GFOO Genufood Energy Enzymes Corporation (CE)

GENERAL NOTE

Throughout this report, we refer to our business from the period from inception (June 21, 2010) through approximately mid- to late-2016, as our “historic period”, the business conducted during the historic period as our “original business” and the management of our company during the historic period as “previous management” or “Oliver Lin’s management”.

A 1-for-100 reverse stock split (the “Reverse Stock Split”) of our common stock (the “Common Stock”) became effective with the State of Nevada on July 6, 2020 and with the Financial Industry Regulatory Authority and in the market on July 23, 2020 (the “Effective Date”). Unless expressly stated herein, all share amounts of our common stock (“Common Stock”) presented in this report have been adjusted to reflect the Reverse Stock Split.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect”, “anticipate”, “hope” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. 

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. Some of the key factors impacting these risks and uncertainties include, but are not limited to:

Overview

In 2019 and through early 2020, we had planned to import enzyme supplements from the United States for sale in Taiwan. However, due to the COVID-19 pandemic, all non COVID-19 related matters, including obtaining an import license from Taiwan’s Ministry of Economic Affairs and the Taiwan Food and Drug Administration (“FDA”), have been delayed or are taking longer than usual in Taiwan since late-January 2020. For various reasons, including the fact that without a reasonably foreseeable end of the pandemic and Taiwan government resources being shifted to dealing with the pandemic, our current management, which took office in March 2020, we decided to abandon the plan to restart our enzyme products business.

In May 2020, we announced that we were in the preliminary stage of developing a new business plan to sell and distribute physiological sea water and nasal spray in Taiwan and the United States. However, after exploring this possible business as a result of several factors, including but not limited to difficulties in commencing a new business during the ongoing COVID-19 pandemic, in September 2020 we announced that we will not pursue the nasal spray business.

In late September 2020, we announced that Hukui and we had entered into a Series C Preferred Shares Subscription Agreement dated September 23, 2020 (the “Hukui Agreement”), pursuant to which we have agreed to purchase an aggregate 200,000 shares of Hukui’s Series C Preferred Stock (“Series C Preferred Shares”) at $10.00 per share, for an aggregate investment of $2,000,000. 

We will purchase the Series C Preferred Shares in three tranches, through a date on or before June 30, 2022, as follows:

If Hukui does not achieve further milestones or meet further conditions, we will have the option either to (i) abandon the Second Tranche Investment and/or the Third Tranche Investment, or (ii) waive the failure of Hukui to meet such conditions and proceed with the Second Tranche Investment and/or the Third Tranche Investment.

Notwithstanding the foregoing, management and the Board of Directors may amend or abandon at any time our current intended investment in Hukui. and/or develop a business plan for a new business that we would operate and/or engage in a reverse merger with another company. 

If we do not adopt a plan of operations to operate a business or engaged in a reverse merger with another company, we may be obligated to register and operate as an investment company under the Investment Company Act of 1940 as a result of our investment in Hukui.

Regardless of which overall business strategy we pursue – starting our own operating business, engaging in a reverse merger or being an investment company – we will continue to need capital to meet our expenses, primarily overhead and the professional fees related to the cost of compliance as a reporting company. We must also raise funds to meet our obligation to invest $0.8 million in Hukui in the Second Tranche Investment on or before June 30, 2021. There are no commitments in place to fund any such business or fund the Second Tranche Investment and no guarantee can be given that we will be able to secure such funding on terms that are favorable to us, or at all.

For the fiscal year ended September 30, 2020, Jui Pin (John) Lin, our President and Chief Executive Officer, has provided such capital periodically in the form of loans in the aggregate principal amount of $120,410, the principal and accrued and unpaid interest of which are convertible, at his option, into shares of our Common Stock at $0.05 per share. On December 28, 2020, we repaid Mr. Lin $65,410 of the principal amount of loans due and payable plus accrued interest in the amount of $1,162, for a total of $66,572. On January 5, 2021, we repaid Mr. Lin $20,000 of the principal amount of another such loan due and payable plus accrued interest in the amount of $403, for a total of $20,403.

In the quartered ended December 31, 2020, another stockholder loaned us $30,000, on substantially the same terms as the terms of the loans from Mr. Lin. We may also raise equity, debt, convertible debt or a combination of any of the foregoing, from other parties for the capital we may need for any of the purposes specified in this report. There is no agreement in place between the Company and Mr. Lin, the other shareholder or anyone else, for such capital to continue to be made available to us as needed, and we cannot guarantee that any such capital will continue to be available to us on favorable terms, or at all, in the future.

Plan of Operations

The following plan of operations is tentative and subject to change, including but not limited to delays we are facing, and expect to continue to face, dealing with governmental agencies and other regulators as a result of reduced operations resulting from the COVID-19 pandemic. Management and the Board of Directors may amend or abandon at any time our new plan of operations, which itself in an early phase.

We are currently exploring business opportunities for products with high demand since the advent of the COVID-19 pandemic in the areas of medical diagnostics and personal protection equipment (“PPE”). We are exploring marketing two COVID-19 rapid test kits which will be useful during the pandemic period, as well as a medical mask. The primary marketing period for the rapid test kits would be during the pandemic itself, while the medical mask may still be in demand after the pandemic but with lesser demand. The rapid test method and kits are similar to those already on the market. The manufacturers are working on regulatory review and approval to be accepted by the market and potential clients. We plan to initiate the business plan of the distribution and sale of the medical diagnostics and PPE discussed below within the next six months, subject to adequate funding, regulatory approval and other factors, some of which are beyond our control.

Medical Diagnostics

2019-nCoV IgG/IgM Antibody Rapid Test. The 2019-nCoV IgG/IgM Antibody Rapid Test is a rapid immuno-chromatographic assay for the simultaneous detection of IgG and IgM antibodies to 2019-nCoV virus in human whole blood, serum or plasma. The assay is used as a screening test for 2019-nCoV viral infection and as an aid for differential diagnosis of acute phase infections or previous infections. We are currently communicating with one or more manufacturers in Taiwan for distribution of the rapid test in the United States.

Vstrip COVID-19 Antigen Rapid Test. The Vstrip COVID-19 Antigen Rapid Test is a rapid in vitro immunochromatographic assay intended for the qualitative detection of nucleocapsid protein antigen from SARS-CoV-2 in nasopharyngeal swab from individuals who are suspected of COVID-19 by their healthcare provider within the first five days of the onset of symptoms. We are currently communicating with one or more manufacturers in Taiwan for future distribution of the rapid test in the United States.

We do not have any agreement in place at this time with any manufacturer of either the antibody rapid test or the antigen rapid test.

PPE

3-Ply Medical Grade Mask. The medical-grade face mask is intended to be worn to protect against the spread or transmission of infectious germs during surgical interventions in operating theatres and other medical facilities. The main aim is to protect the patient against infectious germs. We are currently communicating with one or more manufacturers in Taiwan for future distribution of the masks in the United States. We do not have any agreement in place at this time with any manufacturer of the masks.

Manufacturing

We do have our own manufacturing plants for the above mentioned products. We have contacted manufacturers with whom our management has previous relations. If we are successful in our negotiations, we will purchase the test kits and/or masks directly from the manufacturers for sale in the United States.

We currently estimate that we may spend up to approximately $1,000,000 to purchase the products that we would sell in the United States.

Marketing

We plan to distribute the PPE through online sales platform and distributors in the United States to sell the products in retail stores. We understand from the manufacturers that the mask has already received U.S. Food and Drug Administration (“FDA”) approval. We understand that the manufacturers of the rapid test kits have applied for, but not yet received, FDA approval. We will explore the market and sales channels beginning in this pre-operational period. We are still developing a more detailed marketing timeline for the PPE.

We currently estimate that we may spend up to approximately $1,200,000 on various operational expenses, including marketing costs, which may include sampling giveaway/testing, on-line marketing and printed marketing materials, in addition to the cost of actual product purchases for a total requirement of up to $2,200,000 to commence this business. We do not have any commitments for such funding at this time.

Competition

The antigen and antibody rapid test kits are relatively new in the market. With vaccines being rolled out worldwide, we believe the demand for test kits will increase, since many businesses, including airlines, and many places, including tourist destinations, will require negative COVID tests, not just proof of vaccination, for the foreseeable future. Nonetheless, we will face significant competition from other manufacturers of rapid antigen and antibody tests, including Abbott Laboratories, Access Bio, Inc. and Babson Diagnostics, Inc., many of which companies have been in business longer than we have and have substantially larger resources than we have.

The mask has an extremely low barrier to entry and is a highly fragmented market. Masks such as the mask we intend to sell are currently being widely sold in the market under many different trade names. Therefore, we will face intense competition in the marketing of the product with many companies, including Honeywell, 3M Company and Kimberley-Clark Corporation, a number of which have been in business much longer than we have and have substantially greater financial and other resources than we have.

Regulation

In order to sell the rapid test kits in the United States, FDA approval is required. We believe that the manufacturers to whom we are speaking have applied for FDA approval for their rapid test kits and are awaiting approval.

In order to sell a medical-grade mask in the United States, FDA approval is required. We believe that the manufacturers to whom we are speaking have received FDA approval for their masks.

Intellectual Property

As distributors of other parties’ products, we do not believe that we have any protectable intellectual property for the test kits or medical masks.

Results of Operations

Three -Month Period Ended December 31, 2020 compared to the Three-Month Period Ended December 31, 2019

Revenues

We did not generate any revenues during the three-month period ended December 31, 2020 and 2019.

Operating Expenses

We incurred total operating expenses of $76,700 and $73,018 for the three-month periods ended December 31, 2020 and 2019, respectively. Our operating expenses consist of legal fees, other professional fees, payroll expenses, rent, bank charges, and transfer agent fees. The increase in operating expenses for the three-month period ended December 31, 2020 compared to the same period ended in 2019 was primarily due to increase in legal fees and payroll expenses.

Net Loss

As a result of the above, our net loss increased from $73,104 in the three-month period ended December 31, 2019 to $77,883 in the same period ended in 2020.

Effect of the COVID-19 Pandemic on our Business

While our liquidity and capital resources are severely limited and present serious obstacles to starting a business or continuing to meet or obligations to invest in Hukui, these limitations are unrelated to the pandemic and resulting global economic crisis.

We have been affected by the COVID-19 pandemic to the extent that it was one of a number of contributing factors in our decision to change our plan of operations from restarting our enzyme products business to selling the nasal spray product and then deciding not to pursue the nasal spray product business, although the first of those two decisions was largely made prior to the full impact of the COVID-19 pandemic. Our personnel are in Taiwan, which has been relatively less affected by the pandemic compared to many other countries in Asia, Europe and the United States. Nonetheless, we expect to experience delays in obtaining business licenses and permits, and any other governmental approvals that may be required for a future business, since government offices are continuing to work with reduced staff during the pandemic.

Nonetheless, depending upon the extent and duration of the pandemic and the resulting global economic crisis, these conditions may have an adverse impact on our ability to raise capital and commence any other business we may pursue. Depending upon possible changes in consumer demand, shopping and spending habits as a result of the pandemic and the resulting global economic crisis, we may also face challenges of consumer acceptance if and when we start to market any products.

As of December 31, 2020, we had cash and cash equivalents of $189,236 and a working capital deficit of $169,961. In comparison, as of September 30, 2020, we had cash and cash equivalents of $18,092 and a working capital deficit of $352,943.

As of December 31, 2020, we had total assets of $989,236, compared with total assets of $18,092 at September 30, 2020. The increase in total assets was primarily due to increase in cash and cash equivalent and investment from the private offering of our Common Stock, which was completed in December 2020.

We had $359,197 in total current liabilities as of December 31, 2020, consisting of $131,236 in accounts payable, $21,933 in accrued expenses, $121,028 due to related parties, $55,000 in notes payable – related party, and $30,000 in note payable. This is compared to total current liabilities of $371,035 as of September 30, 2020, which included $129,154 in accounts payable, $25,436 in accrued expenses, $96,035 due to related parties and $120,410 in notes payable – related party. The increase in due to related parties was primarily due to unpaid compensation to officers and directors.

During the quarter ended December 31, 2020, one of our shareholders loaned us the principal amount of $30,000 (the “October 2020 Loan”), primarily to pay our expenses. The October 2020 Loan bears simple interest at a rate of 4% per annum and is payable as to both principal and interest on April 13, 2021.

There is also outstanding a loan in the principal amount of $35,000, which our President and Chief Executive Officer, Jui Pin Lin, loaned to us on August 26, 2020 (the “August 2020 Loan”). The August 2020 Loan bears simple interest at a rate of 4% per annum and is payable as to both principal and interest on February 26, 2021.

The holders of the promissory notes evidencing the August 2020 Loan (the “August 2020 Note”) and the October 2020 Loan (individually, the “October 2020 Note” and, together with the August 2020 Notes, the “Notes”), may, at the holder’s sole option, convert (a “Voluntary Conversion”) the outstanding principal and accrued and unpaid interested on their note into shares of our Common Stock at a rate of $0.05 per share.

The Notes also provides for events of default and remedies in such event, including without limitation interest at a rate equal to the lesser of 10% per annum or the maximum interest rate allowed under usury or other similar laws from the respective maturity dates of the August 2020 Loan and October 2020 Loan, until the August 2020 Note and October 2020 Note, respectively, are paid in full. The Notes also contains other terms and conditions typical for a transaction of this type. There is no commitment from Mr. Lin, the other lending shareholder or anyone else, to continue to fund our expenses.

We had a total stockholders’ equity of $630,039 and an accumulated deficit of $8,236,272 as of December 31, 2020. In comparison, we had a total stockholders’ deficiency of $352,943 and an accumulated deficit of $8,158,389 as of September 30, 2020

On December 15, 2020, we completed a private offering of our Common Stock. We sold 107,000,000 shares of our Common Stock to 34 individuals at a purchase price of $0.01 per share, for gross proceeds of $1,070,000 before allocating certain expenses associated with the offering in the amount of $5,852 as adjusted paid-in capital.

Reverse Stock Split

On June 23, 2020, our Board of Directors approved the Reverse Stock Split of our Common Stock, at a ratio of 1-for-100, as of the Effective Date. The Effective Date of the Reverse Stock Split with the Secretary of State of the State of Nevada was 9:00 a.m. on July 6, 2020 and July 23, 2020 with the Financial Industry Regulatory Authority and in the marketplace.

On the Effective Date, the total number of shares of our Common Stock held by each shareholder was converted automatically into the number of whole shares of Common Stock equal to (i) the number of issued and outstanding shares of Common Stock held by such shareholder immediately prior to the Reverse Stock Split, divided by (ii) 100.

No fractional shares were issued in connection with the Reverse Stock Split, and no cash or other consideration was be paid. Instead, we issued one whole share of the post-Reverse Stock Split Common Stock to any shareholder who otherwise would have received a fractional share as a result of the Reverse Stock Split.

We are authorized to issue 10,000,000,000 shares of Common Stock and that number did not change as a result of the Reverse Stock Split. 

During the three-month period ended December 31, 2020, we used $57,594 of cash in operating activities which was attributable primarily to our net loss of $77,883 offset by the change in operating assets and liabilities of $20,289. In comparison, during the three-month period ended December 31, 2019, we used $58,472 of cash in operating activities which was attributable to our net loss of $73,104 and the change in operating assets and liabilities of $14,632.

With respect to our investing activities, we used $800,000 in payment for investment made to Hukui during the three months ended December 31, 2020. We did not have investing cash flow activities for the three months ended December 31, 2019.

During the three-month period ended December 31, 2020, we had total cash inflow of $1,028,738 from financing activities. We repaid $65,410 to notes payable – related party, which our President and Chief Executive Officer, Jui Pin Lin, previously loaned us. We received $30,000 from note payable as loan from a shareholder of the Company. We received $1,064,148, net of directly associated expenses, including legal, transfer agent, and printing and delivery expenses, from private offering of our Common Stock, which was completed in December 2020. For accounting purpose, we recorded the net proceeds from private offering instead of the gross amount of $1,070,000.

There is substantial doubt that we can continue as an ongoing business for the next twelve months unless we obtain additional capital to pay our expenses as they become due. We do not anticipate any significant additional revenue until and unless we begin to execute on our plan of operations involving the start of our new nasal spray business. There is no assurance that we will ever reach that stage. The condensed consolidated financial statements presented herein do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that we cannot continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to successfully execute our business plan and generate profitable operations in the future, and, until and unless we achieve that, to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operation as and when they become due. Management intends to finance operating costs for the foreseeable future with the issuance of equity and/or debt. While we have received certain loans from our President and Chief Executive Officer, Jui Pin (John) Lin, there is no standing commitment from Mr. Lin, or any person, for any such capital and there can be no assurances that capital will be available to us on favorable terms, or at all. Our failure to obtain adequate funding would be detrimental to us and result in the inability to execute our plan of operations, or even having to cease operations completely.

To date, our capital requirements have primarily been funded by shareholders through the purchase of our Common Stock in private offerings. We currently estimate that we will need to raise additional capital of approximately $3,000,000, consisting of up to $2,200,000 to start our new medical diagnostics and PPE business over the next nine months and $800,000 for the Second Tranche Investment in Hukui. We may also need to raise additional capital for corporate expenses. We are exploring options of raising additional capital through issuing more Common Stock or other securities, including debt, convertible into Common Stock. There are no agreements, arrangements or understandings in place with respect to raising any additional capital from any person. There can be no assurance that we will be able to raise such capital when and as needed on terms that are favorable to us, or at all.

Contractual Obligations

We do not have material contractual obligations and commitments. We only have one lease that is renewed on a month-to-month basis.

Off-Balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our condensed consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Critical accounting policies and estimates

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, inventories, recovery of long-lived assets, income taxes, and the valuation of equity transactions. We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. For the three-month periods ended December 31, 2020 and 2019, no significant estimates and assumptions have been made in the condensed consolidated financial statements. The following are some of the critical accounting policies in relation to the preparation of the condensed consolidated financial statements. For a full summary of our critical accounting policies, please refer to Note 2 of Notes to Condensed Consolidated Financial Statements.

Foreign currency translation

The financial statements of our subsidiary denominated in currencies other than the USD are translated into USD using the closing rate method. The balance sheet items are translated into USD using the exchange rates at the respective balance sheet dates. The capital and various reserves are translated at historical exchange rates prevailing at the time of the transactions while income and expenses items are translated at the average exchange rate for the period. All exchange differences are recorded in stockholders’ equity (deficiency).

Stock-Based Compensation

We account for stock-based compensation in which we obtain employee services in share-based payment transactions under FASB ASC Topic 718, Compensation – Stock Compensation, which requires us to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the vesting period.

We also adopted FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees, to account for equity instruments issued to parties other than employees for acquiring goods or services. Such awards for services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.

Recent accounting pronouncements

We do not expect that the adoption of recently issued accounting pronouncements will have a material impact on its financial position, results of operations, or cash flows. For a full summary of recent accounting pronouncements, please refer to Note 2 of Notes to Condensed Consolidated Financial Statements.

Currency exchange rates

Our functional currency is the USD, and the functional currency of our operations is the TWD. It is anticipated that all of our sales will be denominated in TWD. As a result, changes in the relative values of USD and TWD affect our reported amounts of revenues and profit (or loss) as the results of our operations are translated into USD for reporting purposes. In particular, fluctuations in currency exchange rates could have a significant impact on our financial stability. Fluctuations in exchange rates between the USD and the TWD would also affect our gross and net profit margins and could result in foreign exchange and operating losses.

Our exposure to foreign exchange risk primarily relates to currency gains or losses resulting from timing differences between the signing of sales contracts and the settling of these contracts. Furthermore, we translate monetary assets and liabilities denominated in other currencies into TWD, the functional currency of our operations. Our results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate at the end of the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in our statement of shareholders’ equity. We have not used any forward contracts, currency options or borrowings to hedge our exposure to foreign currency exchange risk. We cannot predict the impact of future exchange rate fluctuations on our results of operations and may incur net foreign currency losses in the future.

To the extent that we hold assets denominated in USD, any appreciation of the TWD against the USD could result in a charge in our statement of operations and a reduction in the value of our USD-denominated assets. On the other hand, a decline in the value of the TWD against the USD could reduce the USD equivalent amounts of our financial results. 

For financial reporting purposes, the financial statements of the Company’s Singapore subsidiary, which are prepared using the SGD, are translated into the Company’s reporting currency, USD. Assets and liabilities are translated using the exchange rate on the balance sheet date, which was 0.7571 and 0.7325 as of December 31, 2020 and September 30, 2020, respectively. Revenue and expenses are translated using average exchange rates prevailing during each reporting period. The 0.7431 and 0.7337 average exchange rates were used to translate revenues and expenses for the three months ended December 31, 2020 and 2019, respectively. Stockholders’ equity (deficiency) is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity (deficiency).