Overview
We were incorporated under the laws of the State of Delaware on July 6, 2010
under the name "Advanced Ventures Corp." Effective January 6, 2014, we changed
our name to "Gold Union Inc." Effective March 26, 2018, we changed our name to
Noble Vici Group, Inc. and our trading symbol was changed to NVGI. On August 8,
2018, we consummated the acquisition of Noble Vici Private Limited, a
corporation organized under the laws of Singapore ("NVPL"), which was wholly
owned by Eldee Tang, our sole director and Chief Executive Officer. NVPL is
engaged in the IoT, Big Data, Blockchain and E-commerce business. As a result of
our acquisition of NVPL, we entered into the IoT, Big Data, Blockchain and
E-commerce business. We are headquartered in Singapore and operate a branch
office in Taiwan. Certain of our resellers are operating "V-More" branded
satellite offices in Shenzhen, China.
History
As Advanced Ventures Corp., we acquired a patent (U.S. Patent Number: 6,743,209)
(the "Patent"), for a catheter with a integral anchoring mechanism. During the
second fiscal quarter of 2014, we elected to discontinue our business of
exploiting the Patent and began to consider other business opportunities that
may bring quicker and greater value to our stockholders. We initially considered
entering into the business of trading precious metal bullion primarily in the
Asia Pacific region. Therefore, effective January 6, 2014, we changed our name
to "Gold Union Inc." to more adequately reflect our initial intended business
operations.
Effective March 7, 2012, we increased the number of our authorized shares of
common stock to three billion shares (3,000,000,000) and engaged in a forward
stock split of its common shares whereby each one share of our common stock was
split into fifteen shares of our common stock.
On December 31, 2015, we consummated a Share Exchange Agreement with G.U.
International Limited, a limited company incorporated under the laws of the
Republic of Seychelles and our wholly owned subsidiary ("GUI"), and Kao
Wei-Chen, an individual representing herself and 8 other individuals
(collectively, the "Golden Corridor Shareholders"), which agreement was amended
several times to extend the closing date of the acquisition (collectively, the
"Share Exchange Agreement"). Pursuant to the Share Exchange Agreement, we,
through GUI, purchased 480 shares of Phnom Penh Golden Corridor Trading Co.
Limited (the "GC Shares"), from 9 private Golden Corridor Shareholders,
representing 48% of the issued and outstanding shares of common stock of Golden
Corridor. As consideration, we issued to the Golden Corridor Shareholders
2,500,000,000 shares of our common stock, at a value of US $0.002 per share, for
an aggregate value of US $5,000,000.
As a result of our acquisition of the GC Shares, we ceased our metal bullion
trading business and entered into the real estate development and rental
business located in the Kingdom of Cambodia. Golden Corridor owns three parcels
of land located at National Road 44, Phum Phkung, Chbarmorn Commune, Chbarmorn
District, Kampong Speu Province, Kingdom of Cambodia, measuring an aggregate of
172,510 square meters (collectively, the "Properties"). We intended to develop
the Properties into an industrial park for rental income.
Due to difficulties in entering the real estate development and rental business,
on February 2, 2018, we engaged in a corporate reorganization and distributed
the GC Shares to our shareholders. On March 18, 2018, our subsidiary, G.U. Asia
Limited was dissolved.
Change in Control
On January 29, 2018, Eldee Tang entered into Share Sale Agreements with four
shareholders and former affiliates of the Company to purchase up to
1,675,000,000 shares of the Company's common stock at a per share purchase price
of US$0.00008, for an aggregate price of US$134,000. On June 15, 2018, the
Company effectuated a 1 for 1,000 reverse stock split whereby every 1,000 shares
of the Company's common stock were reduced to one share. The parties effectuated
Mr. Tang's purchase of 750,000 shares such securities (expressed on a post
reverse split basis) effective June 15, 2018. Mr. Tang hopes to purchase the
balance of the 925,000 shares from Kao Wei-Chen, a former affiliate of the
Company, in the near future. The foregoing description of the Share Sale
Agreement with Kao Wei-Chen is qualified in its entirety by reference to such
agreement which is filed as Exhibit 10.2 to this Quarterly Report and is
incorporated herein by reference.
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In connection with the contemplated change in control, on March 27, 2018, Lim
Yew Chuan, the director, Chief Executive Officer, Chief Financial Officer and
Secretary of Noble Vici Group, Inc. (the "Company"), resigned from all of his
positions as director, Chief Executive Officer, Chief Financial Officer and
Secretary of the Company. Concurrently, Eldee Tang was appointed to serve as the
Chief Executive Officer and Director of the Company, together with other members
of the new management team.
Effective June 15, 2018, we:
1. Increased the Company's authorized capital from 3,000,000,000 shares of
common stock, par value $0.0001 (the "Common Stock"), to 3,050,000,000
shares, consisting of 3,000,000,000 shares of Common Stock and
50,000,000 shares of undesignated preferred stock, par value $0.0001
(the "Preferred Stock");
2. Effected a 1-for-1000 reverse stock split of our issued and outstanding
Common Stock (the "Reverse Stock Split");
3. Elected not to be governed by Section 203 of the Delaware General
Corporation Law;
4. Changed the Company's fiscal year end from December 31st to March 31st,
for all purposes (including tax and financial accounting);
5. Adopted Amended and Restated Certificate of Incorporation for the
purpose of consolidating the amendments to the Company's Certificate of
Incorporation; and
6. Adopted the Amended and Restated Bylaws of the Company.
Acquisition of NVPL, TDA and NDA
On August 8, 2018, we consummated the acquisition of Noble Vici Private Limited,
a corporation organized under the laws of Singapore ("NVPL"), in accordance with
the terms of a Share Exchange Agreement. NVPL is wholly owned by Eldee Tang, our
Chief Executive Officer and Director. Pursuant to the Share Exchange Agreement,
we purchased One Million and One (1,000,001) shares of NVPL (the "NVPL Shares"),
representing all of the issued and outstanding shares of common stock of NVPL,
in consideration of One Hundred Forty Million (140,000,000) shares of our common
stock, at a value of US $1.70 per share, for an aggregate value of US
$238,000,000. It is our understanding that Mr. Tang is not a U.S. Person within
the meaning of Regulations S. Accordingly, the Shares are being sold pursuant to
the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as
amended, Regulation D and Regulation S promulgated thereunder. As a result of
our acquisition of NVPL, we entered into the IoT, Big Data, Blockchain and
E-commerce business.
On September 17, 2018, we consummated the acquisition of a 51% controlling
interest in The Digital Agency Private Limited, a private limited company
organized under the laws of Singapore ("TDA"), and a start-up digital marketing
company, in accordance with the terms of that certain Share Exchange Agreement
by and among the Company, NIApplications Private Limited (formerly, "Noble
Infotech Applications Private Limited"), a private limited company organized
under the laws of Singapore and our wholly owned subsidiary ("NIA"), TDA and Mok
Jo Han ("the "TDA Share Exchange Agreement"). Pursuant to the terms of the TDA
Share Exchange Agreement, we acquired 51 ordinary shares of TDA, representing
approximately fifty-one percent (51%) of the issued and outstanding ordinary
shares of TDA, in exchange for 510,000 shares of common stock of the Company,
par value $0.0001 (the "TDA Shares"), representing an exchange ratio of ONE (1)
ordinary share of TDA for Ten Thousand (10,000) shares of common stock of the
Company, at a valuation of $2.00 per share of the Company, for an aggregate
value of $1,020,000. It is our understanding that Mr. Mok is not a U.S. Person
within the meaning of Regulations S. The TDA Shares were sold pursuant to the
exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended,
and Regulation S promulgated thereunder.
On September 17, 2018, we consummated the acquisition of a 51% controlling
interest in Noble Digital Apps Sendirian Berhad, a private limited company
organized under the laws of Malaysia ("NDA"), and a start-up digital apps and
big data company in accordance with the terms of that certain Share Exchange
Agreement by and among the Company, NIA, NDA, Cheng Bok Woon, Tan Yew Fui, and
Yong Swee Sun ("the "NDA Share Exchange Agreement"). Pursuant to the terms of
the NDA Share Exchange Agreement, we acquired 510 ordinary shares of NDA,
representing approximately fifty-one percent (51%) of the issued and outstanding
ordinary shares of NDA, in exchange for 510,000 shares of common stock of the
Company, par value $0.0001 (the "NDA Shares"), representing an exchange ratio of
ONE (1) ordinary share of NDA for One Thousand (1,000) shares of common stock of
the Company, at a valuation of $2.00 per share of the Company, for an aggregate
value of $1,020,000. It is our understanding that Mr. Cheng, Mr. Tan and Mr.
Yong are not U.S. Person within the meaning of Regulations S. The NDA Shares
were sold pursuant to the exemption provided by Section 4(a)(2) of the
Securities Act of 1933, as amended, and Regulation S promulgated thereunder.
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Issuance of shares to sales affiliates
On September 17, 2018, and September 25, 2018, we approved the issuance of Nine
Million One Hundred Thirty Five Thousand Seven Hundred Ninety Four (9,135,794)
shares and Five Hundred Sixty Seven Thousand Sixty-Four (567,064) shares of our
common stock, par value $0.0001, respectively, representing a total of
approximately 6.3% of our issued and outstanding common stock, at a per share
price of One Dollars and Ninety Nine Cents (US $1.99), to approximately 460
sales associates for prior sales and marketing services provided to us and our
subsidiaries and affiliates. As a condition of receipt of such securities, each
recipient executed a Stockholder Representation Letters, which contained, among
other things, restrictions prohibiting the transfer of such securities for a
minimum period of 18 months up to a maximum period of 66 months after the
execution of such letter. For ease of administration, the recipients appointed
Noble Infotech Limited ("NIL") as nominee to hold, manage, administer and
effectuate the distribution of such securities upon the expiration of the
applicable restricted periods. The shares were issued on October 18, 2018 to
NIL. The securities were issued pursuant to the exemption provided by Regulation
S promulgated under the Securities Act of 1933, as amended. The foregoing
description of the Stockholder Representation Letters are qualified in its
entirety by reference to such agreements which are filed as Exhibit 10.3 to this
Quarterly Report and are incorporated herein by reference.
On December 3, 2018, we approved the issuance of up to an aggregate of Ten
Million Eight Hundred Thirty Eight Thousand One Hundred Forty One (10,838,141)
shares of our common stock, par value $0.0001, representing approximately 7.1%
of our issued and outstanding common stock, at a per share price of Two Dollars
(US $2.00), to about 690 sales associates for prior sales and marketing services
provided to us and our subsidiaries and affiliates. As a condition of receipt of
such securities, each recipient was required to execute one of two standard
forms of Stockholder Representation Letters, which contained, among other
things, restrictions prohibiting the transfer of such securities for a minimum
period of 18 or 24 months up to a maximum period of 72 months after the
execution of such letter. For ease of administration, the recipients appointed
Venvici Partners Limited ("VVP") as nominee to hold, manage, administer and
effectuate the distribution of such securities upon the expiration of the
applicable restricted periods. The shares were issued on January 4, 2019 to VVP.
The securities were issued pursuant to the exemption provided Regulation S
promulgated under the Securities Act of 1933, as amended. The foregoing
description of the Stockholder Representation Letters and the appointment of VVP
as trustee are qualified in its entirety by reference to such agreements which
are filed as Exhibits 10.4 and 10.5 to this Quarterly Report and are
incorporated herein by reference.
On March 11, 2019, our Board of Directors, approved the issuance of up to an
aggregate of Fifteen Million (15,000,000) shares of our common stock, par value
$0.0001, representing approximately 8.4% of our issued and outstanding common
stock (collectively, the "Shares"), at a per share price of Two Dollars (US
$2.00), to about 700 sales associates for prior sales and marketing services
provided to us and our subsidiaries and affiliates. As a condition of receipt of
such securities, each recipient was required to execute one of two standard
forms of Stockholder Representation Letters, which contained, among other
things, restrictions prohibiting the transfer of such securities for a minimum
period of 18 months up to a maximum period of 66 months after the execution of
such letter. For ease of administration, the recipients appointed Venvici
Partners Limited ("VVP") as nominee to hold, manage, administer and effectuate
the distribution of the Shares upon the expiration of the applicable restricted
periods. For so long as VVP is the stockholder of record of the Shares, VVP
shall serve as the attorney in fact to vote such Shares at any annual, special
or other meeting of the stockholders of the Company, and at any adjournment or
adjournments thereof, or pursuant to any consent in lieu of a meeting or
otherwise, with respect to any matter that may be submitted for a vote of
stockholders of the Company. The securities will be issued pursuant to the
exemption provided by Regulation S promulgated under the Securities Act of 1933,
as amended. The foregoing description of the Stockholder Representation Letters
and the appointment of VVP as trustee are qualified in its entirety by reference
to such agreements which are filed as Exhibits 10.6 and 10.7 to this Quarterly
Report and are incorporated herein by reference.
V-More Merchant Acquisition Agreements
On March 19, 2019, we entered into a V-More Merchant Acquisition Agreement with
each of the Consultants pursuant to which each Consultant agreed to provide
certain services related to the identification, due diligence, acquisition and
retention of potential merchants in certain designated territories for inclusion
in our V-More platform. As consideration for these services, each Consultant
received up to an aggregate of Fourteen Million Three Hundred Twenty Thousand
(14,320,000) shares of our common stock, for an aggregate of up to Forty-Two
Million Nine Hundred Sixty Thousand (42,960,000) shares of our common stock,
subject to the achievement of certain performance milestones and certain
clawback rights. We registered Twenty-One Million Four Hundred Eighty Thousand
(21,480,000) shares of the amount of shares issuable under the V-More Merchant
Acquisition Agreement on a Registration Statement on Form S-8 filed with the
Securities and Exchange Commission on March 19, 2019. The foregoing description
of the V-More Merchant Acquisition Agreements is qualified in its entirety by
reference to the V-More Merchant Acquisition Agreements dated March 19, 2019,
which are filed as Exhibits 10.8, 10.9 and 10.10 to this Quarterly Report and
incorporated herein by reference.
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Consulting Agreement
During the period from March 19, 2019 till December 31, 2019, one of V-More's
merchants and vendors, Fame Reserve Limited, a subcontractor of Ms. Sukullayanee
Suwunnavid (the "Digital Consultant"), which distributes digital vouchers, ran a
promotion through V-More platform to promote and sell their digital vouchers
(the "Promotion"). As a consideration for purchasing these vouchers for the
promotion, the Board approved the issuance of up to an aggregate of Ten Million
(10,000,000) shares of our common stock, par value $0.0001, of our issued and
outstanding common stock, at a per share price of Two Dollars (US$2.00).
In connection to the Promotion, we entered into a Consulting Agreement with
pursuant to which the Digital Consultant agreed to supply certain digital
offerings and services to our customers, including without limitation, order
fulfilment services with respect to orders from our customers received through
the Digital Consultant's online platform and its related digital offerings. We
issued Ten Million (10,000,000) shares of the Corporation's Common Stock, par
value $0.0001 (the "Shares"), at a per share price of US$2.00, as payment in
full for the Services and the satisfaction of all of our obligations to the
Digital Consultant with respect to such services. These securities were
registered on a Registration Statement on Form S-8 filed with the Securities and
Exchange Commission on March 19, 2019. The foregoing description of the
Consulting Agreement is qualified in its entirety by reference to the
V-Consulting Agreement dated March 19, 2019, which is filed as Exhibit 10.11 to
this Quarterly Report and incorporated herein by reference.
Our current corporate structure is as below:
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Our Operations and Future Plans
Ecommerce Platform
We are focused on providing users with innovative tools to live and interact in
the modern mobile world through our ecosystem of IoT, Big Data, Blockchain and
E-commerce products and services. We integrate blockchain technology with our
E-commerce platform to connect consumers and merchants in a dynamic global
marketplace via blockchain transactions. We onboard users, consumers and
referrers through our Affiliate Incentivized Marketing to Advertising Dollar
Sharing (formerly known as Affiliate Incentivized Marketing (AIM)) model while
merchants are onboarded via our Merchant Incentivized Marketing (MIM) model.
Some products and services offered in our ecosystem include procurement of
discounted goods and services, referral reward system, mobile games and digital
marketing, financial markets apps and a "Business Centre" within the same app.
Our E-commerce platform not only offers users the ability to make online
purchases, but also the convenience of an O2O (Online to Offline) platform
whereby consumers can transact at a discount online while goods and services are
distributed at a physical location. This drives traffic to the already weakened
retail industry. The Business Centre within our ecosystem is offered through a
mobile app and allows users to create their own referral platform within our
ecosystem.
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Advertising Dollar Sharing (ADS)
We have rebranded our Affiliate Incentivized Marketing to Advertising Dollar
Sharing. Similar to the AIM model, the ADS business model also involves driving
online and physical traffic and increasing sales and marketing of targeted
products and services. Its enhanced function includes distribution of
advertising dollars via ADS system to agencies, affiliate marketers, advertiser,
users and referrals.
Sale and Distribution of IoT Smart Devices / VMore System Private Limited
In addition to the E-commerce platform, we intend to focus on the sales and
distribution of IoT smart devices and appliances. In September, 2019, we began
to sell our first IoT appliance, our smart coffee dispensing machines (the
V-More Express ("VX")). We hope to begin distributing the machines on or about
the second calendar quarter of 2020 and expect them to be progressively placed
into operation in Singapore on or around the third quarter of 2020. We expect to
derive income from sales of our VX IoT hardware, the core consumables in VX and
the advertising services we provide to our customers in connection with the VX.
Features of the VX; Revenue Sources:
Machine Capacity: The VX offers 9 types of beverage, holds 60 litres of
distilled water tank and is able to produce 400 cups of beverages. VX currently
offers barista-grade coffee in 9 different varieties in both hot and ice
options. VX can be modified to allow for other offerings to be sold. We expect
to adopt regional pricing for core products sales, aligning to each specific
market's demand and supply.
AdTech: In addition to sales of core products, we expect to rely on
advertisements placed through the VX to drive revenue. We intend to seek
advertisers that are proximate to each specific VX to display their
advertisements through our smart machine. We believe that the use of local
advertisements (Proximate Location Ads, or PLA) will drive relevant traffic to
nearby physical merchants as well as online merchants. Advertisements can be
static or dynamic and may be interactive, allowing user interaction. We expect
to provide services to advertisers to assist them in creating and placing
effective ads in the VX.
Smart Technology: The VX features a 42 inch touch screen with Smart Digital
Panel Advertising Technology ("SDPAT") that allows users to interact with
advertisements via its interactive touch screen. Through the VX, we hope to
capture users' spending behaviour, advertisement interactions and other
quantitative data, while developing our Big Data analytics. Data from our
machines can be integrated with our ecommerce platform to facilitate the
offering of discounts, rewards or other products and services across our
e-commerce platform. We believe that additional data will allow us to: (i)
deliver and improve our offerings and services of our online VMore E-commerce
platform; (ii) improve synergy with offline merchants; (iii) improve the
efficacy of our advertising services; and (iv) improve sales of products offered
by the VX.
VX Operations
Our VX business operations are segregated into the following core functions to
address the needs of our advertisers, VX IoT hardware purchasers and consumers.
Sales and Marketing Team. Our team will focus on the sale of the VX IoT
hardware. Its targeted industries are primarily from real estate and property
owners such as commercial offices, retails and buildings, where the VX will be
installed. In addition to the sale of VX, the team will also create brand
awareness of the VX and its core offerings in the VX.
Advertiser Onboarding Team. Once an advertiser engages us online to have its
advertisement placed in VX, a member of our advertiser onboarding team will
initiate the first of several communications with the merchant to introduce the
advertiser to the technology involved in our PLA ecosystem. Before the
advertisement goes live on the VX, the team will work with the advertiser to
build and create the advertisement. We will provide tools such as an app to
ensure the advertisement traffic monitoring and management are aligned. All
advertisements will be proximate locality based, ensuring relevance for targeted
traffic to be driven.
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Operation and Maintenance Team(O&M). Once the VX are deployed, O&M team will
monitor the performance of each VX deployed for its ingredients supply, hardware
status and data collection efficiency. Maintenance of the hardware for
performance to prevent downtime and refilling the ingredients into the VX will
be undertaken by the O&M team.
Customer/User Service Representatives. Our customer service representatives will
be reachable via the app or email 24 hours a day, seven days a week. The
customer service team will also work with our technology team to improve the
experience of VX owners, consumers and advertisers on the mobile application
based on their feedback.
Technology.We employ technology to improve the experience we offer to VX owners,
users and advertisers, increase the rate at which our users use our V-More Pro
platform and enhance the efficiency of our business operations. A component of
our strategy is to continue developing and refining our technology. With the
future use of blockchain technology for recording and collecting data, we
believe the security of transactional records will be increased, protecting the
accuracy of data held by VX owners, advertisers and users. We believe that
basing transactional data on a private blockchain network will facilitate a
smoother and faster transaction completion.
We expect to use an algorithm to analyze data collected through our VX
ecosystem. As the volume of transactions grow organically through increased
deployment of VXs, we expect to increase the amount of data that we can collect
and analyze. We believe that such data will allow us to continue to improve the
experience of our VX owners, advertisers and consumers which, in turn, will help
us improve the way the ecosystem flows.
Cybersecurity. We have integrated our technology with encryption algorithm
"SHA3-256" & RSA Public/Private-Key, which is designed to withstand timing
attacks. It also accepts any 32-byte string as a valid public key and does not
require validation. We believe that the security of transaction records within
our current system is adequate.
Advertising Dollar Sharing (ADS). We believe our ADS model will allow users
and advertisers to benefit from reduced costs to consumers and higher traffic
for advertisers. We expect users to benefit from discounts and advertising
dollar rebates offered through our PLA ecosystem from online and offline
merchants, referrals, and internal marketing efforts, with advertisers
benefitting from increased retail sales volume offline or online.
Core Product/User Scale. We hope to include other products from mass market
merchants, such as food and other beverages, as part of our product and service
offerings. We believe that outreach to the mass market will be more effective to
drive traffic for the advertisers/merchants where simple to complex transactions
can be achieved through adoption of an incentivized model.
Brand.A substantial portion of our VX owners, advertisers and users are acquired
through agencies, word-of-mouth & social network/platforms. We believe that
relying on the referral process, in turn, will improve the quality of our user
base, advertisers and VX owners as well as brand awareness. We expect that
higher confidence in our brand will facilitate acquiring more users, advertisers
and VX owners for our ecosystem.
We operate our IoT Smart Device business through VMore System Private Limited
("VMSPL"), our wholly owned subsidiary. VMSPL was incorporated in Singapore on
July 22, 2019, and operates with our subsidiary AIM System Private Limited
("ASPL"), a Singapore private limited corporation incorporated on April 1, 2019,
as described below:
· VMSPL - engages in sales and marketing of VX and barista grade
coffee to owners and consumers, operates and maintains the VX
including support, both technical and non-technical;
· ASPL - engages in VX software technology integration; Proximate
Location Ads ("PLA") activities such as advertisement sales, build,
create and deploy its proprietary software technology ("PropST");
distribute advertising dollars via an Advertising Dollar Sharing
("ADS") system to agencies, affiliate marketers, advertisers, users
and referrals; provide technical and non-technical support in
relation to PLA; and engages in brand management, marketing,
promotions and media engagement activities.
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VX vendor
We expect to rely on Barista Uno Private Limited ("BUPL") to provide VMSPL with
VX IoT hardware and coffee sourcing, distribution, and logistical upstream and
downstream fulfilment services. Eldee Tang, our Chief Executive Officer and
Director owns 31% of BUPL.
Trends, Markets and Regions
Advertisement Spending
*It is estimated that advertising spending worldwide will surpass 560 billion
U.S. dollars in 2019, representing a growth of roughly four percent compared
with the previous year. North America is expected to remain the largest regional
ad market, closely followed by Asia Pacific. Western Europe ranks third, with ad
spends amounting to approximately half of these of North America. (*Source:
https://www.statista.com/statistics/ 236943/global-advertising-spending/)
**Meanwhile, digital advertising spending worldwide - which includes both
desktop and laptop computers as well as mobile devices - stood at an estimate at
194.6 billion U.S. dollars in 2016. This figure is forecast to constantly
increase in the coming years, reaching a total of 335 billion U.S. dollars by
2020. (**Source:
https://www.statista.com/statistics/237974/online-advertising-spending-worldwide/)
In addition to the advertising spending study, we examined various consumer
models such as cashback models for direct compensation to affiliate marketing
(e.g., https://www.shopback.sg), discounted coupons sales model (e.g.
https://www.groupon.com) and incentivized reward model (e.g.
https://www.dollarshaveclub.com).
We believe that advertising spending, including digital advertising spending
will continue to increase in the near future. We intend to innovate the way
advertisement is used in the marketplace through digital advertisements and
effective channeling relevant traffic.
Market and Region: Bank and Unbanked in Southeast Asia
*With a population of 570 million and a booming GDP expected to reach $4.7
trillion by 2025, the six largest countries in Southeast Asia represent one of
the world's largest and fastest-growing regions. Within the region, we believe
that the financial services industry holds tremendous if fundamental underlying
challenges are addressed. For example, cash is still the primary means of
transaction. More than 70% of the adult population is either "underbanked" or
"unbanked," with limited access to financial services. (*Source:
https://www.bain.com/insights/fufilling-its-promise/)
*Currently, only 50% of adults in ASEAN have an account at a financial
institution. ASEAN is discussing a specific financial inclusion target for 2020.
There is a consensus to set the target at around 70% for 2020. Rates of
financial "exclusion" are higher among the poor, those living in rural areas,
and those who are less-educated. Interestingly, neither gender nor age are
relevant factors that explain financial exclusion in ASEAN countries. In ASEAN
countries, only 29% of workers reported receiving their monthly salaries through
an account from a financial institution, while the remaining 71% is paid in cash
by their employers. (Source:
http://blogs.worldbank.org/eastasiapacific/how-to-scale-up-financial-inclusion-in-asean-countries).
We believe the unbanked population in the ASEAN region represents an untapped
opportunity, as individuals without accounts at financial institutions are
limited in their ability to shop or engage in other financial transactions
online. We intend to focus on the ASEAN region, especially the unbanked market
which is generally not the main focus of many large corporations. We believe
that our model of converting VX spending into reward incentives and rebates that
are redeemable on our platform allows the unbanked market to access our online
platform for new and additional spending experiences without the requirement of
having an account at a financial institution.
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INTELLECTUAL PROPERTY AND PATENTS
We expect to rely on patents, trade secrets, copyrights, know-how, trademarks,
license agreements and contractual provisions to establish our intellectual
property rights and protect our "VMore Express" brand and services. These legal
means, however, afford only limited protection and may not adequately protect
our rights. Litigation may be necessary in the future to enforce our
intellectual property rights, protect our trade secrets or determine the
validity and scope of the proprietary rights of others. Litigation could result
in substantial costs and diversion of resources and management attention. Any
unauthorized disclosure or use of our intellectual property could make it more
expensive to do business and harm our operating results.
The laws of Singapore and our target countries may not protect our brand and
services and intellectual property to the same extent as U.S. laws, if at all.
We may be unable to fully protect our intellectual property rights in these
countries. Further, companies in the internet, social media technology and other
industries may own large numbers of patents, copyrights and trademarks and may
frequently request license agreements, threaten litigation or file suit against
us based on allegations of infringement or other violations of intellectual
property rights.
We intend to seek the widest possible protection for significant product and
process developments in our major markets through a combination of trade
secrets, trademarks, copyrights and patents, if applicable. We anticipate that
the form of protection will vary depending upon the level of protection afforded
by the particular jurisdiction. Initially, we expect that our revenue will be
derived principally from our operations in Singapore and other parts of
Southeast Asia where intellectual property protection may be more limited and
difficult to enforce. In such instances, we may seek protection of our
intellectual property through measures taken to increase the confidentiality of
our findings.
We intend to register trademarks as a means of protecting the brand names of
VMSPL, its products, and systems. We intend protect our trademarks against
infringement and also seek to register design protection where appropriate.
We rely on trade secrets and unpatentable know-how that we seek to protect, in
part, by confidentiality agreements. We expect that, where applicable, we will
require our employees to execute confidentiality agreements upon the
commencement of employment with us. We expect these agreements to provide that
all confidential information developed or made known to the individual during
the course of the individual's relationship with us is to be kept confidential
and not disclosed to third parties except in specific limited circumstances. The
agreements will also provide that all inventions conceived by the individual
while rendering services to us shall be assigned to us as the exclusive property
of our company. There can be no assurance, however, that all persons who we
desire to sign such agreements will sign, or if they do, that these agreements
will not be breached, that we would have adequate remedies for any breach, or
that our trade secrets or unpatentable know-how will not otherwise become known
or be independently developed by competitors.
COMPETITION
We operate in a highly competitive and fragmented industry that is sensitive to
price and service. We compete with leading beverage companies such as Luckin
Coffee (China), Toastbox (Singapore) which may offer substantially the same or
similar product offerings as us. We also compete with businesses that focus on
particular merchant categories or markets as well as traditional cash payments
and other popular online shopping websites and apps, and other traditional media
companies that provide discounts on products and services. We believe the
principal competitive factors in our market include the following:
· breadth of consumer base and advertisers/merchants featured;
· local presence and understanding of local business trends;
· ability to deliver a high volume of relevant deals to consumers;
· ability to produce high purchase rates for deals among users;
· ability to generate positive return on investment for
advertisers/merchants; and
· strength and recognition of our brand.
27
Although we believe we compete favorably on the factors described above, we
anticipate that larger, more established companies may directly compete with us
as we continue to demonstrate the viability of a local online-to-offline &
offline-to-online solution provider. Many of our current and potential
competitors have longer operating histories, significantly greater financial,
technical, marketing and other resources, larger product and services offerings,
larger customer base and greater brand recognition. These factors may allow our
competitors to benefit from their existing customer or subscriber base with
lower acquisition costs or to respond more quickly than we can to new or
emerging technologies and changes in customer requirements. These competitors
may engage in more extensive research and development efforts, undertake more
far-reaching marketing campaigns and adopt more aggressive pricing policies,
which may allow them to build a larger subscriber base or to monetize that
subscriber base more effectively than us. Our competitors may develop products
or services that are similar to our products and services or that achieve
greater market acceptance than our products and services. In addition, although
we do not believe that merchant payment terms are a principal competitive factor
in our market, they may become such a factor and we may be unable to compete
fairly on such terms.
We are pursuing a plan of expansion and hope to achieve revenue growth through
mass adoption by users and merchants of our platform/ecosystem. We seek to
increase our user and merchant base through user incentive programs and brand
awareness marketing programs, among other things. We expect to focus on users
and merchants located in China and the Asia Pacific region in the foreseeable
future. Similarly, we intend to seek corporate growth by listing our securities
on a national exchange such as the Nasdaq Capital Markets in the future.
Our principal office is located at 1 Raffles Place, #33-02, One Raffles Place
Tower One, Singapore 048616. This service office is subjected to one year
service agreement pursuant to which we are permitted to use the service office
space for a period of one year at a monthly rate of S$24,000, or approximately
US$17,778. The service office agreement expired on May 31, 2019. We are in
discussions with the service provider regarding the extension on the reduced
size of the use by half for the service office with effect from February 1, 2020
for a period of thirteen months. We are in the process of memorializing the
agreement in due course. The foregoing description of the service office usage
is qualified in its entirety by reference to the Service Agreement dated May 2,
2018, which is filed as Exhibit 10.14 to this Quarterly Report and incorporated
herein by reference.
On October 1, 2018, we purchased a building subject to a sixty year leasehold
located at 45 Ubi Crescent, Singapore 408590 to serve as our primary operational
center. The four storey building is approximately 13,000 square feet with a
remaining lease term of thirty-eight years. The purchase price of S$4,480,000
(approximately US$3,295,819) was financed by a loan with Ethoz Capital Limited
in the principal amount of S$3,136,000 (approximately US$2,307,073) at an annual
rate of 3.75%, payable over 120 months commencing October 1, 2018. The loan is
personally guaranteed by our Chief Executive Officer and Director, Eldee Tang.
The foregoing description of the loan is qualified in its entirety by reference
to the Secured Term Loan Facility dated September 14, 2018, which is filed as
Exhibit 10.15 to this Quarterly Report and incorporated herein by reference.
On January 19, 2019, we opened a branch office in Taiwan to service merchants
and customers of our online platform, V-more, located within the Greater China
Region. Our Taiwan branch office also oversees the operations of a V-More
branded office located in China and is operated by one of our sales affiliates.
The Taiwan branch office is currently operated through our subsidiary VESG. The
Taiwan branch office is a party to a lease agreement, a summary of which is as
follows:
Name of Branch Ventrepreneur (SG) Private Limited, Taiwan Branch
Office Address 282 Zheng Bei Road 2, Level 5 Unit 3, Xitun District,
Taichung, Taiwan
Tenancy Period December 1, 2018 to November 30, 2020
Premises Size Approximately 3,000 square feet
Yearly Lease Amount US$37,473 for Taiwan branch
In addition to our Taiwan office and China affiliate office, certain of our
sales affiliates also operate additional V-More branded affiliate offices in the
following regions: Indonesia, Thailand and Malaysia. We hope to memorialize the
terms of operations of these affiliate offices in the near future.
Intellectual Property
We continue to own the rights, title and interests in Patent for a receptacle
catheter with integral anchoring means, which Patent is associated with our
former business. The Patent was issued on September 1, 2004 and will expire on
September 6, 2022. We do not expect to exploit these Patents in the near future.
28
Results of Operations
The COVID-19 pandemic and the effects arising from efforts to contain the
outbreak have materially and adversely affected our business and financial
performance for the three and six months ended September 30, 2020. Our unaudited
condensed consolidated financial statements for the three and six months ended
September 30, 2020, includes a note about our ability to continue as a going
concern due to consecutive quarterly losses from operations from the last year
ended March 31, 2020, and continuing into the first fiscal quarter ended June
30, 2020 , as a result of COVID-19. If COVID-19 continues to adversely affect
our business and financial performance, we may not be able to generate
sufficient cash flow to meet our operating expenses.
In response to the outbreak and related government-imposed restrictions
impacting goods and services movement and fulfilment, we have taken a series of
measures accordingly, including telecommute working for some employees, reducing
pay and benefits for remaining employees, and cutting back capital spending. The
above measures have affected our operating capacity and work efficiency, and
negatively impacted our sales and marketing activities as well as its business
performance. The extent to which COVID- 19 affects our business performance will
depend on the future development of the epidemic, including new actions taken by
the government to contain the outbreak, which is highly uncertain and
unpredictable. In addition, if the economy of Southeast Asia as a whole is
negatively impacted by the outbreak, our operating performance will also be
adversely affected.
In light of the uncertainty as to when we can resume full operations and the
uncertain customer demand environment, we are seeking financing from equity
investors and financial institutions for current and projected future working
capital and growth expansion purposes. In addition, we have also re-aligned our
targeted sectors and increased product bundling in our business plan. Based on
our revised business plan and updated forecast, we believe the Company will have
sufficient operating cash flows to operate as a going concern over the next 12
months.
Comparison of the three months ended September 30, 2020 and September 30, 2019
The following table sets forth certain operational data for the three months
ended September 30, 2020, as compared to the three months ended September 30,
2019:
Three months ended September 30,
2020 2019
Net Revenue $ 119,837 $ 2,738,254
Cost of revenue (26,109 ) (1,616,242 )
Gross profit 93,728 1,122,012
Operating expenses:
Sales and marketing expense (155,780 ) (39,730 )
General and operating expenses (833,430 ) (1,202,526 )
Total operating expenses (989,210 ) (1,242,256 )
Loss from operations (895,482 ) (120,244 )
Loss before income taxes (819,632 ) (129,885 )
NET LOSS $ (855,577 ) $ (136,514 )
Net Revenue. We generated net revenue of $119,837 and $2,738,254 for the three
months ended September 30, 2020 and 2019, respectively. The decrease in net
revenue for the three months ended September 30, 2020 was due to COVID-19
related government imposed restrictions impacting goods and services movement
and fulfilment. For the three months ended September 30, 2020, 90% of net
revenue was contributed by Singapore. None of the other countries contribute
more than 10% each. For the three months ended September 30, 2019, 57% of our
net revenue was derived from income from V-More, our ecommerce platform while
38% of our net revenue was contributed by our IoT business, mainly from smart
coffee dispensing machines sales. The balance of net revenues consisted of
mainly of administrative charges income, service income.
On a going forward basis, we hope to generate revenue from our IoT products such
as our smart coffee dispensing machines, e-commerce platform as well as any
products that we distribute for our merchants, as more merchants are
progressively on boarded.
29
For the three months ended September 30, 2020 and 2019, the following geographic
regions accounted for 10% or more of our total net revenues:
Country September 30, 2020 September 30, 2019
Singapore 90% 70%
Malaysia 4% 15%
Philippines 1% 2%
Thailand 2% 2%
Indonesia 2% 3%
Greater China Region - 4%
United States - -
Rest of the World 1% 4%
Total 100% 100%
For the three months ended September 30, 2020 and 2019, no customers accounted
for 10% or more of our total net revenues.
Major Vendors.
For the three months ended September 30, 2020 and 2019, no vendors account for
more than 10% of the Company's purchase.
Gross Profit. We achieved a gross profit of $93,728 and $1,122,012 for the three
months ended September 30, 2020, and 2019, respectively. The attributing factor
for the decreased in gross profit was due to lower sales during the Covid-19
pandemic climate. We expect to continue focus on the new IoT product line.
Operating Expenses.
Three months ended September 30,
2020 2019
Operating expenses:
Sales and marketing expense $ 155,780 $ 39,730
General and operating expenses 833,430 1,202,526
Total operating expenses $ 989,210 $ 1,242,256
During the three months ended September 30, 2020, and 2019, we incurred
operating expenses of $989,210 and $1,242,256, respectively. Our operating
expenses for the three months ended September 30, 2020 includes sales and
marketing expense of $155,780 and general and operating expenses of $833,430.
Our operating expenses for the three months ended September 30, 2019 includes
sales and marketing expense of $39,730 and general and operating expenses of
$1,202,526. The overall decrease in operating expenses was due to the
streamlining of processes to improve efficiencies and cost cutting measures
taken amid the Covid-19 pandemic.
Net Loss. We recorded a net loss of $855,577 and $136,514 for the three months
ended September 30, 2020, and 2019, respectively. The increase in net loss is
primarily attributable to the slower sales contributing lesser margin to our
business during the Covid-19 pandemic situation. We hope to make progressive
changes to our business model over the next few months to improve our net income
during the Covid-19 pandemic situation.
30
Comparison of the six months ended September 30, 2020 and September 30, 2019
The following table sets forth certain operational data for the six months ended
September 30, 2020, as compared to the six months ended September 30, 2019:
Six months ended September 30,
2020 2019
Net Revenue $ 250,075 $ 12,610,884
Cost of revenue (85,316 ) (6,060,453 )
Gross profit 164,759 6,550,431
Operating expenses:
Sales and marketing expense (433,581 ) (338,321 )
General and operating expenses (1,594,499 ) (13,192,258 )
Total operating expenses (2,028,080 ) (13,530,579 )
Loss from operations (1,863,321 ) (6,980,148 )
Loss before income taxes (1,629,586 ) (6,965,794 )
NET LOSS $ (1,677,568 ) $ (6,977,018 )
Net Revenue. We generated net revenue of $250,075 and $12,610,884 for the six
months ended September 30, 2020 and 2019, respectively. The decrease in net
revenue for the six months ended September 30, 2020 was due to COVID-19 related
government imposed restrictions impacting goods and services movement and
fulfilment. For the six months ended September 30, 2020, 89% of net revenue was
contributed by Singapore. None of the other countries contribute more than 10%
each. For the six months ended September 30, 2019, 90% of our net revenues were
derived from income from V-More, our ecommerce platform. Sales from our IoT's
coffee machines contributed 8% to our revenue for the six months ended September
30, 2019. The balance of net revenues consisted of mainly of administrative
charges income, service income. On a going forward basis, we hope to generate
revenue from our IoT products such as our smart coffee dispensing machines,
e-commerce platform as well as any products that we distribute for our
merchants, as more merchants are progressively on boarded.
For the six months ended September 30, 2020 and 2019, the following geographic
regions accounted for 10% or more of our total net revenues:
Country September 30, 2020 September 30, 2019
Singapore 89% 43%
Malaysia 4% 29%
Philippines 1% 13%
Thailand 1% 6%
Indonesia 2% 3%
Greater China Region - 2%
United States - -
Rest of the World 3% 4%
Total 100% 100%
For the six months ended September 30, 2020 and 2019, no customers accounted for
10% or more of our total net revenues.
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Major Vendors.
For the six months ended September 30, 2020 and 2019, no vendors account for
more than 10% of the Company's purchase.
Gross Profit. We achieved a gross profit of $164,759 and $6,550,431 for the six
months ended September 30, 2020, and 2019, respectively. The attributing factor
for the decreased in gross profit was due to lower sales during the Covid-19
pandemic climate. We expect to continue focus on the new IoT product line.
Operating Expenses.
Six months ended September 30,
2020 2019
Operating expenses:
Sales and marketing expense $ 433,581 $ 338,321
General and operating expenses 1,594,499 13,192,258
Total operating expenses 2,028,080 13,530,579
Less: Stock based compensation - 10,829,239
Total operating expenses (Excluding stock based
compensation) $ 2,028,080 $ 2,701,340
During the six months ended September 30, 2020, and 2019, we incurred operating
expenses of $2,028,080 and $13,530,579, respectively. Our operating expenses for
the six months ended September 30, 2020 includes sales and marketing expense of
$433,581 and general and operating expenses of $1,594,499. There was no stock
based compensation in the six months ended September 30, 2020, resulting in
lower operating expenses. Our operating expenses for the six months ended
September 30, 2019 included a one-time charge of $10,829,239 arising from the
issuance of shares of our common stock as compensation to our sales affiliates,
merchant acquisition consultants and digital offerings consultant. Excluding the
one-time stock based compensation charge, our operating expenses would be
$2,701,340 for the six months ended September 30, 2019.
Net Loss.
We recorded a net loss of $1,677,568 and $6,977,018 for the six months ended
September 30, 2020, and 2019, respectively. The decrease in net loss is
primarily attributable to the one time stock based compensation charge of
$10,829,239 for the six months ended September 30, 2019. We hope to make
progressive changes to our business model over the next few months to further
improve our net income during the Covid-19 pandemic situation.
Liquidity and Capital Resources
As of September 30, 2020, we had current assets of $6,965,546 and current
liabilities of $12,150,411. Our current assets consisted of $24,591 of cash and
cash equivalents, $141,400 of account receivable, purchase deposits of
$1,684,359, deferred costs of $4,587,139, $513,148 of deposits, prepayment and
other receivable and inventories of $14,909. Our current liabilities consisted
of $3,197,464 of accrued liabilities and account payables, $1,080,751 of
commission liabilities, $6,691,080 of deferred revenue, $80,291 of income tax
payable, $518,966 of amount due to Eldee Tang, our Chief Executive Officer and
Director, $301,542 of current portion of borrowings and $280,317 of amount due
to a related party for which it represents a unsecured non-interest bearing
advance from our shareholder Ms. Kao Wei-Chen.
As of March 31, 2020, we had current assets of $6,746,428 and current
liabilities of $10,056,164. Our current assets consisted of $223,527 of cash and
cash equivalents, deferred cost of $4,252,107, $152,545 of accounts receivable,
purchase deposits of $1,619,966, $418,541 of deposits, prepayment and other
receivables, inventories of $14,339 and tax recoverable of $65,403. Our current
liabilities consisted of $2,216,563 of account payables and accrued liabilities,
$1,045,568 of commission liabilities, $6,239,296 of deferred revenue, $17,662 of
amount due to Eldee Tang, our Chief Executive Officer and Director, $280,317 of
amount due to a related party consisting of unsecured non-interest bearing
advances from our shareholder Ms. Kao Wei-Chen and current portion of borrowing
of $256,758.
32
We had accumulated deficits of $139,381,678 and $137,703,504 as of September 30,
2020 and March 31, 2020, respectively. The increase in accumulated deficit is
mainly due to the dire decreased in sales volume, as a result of government
imposed restrictions on the movement of goods and services globally and locally.
Six months ended September 30,
2020 2019
Net cash (used in) generated from operating activities $ (540,509 ) $ 2,534,482
Net cash used in investing activities
$ (74,679 ) $ (42,241 )
Net cash generated from (used in) financing activities $ 374,315 $ (166,198 )
Net Cash (Used in) Generated from Operating Activities
Net cash used in operating activities was $540,509 for the six months ended
September 30, 2020, and consisted primarily of a net loss of $1,677,568,
adjusted for amortization of intangible of $1,135, depreciation of property,
plant and equipment of $121,472, a decrease in account receivable of $17,255, a
decrease in deposits, prepayment and other receivable of $25,603, an increase in
accrued liabilities and account payables of $895,214, an increase in deferred
revenue of $204,327, an increase in tax payable of $44,911, offset by an
increase in deferred costs of $166,463 and a decrease in commission liabilities
of $6,395.
Net cash generated from operating activities was $2,534,482 for the six months
ended September 30, 2019, and consisted primarily of a net loss of $6,977,018,
adjusted for amortization of intangible of $137,383, depreciation of property,
plant and equipment of $98,020, a gain on disposal of property, plant and
equipment of $3,599 and a one-time non-cash stock based compensation of
$10,829,239, a decrease in account receivable of $5,358,303, an increase in
account payables of $1,936,453, an increase in tax payable of $6,807; offset by
a decrease in accrued liabilities and other payables of $299,338, by an increase
in purchase deposits of $502,971, an increase in deposits, prepayments and other
receivable of $986,651, decrease in commission liabilities of $605,397 and a
decrease in deferred revenue of $6,456,749.
Net Cash Used In Investing Activities
Net cash used in investing activities was $74,679 for the six months ended
September 30, 2020, and consisted primarily of purchase of property, plant and
equipment of $74,679. Net cash used in investing activities was $42,241 for the
six months ended September 30, 2019, and consisted primarily of proceeds from
disposal of property, plant and equipment of $52,596 and purchase of property,
plant and equipment of $94,837.
Net Cash Generated From (Used in) Financing Activities
Net cash generated from financing activities for the six months ended September
30, 2020, was $374,315 and consisted primarily of advance from a director of
$501,958, repayment of loan of $95,692 and repayment of finance lease of
$31,951. Net cash used in financing activities for the six months ended
September 30, 2019, was $166,198 and consisted primarily of amount received from
related parties of $5,452, repayment to a director $72,858 and repayment of a
finance lease of $98,792.
We have never paid dividends on our Common Stock. Our present policy is to apply
cash to investments in product development, acquisitions or expansion;
consequently, we do not expect to pay dividends on Common Stock in the
foreseeable future.
The success of our growth strategy is dependent upon the availability of
additional capital resources on terms satisfactory to management as we are not
generating sufficient revenues from our business operations. Our sources of
capital in the past have included the sale of equity securities, which include
common stock sold in private transactions, capital leases and stockholder
advances. There can be no assurance that we can raise such additional capital
resources on satisfactory terms. We believe that our current cash and other
sources of liquidity discussed above are adequate to support operations for at
least the next 12 months. We anticipate continuing to rely on equity sales of
our common shares and shareholder loans in order to continue to fund our
business operations. Issuances of additional shares will result in dilution to
our existing shareholders. There is no assurance that we will achieve any
additional sales of our equity securities or arrange for debt or other financing
to fund our plan of operations.
33
Off-Balance Sheet Arrangements
We have no outstanding off-balance sheet guarantees, interest rate swap
transactions or foreign currency contracts. We do not engage in trading
activities involving non-exchange traded contracts.
Going Concern
The unaudited condensed financial statements contain an explanatory paragraph
expressing substantial doubt about our ability to continue operating as a going
concern. The financial statements have been prepared "assuming that we will
continue as a going concern," which states that we will realize our assets and
satisfy any liabilities and commitments in the ordinary course of business.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires our management to make
assumptions, estimates and judgments that affect the amounts reported, including
the notes thereto, and related disclosures of commitments and contingencies, if
any. We have identified certain accounting policies that are significant to the
preparation of our financial statements. These accounting policies are important
for an understanding of our financial condition and results of operations.
Critical accounting policies are those that are most important to the
presentation of our financial condition and results of operations and require
management's subjective or complex judgment, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods. Certain accounting estimates are particularly
sensitive because of their significance to financial statements and because of
the possibility that future events affecting the estimate may differ
significantly from management's current judgments. We believe the following
accounting policies are critical in the preparation of our financial statements.
• Basis of presentation
These accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States of America ("US GAAP").
• Use of estimates
In preparing these condensed consolidated financial statements, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities in the balance sheets and revenues and expenses during the periods
reported. Actual results may differ from these estimates.
• Intangible assets
Intangible assets represented the acquired game right from a related party,
which are stated at acquisition cost, less accumulated amortization. The Company
amortizes its intangible assets with definite lives over their estimated useful
lives and reviews these assets for impairment when an indicator for potential
impairment exists. The Company is currently amortizing its intangible assets
with definite lives over periods of 3 years.
• Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses, if any. Depreciation is calculated on the
straight-line basis over the following expected useful lives from the date on
which they become fully operational and after taking into account their
estimated residual values:
Expected useful lives
Building 38 years or lesser than term of lease
Leasehold improvements 3 - 10 years or lesser than term of lease
Furniture and fittings 3 years
Office equipment and computers 1 - 5 years
Motor vehicle 3 - 3.33 years
Expenditures for repairs and maintenance are expensed as incurred. When assets
have been retired or sold, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is recognized in the
results of operations.
34
• Revenue recognition
The Company adopted Accounting Standards Update ("ASU") 2014-09, Revenue from
Contracts with Customers (Topic 606) ("ASU 2014-09"). Under ASU 2014-09, the
Company applies the following five steps in order to determine the appropriate
amount of revenue to be recognized as it fulfils its obligations under each of
its agreements:
· identify the contract with a customer;
· identify the performance obligations in the contract;
· determine the transaction price;
· allocate the transaction price to performance obligations in the contract;
and
· recognize revenue as the performance obligation is satisfied.
The Company accounts for a contract with a customer when the contract is
committed in writing, the rights of the parties, including payment terms, are
identified, the contract has commercial substance and consideration to collect
is substantially probable.
The Company continues to derive its revenues from sales contracts with its
customers with revenues being recognized upon delivery of products. Persuasive
evidence of an arrangement is demonstrated via sales contract and invoice; and
the sales price to the customer is fixed upon acceptance of the sales contract
and there is no separate sales rebate, discount, or volume incentive. The
Company recognizes revenue when title and ownership of the goods are transferred
upon shipment to the customer by the Company to consider control of goods are
transferred to its customer and collectability of payment is reasonably assured.
The Company's revenues are recognized at a point in time after all performance
obligations are satisfied.
The Company records revenues from the sales of third-party products on a "gross"
basis pursuant to ASC 605-45 Revenue Recognition - Principal Agent
Considerations, when we are the primary obligor in the arrangement with the end
customer and have the risks and rewards as principal in the transaction, such as
responsibility for fulfillment, retaining the risk for collection, and
establishing the price of the products. If these indicators have not been met,
or if indicators of net revenue reporting specified in ASC 605-45 are present in
the arrangement, revenue is recognized net of related direct costs.
Product sales are recorded net of good and service taxes and product returns.
• Commission credits
The Company maintains a membership program, whereby certain members earn
commission credits, based on the sales volume of certain other members who are
sponsored directly or indirectly by the member. Commission credits are
redeemable on future spending of the products purchased or playing online games.
Commission credits are recorded and classified as operating expense when the
products are delivered and revenue is recognized. The estimated liability for
unredeemed commission credit is included in commission liability on the
accompanying balance sheets. Management reviews the adequacy for the accrual for
unredeemed commission credits by periodically evaluating the historical
redemption and projected trends.
• Foreign currencies translation
Transactions denominated in currencies other than the functional currency are
translated into the functional currency at the exchange rates prevailing at the
dates of the transaction. Monetary assets and liabilities denominated in
currencies other than the functional currency are translated into the functional
currency using the applicable exchange rates at the balance sheet dates. The
resulting exchange differences are recorded in the consolidated statement of
operations.
35
The reporting currency of the Company is United States Dollar ("US$") and the
accompanying consolidated financial statements have been expressed in US$. In
addition, the Company's operating subsidiaries in Singapore and Seychelles
maintain their books and record in its local currency, Singapore Dollars ("S$"),
which is a functional currency as being the primary currency of the economic
environment in which their operations are conducted. In general, for
consolidation purposes, assets and liabilities of its subsidiaries whose
functional currency is not US$ are translated into US$, in accordance with ASC
Topic 830-30, " Translation of Financial Statement", using the exchange rate on
the balance sheet date. Revenues and expenses are translated at average rates
prevailing during the year. The gains and losses resulting from translation of
financial statements of foreign subsidiaries are recorded as a separate
component of accumulated other comprehensive income within the statements of
changes in stockholder's equity.
Translation of amounts from S$ into US$1 has been made at the following exchange
rates for the six months ended September 30, 2020 and 2019:
September 30, 2020 September 30, 2019
Period-end S$:US$1 exchange rate 1.3692 1.3821
Period average S$:US$1 exchange rate 1.3655 1.3689
• Related parties
The Company follows the ASC 850-10, Related Party for the identification of
related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the
Company; b) entities for which investments in their equity securities would be
required, absent the election of the fair value option under the Fair Value
Option Subsection of section 825-10-15, to be accounted for by the equity method
by the investing entity; c) trusts for the benefit of employees, such as pension
and Income-sharing trusts that are managed by or under the trusteeship of
management; d) principal owners of the Company; e) management of the Company; f)
other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g) other parties that can significantly
influence the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests.
The consolidated financial statements shall include disclosures of material
related party transactions, other than compensation arrangements, expense
allowances, and other similar items in the ordinary course of business. However,
disclosure of transactions that are eliminated in the preparation of
consolidated or combined financial statements is not required in those
statements. The disclosures shall include: a) the nature of the relationship(s)
involved; b) a description of the transactions, including transactions to which
no amounts or nominal amounts were ascribed, for each of the periods for which
income statements are presented, and such other information deemed necessary to
an understanding of the effects of the transactions on the consolidated
financial statements; c) the dollar amounts of transactions for each of the
periods for which income statements are presented and the effects of any change
in the method of establishing the terms from that used in the preceding period;
and d) amount due from or to related parties as of the date of each balance
sheet presented and, if not otherwise apparent, the terms and manner of
settlement.
• Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards
Codification for disclosures about fair value of its financial instruments and
has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification
("Paragraph 820-10-35-37") to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards
Codification establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value
measurements and related disclosures, paragraph 820-10-35-37 of the FASB
Accounting Standards Codification establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into
three (3) broad levels. The fair value hierarchy gives the highest priority to
quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. The three (3) levels of fair
value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting
Standards Codification are described below:
Level 1 Quoted market prices available in active markets for identical assets or
liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the
reporting date.
Level 3 Pricing inputs that are generally observable inputs and not corroborated
by market data.
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Financial assets are considered Level 3 when their fair values are determined
using pricing models, discounted cash flow methodologies or similar techniques
and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. If the inputs used to measure the
financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant
to the fair value measurement of the instrument.
The carrying amounts of the Company's financial assets and liabilities, such as
cash and cash equivalents, approximate their fair values because of the short
maturity of these instruments.
• Recent accounting pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its financial condition or the
results of its operations.
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