Results of Operations
The following summary of our results of operations should be read in conjunction
with our financial statements for the six months ended December 31, 2021 and
2020, which are included herein.
Our operating results for three months ended December 31, 2021 and 2020, and the
changes between those periods for the respective items are summarized as
follows:
Three months ended
December 31,
2021 2020 Change %
Sales $ - $ - $ - -
Cost of Goods Sold - - - -
Gross Profit - - - -
Operating expenses 124,501 20,206 104,295 516 %
Other Expense 212,061 52,270 159,791 306 %
Net loss $ (336,562 ) $ (72,476 ) $ (264,086 ) 364 %
-
Foreign currency translation (89%)
adjustments: $ (8,708 ) $ (75,825 ) $ 67,117
Total comprehensive loss $ (345,270 ) $ (148,301 ) $ (196,969 ) (133 )%
During the three months ended December 31, 2021 and 2020, the Company did not
recognize any revenues, cost of goods sold or gross profit.
Our financial statements reported a net loss of $336,562 for the three months
ended December 31, 2021 compared to a net loss of $72,476 for the three months
ended December 31, 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 December 31, 2021, the results included other expense of $68,886 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 was offset by interest expense
of $227,140 related to the amortization of the debt discount on such debt.
Operating expense increased to $124,501 for the three months ended December 31,
2021 compared to $20,206 for the three months ended December 31, 2020. The
increase in operating expense during the three months ended December 31, 2021
compared to the same period in the prior year was an increase in general and
administrative expenses as a result of increased corporate activity,
professional fees of $61,078 incurred as a result of the Company completing
several filings during the period and exploration expenditures of $8,368.
Other expense increased to $212,061 for the three months ended December 31,
2021, compared to $52,270 for the three months ended December 31, 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 period ended December 31, 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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Our operating results for six months ended December 31, 2021 and 2020, and the
changes between those periods for the respective items are summarized as
follows:
Six months ended
December 31,
2021 2020 Change %
Sales $ - $ - $ - -
Cost of Goods Sold 24 - 24 -
Gross Loss (24 ) - (24 ) -
Operating expenses 225,576 44,165 181,411 411 %
Other Expense 876,805 103,199 773,606 750 %
Net loss $ (1,102,405 ) $ (147,364 ) $ (955,041 ) 648 %
Foreign currency translation (108%)
adjustments: $ 11,312 $ (142,969 ) $ 154,281
Total comprehensive loss $ (1,091,093 ) $ (290,333 ) $ (800,760 ) 276 %
During the six months ended December 31, 2021 and 2020, the Company did not
recognize any revenues, cost of goods sold of $24 and $0, respectively and a
gross loss profit of $(24) and $0, respectively.
Our financial statements reported a net loss of $1,102,405 for the six months
ended December 31, 2021 compared to a net loss of $147,364 for the three months
ended December 31, 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 six months ended
December 31, 2021, the results included other expense of $101,385 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 $669,344 primarily related to the amortization of the debt discount on such
debt.
Operating expense increased to $222,576 for the six months ended December 31,
2021 compared to $44,165 for the six months ended December 31, 2020. The
increase in operating expense during the six months ended December 31, 2021
compared to the same period in the prior year was an increase in general and
administrative expenses as a result of increased corporate activity,
professional fees as a result of the Company completing several filings during
the period and exploration expenditures.
Other expense increased to $876,805 for the six months ended December 31, 2021,
compared to $103,199 for the six months ended December 31, 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 six months ended December 31, 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
December 31, June 30, Change
2021 2021 Amount %
Cash $ 1,749 $ 24,003 $ (22,254 ) (93%)
Current Assets $ 33,736 $ 56,159 $ (22,423) (40) %
Current Liabilities $ 5,448,276 $ 4,643,820 $ 804,456 17 %
Working Capital Deficiency $ (5,414,540 ) $ (4,587,661 ) $ (826,879 ) 18 %
Our working capital deficit increased as of December 31, 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
Six months ended
December 31, Change
2021 2020 Amount %
Cash Flows used in operating %
activities $ (585,595 ) $ (11,126 ) $ (574,469 ) 5,163
Cash Flows used in investing -
activities $ (115,687 ) $ - $ (115,687 ) %
Cash Flows provided by financing
activities $ 679,240 $ 11,166 $ 668,074 5,983
Effects on changes in foreign (4,2615%)
exchange rate $ (212 ) $ 65 $ (277 )
Net (decrease) increase in cash (21,294%)
during period $ (22,254 ) $ 105 $ (22,359 )
Operating Activities
Net cash used in operating activities was $585,595 for the six months ended
December 31, 2021 compared to $11,126 in the same period in 2020.
During the six months ended December 31, 2021, cash used in operating activities
consisted of a net loss of $(1,102,405), depreciation of property and equipment
of $2,918, imputed interest on non-interest bearing related party advances
contributed as paid in capital of $107,343, amortization of debt discount of
$327,710, change in fair value of derivative liability of $101,585, expenses
paid directly through related party advances of $156, expenses paid directly
through unrelated party advances of $2,463, accrued interest of $3,441,
accounts payable and accrued liabilities of $(28,977), and other payables and
accruals of $371.
During the six months ended December 31, 2020, cash used in operating activities
consisted of a net loss of $(147,364), depreciation of property and equipment of
$3,084, imputed interest on non-interest bearing related party advances
contributed as paid in capital of $106,229, expenses paid by an unrelated party
of $20,075, changes in other receivable and deposits of $(594) and other
payables and accruals of $7,444.
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Investing Activities
Net cash used in investing activities was $115,687 and nil for the six months
ended December 31, 2021 and 2020, respectively. During the six months ending
December 31, 2021, the Company engaged with consultants to provide services
related to commencing dredging operations. There were no such expenditures in
the six months period ended December 31, 2020.
Financing Activities
Net cash provided by financing activities was $679,240 for the six months ended
December 31, 2021, compared to net cash provided by financing of $11,166 in the
same period in 2020. Net cash used in financing during the six months ended
December 31, 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 $47,980, advances from an unrelated party of $623,515, repayments of
related party advances of $(10,759), and repayments of advances to an unrelated
party of $(24,425). Net cash provided by financing activities for the six months
ended December 31, 2020 was a result of advances received from an unrelated
party of $13,353 and repayments of advances to an unrelated 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.
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.
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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 completely 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.
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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