KING RESOURCES, INC. 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 ii. Unless otherwise noted, all currency figures quoted as "U.S. dollars", "dollars" or "$" refer to the legal currency ofthe United States . Throughout this report, assets and liabilities of the Company's subsidiaries are translated intoU.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. Our Mission
Our mission is to create value for our shareholders through innovative solutions and products with Technologies, Lifestyle, and Green elements.
Overview
Recent development of the Company
OnOctober 25, 2021 ,Caren Currier entered into a Stock Purchase Agreement with Dr.Lee Ying Chiu Herbert ("Dr. Lee") pursuant to whichMs. Currier agreed to sell toDr. Lee all 30 million shares of Series C Preferred Stock of the Company held by her for aggregate consideration of Four HundredTen Thousand Dollars ($410,000 ). This transaction consummated onNovember 10, 2021 . In connection with the acquisition,Ms. Currier resigned from all her positions with the Company and the following persons were appointed to serve in the positions
set forth next to their names:Name Position
FU Wah Chief Executive Officer, Secretary, Director LAU Ping Kee Chief Financial Officer, Director
Acquisition of Powertech OnDecember 15, 2021 , we acquired 50,000 shares ofPowertech Management Limited , a limited liability company organized under the laws of theBritish Virgin Islands ("Powertech"), representing all of its issued and outstanding securities, from its shareholdersSilver Bloom Properties Limited and FU Wah in exchange for 2,835,820,896 shares of our Common Stock ("Share Exchange"). In connection with the acquisition, each ofSilver Bloom Properties Limited and FU Wah received 2,126,865,672 and 708,955,224 shares of our Common Stock, respectively. Powertech operates its smart power supply business through its wholly owned subsidiaryPowertech Corporation Limited , a limited liability company organized under the laws ofHong Kong . The Company relied on the exemption from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under the Act in selling the Company's securities to the shareholders of Powertech. Prior to the Share Exchange, the Company was considered as a shell company due to its nominal assets and limited operation. The transaction was treated as a recapitalization of the Company. The Share Exchange between the Company and Powertech onDecember 15, 2021 is deemed a merger of entities under common control for which FU Wah is the common director and shareholder of both the Company and Powertech. Under the guidance in ASC 805 for transactions between entities under common control, the assets, liabilities and results of operations, are recognized at their carrying amounts on the date of the Share Exchange, which required the retrospective combination of the Company and Powertech for all periods presented. 18 OnJune 27, 2022 , the board of directors ofKing Resources, Inc. , aDelaware corporation, and certain stockholders holding a majority of the voting rights of our common stock approved by written consent in lieu of a special meeting the taking of all steps necessary to effect the following corporate actions:
1. Amend the Company's Certificate of Incorporation filed with the
Secretary of State (the "Certificate of Incorporation") to change the
Company's name to
2 Amend 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
36,100,000,000 consisting of 36,000,000,000 shares of common stock, par value
3. Elect not to be governed by Section 203 of the
Law; and
4. Adopt the Amended and Restated Certificate of Incorporation for the purpose of
consolidating the amendments to the Company's Certificate of Incorporation and
to conform the par values of the preferred stock.
We expect that such corporate actions to become effective on the later to occur
of: (i) the date on which the Corporate Actions are approved by the Financial
Industry Regulatory Authority ; or (ii) no earlier than August 22, 2022 .
Our Organization Structure
King Resources, Inc. is a holding company, through its subsidiaries, engaged
primarily in the development of smart power conversion solutions and products.
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 .
Our corporate organization chart is as below:
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We currently provide solutions for other companies who are in the fields of developing high power, high voltage power supply and wireless charging technologies. We intend to launch the trial sales of our 65W AC-DC Type C PD chargers in the next quarter.
We are currently at the market introduction phase as we are preparing to launch our first batch of smart chargers to the market. For the three months endedJune 30, 2022 and 2021, we reported a net loss of$181,959 and$51,984 , respectively. As ofJune 30, 2022 , we had current assets of$1,008,161 and current liabilities of$2,454,595 . As ofMarch 31, 2022 , we had current assets of$91,269 and current liabilities of$1,887,152 . 19 Our Business We currently operate inHong Kong , and we seek to expand distribution of our products toAsia Pacific ("APAC"),Europe ,Middle East andAfrica ("EMEA") andUSA markets as opportunities permit. Our products are currently manufactured inChina on a purchase order basis. As our distribution increases, we expect to sub-contract our products elsewhere inAsia as pricing and logistics dictate. We have no intention of expanding operations or our physical presence intoChina at this time. With the explosive growth of consumer electronic products, the demands of both the size and the weight of brilliant electronic products are increasingly high, including the power charger. However, the conventional power topology scheme and power components, such as MOSFET, Driver, magnetic core materials, etc., cannot meet the need to size down the development of power supplies. We believe our new proprietary power conservation technology will allow us to develop products meeting the demand of smaller sized, high power density products. We are committed to the development of applications as well as research and development of smart new power conversion technologies. In recent years, with the significant increase in demand for small power chargers, energy efficiency and power density have become the focus of the markets. There is an increasing demand of modern electronic product consumers to push for DC/DC and AC/DC power chargers with more efficient energy consumption and higher power density. The main purpose of the power charger is to reduce the energy loss and increase the switching frequency of the converter, in order to manufacture a high-efficiency, energy-saving, and high-power density converter. The range of operating frequency for most power chargers currently in the market is about 10-1000KHz. Our power chargers are designed for isolated converters with operating frequencies in the range of 1-30MHz. We have merged the core planar transformers with a power range of 5-240W, so the power charger frequency is about 500 times of the other power charger frequency in the market. In order to further improve the energy efficiency of the converter, we incorporated high-end power conversion technology with new material equipment into the design thereby improving energy efficiency by about 8-10% as compared to other similar devices. Products and Services Currently, all of our revenues are derived from solution services that we provide to other companies. We are currently preparing trial sales of our 65W AC-DC Type C PD chargers, USB-C multiport hub, USB-C mini hub, 65W power bank with 30,000mAh and other accessories through our online store and distribution channel.
We intend to offer three ultra-small power supply products as follows:
Product Status/Anticipated Launch Date
65W AC-DC Type C PD charger Product currently pre-sale on Company's online
product store. Expect to distribute our products to the
chain stores by early 202345W AC-DC dual-port Type C PD Anticipate to launch with mobile and tablet charger model product
makers by early 2023
65W AC-DC dual-port Type C PD
charger model product
120W AC-DC Multi-Charging Anticipate to sale, distribute and launch with
outputs charger product high power computer and notebook manufacturers
by 2023.
We expect these products will become one of the world's smallest smart power supply products.
The following are the characteristics of our power chargers:
· Power AC-DC charger with high-end power conversion technology
· Uses ultra-high pulse width modulation frequency
· Intelligent voltage and current detection algorithm· Digital power factor correction algorithm with high frequency switching
program
· Energy efficiency meets US Class 6 AC-DC power charger standard
· In-house developed innovative driver and controller that can solve the
problem of ultra-high switching frequency
· In-house developed PCBA heat dissipation solution
· In-house developed circuits that can solve dependency problems
· Power efficiency reaching 94%
· In-house developed compact power transformer· Environmental design, miniaturized equipment size, reducing plastic
material consumption up to 50%
20
Future IoT Technology and Lifestyle Products - The Smart Home Ecosystem
We believe that the smart home ecosystem has become both in concept and reality a part of the common culture around the world. When homeowners or buyers consider renovation or new construction, many of them are considering the possibility of implementing smart home ecosystem devices to their homes due to increasing awareness of the importance of energy efficiency and lifestyle improvement of smart home products. According toInternational Data Corporation ("IDC") Worldwide Quarterly Smart Home Device Tracker, in 2021, the global market for smart home device increased by 11.7% from 2020, with more than 895 million devices shipped. TheAsia and the Pacific region is the second largest smart home device region in terms of shipment volume. It accounts for 31% of shipment and has a year-on-year growth rate of 10.8%. Our research indicates that more users are looking to purchase higher price smart devices such as smart TV and lighting fixtures in order to save energy and increase controllability and convenience. We believe that as 5G technology becomes more stable and popular throughout the world, more and more smart home appliances will become available in the market. We believe that smart home appliances with IoT and AI technology can improve our users' living standards and lifestyles dramatically. Smart home appliances are generally easily adopted and accessed through mobile phones or tablets via Apps. Users can easily manage multiple smart home appliances in just one device by their fingertip in the App: the status of all the appliances connected such as power levels, power consumed, air pollution, and room humidity will be displayed on their screen. Moreover, users will be able to control and manage every single appliance in large size homes with multiple floors by using the smart home ecosystem without the need access each individual appliance. We established an IoT Technology and Lifestyle product team during the quarter endedJune 30, 2022 , and are in the process of developing a series of IoT home automation products. We expect to initially distribute the IoT products inHong Kong andSoutheast Asia and hope to expand to other countries as opportunities permit. Use of Capital Funds
OnJune 21, 2022 , the Company has entered into an Equity Purchase Agreement withWilliamsburg Venture Holdings, LLC ("Investor"), aNevada venture capital company, pursuant to which the Investor has committed to invest up toTwenty Million Dollars ($20,000,000 ) in the Company's common stock over a 36-month period. In light of the Company's latest strategic plan to tackle the Smart Home segment with products enhanced with Technologies, Lifestyle, and Green elements, the Company will use the proceeds to establish a sustainable smart home ecosystem through in-house development of smart home appliances, target acquisition of smart home sector companies, and establish strategic partnerships with ESG promote companies. Research and Development During the quarter endedJune 30, 2022 , our research and development expenses are mainly incurred for the maintenance cost of our product development team. We expect to allocate our research and development funding towards product innovation of smart home appliances, and the recruitment on product development talents. Sales and Marketing
We believe, the demand for smart home appliances will continue to increase especially as the technological improvements such as AI are integrated into products to enhance user experience. We expect to distribute our current and future power supply and IoT products as follows:
· Hong Kong - through our e-commerce channels, and leverage on our
networks to distribute to prominent retailers, collaborate
distribution channels with sales solution and promotioncampaign.
· APAC - through third party authorized dealers and channel partners.
· USA /EMEA - through third party authorized distributors (which we
expect to be wholesalers that sell to end retailers).
21
Recently, we have begun a channel partnership arrangement to open up the
Malaysian market. We believe this arrangement will enhance market recognition of
our brand, and increase our market shares in the Southeast Asia region. In the
near future, we intend to begin discussions with authorized dealers or
distributors in other regions.
Results of Operations
Comparison of the three months ended
The following table sets forth certain operational data for the periods
indicated:
Three months ended June 30,
2022 2021
Revenue, net $ 159,317 $ -
Cost of revenue (16,486 ) -
Gross profit 142,831 -
Operating expenses:
Research and development expenses (62,611 ) (28,419 )
Sales and marketing expenses (149,000 ) -
General and administrative expenses (101,654 ) (23,565 )
Loss from operation (170,434 ) (51,984 )
Other income, net (11,525 ) -
Loss before income taxes (181,959 ) (51,984 )
Income tax expense - -
Net loss $ (181,959 ) $ (51,984 )
Revenue
During the three months ended
Three months ended June 30, 2022 June 30, 2022
Percentage Accounts
Customer Revenues of revenues receivable
Mirum Digital Media Ltd. $ 159,317 100% $ -
During the three months
Cost of Revenue Cost of revenue for the three months endedJune 30, 2022 and 2021, was$16,486 and$0 , respectively. The increase was primarily attributable to the increase in revenue from our research businesses. Gross Profit We achieved a gross profit of$142,831 and$0 for the three months endedJune 30, 2022 and 2021, respectively. The increase in gross profit was attributable to an increase in revenue from our research businesses. 22
Research and Development Expenses ("R&D")
Research and development expenses was$62,611 and$28,419 for the three months endedJune 30, 2022 and 2021, respectively. The increase in expenses was primarily attributable to the increase in R&D expenses associated with our smart chargers, power banks and IoT products development.
Sales and Marketing Expenses
Sales and marketing expenses was$149,000 and$0 for the three months endedJune 30, 2022 and 2021, respectively. The expenses primarily include consulting fees incurred in relation to public relations and promotional expenses.
General and Administrative Expenses ("G&A")
General and administrative expenses was$101,654 and$23,565 for the three months endedJune 30, 2022 and 2021, 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 increased by approximately$78,089 in the three months endedJune 30, 2022 from$23,565 in the three months endedJune 30, 2021 . The increase was primarily attributable to the increase in professional fees and salaries. Other income, net
Other income, net was (
Income Tax Expense
No income tax expense incurred during the three months ended
Net loss As a result of the above, we reported net loss of$181,959 for the three months endedJune 30, 2022 , as compared to$51,984 for the three months endedJune 30 ,2021. The increase in net loss was mainly attributable to sales and marketing cost associated with sales channel development.
Liquidity and Capital Resources
The following table summarizes the key components of our cash flows for the
three months ended
Three months ended June 30,
2022 2021
Net cash provided by (used in) operating activities
134,848 32,683
23
Net Cash Provided By (Used In) Operating Activities
For the three months endedJune 30, 2022 , net cash provided by operating activities was$255,937 , which consisted primarily of a net loss of$181,959 , an increase in inventories of$874 , an increase in deposits, prepayments and other receivables of$4,664 , and a decrease of lease liabilities of$9,478 , offset by a an increase in accrued liabilities and other payables of$226,086 , an increase in accrued consulting and service fee of$200,000 , plus non-cash items such as, depreciation of$10,276 , amortization of$1,122 , non-cash lease expenses of$845 , and amortization of deferred financing cost of$14,583 . For the three months endedJune 30, 2021 , net cash used in operating activities was$51,423 , which consisted primarily of a net loss of$51,984 , a decrease in accrued liabilities and other payables of$2,002 , a decrease of lease liabilities of$9,945 , offset by a decrease in deposit, prepayment and other receivables of$1,528 , plus non-cash items such as, depreciation of$9,550 , amortization of$1,069 and non-cash lease expenses of$361 .
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.
For the three months ended
For the three months ended
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. We believe that our current cash and other sources of liquidity discussed below are adequate to support operations for at least the next 12 months. 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 2023 to be significantly higher than 2022. As ofJune 30, 2022 , we had an accumulated deficit of$6,750,452 . Our material cash requirements are highly dependent upon the additional financial support from our major shareholders in the next 12 - 18 months. 24 We had the following contractual obligations and commercial commitments as ofJune 30, 2022 : Less than More than 5
Contractual Obligations Total 1 Year 1-3 Years 3-5 Years Years
$ $ $ $ $
Amounts due to related
parties 1,814,530 1,814,530 - - -
Operating lease liability 39,091 39,091 - - -c
Other contractual
liabilities (1) 600,974 600,974 - - -
Total obligations 2,454,595 2,454,595 - - -
(1) Includes all obligations included in "Accrued liabilities and other
payables" and "Accrued consulting and service fee" in current liabilities in the
"Unaudited Condensed Consolidated Balance Sheet" that are contractually fixed as
to timing and amount.
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.
Critical Accounting Policies and Estimates
For a detailed description of the Critical Accounting Policies and Estimates of the Company, please refer to Part II, ITEM 7 "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" in our Annual Report Form 10-K for the year endedMarch 31, 2022 filed with theSEC onJune 24, 2022 .
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