Item 1. Business
Overview
Weyland Techs core platform, offered as a Platform as a Service (PaaS) also referred to under the brand name CreateApp, enables small-medium-sized businesses ("SMB") to create a mobile application ("app") without the need of technical knowledge, high investment or background in IT. The Company recognizes revenue on a pay to use subscription basis when our customers use our platform.
We believe that SMBs can increase sales, reach more customers and promote their products and services via a simple easy to build mobile app at an affordable price and in a cost-effective manner.
Weyland Tech, Inc. is focused on mobile commerce enablement via our enhanced platform built in 2017 and, offered on a Platform-as-a-Service (PaaS) basis, and the companys e-wallet initiative. Recent product launches with our strategic partners DPEX (Indonesia), BGT (Thailand), Augicom/Orange (France) are representative of the PaaS platform strategy and product offering.
As a result, the Companys core product has evolved over the course of 2017 and 2018 to capitalize on the immediate opportunity for developing a larger network of valuable users and merchants by developing services that will enable the adoption of mobile commerce across Greater South East Asia. The platform enhancements have taken the Companys technology from a standalone DIY app builder to an enhanced platform built to enable mobile commerce.
In 2018, Weyland focused on scaling this business model by continuing to develop and expand strategic partnerships that would increase the number of users and merchants available to users of the Companys products on a Platform-as-a-Service (PaaS) basis. These efforts expanded on the success of recent product launches representative of the PaaS platform strategy and product offerings with our strategic partners DPEX (Indonesia), BGT (Thailand), and Augicom/Orange (France). And after extensive discussions with our partners, management believes that supporting these initiatives through deeper engagement, interaction and co-marketing/sales substantially benefited the Company in 2018 and beyond.
The Company is also pleased to report that its late 2017 e-wallet initiative, AtozPay, has surpassed expectations since its launch, achieving stronger than anticipated customer traction with limited marketing expense. With the AtozPay e-wallet, the Company created a consumer facing product offering that supports the PaaS strategy developed by the enhancements to the CreateApp platform and enables Weyland to drive higher monetization on those platforms by providing payments capabilities.
Digital Wallet or eWallet a digital financial services business, a distinguishing characteristic of Greater South East Asia (GSEA) compared to the United States is the substantially lower percentage of the population with bank accounts, credit cards, or debit cards. This creates the need for alternative payment methods, specifically e-wallets.
GSEA is poised for its own payments transformation in much the same way that China has shifted to online payments, according to IDC. Online payments in GSEA is divided into four broad payment modes: e-wallets, such as our AtoZPay platform, credit cards, debit cards and online banking. Of these, the e-wallet mode is expected to grow the fastest over the next five years, according to IDC. Drivers for GSEAs e-wallet industry include the mismatch between internet penetration and banking penetration, which creates a structural opportunity for e-wallets; the
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increasing integration of e-wallets with use cases such as online games and e-commerce; and the opportunity to offer broader digital financial services using e-wallets as a foundation.
AtozPay officially exited the closed beta environment on May 23, 2018 and officially launched for business.
AtozPay is designed to be a robust, universal payment platform therefore its growth is not limited to the Companys PaaS customers alone.
On April 23, 2018, the Company participated in the incorporation of a company in Indonesia, PT Weyland Indonesia Perkasa (WIP), an Indonesian limited liability company of which the Company held a 49% equity interest with the option to purchase an additional 31% equity interest at a later date. Based on the results of operations of WIP from April 23, 2018 to December 31, 2018, the investment in WIP had been fully impaired and written off.
The Company holds 49% equity interest and a 31% unexercised option in WIP as at December 31, 2018.
Due to the continuing legal restructuring in Indonesia, all the conditions precedent had not been satisfied and the 31% option had not been exercised as at December 31, 2018.
In order to maximize the independent growth of AtoZPay and consequently shareholder value, management began the process to spin-off the e-wallet business via a special dividend, and on September 24, 2018, the Company announced that it has made available, to its transfer agent, DTCC and DTC Participants with positions in WEYL, instructions for receiving the spin-off shares of its Weyland AtoZ Pay subsidiary (WAI).
Our Strategy
Although Weyland Tech's CreateApp platform originally focused on the Pan-Asia marketsthe platform is provided in fourteen, predominantly Asian, languageswe have partners that work with us to develop other markets.
The CreateApp platform enables SMB to create a mobile application ("app") without the need of technical knowledge, high investment or background in IT.
We believe that through our app, SMB can increase sales, reach more customers and promote their products and services via a simple easy to build mobile app at an affordable price and in a cost-effective manner.
Weyland Tech currently offers the CreateApp platform directly, as a Platform as a Service (PaaS) in the following key markets:
-Singapore: www.createappsingapore.com
-India (Jaipur): www.aapkiapp.in
Weyland Tech currently offers a DIY App builder through a 'white label' platform, also under a PaaS model, with the apps developed generating revenue in the following markets, primarily via cooperation agreements that were structured in late 2015, 2016 and 2017:
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EU, via a Strategic Cooperation with Augicom S.A. (www.augicom.ch)
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Malaysia, via a Cooperation Agreement with Silver Ridge Tangerine Sdn Bhd (www.silverridge.com.my)
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Hong Kong and South China via a Cooperation Agreement with Info Zone Development Ltd.
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Indonesia, via a Cooperation Agreement with DPEX Worldwide
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Thailand via a Cooperation Agreement with BGT Corporation Public Company Limited
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The Philippines via a Cooperation Agreement with MocaApp
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France via a Cooperation Agreement with Orange Pro
For the territories licensed to our distributors and on a white label basis, we derive royalty income from the end user use of our platform.
SMBs
The Company believes that these agreements will create a large enough addressable market opportunity to generate sales and profits in a scalable manner, grow the Company's business and enhance shareholder value. Given the nature of DIY mobile apps ("apps"), and the primary target market of SMB, a typical go-to-market strategy would have a direct sales force or resellers approach SMB directly to drive our revenue.
Over the past two years, the Company has evolved our Platform as a service model with three distinct market paths to drive recurring revenue business model:
A) Cooperation agreements in countries/regions where our partners are responsible for targeting SMB either through an installed base of customers or groups of Direct Sellers with a sales force encompassing SMB as end customers.
B) Enterprise Solutions where large retailers (hypermarket chains, mall owners, brand owners with company-owned and franchise stores) adopt a 'Master App' on a white-label basis, hosted at a 3rd party regional Hosting or Data Center facility.
C) Digital Wallet or e-Wallet: a digital financial services business, a distinguishing characteristic of Greater South East Asia (GSEA) compared to the United States, is the substantially lower percentage of the population in GSEA with bank accounts, credit cards, or debit cards. This creates the need for alternative payment methods, specifically e-wallets. GSEA is poised for its own payments transformation in much the same way that China has shifted to online payments, according to IDC. Online payments in GSEA is divided into four broad payment modes: e-wallets, such as our AtoZPay platform, credit cards, debit cards and online banking. Of these, the e-wallet mode is expected to grow the fastest over the next five years, according to IDC. Drivers for GSEAs e-wallet industry include the mismatch between internet penetration and banking penetration, which creates a structural opportunity for e-wallets; the increasing integration of e-wallets with use cases such as online games and e-commerce; and the opportunity to offer broader digital financial services using e-wallets as a foundation.
With the above strategy, we believe that the Company has been able to maintain a lower capital expenditure base due to the 'level-two' customer support vs. 'level-one' customer support, smaller sales and marketing teams, and the need to provide hosting services.
The Companys CreateApp Platform operates as a Platform as a Service (PaaS) allowing users to develop their own applications supplying the infrastructure and IT services, which users can access anywhere via a web or desktop browser. The Company recognizes revenue on a pay to use subscription basis when our customers use our platform.
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We do not compensate resellers and distributors, instead the end user pays the reseller/distributor directly as well as paying for our services, for which we or our reseller/distributor in licensed territories bill the end user separately.
Growth of the Mobile Apps Industry
We believe that there are a number of factors that are contributing to the continued growth of the mobile apps industry: (i) smartphone adoption continues to increase globally; (ii) lower purchase prices of smartphones for consumers; (iii) smartphone users are becoming increasingly comfortable with the process of searching for and conducting business on their phones; (iv) SMB are placing more emphasis on implementing a mobile app versus a mobile website to enable customers to gain a higher level of interaction and functionality; and (v) internet users in emerging markets use smartphones as their primary internet access device, having bypassed the desktop PC entirely. We believe that the Company will be able to participate in the growth of the mobile apps industry by offering an affordable, easy to build and use platform.
Recent Developments
On January 9, 2018 the Company provided an update on the status of its initiative with Chinas DDBill Payment Co., Ltd; the operators of Chinas fourth largest payments gateway Dinpay (www.dinpay.com, English: us.dinpay.com); following up on the companies previously announced memorandum of understanding (MOU).
On February 15, 2018 announced that Mr. Jon Najarian has joined the Companys Board of Directors.
On March 14, 2018 the Company confirmed that it has received a non-binding acquisition proposal from its recently announced strategic partner, Chinas DDBill Payment Co., Ltd (DDBill) which operates Chinas fourth largest payments gateway Dinpay (
www.dinpay.com
, English:
us.dinpay.com
) and Dinpay Technology Group Ltd. (DTG). Given the highly complex structure proposed to the Company along with multiple country regulatory hurdles, the Companys management declined the proposal.
On March 28, 2018 the Company announced the launch of the ENable mobile commerce and logistics platform with its Strategic Partner, DPEX Worldwide (DPEX). The result of the strategic partnership announced in December 2016, the official launch of ENable is the culmination of over a year of integration of Weylands CreateApp technologies with DPEXs logistics and shipping platform.
On May 23, 2018 the Company, announced that AtozPay exited beta stage.
On July 11, 2018
the Company announced that its board of directors has approved a pro-rata distribution to the Companys shareholders of 90% of the outstanding shares of the Companys subsidiary, Weyland AtoZ Pay Inc. (WAI), through which the Company holds its ownership interest in its eWallet business (the Spin-Off). The Companys shareholders of record as of the close of trading on September 28, 2018, the record date for the Spin-Off, will receive one share of common stock of WAI for every five shares of the Companys common stock held as of the record date. Fractional shares of WAI common stock will not be issued in the distribution. The Spin-Off is expected to be effective as of the end of the day on October 5, 2018, the distribution date for the Spin-Off, with 90% of the shares of WAI distributed to the Companys shareholders of record.
On Aug. 20, 2018 the Company, announced a strategic partnership between its eWallet business and PT. Finnet Indonesia (Finnet). Finnet http://www.finnet-indonesia.com/home/en, founded in 2005, is 60% owned by PT. Telekomunikasi Indonesia, the largest provider of telecom
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services in Indonesia, is currently the largest fixed-line provider with over 10 million households and businesses as their clients.
On September 06, 2018 the Company announced that its eWallet business, AtoZPay, has entered into multiple additional agreements with the following companies in Indonesia, to enable users of AtoZPay to pay for goods and services from said companies.
The partnerships include:
Telkomsel
Indonesias largest telecom service provider.
BRI Bank
one of the oldest banks in Indonesia, with US$62 billion in assets.
Bank Mandiri
one of the largest banks in Indonesia with over US$81 billion in assets.
Grab Taxi
the number one ride sharing and delivery service in Southeast Asia funded by HSBC, Toyota Motor Company, Paul Allen (Co-founder of Microsoft), Oppenheimer, Softbank and multiple other tier-one investors.
Go-Jek
Indonesias largest motorcycle and scooter based taxi service, funded by Google, Tencent, Temasek, Sequoia Capital, KKR and multiple other tier-one investors.
On September 19, 2018, we entered into formal distribution agreement (the Agreement)
with
our Weyland AtoZ Pay subsidiary (WAI),
to transfer the Companys
49% equity ownership interest in PT Weyland Indonesia Perkasa, a limited liability company organized under the laws of the Republic of Indonesia (WIP) to WAI. WIPs primary business operations includes a digital financial transactions app serving the rapidly growing Indonesia e-commerce and e-payment markets (eWallet). The transfer is being made in order to effect the previously announced distribution to Weyland Tech stockholders of a pro-rata share of the Companys ownership in its eWallet business. On Nov. 30, 2018 the Company announced that the distribution of its holdings in Weyland AtoZPay Indonesia (WAI) will be completed with a distribution of WAI shares on December 11th 2018.
The Companys shareholders of record as of the close of trading on October 12, 2018 will receive a pro-rata distribution of one (1) share of common stock of WAI for each five (5) shares of the Companys common stock held as of the record date. Fractional shares of WAI common stock will not be issued in the distribution, as fractional shares will be rounded up to the immediate next whole share. The spin-off is expected to be effective as of the end of the day on December 11th, 2018, the new distribution date for the spin-off.
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The spin-off of (WAI) holds a 49% equity ownership interest in PT Weyland Indonesia Perkasa, a limited liability company organized under the laws of the Republic of Indonesia (WIP).
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WIPs primary business operations include a digital financial transactions app serving the rapidly growing Indonesia e-commerce and e-payment markets (eWallet).
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Post distribution Weyland will retain an option for 31% of AtoZPay which can be acquired by the Company at its discretion for a nominal exercise price.
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As AtoZPay was at no time consolidated into Company financial statements the spin-off will have no effect on the Company's core business financials.
WAI will be free to enter the capital markets to unlock value for its shareholders. While Weyland continues to support AtoZPay generating additional value for Weyland shareholders based on its 31% option to purchase AtoZPay.
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On December 14, 2018 the Company announced that after reviewing the beneficial owner lists submitted by banks/brokers in connection with its Weyland AtoZ Pay Inc. (WAI) spin-off, the Company has decided to distribute the WAI spin-off shares via book-entry statement from its transfer agent, in lieu of stock certificate form as was originally intended. From a shareholder perspective, book-entry account statements from the transfer agent are the functional equivalent of stock certificates. The Company believes that switching to a book-entry statement delivery method will expedite the delivery of the WAI spin-off shares to beneficial owners and bank/brokers, and also streamline the process for banks/brokers in connection with their handling of objecting beneficial owner (OBO) and retirement account spin-off shares, which they will receive directly.
On October 10, 2018 the Company announced a $2 million investment from
TRITON FUNDS LP
, the La Jolla, CA-based investment fund, allegedly, managed by students from the University of California, San Diego and California State University, Northridge. This agreement was subsequently terminated on November 7, 2019.
On November 7, 2018, the Company entered into a Common Stock Purchase Agreement with RedDiamond Partners LLC (the Equity Agreement), with respect to an equity line of credit for up to Five Million Dollars. The Equity Agreement allows the Company to sell shares to RedDiamond by providing them with notice (a Purchase Notice) of the Companys request to sell such shares which shall not exceed 20% of the aggregate trading volume of the Common Stock during the 5 trading days preceding the date of the Purchase Notice (the Maximum Weekly Amount) and further subject to other limitations. The purchase price at an assumed purchase price under the Equity Agreement of the the lower of (i) 85% of the of the lowest of the VWAP for each of the five (5) trading days preceding and including the Clearing Date with respect to the subject Purchase Notice, or (ii) 90% of the average of the two (2) lowest VWAPS for the five (5) days after the Clearing Date.
RedDiamond has agreed to a no-shorting clause in the Equity Agreement, which generally prohibits RedDiamond from engaging in any short sales of our Common Stock during the term of the Equity Agreement. Nevertheless, we do anticipate that RedDiamond will sell the shares it acquires with respect to each Purchase Notice during the period of time occurring shortly after the delivery of such shares. If the Company terminates the Purchase Agreement, other than in the event of a material breach by RedDiamond, prior to the purchase of at least $3,000,000 of the Commitment Amount, then the Company must pay to RedDiamond as liquidated damages and compensation for the costs of being prepared to make funds available and make purchases hereunder, an amount equal to twelve and one-half percent (12.5%) of the remaining amount of the Commitment Amount not purchased.
The Equity Agreement was entered into in conjunction with a Registration Rights Agreement with a mandatory registration statement filing requirement. The Company has filed an initial Registration Statement on Form S-1.
On November 19, 2018 the Company announced a strategic partnership with Southeast Asias largest B2B portal for the construction industry, Keepital, a part of the KEEP family of business marketing services. Keepital is a leading B2B portal in Southeast Asia for the construction industry with over 500,000 members. Utilizing Weylands PaaS platform on a white label basis, Keepital will offer its members the ability to source, procure, buy and sell construction equipment, materials, products and services directly from their mobile phones.
On November 11, 2018 the Company announced it signed binding Memorandum of Understanding (MOU) with PT Rex Indonesia ("Rex") Rex focuses its services as a document and package shipping company through air, sea and land transportation with domestic and international destinations. Rex ships approximately 10,000 packages per day for thousands of Small-Medium sized Businesses (SMBs). Under the terms of the MOU, Weyland and Rex will leverage the Rex SMB customer base and Weyland Tech's 13,000-partnership network across 23 cities in Indonesia. The combined platform will implement a non-cash based payment system through the AtoZpay eWallet, integrate Weyland's PaaS platform functionality for eCommerce and mCommerce thereby providing a
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last-mile and payment solution for companies looking to expand their sales thru eCommerce/mCommerce and have goods and services paid for and delivered.
Competition
Our business is rapidly evolving and highly competitive. Our current and potential competitors include Online Gaming companies, eCommerce and eWallet platforms.
Each of the above listed industries in GSEA is highly fragmented. We face competition in each of our lines of business in each market where we operate. Some of our competitors, particularly those based outside of GSEA, may have greater access to capital markets, more financial and other resources, and a longer operating history than we do.
Online Games
We compete on the basis of a number of factors, including user base, game portfolio, quality of user experience, brand awareness and reputation, relationships with game developers and access to distribution and payment channels. Our competitors primarily include companies with a presence in just one or a few markets in the region.
E-commerce
We face competition principally from regional players that operate across several markets in the region. We also face competition from single-market players in the region. We compete to attract, engage and retain buyers based on the variety and value of products and services listed on our marketplaces, overall user experience and convenience, online communication tools, integration with mobile and networking applications and tools, quality of mobile applications, and availability of payment settlement and logistics services. We also compete to attract and retain sellers based on the number and engagement of buyers, the effectiveness and value of the marketing services we offer, commission rates and the usefulness of the services we provide including data and analytics for potential buyer targeting, cloud computing services and the availability of support services including payment settlement and logistics services.
E-wallet Platforms
AtoZPay competes primarily with credit card and debit card service providers, banks with payment processing offerings, other offline payment options and other electronic payment system operators. AtoZPay competes with these companies primarily on the basis of transaction processing speed, convenience, network size, accessibility, reliability and price. We believe the combination of AtoZPays numerous physical service counters and the AtoZPay App is a significant competitive advantage because of the strong demand in GSEA for convenient forms of payment processing.
Our business is rapidly evolving and highly competitive. Our current and potential competitors include: (1) Advertising companies, Web design firms and more recently, mobile app makers; (2) other DIY mobile app companies; (3) a number of indirect competitors, including media companies, web portals, comparison shopping websites, and web search engines, either directly or in collaboration with SMB; (4) companies that provide e-commerce services, including website/app development.; (5) companies that provide infrastructure web and mobile services. We believe that the principal competitive factors in our mobile apps business include ease of use, affordability and broad range of functionality. Many of our current and potential competitors have greater resources, slightly longer histories, more customers, and greater brand recognition. They may adopt more aggressive pricing and devote more resources to technology, functionality and ease of use and marketing. Other companies also may enter into business combinations or alliances that strengthen their competitive positions.
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Intellectual Property
The Company has, under a software purchase agreement (SPA), the eWallet platform currently operating under the brand name AtozPay in Indonesia, and the global rights to market and operate in other countries, worldwide.
Employees
The Company currently has seventeen full-time contracted personnel in Singapore, Myanmar, Hong Kong and the United States.
None of our employees are represented by a union or covered by a collective bargaining agreement. We have not experienced any work stoppages and we consider our relationship with our employees to be good.
Available Information
Our website address is
www.weylandtech.com
. We do not intend our website address to be an active link or to otherwise incorporate by reference the contents of the website into this Report. We electronically file certain documents with the Securities and Exchange Commission (the SEC). We file annual reports on Form 10-K; quarterly reports on Form 10-Q; and current reports on Form 8-K (as appropriate); along with any related amendments and supplements thereto. From time-to-time, we may also file registration statements and related documents in connection with equity or debt offerings. You may read and copy any materials we file with the SEC at the SECs Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information regarding the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet website at
www.sec.gov
that contains reports and other information regarding registrants that file electronically with the SEC.
Item 1A. Risk Factors
In addition to other information in this Annual Report on Form 10-K and in other filings we make with the Securities and Exchange Commission, the following risk factors should be carefully considered in evaluating our business as they may have a significant impact on our business, operating results and financial condition. If any of the following risks actually occurs, our business, financial condition, results of operations and future prospects could be materially and adversely affected. Because of the following factors, as well as other variables affecting our operating results, past financial performance should not be considered as a reliable indicator of future performance and investors should not use historical trends to anticipate results or trends in future periods.
RISKS RELATED TO OUR BUSINESS
We are subject to risks associated with changing technologies in the mobile apps industry, which could place us at a competitive disadvantage.
The successful implementation of our business strategy requires us to continuously evolve our existing solutions and introduce new solutions to meet customers needs. We believe that our customers rigorously evaluate our solution and service offerings on the basis of a number of factors, including, but not limited to: quality; price competitiveness; technical expertise and development capability; innovation; reliability and timeliness of delivery; operational flexibility; customer service; and overall management.
Our success depends on our ability to continue to meet our customers changing requirements and specifications with respect to these and other criteria. There can be no assurance that we will be
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able to address technological advances or introduce new offerings that may be necessary to remain competitive within the mobile apps industry.
Systems failures could cause interruptions in our services or decreases in the responsiveness of our services which could harm our business.
If our systems fail to perform for any reason, we could experience disruptions in operations, slower response times or decreased customer satisfaction. Our ability to host mobile apps successfully and provide high quality customer service depends on the efficient and uninterrupted operation of our hosting company's computer and communications hardware and software systems. Although unlikely, our hosting company's systems are vulnerable to damage or interruption from human error, natural disasters, power loss, telecommunication failures, break-ins, sabotage, computer viruses, intentional acts of vandalism and similar events. Any systems failure that causes an interruption in our services or decreases the responsiveness of our services could impair our reputation, damage our brand name and materially adversely affect our business, financial condition and results of operations and cash flows.
Our cost structure is partially fixed. If our revenues decline and we are unable to reduce our costs, our profitability will be adversely affected.
Our cost structure is partially fixed and, if our revenues decrease these fixed costs will not be reduced.. We base our cost structure on historical and expected levels of demand for our services, as well as our fixed operating infrastructure, such as computer hardware and software, and staffing levels. If demand for our services declines and, as a result, our revenues decline, we may not be able to adjust our cost structure on a timely basis and our profitability may be materially adversely affected.
Attrition of customers and failure to attract new customers could have a material adverse effect on our business, financial condition and results of operations and cash flows.
Although we offer mobile apps designed to support and retain our customers, our efforts to attract new customers or prevent attrition of our existing customers may not be successful. If we are unable to retain our existing customers or acquire new customers in a cost-effective manner, our business, financial condition and results of operations and cash flows would likely be adversely affected. Although we have spent significant resources on business development and related expenses and plan to continue to do so, these efforts may not be cost-effective at attracting new customers.
Any future acquisitions may result in significant transaction expenses, integration and consolidation risks and risks associated with entering new markets, and we may be unable to profitably operate our consolidated company.
The Company intends to selectively pursue acquisitions and new businesses. Any future acquisitions may result in significant transaction expenses and present new risks associated with entering additional markets or offering new products and services, and integrating the acquired companies. We may not have sufficient management, financial and other resources to integrate companies we acquire or to successfully operate new businesses and we may be unable to profitably operate our expanded company. Additionally, any new businesses that we may acquire, once integrated with our existing operations, may not produce expected or intended results.
We may be unable to respond to customers' demands for new mobile app solutions and service offerings and our business, financial condition and results of operations and cash flows may be materially adversely affected.
Our customers may demand new mobile app solutions and service offerings. If we fail to identify these demands from customers or update our offerings accordingly, new offerings provided by our competitors may render our existing solutions and services less competitive. Our future
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success will depend, in part, on our ability to respond to customers' demands for new offerings on a timely and cost-effective basis and to adapt to address the increasingly sophisticated requirements and varied needs of our customers and prospective customers. We may not be successful in developing, introducing or marketing new offerings. In addition, our new offerings may not achieve market acceptance. Any failure on our part to anticipate or respond adequately to customer requirements, or any significant delays in the development, introduction or availability of new offerings or enhancements of our current offerings could have a material adverse effect on our business, financial condition and results of operations and cash flows.
We may be unable to respond to the evolving industry practices and technology solutions, and our business, financial condition and results of operations and cash flows may be materially adversely affected.
To remain competitive as a mobile app provider, we must continue to invest in research and development of new technology solutions in order to keep up with the ever-evolving industry practices and enhancements to our existing solutions. The process of developing new technologies, products and services is complex and expensive. The introduction of new solutions by our competitors, the market acceptance of competitive solutions based on new or alternative technologies or the emergence of new industry practices could render our solutions less competitive.
We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act could have a material adverse effect on our business.
We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We have operations, agreements with third parties and make sales in Asia, which may experience corruption. Our activities in Asia create the risk of unauthorized payments or offers of payments by one of the employees, consultants or agents of our company, because these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. Also, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.
RISKS RELATED TO THE MARKET FOR OUR STOCK
The market price of our common stock can become volatile, leading to the possibility of its value being depressed at a time when you may want to sell your holdings.
The market price of our common stock can become volatile. Numerous factors, many of which are beyond our control, may cause the market price of our common stock to fluctuate significantly. These factors include:
our earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the expectations of financial market analysts and investors;
changes in financial estimates by us or by any securities analysts who might cover our stock;
speculation about our business in the press or the investment community;
significant developments relating to our relationships with our customers or suppliers;
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stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industry;
customer demand for our business solutions;
investor perceptions of our industry in general and our Company in particular;
the operating and stock performance of comparable companies;
general economic conditions and trends;
announcements by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures;
changes in accounting standards, policies, guidance, interpretation or principles;
loss of external funding sources;
sales of our common stock, including sales by our directors, officers or significant stockholders; and
addition or departure of key personnel.
Securities class action litigation is often instituted against companies following periods of volatility in their stock price. Should this type of litigation be instituted against us, it could result in substantial costs to us and divert our managements attention and resources.
Moreover, securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to the operating performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests in our Company at a time when you want to sell your interest in our common stock.
Our common stock is quoted on the over-the-counter electronic quotation system maintained by the OTC Markets which may have an unfavorable impact on our stock price and liquidity.
Our common stock is quoted on the OTCQX, an over-the-counter electronic quotation system maintained by the OTC Markets. The OTCQX is more limited than a trading market such as the New York Stock Exchange or NASDAQ. The OTCQX is a less visible market for the trading of our common stock by existing and potential stockholders, and so trading of our common stock on the OTCQX could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future. We plan to list our common stock as soon as practicable. However, we cannot assure you that we will be able to meet the initial listing standards of any stock exchange, or that we will be able to maintain any such listing.
We may be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.
The SEC has adopted regulations which generally define so-called penny stocks to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. If our common stock becomes a penny stock, we may become subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and accredited investors (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by the Penny Stock Rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchasers written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.
For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock
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held in the account and information on the limited market in penny stock. Additionally, some broker dealers do not accept low priced securities for deposit, which in turn limits a shareholders liquidity and our ability to raise capital.
There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.
We may be required to raise additional financing by issuing common stock or new debt or preferred or other equity securities with terms or rights superior to those of our shares of common stock, which could adversely affect the market price of our shares of common stock.
We may require additional financing to fund future operations, develop and exploit existing and new products and to expand into new markets. We may not be able to obtain financing on favorable terms, if at all. If we raise additional funds by issuing equity securities, the percentage ownership of our current shareholders will be reduced, and the holders of the new equity securities may have rights superior to those of the holders of shares of common stock, which could adversely affect the market price and the voting power of shares of our common stock. If we raise additional funds by issuing debt securities, the holders of these debt securities would similarly have some rights senior to those of the holders of shares of common stock, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us.
We do not intend to pay dividends for the foreseeable future.
For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board deems relevant.