KRFG 10-Q
King Resources, Inc. (KRFG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the Quarterly Period ended
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Commission file number:
(Exact name of registrant as specified in its charter)
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(IRS Employer Identification No.) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. ☒
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes
The number of shares outstanding of the registrant’s common stock, par value $0.0001 per share, as of August 13, 2024 was .
TABLE OF CONTENTS
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INTRODUCTORY COMMENT
We are not a Hong Kong operating company but a Delaware holding company with operations conducted through our wholly owned subsidiaries based in Hong Kong and the British Virgin Islands. Our investors hold shares of common stock in OneSolution Technology Inc, the Delaware holding company. This structure presents unique risks as our investors may never directly hold equity interests in our Hong Kong operating subsidiary and will be dependent upon contributions from our subsidiaries to finance our cash flow needs. Our ability to obtain contributions from our subsidiaries are significantly affected by regulations promulgated by Hong Kong and the People’s Republic of China (“the PRC”) authorities. Any change in the interpretation of existing rules and regulations or the promulgation of new rules and regulations may materially affect our operations and or the value of our securities, including causing the value of our securities to significantly decline or become worthless. For a detailed description of the risks facing the Company associated with our structure, please refer to “Risk Factors – Risk Factors Relating to Doing Business in Hong Kong and China” set forth in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on July 16, 2024 (the “Annual Report”).
We currently operate in Hong Kong, and we intend to expand distribution of our products into China and other Asia markets as opportunities permit. While we have no current intention of expanding our physical presence or operations into China, we expect to become directly subject to all PRC laws with all risks described herein relating to the PRC to increase if we develop such physical presence or establish operations in China.
OneSolution Technology Inc. and its Hong Kong and British Virgin Islands subsidiaries are not required to obtain permission from the Chinese authorities including the China Securities Regulatory Commission, or CSRC, or Cybersecurity Administration Committee, or CAC, to operate or to issue securities to foreign investors. In making this determination, we relied on the legal opinion of Ravenscroft & Schmierer, a copy of which is attached as Exhibit 5 to the Company’s Amendment No. 2 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission on April 21, 2022 (the “Form 10”). However, in light of the recent statements and regulatory actions by the PRC government, such as those related to the extension of China’s oversight and control into Hong Kong, the promulgation of regulations prohibiting foreign ownership of Chinese companies operating in certain industries, which are constantly evolving, and anti-monopoly concerns, we may be subject to the risks of uncertainty of any future actions of the PRC government in this regard including the risk that the PRC government could disallow our holding company structure, which may result in a material change in our operations, including our ability to continue our existing holding company structure, carry on our current business, accept foreign investments, and offer or continue to offer securities to our investors. If our subsidiary or the holding company were required to obtain approvals in the future, or we erroneously conclude that approvals were not required, or were denied permission from Chinese authorities to list on U.S. exchanges, our operations may materially change, our ability to offer or continue to offer securities to our investors or to continue listing on a U.S. exchange may be adversely affected, and the value of our common stock may significantly decline or become worthless, which would materially affect the interest of the investors. We may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the CSRC, if we fail to comply with such rules and regulations, which could adversely affect the ability of the Company’s securities to continue to trade on the Over-the-Counter Bulletin Board, which may cause the value of our securities to significantly decline or become worthless.
There may be prominent risks associated with our operations being in Hong Kong and China. For example, as a U.S.-listed Hong Kong public company, we may face heightened scrutiny, criticism and negative publicity, which could result in a material change in our operations and the value of our common stock. It could also significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. Additionally, changes in Chinese internal regulatory mandates, such as the M&A rules, Anti-Monopoly Law, and the Data Security Law, and recent statements and regulatory actions by the PRC government such as those related to the use of variable interest entities, data security and anti-monopoly concerns, may target the Company's corporate structure and impact our ability to conduct business in Hong Kong and China, accept foreign investments, or list on an U.S. or other foreign exchange. For a detailed description of the risks facing the Company and the offering associated with our operations in Hong Kong and future operations in China, please refer to “Risk Factors – Risk Factors Relating to Doing Business in Hong Kong and China.” set forth in the Annual Report.
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The recent joint statement by the U.S. Securities and Exchange Commission (“SEC”) and Public Company Accounting Oversight Board (“PCAOB”), and the Holding Foreign Companies Accountable Act (“HFCAA”) all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. Trading in our securities may be prohibited under the HFCAA if the PCAOB determines that it cannot inspect or investigate completely our auditor, and that as a result an exchange may determine to delist our securities. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act which would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two thus reducing the time before our securities may be prohibited from trading or being delisted. On December 2, 2021, the SEC adopted rules to implement the HFCAA. Pursuant to the HFCAA, the PCAOB issued its report notifying the Commission that it is unable to inspect or investigate completely accounting firms headquartered in mainland China or Hong Kong due to positions taken by authorities in mainland China and Hong Kong. Our auditor is based in Kuala Lumpur, Malaysia and is subject to PCAOB’s inspection. It is not subject to the determinations announced by the PCAOB on December 16, 2021. However, in the event the Malaysian authorities subsequently take a position disallowing the PCAOB to inspect our auditor, then we would need to change our auditor to avoid having our securities delisted. Furthermore, due to the recent developments in connection with the implementation of the HFCAA, we cannot assure you whether the SEC or other regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. The requirement in the HFCAA that the PCAOB be permitted to inspect the issuer’s public accounting firm within two or three years, may result in the delisting of our securities from applicable trading markets in the U.S, in the future if the PCAOB is unable to inspect our accounting firm at such future time. Please see “Risk Factors – The Holding Foreign Companies Accountable Act requires the Public Company Accounting Oversight Board (PCAOB) to be permitted to inspect the issuer's public accounting firm within three years. This three-year period will be shortened to two years if the Accelerating Holding Foreign Companies Accountable Act is enacted. There are uncertainties under the PRC Securities Law relating to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC. If the U.S. securities regulatory agencies are unable to conduct such investigations, they may suspend or de-register our registration with the SEC and delist our securities from applicable trading market within the US.” set forth in the Annual Report.
In addition to the foregoing risks, we face various legal and operational risks and uncertainties arising from doing business in Hong Kong and China as summarized below and in “Risk Factors – Risks Factors Relating to Doing Business in Hong Kong and China.” set forth in the Annual Report.
| · | There are significant risks associated with our operations being based in Hong Kong. Adverse changes in economic and political policies of the Hong Kong and PRC government could have a material and adverse effect on overall economic growth in China and Hong Kong, which could materially and adversely affect our business. Please see “Risk Factors – We face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in Hong Kong currently, and in the future, in China, and the profitability of such business.” and “Substantial uncertainties and restrictions with respect to the political, legal and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business that we may be able to conduct in Hong Kong and the PRC, and accordingly on the results of our operations and financial condition.” set forth in the Annual Report. | |
| · | We are a holding company with operations conducted through our wholly owned subsidiary based in Hong Kong. This structure presents unique risks as our investors may never directly hold equity interests in our Hong Kong subsidiary and will be dependent upon contributions from our subsidiary to finance our cash flow needs. Any limitation on the ability of our subsidiary to make payments to us could have a material adverse effect on our ability to conduct business. We do not anticipate paying dividends in the foreseeable future; you should not buy our stock if you expect dividends. Please see “Risk Factors – Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other cash payments is limited.” set forth in the Annual Report. |
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| · | There is a possibility that the PRC could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business or for the payment of dividends. We rely on dividends from our Hong Kong subsidiary for our cash and financing requirements, such as the funds necessary to service any debt we may incur. Any such controls or restrictions may adversely affect our ability to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. Please see “Risk Factors – Our Hong Kong subsidiary may be subject to restrictions on paying dividends or making other payments to us, which may restrict its ability to satisfy liquidity requirements, conduct business and pay dividends to holders of our common stock.”; “Risk Factors - PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to our Hong Kong subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand business.”; “Risk Factors - Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other payments is limited.” and “Transfers of Cash to and from our Subsidiaries.” set forth in the Annual Report. | |
| · | PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our operating subsidiaries in Hong Kong. Substantial uncertainties exist with respect to the interpretation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations. Please see “Risk Factors – PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to our Hong Kong subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand business.” set forth in the Annual Report. | |
| · | In light of China’s extension of its authority into Hong Kong, we are subject to risks arising from the legal system in Hong Kong and China, including risks and uncertainties regarding the enforcement of laws and that rules and regulations in Hong Kong and China can change quickly with little or no advance notice. There is also a risk that the Chinese government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in Hong Kong or PRC based issuers, which could result in a material change in our operations and/or the value of our securities. We are currently not required to obtain approval from Chinese authorities (including the CSRC and the CAC) to operate or to list on U.S. exchanges. However, to the extent that the Chinese government exerts more control over offerings conducted overseas and/or foreign investment in Hong Kong-based issuers over time and if our subsidiary or the holding company were required to obtain approvals in the future, or we erroneously conclude that approvals were not required, or were denied permission from Chinese authorities to list on U.S. exchanges, our operations may materially change, our ability to offer or continue to offer securities to our investors or to continue listing on a U.S. exchange may be significantly limited or completely hindered, and the value of our common stock (including those we are registering for sale now or in the future) may significantly decline or become worthless, which would materially affect the interest of the investors. To the extent that we expand our operations into China, all of the foregoing risks will become more prominent and directly applicable to us, and significantly adverse policies from the PRC may force us to divest of such Chinese operations or face other risks of forfeiture. Please see “Risk Factors – We face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in Hong Kong currently, and in the future, in China, and the profitability of such business.”, “Substantial uncertainties and restrictions with respect to the political, legal and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business that we may be able to conduct in Hong Kong and the PRC, and accordingly on the results of our operations and financial condition.” and “The PRC government has significant oversight and discretion over the conduct of a Hong Kong company’s business operations or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, and may intervene with or influence our operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless, as the government deems appropriate to further regulatory, political and societal goals.” set forth in the Annual Report. | |
| · | Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment. |
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| · | We may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection, especially if we expand operations or physical presence into China. We may be liable for improper use or appropriation of personal information provided by our customers. Please see “Risk Factors – The PRC government has significant oversight and discretion over the conduct of a Hong Kong company’s business operations or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, and may intervene with or influence our operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless, as the government deems appropriate to further regulatory, political and societal goals.” set forth in the Annual Report. | |
| · | Under the Enterprise Income Tax Law of the PRC (“EIT Law”), we may be classified as a “Resident Enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders. Please see “Risk Factors – Our global income may be subject to PRC taxes under the PRC Enterprise Income Tax Law, which could have a material adverse effect on our results of operations.” set forth in the Annual Report. | |
| · | Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident Shareholders to personal liability, may limit our ability to acquire Hong Kong and PRC companies or to inject capital into our Hong Kong subsidiary, may limit the ability of our Hong Kong subsidiaries to distribute profits to us or may otherwise materially and adversely affect us. | |
| · | You may be subject to PRC income tax on dividends from us or on any gain realized on the transfer of shares of our common stock. Please see “Risk Factors – Dividends payable to our foreign investors and gains on the sale of our shares of common stock by our foreign investors may become subject to tax by the PRC.” set forth in the Annual Report. | |
| · | We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. Please see “Risk Factors – We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.” set forth in the Annual Report. | |
| · | We are organized under the laws of the State of Delaware as a holding company that conducts its business through a number of subsidiaries organized under the laws of foreign jurisdictions such as Hong Kong and the British Virgin Islands. This may have an adverse impact on the ability of U.S. investors to enforce a judgment obtained in U.S. Courts against these entities, bring actions in Hong Kong against us or our management or to effect service of process on the officers and directors managing the foreign subsidiaries. Please see “Risk Factors – Investors may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in Hong Kong based upon U.S. laws, including the federal securities laws or other foreign laws against us or our management. set forth in the Annual Report. | |
| · | U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China. | |
| · | There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits. Please see “Risk Factors – Our global income may be subject to PRC taxes under the PRC Enterprise Income Tax Law, which could have a material adverse effect on our results of operations.” set forth in the Annual Report. |
References in this Form 10-Q to the “Company,” “KRFG,” “we,” “us” and “our” refer to OneSolution Technology Inc., a Delaware company and all of its subsidiaries on a consolidated basis. Where reference to a specific entity is required, the name of such specific entity will be referenced.
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Transfers of Cash to and from Our Subsidiaries
OneSolution Technology Inc. is a Delaware holding company with no operations of its own. We conduct our operations in Hong Kong primarily through our operating subsidiary in Hong Kong, and most of our cash is maintained in Hong Kong Dollars. We may rely on dividends to be paid by our Hong Kong or British Virgin Islands subsidiaries to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. There is a possibility that the PRC could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business or for the payment of dividends. Any such controls or restrictions may adversely affect our ability to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. If our Hong Kong subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. To date, our subsidiaries have not made any transfers, dividends or distributions to OneSolution Technology Inc. and OneSolution Technology Inc. has not made any transfers, dividends or distributions to its subsidiaries.
OneSolution Technology Inc. is permitted under Delaware laws to provide funding to our subsidiaries in Hong Kong and the British Virgin Islands through loans or capital contributions without restrictions on the amount of the funds, subject to satisfaction of applicable government registration, approval and filing requirements. Our Hong Kong subsidiary, Powertech Corporation Limited (“Powertech Corp”), and British Virgin Islands subsidiary, Powertech Management Limited, are also permitted under the laws of Hong Kong and the British Virgin Islands to provide funding to OneSolution Technology Inc. through dividend distributions without restrictions on the amount of the funds. As of the date of this report, there has been no dividends or distributions among the parent company or the subsidiaries nor do we expect such dividends or distributions to occur in the foreseeable future among the parent company and its subsidiaries.
We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
Currently, the treasury function of OneSolution Technology Inc. and its subsidiaries is centralized and operated by the finance department of Powertech Corporation Limited located in Hong Kong under the management of its chief financial officer. In order to provide a process and guidance on collecting, accounting for, and safeguarding all cash and cash equivalents of OneSolution Technology Inc. and its subsidiaries, we have established a cash management policy that includes procedures on receiving funds, depositing funds, and proper documentation and recording of cash.
Subject to the Delaware General Corporation Law and our bylaws, our board of directors may authorize and declare a dividend to shareholders at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend the value of our assets will exceed our liabilities and we will be able to pay our debts as they become due. There is no further Delaware statutory restriction on the amount of funds which may be distributed by us by dividend.
Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us. The laws and regulations of the PRC do not currently have any material impact on transfer of cash from OneSolution Technology Inc. to our Hong Kong subsidiary or from our Hong Kong subsidiary to OneSolution Technology Inc. There are no restrictions or limitation under the laws of Hong Kong imposed on the conversion of Hong Kong dollar into foreign currencies and the remittance of currencies out of Hong Kong or across borders and to U.S. investors.
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There is a possibility that the PRC could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business or for the payment of dividends. Any such controls or restrictions may adversely affect our ability to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. Please see “Risk Factors – Our Hong Kong subsidiary may be subject to restrictions on paying dividends or making other payments to us, which may restrict its ability to satisfy liquidity requirements, conduct business and pay dividends to holders of our common stock.”; “Risk Factors – PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to our Hong Kong subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand business.”; “Risk Factors – Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other payments is limited.” set forth in the Annual Report.
Current PRC regulations permit PRC subsidiaries to pay dividends to Hong Kong subsidiaries only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. As of the date of this report, we do not have any PRC subsidiaries.
The PRC government also imposes controls on the conversion of Renminbi (“RMB”) into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations, we may be unable to pay dividends on our common stock.
Cash dividends, if any, on our common stock will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10%.
In order for us to pay dividends to our shareholders, we will rely on payments made from our Hong Kong subsidiary to OneSolution Technology Inc. If in the future we have PRC subsidiaries, certain payments from such PRC subsidiaries to our Hong Kong subsidiary will be subject to PRC taxes, including business taxes and Value-added tax. As of the date of this report, we do not have any PRC subsidiaries and our Hong Kong subsidiary has not made any transfers, dividends or distributions nor do we expect to make such transfer, dividends or distributions in the foreseeable future.
Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC entity. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including, without limitation, that (a) the Hong Kong entity must be the beneficial owner of the relevant dividends; and (b) the Hong Kong entity must directly hold no less than 25% share ownership in the PRC entity during the 12 consecutive months preceding its receipt of the dividends. In current practice, a Hong Kong entity must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by a PRC subsidiary to its immediate holding company. As of the date of this report, we do not have a PRC subsidiary. In the event that we acquire or form a PRC subsidiary in the future and such PRC subsidiary desires to declare and pay dividends to our Hong Kong subsidiary, our Hong Kong subsidiary will be required to apply for the tax resident certificate from the relevant Hong Kong tax authority. In such event, we plan to inform the investors through SEC filings, such as a current report on Form 8-K, prior to such actions. See “Risk Factors – Risk Factors Relating to Doing Business in Hong Kong and China.” set forth in the Annual Report.
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CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical facts, included in this Form 10-Q including, without limitation, statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s market projections, financial position, business strategy and the plans and objectives of management for future operations, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof); expansion and growth of the Company's business and operations; and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. However, whether actual results or developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, including general economic, market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control of the Company.
These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as “believes,” “anticipates,” “expects,” “estimates,” “plans,” “may,” “will,” or similar terms. These statements appear in a number of places in this filing and include statements regarding the intent, belief or current expectations of the Company, and its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations for its limited history; (ii) the Company's business and growth strategies; and (iii) the Company's financing plans. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Such factors that could adversely affect actual results and performance include, but are not limited to, the Company's limited operating history, potential fluctuations in quarterly operating results and expenses, government regulation, technological change and competition. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report.
Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ONESOLUTION TECHNOLOGY INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2024 AND MARCH 31, 2024
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| June 30, 2024 | March 31, 2024 | |||||||
| (Audited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Amount due from a related party | ||||||||
| Prepayment to suppliers | ||||||||
| Deposits, prepayments and other receivables | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Property and equipment | ||||||||
| Intangible assets | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities and other payables | ||||||||
| Accrued consulting and service fee | ||||||||
| Advance received from customer | ||||||||
| Amounts due to related parties | ||||||||
| Total current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred Stock, par value $, shares authorized, shares undesignated as of June 30, 2024 and March 31, 2024 | ||||||||
| Series C Preferred Stock, par value $, shares designated, shares issued and outstanding as of June 30, 2024 and March 31, 2024, respectively | ||||||||
| Common stock, par value $, shares authorized, and shares issued and outstanding as of June 30, 2024 and March 31, 2024, respectively | ||||||||
| Common stock to be issued | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Stockholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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ONESOLUTION TECHNOLOGY INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED JUNE 30, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”))
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenue, net | $ | $ | ||||||
| Cost of revenue | ( |
) | ( |
) | ||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Research and development expenses | ( |
) | ||||||
| Sales and marketing expenses | ( |
) | ( |
) | ||||
| General and administrative expenses | ( |
) | ( |
) | ||||
| Total operating expenses | ( |
) | ( |
) | ||||
| Loss from operation | ( |
) | ( |
) | ||||
| Other income (expense): | ||||||||
| Interest expenses | ( |
) | ||||||
| Interest income | ||||||||
| Sundry income | ||||||||
| Total other income (expense), net | ( |
) | ||||||
| LOSS BEFORE INCOME TAXES | ( |
) | ( |
) | ||||
| Income tax expense | ||||||||
| NET LOSS | ( |
) | ( |
) | ||||
| Other comprehensive loss: | ||||||||
| – Foreign currency adjustment loss | ( |
) | ( |
) | ||||
| COMPREHENSIVE LOSS | $ | ( |
) | $ | ( |
) | ||
| Net loss per share – Basic and Diluted* | ||||||||
| – Basic | $ | ) | $ | ) | ||||
| – Diluted | $ | ) | $ | ) | ||||
| Weighted average outstanding shares | ||||||||
| – Basic* | ||||||||
| – Diluted* | ||||||||
| * |
See accompanying notes to unaudited condensed consolidated financial statements.
| 11 |
ONESOLUTION TECHNOLOGY INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”))
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation - Property and equipment | ||||||||
| Depreciation - Right-of-use assets | ||||||||
| Amortization | ||||||||
| Non-cash accretion of lease liability | ||||||||
| Amortization of deferred financing cost | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Deposit, prepayments and other receivables | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued liabilities and other payables | ( | ) | ||||||
| Advances received from customer | ||||||||
| Accrued consulting and service fees | ||||||||
| Right-of-use assets and lease liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activity: | ||||||||
| Advances from related parties | ||||||||
| Net cash provided by financing activity | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 12 |
ONESOLUTION TECHNOLOGY INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED JUNE 30, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| Series C Preferred stock | Common stock | Common stock to be issued | Additional | Accumulated other comprehensive | Total | |||||||||||||||||||||||
| No. of | No. of | No. of | paid-in | income | Accumulated | stockholders’ | ||||||||||||||||||||||
| shares | Amount | shares | Amount | shares | Amount | capital | (loss) | losses | deficit | |||||||||||||||||||
| Balance as of April 1, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Foreign translation adjustment | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||
| Net loss for the period | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Balance as of April 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Share issued for services rendered | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign translation adjustment | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||
| Net loss for the period | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
*Adjusted retrospectively for amendment in the par value of common stock (refer Note 8)
See accompanying notes to unaudited condensed consolidated financial statements.
| 13 |
ONESOLUTION TECHNOLOGY INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”), except for number of shares)
NOTE － 1 BASIS OF PRESENTATION
These accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the interim period ended June 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2024. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with Management’s Discussion and Analysis, and the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024, filed with the SEC on July 16, 2024.
NOTE – 2 DESCRIPTION OF BUSINESS AND ORGANIZATION
OneSolution Technology Inc. (the “Company”) was incorporated in the State of Delaware on September 8, 1995, under the name of ARXA International Energy, Inc. On June 4, 2001, the Company changed its name to King Resources, Inc. Effective December 27, 2023, the Company changed its name to OneSolution Technology Inc., its current name. Currently, the Company through its subsidiaries, is engaged primarily in the rendering of smart power supply solutions and the related technical service as well as lifestyle products in Hong Kong.
Description of subsidiaries
| Name | Place of incorporation and kind of legal entity |
Principal activities and place of operation |
Particulars of registered/paid-up capital | Effective interest held | ||||
The Company and its subsidiaries are hereinafter referred to as the “Company”.
| 14 |
NOTE – 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying unaudited condensed consolidated financial statements and notes.
| · | Basis of presentation |
These accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
| · | Use of estimates and assumptions |
In preparing these unaudited condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted. Significant estimates in the period include the valuation and useful lives of intangible assets and deferred tax valuation allowance.
| · | Allowance for Expected Credit Losses |
ASU
No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires
entities to use a current lifetime expected credit loss methodology to measure impairments of certain financial assets. The
Company’s allowance for expected credit loss estimates the amount of expected future credit losses by analyzing accounts
receivables balance by age and applying historical write off and collection experience. The Company’s estimate separately
considers macroeconomics trends, specific circumstances and credit conditions of customer receivables. Account balances are written
off against the allowance when it is determined the receivable will not be recovered. There was
| · | Basis of consolidation |
The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
| · | Segment reporting |
ASC Topic 280, Segment Reporting establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in unaudited condensed consolidated financial statements. For the three months ended June 30, 2024 and 2023, the Company operates in one reportable operating segment in Hong Kong.
| · | Cash and cash equivalents |
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
| 15 |
| · | Accounts receivable |
Accounts receivable are recorded at the invoiced amount
and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is
extended based on evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts
receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified
amount are reviewed individually for collectability. At the end of fiscal year, the Company specifically evaluates individual customer’s
financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables.
The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to
make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are
taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against
the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does
not have any off-balance-sheet credit exposure related to its customers. As of June 30, 2024 and March 31, 2024, there was
| · | Intangible assets |
Intangible assets consist of trademarks and trade
names. The intangible assets are stated at the purchase cost and are amortized based on their economic benefits expected to be realized
and assessed for impairment annually. There was
| · | Property and equipment |
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational:
| Expected useful lives | ||
| Office equipment | ||
| Furniture and fixtures | ||
| Computer equipment |
Expenditures for repair and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
| · | Website development costs |
The Company accounts for its website development costs in accordance with ASC Topic 350-50, Website Development Costs. These costs, if any, are included in intangible assets in the accompanying unaudited condensed consolidated financial statements. Upgrades or enhancements that add functionality are capitalized while other costs during the operating stage are expensed as incurred. The Company amortizes the capitalized website development costs over an estimated useful life of five years.
| 16 |
| · | Impairment of long-lived assets |
In accordance with the provisions of ASC Topic 360,
Impairment or Disposal of Long-Lived Assets, all long-lived assets such as property and equipment owned and held by the Company
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted
cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been
| · | Revenue recognition |
The Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”) using the full retrospective transition method. The Company’s adoption of ASU 2014-09 did not have a material impact on the amount and timing of revenue recognized in its unaudited condensed consolidated financial statements.
Under ASU 2014-09, the Company recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| · | identify the contract with a customer; |
| · | identify the performance obligations in the contract; |
| · | determine the transaction price; |
| · | allocate the transaction price to performance obligations in the contract; and |
| · | recognize revenue as the performance obligation is satisfied. |
For sale of goods, revenue is recognized from the sale of products upon delivery to the customers at a point in time, when the title and risk of loss are fully transferred to the customers.
The Company’s services revenue is derived from performing the research and development and technology development for the customers under fixed-price contracts. Revenue is recognized at a point in time upon completion of the service.
Costs incurred in connection with sales of goods, are included in cost of revenue which consist primarily of costs associated with the goods sold.
Costs incurred in connection with the research and development, are included in cost of revenue. Product development costs charged to billable projects are recorded as cost of revenue, which consist primarily of costs associated with personnel, supplies and materials.
Costs incurred in connection with the technology service agreement, are included in cost of revenue which consist primarily of costs associated with labor cost.
| 17 |
| · | Income taxes |
The Company adopted the ASC Topic 740, Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the unaudited condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the unaudited condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
| · | Uncertain tax positions |
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the three months ended June 30, 2024 and 2023.
| · | Stock based compensation |
The Company accounts for non-employee stock-based compensation in accordance with the guidance of ASC Topic 718, Compensation—Stock Compensation, which requires all share-based payments to non-employees to be recognized in the financial statements based on their fair values as at date that the service is provided. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital.
| · | Net loss per share |
The Company calculates net loss per share in accordance with ASC Topic 260, Earnings per Share. Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
| · | Foreign currencies translation |
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the unaudited condensed consolidated statement of operations.
| 18 |
The reporting currency of the Company is United States Dollar ("US$") and the accompanying unaudited condensed consolidated financial statements have been expressed in US$. In addition, the Company is operating in Hong Kong and maintains its books and record in its local currency, Hong Kong Dollars (“HKD”), which is it’s a functional currency, being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.
Translation of amounts from HKD into US$ has been made at the following exchange rates for the period ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end HKD:US$ exchange rate | ||||||||
| Annualized average HKD:US$ exchange rate | ||||||||
| · | Comprehensive income |
ASC Topic 220, Comprehensive Income, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying unaudited condensed consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
| · | Leases |
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use assets may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
In accordance with the guidance in ASC Topic 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
The Company made the policy election to not separate lease and non-lease components. Each lease component and the related non-lease components are accounted for together as a single component.
| 19 |
| · | Deferred financing costs |
In accordance with ASC Topic 835-20, Interest, Capitalization of Interest, costs related to the issuance of debt, including costs incurred for revolving credit facilities which is considered to be applicable to the commitment shares for an equity purchase agreement, are deferred and recorded as an asset on the balance sheet. In accordance with ASC 310 -20 Receivables, Nonrefundable Fees and Other Costs, these deferred financing costs are amortized to interest expense over the life of the related debt instrument.
The Company regularly reviews the carrying value of the deferred financing costs to determine whether there are any events or changes in circumstances that may indicate impairment. If such events or changes in circumstances are present, the Company assesses the recoverability of the deferred financing costs by comparing the carrying amount of the asset to the future unamortized interest expense that the asset is expected to offset. If the carrying amount of the deferred financing costs exceeds this amount, the Company recognizes an impairment loss equal to the difference.
Amortization expense for the three months ended June
30, 2024 and 2023 were $
| · | Related parties |
The Company follows the ASC Topic 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The unaudited condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of unaudited condensed consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
| · | Commitments and contingencies |
The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
| 20 |
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s unaudited condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
| · | Fair value of financial instruments |
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposit, prepayments and other receivables approximate their fair values because of the short maturity of these instruments.
| · | Recent accounting pronouncements |
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
| 21 |
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and believe the future adoption of any such pronouncements may not be expected to cause a material impact on its financial condition or the results of its operations.
NOTE – 4 GOING CONCERN UNCERTAINTIES
The accompanying unaudited condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company incurred a recurring loss from prior years
and suffered from an accumulated deficit of $
These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
NOTE – 5 PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
| June 30, | March 31, | |||||||
| 2024 | 2024 | |||||||
| Office equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Computer equipment | ||||||||
| Foreign translation difference | ||||||||
| Property and equipment gross | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Less: foreign translation difference | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense for the three months ended June
30, 2024 and 2023 were $
NOTE – 6 INTANGIBLE ASSETS
As of June 30, 2024 and March 31, 2024, intangible assets consisted of the following:
| Useful life | June 30, 2024 | March 31, 2024 | ||||||||
| At cost: | ||||||||||
| Website development cost | $ | $ | ||||||||
| Trademarks | ||||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||||
| Foreign translation adjustment | ||||||||||
| $ | $ | |||||||||
| 22 |
Amortization of intangible assets for the three months
ended June 30, 2024 and 2023 were $
As of June 30, 2024, the estimated amortization expense for intangible assets for each of the succeeding five years and thereafter is as follows:
| Year ending June 30: | Amount | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
NOTE – 7 AMOUNTS DUE FROM (TO) RELATED PARTIES
The amount due from a related party represented
temporary advances to the related party for research and development conducted. The amount due from a related party was $
The amount due to related parties was $
NOTE – 8 STOCKHOLDERS’ DEFICIT
The Company is authorized to issue two classes
of capital stock, up to
The Company is authorized to issue shares of preferred stock, with a par value of $0.0001. The Company has one class of Preferred Stock designated with shares authorized as Series C Preferred Stock, with a par value of $ per share.
The Company is authorized to issue shares of common stock, with a par value of $.
On December 27, 2023, the Company filed an Amended and Restated Certificate of Incorporation effectuating all of the foregoing corporate actions. The Amended and Restated Certificate of Incorporation also confirmed the cancellation of the Series A Preferred Stock and Series B Preferred Stock. The Company amended the Company’s Certificate of Incorporation to increase the authorized capital stock from 6,085,000,000, consisting of 6,000,000,000 shares of common stock, par value $0.001, and 85,000,000 shares of preferred stock, to 36,100,000,000 consisting of 36,000,000,000 shares of common stock, par value $0.0001, and 100,000,000 shares of preferred stock, par value $0001. This has been adjusted for retrospectively.
Series C Preferred Stock
The Company has designated shares of Series C Preferred Stock. Each one share of Series C Convertible Preferred Stock converts into 100 shares of common stock of the Company at the election of the holder, subject to equitable adjustments.
As of June 30, 2024 and March 31, 2024, the Company had shares of Series C Preferred Stock issued and outstanding.
| 23 |
Common Stock
On April 12, 2024, the Company issued shares of its common stock to settle the consulting and service fee to consultants who rendered services to the Company.
As of June 30, 2024 and March 31, 2024, the Company had a total of shares and shares of common stock issued and outstanding, respectively.
The following table sets forth the computation of basic and diluted net loss per share for the three months ended June 30, 2024 and 2023:
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding: | ||||||||
| – Basic | ||||||||
| – Diluted | ||||||||
| Net loss per share: | ||||||||
| – Basic | $ | ) | $ | ) | ||||
| – Diluted | $ | ) | $ | ) | ||||
____________________
| # | Less than $0.001 |
For the three months ended June 30, 2024 and 2023, diluted net loss per share is equal to basic net loss per share, as the inclusion of common stock equivalents would have been antidilutive.
NOTE – 10 INCOME TAX
For the three months ended June 30, 2024 and 2023, the local (“United States of America”) and foreign components of loss before income taxes comprised of the following:
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Tax jurisdiction from: | ||||||||
| - Local | $ | ( | ) | $ | ( | ) | ||
| - Foreign, including | ||||||||
| British Virgin Islands | ( | ) | ( | ) | ||||
| Hong Kong | ( | ) | ( | ) | ||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
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The provision for income taxes consisted of the following:
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Current tax: | ||||||||
| - Local | $ | $ | ||||||
| - Foreign | ||||||||
| Deferred tax | ||||||||
| - Local | ||||||||
| - Foreign | ||||||||
| Income tax expense | $ | $ | ||||||
The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company mainly operates in Hong Kong and is subject to taxes in the jurisdictions in which it operates, as follows:
United States of America
OneSolution Technology Inc. is registered in the State of Delaware and is subject to tax laws of the United States of America. The U.S. corporate income tax rate is 21% effective January 1, 2018. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income tax provision. The Company has not accrued for interest or penalties as they were not material to its results of operations for the periods presented.
As of June 30, 2024, the operations in the United
States of America incurred $
BVI
Under the current BVI law, the Company is not subject to tax on income.
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Hong Kong
The Company’s subsidiary operating in Hong Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from 8.25% to 16.5% on the estimated assessable profits arising in Hong Kong during the current period after deducting a tax concession for the tax year. The reconciliation of income tax rate to the effective income tax rate for the three months ended June 30, 2024 and 2023 is as follows:
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
| Statutory income tax rate | ||||||||
| Income tax expense at statutory rate | ( | ) | ( | ) | ||||
| Tax effect of non-deductible items | ||||||||
| Tax effect of non-taxable items | ( | ) | ( | ) | ||||
| Valuation allowance | ||||||||
| Income tax expense | $ | $ | ||||||
As of June 30, 2024, the operations in Hong Kong incurred
$
The following table sets forth the significant components of the deferred tax assets and liabilities of the Company as of June 30, 2024 and March 31, 2024:
| June 30, | March 31, | |||||||
| 2024 | 2024 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforward, from | ||||||||
| US tax regime | $ | $ | ||||||
| Hong Kong tax regime | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
The Company filed income tax returns in the United States federal tax jurisdiction and the Delaware state tax jurisdiction. Since the Company is in a loss carryforward position, it is generally subject to examination by federal and state tax authority for all tax years in which a loss carryforward is available.
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NOTE – 11 RELATED PARTY TRANSACTIONS
From time to time, the Company’s related companies and director advanced working capital funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and is repayable on demand.
During the three months ended June 30, 2024 and 2023,
the Company outsourced and incurred technical consultancy services of $
During the three months ended June 30, 2024 and
2023, the Company earned technical consultancy services income of $
During the three months ended June 30, 2024 and
2023, the Company incurred consulting fee expenses of $
The amount due from a related party
represented temporary advances to the related party for research and development conducted. The amount due from a related party was
$
Apart from the transactions and balances detailed above and elsewhere in these accompanying unaudited condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.
NOTE – 12 CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major customers
For the three months ended June 30, 2024, there was
a single customer exceeding 10% of the Company’s revenue. This customer is located in Hong Kong, and accounted for
For the three months ended June 30, 2023, there was a single customer exceeding
10% of the Company’s revenue. This customer is located in Hong Kong, and accounted for
(b) Major vendors
For the three months ended June 30, 2024, there was
a single vendor exceeding 10% of the Company’s cost of revenue. This vendor is located in PRC, and accounted for
For the three months ended June 30, 2023, there
was a single vendor exceeding 10% of the Company’s cost of revenue. This vendor is located in Hong Kong, and accounted for
(c) Economic and political risk
The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations. The Company may also be exposed to the broader global economic conditions.
The present global economic climate with rising global tensions, rising costs and fuel shortage which potentially could escalate and result in global inflation may also impact the Company’s business, financial condition, and results of operations.
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(d) Exchange rate risk
The Company cannot guarantee that the current exchange rate will remain steady; therefore, there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
(e) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s policy is to ensure that it has sufficient cash to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. A key risk in managing liquidity is the degree of uncertainty in the cash flow projections. This is presently managed through shareholder financial support. If future cash flows are fairly uncertain, the liquidity risk increases.
NOTE – 13 COMMITMENTS AND CONTINGENCIES
As of June 30, 2024, the Company has no material commitments or contingencies.
NOTE – 14 SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before unaudited condensed consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after June 30, 2024, up through the date the Company issued the unaudited condensed consolidated financial statements. The Company had no material recognizable subsequent events since June 30, 2024.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our Company’s financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in the report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors. See “Cautionary Note Concerning Forward-Looking Statements” on page 9.
Unless otherwise noted, all currency figures quoted as “U.S. dollars”, “dollars” or “$” refer to the legal currency of the United States. Throughout this report, assets and liabilities of the Company’s subsidiaries are translated into U.S. dollars using the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates prevailing during the period. The gains and losses resulting from the translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.
Overview
We were incorporated in the state of Delaware on September 8, 1995, under the name ARXA International Energy, Inc. On June 4, 2001, we changed our name to King Resources, Inc. Effective December 27, 2023 we changed our name to OneSolution Technology Inc., our current name.
OneSolution Technology Inc. is a holding company that, through its subsidiaries, is engaged primarily in the development of smart power supply solutions and products and rendering of related technical service as well as lifestyle products in Hong Kong. We operate our business through our wholly owned subsidiary Powertech Corporation Limited (“Powertech Corp”). Powertech Corp commenced operation in Hong Kong on January 21, 2015 and sold our products primarily in Asia. We are not required to obtain permission from the Chinese authorities to operate or to issue securities to foreign investors. The holding company of Powertech Corp, Powertech Management Limited (“Powertech”) was organized as a private limited liability company on December 3, 2021, in British Virgin Islands. We acquired Powertech on December 15, 2021.
We have five wholly-owned subsidiaries: (i) OneSolution Holdings Limited (“OSH”), a BVI limited liability company formed in August 2022; (ii) Powertech Management Limited (“Powertech”), a BVI limited liability company formed in December 2021; (iii) Powertech Corporation Limited (“Powertech Corp”), a Hong Kong limited liability company formed in January 2015; (iv) OneSolution Management Limited (“OSM”), a BVI limited liability company formed in August 2022; and (v) OneSolution Innotech Limited (“OSIL”), a Hong Kong limited liability company formed in September 2022, and we have two business focuses:
Powertech Corp focuses on (i) research and development solutions; (ii) sales of own brand smart power supply products, and (iii) development of IoT products across our smart home, smart office and smart fitness ecosystem;
OSIL has entered into several partnership agreements with brands selling innovative and lifestyle products. Currently, OSIL acts as the distributor of five brands, namely Aqigo, Brusheva, Qivation, Paudin and Team Cuisine.
For the three months ended June 30, 2024 and 2023, we reported a net loss of $161,652 and $140,360, respectively. As of June 30, 2024, and March 31, 2024, we had current assets of $136,874 and $132,876, respectively, and current liabilities of $3,335,885 and $3,165,453, respectively.
Our unaudited condensed consolidated financial statements for the three months ended June 30, 2024 and 2023 were prepared assuming that we will continue as a going concern. Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions and public offerings, capital leases and short-term and long-term debts.
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We are not required to obtain permission from the Chinese authorities to operate or to issue securities to foreign investors.
Our corporate organization chart is as below:
Results of Operations
Comparison of the three months ended June 30, 2024 and 2023
The following table sets forth certain operational data for the periods indicated:
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenue, net | $ | 19,189 | $ | 12,757 | ||||
| Cost of revenue | (11,513 | ) | (7,654 | ) | ||||
| Gross profit | 7,676 | 5,103 | ||||||
| Operating expenses: | ||||||||
| Research and development expenses | (66,000 | ) | – | |||||
| Sales and marketing expenses | (66,000 | ) | (3,036 | ) | ||||
| General and administrative expenses | (37,440 | ) | (41,804 | ) | ||||
| Loss from operation | (161,764 | ) | (39,737 | ) | ||||
| Other income (expense), net | 112 | (100,623 | ) | |||||
| Loss before income taxes | (161,652 | ) | (140,360 | ) | ||||
| Income tax expense | – | – | ||||||
| Net loss | $ | (161,652 | ) | $ | (140,360 | ) | ||
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Revenue
During the three months ended June 30, 2024, the following customer accounted for 10% or more of our total net revenue:
| Three months ended June 30, 2024 | June 30, 2024 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Marvel Digital Group Limited | $ | 19,189 | 100% | $ | 0 | |||||||
During the three months ended June 30, 2023, the following customer accounted for 10% or more of our total net revenue:
| Three months ended June 30, 2023 | June 30, 2023 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Marvel Digital Group Limited | $ | 12,757 | 100% | $ | 12,762 | |||||||
Cost of Revenue
Cost of revenue for the three months ended June 30, 2024 and 2023, was $11,513 and $7,654, respectively. The increase was primarily attributable to one more month of outsourced costs which was incurred for the three months ended June 30, 2024.
Gross Profit
We achieved a gross profit of $7,676 and $5,103 for the three months ended June 30, 2024 and 2023, respectively. The increase in gross profit was attributable to increase in the revenue from technical consultancy services.
Research and Development Expenses (“R&D”)
Research and development expenses was $66,000 and $0 for the three months ended June 30, 2024 and 2023, respectively. The increase in expenses was attributable to the increase in R&D activity associated with our smart chargers, power banks and IoT products development.
Sales and Marketing Expenses
Sales and marketing expenses was $66,000 and $3,036 for the three months ended June 30, 2024 and 2023, respectively. The expenses primarily include consulting fees The increase in expenses was primarily attributable to the increase in consulting fees.
General and Administrative Expenses (“G&A”)
General and administrative expenses was $37,440 and $41,804 for the three months ended June 30, 2024 and 2023, respectively. These expenses primarily include consulting fees, personnel related expenses, as well as costs incurred on other professional fees incurred in connection with general operations of the Company. The G&A expenses decreased by approximately $4,364 in the three months ended June 30, 2024 from $41,804 in the three months ended June 30, 2023. The decrease was primarily attributable to the decrease in accounting fees, dues & subscriptions, government charges and membership expenses, offset by an increase in legal and professional fees.
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Other income (expense), net
Other income (expense), net was $112 and $(100,623) for the three months ended June 30, 2024 and 2023, respectively. The decrease was attributable to no amortization of deferred financing cost on commitment shares issued for capital funding during the three months ended June 30, 2024.
Income Tax Expense
No income tax expense incurred during the three months ended June 30, 2024 and 2023.
Net loss
As a result of the above, we reported net loss of $161,652 for the three months ended June 30, 2024, as compared to $140,360 for the three months ended June 30, 2023. The increase in net loss was mainly attributable to the increase in R&D expenses, sales and marketing expenses and offset by decrease of G&A expenses as mentioned above.
Liquidity and Capital Resources
The following table summarizes the key components of our cash flows for the three months ended June 30, 2024 and 2023.
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (37,223 | ) | $ | (24,919 | ) | ||
| Net cash used in investing activity | $ | – | $ | – | ||||
| Net cash provided by financing activities | $ | 47,525 | $ | 24,773 | ||||
Net Cash Used In Operating Activities
For the three months ended June 30, 2024, net cash used in operating activities was $37,223, which consisted primarily of a net loss of $161,652, an increase in accrued liabilities and other payables of $23,146, an increase in account payables of $122, an increase in accrued consulting and service fee of $99,000, offset by an increase in deposits, prepayments and other receivables of $226, plus non-cash items such as, depreciation of $648 and amortization of $1,126.
For the three months ended June 30, 2023, net cash used operating activities was $24,919, which consisted primarily of a net loss of $140,360, an increase in account receivables of $12,795, a decrease in accrued liabilities and other payables of $266,188, and a decrease of lease liabilities of $10,333, offset by, a decrease in deposits, prepayments and other receivables of $2,798, an increase in advance received from Mirum Digital Media Limited of $289,369, plus non-cash items such as, depreciation on Property and equipment of $646, depreciation on Right-of-use assets of $9,825, amortization of $1,123, non-cash lease expenses of $371, and amortization of deferred financing cost of $100,625.
We expect to continue to rely on cash generated through financing from our existing shareholders and private placements of our securities to finance our operations and future acquisitions.
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Net Cash Used in Investing Activity
For the three months ended June 30, 2024, no net cash was generated from investing activities.
For the three months ended June 30, 2023, no net cash was generated from investing activities.
Net Cash Provided by Financing Activity
For the three months ended June 30, 2024, net cash provided by financing activities was $47,525, which consisted of advances from related parties and accrued consulting expenses incurred.
For the three months ended June 30, 2023, net cash provided by financing activities was $24,773, which consisted of advances from related parties.
Going Concern
Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital may include the sale of equity securities, which include common stock sold in private transactions, capital leases and short-term and long-term debts. While we believe that we will obtain external financing and the existing shareholders will continue to provide the additional cash to meet our obligations as they become due, there can be no assurance that we will be able to raise such additional capital resources on satisfactory terms. The Company incurred a recurring loss from prior years and suffered from an accumulated deficit of $9,553,122 at June 30, 2024. The continuation as a going concern is dependent upon improving profitability and obtaining the continued financial support from the stockholders and external financing to provide the additional cash to meet the Company’s obligations as they become due. Whilst management believes that external financing can be obtained, there can be no assurance on the success of raising such additional capital resources on terms satisfactory to the Company.
Material Cash Requirements
We have not achieved profitability since our inception, and we expect to continue to incur net losses for the foreseeable future. We expect net cash expended in 2024 to be significantly higher than 2023. As of June 30, 2024, we had an accumulated deficit of $9,553,122. Our material cash requirements are highly dependent upon the additional financial support from our major shareholders in the next 12 - 18 months.
Off-Balance Sheet Arrangements
We are not party to any off-balance sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.
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Critical Accounting Policies and Estimates
The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying unaudited condensed consolidated financial statements and notes.
| · | Impairment of long-lived assets |
In accordance with the provisions of ASC Topic 360, Impairment or Disposal of Long-Lived Assets, all long-lived assets such as property and equipment owned and held by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the three months ended June 30, 2024 and 2023.
| · | Revenue recognition |
The Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”) using the full retrospective transition method. The Company’s adoption of ASU 2014-09 did not have a material impact on the amount and timing of revenue recognized in its unaudited condensed consolidated financial statements.
Under ASU 2014-09, the Company recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| · | identify the contract with a customer; | |
| · | identify the performance obligations in the contract; | |
| · | determine the transaction price; | |
| · | allocate the transaction price to performance obligations in the contract; and | |
| · | recognize revenue as the performance obligation is satisfied. |
For sale of goods, revenue is recognized from the sale of products upon delivery to the customers at a point in time, when the title and risk of loss are fully transferred to the customers.
The Company’s services revenue is derived from performing the research and development and technology development for the customers under fixed-price contracts. Revenue is recognized at a point in time upon completion of the service.
Costs incurred in connection with sales of goods, are included in cost of revenue which consist primarily of costs associated with the goods sold.
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Costs incurred in connection with the research and development, are included in cost of revenue. Product development costs charged to billable projects are recorded as cost of revenue, which consist primarily of costs associated with personnel, supplies and materials.
Costs incurred in connection with the technology service agreement, are included in cost of revenue which consist primarily of costs associated with labor cost.
| · | Recent accounting pronouncements |
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and believe the future adoption of any such pronouncements may not be expected to cause a material impact on its financial condition or the results of its operations.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer. Under the direction of our Chief Executive Officer and our Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that they were not effective as of June 30, 2024. Management has mitigated this risk by the engagement of an external consultant to ascertain compliance with the regulatory reporting requirements.
However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
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Management’s Annual Report On Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Management, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of June 30, 2024. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of June 30, 2024, as a result of the following material weaknesses:
| · | Because of the Company’s limited resources, there are limited controls over information processing. | |
| · | where limitations on segregation of duties exist. In order to remedy this situation, we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will reassess this matter in the following year to determine whether improvement in segregation of duty is feasible. | |
| · | There is a lack of formal policies and procedures necessary to adequately review significant accounting transactions. The Company utilizes a third-party independent contractor for the preparation of its financial statements. Although the financial statements and footnotes are reviewed by our management, we do not have a formal policy to review significant accounting transactions and the accounting treatment of such transactions. The third-party independent contractor is not involved in the day to day operations of the Company and may not be provided information from management on a timely basis to allow for adequate reporting/consideration of certain transactions. |
Our management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. Management has mitigated this risk by the engagement of an external consultant.
Inherent Limitations
Because of its inherent limitations, our disclosure controls and procedures may not prevent or detect misstatements. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the period ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. legal proceedings.
We are not a party to any legal or administrative proceedings that we believe, individually or in the aggregate, would be likely to have a material adverse effect on our financial condition or results of operations.
ITEM 1A. Risk factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
ITEM 3. Defaults upon Senior securities.
None.
ITEM 4. Mine Safety disclosures.
Not applicable.
ITEM 5. other information.
During the quarter ended June
30, 2024, no director or officer of the Company
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ITEM 6. Exhibits.
| Exhibit No. | ||
| 3.1 | Amended and Restated Certificate of Incorporation (1) | |
| 3.2 | Bylaws (2) | |
| 4.1 | Specimen certificate evidencing shares of Common Stock (3) | |
| 4.2 | Description of Securities (1) | |
| 5 | Opinion of Ravenscroft & Schmierer (4) | |
| 10.1 | Share Exchange Agreement dated December 15, 2021, by and among King Resources, Inc., Powertech Management Limited, a British Virgin Island corporation, FU Wah and Silver Bloom Properties Limited (2) | |
| 10.2 | King Resources, Inc. 2022 Stock Incentive Plan (5) | |
| 21 | Subsidiaries (1) | |
| 31.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 * | |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted in iXBRL, and included in exhibit 101). | |
_______________________
| * | Filed herewith |
| (1) | Incorporated by reference to the Exhibits of the Annual Report on Form 10-K filed with the Securities and Exchange Commission on July 16, 2024. |
| (2) | Incorporated by reference to the Exhibits of the Registration Statement on Form 10 filed with the Securities and Exchange Commission on February 14, 2022. |
| (3) | Incorporated by reference to the Exhibits of Amendment No. 1 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission on March 25, 2022. |
| (4) | Incorporated by reference to the Exhibits of Amendment No. 2 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission on April 21, 2022. |
| (5) | Incorporated by reference to Exhibit 99.1 of the Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 9, 2024. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ONESOLUTION TECHNOLOGY INC. | ||
| By: | /s/ Wong Nga Yin Polin | |
| Name: Wong Nga Yin Polin | ||
Title: Chief Executive Officer, Chief Financial Officer, Secretary and Director | ||
Date: August 19, 2024
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