GFOO Genufood Energy Enzymes Corporation (CE)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – GENERAL ORGANIZATION AND BUSINESS

Genufood Energy Enzymes Corp., USA (the “Company” or “GEEC”) was incorporated under the laws of the State of Nevada on June 21, 2010. On February 13, 2012, GEEC incorporated a wholly-owned subsidiary, Genufood Enzymes (S) Pte Ltd (“GESPL”) in Singapore, which ceased its operations on January 9, 2023.

Since its inception, the Company has always been in the development stage and never generated significant revenues. The Company is currently developing business in Electric Vehicle Charge station. The Company has engaged in business agreements and development with various parties. During the three months ended December 31, 2022, the Company has initiated its electric vehicle charging station business.

The Company made two investments in Hukui Biotechnology Corporation (“Hukui”) by purchasing 80,000 shares of Hukui’s Series C Preferred Stock for $800,000 on December 15, 2020; and purchasing 60,000 shares of Hukui’s Series C Preferred Stock for $600,000 on June 25, 2021. The Company, an individual and resident of the Republic of China (the “Purchaser”), and Hukui, entered into a Stock Purchase Agreement dated as of November 17, 2021, pursuant to which the Company agreed to sell these 140,000 shares of Hukui’s Series C Preferred Stock (the “Hukui Shares”) to the Purchaser for $350,000 in cash, or $2.50 per share. The sale of the Hukui Shares closed on November 19, 2021.

On August 1, 2022, the board of directors (the “Board”) of the Company unanimously approved to expand our business in the area of electric vehicle supply equipment (“EVSE”) and will direct the management team to implement its new business plan in such industry. On August 16, 2022, the Company formally announced its intention to reposition as EVSE solutions provider, seeking to grow business in EVSE industry, including building, owning, and operating the next generation of electric vehicle charging stations in the U.S. The Company intends to bring convenient, reliable, and accessible charging experience to electric vehicle drivers, utilizing frictionless technology and carbon-neutral vehicle-charging infrastructure.

On October 26, 2022, the Company entered into three Charging Station Site Host Agreements (the “Agreements”) with two institutions (the “Site Hosts”), respectively, pursuant to which the Site Hosts agree to allow the Company to install its electric vehicle charging stations at the locations set forth in the Agreements (the “Charging Stations”). Under the Agreements, the Company has agreed to share the revenue generated by the sales of electricity at the Charging Stations with the Site Hosts in accordance with the schedules set forth therein.

As of December 31, 2022, the Company has purchased certain electric vehicle charging equipment. Furthermore, the Company is in the process of obtaining permits to construct the Charging Stations at the three confirmed sites. As of December 31, 2022, the Company contracted an architectural firm on providing designing and engineering services for two sites, and working on technical issues for the third site.

As of February 13, 2023, the Company has received the finalized site plans and electrical diagrams from the architectural firm and electrical engineers for 2 sites. The Company has also received permission from the site owners to proceed with the charging station construction permit applications with the local municipalities.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The accompanying condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending September 30, 2023. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2022. 

Principle of Consolidation

The condensed consolidated financial statements include the accounts of GEEC and its wholly-owned subsidiary GESPL. All significant inter-company accounts and transactions have been eliminated in consolidation. The wholly-owned subsidiary of the Company did not have business activities during the three months ended December 31, 2022 and 2021.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

GENUFOOD ENERGY ENZYMES CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consisted primarily of cash, to the extent balances exceeded limits that were insured by the Federal Deposit Insurance Corporation. The Company does not require collateral and maintains reserves for potential credit losses. Such losses have historically been immaterial and have been within management’s expectations.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with original maturities of three months or less when acquired to be cash equivalents. As of December 31, 2022 and September 30, 2022, the Company did not have cash equivalents. The Company’s cash was denominated in United States Dollars (“USD”) or New Taiwan Dollars (“TWD”) and was placed with banks in the United States of America and Taiwan.

Fair Value of Financial Instruments

The Company follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

The Company’s financial instruments consist principally of cash and cash equivalents, accounts payable and accrued expenses and due to related parties. The carrying amounts of such financial instruments in the accompanying consolidated balance sheets approximate their fair values due to their relatively short-term nature. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.

Foreign Currency Translation and Transactions

The reporting and functional currency of GEEC is the USD. The functional currency of GESPL, a wholly owned subsidiary of GEEC, is the Singapore Dollar (“SGD”).

For financial reporting purposes, the financial statements of the Company’s Singapore subsidiary, which are prepared using the SGD, are translated into the Company’s reporting currency, USD. Assets and liabilities are translated using the exchange rate on the balance sheet date, which was 0.7464 and 0.6970 as of December 31, 2022 and September 30, 2022, respectively. Revenue and expenses are translated using average exchange rates prevailing during each reporting period. The 0.7214 and 0.7370 average exchange rates were used to translate revenues and expenses for the three months ended December 31, 2022 and 2021, respectively. Stockholders’ equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive loss in stockholders’ deficit.

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 transactions. The resulting exchange difference, presented as foreign currency transaction loss, is included in the accompanying condensed consolidated statements of operations.

GENUFOOD ENERGY ENZYMES CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Business Segments

The Company operates in only one segment.

Net Income (Loss) Per Share

The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. There were no potential dilutive debt or equity instruments issued and outstanding at any time during the three months ended December 31, 2022 and 2021.

Discounts on Common Stock

Common stock issued lower than the Company’s par value is treated as common stock issued under discounts. The portion of the discount is shown separately as a deduction from the Company’s account of common stock on the Company’s condensed consolidated financial statements.

Stock-Based Compensation

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

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized.

The Company considers positive and negative evidence when determining whether a portion or all of its deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, the Company has considered possible sources of taxable income including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected within the industry.

GENUFOOD ENERGY ENZYMES CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company recognizes a tax benefit associated with an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The Company’s liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The Company’s effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. The Company classifies interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense.

There were no current and deferred income tax provision recorded for the three months ended December 31, 2022 and 2021 since the Company is in developing stage and did not generate any revenues in the two fiscal periods.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs” or “ASU”) on the Company’s consolidated financial statements. Updates not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s consolidated financial position or results of operations. Recently issued ASUs that the Company feels may be applicable to the Company are as follows:

In August 2020, the FASB issued Accounting Standards Update No. 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). The subtitle is Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU addresses complex financial instruments that have characteristics of both debt and equity. The application of this ASU would reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models would result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. To date, no such bifurcation has been necessary. Management is evaluating the potential impact. This ASU becomes effective for fiscal years beginning after December 15, 2023.

NOTE 3 – GOING CONCERN

As of December 31, 2022 and September 30, 2022, the Company had an accumulated deficit of $10,128,993 and $9,922,955, respectively. To date, the Company’s cash flow requirements have been primarily met through proceeds received from sales of Common Stock and investment. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.

The Company sold the 140,000 Hukui Shares for $350,000 cash on November 19, 2021. The proceeds have been used for operation expenses. Management is currently seeking additional funds for the Company’s future operation.

GENUFOOD ENERGY ENZYMES CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 4 – EQUIPMENT

As of December 31, 2022 and September 30, 2022, the Company had equipment of $15,005 and $0, respectively, consisting of equipment to be installed at its electric vehicle charging stations.

NOTE 5 – INVESTMENT

Pursuant to that certain Series C Preferred Shares Subscription Agreement dated September 23, 2020 between the Company and Hukui (the “Hukui Agreement”), the Company agreed to purchase an aggregate 200,000 Series C Preferred Shares, at $10.00 per share, for an aggregate investment of $2,000,000, in a series of three closings from December 15, 2020 through June 30, 2022. On December 15, 2020, the Company purchased 80,000 shares of Series C Preferred Stock at $10.00 per share, for a total purchase price of $800,000; and on June 25, 2021, the Company purchased an additional 60,000 shares of Series C Preferred Stock at $10.00 per share, for a total purchase price of $600,000. The total $1,400,000 investment consists of less than 20% of Hukui’s total equity with no significant control over or influence on Hukui. The investment is recorded at cost.

On November 17, 2021, the Company entered into a stock purchase agreement to sell all 140,000 Hukui Shares at $2.50 per share for a total of $350,000. The sale was completed on November 19, 2021, resulting in loss of $1,050,000. The Company recognized impairment loss of the market value of the shares of $1,050,000 for the year ended September 30, 2021.

NOTE 6 – STOCKHOLDERS’ EQUITY (DEFICIT)

The Company is authorized under its articles of incorporation, as amended, to issue 10,000,000,000 shares of Common Stock, par value $0.001 per share.

Stock Options

On July 15, 2022, the CEO, David Tang, was granted 15,000,000 options to purchase shares at $0.01 per share. As of December 31, 2022, total options granted was 15,000,000 and none was vested. This option will be subject to a vesting schedule providing for twenty-five percent (25%) vesting after the first twelve (12) months of employment and monthly vesting as to the remaining seventy-five percent (75%) of the shares over the following thirty-six (36) months after the first anniversary of the employment commencement date. These stock options are exercisable over a maximum period of 10 years from the grant date. The weighted average grant date fair value of options granted during the year ended September 30, 2022 was $0.02.

Compensation costs associated with the Company’s stock options are recognized, based on the grant-date fair value of these options, over the requisite service period, or vesting period. Accordingly, the Company recognized stock-based compensation expense of $75,000 and $0, respectively, which was included in the general and administrative expenses in the condensed consolidated statements of operations for the three months ended December 31, 2022 and 2021.

GENUFOOD ENERGY ENZYMES CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The fair value of the stock options listed above was determined using the Black-Scholes option pricing model with the following assumptions: 

The following is a summary of the option activity for the three months ended December 31, 2022:

As of December 31, 2022, unrecognized total compensation cost associated with these options was $161,712. This expense is expected to be recognized over a weighted-average period of 3.54 years.

GENUFOOD ENERGY ENZYMES CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The related party balances are unsecured, interest-free and due on demand.

NOTE 8 – INCOME TAXES

The Company has not generated any revenue from any source in the United States and had consolidated net loss for all the years since inception in 2010. Management believes GEEC does not have any U.S. income tax liability due. However, even though the Company does not have U.S. income tax liability, it may be required to file Form 5471 each year with the Internal Revenue Service (the “IRS”) of Department of Treasury. GEEC falls in the Category Five Filer (as a domestic corporation). The Company used to have subsidiaries: GEECIS in Sri Lanka that was established in May 2011, GESPL in Singapore that was established in February 2012, and GESTL in Thailand that was established in December 2014. The subsidiaries in Sri Lanka and Thailand were disposed in 2014 and 2016, respectively, and the Singapore subsidiary has been inactive since 2016.

Internal Revenue Code (“IRC”) Section 6038(a) requires information reporting with respect to certain foreign corporations (Form 5471) and describes the information required to be reported on this form. IRC Section 6038(b)(1) provides for a monetary penalty of $10,000 for each Form 5471 that is filed after the due date of the income tax return (including extensions) or does not include the complete and accurate information described in Section 6038(a). According to IRS rules, a penalty may apply to each Form 5471 which is filed after the due date of the income tax return. The penalty will be applied whether or not any tax is due on Form 1120.

The Company believes that based on the current information available, it is difficult to determine whether it is probable that the Company will be charged penalties by IRS for the late filing of Form 5471 and even if it will be, it is difficult to reasonably estimate the amount of penalties that may be assessed.

During the fiscal year ended September 30, 2021, the IRS imposed a $25,000 penalty on the Company for failure to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, for the year ended September 30, 2020. The Company has engaged an outside professional advisor to seek for forgiveness of the penalty and interest thereon in the amount of $4,976, for a total of $29,976, which was still pending as of December 31, 2022.

GENUFOOD ENERGY ENZYMES CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 9 – COMMITMENTS AND CONTINGENCIES

The Company terminated its previous virtual office agreement in Los Angeles, California and has established a new virtual office in Arcadia, California. The new arrangement is on a month-to-month basis at a cost of $200 per month. As of December 31, 2022, the Company had no material commitments under operating leases.

During the fiscal year ended September 30, 2021, the IRS imposed a $25,000 penalty on the Company for failure to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, for the year ended September 30, 2020 (see Note 8).