The following discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See "Note Regarding Forward-Looking Statements." Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed in "Risk Factors" and elsewhere in this report.
Overview
Because we changed our fiscal year from the year ended
Since
All of our sales to date have been sales of cordyceps related products and, in
the quarter ended
All of our revenue for the years ended
At present, we have no full-time employees. Our only employee is our chief
executive officer who work for us on a part-time basis. We face significant
risks in implementing our business plan, as described under Item 1.Business -
Proposed Business, including, but not limited to, our ability to raise the
necessary financing either through the sale of debt or equity securities or
through a loan facility, our ability to increase our customer base and supply
chain, our ability to increase our gross margins, our ability to hire and retain
qualified research and development, marketing and administrative personnel, our
ability to develop products and to market in
17 Table of Contents
Although our business plan initially contemplated that we would conduct research and development on our own proprietary products based on cordyceps sinensis, to date we have neither commenced such activities nor take any preliminary steps with respect to such activities. We do not presently have the funds necessary for us to engage in such activities, and we cannot assure you that we will be able to commence any research and development activities or that any such activities that we may undertake will be successful.
We require funds for our operations. At
To the extent that we implement our business plan, we anticipate that we will
incur marketing and other expenses without any assurance that such expenses will
generate any significant revenue or net income. Because of our cash position, we
may use equity-based compensation for our employees and independent contractors.
In
Effects of COVID-19
Since our products are purchased by customers in
• The effect of COVID-19 on the ability of our customers and potential customers to manufacture products. • The financial health of our potential customers. • Since our customers use our products as an ingredient in their products, the inability of the customer to obtain other ingredients may affect their willingness or ability to purchase our product. • The ability of our customers to ship their products toChina and the ability of their customers to distribute product to retail markets. • The willingness or ability of the ultimate purchasers in the PRC and any other countries to which our customers sell products to purchase products with our ingredients and their perception as to whether the products may have beneficial effects to them. • The extent to which any quarantine which may be imposed affects the willingness or ability of consumers to purchase products with our ingredients. • The perceived benefit, if any, to consumers of products with our ingredients. • The extent to which the purchase of products with our ingredients is a low priority item for a population whose disposable income may have decreased as a result of COVID-19 and the steps taken by governments to curb the spread of infection. Results of Operations
Years Ended
For the year ended
18 Table of Contents
For the year ended
We imputed interest at the rate of 4% on the advances made to the Company by
stockholders in the amount of
Because of our dependence on a few customers, one of which accounted for all of our sales in 2020 and 2019, our revenue in any quarter is dependent upon both the timing of orders from customers and the delivery of products from our suppliers.
Three Months Ended
Our revenue for three months ended
Our operating expenses, consisting of selling, general and administrative
expenses, for the three months ended
We imputed interest at the rate of 4% on the advances made to the Company by
stockholders in the amount of
As a result of the foregoing, we had a net loss of
Liquidity and Capital Resources
The following table sets forth information relating to our working capital at
December 30, December 31, 2020 2019 Change Current assets$ 973,353 $ 879,471 $ 93,882 Current liabilities$ 312,185 $ 111,541 $ 200,644 Working capital$ 661,168 $ 767,930 $ (106,762 ) The following is a summary of the statements of cash flows for the years endedDecember 30, 2020 and 2019 and the three months endedDecember 31, 2019 and 2018: Years Ended Three Months Ended December 31, December 31, 2020 2019 2019 2018 Cash provided by (used in) operating activities$ (199,460 ) $ (59,709 ) $ 34,928 $ 174,329 Cash provided by investing activities - - - - Cash provided by (used in) financing activities 216,672 23,013 (35,489 ) (137,870 ) Cash and cash equivalents end of year/period 18,123 911 911 37,607 19 Table of Contents
Cash used in operating activities for the year ended
Cash provided by operating activities for the three months ended
Cash provided by financing activities for the year ended
Cash used in financing activities of
For the three months ended
Going Concern
Our financial statements have been prepared assuming that we will continue as a
going concern, which contemplates the realization of assets and the liquidation
of liabilities in the normal course of business. We had minimal cash as of
We propose to fund operations through sales of our products and equity financing arrangements. However, because of the lack of sales and the absence of any active trading market for its common stock, the lack of independent directors, our financial condition and our lack of an operating history, we may not be able to raise funds for capital expenditures, working capital and other cash requirements and will have to rely on advances from a minority stockholder and our officer. If we cannot generate revenue from our products, we may not be able to continue in its business.
Critical Accounting Policies and Estimates
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money market funds, and
certificates of term deposits with maturities of less than three months from
inception, which are readily convertible to known amounts of cash and which, in
the opinion of management, are subject to an insignificant risk of loss in
value. We had
20 Table of Contents Inventories
Inventories consist primarily of finished goods. Inventories are valued at the
lower of cost or net realizable value. We determine cost on the basis of
first-in, first-out methods. We periodically review inventories for obsolescence
and any inventories identified as obsolete are written down or written off.
Although we believe that the assumptions we use to estimate inventory
write-downs are reasonable, future changes in these assumptions could provide a
significantly different result. No inventory markdown was recorded for the years
ended
Net Income (Loss) Per Share of Common Stock
We adopted ASC Topic 260, "Earnings per Share" which requires presentation of
basic earnings per share on the face of the statements of operations for all
entities with complex capital structures and requires a reconciliation of the
numerator and denominator of the basic earnings per share computation. Basic
loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the year. Diluted earnings per
share is computed by dividing net income by the weighted average number of
shares of common stock and potentially dilutive outstanding shares of common
stock during the period to reflect the potential dilution that could occur from
common shares issuable through contingent share arrangements, stock options and
warrants unless the result would be antidilutive. There were no potentially
dilutive shares of common stock outstanding for the years ended
Concentrations of Credit Risk
Our financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables that we will likely incur in the near future. We place our cash and cash equivalents with financial institutions of high credit worthiness. At times, our cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits.
Stock-Based Compensation
We recognize compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee and non-employee stock-based awards, we calculate the fair value of the award on the date of grant using the option-pricing model for stock options and the quoted price of its common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. We consider many factors when estimating expected forfeitures, including types of awards, employee class and historical experience.
Income Taxes
We use the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on differences between financial reporting and the tax basis of assets, liabilities, the carry forward of operating losses and tax credits, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.
Related Parties
We follow ASC 850, "Related Party Disclosures," for the identification of related parties and disclosure of related party transactions.
21 Table of Contents Revenue Recognition
We recognize revenue in accordance with Topic 606, which requires revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We apply the following five steps in order to determine the appropriate amount of revenue to be recognized as we fulfill our obligations under each of its agreements:
· identify the contract with a customer; · identify the performance obligations in the contract; · determine the transaction price; · allocate the transaction price to performance obligations in the contract; and · recognize revenue as the performance obligation is satisfied.
We recognize revenue when products are delivered to customers in accordance with the written sales terms.
Recent Accounting Pronouncements
We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements.
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