GLOBAL SEED CORPORATION The following discussion and analysis should be read in conjunction with our financial statements and related notes thereto.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain statements that may be deemed "forward-looking statements" within the meaning ofUnited States of America securities laws. All statements, other than statements of historical fact, that address activities, events or developments that we intend, expect, project, believe or anticipate and similar expressions or future conditional verbs such as will, should, would, could or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to
be appropriate. These statements include, without limitation, statements about our anticipated expenditures, including those related to general and administrative expenses; the potential size of the market for our services, future development and/or expansion of our services in our markets, our ability to generate revenues, our ability to obtain regulatory clearance and expectations as to our future financial performance. Our actual results will likely differ, perhaps materially, from those anticipated in these forward-looking statements as a result of various factors, including: our need and ability to raise additional cash. The forward-looking statements included in this report are subject to a number of additional material risks and uncertainties, including but not limited to the risks described in our filings with theSecurities and Exchange Commission . You should review this section with our financial statements and the related notes to those statements included in this filing. In addition to historical financial information, this discussion may contain forward-looking statements reflecting our current plans, estimates, beliefs and expectations that involve risks and uncertainties. As a result of many important factors, our actual results and the timing of events may differ materially from those anticipated in these forward-looking statements. OverviewGlobal Seed Corporation (the "Company") was incorporated in theState of Texas onJuly 13, 2010 . We had been engaged principally in the distribution of a monthly journal prior to our change in control consummated onJune 2, 2018 . OnOctober 1, 2019 , the Company entered into share exchange agreement (the "Share Exchange Agreement") by and amongWell Benefit International Limited ("Well Benefit") and its shareholders (the "Shareholders"), whereby the Company newly issued 252,874,025 shares of its common stock to the Shareholders in exchange for all the outstanding ordinary shares of Well Benefit. OnOctober 30, 2019 , the reverse merger transactions contemplated under the Share Exchange Agreement closed and we acquired all of the issued and outstanding shares of Well Benefit (the "Reverse Merger").Dongguan Zhenghao Industrial Investment Company Limited ("Zhenghao"), a company formed under the laws ofthe People's Republic of China ("PRC"), is a wholly-owned subsidiary of Well Benenfit. Zhenghao provides healthy coffee and beverage products to customers inChina . As a result of the Reverse Merger, Zhenghao became our wholly-owned subsidiary, and we transitioned our business focus to providing healthy coffee and beverage products to customers inChina through Zhenghao under its established brand, "Ka Su Le". Our business comprises of three segments: (i) wholesale business, including wholesaling coffee and healthy drinks capsules, coffee brewing machines and health supplements and skin care products; (ii) retail selling coffee products and (iii) retail selling of coffee brewing machines. 14 Wholesale Business Under our wholesale business segment, we sell our capsules through our brand stores (each a "Brand Store ", collectively the "Brand Stores") and cooperation stores (each a "Cooperation Store ", collectively the "Cooperation Stores"). To join us as aBrand Store , we will charge a one-time brand authorization fee. After becoming ourBrand Store , we will grant it the rights to use our brand,Ka Su Le , and provided it with all of the materials (including different kinds of capsules) and equipment that are necessary to make our coffee and other healthy beverages (collectively, the "Initiation Package"). In addition, we provide our Brand Stores with staff training and help them with the designing and decoration of their stores, setting up the equipment and other matters such as developing and shipping products. After paying the brand authorization fee, our Brand Stores will receive certain amount of coffee and healthy drinks capsules, included in their Initiation Package, enabling them to start their business. In addition, to better promote our products and enhance our brand recognition, we are expanding our network by working with and placing our coffee machines free of charge in various stores, including grocery stores, bakeries, super markets, shopping malls and other places with significant customer volume and high demand of coffee. The Cooperation Stores can use our coffee machines free of charge with proper care and a commitment of selling a certain amount of brewed coffee and healthy drinks each month. Similar to our Brand Stores, the Cooperation Stores can purchase our capsules products from our retail stores or online store if they need additional supplies. We also offer our customers two types of coffee brewing machines, one for domestic use and the other is for commercial use. Our wholesale business of health supplements and skin care products are currently at its initial stage and contributed very limited sales revenue to us as of the date of this report.
We have two coffee retail stores inDongguan City andShenzhen City, through which we offer capsule products and brewed coffee and healthy drinks to our customers. We are currently looking to relocate one of our retail stores to an area with a higher demand of brewed coffee and healthy drinks. This segment is currently at its initial stage and contributed very limited sales revenue to us as of the date of this report.
In addition, We also market and sell our brewing machines through our sales persons. Customers can also purchase a brewing machine from our online store. As of the date of this report, we have very limited sales of the coffee brewing machines.
Factors Affecting Financial Performance
We believe that the following factors will affect our financial performance:
Increasing demand for our products - The increasing demand for our "Ka Su Le" products and our coffee and healthy drinks capsules will have a positive impact on our financial position. We plan to expand our distribution network, by placing more coffee machines free of charge in our Cooperation Stores, granting rights to Brand Stores with an aim of increasing awareness of our brand, developing customer loyalty, meeting customer demands in various markets and providing solid foundations for our continuous growth. As of the date of this report however, we do not have any agreements, undertakings or understandings to expand our distribution network and there can be no guarantee that we ever will. Expansion of our sales network - To meet the increasing demand for our products, we need to expand our sales network. In the short-run, we intend to increase our investment in personnel training, expanding our Brand Stores and Cooperation Stores, research and development on information technology applications. Maintaining effective control of our costs and expenses - We will focus on improving our long-term cost control strategies including establishing long-term alliances with certain suppliers. Moreover, we will step up our efforts in improvements over quality management, procurement processes and cost control, and give full play to the trustworthy sales teams to maximize our profit and bring better long-term return for our shareholders.
Economic and Political Risks
Our operations are conducted primarily in the PRC. Accordingly, our business, financial conditions and results may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy. Our operations in the PRC are subject to special considerations and significant risks not typically associated with companies inNorth America andWestern Europe . These include risks with, among others, the political, economic and legal environment and foreign currency exchange. Our company's results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversions, remittances abroad, and rates and methods of taxation, among other things. 15
Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States . Our financial statements reflect the selection and application of accounting policies that require management to make significant estimates and judgments. The discussion of our critical accounting policies contained in Note 2 to our consolidated financial statements, "Summary of Significant Accounting Policies", is incorporated herein by reference. Results of Operations The following table sets forth a breakdown of revenue for the periods indicated, both in absolute amount and as a percentage of total revenues. The information should be read together with our consolidated financial statements and related notes included elsewhere in this report. Comparison of the Three Months EndedSeptember 30, 2019 and the Three Months EndedSeptember 30, 2018 Three Months Ended September 30, Variance 2019 2018 Amount % Revenue$ 27,811 76 27,735 36,493 % Cost of sales 14,044 4,381 9,663 221 % Gross profit 13,767 (4,305 ) 18,072 -420 % Operating expenses
Selling and marketing expenses 13,506 6,486 7,020 108 % General and administrative expenses 339,645 220,116
119,529 54 % Total operating expenses 353,151 226,602 126,549 56 % Operating loss (339,384 ) (230,907 ) -108,477 47 % Other income (expenses) Interest income 11 - 11 N/A Interest Expense - 1,637 -1,637 -100 % Other Income 1,399 (405 ) 1,804 -445 % Other expenses (683 ) (14 ) -669 4,779 %
Total other income and (expenses) 727 1,218 -491 -40 % Loss before taxes from operations (338,657 ) (229,689 )
-108,968 -47 % Provision for income taxes 195 (151 ) 346 -229 % Net loss (338, 852) (229,538 ) -109,314 48 % Non-controlling interest 949 - 949 N/A
Net loss attributable to stockholder (339,801 ) (229,538 ) (110,263 ) 48 % Other comprehensive income: Foreign currency translation income 27,372 1,307
26,065 1,994 %
Comprehensive loss $ (312,429 ) $ (228,231 ) $ (84,198 ) $ 37 %
16
(a) Revenue
Currently our main revenue stream is deriving from wholesale business, retail
outlets coffee capsules and coffee brewing machines. Our business commencedin 2017. For the three months endedSeptember 30, 2019 andSeptember 30, 2018 , our revenue was$27,811 and 76, respectively, which represented an increase of$27,735 . The increase of revenue was mainly due to the increased sales volume of our products. (b) Cost of Sales Three Months Ended September 30, Variance 2019 2018 Amount % Sales of coffee products 14,044 4,381 9,663 221 % Sales of other products - - - N/A Total Amount 14,044 4,381 9,663 221 %
For the three months endedSeptember 30, 2019 andSeptember 30, 2018 , cost of sales from our coffee wholesale business was$14,044 and 4,381, respectively. The increase of cost of sales was mainly due to the increased sales volume
of our coffee capsules.
For the three months ended
(c) Gross Profit
Three Months Ended
September 30, Variance
2019 2018 Amount %
Gross Profit 13,767 (4,305 ) 18,072 -420 %
Sales of other products - - - N/A
Total Amount 13,767 (4,305 ) 18,072 -420 %
Gross profit from our coffee wholesale business increased by $18,072 for the
three month ended September 30, 2019 from gross loss of $4,305 for same period
ended September 30, 2018 . The increase of gross profit is due to the Company's
adoption of a strategy to sell products with stable profit margins.
(d) Selling and Distribution Expenses
For the three months endedSeptember 30, 2019 , our selling and marketing expenses were$13,506 , representing an increase of$7,020 , as compared to$6,486 during the three months endedSeptember 30, 2018 . The increase was primarily due to the increased advertising and marketing expenses during the three months
endedSeptember 30, 2019 . 17
(e) General and Administrative Expenses
For the three months endedSeptember 30, 2019 , our administrative expenses were$339,645 , representing an increase of$119,529 , as compared to$220,116 in the same period endedSeptember 30, 2018 . The increase was primarily due to increased travelling expenses, hospitality expenses, office expenses, rental expenses and salaries for the three months endedSeptember 30, 2019 . (f) Other Income
For the three months endedSeptember 30, 2019 , our other income was$1,399 as compared to$(405) in the same period of 2018. The increase in other interest income was primarily due to increased interest income from bank deposits.
(g) Interest and Other Financial Charges
For the three months endedSeptember 30, 2019 , our interest and other financial charges were nil as compared to$1,637 in the same period of 2018. The decrease in interest and other financial charges was primarily due to the bank fees.
(h) Income Taxes The Company's income taxes increased by$346 for the three months endedSeptember 30, 2019 from$151 income tax refund for the same period of 2018. The increase in the Company's income taxes was primarily due to increased taxable income of the Company for the period indicated. Comparison of the Nine Months endedSeptember 30, 2019 andSeptember 30, 2018 Nine Months Ended September 30 Variance 2019 2018 Amount % $ $ Net revenues 85,799 14,070 71,729 510 % Cost of revenues 52,901 8,073 44,828 555 % Gross profit 32,898 5,997 26,901 449 % Operating expenses: Selling and marketing expenses 29,369 6,486 22,883 353 % General and administrative expenses 686,437 295,200 391,237 133 % Total operating expenses 715,806 301,686 414,120 137 % Operating loss (682,908 ) (295,689 ) -387,219 131 % Other income (expenses): Interest income 29 - 29 N/A Interest expense - - - N/A Other income 341 - 341 N/A Other expenses (683 ) (14 ) -669 4,779 %
Total other income and (expenses) (313 ) (14 )
-299 2,136 %
Loss before taxes from operations (683,221 ) (295,703 ) -387,518 131 %
Provision for income taxes 233 110 123 112 %
Net loss (683,454 ) (295,813 ) -387,641 131 %
Non-controlling interest (339 ) - -339 N/A
Net loss attributable to stockholder (683,115 ) (295,813 ) -387,302 131 %
Other comprehensive income:
Foreign currency translation income 32,986 6,921 26,065 377 %
Comprehensive loss (650,129 ) (288,892 ) -361,237 125 %
18
(a) Revenue
For the nine months ended September 30, 2019 and September 30, 2018 , our revenue
was $85,799 and $14,070 , respectively, which represented an increase of $71,729 .
The increase of revenue was mainly due to the increased sales volume of our
products.
(b) Cost of Revenues
Nine Months Ended
September 30, Variance
2019 2018 Amount %Sales of coffee products 52,901 8,073 44,828 555 % Sales of other products
- - - N/A
Total Amount 52,901 8,073 44,828 555 %
For the nine months ended September 30, 2019 and September 30, 2018 , cost of
sales from our coffee wholesale business was $52,901 and $8,073 , respectively
which represented an increase of $44,828 . The increase of cost of sales was
mainly due to the increased sales volume of our coffee capsules.
(c) Gross Profit
Nine Months Ended Variance
September 30, 2018 Amount %
Gross Profit 32,898 5,997 26,901 449 %
Sales of other products - - - N/A
Total Amount 32,898 5,997 26,901 449 %
Gross profit from our coffee wholesale business increased by $32,898 for the
nine months end September 30, 2019 , as compared to $5,997 for the same period of
2018 which represented an increase of $26,901 . The increase of gross profit is
because the Company adopted strategies to sell products with stable profit
margins.
19
(d) Selling and Distribution Expenses
For the nine months endedSeptember 30, 2019 , our selling and marketing expenses were$29,369 , representing an increase of$22,883 as compared to the nine months endedSeptember 30, 2018 . The increase of selling and distribution expenses was primarily due to the increased advertising and marketing expenses during the nine months endedSeptember 30, 2019 compared to the same period of 2018.
(e) General and Administrative Expense
For the nine months endedSeptember 30, 2019 , our administrative expenses were$686,437 , representing an increase of$391,237 , as compared to the same period in 2018. The increase was primarily due to the increased travelling expenses, personal, hospitality expenses, office expenses, rental expenses and salaries for the nine months endedSeptember 30, 2019 as compared to the same period
in 2018. (f) Other Income
For the nine months endedSeptember 30, 2019 , our other income was$341 as compared to other income of nil for the same period in 2018. The increase in other interest income was primarily due to the increased interest income from bank deposits.
(g) Interest and Other Financial Charges
For the nine months ended
(h) Income Taxes
The income taxes increased by
Liquidity and Capital Resources
We currently finance our business operations primarily through cash flows from operations and from loans. Our current cash primarily consists of cash on hand and cash in bank, which is unrestricted as to withdrawal and use and is deposited with banks inChina . Management believes that our current cash, cash flows from current and future operations, and access to loans may or may not be sufficient to meet our working capital needs for at least the next 12 months. We intend to continue to carefully execute our growth plans and manage market risk. Going Concern We currently had recurring losses since the Company's inception and had negative working capital of$973,817 as ofSeptember 30, 2019 . Accordingly, there is substantial doubt the Company will continue as a going concern. The Company's management intends to raise working capital through the sale of stock via private placements.
Off-balance Sheet Arrangements
The Company has no material transactions, arrangements, obligations or other relationships with entities or other persons that have or are reasonably likely to have a material current or future impact on its financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses, other
than
those disclosed above.
20© Edgar Online, source
