KING RESOURCES, INC. The following discussion and analysis of our Company's financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in the report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors. See "Cautionary Note Concerning Forward-Looking Statements" on page ii. Unless otherwise noted, all currency figures quoted as "U.S. dollars", "dollars" or "$" refer to the legal currency ofthe United States . Throughout this report, assets and liabilities of the Company's subsidiaries are translated intoU.S. dollars using the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates prevailing during the period. The gains and losses resulting from the translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders' equity. Our Mission
Our mission is to create value for our shareholders through innovative solutions and products with Healthcare, Lifestyles, and Mobility elements.
Overview We were incorporated in the state ofDelaware onSeptember 8, 1995 , under the nameARXA International Energy, Inc. OnJune 4, 2001 , we changed our name toKing Resources, Inc. , our current name. OnApril 2, 2018 , a change of control occurred with respect to the Company. OnOctober 18, 2018 ,Brian Kistler , the then sole director and executive resigned from his position as the Chairman of the Board, andJunrong Yin was appointed to fill the vacancy caused by his resignation. OnMay 3, 2021 ,Mr. Kistler resigned from his positions as CEO with the Company and appointedCaren Currier to fill the vacancies caused by his resignation. OnOctober 25, 2021 ,Caren Currier entered into a Stock Purchase Agreement with Dr.Lee Ying Chiu Herbert ("Dr. Lee") pursuant to whichMs. Currier agreed to sell toDr. Lee all 30 million shares of Series C Preferred Stock of the Company held by her for aggregate consideration of Four HundredTen Thousand Dollars ($410,000 ). This transaction was consummated onNovember 10, 2021 . In connection with the acquisition,Ms. Currier resigned from all her positions with the Company and the following persons were appointed to serve in the positions
set forth next to their names:Name Position
FU Wah Chief Executive Officer, Secretary, Director LAU Ping Kee Chief Financial Officer, Director
Acquisition of Powertech OnDecember 15, 2021 , we acquired 50,000 shares ofPowertech Management Limited , a limited liability company organized under the laws of theBritish Virgin Islands ("Powertech"), representing all of its issued and outstanding securities, from its shareholdersSilver Bloom Properties Limited and FU Wah in exchange for 2,835,820,896 shares of our Common Stock ("Share Exchange"). In connection with the acquisition, each ofSilver Bloom Properties Limited and FU Wah received 2,126,865,672 and 708,955,224 shares of our Common Stock, respectively. Powertech operates its smart power supply business through its wholly owned subsidiaryPowertech Corporation Limited , a limited liability company organized under the laws ofHong Kong . The Company relied on the exemption from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under the Act in selling the Company's securities to the shareholders of Powertech. Prior to the Share Exchange, the Company was considered as a shell company due to its nominal assets and limited operation. The transaction was treated as a recapitalization of the Company. 19 The Share Exchange between the Company and Powertech onDecember 15, 2021 is deemed a merger of entities under common control for which FU Wah is the common director and shareholder of both the Company and Powertech. Under the guidance in ASC 805 for transactions between entities under common control, the assets, liabilities and results of operations, are recognized at their carrying amounts on the date of the Share Exchange, which required the retrospective combination of the Company and Powertech for all periods presented.
Recent developments of the Company
OnJune 27, 2022 , the board of directors ofKing Resources, Inc. , aDelaware corporation, and certain stockholders holding a majority of the voting rights of our common stock approved by written consent in lieu of a special meeting the taking of all steps necessary to effect the following corporate actions:
1. Amend the Company's Certificate of Incorporation filed with the
Secretary of State (the "Certificate of Incorporation") to change the
Company's name to
2 Amend the Company's Certificate of Incorporation to increase the authorized
capital stock from 6,085,000,000, consisting of 6,000,000,000 shares of
common stock, par value
to 36,100,000,000 consisting of 36,000,000,000 shares of common stock, par
value
3. Elect not to be governed by Section 203 of the
Law; and
4. Adopt the Amended and Restated Certificate of Incorporation for the purpose
of consolidating the amendments to the Company's Certificate of
Incorporation and to conform the par values of the preferred stock.
We expect that such corporate actions to become effective on occurrence of the the later of: (i) the date on which the Corporate Actions are approved by theFinancial Industry Regulatory Authority ; or (ii) no earlier thanAugust 22, 2022 . As of the date of this report, the Corporate Actions have not been approved by theFinancial Industry Regulatory Authority . OnAugust 8, 2022 , the Company filed a registration statement on Form S-8, which authorized the issuance of the Company's common stock as the compensation for the consultants who have provided services for the Company. OnAugust 12, 2022 , 151,515,152 shares of the Company's common stock have been issued to the consultants.
On
Name Age Office(s) Wong Kan Tat Frederick 58 Independent Director Lo Mei Fan Pauline 51 Independent Director
None of the foregoing persons has a direct family relationship with any of the Corporation's directors or executive officers, or any person nominated or chosen by the Corporation to become a director or executive officer.
None of the foregoing officers and directors will receive compensation in connection with their service on our Board of Directors or as an executive officer.
The Company adopted an Insider Trading Compliance Program, established an audit committee, a compensation committee and a nomination and governance committee, and adopted charters to govern the governance of such audit, compensation, nomination and governance committees. The audit and compensation committees consist of Mr.Wong Kan Tat Frederick and Ms.Lo Mei Fan Pauline , our independent directors, and Mr.Lau Ping Kee , our Chief Financial Officer and Director.Mr. Lau is the chair of our audit committee and compensation committee. Our nomination and governance committee consists of Mr.Wong Kan Tat Frederick , Ms.Lo Mei Fan Pauline , and Mr.Fu Wah , our Chief Executive Officer, Secretary and Director.Mr. Fu is the chair of our nomination and governance committee. 20 The Company believes that the above actions are the first step for the Company to establish good corporate governance which could lead to corporate success and growth in the future. During the three months endedSeptember 30, 2022 , the Company recorded a revenue of$2,872 and a net loss of$592,078 . The significant drop in revenue was mainly attributable to the global economic downturn. During this period, the Company started the distribution business, however, the material supply and logistic of final products are still impacted by the effect of COVID-19. The pace of implementation of distribution business was hindered and only a few sales were made as a result. The Company has tried its best to overcome the challenges in this tough situation and successfully secured the supply chain subsequent to the quarter endedSeptember 30, 2022 . The management expects a sales rebound will occur in the next quarter, together with the seasonal effect brought by Christmas and New Year Holiday, and expand to the oversea market when opportunity permits. Our Organization Structure The following corporate organization chart illustrates the current corporate structure ofKing Resources, Inc. , including the jurisdiction of incorporation and ownership interest of each of its subsidiaries: [[Image Removed]]King Resources, Inc. is a holding company with no operations. It operates solely through its subsidiaries by providing innovative solutions and products with Healthcare, Lifestyles, and Mobility elements. 21 We have five wholly-owned subsidiaries: (i)OneSolution Holdings Limited ("OSH"), a BVI limited liability company formed inAugust 2022 ; (ii)Powertech Management Limited ("Powertech"), a BVI limited liability company formed inDecember 2021 ; (iii)Powertech Corporation Limited ("Powertech Corp "), aHong Kong limited liability company formed inJanuary 2015 ; (iv)OneSolution Management Limited ("OSM"), a BVI limited liability company formed inAugust 2022 ; and (v)OneSolution Innotech Limited ("OSIL"), aHong Kong limited liability company formed inSeptember 2022 , and we have two business focuses:
·
of own brand smart power supply products, and (iii) development of IoT
products across our smart home, smart office and smart fitness ecosystem;
· OSIL has entered into several partnership agreements with brands selling
innovative and lifestyle products. Currently, OSIL acts as the distributor of
five brands, namely Aqigo, Brusheva, Qivation, Paudin and Team Cuisine.
We are currently preparing to launch the Powertech Corp's own brand smart power
supply products on online store, and launching the sales of OSIL's product with
channel partners by the end of 2022. For the six months ended September 30, 2022
and 2021, we reported a net loss of $774,037 and $57,589 , respectively. As of
September 30, 2022 , we had current assets of $740,515 and current liabilities of
$2,567,729 . As of March 31, 2022 , we had current assets of $91,269 and current
liabilities of $1,887,152 .
Our Business
We currently operate in Hong Kong , and we seek to expand distribution of our
products to Asia Pacific ("APAC"), Europe , Middle East and Africa ("EMEA") and
USA markets as opportunities permit. Our products are currently manufactured in
China on a purchase order basis. As our distribution increases, we expect to
sub-contract our products elsewhere in Asia as pricing and coordination dictate.
We have no intention of expanding operations or our physical presence intoChina currently. Products and Services Currently, we are currently preparing to launch thePowertech Corp's own brand of smart power supply products on an online store. Meanwhile, the newly established subsidiary, OSIL, acts as distributor inHong Kong and has concluded several partnerships with five brands. We are building up our sales channels for the following brands in retails and online store inHong Kong and categorized the products into "Healthcare", "Lifestyle" and "Mobility": Healthcare Aqigo
Aqigo is aHong Kong brand that offers both home-use and commercial-use air purifiers to consumers. By leveraging the Paco Nanotech, a patented technology co-developed byASA Innovation & Technology Limited andCity University of Hong Kong , which can kill or decompose 99.9% of bacteria & virus, including the COVID-19 virus. Paco Nanotech has obtained the ISO 18184 standard. Aqigo products purify up to 3 times faster than traditional purifiers, which could bring cleaner and fresher air for consumers.
Brusheva
Brusheva offers sonic rechargeable electric toothbrush for users to maintain their teeth's health. The sonic rechargeable electric toothbrush is available to vibrate at more than 25,000 strokes per minute, with the application of smaller brush head and softer bristles, it allows the users to reach all parts of their mouth easily, including all nooks and crannies, without damaging the gum when they are brushing their teeth. We hope the Brusheva's toothbrush could improve the oral health for users and bring the users a healthier smile. 22 Qivation Qivation offers innovative, safe and convenient to use products which integrate as part of our home living. Qivation applies the Nano Photocatalyst technology approved byPhotocatalysis Industry Association of Japan ("PIAJ") on its products which combined self-antibacterial and purification function together with lighting. The use of TiO2 technology allows Qivation products to initiate an antimicrobial effect for sanitization and air purification. It does not require any solvent, binders or alcohol, and can initiate the purifying process with visible light. This technological breakthrough creates a giant leap in making use of TiO2 sanitization technology. Other than self-antibacterial and purification function, Qivation adopted the lighting software solutions by WiZ Connected under Signify (formerly known asPhilips Lighting ) combined with the Nano Photocatalyst technology. The lighting products are adjustable shades of lightness up to 64,000 and up to 16 million colors with preset well-being modes. We hope the Qivation products could reduce domestic health risks and creates a comforting lifestyle setting at home or
at office. Lifestyle Paudin Paudin is a kitchen knives brand that offers a wide selection of high-quality cutlery lines to suit all purposes and budgets for users, including chef's knives, bread knives, steak knives and Japanese knives etc. The sharp, comfortable and durable kitchen knives with a wide collection of designs allow users to enjoy preparing and having their meals.
Team Cuisine
Team Cuisine offers smart kitchen appliances that connect to their application, which allows users to perform precise cooking remotely. Team Cuisine products can help users to cook with convenience and healthy fashion. It has an in-app recipe library as cooking guidance for each of the users. We are authorized to distribute Team Cuisine's smart kitchen appliances, including smart cooking machine, smart pressure cooker, smart convention oven, smart air fryer etc. inHong Kong . We hope Team Cuisine's products could bring users a lifestyle and enjoyable cooking experience with the multi-function appliances. Mobility Powertech The Company's own brand "Powertech" is self-developing and distributing smart power supply products, including smart power chargers, wireless charging power banks, charging cables and Type C multi hub. These products will be launched both in our online store and local retail stores by the end of 2022. We hope the Powertech's portable products could bring the users convenient in supporting the use of their mobile devices.
Future IoT Technology and Lifestyle Products - The Smart Home Ecosystem
We believe that the smart home ecosystem has become both in concept and reality a part of the common culture around the world. When homeowners or buyers consider renovation or new construction, many of them are considering the possibility of implementing smart home ecosystem devices to their homes due to increasing awareness of the importance of energy efficiency and lifestyle improvement of smart home products. According toInternational Data Corporation ("IDC") Worldwide Quarterly Smart Home Device Tracker, in 2021, the global market for smart home device increased by 11.7% from 2020, with more than 895 million devices shipped. TheAsia and the Pacific region is the second largest smart home device region in terms of shipment volume. It accounts for 31% of shipment and has a year-on-year growth rate of 10.8%. Our research indicates that more users are looking to purchase higher price smart devices such as smart TV and lighting fixtures in order to save energy and increase controllability and convenience. We believe that as 5G technology becomes more stable and popular throughout the world, more and more smart home appliances will become available in the market. We believe that smart home appliances with IoT and AI technology can improve our users' living standards and lifestyles dramatically. 23 Smart home appliances are generally easily adopted and accessed through mobile phones or tablets via Apps. Users can easily manage multiple smart home appliances in just one device by their fingertip in the App: the status of all the appliances connected such as power levels, power consumed, air pollution, and room humidity will be displayed on their screen. Moreover, users will be able to control and manage every single appliance in large size homes with multiple floors by using the smart home ecosystem without the need access each individual appliance. We established an IoT Technology and Lifestyle product team during the quarter endedSeptember 30, 2022 , and are in the process of developing a series of IoT home automation products. We expect to initially distribute the IoT products inHong Kong andSoutheast Asia and hope to expand to other countries as opportunities permit. Use of Capital Funds
OnJune 21, 2022 , the Company has entered into an Equity Purchase Agreement withWilliamsburg Venture Holdings, LLC ("Investor"), aNevada venture capital company, pursuant to which the Investor has committed to invest up toTwenty Million Dollars ($20,000,000 ) in the Company's common stock over a 36-month period. In light of the Company's latest strategic plan to tackle the Smart Home segment with products enhanced with Healthcare, Lifestyles, and Mobility elements, the Company will use the proceeds to establish a sustainable smart home ecosystem through in-house development of smart home appliances, target acquisition of smart home sector companies, and establish strategic partnerships with ESG promote companies. Research and Development During the quarter endedSeptember 30, 2022 , our research and development expenses are mainly incurred for the maintenance cost of our product development team. We expect to allocate our research and development funding towards product innovation of smart home appliances, and the recruitment of product development talents. Sales and Marketing
We believe the demand for smart home appliances will continue to increase especially as the technological improvements such as AI are integrated into products to enhance user experience. We expect to distribute our current and future power supply and IoT products as follows:
· Hong Kong - through our e-commerce channels, and leverage on our
networks to distribute to prominent retailers, collaborate
distribution channels with sales solution and promotion campaign.
· APAC - through third party authorized dealers and channel partners.
· USA /EMEA - through third party authorized distributors (which we
expect to be wholesalers that sell to end retailers).
Recently, we signed an arrangement with local retail chain store to sell our
brands. We believe this arrangement will enhance market recognition of our
brand. In the near future, we intend to enhance our sales channels in HongKong and other regions. 24 Results of Operations
Comparison of the three months ended
The following table sets forth certain operational data for the periods
indicated:
Three months ended September 30,
2022 2021
Revenue, net $ 2,872 $ 64,332
Cost of revenue (2,634 ) (34,864 )
Gross profit 238 29,468
Operating expenses:
Research and development expenses (171,545 ) (10,090 )
Sales and marketing expenses (198,908 ) -
General and administrative expenses (193,743 ) (24,983 )
Loss from operation (563,958 ) (5,605 )
Other expense, net (28,120 ) -
Loss before income taxes (592,078 ) (5,605 )
Income tax expense - -
Net loss $ (592,078 ) $ (5,605 )
Revenue
During the three months ended
Three months ended September 30, 2022 September 30, 2022
Percentage Accounts
Customer Revenues of revenues receivableEvangelical Lutheran Church Hong Kong $ 2,872
100% $ 2,889
During the three months
September 30,
Three months ended September 30, 2021 2021
Percentage Accounts
Customer Revenues of revenues receivable
TLD Optoelectronic Technology Company
Limited $ 64,332 100% $ 64,210
Cost of Revenue
Cost of revenue for the three months ended
25 Gross Profit
We achieved a gross profit of
Research and Development Expenses ("R&D")
Research and development expenses was$171,545 and$10,090 for the three months endedSeptember 30, 2022 and 2021, respectively. The increase in expenses was primarily attributable to the increase in R&D expenses associated with our smart chargers, power banks and other products development. Sales and Marketing Expenses
Sales and marketing expenses was
General and Administrative Expenses ("G&A")
General and administrative expenses was$193,743 and$24,983 for the three months endedSeptember 30, 2022 and 2021, respectively. These expenses primarily include consulting fees, personnel related expenses, as well as costs incurred on other professional fees incurred in connection with general operations of the Company. The G&A expenses increased by approximately$168,760 in the three months endedSeptember 30, 2022 from$24,983 in the three months endedSeptember 30, 2021 . The increase was primarily attributable to the increase in professional fees and salaries. Other expense, net
Other expense, net was$28,120 and$0 for the three months endedSeptember 30, 2022 and 2021, respectively. The increase was attributable to interest expense on capital funding and loss on impairment of inventories offset by government subsidy. Income Tax Expense
No income tax expense incurred during the three months ended
Net loss As a result of the above, we reported net loss of$592,078 for the three months endedSeptember 30, 2022 , as compared to$5,605 for the three months endedSeptember 30 ,2021. The increase in net loss was mainly attributable to decrease in research revenue, increase in sales and marketing cost associated with sales channel development, research and development expenses associated with new products development and general and administrative expense. 26
Comparison of the six months ended
The following table sets forth certain operational data for the periods
indicated:
Six months ended September 30,
2022 2021
Revenue, net $ 162,189 $ 64,332
Cost of revenue (19,120 ) (34,864 )
Gross profit 143,069 29,468
Operating expenses:
Research and development expenses (234,156 ) (38,509 )
Sales and marketing expenses (347,908 ) -
General and administrative expenses (295,397 ) (48,548 )
Loss from operation (734,392 ) (57,589 )
Other expense, net (39,645 ) -
Loss before income taxes (774,037 ) (57,589 )
Income tax expense - -
Net loss $ (774,037 ) $ (57,589 )
Revenue
During the six months ended
Six months ended September 30, 2022 September 30, 2022
Percentage Accounts
Customer Revenues of revenues receivable
Mirum Digital Media Ltd. $ 159,317 98.2% $ -
During the six months ended
September 30,
Six months ended September 30, 2021 2021
Percentage Accounts
Customer Revenues of revenues receivable
TLD Optoelectronic Technology Company
Limited $ 64,332 100% $ 64,210
Cost of Revenue
Cost of revenue for the six months ended
Gross Profit
We achieved a gross profit of
27
Research and Development Expenses ("R&D")
Research and development expenses was$234,156 and$38,509 for the six months endedSeptember 30, 2022 and 2021, respectively. The increase in expenses was primarily attributable to the increase in R&D expenses associated with our smart chargers, power banks and IoT products development.
Sales and Marketing Expenses
Sales and marketing expenses was
General and Administrative Expenses ("G&A")
General and administrative expenses was$295,397 and$48,548 for the six months endedSeptember 30, 2022 and 2021, respectively. These expenses primarily include consulting fees, personnel related expenses, as well as costs incurred on other professional fees incurred in connection with general operations of the Company. The G&A expenses increased by approximately$246,849 in the six months endedSeptember 30, 2022 from$48,548 in the six months endedSeptember 30, 2021 . The increase was primarily attributable to the increase in professional fees and salaries. Other expense, net Other expense, net was$39,645 and$0 for the six months endedSeptember 30, 2022 and 2021, respectively. The increase was attributable to interest expense on capital funding and loss on impairment of inventories offset by government subsidy. Income Tax Expense
No income tax expense incurred during the six months ended
Net loss As a result of the above, we reported net loss of$774,037 for the six months endedSeptember 30, 2022 , as compared to$57,589 for the six months endedSeptember 30 ,2021. The increase in net loss was mainly attributable to sales and marketing cost associated with sales channel development, research and development expenses associated with new products development and general and administrative expense
Liquidity and Capital Resources
The following table summarizes the key components of our cash flows for the six
months ended
Six months ended September 30,
2022 2021
Net cash used in operating activities
-
Net cash provided by financing activities
28
For the six months endedSeptember 30, 2022 , net cash used in operating activities was$74,155 , which consisted primarily of a net loss of$774,037 , an increase in inventories of$800 , an increase in accounts receivables of$2,889 , an increase in deposits, prepayments and other receivables of$93,674 , and a decrease of lease liabilities of$19,065 , offset by an increase in accounts payables of$3,715 , an increase in accrued liabilities and other payables of$240,969 , an increase in accrued consulting and service fee of$300,000 , plus non-cash items such as, depreciation of$20,657 , amortization of$2,243 , non-cash lease expenses of$1,573 , amortization of deferred financing cost of$47,153 and share issued for services rendered of$200,000 . For the six months endedSeptember 30, 2021 , net cash used in operating activities was$118,391 , which consisted primarily of a net loss of$57,589 , an increase in accounts receivables of$64,149 , a decrease in accrued liabilities and other payables of$1,889 , a decrease of lease liabilities of$20,072 , offset by a decrease in deposit, prepayment and other receivables of$3,486 , plus non-cash items such as, depreciation of$19,084 , amortization of$2,136 and non-cash lease expenses of$602 .
We expect to continue to rely on cash generated through financing from our existing shareholders and private placements of our securities to finance our operations and future acquisitions.
For the six months ended
For the six months ended
Net Cash Provided by Financing Activities
For the six months ended
For the six months ended
Going Concern Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital may include the sale of equity securities, which include common stock sold in private transactions, capital leases and short-term and long-term debts. While we believe that we will obtain external financing and the existing shareholders will continue to provide the additional cash to meet our obligations as they become due, there can be no assurance that we will be able to raise such additional capital resources on satisfactory terms. We believe that our current cash and other sources of liquidity discussed below are adequate to support operations for at least the next 12 months. Material Cash Requirements We have not achieved profitability since our inception, and we expect to continue to incur net losses for the foreseeable future. We expect net cash expended in 2023 to be significantly higher than 2022. As ofSeptember 30, 2022 , we had an accumulated deficit of$7,342,530 . Our material cash requirements are highly dependent upon the additional financial support from our major shareholders in the next 12 - 18 months. 29 We had the following contractual obligations and commercial commitments as ofSeptember 30, 2022 : Less than More than 5 Contractual Obligations Total 1 Year 1-3 Years 3-5 Years Years $ $ $ $ $ Amounts due to related parties 1,828,102 1,828,102 - - - Accounts payables 3,715 3,715 - - - Operating lease liability 53,174 29,606 23,568 - - Other contractual liabilities (1) 706,306 706,306 - - - Total obligations 2,591,297 2,567,729 23,568 - - (1) Includes all obligations included in "Accrued liabilities and other payables" and "Accrued consulting and service fee" in current liabilities in the "Unaudited Condensed Consolidated Balance Sheet" that are contractually fixed as to timing and amount.
Off-Balance Sheet Arrangements
We are not party to any off-balance sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.
Critical Accounting Policies and Estimates
For a detailed description of the Critical Accounting Policies and Estimates of the Company, please refer to Part II, ITEM 7 "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" in our Annual Report Form 10-K for the year endedMarch 31, 2022 filed with theSEC onJune 24, 2022 .
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