Notes to the Consolidated Financial Statements
March 31, 2020
Expressed in United States Dollars
(Unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Resort Savers, Inc. (“we,” “us,” “our,” the “Company,” “Resort Savers” or “RSSV”) is a Nevada corporation incorporated on June 25, 2012. It is based in Shenzhen, the People’s Republic of China (the “PRC”). The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is December 31.
The Company makes investments and acquisitions into sound, transparent markets and industries throughout the world. The Company is principally engaged in the trading of oil, gas and lubricant, as well as an agricultural business and provides nutrition consultancy services and training as well as selling health products through an online store.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company prepares its financial statements in accordance with rules and regulations of the U.S. Securities and Exchange Commission (SEC) and generally accepted accounting principles (“GAAP”) in the United States of America. The accompanying consolidated financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X and presented in United States dollars.
In the opinion of the company’s management, the accompanying unaudited interim consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the company as of March 31, 2020 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited interim consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on April 6, 2020.
Principles of Consolidation
At March 31, 2020, the principal subsidiaries of the Company were listed as follows:
Entity Name
|
|
Acquisition
Date
|
|
Ownership
|
|
|
Jurisdiction
|
|
Investments
Held By
|
|
Nature of
Operation
|
|
Fiscal
Year
|
|
Admall Sdn. Bhd.
|
|
May 16,
2018
|
|
|
100
|
%
|
|
Malaysia
|
|
RSSV
|
|
Nutritional
Services
|
|
December 31
|
|
Xing Rui International Investment Holding Group Co., Ltd. (“Xing Rui”)
|
|
December 22,
2014
|
|
|
100
|
%
|
|
Seychelles
|
|
RSSV
|
|
Holding
Company
|
|
January 31
|
|
Xing Rui International Investment Group Ltd. (“Xing Rui HK”)
|
|
December 22,
2014
|
|
|
100
|
%
|
|
Hong Kong,
the PRC
|
|
Xing Rui
|
|
Holding
Company
|
|
January 31
|
|
Huaxin Changrong (Shenzhen) Technology Service Co., Ltd. (“Huaxin”) *
|
|
August 27,
2015
|
|
|
100
|
%
|
|
the PRC
|
|
Xing Rui
|
|
Holding
Company
|
|
December 31
|
|
Beijing Yandong Tieshan Oil Products Co., Ltd. (“Tieshan Oil”) *
|
|
January 29,
2016
|
|
|
51
|
%
|
|
the PRC
|
|
Huaxin
|
|
Trading of oil products
|
|
December 31
|
|
|
|
May 16,
2018
|
|
|
49
|
%
|
|
|
|
|
|
|
|
|
|
__________
*
|
The English names used are translated only.
|
These consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.
Foreign Currency Translation and Re-measurement
The Company translates its foreign operations to U.S. dollars in accordance with ASC 830, “Foreign Currency Matters”.
The Company’s functional currency and reporting currency is the U.S. dollar, and our subsidiaries’ functional currency is the Chinese Yuan Renminbi (“CNY”), Malaysian Ringgit (“MYR”) and Hong Kong Dollar (“HKD”).
The translate its records into U.S. dollar as follows:
|
•
|
Assets and liabilities at the rate of exchange in effect at the balance sheet date
|
|
•
|
Equities at historical rate
|
|
•
|
Revenue and expense items at the average rate of exchange prevailing during the period
|
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents, and accounts receivable. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company also reviews its accounts receivable in a timely manner. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Tieshan Oil
During the three months ended March 31, 2020, one customer accounted for 95% of revenues.
As of March 31, 2020 and December 31, 2019, one customer accounted for approximately 99% and 99% of accounts receivable, one vendor accounted for approximately 11% and 0% of accounts payable, respectively.
Admall
As of March 31, 2020 and December 31, 2019, one vendor accounted for approximately 87% and 91% of accounts payable, respectively.
Earnings Per Share of Common Stock
The Company has adopted ASC Topic 260, ”Earnings per Share,” (“EPS”) which requires presentation of basic EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying financial statements, basic earnings per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 3 - GOING CONCERN
The Company’s consolidated financial statements are prepared using GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet had sufficient revenues to cover its operating cost, and requires additional capital to commence its operating plan. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about its ability to continue as a going concern.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company include: sales of equity instruments; traditional financing, such as loans; and obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 4 – ACCOUNTS RECEIVABLE
The Company has performed an analysis on all of its accounts receivable and determined that all amounts are collectible by the Company. As such, all accounts receivable are reflected as a current asset and no allowance for bad debt has been recorded as of March 31, 2020 and December 31, 2019. As at March 31, 2020 and December 31, 2019, the Company had accounts receivable of $1,413,500 and $548,281, respectively.
NOTE 5 – INVENTORIES
Inventories at March 31, 2020 and December 31, 2019 consist of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Finished goods
|
|
$
|
7,038,288
|
|
|
$
|
7,225,155
|
|
NOTE 6 – PROPERTYAND EQUIPMENT
Plant and equipment at March 31, 2020 and December 31, 2019 consist of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cost:
|
|
|
|
|
|
|
Computer and software
|
|
$
|
73,912
|
|
|
$
|
77,995
|
|
Furniture and fittings
|
|
|
7,574
|
|
|
|
4,369
|
|
Motor Vehicles
|
|
|
46,340
|
|
|
|
-
|
|
Renovation
|
|
|
39,635
|
|
|
|
-
|
|
Office equipment
|
|
|
5,556
|
|
|
|
5,863
|
|
Plant and machinery
|
|
|
741,679
|
|
|
|
780,904
|
|
|
|
|
914,696
|
|
|
|
869,131
|
|
Less: accumulated depreciation
|
|
|
(406,150
|
)
|
|
|
(402,815
|
)
|
Equipment, net
|
|
$
|
508,546
|
|
|
$
|
466,316
|
|
During the three months ended March 31, 2020 and 2019, the Company recorded depreciation of $23,513 and $24,027, respectively.
NOTE 7 –ACCRUED LIABILITIES AND OTHER PAYABLE
The Company’s accounts payable and accrued liabilities consist of the followings:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Accrued expenses
|
|
$
|
-
|
|
|
$
|
-
|
|
Accrued salary
|
|
|
23,635
|
|
|
|
18,761
|
|
Accrued interest
|
|
|
14,758
|
|
|
|
5,579
|
|
Deposit received
|
|
|
10,195
|
|
|
|
10,759
|
|
Other payables
|
|
|
96,124
|
|
|
|
50,735
|
|
|
|
$
|
144,712
|
|
|
$
|
85,834
|
|
NOTE 8 - CONVERTIBLE NOTE
At March 31, 2020 and December 31, 2019, convertible loans consisted of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Convertible Notes - originated in September 18, 2019
|
|
$
|
158,000
|
|
|
$
|
158,000
|
|
Convertible Notes - originated in November 20, 2019
|
|
|
125,000
|
|
|
|
125,000
|
|
Convertible Notes - originated in November 22, 2019
|
|
|
55,000
|
|
|
|
55,000
|
|
Convertible Notes - originated in February 19, 2020
|
|
|
122,750
|
|
|
|
-
|
|
Total convertible notes payable
|
|
|
460,750
|
|
|
|
338,000
|
|
Less: Unamortized debt discount
|
|
|
(363,522
|
)
|
|
|
(162,566
|
)
|
Total convertible notes
|
|
|
97,228
|
|
|
|
175,434
|
|
Less: current portion of convertible notes
|
|
|
97,228
|
|
|
|
19,864
|
|
Long-term convertible notes
|
|
$
|
-
|
|
|
$
|
155,570
|
|
For the three months ended March 31, 2020 and 2019, the interest expense on convertible notes was $9,179 and $0, and amortization of discount, including interest expense, of $66,794 and $0, respectively. As of March 31, 2020 and December 31, 2019, the accrued interest was $14,758 and $5,579, respectively.
Convertible Notes – Issued during the three months ended March 31, 2020
During the three months ended March 31, 2020, the Company issued a total principal amount of $112,750 convertible note for cash proceeds of $90,000. The terms of convertible note are summarized as follows:
|
•
|
Term: 10 months;
|
|
•
|
Annual interest rates: 12%;
|
|
•
|
Convertible at the option of the holders at any time;
|
|
•
|
Conversion prices are based on discounted (35% - 50% discount) lowest trading prices of the Company’s shares during various periods prior to conversion.
|
Convertible Notes – Issued during the year ended December 31, 2019
During the year ended December 31, 2019, the Company issued a total principal amount of $338,000 convertible notes for cash proceeds of $310,000. The convertible notes were also provided with a total of 112,500 warrants. The terms of convertible notes are summarized as follows:
|
•
|
Term: 12 months - 18 months;
|
|
•
|
Annual interest rates: 8% - 10%;
|
|
•
|
Convertible at the option of the holders at any time or 180 days from issuance.
|
|
•
|
Conversion prices are based on discounted (35% - 40% discount) lowest trading prices of the Company’s shares during various periods prior to conversion. Certain note has a fixed conversion price of $1.
|
The Company determined that the conversion feature met the definition of a liability in accordance with ASC Topic No. 815-40, “Derivatives and Hedging - Contracts in Entity’s Own Stock” and therefore bifurcated the embedded conversion option once the note becomes convertible and accounted for it as a derivative liability. The fair value of the conversion feature was recorded as a debt discount and amortized to interest expense over the term of the note.
The Company valued the conversion feature using the Black Scholes valuation model. The fair value of the derivative liability for all the notes that became convertible, including the notes issued in prior years, during the three months ended March 31, 2020 amounted to $333,918. $245,000 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $88,918 was recognized as a “day 1” derivative loss.
NOTE 9 – WARRANTS
A summary of activity regarding warrants issued as follows:
|
|
Warrants Outstanding
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2019
|
|
|
112,500
|
|
|
$
|
1.67
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Reset feature
|
|
|
220,898
|
|
|
|
0.62
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited/canceled
|
|
|
-
|
|
|
|
-
|
|
Outstanding, March 31, 2020
|
|
|
333,398
|
|
|
$
|
0.62
|
|
During the year ended December 31, 2019, the Company issued warrants with convertible notes. Each warrant is immediately exercisable into one share of common stock at a price ranging from $1.25 to $5.00 per share. The warrants will expire on the three (3) year anniversary of the issuance date. As a result of the reset features, the warrants increased by 220,898 for the period ended March 31, 2020, and the total warrants exercisable into 333,398 shares of common stock at a weighted average exercise price of $0.62 per share as of March 31, 2020. The reset feature of warrants was effective at the time that a separate convertible instrument with lower exercise price was issued. We accounted for the issuance of the Warrants as a derivative. (See Note 10).
The following table summarizes information relating to outstanding and exercisable warrants as of March 31, 2020.
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
Number of
|
|
|
Contractual life
|
|
|
|
|
|
Number of
|
|
|
|
|
Shares
|
|
|
(in years)
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
203,252
|
|
|
|
2.64
|
|
|
$
|
0.62
|
|
|
|
203,252
|
|
|
$
|
0.62
|
|
|
130,146
|
|
|
|
2.65
|
|
|
$
|
0.62
|
|
|
|
130,146
|
|
|
$
|
0.62
|
|
Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the warrants at March 31, 2020 for those warrants for which the quoted market price was in excess of the exercise price (“in-the-money” warrants). The intrinsic value of the warrants as of March 31, 2020 is $225,044.
NOTE 10 – DERIVATIVE LIABILITIES
The Company analyzed the conversion option for derivative accounting consideration under ASC 815, “Derivatives and Hedging, and hedging,” and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.
ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.
The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of March 31, 2020. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note and warrant is estimated using the Black-Scholes valuation model. The following weighted-average assumptions were used in the March 31, 2020 and December 31, 2019:
|
|
Three Months Ended
|
|
|
Year ended
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Expected term
|
|
0.64 - 2.65 years
|
|
|
0.89 - 3.00 years
|
|
Expected average volatility
|
|
229% - 368
|
%
|
|
175% - 272
|
%
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
Risk-free interest rate
|
|
0.20% - 1.47
|
%
|
|
1.55% - 1.62
|
%
|
The following table summarizes the changes in the derivative liabilities during the three months ended March 31, 2020:
Fair Value Measurements Using Significant Observable Inputs (Level 3)
|
|
|
|
|
|
Balance - December 31, 2019
|
|
$
|
356,395
|
|
Addition of new derivatives recognized as debt discounts
|
|
|
245,000
|
|
Addition of new derivatives recognized as loss on derivatives
|
|
|
88,918
|
|
Balance - March 31, 2020
|
|
$
|
690,313
|
|
The following table summarizes the loss on derivative liability included in the income statement for the three months ended March 31, 2020 and 2019, respectively.
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Day one loss due to derivative liabilities on convertible notes
|
|
$
|
88,918
|
|
|
$
|
-
|
|
NOTE 11 - STOCKHOLDERS’ EQUITY
The capitalization of the Company consists of the following classes of capital stock as of March 31, 2020:
Preferred Stock
The Company has authorized 15,000,000 shares of preferred stock with a par value of $0.0001 per share. The Board of Directors are authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. No shares of preferred stock have been issued.
Common Stock
The Company has authorized 1,000,000,000 shares of common stock with a par value of $0.0001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
During the three months ended March 31, 2020, there were no issuances of common stock.
As at March 31, 2020 and December 31, 2019, the Company had 5,209,881 common shares issued and outstanding.
The Company has no stock option plan, warrants or other dilutive securities.
NOTE 12 – RELATED PARTY TRANSACTIONS
Due to related party
As of March 31, 2020 and December 31, 2019, the Company recorded due to related parties as follows. The loan is non-interest bearing and due on demand.
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Loan from directors
|
|
$
|
301,820
|
|
|
$
|
142,480
|
|
Loan from related party
|
|
|
124,543
|
|
|
|
111,101
|
|
|
|
$
|
426,363
|
|
|
$
|
253,581
|
|
NOTE 13 - SEGMENTED INFORMATION
At March 31, 2020, the Company operates in two industry segments, health beverage and oil and gas, and two geographic segments, Malaysia and China, where majority current assets and equipment are located.
Segment assets and liabilities as of March 31, 2020 and December 31, 2019 were as follows:
March 31, 2020
|
|
Holding Company
|
|
|
Oil and gas
|
|
|
Nutritional Services
|
|
|
Total Consolidated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
141,675
|
|
|
$
|
6,350,596
|
|
|
$
|
2,152,216
|
|
|
$
|
8,644,487
|
|
Non-current assets
|
|
|
3,199,594
|
|
|
|
-
|
|
|
|
508,546
|
|
|
|
3,708,140
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
1,033,636
|
|
|
|
151,431
|
|
|
|
1,553,772
|
|
|
|
2,738,839
|
|
Long term liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
17,091
|
|
|
|
17,091
|
|
Net assets
|
|
$
|
2,307,633
|
|
|
$
|
6,199,165
|
|
|
$
|
1,089,899
|
|
|
$
|
9,596,697
|
|
December 31, 2019
|
|
Holding
Company
|
|
|
Oil and
gas
|
|
|
Nutritional
Services
|
|
|
Total
Consolidated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
198,916
|
|
|
$
|
6,413,082
|
|
|
$
|
2,322,629
|
|
|
$
|
8,934,627
|
|
Non-current assets
|
|
|
3,199,594
|
|
|
|
-
|
|
|
|
466,316
|
|
|
|
3,665,910
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
594,891
|
|
|
|
168,739
|
|
|
|
1,577,547
|
|
|
|
2,341,177
|
|
Long term liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
18,035
|
|
|
|
18,035
|
|
Net assets
|
|
$
|
2,803,619
|
|
|
$
|
6,244,343
|
|
|
$
|
1,193,363
|
|
|
$
|
10,241,325
|
|
Segment revenue and net income (loss) for the three months ended March 31, 2020 and 2019 were as follows:
Three Months Ended March 31, 2020
|
|
Holding Company
|
|
|
Oil and gas
|
|
|
Nutritional Services
|
|
|
Total Consolidated
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
882,911
|
|
|
$
|
42,746
|
|
|
$
|
925,657
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
(804,044
|
)
|
|
|
(53,523
|
)
|
|
|
(857,567
|
)
|
Operating expenses
|
|
|
(175,588
|
)
|
|
|
(10,946
|
)
|
|
|
(96,318
|
)
|
|
|
(282,852
|
)
|
Other income (expenses)
|
|
|
(164,891
|
)
|
|
|
-
|
|
|
|
64,799
|
|
|
|
(100,092
|
)
|
Provision for income taxes
|
|
|
-
|
|
|
|
(3,396
|
)
|
|
|
-
|
|
|
|
(3,396
|
)
|
Net income (loss)
|
|
$
|
(340,479
|
)
|
|
$
|
64,525
|
|
|
$
|
(42,296
|
)
|
|
$
|
(318,250
|
)
|
Three Months Ended March 31, 2019
|
|
Holding
Company
|
|
|
Oil
and gas
|
|
|
Nutritional
Services
|
|
|
Total
Consolidated
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
14,664,803
|
|
|
$
|
116,242
|
|
|
$
|
14,781,045
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
(14,118,726
|
)
|
|
|
(50,664
|
)
|
|
|
(14,169,390
|
)
|
Operating expenses
|
|
|
(5,687
|
)
|
|
|
(20,834
|
)
|
|
|
(182,468
|
)
|
|
|
(208,989
|
)
|
Other income
|
|
|
-
|
|
|
|
-
|
|
|
|
134
|
|
|
|
134
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
(131,311
|
)
|
|
|
-
|
|
|
|
(131,311
|
)
|
Net income (loss)
|
|
$
|
(5,687
|
)
|
|
$
|
393,932
|
|
|
$
|
(116,756
|
)
|
|
$
|
271,489
|
|
NOTE 14 - SUBSEQUENT EVENTS
Subsequent to March 31, 2020, the Company issued 149,659 shares of common stock per conversion notices from convertible noteholders.