6-K
Cordyceps Sunshine Biotech Holdings Co., Ltd. (RAJAF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TORULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2023
Commission File Number: 333-269315
Cordyceps
Sunshine Biotech Holdings Co., Ltd.
(Translation of registrant’s name into English)
6th Fl., No. 15, Lane 548, Ruiguang Road,
Neihu District, Taipei City, Taiwan
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Entry into a Material Definitive Agreement.
On September 28, 2023, Cordyceps Sunshine Biotech Holdings Co., Ltd. (the “Company”), entered into a share purchase agreement (the “Agreement”) with Mr. Xusheng Niu (“Mr. Niu”), Cordyceps Sunshine Biotech Co., Ltd. (Hong Kong), a company incorporated under the laws of Hong Kong (the “Target”), and Chengdu Skyherb Biotechnology Co., Ltd. (China), a wholly foreign-owned enterprise formed under the laws of the People’s Republic of China and a wholly-owned subsidiary of the Target. Pursuant to the Agreement, the Company agreed to sell, and Mr. Niu agreed to purchase, 100% equity interest in the Target, in exchange for cancelling the debt (the “Transaction”) in a total amount of $1.152,328.5 (RMB8,411,156.95) (the “Debt”). The Debt was resulted from several loan agreements entered into by the Company and Mr. Niu since June 29, 2020. Pursuant to those loan agreement, Mr. Niu borrowed and made payments to fund the Company. Upon the closing of the Transaction, Mr. Niu agreed to release the Company from the obligation to repay the Debt and the Debt shall be deemed paid in full.
The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Agreement, which is filed as Exhibit 10.1.
The following diagram illustrates the corporate structure of the Company after giving effect to the Transaction:
The Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company for the nine months ended September 30, 2023 and 2022 and the Unaudited Consolidated Financial Statements of the Company for the nine months ended September 30, 2023 and 2022 are attached as Exhibit 99.1 and Exhibit 99.2, respectively, to this Report of Foreign Private Issuer on Form 6-K.
Exhibit Index
| Exhibit No. | Description |
|---|---|
| 10.1 | Share Purchase Agreement, dated September 28, 2023 |
| 99.1 | Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company |
| 99.2 | Unaudited Consolidated Financial Statements of the Company |
| 101.INS | Inline XBRL Instance 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 as Inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements 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.
| Date: November 13, 2023 | Cordyceps Sunshine Biotech Holdings Co., Ltd. | |
|---|---|---|
| By: | /s/ Szu Hao Huang | |
| Name: | Szu Hao Huang | |
| Title: | Director, Chief Executive Officer, <br><br>Chief Financial Officer |
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Exhibit 10.1
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this “Agreement”), dated as of September 28,2023 (the “Effective Date”), is entered into among Cordyceps Sunshine Biotech Co., Ltd. (Hong Kong), a company incorporated under the laws of Hong Kong (the “Target”), Cordyceps Sunshine Biotech Holdings Co., Ltd., a company incorporated under the laws of Cayman Islands (the “Seller” or the “Debtor”, as the case may be), Mr. Xusheng Niu (the “Buyer” or the “Creditor”, as the case may be) and Chengdu Skyherb Biotechnology Co., Ltd. (China), a wholly foreign-owned enterprise formed under the laws of the People’s Republic of China and a wholly-owned subsidiary of the Target (the “Cordyceps Sunshine WFOE”) . Capitalized terms used in this Agreement have the meanings given to such terms herein. Each of the Target, the Seller, the Buyer or the Creditor, as the case may be, and the Debtor may be referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, the Seller owns 100% equity interest in the Target;
WHEREAS, since June 29, 2020, the Creditor and the Debtor entered into certain loan agreements. Pursuant to those loan agreement, the Creditor continued to borrow and make payments to fund the Debtor. As of the date of this Agreement, the Debtor owes the Creditor a total amount of $1.152,328.5 (RMB8,411,156.95) (the “Debt”);
WHEREAS, the Seller now wishes to sell 100% equity interest in the Target to settle the Debt subject to the terms and conditions as set forth herein.
NOW,THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Purchase and sale
Section1.01 Purchase and Sale. Subject to the terms and conditions set forth herein, at the Closing (as defined in Section 3.01), the Seller agrees to sell, and the Buyer agrees to purchase, 100% equity interest of the Target, in exchange for cancelling the Debt pursuant to Article II of this Agreement. This Agreement and any other agreements, instruments, and documents required to be delivered in connection with this Agreement or at the Closing are collectively referred to as the “TransactionDocuments”.
ARTICLE II
cancellation and release of debt
Section2.01 Cancellation and Release of Debt. Effective as of the Effective Date, the Parties acknowledge and agree that the Debt is hereby cancelled in all respects and shall be of no further force or effect and, to the extent payable, shall be deemed paid in full. The Creditor represents and warrants that the Debt represents the total amount due or possibly due to the Creditor by the Debtor and there are no other loans or amounts due to the Creditor by the Debtor.
ARTICLE III
CLOSING
Section3.01 Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place on a date mutually agreed by the parties after the date all of the conditions described in Section 3.02 are met (the “Closing Date”).
Section3.02 Conditions to Closing. The Target, the Seller and the Buyer shall obtain any and all regulatory approval as required in connection with the transactions contemplated by this Agreement.
Section3.03 Additional Agreement. This Agreement shall be effective upon its execution by each of the Parties hereto. Each of the Parties hereto shall execute such documents and perform such further acts as may be reasonably required to carry out the provisions hereof and the actions contemplated hereby. No Party shall, and each Party shall cause their respective Affiliates not to, in each case, whether directly or indirectly, for itself or through or on behalf of any other Party not to, make any disparaging comments (or induce or encourage others to make disparaging comments) about any other Party or its officers, directors, shareholders, employees and agents, or their respective operations, financial condition, prospects, products or services.
ARTICLE IV
Representations and warranties of seller
Seller represents and warrants to Buyer that the statements contained in this Article ARTICLE IV are true and correct as of the date hereof. For purposes of this Article ARTICLE IV, “Seller’s knowledge,” “knowledge of Seller” and any similar phrases shall mean the actual or constructive knowledge of any director or officer of Seller, after due inquiry.
Section4.01 Organization and Authority of Seller. The Seller, if an entity, is a company duly organized and validly existing under the laws (as defined in Section 4.03) of the Cayman Islands. The Seller has full corporate power and authority to enter into this Agreement and the other Transaction Documents to which the Seller is a party, to carry out its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Seller of this Agreement and any other Transaction Document to which the Seller are a party, the performance by the Seller of its obligations hereunder and thereunder, and the consummation by the Seller of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the Seller. This Agreement and each Transaction Document to which the Seller are a party constitute legal, valid, and binding obligations of the Seller enforceable against the Seller in accordance with their respective terms.
Section4.02 Organizations, Authority, and Qualification of theTarget and the Cordyceps Sunshine WFOE. The Target is duly organized and validly existing under the Laws of the Hong Kong and has full corporate power and authority to own, operate, or lease the properties and assets now owned, operated, or leased by it and to carry on its business as it has been and is currently conducted. The Target is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business as currently conducted makes such licensing or qualification necessary. The Target owns 100% equity interest in the Cordyceps Sunshine WFOE. The Cordyceps Sunshine WFOE is duly organized and validly existing under the Laws of the PRC and has full corporate power and authority to own, operate, or lease the properties and assets now owned, operated, or leased by it and to carry on its business as it has been and is currently conducted. The Cordyceps Sunshine WFOE is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business as currently conducted makes such licensing or qualification necessary.
Section4.03 No Conflicts or Consents. The execution, delivery, and performance by the Seller of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) violate or conflict with any provision of the certificate of incorporation, by-laws, or other governing documents of the Seller or the Target; (b) violate or conflict with any provision of any statute, law, ordinance, regulation, rule, code, treaty, or other requirement of any Governmental Authority (collectively, “Law”) or any order, writ, judgment, injunction, decree, determination, penalty, or award entered by or with any Governmental Authority (“Governmental Order”) applicable to the Seller or the Target; (c) require the consent, notice, or filing with or other action by any Person (defined below) or require any permit, license, or Governmental Order; (d) violate or conflict with, result in the acceleration of, or create in any party the right to accelerate, terminate, or modify any contract, lease, deed, mortgage, license, instrument, note, indenture, joint venture, or any other agreement, commitment, or legally binding arrangement, whether written or oral (collectively, “Contracts”), to which the Seller or the Target is a party or by which the Seller or the Target is bound or to which any of their respective properties and assets are subject; or (e) result in the creation or imposition of any encumbrance on any properties or assets of the Target. “Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.
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ARTICLE V
Representations and warranties of Buyer
Buyer represents and warrants to the Seller that the statements contained in this Article ARTICLE V are true and correct as of the date hereof. For purposes of this Article ARTICLE V, “Buyer’s knowledge,” “knowledge of Buyer,” and any similar phrases shall mean the actual or constructive knowledge of Buyer, after due inquiry.
Section5.01 Authorization; Binding Agreement. The Buyer has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (a) have been duly and validly authorized and (b) no other proceedings, other than as set forth elsewhere in the Agreement, are necessary to authorize the execution and delivery of this Agreement or to consummate the transactions contemplated hereby. This Agreement has been, and shall be when delivered, duly and validly executed and delivered by the Buyer, assuming the due authorization, execution and delivery of this Agreement by the other parties hereto, and constitutes, or when delivered shall constitute, the valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms.
Section5.02 Governmental Approvals. No Consent of or with any Governmental Authority, on the part of the Buyer is required to be obtained or made in connection with the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby, other than (a) such filings as may be required in any jurisdiction in which such party is qualified or authorized to do business as a foreign corporation in order to maintain such qualification or authorization, (b) such filings as contemplated by this Agreement, or (c) applicable requirements, if any, of the Securities Act, the Securities Exchange Act of 1934, as amended (the “ExchangeAct”), and/ or any state “blue sky” securities laws, and the rules and regulations thereunder.
Section5.03 Non-Contravention. The execution and delivery by the Buyer of this Agreement and the consummation of the transactions contemplated hereby, and compliance with any of the provisions hereof, will not (a) conflict with or violate any provision of the Organizational Documents of such party (if any), (b) conflict with or violate any Law, Order or Consent applicable to such party or any of its properties or assets, or (c) (i) violate, conflict with or result in a breach of, (ii) constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, (iii) result in the termination, withdrawal, suspension, cancellation or modification of, (iv) accelerate the performance required by such party under, (v) result in a right of termination or acceleration under, (vi) give rise to any obligation to make payments or provide compensation under, (vii) result in the creation of any Lien upon any of the properties or assets of such party under, (viii) give rise to any obligation to obtain any third party consent or provide any notice to any Person or (ix) give any Person the right to declare a default, exercise any remedy, claim a rebate, chargeback, penalty or change in delivery schedule, accelerate the maturity or performance, cancel, terminate or modify any right, benefit, obligation or other term under, any of the terms, conditions or provisions of, any material contract of such party.
ARTICLE VI
Miscellaneous
Section6.01 Interpretation; Headings. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
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Section6.02 Severability. If any term or provision of this Agreement is invalid, illegal, or unenforceable in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other term or provision of this Agreement.
Section6.03 Entire Agreement. This Agreement and the other Transaction Documents constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the other Transaction Documents, the statements in the body of this Agreement will control.
Section6.04 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.
Section6.05 Amendment and Modification; Waiver. This Agreement may only be amended, modified, or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No failure to exercise, or delay in exercising, any right or remedy arising from this Agreement shall operate or be construed as a waiver thereof. No single or partial exercise of any right or remedy hereunder shall preclude any other or further exercise thereof or the exercise of any other right or remedy.
Section6.06 Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction). Any legal suit, action, proceeding, or dispute arising out of or related to this Agreement, the other Transaction Documents, or the transactions contemplated hereby or thereby may be instituted in the federal courts of the United States of America or the courts of the State of New York in each case located in the city of New York and county of New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action, proceeding, or dispute.
Section6.07 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
[signature page follows]
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INWITNESS WHEREOF, the parties have executed and delivered this Share Purchase Agreement as of the date first written above.
| THE BUYER AND THE CREDITOR | |
|---|---|
| Xusheng Niu | |
| /s/ Xusheng Niu | |
| Name: | Xusheng Niu |
| THE TARGET | |
| Cordyceps Sunshine Biotech Co., Ltd. (Hong Kong) | |
| /s/ Szu Hao Huang | |
| Name: | Szu Hao Huang |
| Title: | Director |
| THE SELLER AND THE DEBTOR | |
| Cordyceps Sunshine Biotech Holdings Co., Ltd. | |
| /s/ Szu Hao Huang | |
| Name: | Szu Hao Huang |
| Title: | Director |
| THE SUBSIDIARY OF THE TARGET | |
| Chengdu Skyherb Biotechnology Co., Ltd. (China) | |
| /s/ Cheng-yu Tsai | |
| Name: | Cheng-yu Tsai |
| Title: | Legal representative |
Exhibit 99.1
Item 2. Management’s Discussion and Analysisof Financial Condition and Results of Operations.
Forward-Looking Statements
Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words “expects”, “anticipates”, “intends”, “believes” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the sections “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. You should carefully review other documents we file from time to time with the Securities and Exchange Commission (“SEC”). You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.
Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.
All references in this Form 10-Q to the “Company”, “Cordyceps Sunshine Cayman”, “we”, “us” or “our” are to Cordyceps Sunshine Biotech Holdings Co., Ltd.
Our unaudited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Overview
We specialize in the research, development, manufacturing, and marketing of cordyceps, and fine-herb processing products and other health-care products.
We actively pursue markets where our products can make a substantial difference to customers. Our current capabilities allow us to develop new and innovative products and obtain new distribution channels for existing and potential markets.
On September 28, 2023, we sold all of the equity interest in Cordyceps Sunshine HK and its subsidiary, Chengdu Skyherb, to two individual persons, with a total consideration of $1,152,328.5 (RMB8,411,156.95).
From then on we have focused our business in the Taiwan market, and explored its business directly through our holding company’s branch office, Cordyceps Sunshine Taiwan Branch.
By the end of the third quarter 2023, we have generated good business revenue from the Taiwan market. We believe we will continue our business expansion in the Taiwan market, through exploration of markets and sales of our products, as well as continued financial support from our president.
As such, we will be able to maintain our continued business growth and our net income over the coming years.
Results of Operations
Nine Months Ended September 30, 2023 and 2022
| **** | For the nine months ended September 30, | **** | **** | **** | **** | **** | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | 2023 | **** | 2022 | **** | Variance | **** | % | **** | ||||
| Revenue - third parties | $ | 446,785 | - | 446,785 | N/A | |||||||
| Revenue - related parties | 120,246 | - | 120,246 | N/A | ||||||||
| Total net revenues | 567,031 | - | 567,031 | N/A | ||||||||
| Cost of revenues - third parties | 61,399 | - | 61,399 | N/A | ||||||||
| Cost of revenues - related parties | 23,905 | - | 23,905 | N/A | ||||||||
| Total cost of revenues | 85,304 | - | 85,304 | N/A | ||||||||
| Gross profit | 481,727 | - | 481,727 | N/A | ||||||||
| Operating expenses: | ||||||||||||
| Professional fee | 185,940 | 123,312 | 62,628 | 50.79 | % | |||||||
| General and administrative | 188,402 | 254,908 | (66,506 | ) | -26.09 | % | ||||||
| Total operating expenses | 374,342 | 378,220 | (3,878 | ) | -1.03 | % | ||||||
| Income (loss) from operations | 107,385 | (378,220 | ) | 485,605 | -128.39 | % | ||||||
| Income(loss) before income taxes provisions | 107,385 | (378,220 | ) | 485,605 | -128.39 | % | ||||||
| Income tax provisions | - | - | - | N/A | ||||||||
| Net income from continued operations | 107,385 | (378,220 | ) | 485,605 | -128.39 | % | ||||||
| Net loss from discontinued operations | (256,947 | ) | (264,827 | ) | 7,880 | -2.98 | % | |||||
| Net income(loss) | (149,562 | ) | (643,047 | ) | 493,485 | -76.74 | % |
Revenues and gross margin
The Company has generated revenue of $567,031 and zero for the nine months ended September 30, 2023 and 2022. Our products were cordyceps fine-herb processed food supplement and health-care products.
For the nine months ended September 30, 2023, related party revenue of $120,246 referred to the revenue sold to Gasar Biotechnology Co., Ltd, a company controlled by Mr. Szuhao Huang. And the gross profit and margin for related party sales were $96,341 and 80.12% respectively.
The gross profit and margin for third parties’ sales were $385,386 and 86.26% respectively for the nine months ended September 30, 2023.
We did not generated any revenue for continued operation during the nine months ended September 30, 2022.
Operating expenses
Total operating expenses, which of consisted general and administrative fees and professional fees, were $374,342 and $378,220 for the nine months ended September 30, 2023 and 2022 respectively.
The operating expense maintained stable for the nine months ended September 30, 2023 and 2022.
Net income
We generated net income of $107,385 in the continued operation, though incurred net loss of $256,947, for the nine months ended September 30, 2023
As no revenue was generated for the nine months ended September 30, 2022, we incurred net loss of $378,220 and $264,827 for continued operation and discontinued operation respectively.
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The following table provides selected financial data about our company as of September 30, 2023 and December 31, 2022.
| September 30,2023 | December 31,2022 | |||
|---|---|---|---|---|
| Cash | $ | 16,911 | $ | 16,100 |
| Total Assets | $ | 1,797,722 | $ | 2,104,853 |
| Total Liabilities | $ | 1,980,661 | $ | 3,056,187 |
| Stockholders’ Equity (Deficit) | $ | 1,797,722 | $ | 2,104,853 |
As of September 30, 2023, the Company’s cash balance was $16,911, compared to $16,100 as of December 31, 2022, and our total assets as of September 30, 2023, were $1,797,722 compared with $2,104,853 as of December 31, 2022. The cash balance maintained stable for the reporting period.
As of September 30, 2023, the Company had total liabilities of $1,980,661 compared with total liabilities of $3,056,187 as of December 31, 2022. The fluctuation of total liabilities was due to the decrease in due to related parties balances to $zero from $1,386,504.
Liquidity and Capital Resources
Working Capital
| September 30,2023 | December 31, 2022 | |||||
|---|---|---|---|---|---|---|
| Current Assets | $ | 52,135 | $ | 501,552 | ||
| Current Liabilities | $ | 1,465,332 | $ | 2,521,130 | ||
| Working Capital Deficiency | $ | (1,413,197 | ) | $ | (2,019,578 | ) |
As of September 30, 2023, the Company had a working capital deficiency of $1,413,197, compared with working capital deficiency of $2,019,578 as of December 31, 2022. The decrease in working capital deficiency was primarily attributed to the greater decrease in current liabilities due to the decrease to zero in due to related parties balance as of September 30, 2023.
Cash Flows
| Nine MonthsEndedSeptember 30, 2023 | Nine MonthsEndedSeptember 30, 2022 | |||||
|---|---|---|---|---|---|---|
| Cash Flows Provided by (Used in) Operating Activities | $ | 1,592,448 | ) | $ | (210,561 | ) |
| Cash Flows Provided by (Used in) Investing Activities | $ | (1,537,131 | ) | $ | 981 | |
| Cash Flows Provided by (Used in) Financing Activities | $ | (80,238 | ) | $ | 238,817 | |
| Effects on change in foreign exchange rate | $ | 27,354 | $ | (111,065 | ) | |
| Net increase (decrease) in Cash During Period | $ | 2,433 | $ | (81,828 | ) |
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Cash Flows Used in Operating Activities
During the nine months ended September 30, 2023, the Company had $1,592,448 in cash provided by operating activities, which was mainly attributed from the net income of $107,385, the increase of $1,426,169 in account payable, the increase of $32,108 in operating lease liability, and offset by the amortization of $32,108 in right-of-use asset, an increase of $9,443 in other receivable.
During the nine months ended September 30, 2022, the Company had $210,561 in cash used in operating activities, which was mainly attributed from net loss from operations of $378,220 and offset by the net cash provided by operating activities from discontinued operations of $167,659.
Cash Flows Provided by Investing Activities
During the nine months ended September 30, 2023, the Company used $1,537,131 in investing activities, which was mainly attributed from purchase of property and equipment of $1,541,551.
During the nine months ended September 30, 2022, the Company provided $981 in investing activities, which was attributed from discontinued operations of $981.
Cash Flows Provided by Financing Activities
During the nine months ended September 30, 2023, the Company used $80,238 in financing activities, which was mainly attributed from discontinued operations of $75,710.
During the nine months ended September 30, 2022, the Company provided $238,817 in financing activities, which was mainly attributed from the fact that the President have advanced the Company $280,325 for operating expenses. However, it was offset by the used cash of $41,508 in discontinued operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
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Exhibit99.2
CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
FINANCIAL
REPORT
At
September 30, 2023 and December 31, 2022, and
For
the nine months ended September 30, 2023 and 2022
CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
INDEX
| PAGE | |
|---|---|
| CONSOLIDATED BALANCE SHEETS | 3 |
| CONSOLIDATED STATEMENTS OF OPERATIONS | 4 |
| CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) | 5 |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | 6 |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 7-21 |
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CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
Cordyceps
Sunshine Biotech Holdings Co., Ltd. and Subsidiaries
Consolidated
Balance Sheets
| December 31, | |||||
|---|---|---|---|---|---|
| 2022 | |||||
| ASSETS | |||||
| Current assets | |||||
| Cash and cash equivalents | 16,911 | $ | 16,100 | ||
| Accounts receivable, net | - | 149,510 | |||
| Inventories | 4,308 | 313,530 | |||
| Advances and prepayments to suppliers | - | 9,532 | |||
| Due from related parties | 21,869 | - | |||
| Other receivable | 9,047 | 12,880 | |||
| Total current assets | 52,135 | 501,552 | |||
| Property, plant and equipment, net | 1,545,203 | 1,425,135 | |||
| Operating lease right of use asset, net | 200,384 | 178,166 | |||
| Total assets | 1,797,722 | 2,104,853 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||
| Current liabilities | |||||
| Accounts payable | 1,366,277 | 751,135 | |||
| Accounts payable- related parties | - | 263,628 | |||
| Due to related parties | - | 1,386,504 | |||
| Operating lease liabilities - current | 99,055 | 57,109 | |||
| Other payable | - | 62,754 | |||
| Total current liabilities | 1,465,332 | 2,521,130 | |||
| Long term loan payable | 414,000 | 414,000 | |||
| Operating lease liabilities - noncurrent | 101,329 | 121,057 | |||
| Total liabilities | 1,980,661 | 3,056,187 | |||
| Shareholders’ equity | |||||
| Ordinary shares (par value 0.0001, 500,000,000 shares authorized; 111,120,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022) | 11,112 | 11,112 | |||
| Additional paid-in capital | 221,288 | 221,288 | |||
| Retained earnings | (477,490 | ) | (1,224,575 | ) | |
| Accumulated other comprehensive loss | 62,151 | 40,841 | |||
| Total shareholders’ equity | (182,939 | ) | (951,334 | ) | |
| Total liabilities and shareholders’ equity | 1,797,722 | $ | 2,104,853 |
All values are in US Dollars.
The
accompanying notes are an integral part of these consolidated financial statements.
3
CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
| For the nine months ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| Revenue - third parties | $ | 446,785 | - | |||
| Revenue - related parties | 120,246 | - | ||||
| Total net revenues | 567,031 | - | ||||
| Cost of revenues - third parties | 61,399 | - | ||||
| Cost of revenues - related parties | 23,905 | - | ||||
| Total cost of revenues | 85,304 | - | ||||
| Gross profit | 481,727 | - | ||||
| Operating expenses: | ||||||
| Professional fee | 185,940 | 123,312 | ||||
| General and administrative | 188,402 | 254,908 | ||||
| Total operating expenses | 374,342 | 378,220 | ||||
| Income (loss) from operations | 107,385 | (378,220 | ) | |||
| Other expenses(income) | - | - | ||||
| Total other expense | - | - | ||||
| Income(loss) before income taxes provisions | 107,385 | (378,220 | ) | |||
| Income tax provisions | - | - | ||||
| Net income from continued operations | 107,385 | (378,220 | ) | |||
| Net loss from discontinued operations | (256,947 | ) | (264,827 | ) | ||
| Net income(loss) | (149,562 | ) | (643,047 | ) | ||
| Other comprehensive income (loss) | ||||||
| Foreign currency translation adjustment | 21,310 | 29,105 | ||||
| Total comprehensive income(loss) | $ | (128,252 | ) | (613,942 | ) | |
| Earnings per common share | ||||||
| Basic and diluted | $ | (0.00 | ) | -0.01 | ||
| Weighted average common shares outstanding | ||||||
| Basic and diluted | 111,120,000 | 100,000,000 |
The
accompanying notes are an integral part of these consolidated financial statements.
4
CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
| Ordinary shares | Additional paid-in | Retained Earnings | Accumulated Other Comprehensive | Total Shareholders’ | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| No. of shares | Amount | capital | (Deficit) | Income (Loss) | Equity | |||||||||
| Balance, January 1, 2022 | 100,000,000 | 10,000 | 222,400 | 233,801 | - | 466,201 | ||||||||
| Net income | (378,220 | ) | (378,220 | ) | ||||||||||
| Foreign currency translation adjustment | 29,105 | 29,105 | ||||||||||||
| Balance, September 30, 2022 | 100,000,000 | 10,000 | 222,400 | (144,419 | ) | 29,105 | 117,086 | |||||||
| Balance, January 1, 2023 | 111,120,000 | 11,112 | 221,288 | (1,224,575 | ) | 40,841 | (951,334 | ) | ||||||
| Subsidiary spin-off | 639,700 | 639,700 | ||||||||||||
| Net income | 107,385 | 107,385 | ||||||||||||
| Foreign currency translation adjustment | 21,310 | 21,310 | ||||||||||||
| Balance, September 30, 2023 | 111,120,000 | 11,112 | 221,288 | (477,490 | ) | 62,151 | (182,939 | ) |
The
accompanying notes are an integral part of these consolidated financial statements.
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CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
| For the Nine Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| Cash flows from operating activities | ||||||
| Net loss | $ | 107,385 | $ | (378,220 | ) | |
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||
| Depreciation and amortization | 1,040 | |||||
| Amortization of operating lease right of use asset | (32,108 | ) | ||||
| Changes in assets and liabilities: | ||||||
| Inventories | 4,946 | |||||
| Other receivable | (9,443 | ) | ||||
| Operating lease liability | 32,108 | |||||
| Accounts payable | 1,426,169 | |||||
| Interest expense accrued for related party | 4,528 | |||||
| Net cash provided by (used in) operating activities from continuing operations | $ | 1,534,625 | $ | (378,220 | ) | |
| Net cash used in operating activities from discontinued operations | 57,823 | 167,659 | ||||
| Net cash provided by (used in) operating activities | 1,592,448 | (210,561 | ) | |||
| Cash flows from investing activities | ||||||
| Purchase of property and equipment | (1,541,551 | ) | ||||
| Net cash used in investing activities from continuing operations | $ | (1,541,551 | ) | $ | - | |
| Net cash provided by investing activities from discontinued operations | 4,420 | 981 | ||||
| Net cash provided by (used in) investing activities | (1,537,131 | ) | 981 | |||
| Cash flows from financing activities | ||||||
| Proceeds from (repayment to ) related party | (4,528 | ) | 280,325 | |||
| Net cash provided by (used in) financing activities from continuing operations | $ | (4,528 | ) | $ | 280,325 | |
| Net cash used in financing activities from discontinued operations | (75,710 | ) | (41,508 | ) | ||
| Net cash provided by(used in) financing activities | (80,238 | ) | 238,817 | |||
| Effect on changes in foreign exchange rate | 27,354 | (111,065 | ) | |||
| Net increase in cash, and cash equivalents | 2,433 | (81,828 | ) | |||
| Cash, and cash equivalents, beginning of period | 14,541 | 101,164 | ||||
| Cash, and cash equivalents, end of period | $ | 16,974 | $ | 19,336 | ||
| Less:Cash from discontinued operation | 63 | 11,135 | ||||
| Cash from continued operation, end of period | 16,911 | 8,201 | ||||
| - | - | |||||
| Supplemental cash flow information | ||||||
| Cash paid for interest | $ | - | $ | - | ||
| Cash paid for income taxes | $ | - | $ | - |
The
accompanying notes are an integral part of these consolidated financial statements.
6
CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note1 - ORGANIZATION
Cordyceps Sunshine Biotech Holdings Co., Ltd. (“Cordyceps Sunshine Cayman”) was incorporated on May 4, 2020 under the laws of the Cayman Islands. On June 5, 2020, Cordyceps Sunshine Cayman established a wholly owned subsidiary, Cordyceps Sunshine Biotec Co., Ltd (“Cordyceps Sunshine HK”) in Hongkong. On June 5, 2020, Cordyceps Sunshine HK established a wholly owned subsidiary, Chengdu Skyherb Biotechnology Co., Ltd (“Chengdu Skyherb” or “Cordyceps Sunshine WFOE”) in the People’s Republic of China (“PRC”). On November 3, 2021, Cordyceps Sunshine Cayman established a branch (“Cordyceps Sunshine Taiwan Branch”) in Taiwan, Republic of China.
On September 28, 2023, Cordyceps Sunshine Cayman sold all of the equity interest in Cordyceps Sunshine HK and its subsidiary, Chengdu Skyherb, to two individual persons, with a total consideration of $1,152,328.5(RMB8,411,156.95).
On August 17, 2023, Cordyceps Sunshine Cayman established a wholly owned subsidiary, Taiwanofungus Biotech Company Limitd (“Taiwanofungus Company”) in Hongkong.
Cordyceps Sunshine Cayman, its Taiwan branch, and its wholly owned subsidiaries are collectively referred to herein as the “Company”, “we” and “us”, unless specific reference is made to an entity.
The Company focus on cultivating and sales of cordyceps.
Note2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basisof Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of the Company, its Taiwan branch, and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Certain amounts in the prior year’s consolidated financial statements and notes have been revised to conform to the current year presentation. These reclassifications had no impact on the reported results of operations and cash flows.
ForeignCurrency Translation
The accompanying consolidated financial statements are presented in United States dollar (“USD”), which is the reporting currency of the Company. The functional currency of Taiwanofungus Company is Hong Kong dollar (“HKD”). The functional currency of Cordyceps Sunshine Taiwan Branch is New Taiwan dollar (“TWD”). The functional currency of Chengdu Skyherb is Renminbi (“RMB”).
7
CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company maintains its books and record in its functional currency. 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. The resulting exchange differences are recorded in the statements of operations.
The reporting currency of the Company is the United States Dollars (“US$”), and the accompanying consolidated financial statements have been expressed in US$. In accordance with ASC Topic 830- 30, “Translation of Financial Statements”, assets and liabilities of the Company whose functional currency is not US$ are translated into US$, 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 the translation of financial statements are recorded as a separate component of accumulated other comprehensive gain (loss) within the statements of changes in shareholders’ deficit.
The exchange rates used for foreign currency translation were as follows:
| (1) | USD$1<br>= HKD | |||
|---|---|---|---|---|
| Period Covered | Balance Sheet Date | Average Rates | ||
| --- | --- | --- | --- | --- |
| Nine months ended September 30, 2023 | 7.8312 | 7.8348 | ||
| Year ended December 31, 2022 | 7.8015 | 7.8306 | ||
| Nine months ended September 30, 2022 | 7.85 | 7.8329 | ||
| (2) | USD$1<br>= RMB | |||
| --- | --- | |||
| Period Covered | Balance Sheet Date | Average Rates | ||
| --- | --- | --- | --- | --- |
| Nine months ended September 30, 2023 | 7.2755 | 7.0272 | ||
| Year ended December 31, 2022 | 6.8972 | 6.7290 | ||
| Nine months ended September 30, 2022 | 7.1159 | 6.5981 |
The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through local authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.
| (3) | USD$1<br>= TWD | |||
|---|---|---|---|---|
| Period Covered | Balance Sheet Date | Average Rates | ||
| --- | --- | --- | --- | --- |
| Nine<br> months ended September 30, 2023 | 32.2775 | 30.9220 | ||
| Year ended December<br> 31, 2022 | 30.7300 | 29.7963 | ||
| Nine months ended<br> September 30, 2022 | 31.7917 | 29.2478 |
8
CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Statementsof Cash Flows
In accordance with FASB ASC 830-230, “Statement of Cash Flows”, cash flows from the Company’s operations is calculated based upon the functional currency. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.
Useof Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. Estimates and assumptions of future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as operating environment changes. Significant estimates and assumptions by management include, among others, estimated life and impairment of long-lived assets, allowance for doubtful accounts, contingencies, valuation of inventories and income taxes including the valuation allowance for deferred tax assets.
While the Company believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary.
FairValue of Financial Instruments
The Company adopted ASC 820 “Fair Value Measurements,” which defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosures requirements for fair value measures. Current assets and current liabilities qualified as financial instruments and management believes their carrying amounts are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their current interest rate is equivalent to interest rates currently available. The three levels are defined as follow:
| Level 1: | Inputs<br> to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
|---|---|
| Level 2: | Inputs<br> to the valuation methodology include quoted prices for similar assets and liabilities in<br> active markets, and inputs that are observable for the assets or liability, either directly<br> or indirectly, for substantially the full term of the financial instruments. |
| Level 3: | Inputs<br> to the valuation methodology are unobservable and significant to the fair value. |
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CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
FairValue of Financial Instruments (continued)
As of the balance sheet date, the estimated fair values of the financial instruments approximated their fair values due to the short-term nature of these instruments. Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates the hierarchy disclosures each year.
Cashand Cash Equivalents
Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all other highly liquid instruments with original maturities of three months or less.
AccountsReceivable
Accounts receivable, net represent the amounts that the Company has an unconditional right to consideration, which are stated at the original amount less an allowance for doubtful receivables. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of operations and comprehensive income (loss). Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is remote. In circumstances in which the Company receives payment for accounts receivable that have previously been written off, the Company reverses the allowance and bad debt.
10
CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Inventory
Inventories, consisting of raw materials, work-in-process, and finished goods are stated at the lower of cost or net realizable value utilizing the weighted average method.
Work-in-process inventoried costs on cultivating cordyceps includes direct materials, direct cultivating labor costs, and applicable overhead, which includes fringe benefits, cultivating related utility, and cultivating facilities management salaries and services. To the extent a material amounts of such costs are related to an abnormal event or are fixed costs not appropriately attributable to cordyceps cultivation, they are expensed in the current period rather than inventoried. Inventoried costs include amounts relating to cordyceps cultivation with long-term production cycles, a portion of which is not expected to be realized within one year.
The determination of net realizable value of long-term cordyceps cultivation costs is based upon quarterly reviews of costs incurred and estimated costs to complete the cultivating process. When costs incurred and the estimate to complete exceed the net realizable value of cordyceps cultivated, a loss provision is recorded.
The Company review and identify impaired inventory quarterly, including excess or obsolete inventory, based on expected production usage, abnormal production cycle. Impaired inventories are charged to cost of revenues in the period the impairment occurs. The allowance for inventory impairment are removed from the accounts when the relevant inventory is sold or disposed.
Property,plant and equipment
Property and equipment primarily consist of cultivation equipment, office equipment, furniture, tools and construction in progress. Cultivation equipment, office equipment, furniture and tools are stated at cost less accumulated depreciation less any provision required for impairment in value. Depreciation is computed using the straight-line method with residual value rate of 5% based on the estimated useful lives as follows:
| Buildings and cultivation facilities | 20 years (by local laws) |
|---|---|
| Machinery and equipment | 3- 10 years |
| Office equipment and furniture | The less of 5 years or lease term |
Costs of repairs and maintenance are expensed as incurred and asset improvements are capitalized. The cost and related accumulated depreciation of assets disposed of or retired are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statement of income.
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CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairmentof long-lived assets
The Company reviews long-lived assets 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 measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment of long-lived assets for the nine months ended September 30, 2023 and 2022.
Operatinglease
The Company leases are classified as operating leases in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. No impairment for right-of-use lease assets incurred for the nine months ended September 30, 2022 and 2021.
ComprehensiveIncome (Loss)
ASC 220 “Comprehensive Income” established standards for reporting and display of comprehensive income/loss, its components and accumulated balances. Components of comprehensive income/loss include net income/loss and foreign currency translation adjustments. The component of accumulated other comprehensive income (loss) consisted of foreign currency translation adjustments.
12
CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
RevenueRecognition
The Company adopted ASC 606 upon inception. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
A performance obligation is a promise in a contract to transfer a distinct goods to the customer and is the unit of account in ASC 606. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised goods or services is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Revenue is recognized for sales of cordyceps at the point in time when the cordyceps are delivered to or picked up by, and accepted by customers. Costs accumulated during the cordyceps cultivating process are recognized as inventory; and charged to cost of goods sold upon cordyceps delivery to or pick up by customers.
The Company’s return policy allows for the return of damaged or defective products, and the Company absorbs the shipping fee for the return. The Management believes the return is immaterial because the customers inspect and accept the goods upon delivery or pick up. There were no return for the nine months ended September 30, 2023 and 2022.
Payments for cordyceps sales received in advance in accordance to the contract is recognized as deferred revenues when received.
IncomeTaxes
The Company accounts for income taxes under the provision of FASB ASC 740- 10, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
13
CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earningsper share
Basic earnings per ordinary share is computed by dividing net earnings attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to ordinary shareholders by the sum of the weighted average number of ordinary share outstanding and of potential ordinary share (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. For the nine months ended September 30, 2023 and 2022, the Company had no dilutive stocks.
Concentrationof Credit Risk
Financial instruments the Company holds that are subject to concentrations of credit risk are cash, restricted cash, notes receivables and accounts receivable arising from its normal business activities. The Company places its cash and restricted cash in what it believes to be credit-worthy financial institutions. The Company routinely assesses the credit status of its customers and, based upon factors surrounding the credit risks, establishes an allowance, if required, for uncollectible accounts. The company believes its accounts receivable and others receivable credit risk exposure beyond such allowance is limited.
RelatedParties Transactions
A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered as a related party transaction when there is a transfer of resources or obligations between related parties. Related parties may be individuals or corporate entities.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts of related party transactions due to their related party nature.
14
CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
SegmentReporting
ASC 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s chief operating decision maker organizes segments within the Company for making operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
Management determined the Company’s operations constitute a single reportable segment in accordance with ASC 280. The Company operates exclusively in one business and industry segment: cultivating and sales of cordyceps.
RecentlyIssued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging
- Contracts in Entity’s Own Equity (Subtopic 815- 40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020- 06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The Company is currently evaluating the impact that ASU 2020-06 may have on its financial statements and related disclosures.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material impact on its the consolidated financial position, statements of operations and cash flows.
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CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note3 - GOING CONCERN
The financial statements have been prepared “assuming that we will continue as a going concern,” which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
The Company has not yet established an ongoing source of revenues and cash flows sufficient to cover the operating costs and allow it to continue as a going concern. The Company incurred loss of $149,562 and $643,047 for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, the Company had an accumulated deficit of $477,490. These factors among others raise substantial doubt about the ability to continue as a going concern for a reasonable period of time.
In order to continue as a going concern, The Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources by obtaining capital from management sufficient to meet its minimal operating expenses and seeking third party equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note4 - ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
| September 30, 2023 | December 31, 2022 | |||
|---|---|---|---|---|
| Accounts receivable | $ | - | $ | 149,510 |
| Less: Allowance for doubtful accounts | - | - | ||
| Accounts receivable, net | $ | - | $ | 149,510 |
Bad debt expense charged to operations was $0 for the nine months ended September 30, 2023 and 2022.
16
CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note5 - INVENTORIES
Inventories consist of following:
| September 30, 2023 | December 31, 2022 | ||||
|---|---|---|---|---|---|
| Finished goods | $ | 4,308 | $ | 207,645 | |
| Work-in-progress | - | 266,488 | |||
| Supplies and packing materials | - | 12,823 | |||
| Less: Allowance for obsolete inventory | - | (173,426 | ) | ||
| Total, net | $ | 4,308 | $ | 313,530 |
The Company recorded impairment of obsolete or slow-moving inventory of $0 for the nine months ended September 30, 2023 and 2022.
Note6 - PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property, plant and equipment:
| September 30, 2023 | December 31, 2022 | |||||
|---|---|---|---|---|---|---|
| Buildings and cultivation facilities | $ | - | $ | 635,040 | ||
| Machinery and equipment | 1,383,356 | 1,017,206 | ||||
| Office equipment and furniture | 193,456 | 103,201 | ||||
| Total | 1,576,812 | 1,755,447 | ||||
| Less: Accumulated depreciation | (31,609 | ) | (330,312 | ) | ||
| Total property, plant and equipment, net | $ | 1,545,203 | $ | 1,425,135 |
Depreciation expense charged to operations was $31,609 and $12,245 for the nine months ended September 30, 2023 and 2022, respectively.
Note7 - RELATED PARTY TRANSACTIONS
The Company had transactions with the following related parties:
| Nature of Relationship | Name of Related Party |
|---|---|
| Mr. Szuhao Huang | Director, Chief Executive Officer (“CEO”) |
| Gasar Biotechnology Co., Ltd | A company controlled by Mr. Szuhao Huang |
(1) Sales to related parties
For the nine months ended September 30, 2023, the Company sold newly developed products processed with cordyceps of $120,246 to Gasar Biotechnology Co., Ltd.
Accounts receivable from related parties was zero as of September 30, 2023 and December 31, 2022.
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SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note7 - RELATED PARTY TRANSACTIONS (continued)
(2) Due from related parties
The Company advanced fund to Mr. Szuhao Huang, our CEO, to work on the Company’s projects for the nine months ended September 30, 2023. When the projects were completed, Mr. Huang reported expenses to the Company, which recorded such expenses in the periods incurred.
Balances due from Mr. Szuhao Huang were $21,869 and zero as of September 30, 2023 and December 31, 2022 respectively.
(3) Due to related parties
The Company advanced fund to Mr. Szuhao Huang, our CEO, to work on the Company’s projects. When the projects were completed, Mr. Huang reported expenses to the Company, which recorded such expenses in the periods incurred. In 2022, due to lack of cash resources, Mr. Szuhao Huang made fund to Cordyceps Sunshine Taiwan Branch to finance its operation. These funds are non-interest bearing, non-secured, due on demand, and without a written agreement.
Balances due to Mr. Szuhao Huang were zero and $1,386,504 as of September 30, 2023 and December 31, 2022 respectively.
Note8 - LEASES
The Company has operating leases for corporate offices and employees’ accommodation. These leases have remaining lease terms of 6 months to 4 years. The Company has elected to not recognize lease assets and liabilities for leases with a term less than twelve months.
The Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate present value is incremental borrowing rate or, if available, the rate implicit in the lease. The Company determines the incremental borrowing rates for these leases based primarily on lease terms were 4.75% in PRC, and 3.94% in Taiwan.
As of September 30, 2023, the future maturity of lease liabilities is as follows:
| For the years ended September 30, | Operating Leases | |
|---|---|---|
| 2024 | $ | 85,732 |
| 2025 | 85,732 | |
| 2026 | 30,108 | |
| Total undiscounted cash flows | 201,572 | |
| Less: imputed interest | 1,188 | |
| Present value of lease liabilities | 200,384 | |
| Less: current portion | 99,055 | |
| Non-current lease liabilities | $ | 101,329 |
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CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note9 - LONG-TERM LOANS PAYABLE
In June 2020 through September 2020, Cordyceps Sunshine Cayman entered into loan agreements to borrow totally $414,000 from six individuals to finance its operation. These loans were non-interest bearing, non-secured, and had a term of one year which was subsequently extended two more years. The outstanding balance of these loans amounted to $414,000 as of September 30, 2023 and December 31, 2022.
Note10 - EQUITY CAPITAL
On May 4, 2020, Cordyceps Sunshine Cayman issued 1 common shares to Sertus Nominees (Cayman) Limited, and Sertus Nominees (Cayman) Limited then transferred the share to Mr. Szu Hao Huang.
On July 17, 2020, Cordyceps Sunshine Cayman repurchased all of the share of Mr. Szu Hao Huang and issued a total of 100,000,000 shares with a par value of $0.0001 per share for $10,000, which was subsequently received in 2021.
On August 13, 2021, the Company entered private replacement subscription agreements with 65 investors to offer a total of 11,120,000 shares of common stock, at a price of $0.02 per share for an aggregate purchase price amount of $222,400, which was received in 2021 and recorded as common stock to-be issued as of December 31, 2021, because such shares were subsequently issued in July 2022.
The balance of ordinary shares were $11,112 as of September 30, 2023 and December 31, 2022.
Note11 - INCOME TAXES
CaymanIslands
Under the current laws of Cordyceps Sunshine Cayman is not subject to tax on income or capital gain. In addition, payments of dividends by the Company to their shareholders are not subject to withholding tax in the Cayman Islands.
HongKong
Cordyceps Sunshine HK is incorporated in Hong Kong and has no operating profit or tax liabilities during the periods. Cordyceps Sunshine HK is subject to tax at 8.25% on the first HKD 2,000,000 profit and 16.5% on the remaining profits arising in or derived from Hong Kong.
Taiwan
Cordyceps Sunshine Biotech Holdings Co., Ltd. is incorporated in the Cayman Islands, and has established a branch in Taiwan. It is a branch office of a foreign company and is not an independent legal entity, subject to the provisions of the For-profit Income Tax Act. The applicable sales tax rate is 5%, and the applicable income tax rate is 20%.
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CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note11 - INCOME TAXES (continued)
China,PRC
Chengdu Skyherb was incorporated in the PRC and are subject to PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with the relevant PRC income tax laws. On March 16, 2007, the National People’s Congress enacted a new enterprise income tax law, which took effect on January 1, 2008. The law applies a uniform 25% enterprise income tax rate to both foreign invested enterprises and domestic enterprises.
Chengdu Skyherb incurred net loss and no income tax was provided for the nine months ended September 30, 2023 and 2022.
Note12 - CONCENTRATIONS, RISKS AND UNCERTAINTIES
Concentration
The Company offers one product (cordyceps) for sale while depends on limited suppliers for materials. Accordingly, the Company has a concentration risk related to its suppliers. Failure to maintain existing relationships with the customers and suppliers or to establish new relationships in the future could negatively affect the Company’s ability to generate revenue and obtain materials in a timely manner.
There is no customer whose revenue accounted more than 10% of the Company’s total revenue for the nine months ended September 30, 2023 and 2022.
The concentration on suppliers’ purchases is as follows:
| **** | For nine months ended September 30, | ||||||
|---|---|---|---|---|---|---|---|
| 2023 | **** | 2022 | |||||
| Suppliers | Amount | % | **** | Amount | % | ||
| Supplier A | 48,638 | 74.55 | % | N/A | N/A | ||
| Supplier B | 15,360 | 23.54 | % | N/A | N/A |
Creditrisk
Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents. The maximum exposure of such assets to credit risk is their carrying amount as at the balance sheet dates. The Company held cash and cash equivalents which were deposited in financial institutions located in Mainland China, and each bank account is insured by the local government authority with the maximum limit of RMB 500,000 (equivalent to approximately $71,821). The Company also held cash and cash equivalents which were deposited in financial institutions located in Taiwan, and each bank account is insured by the local government authority with the maximum limit of TWD 3,000,000 (equivalent to approximately $108,147).To limit exposure to credit risk relating to deposits, the Company primarily place cash and cash equivalent deposits with large financial institutions which management believes are of high credit quality and the Company also continually monitors their credit worthiness.
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CORDYCEPS
SUNSHINE BIOTECH HOLDINGS CO., LTD AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note12 - CONCENTRATIONS, RISKS AND UNCERTAINTIES (continued)
The Company’s operations are carried out in China. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. In addition, the Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation among other factors.
Liquidityrisk
The Company is also exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and liquidity to meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, the Company will turn to other financial institutions and the shareholders to obtain short-term funding to meet the liquidity shortage.
Otherrisk
The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, such as the COVID- 19 outbreak and spread, which could significantly disrupt the Company’s operations.
Note13 - SUBSEQUENT EVENTS
The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. Based on this evaluation, the Company concluded that subsequent to September 30, 2023, the date the financial statements were available to be issued, there was no subsequent event that would require disclosure to or adjustment to the financial statements other than the ones disclosed above.
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