UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

 

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

 

For the quarterly period ended March 31, 2022

OR

 

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ___________

 

Commission File No. 000-55319

 

PHOENIX RISING COMPANIES

(Exact name of registrant as specified in its charter)

 

Nevada

46-1993448

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

641 10th Street

Cedartown, Georgia 30125

 (Address of principal executive offices, zip code)

 

(844) 487-4636

 (Registrant’s telephone number, including area code)

 

___________________________________________________________

 (Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

 

 

 

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

 

Emerging growth company   

 

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

 

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

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒     No ☐

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of May 17, 2022, there were 549,087,757 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 

PHOENIX RISING COMPANIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED MARCH 31, 2022

 

INDEX

 

Index

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

4

Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021.

4

Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the Three Months Ended March 31, 2022 and 2021 (unaudited)

5

 

 

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity (Deficit) for Three Months ended March 31, 2022 and 2021, and the year ended December 31, 2021 (unaudited).

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2022 and 2021 (unaudited).

 

 

8

 

Notes to Condensed Financial Statements (unaudited).

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

21

Item 4.

Controls and Procedures.

21

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

22

Item 1A.

Risk Factors.

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

22

Item 3.

Defaults Upon Senior Securities.

22

Item 4.

Mine Safety Disclosures.

22

Item 5.

Other Information.

22

Item 6.

Exhibits.

23

Signatures

24

 

 
2

Table of Contents

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q of Phoenix Rising Companies, a Nevada corporation (the “Company”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things to fluctuations in commodities prices, the ability to obtain additional financing, the ability to obtain permits, licenses and approvals, as well as general industry and market conditions and growth rates and general economic conditions; and other factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”).

 

Our management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

 

 
3

Table of Contents

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

  

PHOENIX RISING COMPANIES

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

 March 31,

 

 

 December 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$ 82,507

 

 

$ 101,876

 

Accounts receivable, net

 

 

8,351,794

 

 

 

9,318,431

 

Inventory

 

 

7,748,308

 

 

 

7,733,568

 

Other current assets

 

 

104,754

 

 

 

151,292

 

Total Current Assets

 

 

16,287,363

 

 

 

17,305,167

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

1,979,787

 

 

 

1,979,787

 

TOTAL ASSETS

 

$ 18,267,150

 

 

$ 19,284,954

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$ 7,505,238

 

 

$ 8,489,790

 

Accrued liabilities and other payables

 

 

182,907

 

 

 

131,197

 

Advance payment

 

 

1,817,958

 

 

 

1,814,499

 

Convertible notes, net of unamortized discounts

 

 

588,945

 

 

 

730,981

 

Due to related parties

 

 

25,230

 

 

 

24,193

 

Derivative liabilities

 

 

1,164,133

 

 

 

2,768,484

 

Tax payable

 

 

16,827

 

 

 

2,451

 

Total Current Liabilities

 

 

11,301,238

 

 

 

13,961,595

 

 

 

 

 

 

 

 

 

 

Convertible notes non-current, net of unamortized discounts

 

 

209,765

 

 

 

217,069

 

TOTAL LIABILITIES

 

 

11,511,003

 

 

 

14,178,664

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 15,000,000 shares authorized; no shares issued and outstanding

 

 

-

 

 

 

-

 

Series A Preferred stock, $0.0001 par value; 1,500,000 shares designated; 1,500,000 shares issued and outstanding, respectively

 

 

150

 

 

 

150

 

Common stock, $0.0001 par value; 8,000,000,000 shares authorized; 309,815,605 and 169,127,299 shares issued and outstanding, respectively

 

 

30,981

 

 

 

16,912

 

Additional paid-in capital

 

 

46,048,313

 

 

 

45,317,109

 

Subscription receivable

 

 

(24,522,000 )

 

 

(24,522,000 )

Accumulated deficit

 

 

(14,903,411 )

 

 

(15,794,894 )

Accumulated other comprehensive income (loss)

 

 

102,114

 

 

 

89,013

 

Total shareholders' equity (deficit)

 

 

6,756,147

 

 

 

5,106,290

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

 

$ 18,267,150

 

 

$ 19,284,954

 

 

The notes are an integral part of these unaudited consolidated financial statements. 

 

 
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Table of Contents

 

PHOENIX RISING COMPANIES

Condensed Consolidated Statements of Operations and Other Comprehensive Loss

(Unaudited)

 

 

 

 Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Revenue

 

$ 7,759,922

 

 

$ 4,272,841

 

Cost of goods sold

 

 

7,682,924

 

 

 

4,254,731

 

Gross Profit

 

 

76,998

 

 

 

18,110

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

General and administrative

 

 

65,928

 

 

 

88,250

 

Professional fees

 

 

164,500

 

 

 

47,885

 

Total Operating Expenses

 

 

230,428

 

 

 

136,135

 

 

 

 

 

 

 

 

 

 

Loss from Operations

 

 

(153,430 )

 

 

(118,025 )

 

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

 

Other loss

 

 

-

 

 

 

(1,820 )

Interest expense

 

 

(299,285 )

 

 

(331,840 )

Change in fair value of derivative liabilities

 

 

1,361,003

 

 

 

(8,233,121 )

Total Other Income (Expense)

 

 

1,061,718

 

 

 

(8,566,781 )

 

 

 

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

 

908,288

 

 

 

(8,684,806 )

Provision for income taxes

 

 

(16,805 )

 

 

-

 

Net Income (Loss)

 

$ 891,483

 

 

$ (8,684,806 )

 

 

 

 

 

 

 

 

 

Dividend on Series A Preferred Stock

 

 

-

 

 

 

-

 

Net income (loss) attributable to common stockholders

 

$ 891,483

 

 

$ (8,684,806 )

 

 

 

 

 

 

 

 

 

Other Comprehensive Income (Loss)

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

13,101

 

 

 

(81,290 )

Total Comprehensive Income (Loss)

 

$ 904,584

 

 

$ (8,766,096 )

 

 

 

 

 

 

 

 

 

Basic Income (Loss) per Common Share

 

$ 0.00

 

 

$ (0.07 )

Diluted Loss per Common Share

 

$ (0.00 )

 

$ (0.07 )

 

 

 

 

 

 

 

 

 

Basic Weighted Average Common Shares Outstanding

 

 

218,273,080

 

 

 

128,338,538

 

Diluted Weighted Average Common Shares Outstanding

 

 

965,351,753

 

 

 

128,338,538

 

 

The notes are an integral part of these unaudited consolidated financial statements.

 

 
5

Table of Contents

 

PHOENIX RISING COMPANIES

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

 

Three months ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Series A Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

Other

 

 

 Total

 

 

 

Number of Shares

 

 

Amount

 

 

Number of Shares

 

 

Amount

 

 

Paid-in

Capital

 

 

Subscription

receivable

 

 

Accumulated

Deficit

 

 

Comprehensive

Loss

 

 

Stockholders'

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2021

 

 

1,500,000

 

 

$ 150

 

 

 

169,127,299

 

 

$ 16,912

 

 

$ 45,317,109

 

 

$ (24,522,000 )

 

$ (15,794,894 )

 

$ 89,013

 

 

$ 5,106,290

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for conversion of debt

 

 

-

 

 

 

-

 

 

 

140,688,306

 

 

 

14,069

 

 

 

731,204

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

745,273

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

891,483

 

 

 

-

 

 

 

891,483

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,101

 

 

 

13,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2022

 

 

1,500,000

 

 

$ 150

 

 

 

309,815,605

 

 

$ 30,981

 

 

$ 46,048,313

 

 

$ (24,522,000 )

 

$ (14,903,411 )

 

$ 102,114

 

 

$ 6,756,147

 

 

 
6

Table of Contents

 

Three months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Series A Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of Shares

 

 

Amount

 

 

Number of Shares

 

 

Amount

 

 

Paid-in

Capital

 

 

Subscription

receivable

 

 

Accumulated

Deficit

 

 

Comprehensive

Loss

 

 

Stockholders'

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2020

 

 

1,500,000

 

 

$ 150

 

 

 

121,169,368

 

 

$ 12,117

 

 

$ 42,434,390

 

 

$ (24,522,000 )

 

$ (26,145,758 )

 

$ (97,151 )

 

$ (8,318,252 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for conversion of debt

 

 

-

 

 

 

-

 

 

 

9,900,730

 

 

 

990

 

 

 

253,460

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

254,450

 

Common stock issued for exercised cashless warrant

 

 

-

 

 

 

-

 

 

 

5,890,538

 

 

 

589

 

 

 

(589 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Resolution of derivative liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,684,780

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,684,780

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,684,806 )

 

 

-

 

 

 

(8,684,806 )

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(81,290 )

 

 

(81,290 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2021

 

 

1,500,000

 

 

$ 150

 

 

 

136,960,636

 

 

$ 13,696

 

 

$ 44,372,041

 

 

$ (24,522,000 )

 

$ (34,830,564 )

 

$ (178,441 )

 

$ (15,145,118 )

 

The notes are an integral part of these unaudited consolidated financial statements.

 

 
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Table of Contents

 

PHOENIX RISING COMPANIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

 Three Months Ended

 

 

 

 March 31,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income (loss)

 

$ 891,483

 

 

$ (8,684,806 )

Adjustments to reconcile net loss to net cash from operating activities:

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

258,835

 

 

 

304,064

 

Change in fair value of derivative liabilities

 

 

(1,361,003 )

 

 

8,233,121

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

983,149

 

 

 

(2,444,173 )

Inventories

 

 

-

 

 

 

(7,439,398 )

Other current assets

 

 

46,537

 

 

 

3,148,919

 

Accounts payable

 

 

(999,259 )

 

 

7,549,594

 

Advance payment

 

 

-

 

 

 

(841,137 )

Tax payable

 

 

14,353

 

 

 

3,511

 

Accrued liabilities and other payable

 

 

70,450

 

 

 

34,772

 

Net cash used in operating activities

 

 

(95,454 )

 

 

(135,533 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from convertible notes

 

 

105,000

 

 

 

125,000

 

Repayment of convertible notes

 

 

(30,000 )

 

 

-

 

Loans from related parties

 

 

995

 

 

 

-

 

Net cash provided by financing activities

 

 

75,995

 

 

 

125,000

 

 

 

 

 

 

 

 

 

 

Effects on changes in foreign exchange rate

 

 

90

 

 

 

(68 )

 

 

 

 

 

 

 

 

 

Net change in cash

 

 

(19,369 )

 

 

(10,601 )

Cash - beginning of period

 

 

101,876

 

 

 

185,948

 

Cash - end of period

 

$ 82,507

 

 

$ 175,347

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Disclosures

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ -

 

 

$ 27,777

 

Cash paid for income taxes

 

$ 728

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Non-Cash Investing and Financing Activity:

 

 

 

 

 

 

 

 

Common stock issued for conversion of debt

 

$ -

 

 

$ 1,216,276

 

Common stock issued for exercised cashless warrant

 

$ 7,455,273

 

 

$ 589

 

Derivative liability recognized as debt discount

 

$ 112,500

 

 

$ 120,000

 

 

The notes are an integral part of these unaudited consolidated financial statements.

 

 
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PHOENIX RISING COMPANIES

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

Expressed in United States Dollars

(Unaudited)

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Phoenix Rising Companies. (“we,” “us,” “our,” the “Company “PRCX”) is a Nevada corporation incorporated on June 25, 2012 under the name Resort Savers, Inc. On May 28, 2020, the Company’s corporate name was changed to Phoenix Rising Companies. It is based in Puchong, Malaysia. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is December 31.

 

The Company makes investments and acquisitions into sound, transparent markets and industries throughout the world. The Company is principally engaged in the trading of oil, gas and lubricant. From January 1, 2020, the Company deconsolidated the operations in nutrition and health products.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company prepares its condensed consolidated financial statements in accordance with rules and regulations of the U.S. Securities and Exchange Commission (SEC) and generally accepted accounting principles (“GAAP”) in the United States of America. The accompanying consolidated financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X and presented in United States dollars.

 

In the opinion of the Company’s management, the accompanying unaudited interim consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2022 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited interim consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022.

 

Principles of Consolidation

 

At March 31, 2022, the principal subsidiaries of the Company were listed as follows:

 

Entity Name

 

Acquisition

Date

 

Ownership

 

 

Jurisdiction

 

Investments

Held By

 

Nature of

Operation

 

Fiscal

Year

 

Xing Rui International Investment Holding Group Co., Ltd. (“Xing Rui”)

 

December 22, 2014

 

 

100

%

 

Seychelles

 

PRCX

 

Holding Company

 

January 31

 

Xing Rui International Investment Group Ltd. (“Xing Rui HK”)

 

December 22, 2014

 

 

100

%

 

Hong Kong, the PRC

 

Xing Rui

 

Holding Company

 

January 31

 

Huaxin Changrong (Shenzhen) Technology Service Co., Ltd. (“Huaxin”) *

 

August 27, 2015

 

 

100

%

 

the PRC

 

Xing Rui

 

Holding Company

 

December 31

 

Beijing Yandong Tieshan Oil Products Co., Ltd. (“Tieshan Oil”) *

 

January 29, 2016

 

 

51

%

 

the PRC

 

Huaxin

 

Trading of oil products

 

December 31

 

 

 

May 16, 2018

 

 

49

%

 

 

 

 

 

 

 

 

 

___________

*

The English names used are translated only.

 

These condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated upon the consolidation.

 

 
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Use of Estimates and Assumptions

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

 

Foreign Currency Translation and Re-measurement

 

The Company translates its foreign operations to U.S. dollars in accordance with ASC 830, “Foreign Currency Matters”.

 

The Company’s functional currency and reporting currency is the U.S. dollar, and our subsidiaries’ functional currency is the Chinese Yuan Renminbi (“CNY”), and Hong Kong Dollar (“HKD”).

 

The Company translates the foreign subsidiaries’ records into U.S. dollar as follows:

 

 

·

Assets and liabilities at the rate of exchange in effect at the balance sheet date

 

·

Equities at historical rate

 

·

Revenue and expense items at the average rate of exchange prevailing during the period

Concentrations of Credit Risk

 

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents, and accounts receivable. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company also reviews its accounts receivable in a timely manner. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

 

Tieshan Oil

 

During the three months ended March 31, 2022 and 2021, three customers accounted for 100% of revenues (39%, 33%  and 29%) and one customer accounted for 100% of revenues, respectively.

 

During the three months ended March 31, 2022 and 2021, one vendor accounted for 100% of total purchases and one vendor accounted for 87% of total purchases, respectively

 

As of March 31, 2022 and December 31, 2020, two customers accounted for 100% (52% and 48%) and one customer accounted for approximately 1000% of accounts receivable, and four vendors accounted for 100% (51%, 30%, 10%, and 9%) and three vendors accounted for approximately 99% of accounts payable, respectively.

 

 
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Earnings Per Share of Common Stock

 

The Company has adopted ASC Topic 260, ”Earnings per Share,” (“EPS”) which requires presentation of basic EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying consolidated financial statements, basic earnings per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

 

NOTE 3 - GOING CONCERN

 

The Company’s condensed consolidated financial statements are prepared using GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet had sufficient revenues to cover its operating cost, and requires additional capital to commence its operating plan. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about its ability to continue as a going concern.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company include: sales of equity instruments; traditional financing, such as loans; and obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

 

There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

NOTE 4 – ACCOUNTS RECEIVABLE

 

The Company has performed an analysis on all of its accounts receivable and determined that all amounts are collectible by the Company. As such, all accounts receivables are reflected as a current asset and no allowance for bad debt has been recorded as of March 31, 2022 and December 31, 2021. As at March 31, 2022 and December 31, 2021, the Company had accounts receivable of $8,351,794 and $9,318,431, respectively.

 

NOTE 5 – INVENTORIES

 

Inventories at March 31, 2022 and December 31, 2021 consist of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Finished goods

 

$ 7,748,308

 

 

$ 7,733,568

 

 

 
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NOTE 6 – CONVERTIBLE NOTE

 

At March 31, 2022 and December 31, 2021, convertible loans consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Convertible Notes - originated in November 22, 2019

 

$ -

 

 

$ 4,064

 

Convertible Notes - issued during fiscal year 2020

 

 

579,064

 

 

 

605,000

 

Convertible Notes - issued during fiscal year 2021

 

 

138,076

 

 

 

508,750

 

Convertible Notes - issued during fiscal year 2022

 

 

112,500

 

 

 

-

 

Total convertible notes payable

 

 

829,640

 

 

 

1,117,814

 

Less: Unamortized debt discount

 

 

(30,930 )

 

 

(169,764 )

Total convertible notes

 

 

798,710

 

 

 

948,050

 

Less: current portion of convertible notes

 

 

588,945

 

 

 

730,981

 

Long-term convertible notes

 

$ 209,765

 

 

$ 217,069

 

 

For the three months ended March 31, 2022 and 2021, the interest expense on convertible notes was $40,450 and $27,777, and amortization of discount of $258,835 and $304,063, respectively. As of March 31, 2022 and December 31, 2021, the accrued interest was $147,422 and $125,722, respectively.

 

Conversion

 

During the three months ended March 31, 2022, the Company converted notes with principal amounts and accrued interest of $389,425 into 140,688,306 shares of common stock. The corresponding derivative liability at the date of conversion of $355,848 was credited to additional paid in capital.

 

Convertible Notes – Issued during year ended December 31, 2022

 

During the three months ended March 31, 2022, the Company issued a total principal amount of $112,500 convertible notes for cash proceeds of $105,000.  The terms of convertible note are summarized as follows:

 

 

·

Term: 18 months;

 

·

Annual interest rates: 8%;

 

·

Convertible at the option of the holders at any time or 180 days from issuance

 

·

Conversion prices are based on discounted (35% discount) lowest trading prices of the Company’s shares during various periods prior to conversion.

 

Convertible Notes – Issued during year ended December 31, 2021

 

During the year ended December 31, 2021, the Company issued a total principal amount of $743,500 convertible note for cash proceeds of $688,500.  The terms of convertible note are summarized as follows:

 

 

·

Term: 12 months - 18 months;

 

·

Annual interest rates: 8%;

 

·

Convertible at the option of the holders at any time or 180 days from issuance

 

·

Conversion prices are based on discounted (35% - 40% discount) lowest trading prices of the Company’s shares during various periods prior to conversion.

 

Convertible Notes – Issued during the year ended December 31, 2020

 

During the year ended December 31, 2020, the Company issued a total principal amount of $1,034,750 convertible note for cash proceeds of $912,000. The terms of convertible note are summarized as follows:

 

 

·

Term: a range from 9 months to 18 months;

 

·

Annual interest rates: 8% - 13%;

 

·

Convertible at the option of the holders at any time or 180 days from issuance;

 

·

Conversion prices are based on discounted (10% - 50% discount) lowest trading prices of the Company’s shares during various periods prior to conversion.

·

Certain note allows the principal amount will increase by $15,000 and the discount rate of conversion price will decrease by 20% if the conversion price is less than $0.10 or $0.01. As a result, the discount rate of conversion price changed from 50% to 70% and the Company recognized the penalty of $15,000 and recorded principal amount of $15,000.

 

 
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The Company determined that the conversion feature met the definition of a liability in accordance with ASC Topic No. 815-40, “Derivatives and Hedging - Contracts in Entity’s Own Stock” and therefore bifurcated the embedded conversion option once the note becomes convertible and accounted for it as a derivative liability. The fair value of the conversion feature was recorded as a debt discount and amortized to interest expense over the term of the note.

 

The Company valued the conversion feature and warrant using the Black Scholes valuation model. The fair value of the derivative liability for all warrant and the notes that became convertible, including the notes issued in prior years, during the three months ended March 31, 2022 amounted to $188,465. $112,500 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $75,965 was recognized as a “day 1” derivative loss.

 

NOTE 7 – WARRANTS

 

A summary of activity regarding warrants issued as follows:

 

 

 

Warrants Outstanding

 

 

 

 

 

Weighted Average

 

 

Contractual life

 

 

 

Shares

 

 

Exercise Price

 

 

(in years)

 

 

 

 

 

 

 

 

 

 

 

Outstanding, December 31, 2021

 

 

245,366,811

 

 

$ 0.0069

 

 

 

3.12

 

Granted

 

 

-

 

 

 

-

 

 

 

-

 

Reset feature

 

 

-

 

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited/canceled

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding, Mach 31, 2022

 

 

245,366,811

 

 

$ 0.0065

 

 

 

3.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable warrant at March 31, 2022

 

 

245,366,811

 

 

$ 0.0065

 

 

 

3.12

 

 

The Company determined that the warrants qualify for derivative accounting due to the reset feature of warrants, which led to no explicit limit to the number of shares to be delivered upon future settlement of the exercised warrants.

 

Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the warrants at March 31, 2022 for those warrants for which the quoted market price was in excess of the exercise price (“in-the-money” warrants). The intrinsic value of the warrants as of March 31, 2022 is $0.

 

NOTE 8 – DERIVATIVE LIABILITIES

 

The Company analyzed the conversion option for derivative accounting consideration under ASC 815, “Derivatives and Hedging, and hedging,” and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

 

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.

 

 
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The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of March 31, 2022. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note and warrant is estimated using the Black-Scholes valuation model. The following weighted-average assumptions were used in the three months ended March 31, 2022 and the year ended December 31, 2021:

 

 

 

Three Months Ended

 

 

Year ended

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2021

 

Expected term

 

 0.22 - 3.41 years

 

 

 0.09 - 4.47 years

 

Expected average volatility

 

186% - 253%

 

 

162% - 363%

 

Expected dividend yield

 

 

-

 

 

 

-

 

Risk-free interest rate

 

0.27% - 2.45%

 

 

0.02% - 0.97%

 

 

The following table summarizes the changes in the derivative liabilities during the three months ended March 31, 2022:

 

Fair Value Measurements Using Significant Observable Inputs (Level 3)

 

 

 

 

 

Balance - December 31, 2021

 

$ 2,768,484

 

Addition of new derivatives recognized as debt discounts

 

 

112,500

 

Addition of new derivatives recognized as loss on derivatives

 

 

75,965

 

Settled on issuance of common stock

 

 

(355,848 )

Gain on change in fair value of the derivative

 

 

(1,436,968 )

Balance - March 31, 2022

 

$ 1,164,133

 

 

The following table summarizes the (gain) loss on derivative liability included in the income statement for the three months ended March 31, 2022 and 2021, respectively.

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Day one loss due to derivative liabilities on convertible notes

 

$ 75,965

 

 

$ 128,396

 

Change in fair value of the derivative liabilities

 

 

(1,436,968 )

 

 

8,104,725

 

 

 

$ (1,361,003 )

 

$ 8,233,121

 

 

NOTE 9 - STOCKHOLDERS’ DEFICIT

 

The capitalization of the Company consists of the following classes of capital stock as of March 31, 2022:

 

Preferred Stock

 

The Company has authorized 15,000,000 shares of preferred stock with a par value of $0.0001 per share. The Board of Directors are authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. No shares of preferred stock have been issued.

 

 
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Series A Preferred Stock

 

The Company is designated to issue 1,500,000 shares of Series A Preferred Stock at a par value of $0.0001. The Series A Preferred Stock shall have liquidation preference over any other class of stock and voting rights on the basis of one hundred votes for each shares of Series A Preferred Stock. The Preferred Stock can be converted to common stock, at a conversion rate of 100 common shares for each preferred stock.

 

As at March 31, 2022 and December 31, 2021, the Company had 1,500,000 preferred shares issued and outstanding.

 

Common Stock

 

On February 9, 2022, the Company filed a Certificate of Amendment to its Articles of Incorporation, increasing its authorized shares of common stock from 1,000,000,000 shares to 8,000,000,000 shares.

 

The Company has authorized 8,000,000,000 shares of common stock with a par value of $0.0001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

 

During the three months ended March 31, 2022, the Company issued 140,688,306 shares of common stock for conversion of debt.

 

As at March 31, 2022 and December 31, 2021, the Company had 309,815,605 and 169,127,299 common shares issued and outstanding, respectively.

 

Subscription receivable

 

On February 24, 2020, the Company entered into a Purchase Agreement (the “Agreement”) with Mr. Liu FaKuan (“Seller”), the sole owner of Henan Wandi Mining Product Development Co., Ltd. (“Wandi”), a corporation organized in the People’s Republic of China (“PRC”), pursuant to which the Company will effect an acquisition of Wandi by acquiring from the Seller all outstanding equity interests of Wandi. Wandi owns 49% of a coal mine known as You Zhou Shenhuo Kuanfa Mining Company Ltd., (the “Mine”), with Zhengshou Yshong Coal Industry Co., Ltd. (a State-owned enterprise) owning the remaining 51% of the Mine.

 

Pursuant to the Agreement, the Company issued 60,000,000 restricted common shares of stock of the Company to the Seller, valued at $24,522,000. The obligations of the parties to complete the acquisition is subject to the fulfillment (or, in some cases waiver) of due diligence and certain closing conditions. Upon closing of the acquisition Seller shall transfer to Company 100% of the issued and outstanding equity interests of Wandi, which will then become a wholly owned subsidiary of the Company.

 

As of March 31, 2022, the Company does not have control of Wandi. As a result, the Company determined not to consolidate Wandi and recorded share issuance for acquisition of Wandi as a subscription receivable for $24,522,000, until the common shares of Wandi are delivered.

 

NOTE 10 – RELATED PARTY TRANSACTIONS

 

During the three months ended March 31, 2022 and 2021, the Company borrowed $995 and $0 from our related parties, respectively.

 

As of March 31, 2022 and December 31, 2021, the Company recorded amounts due to related parties of $25,230 and $24,193, respectively. The loan is non-interest bearing and due on demand.

 

NOTE 11 - SEGMENTED INFORMATION

 

At March 31, 2022, the Company operates in one industry segment, oil and gas, and two geographic segments with China being where majority current assets and equipment are located.

 

 
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At March 31, 2022 and December 31, 2021, segment assets and liabilities were as follows:

 

March 31, 2022

 

Holding Company

 

 

Oil and gas

 

 

Total Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

$ 142,764

 

 

$ 16,144,599

 

 

$ 16,287,363

 

Non-current assets

 

 

1,979,787

 

 

 

-

 

 

 

1,979,787

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

2,082,426

 

 

 

9,218,812

 

 

 

11,301,238

 

Long term liabilities

 

 

209,765

 

 

 

-

 

 

 

209,765

 

Net assets

 

$ (169,640 )

 

$ 6,925,787

 

 

$ 6,756,147

 

 

December 31, 2021

 

Holding Company

 

 

Oil and gas

 

 

Total Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

$ 201,429

 

 

$ 17,103,738

 

 

$ 17,305,167

 

Non-current assets

 

 

1,979,787

 

 

 

-

 

 

 

1,979,787

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

3,720,085

 

 

 

10,241,510

 

 

 

13,961,595

 

Long term liabilities

 

 

217,069

 

 

 

-

 

 

 

217,069

 

Net assets

 

$ (1,755,938 )

 

$ 6,862,228

 

 

$ 5,106,290

 

 

For the three months ended March 31, 2022 and 2021, segment revenue and net income (loss) were as follows:

 

Three Months Ended March 31, 2022

 

Holding Company

 

 

Oil and gas

 

 

Total Consolidated

 

Revenue

 

$ -

 

 

$ 7,759,922

 

 

$ 7,759,922

 

Cost of goods sold

 

 

-

 

 

 

(7,682,924 )

 

 

(7,682,924 )

Operating expenses

 

 

(220,650 )

 

 

(9,778 )

 

 

(230,428 )

Other income

 

 

1,061,718

 

 

 

-

 

 

 

1,061,718

 

Provision for income taxes

 

 

-

 

 

 

(16,805 )

 

 

(16,805 )

Net income

 

$ 841,068

 

 

$ 50,415

 

 

$ 891,483

 

 

Three Months Ended March 31, 2021

 

Holding

Company

 

 

Oil

and gas

 

 

Total

Consolidated

 

Revenue

 

$ -

 

 

$ 4,272,841

 

 

$ 4,272,841

 

Cost of goods sold

 

 

-

 

 

 

(4,254,731 )

 

 

(4,254,731 )

Operating expenses

 

 

(126,001 )

 

 

(10,134 )

 

 

(136,135 )

Other expenses

 

 

(8,564,961 )

 

 

(1,820 )

 

 

(8,566,781 )

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

Net income (loss)

 

$ (8,690,962 )

 

$ 6,156

 

 

$ (8,684,806 )

 

 
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NOTE 12 – EARNINGS (LOSS) PER SHARES

 

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the periods. Diluted net income per common share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the periods. Common equivalent shares consist of convertible preferred stock and convertible notes that are computed using the if-converted method, and outstanding warrants that are computed using the treasury stock method.

 

 

 

 Three Months Ended

 

 

 

 March 31,

 

 

 

2022

 

 

2021

 

Numerator:

 

 

 

 

 

 

Net income (loss)

 

$ 891,483

 

 

$ (8,684,806 )

Change in fair value of derivative liabilities

 

 

(1,361,003 )

 

 

-

 

Interest on convertible debts

 

 

18,348

 

 

 

-

 

Net loss - diluted

 

$ (451,172 )

 

$ (8,684,806 )

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

218,273,080

 

 

 

128,338,538

 

Effect of dilutive shares

 

 

 

 

 

 

 

 

Series A Preferred Stock

 

 

150,000,000

 

 

 

-

 

Convertible notes

 

 

597,078,673

 

 

 

-

 

Warrants

 

 

-

 

 

 

-

 

Diluted

 

 

965,351,753

 

 

 

128,338,538

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

Basic

 

$ 0.00

 

 

$ (0.07 )

Diluted

 

$ (0.00 )

 

$ (0.07 )

 

For the three months ended March 31, 2021, the convertible instruments are anti-dilutive and therefore, have been excluded from earnings (loss) per share.

 

NOTE 13 – SUBSEQUENT EVENTS

 

Subsequent to March 31, 2022, the Company issued common shares as follows;

 

·         199,184,552 shares for conversion of debt

 

·         40,087,600 shares for cashless exercise of warrant

 

 

 
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Table of Contents

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Results of Operations

 

Our operations for the three months ended March 31, 2022 and 2021are outlined below:

 

Three months ended March 31, 2022 compared to year ended March 31, 2021

 

 

 

Three months ended

 

 

 

 

 

 

March 31,

 

 

Change

 

 

 

2022

 

 

2021

 

 

Amount

 

Revenue

 

$ 7,759,922

 

 

$ 4,272,841

 

 

$ 3,487,081

 

Cost of goods sold

 

$ 7,682,924

 

 

$ 4,254,731

 

 

$ 3,428,193

 

Gross profit

 

$ 76,998

 

 

$ 18,110

 

 

$ 58,888

 

Operating expenses

 

$ 230,428

 

 

$ 136,135

 

 

$ 94,293

 

Other income (expense)

 

$ 1,061,718

 

 

$ (8,566,781 )

 

$ 9,628,499

 

Provision for income taxes

 

$ 16,805

 

 

$ -

 

 

$ 16,805

 

Net income (loss)

 

$ 891,483

 

 

$ (8,684,806 )

 

$ 9,576,289

 

 

The revenue for the three months ended March 31, 2022 increased by $3,487,081 to $4,272,841 compared with the same period in 2021. The increase is mainly due to the effects of COVID-19 causing a decrease in demand and consequently the pricing in prior year period.

 

Cost of goods sold for the three months ended March 31, 2022 increased by $3,428,193 to $7,682,924 compared with the same period in 2021. The increase is mainly due to an increase in revenue in this period.

 

Operating income for the three months ended March 31, 2022 increased by $94,293 to $230,428 compared with the same period in 2021. The increase is mainly due to an increase in professional fee.

 

 
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Other income (expense) for the three months ended March 31, 2022 increased by $9,628,499 to $1,061,718 from other expenses compared with the same period in 2021. The increase in other income is mainly due to change in fair value of derivative liabilities related to convertible notes.

 

Net income for the three months ended March 31, 2022 was $891,483 compared to net loss of $8,684,806 in the same period in 2021. The change is mainly due to change in fair value of derivative liabilities related to convertible notes.

 

For the three months ended March 31, 2022 and 2021 our results of operations segment, are as follows:

 

Three Months Ended March 31, 2022

 

Holding Company

 

 

Oil and gas

 

 

Total Consolidated

 

Revenue

 

$ -

 

 

$ 7,759,922

 

 

$ 7,759,922

 

Cost of goods sold

 

 

-

 

 

 

(7,682,924 )

 

 

(7,682,924 )

Operating expenses

 

 

(220,650 )

 

 

(9,778 )

 

 

(230,428 )

Other income (expenses)

 

 

1,061,718

 

 

 

-

 

 

 

1,061,718

 

Provision for income taxes

 

 

-

 

 

 

(16,805 )

 

 

(16,805 )

Net income (loss)

 

$ 841,068

 

 

$ 50,415

 

 

$ 891,483

 

 

Three Months Ended March 31, 2021

 

Holding

Company

 

 

Oil

and gas

 

 

Total

Consolidated

 

Revenue

 

$ -

 

 

$ 4,272,841

 

 

$ 4,272,841

 

Cost of goods sold

 

 

-

 

 

 

(4,254,731 )

 

 

(4,254,731 )

Operating expenses

 

 

(126,001 )

 

 

(10,134 )

 

 

(136,135 )

Other expenses

 

 

(8,564,961 )

 

 

(1,820 )

 

 

(8,566,781 )

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

Net income (loss)

 

$ (8,690,962 )

 

$ 6,156

 

 

$ (8,684,806 )

 

Holding Company

 

 

 

Three Months Ended

 

 

 

 

 

 

March 31,

 

 

Change

 

 

 

2022

 

 

2021

 

 

Amount

 

Revenue

 

$ -

 

 

$ -

 

 

$ -

 

Cost of goods sold

 

$ -

 

 

$ -

 

 

$ -

 

Gross profit

 

$ -

 

 

$ -

 

 

$ -

 

Operating expenses

 

$ 220,650

 

 

$ 126,001

 

 

$ 94,649

 

Other income (expense)

 

$ 1,061,718

 

 

$ 8,564,961

 

 

$ (7,503,243 )

Provision for income taxes

 

$ -

 

 

$ -

 

 

$ -

 

Net income (loss)

 

$ 841,068

 

 

$ (8,690,962 )

 

$ 9,532,030

 

 

Operating expense mainly consists of professional fees for ongoing regulatory requirements and general and administrative expense. The increase in operating expense is primarily due to an increase in professional fee.

 

Other income (expense) mainly consists of interest expense and change in fair value of derivative liability from convertible notes.

 

 
19

Table of Contents

 

Oil and Gas

 

 

 

Three Months Ended

 

 

 

 

 

 

March 31,

 

 

Change

 

 

 

2022

 

 

2021

 

 

Amount

 

Revenue

 

$ 7,759,922

 

 

$ 4,272,841

 

 

$ 3,487,081

 

Cost of goods sold

 

$ 7,682,924

 

 

$ 4,254,731

 

 

$ 3,428,193

 

Gross profit

 

$ 76,998

 

 

$ 18,110

 

 

$ 58,888

 

Operating expenses

 

$ 9,778

 

 

$ 10,134

 

 

$ (356 )

Other income (expense)

 

$ -

 

 

$ (1,820 )

 

$ 1,820

 

Provision for income taxes

 

$ 16,805

 

 

$ -

 

 

$ 16,805

 

Net income (loss)

 

$ 50,415

 

 

$ 6,156

 

 

$ 44,259

 

 

The increase in revenue is primarily due to the effects of COVID-19 which caused a decrease in demand and consequently the pricing in prior period. The increase in cost of goods sold is primarily due to an increase in revenue. The percentage of gross profit is 1.0% in 2022 and 0.4% in 2021.

 

Liquidity and Capital Resources

 

The following table provides selected financial data about our Company as of March 31, 2022 and December 31, 2021, respectively.

 

Working Capital

 

The following table provides selected financial data about our Company as of March 31, 2022 and December 31, 2021, respectively.

 

 

 

March 31,

 

 

December 31,

 

 

Change

 

 

 

2022

 

 

2021

 

 

Amount

 

Cash

 

$ 82,507

 

 

$ 101,876

 

 

$ (19,369 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

$ 16,287,363

 

 

$ 17,305,167

 

 

$ (1,017,804 )

Current Liabilities

 

$ 11,301,238

 

 

$ 13,961,595

 

 

$ (2,660,357 )

Working Capital Deficiency

 

$ 4,986,125

 

 

$ 3,343,572

 

 

$ 1,642,553

 

 

The increase in working capital was primarily attributed to an increase in current assets offset by an increase in current liabilities. The increase in current assets was primarily attributed to an increase in accounts receivable. The increase in current liabilities was primarily attributed to an increase in accounts payable offset by a decrease in derivative liabilities.

 

Cash Flow

 

 

 

Three Months Ended

 

 

 

 

 

March 31,

 

 

Change

 

 

 

2022

 

 

2021

 

 

Amount

 

Cash Flows used in operating activities

 

$ (95,454 )

 

$ (135,533 )

 

$ 40,079

 

Cash Flows provided by investing activities

 

$ -

 

 

$ -

 

 

$ -

 

Cash Flows provided by financing activities

 

$ 75,995

 

 

$ 125,000

 

 

$ (49,005 )

Effects on changes in foreign exchange rate

 

$ 90

 

 

$ (68 )

 

$ 158

 

Net change in cash during period

 

$ (19,369 )

 

$ (10,601 )

 

$ (8,768 )

 

Cash Flow from Operating Activities

 

During the three months ended March 31, 2022, our Company used $95,454 in operating activities, compared to $135,533 during the three months ended March 31, 2021. The decrease in cash used in operation activities is primarily due to an increase in operating liabilities offset by operating assets.

 

 
20

Table of Contents

 

Cash Flow from Investing Activities

 

During the three months ended March 31, 2022 and 2021, we did not have any investing acuities.

 

Cash Flow from Financing Activities

 

During the three months ended March 31, 2022 and 2021, our Company received $75,995 and $125,000 from financing activities, respectively. For the three months ended March 31, 2022, the Company received $105,000 from convertible notes and 995 from loans from related parties, and repaid convertible notes for $30,000. For the year ended March 31, 2021, the Company received $125,000 from convertible notes.

 

Critical Accounting Policies and Estimates

 

The preparation of consolidated financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.

 

Off-Balance Sheet Arrangements

 

We do not have any 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 is material to investors.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 3.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and out Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of June 30, 2021, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules, regulations and forms, and (ii) that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting

 

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has concluded there were no significant changes in our internal controls over financial reporting that occurred during this quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
21

Table of Contents

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

The Company is not currently subject to any legal proceedings. From time to time, the Company may become subject to litigation or proceedings in connection with its business, as either a plaintiff or defendant. There are no such pending legal proceedings to which the Company is a party that, in the opinion of management, is likely to have a material adverse effect on the Company’s business, financial condition or results of operations.

 

ITEM 1A.  RISK FACTORS

 

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 1A.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

None.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

 
22

Table of Contents

 

ITEM 6. EXHIBITS.

 

(a) The following Exhibits, as required by Item 601 of Regulation SK, are attached or incorporated by reference, as stated below.

 

Number

 

Description

 

 

 

3.1.1

 

Articles of Incorporation (1)

3.1.2

 

Certificate of Amendment (2)

3.1.3

 

Certificate of Amendment (4)

3.1.4

 

Certificate of Amendment (5)

3.2

 

Amended and Restated Bylaws (3)

31.1

 

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2

 

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1

 

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2

 

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101.INS

 

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).*+

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document.*+

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.*+

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.*+

101.LAB

 

Inline XBRL Taxonomy Extension Labels Linkbase Document.*+

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.*+

104

 

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).*+

_______________ 

(1)

Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-187437), filed with the Securities and Exchange Commission on March 22, 2019.

(2)

Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 001-55319), filed with the Securities and Exchange Commission on May 13, 2016.

(3)

Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-55319), filed with the Securities and Exchange Commission on July 9, 2018.

(4)

Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 001-55319), filed with the Securities and Exchange Commission on June 1, 2021.

(5)

Incorporated by reference to the Registrant’s preliminary Information Statement on Schedule 14C (File No. 001-55319), filed with the Securities and Exchange Commission on March 10, 2022.

_____________ 

*Filed herewith.  

 

+ XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 
23

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

PHOENIX RISING COMPANIES

Date: May 23, 2022

By:

/s/ Ding-Shin “DS” Chang

Name:

Ding-Shin “DS” Chang

Title:

President and Chief Executive Officer

(principal executive officer)

 

Date: May 23, 2022

By:

/s/ Boon Jin “Patrick” Tan

 

Name:

Boon Jin “Patrick” Tan

 

Title:

Chief Financial Officer

(principal accounting officer and principal financial officer)

 

 

 
24

 

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