The accompanying notes are an integral part of these unaudited consolidated financial statements.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
Note 1: Organization and Summary of Significant Accounting Policies
Organization
New Asia Holdings, Inc. (previously known as DM Products, Inc., Midwest E.S.W.T. Corp, and Effective Sport Nutrition Corporation) (the “Company,” “we” or “our”) was incorporated in the State of Nevada on March 1, 2001. In December 2014, the Company underwent a change in control as a result of approximately 90% of the issued and outstanding shares of common stock of the Company being acquired by New Asia Holdings, Ltd. (wholly owned by Lin Kok Peng, Ph.D., the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board) (“NAHL”). At September 30, 2020, NAHL was the Company’s principal stockholder.
We offer trading software solutions to clients on the basis of a “Software as a Service (SaaS)” licensing and delivery model with licensed users availing themselves of service-based contractual arrangements. In addition, and consistent with the requirements of the United States federal securities laws, we may utilize our in-house proprietary neural trading models to trade our own funds, thus providing added value to our shareholders.
Algorithms were placed into commercial operation in November 2015 upon the execution of a Software Licensing Agreement (the “MQL License Agreement”) for the deployment of the proprietary trainable, trading algorithms of Magdallen Quant Pte. Ltd. (“MQL”), a subsidiary wholly owned by the Company, with New Asia Momentum Limited (“NAML”), a company owned and controlled by Dr. Lin Kok Peng, the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board. Under the terms of the MQL License Agreement, NAML agreed to pay MQL a license fee and certain other fixed and time and materials fees. In 2019, MQL’s assets under management (“AUM”) were returned to its investors by NAML. The MQL License Agreement between MQL and NAML still remains in place.
As a result of poor performance by the Company’s algorithms, over the last several quarters, the Company has been focusing on developing new business opportunities, including exploring a potential new acquisition or acquisitions.
Basis of Presentation
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Report on Form 10-K as filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K for the most recent fiscal year, as filed with the Securities and Exchange Commission on April 17, 2020, have been omitted.
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 amounts reported in the financial statements and accompanying notes. The extent to which the COVID-19 pandemic may directly or indirectly impact our business, financial condition, and results of operations is highly uncertain and subject to change. We considered the potential impact of the COVID-19 pandemic on our estimates and assumptions and there was not a material impact to our consolidated financial statements as of and for the three and nine months ended September 30, 2020; however, actual results could differ from those estimates and there may be changes to our estimates in future periods.
Note 2: Going Concern
The accompanying unaudited interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has sustained substantial losses, has a working capital deficit and is in need of additional capital to grow its operations so that it can become profitable. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
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NEW ASIA HOLDINGS, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
In view of these matters, the ability of the Company to continue as a going concern is dependent upon growth of revenues and the ability of the Company to raise additional capital. The unaudited interim consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 3: Common Stock
On July 8, 2020, the Company filed a Certificate of Amendment (the “Amendment”) to the Company’s articles of incorporation, as amended, with the Secretary of State of the State of Nevada. The Amendment had the effect of increasing the number of authorized shares of the Company’s common stock from 400,000,000 to 4,000,000,000 and the number of authorized shares of the Company’s preferred stock from 30,000,000 to 400,000,000. As of September 30, 2020, the Company has authorized 4,400,000,000 shares of capital stock, consisting of 4,000,000,000 shares, par value $0.001 per share, of common stock, and 400,000,000 shares, par value $0.001 per share, of “blank check” preferred stock. The Company had 74,288,667 shares of common stock and no shares of preferred stock issued and outstanding as of September 30, 2020 and 72,288,667 shares of common stock and no shares of preferred stock issued and outstanding as December 31, 2019.
On September 16, 2020, the Company entered into an Equity Purchase Agreement (the “Global Crypto Equity Purchase Agreement”) with Global Crypto Offering Exchange Ltd. (“Global Crypto”). Pursuant to the terms of the Global Crypto Equity Purchase Agreement, the Company agreed to sell to Global Crypto, and Global Crypto agreed to purchase, an aggregate of 50,000,000 restricted shares of the Company’s common stock at purchase price of $0.01 per share, for an aggregate purchase price of $500,000 (the “Share Purchase”). The Global Crypto Equity Purchase Agreement provides that the Share Purchase will be effected in 10 separate blocks (each, a “Block” and collectively, “Blocks”), with the first Block closing on September 18, 2020. In the first Block, Global Crypto purchased 2,000,000 shares for an aggregate purchase price of $20,000. The parties to the Global Crypto Equity Purchase Agreement agreed that each of the remaining nine Blocks will close within 12 months of September 16, 2020.
The Global Crypto Equity Purchase Agreement will terminate (i) upon the completion of the full Share Purchase, or (ii) on September 16, 2021. If the Global Crypto Equity Purchase Agreement terminates on September 16, 2021 prior to completion of the full Share Purchase, no additional shares may be purchased under the Global Crypto Share Purchase Agreement.
The parties to the Global Crypto Equity Purchase Agreement do not intend to effect a change in control as a result of entering into the Global Crypto Equity Purchase Agreement.
On September 21, 2020, the Company entered into an Equity Purchase Agreement (the “ENJU Equity Purchase Agreement”) with ENJU Planning Pte Ltd. (“ENJU”). Pursuant to the terms of the ENJU Equity Purchase Agreement, the Company agreed to sell to ENJU, and ENJU agreed to purchase, 1,000,000 restricted shares of the Company’s common stock at purchase price of $0.20 per share, for an aggregate purchase price of $200,000. The total proceeds were received by the Company during the subsequent period.
As of September 30, 2020, NAHL, the Company’s principal shareholder, had not yet exercised its option to convert advances made by NAHL to the Company into shares of common stock. Accordingly, as of September 30, 2020, the advances remain as an interest-free loan to the Company. See Note 4.
Note 4: Convertible Advances from Shareholder and Other Related Party Transactions
During the nine-month period ended September 30, 2020 and September 30, 2019, NAHL, the Company’s principal shareholder, advanced an aggregate of $80,000 and $104,913 to the Company, respectively. Dr. Lin Kok Peng, the Company’s Chief Executive Officer, Chief Financial Officer and Chairman has voting and dispositive control over the shares of the Company’s common stock held by NAHL. The total advances due to NAHL are $916,452 and $836,452 as of September 30, 2020 and December 31, 2019, respectively. The advances were supposed to have been repaid by October 31, 2016. However, on August 19, 2015, the Company’s Board of Directors approved, if the Company was unable to repay these advances by such date, NAHL, at its sole discretion, would have the option to extend the repayment deadline or convert all or a portion of the advances into common stock of the Company at a conversion price of $0.02 per share (“Agreement on Advances”).
On August 14, 2020, the Company and NAHL entered into an updated agreement on advances (“Updated Agreement on Advances”). Pursuant to the terms of the Updated Agreement on Advances, all funds advanced to the Company by NAHL up to August 14, 2020 (the “Prior Advances”) will continue to constitute an interest-free loan to the Company, which shall be due and payable by the Company to NAHL on or before 15th September 2020 (the “Prior Advance Repayment Date”, which may be extended as set forth below). If the Company does not repay the Prior Advances by the Prior Advance Repayment Date, NAHL, at
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
its sole discretion, will have the option to extend the Prior Advance Repayment Date or convert all or a portion of the Prior Advances into Common Stock at a conversion price of US $0.003 per share (the “Prior Advance Conversion Price”), subject to adjustment as set forth in the Agreement. NAHL’s election to extend the Prior Advance Repayment Date or to convert the Prior Advances into Common Stock shall be made on the first business day following the Prior Advance Repayment Date. The Parties acknowledge and agree that the Prior Advances shall not be convertible into Common Stock prior to the Prior Advance Repayment Date.
Following August 14, 2020, NAHL will endeavor, on a best efforts’ basis, to continue to advance operating funds to the Company as may be required and requested by the Company for its operations, for a period of at least through December 31, 2020 (such additional advances, as funded, the “Additional Advances” and, together with the Prior Advances, the “Advances”). Any such Additional Advances shall be due and payable by the Company to NAHL on or before January 31, 2021 (the “Additional Advance Repayment Date”, which may be extended as set forth below). In the event that any Additional Advances are made and are not repaid by the Additional Advance Repayment Date, NAHL, at its sole discretion, will have the option to extend the Additional Advance Repayment Date or convert all or a portion of the Additional Advances into Common Stock at a conversion price of $0.003 per share (the “Additional Advance Conversion Price”), subject to adjustment as set forth in the Agreement. NAHL’s election to extend the Additional Advance Repayment Date or to convert the Additional Advances into Common Stock shall be made on the first business day following the Additional Advance Repayment Date. The Parties acknowledge and agree that any Additional Advances shall not be convertible into Common Stock prior to the Additional Advance Repayment Date.
As of September 30, 2020, NAHL had not exercised its option to convert the advances into shares of common stock. Accordingly, the total of $916,452 in advances remained as an unsecured interest-free loan to the Company as of September 30, 2020. The advances of $80,000 borrowed by the Company from NAHL during the nine-month period ended September 30, 2020, is non-interest bearing, unsecured, and due as per the terms set forth in the Updated Agreement on Advances. NAHL is expected to continue to advance such operating funds to the Company in the future.
On September 7, 2015, Mr. Jose A. Capote ("Mr. Capote") was appointed to serve as the Company's Secretary and Vice President. There is no family relationship between Mr. Capote and any of the Company's directors or officers. Mr. Capote is currently a shareholder of the Company through his 50% ownership of Earth Heat Ltd. The Company had incurred fees due to Mr. Capote for consulting service for acting as the Company’s Secretary and Vice President in the amount of $13,500 and $13,500 during the nine months ended September 30, 2020 and September 30, 2019, respectively. The balance due to Mr. Capote as of September 30, 2020 and December 31, 2019 were $31,645 and $18,000, respectively, and were included in accounts payable and accrued liabilities.
The Company pays New Asia Momentum Pte Ltd (“NAMPL”), a Singapore private company owned and controlled by Dr. Lin Kok Peng, the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board, fees for the rental of office space and for administrative services at its Singapore headquarters. The Company has incurred fees of $34,562 and $46,603 due to NAMPL during the nine months ended September 30, 2020 and September 30, 2019, respectively. As of September 30, 2020, and December 31, 2019, the Company had $91,664 and $57,102 due to NAMPL recorded in accounts payable and accrued liabilities, respectively.
Note 5: Commitments and Contingencies
The Company entered into an agreement with Premier Business Centers (“PBC”) on July 31, 2018. Under the terms of the agreement, PBC granted the Company a license to use the facilities and services of PBC at 15615 Alton Parkway Suite 450, Irvine, CA 92618. The basic term of this agreement is month to month commencing August 1, 2018 with monthly fixed fees of $195.
The Company pays NAMPL, a Singapore private company owned and controlled by Dr. Lin Kok Peng, the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board, fees for the rental of office space and for administrative services in its Singapore headquarters. The basic term of the agreement is month to month commencing April 1, 2018 with monthly fixed fees of approximately $3,900.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements. Such forward-looking statements are based on current expectations, estimates, and projections about our industry, management beliefs, and certain assumptions made by our management. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are not guaranteeing of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth in other reports and documents that we file from time to time with the United States Securities and Exchange Commission (the “SEC”), particularly the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K, as the same may be amended from time to time.
The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the unaudited consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q.
Overview
Since December 24, 2014, New Asia Holdings, Inc. (the “Company”) has been developing and deploying its proprietary, neural trading models for the financial community. We offer trading software solutions to clients on the basis of a software-as-a-service (“SaaS”) licensing and delivery models with licensed users availing themselves of service-based contractual arrangements.
The Company's products capitalize the large volume of the 24-hour Forex markets to achieve capital appreciation over a medium- to long-term basis, combined with the usage of a good wealth vehicle designed to control risk, profit from both bull or bear markets, and maximize liquidity and economic resilience.
Our proprietary trading models were developed by a team of professional engineers in communications, electronic circuitry design and financial engineering. This diverse team is the key factor in our successful development of non-traditional and innovative trading models. Our systems were designed to take intelligent positions as the market moves/changes and, upon development, our systems were to bring a rigorously tested track-record.
The Company’s systems were designed to adapt themselves and to take intelligent positions as the market moves/changes. The models were subjected to rigorous testing akin to the volatile trading environment of major financial events/crises that have happened in recent history. These models were also programmed to have the ability to learn and adapt new manners of trading, effectively translating the human behavioral of trading into a predictive science. The Company’s quantitative strategies and proprietary algorithmic trading system were developed to generate risk adjustable returns for its licensees and their clients.
Since 2016, the Company's focus has been to license its algorithm to licensees, regulated funds and banks to capitalize on the large volume of the 24-hour Forex markets to achieve capital appreciation over a medium- to long- term basis, combined with the usage of a good wealth vehicle designed to control risk, profit from both bull or bear markets, and maximize liquidity and economic resilience.
On August 25, 2015, the Company entered into a Sale and Purchase Agreement (the “Purchase Agreement”) with Anthony Ng Zi Qin, pursuant to which the Company acquired Magdallen Quant Pte Ltd (“MQL”). The MQL acquisition was accomplished through a share exchange with Anthony Ng Zi Qin of 7,422,000 restricted shares of common stock of the Company ("Consideration Shares"), with a value of $0.41 per share, and an aggregate fair value of $3,043,020, in exchange for the entire issued and outstanding capital of MQL held by Mr. Anthony Ng Zi Qin, consisting of 8,000,100 shares of stock issued at par value of SGD 1.00 per share, or $0.714 on the acquisition date.
On August 19, 2016, the Company and Anthony Ng Zi Qin entered into an Addendum (the “First MQL Addendum”) to the Purchase Agreement to extend the August 25, 2016 anniversary date for the adjustment of issued shares for an additional period of 12 months. On November 10, 2017, the Company and Anthony Ng Zi Qin signed an Addendum (the “Second MQL Addendum”) to the Purchase Agreement, as amended, pursuant to which the Company agreed to issue an aggregate of
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3,339,900 shares of common stock, in satisfaction of the shortfall in the value of the shares issued. These shares were issued on December 12, 2017 in full satisfaction of the aforementioned contingent liability. The Purchase Agreement, as amended, is referred to herein as the “MQL Acquisition Agreement.”
The algorithms were placed into commercial operation in November 2015 upon the execution of a Software Licensing Agreement (the “MQL License Agreement”) between and New Asia Momentum Limited (“NAML”), a company owned and controlled by Dr. Lin Kok Peng, the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board. Under the terms of the MQL License Agreement, MQL agreed to license its proprietary trainable, trading algorithms to NAML in exchange for payment of a license fee and certain other fixed and time and materials fees. Pursuant to the terms of the MQL License Agreement, MQL licensed its proprietary trainable, trading algorithms. NAML, in turn, offered these proprietary, trainable, algorithm trading software solutions to broker-dealers, banks, funds and other clients on the basis of a SaaS licensing and delivery model, with sub-licensed users availing themselves of service-based contractual arrangements. NAML was required to pay MQL royalty fees equal to 20% of the trading profits achieved by the SaaS contract agreements that NAML executed with its clients. The targeted geographic market was Asia, with an initial emphasis on Singapore, Hong Kong, Indonesia, and Australia. From 2015 to 2017, NAML grew its retail assets under management (“AUM”) from zero to approximately $2.5 million.
In conjunction with the expansion into the regulated fund and bank model, NAML decided to ask its clients to redeem the AUM and as of September 30, 2017, trading on the AUM was terminated.
The Company initiated its focus on the regulated bank and fund model in 2017 with the launch of the Feuris Fund A with AUM of approximately $6.67 million. Because the risk profiles required by these regulated funds and banks reflect a lower level of risk, there was a significantly reduced frequency of trading activities. As of September 30, 2019, due to market conditions that impacted trading frequencies and volumes, NAML liquidated the Feuris Fund A and returned the AUM to the investors.
The MQL License Agreement remains in place.
While the Company continues to improve its algorithm products, there are no guarantees that such product improvements will translate to improved financial performance. The Company, in its efforts to expand its business, is currently involved in the development of new business opportunities, including the following:
· The Company may integrate a business solution to provide an e-Commerce platform where buyers and sellers trade products online through incentive-based marketing. If launched, the platform is expected to offer a wide range of selective products to the buyers within a social network of community led by influencers and dedicated services integrated with logistical and payment support to provide buyers with easy, simple and secure online shopping experience and be rewarded at the same time. The platform would use a hybrid of Business-to-Business (B2B) and Business-to-Consumer (B2C) business model. The Global e-Commerce revenue has exceeded more than $2 Trillion and has been enjoying double-digital growth annually fueled by increasing numbers of internet users, greater familiarity and dependence with online shopping without the need of physical interactions especially during the ongoing pandemic, and improved purchasing power of the middle-class population.
·A global digital payment system that would allow users to gain access to the existing global merchant base in multiple countries and regions and earn attractive rewards and cashback benefits. We expect that access to the existing global merchant base would be established through proven payment merchant networks.
The Company continues to improve its products and has been working to create new products. The Company is doing its best to provide the basis for improved performance in the coming quarters, however, there is no guarantee that such new products and product improvements will translate to improved financial performance.
The Company did not generate any revenue during the nine months period ended September 30, 2020 and 2019.
In May 2020, the Company filed with the Securities and Exchange Commission (the “SEC”) a definitive information statement on Schedule 14C relating to a proposed change of the Company's corporate name from New Asia Holdings, Inc. to Digital Alliance Holdings, Inc. and the increase of the number of authorized shares of common stock and preferred stock. On July 8, 2020, the Company filed a Certificate of Amendment (the “Amendment”) to the Company’s articles of incorporation, as amended, with the Secretary of State of the State of Nevada. The Amendment had the effect of increasing the number of authorized shares of the Company’s common stock from 400,000,000 to 4,000,000,000 and the number of authorized shares of the Company’s preferred stock from 30,000,000 to 400,000,000. The Amendment was approved by the Company’s Board
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of Directors on March 26, 2020 and by the holders of a majority of the voting power of the Company’s issued and outstanding capital stock on May 22, 2020. The Company has decided not to pursue the change in the Company’s name at this time.
On September 21, 2020, the Company entered into an Equity Purchase Agreement (the “ENJU Equity Purchase Agreement”) between the Company and ENJU Planning Pte Ltd. (“ENJU”). Pursuant to the terms of the ENJU Equity Purchase Agreement, the Company agreed to sell to ENJU, and ENJU agreed to purchase, 1,000,000 restricted shares of the Company’s common stock at a per share purchase price of $0.20, for an aggregate purchase price of $200,000. The purchase price was received by the Company on October 8, 2020.
On September 16, 2020, the Company entered into that certain Equity Purchase Agreement (the “Global Crypto Equity Purchase Agreement”) between the Company and Global Crypto Offering Exchange Ltd. (“Global Crypto”). Pursuant to the terms of the Global Crypto Equity Purchase Agreement, the Company agreed to sell to Global Crypto, and Global Crypto agreed to purchase, an aggregate of 50,000,000 restricted shares of the Company’s common stock at a per share purchase price of $0.01, for an aggregate purchase price of $500,000 (the “Share Purchase”). The Global Crypto Equity Purchase Agreement provides that the Share Purchase will be effected in 10 separate blocks (each, a “Block” and collectively, “Blocks”), with the first Block closing on September 16, 2020. In the first Block, Global Crypto purchased 2,000,000 shares for an aggregate purchase price of $20,000. The parties to the Global Crypto Equity Purchase Agreement agreed that each of the remaining nine Blocks will close within 12 months of September 16, 2020.
The Global Crypto Equity Purchase Agreement will terminate (i) upon the completion of the full Share Purchase, or (ii) on September 18, 2021. If the Global Crypto Equity Purchase Agreement terminates on September 18, 2021 prior to completion of the full Share Purchase, no additional shares may be purchased under the Global Crypto Equity Purchase Agreement.
The parties to the Global Crypto Equity Purchase Agreement do not intend to effect a change in control as a result of entering into the Global Crypto Equity Purchase Agreement.
COVID-19
In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to most countries around the world and infections have been reported globally. The spread of COVID-19 has had a material adverse effect on segments of the global economy.
Because COVID-19 infections have been reported worldwide, certain national, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future. As a result, certain Company internal operations communications and accounting operations have been disrupted by these stay-at-home orders, which have affected the timing of certain new business development activities (the Company had previously liquidated the Feuris Fund A AUM during the third quarter of 2019).
The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but could be anticipated to have a material adverse impact on our business, financial condition and results of operations.
The measures taken to date have impacted the Company’s business during the first nine months of 2020 and will impact the Company’s business for the fourth quarter of 2020 and potentially beyond. The significance of the impact of the COVID-19 outbreak on the Company’s business and the duration for which it may have an impact cannot be determined at this time.
The COVID-19 outbreak is a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could materially impact our operating results.
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Results of Operations
Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019
Revenues
We had no revenue during the three months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, due to market conditions that impacted trading frequencies and volumes, the Company’s exclusive licensee, NAML, liquidated the Feuris Fund A and returned the AUM to the investors. The MQL License Agreement between MQL and NAML still remains in place and the Company is focusing on the development of expanded new business solutions as described above.
Operating Expenses
Operating expenses were $55,628 for the three months ended September 30, 2020, consisting of $17,713 of general and administrative expenses, $8,400 of outside service expenses, and $29,515 of professional fees. This compares to operating expenses for the three months ended September 30, 2019 of $37,422, consisting of $17,181 of general and administrative expenses, $8,400 of outside service expenses, and $11,841 of professional fees. The operating expenses for the three-month period ended September 30, 2020 were higher than the operating expenses for the corresponding period in 2019 because professional service expenses were slightly higher, associated with activities conducted by the Company, including effecting the increase of the Company’s authorized shares and two private placements.
Net Loss
As a result of the foregoing, we had a net loss of $55,628 for the three months ended September 30, 2020, compared to $37,422 for the three months ended September 30, 2019.
We expect to incur net losses through 2020 because we expect to continue to incur expenses, but do not expect to generate significant, or any, revenues. We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the future to cover our expenses. We expect to cover such shortfall in operating margins through advances from our principal shareholder and other fundraising measures, some of which have been conducted, as the Company deems appropriate. There is no assurance that our principal shareholder will continue to advance funds to us or that we will be successful in any other fundraising measures.
Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019
We had no revenue during the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, due to market conditions that impacted trading frequencies and volumes, the Company’s exclusive licensee, NAML, liquidated the Feuris Fund A and returned the AUM to the investors. The MQL License Agreement between MQL and NAML still remains in place and the Company is focusing on the development of expanded new business solutions as described above.
Operating expenses were $156,705 for the nine months ended September 30, 2020, consisting of $55,472 of general and administrative expenses, $25,200 of outside service expenses and $76,033 of professional fees. This compares with operating expenses for the nine months ended September 30, 2019 of $137,970, consisting of $69,090 of general and administrative expenses, $25,200 of outside service expenses and $43,680 of professional fees. The operating expenses for the nine-month period ended at September 30, 2020 were higher than the corresponding operating expenses at September 30, 2019 because professional fees were higher as indicated above. As a result of the foregoing, we had a net loss from operations of $156,705 for the nine months ended September 30, 2020 compared to $137,970 for the nine months ended September 30, 2019.
We expect to incur operating losses through the balance of this year because we will be incurring expenses and may not generate sufficient revenues. We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the future to cover these operating costs. We expect to cover such shortfall in operating margins through advances from our principal shareholder and other fundraising measures, some of which have been conducted, that the Company deems appropriate.
Liquidity and Capital Resources
We had cash in the amount of $29,160 and $31,876 at September 30, 2020 and September 30, 2019, respectively. To date, we have funded our operations from advances from our principal shareholder, NAHL. Dr. Lin Kok Peng, our Chief Executive Officer, Chief Financial Officer and Chairman of the Board, also has voting and dispositive control over the shares of the Company’s common stock held by NAHL, and we just recently completed two Private Placements as described in herein.
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We do not have sufficient capital to sustain our operations for the next 12 months. We expect to continue to rely on advances from NAHL, as well as from other sources of financing, including additional private placements of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of equity securities or that we will be able to arrange for debt or other financing to fund our operations and other activities. We do not have any oral or written agreements with NAHL which would require NAHL to fund our operations.
During the nine-month period ended September 30, 2020, NAHL advanced an aggregate of $80,000 to the Company. The total advances due to NAHL are $916,452 and $836,452 as of September 30, 2020 and December 31, 2019, respectively. As of September 30, 2020, the advances constitute unsecured interest-free loans to the Company.
On August 14, 2020, the Company signed an Agreement with NAHL, a British Virgin Island Corporation (“NAHL”), which is solely owned and controlled by the Company’s Chairman and Chief Executive Officer, Dr. Lin Kok Peng and is thus considered a related party to the Company. All funds advanced to the Company by NAHL up to the Effective Date (the “Prior Advances”) will continue to constitute an interest-free loan to the Company, which shall be due and payable by the Company to NAHL on or before 15th September 2020 (as the same may be extended as set forth below, the “Prior Advance Repayment Date”). If the Company does not repay the Prior Advances by the Prior Advance Repayment Date, NAHL, at its sole discretion, will have the option to extend the Prior Advance Repayment Date or convert all or a portion of the Prior Advances into Common Stock at a conversion price of $0.003 per share (the “Prior Advance Conversion Price”), subject to adjustment as set forth in the Agreement. NAHL’s election to extend the Prior Advance Repayment Date or to convert the Prior Advances into Common Stock shall be made on the first business day following the Prior Advance Repayment Date. The Parties acknowledge and agree that the Prior Advances shall not be convertible into Common Stock prior to the Prior Advance Repayment Date.
Following the Effective Date, NAHL will endeavor, on a best efforts’ basis, to continue to advance operating funds to the Company as may be required and requested by the Company for its operations, for a period of at least through December 31, 2020 (such additional advances, as funded, the “Additional Advances” and, together with the Prior Advances, the “Advances”). Any such Additional Advances shall be due and payable by the Company to NAHL on or before January 31, 2021 (as the same may be extended as set forth below, the “Additional Advance Repayment Date”). In the event that any Additional Advances are made and are not repaid by the Additional Advance Repayment Date, NAHL, at its sole discretion, will have the option to extend the Additional Advance Repayment Date or convert all or a portion of the Additional Advances into Common Stock at a conversion price of $0.003 per share (the “Additional Advance Conversion Price”), subject to adjustment as set forth in the Agreement. NAHL’s election to extend the Additional Advance Repayment Date or to convert the Additional Advances into Common Stock shall be made on the first business day following the Additional Advance Repayment Date. The Parties acknowledge and agree that any Additional Advances shall not be convertible into Common Stock prior to the Additional Advance Repayment Date.
As of September 30, 2020, NAHL had not exercised its option to convert the advances into shares of common stock. Accordingly, the total of $916,452 in advances remained as an unsecured interest-free loan to the Company as of September 30, 2020. The $80,000 borrowed during the nine-month period ended September 30, 2020, is non-interest bearing, unsecured, and due as per the terms of the Agreement executed on August 14, 2020. NAHL is expected to continue to advance such operating funds to the Company in the future.
Through September 30, 2020, NAHL has continued to advance operating funds to the Company totaling $916,452 and is expected to continue to advance such operating funds in the future. NAHL recently informed the Company that the previous terms of the prior agreement had not reflected the level of risk that NAHL has taken in effecting these advances over the years. Therefore, on August 14, 2020, the Company and NAHL entered into an Agreement on Advances (the “Agreement”) wherein the Company and NAHL agreed as follows:
•All funds that have been advanced to the Company by NAHL up to August 14, 2020 (the “Prior Advances”) will continue to constitute an interest-free loan to the Company, which will be due and payable by the Company to NAHL on or before September 15, 2020. If the Company does not repay the Prior Advances by that date NAHL will have the right to extend that date for repayment or to convert all or a portion of the Prior Advances into Common Stock at a conversion price of $0.003 per share.
•Following August 14, 2020, NAHL will endeavor, on a best efforts’ basis, to continue to advance operating funds to the Company as may be required and requested by the Company for its operations, for a period of at least through December 31, 2020 (such additional advances, as funded, the “Additional Advances”). Any such Additional Advances will be due and payable by the Company to NAHL on or before January 31, 2021. In the event that any Additional Advances are made
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and are not repaid by such date, NAHL will have the right to extend that date for repayment or convert all or a portion of the Additional Advances into Common Stock at a conversion price of US $0.003 per share.
•In the event that NAHL determines not to fund any Additional Advances, then conversion price for any Prior Advances made prior to January 1, 2020 will remain $0.003 per share but the conversion price with respect to any Prior Advances made after January 1, 2020 will be $0.01 per share.
•The conversion prices as set forth above are subject to customary adjustments for stock splits, stock dividends, recapitalizations and other customary events which occur following August 14, 2020.
We expect to incur losses and negative operating cash flows for the foreseeable future, and we may never become profitable. We also expect to continue to incur significant operating and capital expenditures for the next several years and anticipate that our expenses will increase substantially in the foreseeable future. We also expect to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures.
As a result, we will need to generate significant revenues to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.
We have no agreements to obtain funds through bank loans, lines of credit or any other traditional sources. Since we have no financing committed, our inability to realize financing to maintain operations and grow our business would materially restrict our business operations. Future financing may not be available upon acceptable terms, or at all. Should we be successful in securing future financing, new issuances of equity or convertible debt (i) would dilute our current shareholders, possibly significantly, (ii) might require a significant increase to our authorized stock, and (iii) might have rights, preferences, or privileges senior to our common or preferred stock. If financing is not available to us on favorable terms, such severe limitation might cause us to consider another consolidation of existing common equity at any time to attract financing and maintain our business.
Due to the uncertainty of our ability to meet our current operating and capital expenses and the fact that we have suffered recurring losses from operations and have a net capital deficiency, in their report on our audited annual financial statements as of and for the years ended December 31, 2019 and 2018, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Recurring losses from operations raise substantial doubt about our ability to continue as a going concern. The presence of the going concern explanatory paragraph may have an adverse impact on the relationships we are developing and plan to develop with third parties as we continue the commercialization of our products and could make it challenging and difficult for us to raise additional financing, all of which could have a material adverse impact on our business and prospects and result in a significant or complete loss of your investment.
Cash and Cash Equivalents
The following table summarizes the sources and uses of cash for the periods stated. The Company held no cash equivalents for any of the periods presented.
|
|
|
For the Nine Months Ended
|
|
|
|
September 30, 2020
|
|
September 30, 2019
|
|
Cash, beginning of period
|
|
$
|
23,874
|
|
|
$
|
28,617
|
|
|
Net cash used in operating activities
|
|
|
(94,545)
|
|
|
|
(101,522)
|
|
|
Net cash provided by investing activities
|
|
|
-
|
|
|
|
-
|
|
|
Net cash provided by financing activities
|
|
|
100,000
|
|
|
|
104,913
|
|
|
Effect of exchange rate on cash
|
|
|
(169)
|
|
|
|
(132)
|
|
|
Cash, end of period
|
|
$
|
29,160
|
|
|
$
|
31,876
|
|
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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 are material to stockholders.
Critical Accounting Policies
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“U.S. GAAP”). U.S. GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risks and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to U.S. GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Our significant accounting policies are summarized in Note 1 in the Annual Report on Form 10-K for the most recent fiscal year. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the periods presented in this report.
Related Parties
The Company follows the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. See Note 4.
Leases
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, "Leases (Topic 842)," which requires lessees to recognize right-of use assets and lease liability, initially measured at present value of the lease payments, on its balance sheet for leases with terms longer than 12 months and classified as either financing or operating leases. ASU 2016-02 requires a modified retrospective transition approach for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, and provides certain practical expedients that companies may elect including those contained in ASU 2018-01, "Leases (Topic 842): Lease Easement Practical Expedient for Transition to Topic 842". This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years with early adoption permitted. The Company has adopted ASC 842, “Leases” as of January 1, 2019.
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 amounts reported in the financial statements and accompanying notes. The extent to which the COVID-19 pandemic may directly or indirectly impact our business, financial condition, and results of operations is highly uncertain and subject to change. We considered the potential impact of the COVID-19 pandemic on our estimates and assumptions and there was not a material impact to our consolidated financial statements as of and for the nine months ended September 30, 2020; however, actual results could differ from those estimates and there may be changes to our estimates in future periods.