Lin Kok Peng, our Chief Executive Officer, Chief Financial Officer, and Chairman of the Board, also has voting and dispositive control over the shares of the Company’s common stock, and we just recently completed two Private Placements as described in herein.
We do not have sufficient capital to sustain our operations for the next 12 months. We expect to continue to rely on advances from our principal shareholder, as well as from other sources of financing, including additional private placements of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of equity securities or that we will be able to arrange for debt or other financing to fund our operations and other activities. We do not have any oral or written agreements with Lin Kok Peng which would require Lin Kok Peng to fund our operations.
During the nine-month period ended September 30, 2022, Lin Kok Peng advanced the Company $8,000 and was repaid $3,248 for a net advance of $4,752. The total advances due to Lin Kok Peng are $921,204 and $916,452 as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022, the advances constitute unsecured interest-free loans to the Company.
On August 14, 2020, the Company signed an Agreement with NAHL. Pursuant to the terms of the Agreement, all funds advanced to the Company by NAHL up to August 14, 2020 (the “Prior Advances”) will continue to constitute an interest-free loan to the Company, which was due and payable by the Company to NAHL on or before September 15, 2020 (the “Prior Advance Repayment Date”, which may be extended as set forth below). If the Company does not repay the Prior Advances by the Prior Advance Repayment Date, NAHL, at its sole discretion, will have the option to extend the Prior Advance Repayment Date or convert all or a portion of the Prior Advances into Common Stock at a conversion price of $0.003 per share (the “Prior Advance Conversion Price”), subject to adjustment as set forth in the Agreement. NAHL’s election to extend the Prior Advance Repayment Date or to convert the Prior Advances into Common Stock shall be made on the first business day following the Prior Advance Repayment Date. The Parties acknowledge and agree that the Prior Advances shall not be convertible into Common Stock prior to the Prior Advance Repayment Date.
Following the Effective Date, NAHL was to endeavor, on a best efforts’ basis, to continue to advance operating funds to the Company as may be required and requested by the Company for its operations, for a period of at least through December 31, 2020 (such additional advances, as funded, the “Additional Advances” and, together with the Prior Advances, the “Advances”). Any such Additional Advances were to be due and payable by the Company to NAHL on or before January 31, 2021 (as the same may be extended as set forth below, the “Additional Advance Repayment Date”). In the event that any Additional Advances were made and were not repaid by the Additional Advance Repayment Date, NAHL, at its sole discretion, would have the option to extend the Additional Advance Repayment Date or convert all or a portion of the Additional Advances into Common Stock at a conversion price of $0.003 per share (the “Additional Advance Conversion Price”), subject to adjustment as set forth in the Agreement. NAHL’s election to extend the Additional Advance Repayment Date or to convert the Additional Advances into Common Stock shall be made on the first business day following the Additional Advance Repayment Date. The Parties acknowledge and agree that any Additional Advances shall not be convertible into Common Stock prior to the Additional Advance Repayment Date.
On January 5, 2021, the shares of the Company’s stock under the name of NAHL were changed to Lin Kok Peng, as an individual, at the request of the owner of NAHD, Lin Kok Peng and NAHL was closed.
As of September 30, 2022, Dr. Lin Kok Peng had not exercised its option to convert the advances into shares of common stock. Accordingly, the total of $921,204 in advances remained as an unsecured interest-free loan to the Company as of September 30, 2022.
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Through September 30, 2022, Lin Kok Peng has continued to advance operating funds to the Company totaling $921,204 and may be expected to continue to advance such operating funds in the future. In August 2020, NAHL informed the Company that the previous terms of the prior agreement had not reflected the level of risk that NAHL has taken in effecting these advances over the years. Therefore, on August 14, 2020, the Company and NAHL entered into an Agreement on Advances (the “Agreement”) wherein the Company and NAHL agreed as follows. On January 5, 2021, Lin Kok Peng decided to change his ownership of the Company from NAHL to his own Name (Lin Kok Peng) and thus all prior agreements executed between the Company and NAHL remain fully in effect:
·All funds that have been advanced to the Company by NAHL up to August 14, 2020 (the “Prior Advances”) will continue to constitute an interest-free loan to the Company, which will be due and payable by the Company to NAHL on or before September 15, 2020. If the Company does not repay the Prior Advances by that date NAHL will have the right to extend that date for repayment or to convert all or a portion of the Prior Advances into Common Stock at a conversion price of $0.003 per share.
·Following August 14, 2020, NAHL will endeavor, on a best efforts’ basis, to continue to advance operating funds to the Company as may be required and requested by the Company for its operations, for a period of at least through December 31, 2020 (such additional advances, as funded, the “Additional Advances”). Any such Additional Advances were due and payable by the Company to NAHL on or before January 31, 2021. In the event that any Additional Advances are made and are not repaid by such date, NAHL will have the right to extend that date for repayment or convert all or a portion of the Additional Advances into Common Stock at a conversion price of $0.003 per share.
·In the event that NAHL determines not to fund any Additional Advances, then conversion price for any Prior Advances made prior to January 1, 2020, will remain $0.003 per share but the conversion price with respect to any Prior Advances made after January 1, 2020 will be $0.01 per share.
·The conversion prices as set forth above are subject to customary adjustments for stock splits, stock dividends, recapitalizations and other customary events which occur following August 14, 2020.
·On January 5, 2021, the shares of the Company’s stock under the name of NAHL were changed to Lin Kok Peng, as an individual, at the request of the owner of NAHD, Lin Kok Peng and NAHL was closed.
We expect to incur losses and negative operating cash flows for the foreseeable future, and we may never become profitable. We also expect to continue to incur significant operating and capital expenditures for the next several years and anticipate that our expenses will increase substantially in the foreseeable future. We also expect to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures.
As a result, we will need to generate significant revenues to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.
We have no agreements to obtain funds through bank loans, lines of credit or any other traditional sources. Since we have no financing committed, our inability to realize financing to maintain operations and grow our business would materially restrict our business operations. Future financing may not be available upon acceptable terms, or at all. Should we be successful in securing future financing, new issuances of equity or convertible debt (i) would dilute our current shareholders, possibly significantly, (ii) might require a significant increase to our authorized stock, and (iii) might have rights, preferences, or privileges senior to our common or preferred stock. If financing is not available to us on favorable terms, such severe limitation might cause us to consider another consolidation of existing common equity at any time to attract financing and maintain our business.
Due to the uncertainty of our ability to meet our current operating and capital expenses and the fact that we have suffered recurring losses from operations and have a net capital deficiency, in their report on our audited annual financial statements as of and for the years ended December 31, 2021, and 2020, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Recurring losses from operations raise substantial doubt about our ability to continue as a going concern. The presence of the going concern explanatory paragraph may have an adverse impact on the relationships we are developing and plan to develop with third parties as we continue the commercialization of our products and could make it challenging and difficult for us to raise additional financing, all of which could have a material adverse impact on our business and prospects and result in a significant or complete loss of your investment.
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Cash and Cash Equivalents
The following table summarizes the sources and uses of cash for the periods stated. The Company held no cash equivalents for any of the periods presented.
|
| For the Nine Months Ended
|
|
| September 30, 2022
|
| September 30, 2021
|
Cash, beginning of period
|
| $57,888
|
| $200,378
|
Net cash used in operating activities
|
| (46,757)
|
| (73,264)
|
Net cash provided by investing activities
|
| -
|
| -
|
Net cash provided by (used in) financing activities
|
| 4,752
|
| (38,697)
|
Effect of exchange rate on cash
|
| (275)
|
| (417)
|
Cash, end of period
|
| $15,608
|
| $88,000
|
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“U.S. GAAP”). U.S. GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risks and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to U.S. GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Our significant accounting policies are summarized in Note 1 in the Annual Report on Form 10-K for the most recent fiscal year, as filed with the SEC. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the periods presented in this report.
Related Parties
The Company follows the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. See Note 4.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The extent to which the COVID-19 pandemic may directly or indirectly impact our business, financial condition, and results of operations is highly uncertain and subject to change. We considered the potential impact of the COVID-19 pandemic on our estimates and assumptions and there was not a material impact to our consolidated financial statements as of and for the nine months ended September 30, 2022; however, actual results could differ from those estimates and there may be changes to our estimates in future periods.
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