You should consider carefully the risks described below,
together with all of the other information in this Form 10-K, before making
a decision to invest in our common stock. If any of the following risks
actually occurs, our business, financial condition and results of operations
could suffer. In this case, the trading price of our common stock could
decline and you may lose all or part of your investment in our common stock.
Risks Associated With Our Business
Our Independent Registered Public Accounting Firm has expressed
substantial doubt as to our ability to continue as a going concern.
The audited financial statements have been prepared assuming that we will
continue as a going concern and do not include any adjustments that might
result if we cease to continue as a going concern. We believe that in order
to continue as a going concern, including the costs of being a public
company, we will need approximately $30,000 per year simply to cover the
administrative, legal and accounting fees. We plan to fund these expenses
primarily through cash flow, the sale of restricted shares of our Common
Stock, and the issuance of convertible notes.
Based on our financial statements for the years ended December 31, 2016
and 2015, our independent registered public accounting firm has expressed
substantial doubt as to our ability to continue as a going concern. To date
we have not generated any revenue.
During 2016, we raised $1,105,000 from the
private sale of equity securities and raised approximately $585,000 to date
during 2017. We expect to raise an additional $1.6 million during the next
twelve months. There can be no assurance that we will continue to be
successful in raising equity capital and have adequate capital resources to
fund our operations or that any additional funds will be available to us on
favorable terms or in amounts required by us. If we are unable to obtain
adequate capital resources to fund operations, we may be required to delay,
scale back or eliminate some or all of our plan of operations, which may
have a material adverse effect on our business, results of operations and
ability to operate as a going concern.
Our limited operating history does not afford investors a sufficient
history on which to base an investment decision.
On December 1, 2015, we were granted an
exclusive, world-wide license by PT Kinerja Indonesia, our licensor, to
KinerjaPay IP and its website, KinerjaPay.com, an e-commerce Portalthat
provides users with the convenience of EPS for bill transfer and our
Marketplace. The Portal was first launched by PT Kinerja Indonesia in
February 2015 and only has a limited operating history. See the disclosure
under "Description of Business" and in the additional disclosure under "Risk
Factors" below. As a result of its limited operating history, the Portal may
not generate revenues for us or become profitable in the near future, if at
all. If we are unable to reach profitability, our stock price would decline
and our ability to continue to raise capital, either equity or debt, may be
adversely effected. The long-term revenue and income prospects of our
business and the market for electronic online payments have not been proven.
We will encounter risks and difficulties commonly faced by early-stage
companies in new and rapidly evolving markets.
We plan to make significant investment using our
recently raised equity capital in our wholly-owned Indonesian subsidiary, PT
Kinerja Pay Indonesia, which entity will conduct all of our business
activities related to out Portal. Notwithstanding our ability to having
raised equity capital to date and our expectation to be able to raise up to
an additional $1.6 million during the next twelve months, we may not be able
to achieve profitability in the foreseeable future, if at all. Our ability
to achieve profitability will depend on, among other things, market
acceptance of our Portal and our ability to generate revenues and compete
effectively with other e-commerce businesses operating in Indonesia and
potentially in the wider Southeast Asian market. We cannot assure you that
the relatively new market for our EPS and our Marketplace will remain viable
in Indonesia. We expect to make substantial investments during the next 12
months to:
Drive consumer and merchant awareness
to our EPS and Marketplace;
Persuade consumers and merchants to sign up for and use our
EPS product and use our Marketplace;
Improve our system infrastructure to handle seamless
processing of transactions;
Continue to develop our
Portal; and
Broaden our customer base.
We may fail to implement successfully these
objectives. This would adversely impact our ability to generate revenues.
There can be no assurance at this time that we will be able to generate
significant revenues and operate profitably or that we will have adequate
working capital to meet our obligations as they become due. As discussed
elsewhere in this annual report, we have not generated any recognizable
revenues through our year-ended December 31, 2016 and there can be no
assurance that we will generate any significant revenues until the second
half of fiscal 2017, if at all. Investors must consider the risks and
difficulties frequently encountered by early stage companies, particularly
in rapidly evolving markets. Such risks include the following:
competition;
need for acceptance of our Portal;
ability to
develop a brand identity;
ability to anticipate and adapt to a
competitive market;
ability to effectively manage rapidly expanding
operations;
amount and timing of operating costs and capital
expenditures relating to expansion of our business, operations, and
infrastructure; and
dependence upon key personnel to market our product
and the loss of one of our key managers may adversely affect the marketing
of our product.
We cannot be certain that our business strategy will be successful or
that we will successfully address these risks. In the event that we do not
successfully address these risks, our business, prospects, financial
condition, and results of operations could be materially and adversely
effected.
Our revenues will be dependent upon acceptance of our Portal by the
Indonesian Consumers. The failure of such acceptance will cause us to curtail or cease
operations.
Uncertainty exists as to whether our Portal will
be accepted by the Indonesian consumer. A number of factors may limit the
market acceptance of our Portal, including the availability of alternative
electronic payment portals and the fees for our services relative to
alternative electronic payment services and other virtual marketplaces.
There is a risk that potential customers and merchants will be encouraged to
continue to use other portals and/or electronic payment services instead.
Our revenues are expected to come from the sale of our Portal services.
As a result, we will continue to incur operating losses until such time as
our revenues reach a mature level and we are able to generate sufficient
cash flow to meet our operating expenses. There can be no assurance that the
market will adopt our Portal. In the event that we are not able to
successfully market and significantly increase the number of Portal users,
or if we are unable to charge the necessary fees, our financial condition
and results of operations will be materially and adversely affected.
Software failures, breakdowns in the operations of the servers and
communications systems upon which we must rely or glitches or malfunctions
in our Portal technology could hurt our reputation, revenues and
profitability.
Our success depends on the efficient and
uninterrupted operation of the servers and communications systems owned and
operated by PT Kinerja Indonesia, an entity controlled by our controlling
shareholder and CEO, Mr. Ng. We have entered into an agreement with PT Kinerja
Indonesia to operate all of the servers, as well as provide hosting and
maintenance services and the infrastructure systems, upon which we rely. A
failure of these systems and services could impede our business by delays in
processing of data, delivery of databases and services, client data and
day-to-day management of our business. While all of our operations will have
disaster recovery plans in place, they might not adequately protect us.
Despite any precautions we take and PT Kinerja Indonesia already has in place, damage
from fire, floods, hurricanes, power loss, telecommunications failures,
computer viruses, break-ins and similar events at their computer facilities
could result in interruptions in the flow of data to our customers. In
addition, any failure by the computer environment to provide our required
data communications capacity could result in interruptions in our service.
In the event of a server failure, we could be required to transfer our
client/customer data operations to an alternative provider of server hosting
services. Such a transfer could result in delays in our ability to deliver
our services to our customers.
To the extent that glitches or errors cause our
Portal to malfunction and our customers' use of our Portal is interrupted,
our reputation could suffer and our potential revenues could decline or be
delayed until such glitches or errors are remedied, which will not be within
our control. We may also be subject to liability for the glitches and
malfunctions. There can be no assurance that, despite the expertise of PT Kinerja Indonesia, glitches and/or errors in our service or new releases or
upgrades will not occur, resulting in loss of future revenues or delay in
market acceptance, diversion of development resources, damage to our
reputation, potential litigation, or increased service costs, any of which
would have a material adverse effect upon our business, operating results
and financial condition.
Long-term disruptions in the Portal
infrastructure provided by PT Kinerja
Indonesia caused by events such as natural disasters, the outbreak of war,
the escalation of hostilities and acts of terrorism, particularly involving
locations in Indonesia for which we will have no control, could adversely
effect our e-commerce business. Although, we plan to carry property and
business interruption insurance for our business operations, our coverage
might not be adequate to compensate us for all losses that may occur.
We face risks related to the storage of customers' confidential and
proprietary information.
Our Portal, which is maintained by PT Kinerja
Indonesia, is designed to maintain the confidentiality and security of our
customers' confidential and proprietary data that are stored on their server
systems, which may include sensitive personal data. However, any accidental
or willful security breaches or other unauthorized access to these data
could expose us to liability for the loss of such information,
time-consuming and expensive litigation and other possible liabilities as
well as negative publicity which may be expected to adversely effect our
business and operations. Techniques used to obtain unauthorized access or to
sabotage systems change frequently and generally are difficult to recognize
and react to. We rely on PT Kinerja Indonesia, which may be unable to
anticipate these techniques or implement adequate preventative or
reactionary measures.
We might incur substantial expense to further develop and commercially
exploit our Portal which may never become sufficiently
successful.
Our growth strategy requires the successful
expansions of our e-commerce business. Although management will take every
precaution to ensure that our Portal will, with a high degree of likelihood,
achieve market acceptance and therefore commercial success, there can be no
assurance that this will be the case. The causes for commercial failure can
be numerous, including:
market demand for our
EPS and Marketplace proves to be
smaller than we expect;
competitive e-commerce providers, either
presently operating in the Indonesian market or who are to join our market may have superior
features, more competitive prices and/or fees, better performance and, as a result, greater market
acceptance;
further Portal development turns out to be more costly
than anticipated or takes longer;
our Portal requires significant
adjustment to changing market conditions, rendering the Portal uneconomic or
extending considerably the likely investment return period;
additional
regulatory requirements are imposed which increase the overall costs of
running our Portal;
Customers may be unwilling to adopt and/or use our
Portal.
Card association rules may change or certain practices could
negatively affect our business and, if we do not comply with these rules,
could result in our inability to accept credit cards. If we are unable to
accept credit cards, our competitive position would be critically damaged.
We are not a bank and as a result we are barred from belonging to and
directly access the credit card associations or the bank payment network. We
must therefore rely on banks and their service providers to process our
transactions. We must comply with the operating rules of the credit card
associations and bank payment networks as they apply to merchants. The
associations' member banks set these rules, and the associations interpret
the rules. Some of those member banks compete with us. Credit card
associations could adopt new operating rules or interpretations of existing
rules which we may find difficult or even impossible to comply with, in
which case we could lose our ability to give customers the option of using
credit cards to support their payments. If we were unable to accept credit
cards our competitive position would be critically damaged.
We face considerable risks of loss due to fraud and/or disputes between
senders and recipients. If we are unable to deal effectively with losses
from fraudulent transactions, our losses from fraud would increase, and our
business would be materially adversely effected.
We face significant risks of loss due to fraud and disputes between
senders and recipients, including:
unauthorized use of credit cards and bank account information and
identity theft;
merchant fraud and other disputes;
system security
breaches;
fraud by employees; and
use of our system for illegal
purposes.
When a sender pays a merchant for goods or services
through our Portal using a credit card and the cardholder is defrauded or
otherwise disputes the charge, the full amount of the disputed transaction
gets charged back to us and our credit card processor levies additional fees
against us, unless we can successfully challenge the chargeback. Chargebacks
may arise from the unauthorized use of a cardholder's card number or from a
cardholder's claim that a merchant failed to perform. If our chargeback rate
becomes excessive, credit card associations also can require us to pay fines
and could terminate our ability to accept their cards for payments. We
cannot assure you that chargebacks will not arise in the future.
We have taken measures to detect and reduce the risk of fraud, but we
cannot assure you of these measures' effectiveness. If these measures do not
succeed, our business will be adversely effected.
We may incur chargebacks and other losses from merchant fraud, payment
disputes and insufficient funds, and our liability from these items could
have a material adverse effect on our business and result in our losing the
right to accept credit cards for payment as a result of which our ability to
compete could be impaired, and our business would suffer.
We may incur
losses from merchant fraud, including claims from customers that merchants
have not performed, that their goods or services do not match the merchant's
description or that the customer did not authorize the purchase. Our
liability for such items could have a material adverse effect on our
business, and if they become excessive, could result in our losing the right
to accept credit cards for payment.
Unauthorized use of credit cards and bank accounts could expose us to
substantial losses. If we are unable to detect and prevent unauthorized use
of cards and bank accounts, our business would suffer.
The highly automated nature of our Portal makes
us an attractive target for fraud. In configuring our Portal technology, we
face an inherent trade-off between customer convenience and security. We
believe that several of our current and former competitors in the electronic
payments business have gone out of business or significantly restricted
their businesses largely due to losses from this type of fraud. We expect
that technically knowledgeable criminals will continue to attempt to
circumvent our anti-fraud systems. There can be no
assurance that we will not incur chargebacks in the future.
Security and privacy breaches in our Portal may expose us to
additional liability and result in the loss of customers, either of which
events could harm our business and cause our stock price to decline.
Our inability, or the inability of PT Kinerja Indonesia, as the case may
be, to protect the security and privacy of our electronic transactions could
have a material adverse effect on our profitability. A security or privacy
breach could:
expose us to additional liability;
increase our expenses relating
to resolution of these breaches; and
discourage customers from using
our product.
The type and scale of electronic payments that we handle for our
customers makes us vulnerable to employee fraud or other internal security
breaches and, as a result, our business would suffer. We cannot assure you that our internal security systems will
prevent material losses from employee fraud and that our system applications designed for data
security will effectively counter evolving security risks or address the
security and privacy concerns of existing and potential customers. Any
failures in our security and privacy measures could have a material adverse
effect on our business, financial condition and results of operations.
Our Portal might be used for illegal or improper purposes, which could
expose us to additional liability and harm our business.
Despite measures we have taken to detect and prevent identify theft,
unauthorized uses of credit cards and similar misconduct, our electronic
online payment portal remains susceptible to potentially illegal or improper
uses. These may include illegal online gaming, fraudulent sales of goods or
services, illicit sales of prescription medications or controlled
substances, software and other intellectual property piracy, money
laundering, bank fraud, child pornography trafficking, prohibited sales of
alcoholic beverages and tobacco products and online securities fraud.
Despite measures we have taken to detect and lessen the risk of this kind of
conduct, we cannot assure you that these measures will succeed. Our business
could suffer if customers use our system for illegal or improper purposes.
In addition, we classify merchants who historically have experienced
significant chargeback rates as higher risk. The legal status of
many of these higher risk accounts is uncertain, and if these merchants are
prohibited or restricted from operating in the future, our revenue from fees
generated from these accounts would decline. Proposed legislation has been
introduced in Indonesia that operation of an Internet gaming business, sales
of alcoholic beverages and other activities violates Indonesian law, and to
prohibit payment processors such as us from processing payments for those
activities. If merchants accept these illegal activities, we could be
subject to civil and criminal lawsuits, administrative action and
prosecution for, among other things, money laundering or for aiding and
abetting violations of law. We would lose the revenues associated with these
accounts and could be subject to material penalties and fines, both of which
would seriously harm our business.
We face substantial and increasing competition in
the Indonesian e-commerce market.
The
market in which we operate is intensely competitive. We currently and
potentially compete with a wide variety of electronic payment providers
and online and offline companies
marketplaces providing goods and services to consumers and merchants . The Internet
and mobile networks provide new, rapidly evolving and intensely
competitive channels for electronic payment services and marketplaces to
sell all types of goods and services. We
compete in two-sided markets, and must attract both buyers and sellers
to use our Marketplace. Consumers who purchase or sell goods
through our Marketplace have more and more alternatives, and merchants have more
channels to reach consumers. We expect competition to continue to
intensify. Online and offline businesses increasingly are competing with
each other and our competitors include a number of online and offline
retailers with significant resources, large user communities and
well-established brands. Moreover, the barriers to entry into these
channels can be low, and businesses easily can launch online sites or
mobile platforms and applications at nominal cost by using commercially
available software or partnering with any of a number of successful
e-commerce companies. As we respond to changes in the competitive
environment, we may, from time to time, make pricing, service or
marketing decisions or acquisitions that may be controversial with and
lead to dissatisfaction among users, which could reduce activity on
our Portal and harm our profitability.
Some of our competitors are well known, more established and better
capitalized than we are and we may be unable to establish market share. As
such, they may have at their disposal greater marketing strength and
economies of scale and, as they may have additional products and/or services
at more competitive price. They may also have more resources to expend to
create more innovative payment processing products in competition with ours.
Accordingly, we may not be successful in competing effectively for market
share.
The market we operate in emerging, intensely
competitive and characterized by rapid technological change. We compete with
existing electronic payment services and virtual marketplaces, including, among
others:
Tokopedia
Bukalapak
Lazada
Zalora
OLX
Blibli
Payment
processors such as Doku and Veritrans
Our competitors may respond to new technologies and changes
in customer requirements faster and more effectively than we can. These
competitors have offered, and may continue to offer, their services for free
in order to gain market share and we may be forced to lower our prices in
response.
Our status under certain Indonesian and international financial
services regulation is unclear. Violation of or compliance with present or
future regulation could be costly, expose us to substantial liability, force
us to change our business practices or force us to cease offering our
current product.
We operate in an industry subject to government regulation. We currently
are subject to Indonesian regulations in our role as money transfer
agent and are therefore subject to Indonesian electronic fund transfer and
money laundering regulations. In the future, we might be subjected to:
banking regulations;
additional money transmitter regulations and
money laundering regulations;
international banking or financial
services regulations or laws governing other regulated industries; or
U.S. and international regulation of Internet transactions.
If we are
found to be in violation of any current or future regulations, we could be:
exposed to financial liability, including substantial fines which could be
imposed on a per transaction basis and disgorgement of our profits;
forced to change our business practices; or
forced to cease doing
business altogether or with the residents of one or more states or
countries.
However, we cannot assure you that the steps we have taken to address any
regulatory concerns will be effective. If we are found to be engaged in an
unauthorized banking business, we might be subject to monetary penalties and might be required to cease doing business. Even if the
steps we have taken to resolve any concerns are deemed sufficient by the
regulatory authorities, we could be subject to fines and penalties for our
prior activities. The need to comply with laws prohibiting unauthorized
banking activities could also limit our ability to enhance our services in
the future.
Our financial success will remain highly sensitive to changes in the
rate at which our customers fund payments using credit cards rather than
bank account transfers. Our profitability could be harmed if the rate at
which customers fund using credit cards goes up.
We pay significant transaction fees when senders fund payment
transactions using credit cards, nominal fees when customers fund payment
transactions by electronic transfer of funds from bank accounts and no fees
when customers fund payment transactions from an existing account balance
with us. Senders may resist funding payments by electronic transfer from
bank accounts because of the greater protection offered by credit cards,
including the ability to dispute and reverse merchant charges, because of
frequent flier miles or other incentives offered by credit cards or because
of generalized fears regarding privacy or loss of control in surrendering
bank account information to a third party.
We rely on financial institutions to process our payment transactions. Should any of
these institutions decide to stop processing our payment transactions, our
business could suffer.
Not being a bank, we cannot belong to and directly access the credit card
associations or the bank payment network. As a result, we must rely on banks
or their independent service operators to process our transactions. Bank
Central Asia ("BCA") currently processes our bank transactions and our credit card transactions. BCA also provides payment
processing services to some of our competitor and offers credit card
processing services directly to online merchants. If we could not obtain
processing services on acceptable terms, and if we could not switch to
another processor quickly and smoothly, our business could suffer
materially.
Increases in credit card processing fees could increase our costs,
affect our profitability, or otherwise limit our operations.
From time to time, credit card associations increase the interchange fees
that they charge for each transaction using their cards. Our credit card
processors have the right to pass any increases in interchange fees on to
us. Any such increased fees could increase our operating costs and reduce
our profit margins. Furthermore, our credit card processors require us to
pledge cash as collateral with respect to our acceptance of certain credit
cards and the amount of cash that we are required to pledge could be
increased at any time.
Customer complaints or negative publicity about our product and
customer service could affect use of our product adversely and, as a result,
our business could suffer.
Customer complaints or negative publicity about our
Portal could diminish consumer confidence in our EPS and
Marketplace.
Breaches of our customers' privacy and our security measures could have the
same effect. Measures we sometimes take to combat risks of fraud and
breaches of privacy and security, such as freezing customer funds, can
damage relations with our customers. These measures heighten the need for
prompt and accurate customer service to resolve irregularities and disputes.
We may receive negative media coverage, as well as public criticism
regarding customer disputes. Effective customer service requires significant
personnel expense, and if not managed properly, could impact
our profitability significantly. The number of customer service and sales
representatives that PT Kinerja Indonesia employees is expected to increase from
currently 5 throughout
2016. Any inability to manage or train our customer service
representatives properly could compromise our ability to handle customer
complaints effectively. If we do not handle customer complaints effectively,
our reputation may suffer and we may lose our customers' confidence.
We have limited experience in managing and accounting accurately for
large amounts of customer funds. Our failure to manage these funds properly
would harm our business.
Our ability to manage customer funds requires a high level of internal
controls. We have neither an established operating history nor proven
management experience in maintaining, over a long term, these internal
controls. As our business continues to grow, we must strengthen our internal
controls accordingly. Our success requires customer's confidence in
our ability to handle large and growing transaction volumes and amounts of
customer funds. Any failure to maintain controls or to manage
customer funds could diminish customer use of our Portal
severely.
Compliance with changing regulations concerning corporate governance
and public disclosure may result in additional expenses.
In recent years, there have been several changes in laws, rules,
regulations and standards relating to corporate governance and public
disclosure, including the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the "Dodd-Frank Act"), the Sarbanes-Oxley Act of 2002
("Sarbanes-Oxley") and various other new regulations promulgated by the SEC
and rules promulgated by the national securities exchanges. The Dodd-Frank Act, enacted in July 2010, expands federal regulation of
corporate governance matters and imposes requirements on publicly-held
companies, including us, to, among other things, provide stockholders with a
periodic advisory vote on executive compensation and also adds compensation
committee reforms and enhanced pay-for-performance disclosures. While some
provisions of the Dodd-Frank Act were effective upon enactment, others will
be implemented upon the SEC's adoption of related rules and regulations. The
scope and timing of the adoption of such rules and regulations is uncertain
and accordingly, the cost of compliance with the Dodd-Frank Act is also
uncertain.
In addition, Sarbanes-Oxley specifically
requires, among other things, that we maintain effective internal control
over financial reporting and disclosure of controls and procedures.
These and other new or changed laws, rules, regulations and standards
are, or will be, subject to varying interpretations in many cases due to
their lack of specificity. As a result, their application in practice may
evolve over time as new guidance is provided by regulatory and governing
bodies, which could result in continuing uncertainty regarding compliance
matters and higher costs necessitated by ongoing revisions to disclosure and
governance practices. Our efforts to comply with evolving laws, regulations
and standards are likely to continue to result in increased general and
administrative expenses and a diversion of management time and attention
from revenue-generating activities to compliance activities. Further,
compliance with new and existing laws, rules, regulations and standards may
make it more difficult and expensive for us to maintain director and officer
liability insurance, and we may be required to accept reduced coverage or
incur substantially higher costs to obtain coverage. Members of our board of
directors and our principal executive officer and principal financial
officer could face an increased risk of personal liability in connection
with the performance of their duties. As a result, we may have difficulty
attracting and retaining qualified directors and executive officers, which
could harm our business. We continually evaluate and monitor regulatory
developments and cannot estimate the timing or magnitude of additional costs
we may incur as a result.
Online payment processing liability is inherent in the industry and
insurance is expensive and difficult to obtain, we may be exposed to large
lawsuits.
Our business exposes us to potential liability risks, which are inherent
in the e-commerce business. While we will take precautions we
deem to be appropriate to avoid potential liability suits against us, there
can be no assurance that we will be able to avoid significant liability
exposure. Liability insurance for electronic payment processing industry is
generally expensive. We plan to obtain liability professional indemnity
insurance coverage for our Portal services. There can be no assurance that
we will be able to obtain such coverage on acceptable terms, or that any
insurance policy will provide adequate protection against potential claims.
A successful liability claim brought against us may exceed any insurance
coverage secured by us and could have a material adverse effect on our
results or ability to continue our Portal.
We may need to raise additional capital to fund continuing operations
and an inability to raise the necessary capital or to do so on acceptable
terms could threaten the success of our business.
We currently anticipate that our available capital resources will
not be
sufficient to meet our expected working capital and capital expenditure
requirements for the year ended December 31, 2017. We anticipate that we
may require an additional funding during the remainder of 2017. However,
such resources may not be sufficient to fund the long-term growth of our
business.
Any additional equity financing may be dilutive
to our stockholders, new equity securities may have rights, preferences or
privileges senior to those of existing holders of our Shares. Debt or equity financing may subject us to restrictive covenants and
significant interest costs. If we obtain funding through a strategic
collaboration or licensing arrangement, we may be required to relinquish our
rights to our product or marketing territories. If we are unable to obtain financing necessary to support our operations, we may be required to
defer, reduce or eliminate certain planned expenditures or significantly
curtail our operations.
We may need to increase the size of our organization, and may
experience difficulties in managing growth.
At present, we are a small company. We expect to experience a period of
expansion in headcount, infrastructure and overhead and anticipate that
further expansion will be required to address potential growth and market
opportunities. Future growth will impose significant added responsibilities
on members of management, including the need to identify, recruit, maintain
and integrate new managers. Our future financial performance and its ability
to compete effectively will depend, in part, on its ability to manage any
future growth effectively.
The loss of key personnel could adversely affect our business. We may
not be able to hire and retain qualified personnel to support our growth.
Our success depends to a significant extent upon Mr. Edwin
Ng, our CEO and controlling shareholder, and other key personnel
that we expect to join us during the remainder of 2017. The loss of the services of such personnel
and the inability to hire and retain of such personnel could adversely
affect our business and our ability to implement our growth plan. We cannot
assure you that the services of the members of our management team will
continue to be available to us, or that we will be able to find a suitable
replacements. We do not have key man insurance on any members
of our management team. If any member of our management team were to die and
we are unable to replace them for a prolonged period of
time, we may be unable to carry out our long term business plan and our
future prospect for growth, and our business, may be harmed. Our success is dependent upon our ability to attract, train, manage and
retain qualified personnel. There is substantial competition for qualified
personnel, and an inability to recruit or retain qualified personnel may
impact our ability to implement our strategy to grow our business.
We plan to grant stock options or other forms of equity awards in the
future as a method of attracting and retaining employees, motivating
performance and aligning the interests of employees with those of our
stockholders. There are currently no options and/or equity awards outstanding. If we are unable
to adopt, implement and maintain equity compensation arrangements that
provide sufficient incentives, we may be unable to retain our existing
employees and attract additional qualified candidates. If we are unable to
retain our existing employees, including qualified technical personnel, and
attract additional qualified candidates, our business and results of
operations could be adversely effected.
We may not be able to successfully expand our business through
acquisitions.
We review corporate and product acquisitions as a part of our growth
strategy. If we decided to undertake an acquisition, we may not be able to
successfully integrate it in order to realize the full benefit of such
acquisition. Factors which may affect our ability to grow successfully
through acquisitions include:
inability to identify suitable targets given the relatively narrow
scope of our business;
inability to obtain acquisition or additional
working capital financing due to our financial condition;
difficulties
and expenses in connection with integrating the acquired companies and
achieving the expected benefits;
diversion of management's attention
from current operations;
the possibility that we may be adversely
affected by risk factors facing the acquired companies;
acquisitions
could be dilutive to earnings, or in the event of acquisitions made through
the issuance of our common shares to the shareholders of the acquired
company, dilutive to our existing shareholders;
potential losses
resulting from undiscovered liabilities of acquired companies not covered by
the indemnification we may obtain from the seller; and
loss of key
employees of the acquired companies.
We have limited experience competing in international markets, where
we hope to compete, beyond Indonesia. Our international expansion plans will
expose us to greater political, intellectual property, regulatory, exchange
rate fluctuation and other risks, which could harm our business.
We intend to
expand use of our EPS and Marketplace in selected international markets, initially in
the Southeast Asian region. If we are unable to execute our expansion into
international markets, our business could suffer. Accordingly, we anticipate
devoting significant resources and management attention to expanding
international opportunities. Expanding internationally subjects us to a
number of risks, including:
greater difficulty in managing foreign operations;
expenses
associated with localizing our products, including offering customers the
ability to transact business in major currencies in addition to the
Indonesian Rupiah;
laws and business practices that favor local
competitors;
multiple and changing laws, tax regimes and government
regulations;
foreign currency restrictions and exchange rate
fluctuations;
changes in a specific country's or region's political or
economic conditions; and
differing intellectual property laws.
Risks Related to Our Common Stock
We are subject to compliance with securities law, which exposes us to
potential liabilities, including potential rescission rights.
We have offered and sold our Common Stock to investors pursuant to
certain exemptions from the registration requirements of the Securities Act
of 1933, as well as those of various state securities laws. The basis for
relying on such exemptions is factual; that is, the applicability of such
exemptions depends upon our conduct and that of those persons contacting
prospective investors and making the offering. We have not received a legal
opinion to the effect that any of our prior offerings were exempt from
registration under any federal or state law. Instead, we have relied upon
the operative facts as the basis for such exemptions, including information
provided by investors themselves.
If any prior offering did not qualify for such exemption, an investor
would have the right to rescind its purchase of the securities if it so
desired. It is possible that if an investor should seek rescission, such
investor would succeed. A similar situation prevails under state law in
those states where the securities may be offered without registration in
reliance on the partial preemption from the registration or qualification
provisions of such state statutes. If investors were successful in seeking
rescission, we would face severe financial demands that could adversely
affect our business and operations. Additionally, if we did not in fact
qualify for the exemptions upon which it has relied, we may become subject
to significant fines and penalties imposed by the SEC and state securities
agencies.
Edwin Ng, our Control Shareholder and Chairman owns approximately
37%
of our common stock and may be able to influence the outcome of stockholder
votes and their interests may differ from other stockholders.
As of April 28, 2017, our control shareholder, executive officer and
director beneficially owns 3,000,000 shares of our Common Stock representing
approximately 35% of our outstanding Shares, excluding Shares underlying
options and warrants. Subject to any fiduciary duties owed to our other
stockholders under Delaware law, these stockholders may be able to exercise
significant influence over matters requiring stockholder approval, including
the election of directors and approval of significant corporate
transactions, and will have some control over our management and policies.
Some of these persons may have interests that are different from yours. For
example, these stockholders may support proposals and actions with which you
may disagree. The concentration of ownership could delay or prevent a change
in control of the Company or otherwise discourage a potential acquirer from
attempting to obtain control of the Company, which in turn could reduce the
price of our stock. In addition, these stockholders could use their voting
influence to maintain our existing management and directors in office, delay
or prevent changes in control of the Company, or support or reject other
management and board proposals that are subject to stockholder approval,
such as amendments to our employee stock plans and approvals of significant
financing transactions.
The availability of a large number of authorized but unissued shares
of Common Stock may lead to dilution of existing
stockholders.
We are authorized to issue 500,000,000 shares of
Common Stock, $0.0001 par value per share. As of April 28, 2017, we have approximately
491,372,964 shares of Common Stock
available for issuance. Additional shares may be issued by our board of
directors without further stockholder approval. The issuance of large
numbers of shares, possibly at below market prices, is likely to result in
substantial dilution to the interests of other stockholders. In addition,
issuances of large numbers of shares may adversely affect the market price
of our Common Stock.
Our Certificate of Incorporation, as amended, authorizes 10,000,000
shares of preferred stock, $0.0001 par value per share none of which are
issued and outstanding to date. The board of
directors is authorized to provide for the issuance of these unissued shares
of preferred stock in one or more series, and to fix the number of shares
and to determine the rights, preferences and privileges thereof.
Accordingly, the board of directors may issue preferred stock which may
convert into large numbers of shares of Common Stock and consequently lead
to further dilution of other shareholders.
We have never paid cash dividends and do not anticipate doing so in
the foreseeable future.
We have never declared or paid cash dividends on our common shares. We
currently plan to retain any earnings to finance the growth of our business
rather than to pay cash dividends. Payments of any cash dividends in the
future will depend on our financial condition, results of operations and
capital requirements, as well as other factors deemed relevant by our board
of directors.
Our Common Stock is subject to the "Penny Stock" rules of the SEC and
the trading market in our stock is limited, which makes transactions in our
stock cumbersome and may reduce the value of an investment.
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for the purposes relevant to
us, as any equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require:
That a broker or dealer approve a person's account for transactions in
penny stocks; and
The broker or dealer receives a
written agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased.
In order to approve a person's account for transactions in penny stocks,
the broker or dealer must:
Obtain financial information and investment experience objectives of
the person; and
Make a reasonable determination that the transactions
in penny stocks are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of evaluating
the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a
penny stock, a disclosure schedule prescribed by the Commission relating to
the penny stock market, which, in highlight form:
Sets forth the basis on which the broker or dealer made the suitability
determination; and
That the broker or dealer received a signed, written
agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in
securities subject to the "penny stock" rules. This may make it more
difficult for investors to dispose of our Common Stock and cause a decline
in the market value of our stock. Disclosure also has to be made about the risks of investing in penny
stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on
the limited market in penny stocks.
Financial Industry Regulatory Authority, Inc. ("FINRA") sales practice
requirements may limit a shareholder's ability to trade our Common
Stock.
In addition to the "penny stock" rules described above, FINRA has adopted
rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial
status, tax status, investment objectives and other information. Under
interpretations of these rules, FINRA believes that there is a high
probability that speculative low priced securities will not be suitable for
some customers. FINRA requirements make it more difficult for
broker-dealers to make a market, which
may limit your ability to buy and sell our stock and have an adverse effect
on the market for our Shares.
Our stock is thinly traded, sale of your holding may take a
considerable amount of time.
The shares of our Common Stock are thinly-traded on the OTCQB Market,
meaning that the number of persons interested in purchasing our Common Stock
at or near bid prices may be relatively small or
non-existent. As a consequence, there may be periods of several days or more
when trading activity in our shares is minimal or non-existent, as compared
to a seasoned issuer which has a large and steady volume of trading activity
that will generally support continuous sales without an adverse effect on
share price. There can be no assurance that a broader or more active
public trading market for our Common Stock will develop or be sustained. Due to these conditions, we
can give you no assurance that you will be able to sell your shares at or
near bid prices or at all if you need money or otherwise desire to liquidate
your shares.
Shares eligible for future sale may adversely affect the market.
From time to time, certain of our stockholders may be eligible to sell
all or some of their shares of Common Stock by means of ordinary brokerage
transactions in the open market pursuant to Rule 144 promulgated under the
Securities Act, subject to certain limitations. In general, pursuant to
amended Rule 144, non-affiliate stockholders may sell freely after six
months subject only to the current public information requirement.
Affiliates may sell after six months subject to the Rule 144 volume, manner
of sale (for equity securities), current public information and notice
requirements. Any substantial sales of our Common Stock pursuant to Rule 144
may have a material adverse effect on the market price of our Common Stock.
If we fail to maintain effective internal controls over financial
reporting, the price of our Common Stock may be adversely affected.
Our internal control over financial reporting may have weaknesses and
conditions that could require correction or remediation, the disclosure of
which may have an adverse impact on the price of our Common Stock. We are
required to establish and maintain appropriate internal controls over
financial reporting. Failure to establish those controls, or any failure of
those controls once established, could adversely affect our public
disclosures regarding our business, financial condition or
results of operations. In addition, management's assessment of internal
controls over financial reporting may identify weaknesses and conditions
that need to be addressed in our internal controls over financial reporting
or other matters that may raise concerns for investors. Any actual or
perceived weaknesses that need to be addressed in our
internal control over financial reporting or disclosure of management's
assessment of our internal controls over financial reporting may have an
adverse impact on the price of our Common Stock.
We are required to comply with certain provisions of Section 404 of
the Sarbanes-Oxley Act of 2002 and if we fail to comply in a timely manner,
our business could be harmed and our stock price could decline.
Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley
Act of 2002 require an annual assessment of internal controls over financial
reporting, and for certain issuers an attestation of this assessment by the
issuer's independent registered public accounting firm. The standards that
must be met for management to assess the internal controls over financial
reporting as effective are evolving and complex, and require significant
documentation, testing, and possible remediation to meet the detailed
standards.
We expect to incur expenses and to devote resources to Section 404
compliance on an ongoing basis. It is difficult for us to predict how long
it will take or costly it will be to complete the assessment of the
effectiveness of our internal control over financial reporting for each year
and to remediate any deficiencies in our internal control over financial
reporting. As a result, we may not be able to complete the assessment and
remediation process on a timely basis. In addition, although attestation
requirements by our independent registered public accounting firm are not
presently applicable to us, we could become subject to these requirements in
the future and we may encounter problems or delays in completing the
implementation of any resulting changes to internal controls over financial
reporting. In the event that our Chief Executive Officer or Chief Financial
Officer determine that our internal control over financial reporting is not
effective as defined under Section 404, we cannot predict how the market
prices of our shares will be affected; however, we believe that there is a
risk that investor confidence and share value may be negatively affected.
Our share price could be volatile and our trading volume may fluctuate
substantially.
The price of our Common Shares has been and may in the future continue to
be extremely volatile, with the sale price fluctuating from a low of $0.02
to a high of $1.20 since 2013. Many factors could have a significant impact
on the future price of our common shares, including:
our inability to raise additional capital to fund our operations;
our failure to successfully implement our business objectives and
strategic growth plans;
compliance with ongoing regulatory
requirements;
market acceptance of our product;
changes in
government regulations; and
actual or anticipated fluctuations in our
quarterly financial and operating results; and the degree of trading
liquidity in our common shares.
Our annual and quarterly results may fluctuate, which may cause
substantial fluctuations in our common stock price.
Our annual and quarterly operating results may in the future fluctuate
significantly depending on factors including the volume of electronic
transactions, new Portal updates by us and other competitors, gain or loss
of significant customers, pricing of our Portal fees, the timing of
expenditures and economic conditions. Revenues related to our electronic
payment processing are required to be recognized upon satisfaction of all
applicable revenue recognition criteria. The recognition of revenues from
our Portal fees is dependent on a number of factors, including, but not
limited to, the terms of any license agreement and the timing of Portal
transactions by our customers.
Any unfavorable change in these or other factors could have a material
adverse effect on our operating results for a particular quarter or year,
which may cause downward pressure on our common stock price. We expect
quarterly and annual fluctuations to continue for the foreseeable future.
Delaware law contains provisions that could discourage, delay or
prevent a change in control of our Company, prevent attempts to replace or
remove current management and reduce the market price of our stock.
Provisions in our certificate of incorporation and bylaws may discourage,
delay or prevent a merger or acquisition involving us that our stockholders
may consider favorable. For example, our certificate of incorporation
authorizes our board of directors to issue up to ten million shares of
"blank check" preferred stock without further stockholder
approval. The board of directors has the authority to attach special rights,
including voting and dividend rights, to this preferred stock. With these
rights, preferred stockholders could make it more difficult for a third
party to acquire us.
We are also subject to the anti-takeover provisions of the DGCL. Under
these provisions, if anyone becomes an "interested stockholder," we may not
enter into a "business combination" with that person for three years without
special approval, which could discourage a third party from making a
takeover offer and could delay or prevent a change in control of us. An
"interested stockholder" is, generally, a stockholder who owns 15% or more
of our outstanding voting stock or an affiliate of ours who has owned 15% or
more of our outstanding voting stock during the past three years, subject to
certain exceptions as described in the DGCL.
Our quarterly operating results fluctuate and may not predict our
future performance accurately. Variability in our future performance could
cause our stock price to fluctuate and decline.
We expect our quarterly results will fluctuate in the future as a result
of a variety of factors, many of which are beyond our control. These factors
include:
changes in our costs, including interchange and transaction fees
charged by credit card associations, and our transaction losses;
changes in our pricing policies or those of our competitors;
relative
rates of acquisition of new customers;
seasonal patterns, including
increases during the holiday season;
delays in the introduction of new
or enhanced services, software and related products by us or our competitors
or market acceptance of these products and services; and
other changes
in operating expenses, personnel and general economic conditions.
As a result, period-to-period comparisons of our operating results may
not be meaningful, and you should not rely on them as an indication of our
future performance.