Results of Operations
The following summary of our results of operations should be read in conjunction
with our financial statements for the three months ended September 30, 2021 and
2020, which are included herein.
Our operating results for three months ended September 30, 2021 and 2020, and
the changes between those periods for the respective items are summarized as
follows:
Three months ended
September 30,
2021 2020 Change %
Sales $ - $ - $ - -
Cost of Goods Sold 24 - 24 -
Gross Loss (24 ) - (24 ) -
Operating expenses 101,075 23,959 77,116 322 %
Other Expense 664,744 50,929 613,815 1205 %
Net loss $ (765,843 ) $ (74,888 ) $ (690,955 ) 923 %
-
Other Comprehensive Income (Loss): $ 20,020 $ (67,144 ) $ 87,164 (130 )%
-
Comprehensive loss $ (745,823 ) $ (142,032 ) $ (603,791 ) 425 %
During the three months ended September 30, 2021 and 2020, the Company did not
recognize any revenues, cost of goods sold of $24 and $nil, respectively and a
gross loss of $24 and $nil, respectively.
Our financial statements reported a net loss of $765,843 for the three months
ended September 30, 2021 compared to a net loss of $74,888 for the three months
ended September 30, 2020. Our losses have increased on a year-over-year basis,
primarily as a result of the near total lockdown of Malaysia as a result of the
COVID 19 pandemic during the prior year and the subsequent partial restriction
lifting that occurred in July 2021 allowing for the resumption of administrative
activities during the current period. Additionally, during the three months
ended September 30, 2021, the results included other expense of $170,271 from
the change in the fair value of a derivative liability associated with a
contingent interest liability arising from project financing arrangements the
Company entered into in May 2021 and August 2021, which also included interest
expense of $248,165 related to the amortization of the debt discount on such
debt. Also contributing to the increase in other expenses during the three
months ended September 30, 2021 compared to the same period in the prior year
was accrued interest of approximately $3,244 related to two short-term loans the
Company entered into during the year.
Other expense increased to $664,744 for the three months ended September 30,
2021, compared to $50,929 for the three months ended September 30, 2020. The
increase in other expense was mainly related to the change in the fair value of
the derivative liability from the amortization of debt discounts on the
Company's project financing debt, in addition to a reduction in other income and
slight increase in interest expense imputed for our non-interest bearing
advances from related parties, and interest associated with two short-term loans
entered into during the three months ended September 30, 2021. We expect
interest expense to increase in future periods until such time as we are able to
generate profitable operations and begin to repay our advances from our
unrelated debtors as well as our directors and entities related to our
directors.
Should we be successful in our efforts to raise additional capital, and to close
one or more of our outstanding offers to purchase mining and explorations rights
and thus begin exploration and mining operations, we expect our expenses to
increase substantially.
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Liquidity and Financial Condition
Working Capital
September 30, June 30,
2021 2020
Cash $ 4,220 $ 24,003
Total Assets $ 57,241 $ 78,985
Total Liabilities $ 5,486,185 $ 4,815,648
Stockholders' Equity (Deficit) $ (5,428,944 ) $ (4,736,663 )
Our working capital deficit increased as of September 30, 2021, as compared to
June 30, 2021, primarily due to an increase in current liabilities to fund
operating losses, increased debt levels and derivative liabilities related to
our project financing investment offset by funds received from the Company's
project financing debt.
In the coming quarters our largest cash outlays will be in regards to (1)
professional fees for work performed for our reporting as part of Nami Corp.,
(2) for the consultants as part of their work performed to respond to any
additional requests received from governmental authorities as part of the
process of obtaining approval for the permits and licenses. (3) repayments of
the project financing debt.
Management believes that the level of our pre-operating losses are normal for
companies in the mining business, and that we will be able to off-set such
losses against future revenues once the Company commences its operations and
exports. However, our financial statements include a statement that there is a
going concern in regards to the Company. Without significant additional
investment in the form of debt or equity we may have difficulty meeting our
obligations as they come due prior to our obtaining all the necessary permits to
begin contracting for sea sand mining operations.
Cash Flows
Three months ended
September 30, Change
2021 2020 Amount %
Cash Flows used in operating
activities $ (308,399 ) $ (6,408 ) $ (301,991 ) 4,713 %
Cash Flows provided by (used in)
investing activities $ - $ - $ - -
Cash Flows provided by financing
activities $ 288,520 $ 6,425 $ 282,095 4,391 %
Effects on changes in foreign
exchange rate $ 96 $ 29 $ 67 231 %
Net decrease in cash during period $ (19,783 ) $ 46 $ (19,829 ) (43,107) %
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Operating Activities
Net cash used in operating activities was $308,399 for the three months ended
September 30, 2021 compared to $6,408 in the same period in 2020.
During the three months ended September 30, 2021, cash used in operating
activities consisted of a net loss of $765,843, depreciation of property and
equipment of $1,527, imputed interest on non-interest bearing related party
advances contributed as paid in capital of $53,544, amortization of debt
discount of $248,165, change in fair value of derivative liability of $170,271,
expenses paid directly through unrelated party advances of $716, accounts
payable and accrued liabilities of $(18,030), other payables and accruals of
$393 and interest paid of $(859).
During the three months ended September 30, 2020, cash used in operating
activities consisted of a net loss of $(74,888), depreciation, depletion,
amortization and impairment of $1,524, imputed interest on non-interest bearing
related party advances contributed as paid in capital of $52,644, expenses paid
by an unrelated party of 9,725, changes in other receivable and deposits of
$(594) and other payables and accruals of $5,181.
Investing Activities
There were no investing cash flows for the three months ended September 30, 2021
and 2020.
Financing Activities
Net cash provided by financing activities was $288,520 for the three months
ended September 30, 2021, compared to net cash provided by financing of $6,425
in the same period in 2020. Net cash used in financing during the three months
ended September 30, 2021 was the result of proceeds of short-term loans of
$90,628, principal repayments of short-term loans of $47,699, advances from
related parties of $27,355, advances from an unrelated party of $230,273, and
repayments of advances to an unrelated party of $12,037. Net cash provided by
financing activities for the three months ended September 30, 2020 included
advances received from a related party of $8,612 and repayments of advances to a
related party of $2,187.
Going Concern
Our financial statements are prepared using accounting principles generally
accepted in the United States of America applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, our company has negative working capital,
recurring losses, and does not have an established source of revenues sufficient
to cover its operating costs. These factors raise substantial doubt about our
company's ability to continue as a going concern.
The ability of our company to continue as a going concern is dependent upon its
ability to successfully commence its sea sand mining operations and eventually
attain profits. The accompanying financial statements do not include any
adjustments that may be necessary if our Company is unable to continue as a
going concern.
In the coming year, our Company's foreseeable cash requirements will relate to
continual development of the operations of our business, maintaining our good
standing and making the requisite filings with the Securities and Exchange
Commission, and the payment of expenses associated with operations and business
development. Our Company may experience a cash shortfall and be required to
raise additional capital.
Historically, we have mostly relied upon internally generated funds such as
shareholder loans and advances to finance our operations and growth. Management
may raise additional capital by retaining net earnings or through future public
or private offerings of our Company's stock or through loans from private
investors, although there can be no assurance that we will be able to obtain
such financing. Our Company's failure to do so could have a material and adverse
effect upon us and our shareholders.
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This section discusses our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an ongoing basis,
management evaluates its estimates and judgments, including those related to
revenue recognition, accrued expenses, financing operations, and contingencies
and litigation. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions. The most significant accounting estimates
inherent in the preparation of our financial statements include estimates as to
the appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources.
Plan of Operations
This report contains forward looking statements relating to our Company's future
economic performance, plans and objectives of management for future operations,
projections of revenue mix and other financial items that are based on the
beliefs of, as well as assumptions made by and information currently known to,
our management. The words "expects", "intends", "believes", "anticipates",
"may", "could", "should" and similar expressions and variations thereof are
intended to identify forward-looking statements. The cautionary statements set
forth in this section are intended to emphasize that actual results may differ
materially from those contained in any forward looking statement.
If the Company is unsuccessful in raising funds through shareholder loans or
advances, it will have to seek additional funds from third party debt financing,
which would be highly difficult for a development stage company, such as the
Company, to secure; or through the private placement of its common stock.
Therefore, until the lockdown in Malaysia is lifted and the Company is able to
commence its mining operations, the Company will be highly dependent on
shareholder loans and advances. If the Company where able to secure third party
debt financing, being a development stage company with no operations to date, it
would likely have to pay additional costs associated with high-risk loans and be
subject to an above market interest rate. If these funds are required and not
available through shareholder loans or advances, or through the private
placement of the Company's securities, management will evaluate the terms of
such debt financing and determine whether the business could sustain operations
and growth and manage debt repayment terms. If these additional funds are not
obtained through either of the alternatives discussed herein, the Company maybe
required to cease its business operations. As a result, investors in the
Company's common stock would lose all of their investment.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with the accounting principles generally accepted in the United States of
America. Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenue, and expenses. These estimates and assumptions are affected by
management's application of accounting policies. We believe that understanding
the basis and nature of the estimates and assumptions involved with the
following aspects of our financial statements is critical to an understanding of
our financial statements.
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Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Recent Accounting Pronouncements
Our company has implemented all new accounting pronouncements that are in effect
and that may impact its financial statements and does not believe that there are
any other new accounting pronouncements that have been issued that might have a
material impact on its financial position or results of operations.
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