KPAY KinerjaPay Corporation (CE)

ITEM 1A. RISK FACTORS

An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this report in evaluating our company and its business before purchasing shares of our company’s common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. You could lose all or part of your investment due to any of these risks.

Risks Related to Our Business and Industry

Although our financial statements have been prepared on a going concern basis, we must raise additional capital to fund our operations in order 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 to continue to increase sales and revenue to fund business expenses, and support business expansion through the sale of restricted shares of our Common Stock, and the issuance of convertible notes.

During the year ended December 31, 2018, we raised $500,000 from the private sale of equity securities and received net proceeds of $1,519,000 and $100,000 respectively from issuance of convertible notes and exercise of warrants. On November 2, 2018, the Company filed a registration statement on Form S-1 for the purpose of offering a total of up to 300,000 shares of our 11% Series C Cumulative Redeemable Perpetual Preferred Stock (“Series C Preferred Stock”), at an offering price of $25 per share. If the offering is successful, of which there can be no assurance, the gross proceeds will be $7.5 million. The Company’s intention is to have these shares of Series C Preferred Stock subject to quotation on OTC Market Group’s OTCQB. 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.

Our existing electronic payment service and virtual marketplace businesses were first launched and operated by PT Kinerja in February 2015 and only has a limited operating history. The Company initially utilized KinerjaPay IP and operated KinerjaPay.com through License Agreement entered into with PT Kinerja in December 2015 before acquiring PT Kinerja as a wholly-owned subsidiary in August 2018. As a result of limited operating history of the business, and the Company’s short period of control over the subsidiary, the business may not break-even 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 affected. The e-commerce market in Indonesia is emerging and evolving; we may need an extended period of time to prove our business model in the local market and reach long-term profitability and scalability, during which we will encounter risks and difficulties commonly faced by any early-stage companies in new and rapidly evolving markets.

We will need to raise capital in order to realize our business plan, the failure of which could adversely impact our operations.

We are currently not profitable. For the fiscal year ended December 31, 2018 and as of the date of this report, we assessed our financial condition and concluded that we may need to raise additional capital to fund business operations for the next 12 months from the date of the report. Our   auditor’s report for the year ended December 31, 2018 includes a going concern opinion on the matter. We had a net loss of $8,393,660 for the year ended December 31, 2018. During the same period, cash used in operations was $2,037,691, the working capital deficit and accumulated deficit as of December 31, 2018 were approximately $3,594,000 and $18,145,000, respectively. Management is unable to predict if and when we will be able to generate significant positive cash flow or achieve profitability. Without adequate funding or a significant increase in revenue, we may not be able to resume operations in the normal course of business or expand business development efforts in other strategic initiatives; we may not be able to invest in research and development needed to upgrade technological infrastructure of our electronic payment service, virtual marketplace and gamification features; we may not be able to acquire additional businesses or form more collaborative relationships with third parties to gain market share in the e-commerce market. As of December 31, 2018, we had available cash resources of $150,091.

Overall, we have funded our cash needs from inception through the date hereof with a series of debt and equity transactions, and through cash flow from our revenue-generating operations.

We expect to continue to finance our operations, acquisitions and develop strategic relationships, primarily by issuing equity or convertible debt securities, which could significantly reduce the percentage ownership of our existing stockholders. Furthermore, any newly issued securities could have rights, preferences and privileges senior to those of our existing common stock. Moreover, any issuances by us of equity securities may be at or below the prevailing market price of our common stock and in any event may have a dilutive impact on existing stockholders’ ownership interest, which could cause the market price of our common stock to decline. We may also issue securities in our subsidiaries, and these securities may have rights or privileges senior to those of our common stock.

We may have difficulty obtaining additional funds as and when needed, and we may have to accept terms that would adversely affect our stockholders. In addition, any adverse conditions in the credit and equity markets may adversely affect our ability to raise funds when needed. Any failure to achieve adequate funding will delay our business plan executions and could lead to abandonment of one or more of our initiatives, as well as prevent us from responding to competitive pressures or take advantage of unanticipated acquisition opportunities. Any additional equity financing will likely be dilutive to stockholders, and certain types of equity financing, if available, may involve restrictive covenants or other provisions that would limit how we conduct our business or finance our operations.

We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.

As of December 31, 2018, we had 77 employees. As our marketing plans and business strategies develop, we may need to recruit additional managerial, operational, sales and marketing, financial, IT and other personnel. Future growth will impose significant added responsibilities on members of management, including:

Our future financial performance and our ability to scale our e-commerce business will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities. This lack of long-term experience working together may adversely impact our senior management team’s ability to effectively manage our business and growth.

We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our marketing plans to promote e-commerce business may be delayed, or terminated; our technological integrity of the IT system backing up KPAY, KMALL and KGAMES may be compromised, and we may not be able to ensure the security of our electronic payment service or prevent system malfunction of the virtual marketplace. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all. If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to achieve our marketing, research, development, and expansion goals, and we may face loss and liability in connection with any deficiency in service caused by the lack of capable personnel or errors made by third party contractors.

We depend on key personnel who would be difficult to replace, and our business plans will likely be harmed if we lose their services or cannot hire additional qualified personnel.

Our success depends substantially on the efforts and abilities of our senior management, including Mr. Ng, our CEO and controlling shareholder, and certain key personnel. The competition for qualified management and key personnel is intense. The loss of services of one or more of our key employees, or the inability to hire, train, and retain key personnel, could delay the development and sale of our services and products, disrupt our business, and interfere with our ability to execute our intended business plan.

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 personnel. 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 affected.

Our revenue will be dependent upon acceptance of our e-commerce services and products by Indonesian Consumers. The failure of such acceptance will cause us to curtail or cease operations.

We are uncertain whether our e-commerce services and products including KPAY, KMALL and KGAMES will be accepted by Indonesian consumers and become commercial success. A number of factors may limit the market acceptance of our services and products, including:

We may not be able to realize substantial streams of revenue from our offering of services and products if we lose market share in currently dominant market such as the mobile phone credit voucher business, or fail to increase market share in electronic payment service and virtual marketplace. We may incur significant amount of capital expenditure on research and development to exploit and commercialize KinerjaPay IP but never succeed despite of management’s effort.

Service interruption in PT Kinerja may harm our business operations.

We rely on our wholly-owned subsidiary PT Kinerja to provide substantially all technology support required for electronic payment service and payment processing on our virtual marketplace. If the operations of PT Kinerja are limited, restricted, curtailed or degraded in any way or become unavailable to our users for any reason, our business operations may be materially and adversely affected. PT Kinerja operates all of the servers, manages the 1,500 square-feet data center located in North Sumatra, Indonesia, and provides hosting and maintenance services to all infrastructure systems which we rely on.

PT Kinerja’s operation is subject to a number of risks that could materially and adversely impact its ability to provide payment processing and escrow services to KPAY and KMALL, including:

While all of our operations have disaster recovery plans in place and we plan to carry property and business interruption insurance, preventive measures and insurance coverage may be inadequate. Despite any precautions we undertake, damage from natural disasters, outbreak of war, escalation of hostilities, acts of terrorism, and similar events at PT Kinerja’s computer facilities could result in interruptions in the flow of data to our users. 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 user 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 and increased operating costs.

If glitches and errors interrupt user experience with our services, our Company may attract negative publicity and incur further cost to remedy the situation. We may also be subject to liability if the glitches and malfunctions cause breach of the security of user proprietary information. There is no assurance that technical difficulties will not occur in the normal course of business of PT Kinerja. Resulting business consequences may include decrease in market acceptance of our services and products, loss of trust from our existing customers, diversion of development resources and management attention, damage to our reputation, potential litigation, and increased service costs, any of which would have a material adverse effect upon our business, operating results and financial condition.

Change in Credit card associations rules may harm our business.

Credit card associations rules may change or certain practices could negatively affect our electronic payment service business and, incompliance with these rules may result in our inability to accept credit cards from our customers. 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 or directly access any credit card associations or bank payment networks. We rely on banks, credit card companies, and their respective service providers to process our transactions. We must comply with the operating rules of credit card associations and bank payment networks as they apply to all merchants dealing on our Portal. The association’s member banks set these rules, and the association interprets the rules. Some of those member banks compete with us in providing electronic payment services to customers and businesses. Credit Card Association could issue new operating rules or change interpretations of existing rules which we may find difficult or impossible to comply with, in which case we could lose our ability to provide customers with the option of using credit cards to process payments and thus lose our competitive position to financial institutions and/or other electronic payment solution providers.

We rely on a single bank for payment processing.

Bank Central Asia (“BCA”) currently processes our bank transactions and our credit card transactions. BCA also provides payment processing services to some of our competitors and offers credit card processing services directly to online merchants. If our cooperative relationship with BCA become unsustainable, we may not be able to find alternative bank, credit card companies and other service providers quickly at acceptable terms to prevent any disruption in our service.

Increase in transactions processed by credit card may increase our transaction cost.

We pay significant amount of transaction fees depending on issuing banks’ policies, which ranges from 0% to 3% when payers fund payment transactions using credit cards, nominal fees when payers fund payment transactions by electronic transfer of funds from bank accounts, and no fees when payers fund payment transactions from an existing e-wallet account with us. Users may prefer funding payments by credit card because of certain protection and benefits offered by credit cards, including the ability to dispute and reverse merchant charges, offering cash reward and incentive programs. Our transaction fees may increase significantly which in turn squeeze our profit margin in electronic payment service if increasing number of users switch to using credit card as their preferred method of payment.

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 margin. 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 increase at any time.

We may incur liabilities and losses related to our electronic payment processing business; insurance coverage is expensive and difficult to obtain, we may be exposed to lawsuits and monetary penalties that will harm our business.

Our business exposes us to potential liability risks which are inherent in the e-commerce market. As we will take preventive measures we deem to be appropriate to avoid potential liability claims against us, there can be no assurance that we can avoid exposure to significant liability claims. Liability insurance for electronic payment processing industry is generally expensive. We also 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 business.

The loss of market share in the mobile phone credit top-up business or a change in mobile phone bill payment method could harm our business.

Currently we are one of the few players in Indonesia providing mobile phone credit top-up service to our electronic payment service users. The business contributes a significant amount of revenue to our Company. During the year ended December 31, 2018, revenue generated from mobile phone credit top-up service amounts to $1,412,303. There can be no assurance that customers will continue to favor our service if other competitors offer more affordable and convenient payment options. If mobile service providers offer payment options using credit cards or bank accounts directly, our service may be obsolete and cause material adverse effect on our business, operating results and financial condition.

We may be unable to compete successfully against current and future competitors.

The e-commerce market in Indonesia has become very active only during the past several years with a few major companies that were funded by big institutional investors. Some current and potential competitors have longer operating histories, larger customer bases and greater brand recognition in other business and Internet sectors than we do. To a lesser extent, there are local and a few regional companies that have entered the e-commerce market. The products being offered in the marketplace have typically been physical items across few different categories such as electronics and gadgetry, fashion items and household goods. These e-commerce entities typically are charging transaction fees of from 2% to 5% per transaction.

Customer complaints or negative publicity about our product and customer service could harm our business.

Customer complaints or negative publicity about our products and services could tarnish our reputation and decrease customer confidence. Customer complaints may stem from system malfunction, server shutdown, breach of privacy, fraud, disputes around online transactions, and inadequate customer service towards issues and disputes. 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 adversely impact our business. We expect to employ more customer service and sales representatives at PT Kinerja. 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 in our business.

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. With limited experience, we may mishandle a single large transaction or encounter technical difficulty in surging volume of transactions. Any failure to maintain controls over large amount of customer funds can hurt consumer confidence and drive away large merchants.

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 and user disputes, our losses would increase, and our business would be materially adversely affected.

We face significant risks of losses and liabilities to fraud and disputes between senders and recipients, including:

Illegitimate transactions can expose us to governmental and regulatory sanctions as well as potentially prevent us from satisfying our contractual obligations to our third party partners, which may cause us to be in breach of our obligations. The highly automated nature of our payments services may make us a target for illegal or improper uses, including fraudulent or illegal sales of goods or services such as alcoholic beverages, tobacco products, prescription medications, controlled substances, pirated software and intellectual properties, illegal online games, illegal activities such as money laundering, bank fraud, child pornography trafficking, online securities fraud, and terrorist financing.

In the event that a billing dispute between a buyer and a seller is not resolved in favor of the seller, including in situations where the seller engaged in fraud, the transaction is typically “charged back” to the seller and the purchase price is credited or otherwise refunded to the buyer. If we are unable to collect chargebacks or refunds from the seller’s account, or if the seller refuses to or is unable to reimburse us for chargebacks or refunds due to closure, bankruptcy, or other reasons, we may bear the loss for the amounts paid to the buyer. If our chargeback rate becomes excessive, credit card associations may require us to pay fines and could terminate our ability to accept their cards for payments.

In configuring our payments services, we face an inherent trade-off between security and customer convenience. 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 fraudulent transactions. We expect that technically knowledgeable criminals will continue to attempt to circumvent our anti-fraud systems. Our current business and anticipated growth will continue to place significant demands on our risk management and compliance efforts, and we will need to continue developing and improving our risk management infrastructure, techniques, and processes. If our risk management policies and processes contain errors or are otherwise ineffective, we may suffer large financial losses, we may be subject to civil and criminal liability, and our business may be materially and adversely affected.

We have entered into collaborations and may form or seek collaborations or strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.

We may form or seek strategic alliances, create joint ventures or collaborations, or enter into additional licensing arrangements with third parties that we believe will complement or augment our development efforts with respect to our e-commerce business and any future products or services that we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners for which the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership because our e-commerce business may be deemed to be too early stage for collaborative effort and third parties may not view our business model as having the requisite potential to demonstrate security and scalability. Further, collaborations involving our services and products, are subject to numerous risks, which may include the following:

As a result, if we enter into collaboration agreements and strategic partnerships or license our products or businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Any delays in entering into new collaborations or strategic partnership agreements or any unexpected termination of the existing relationships could cause loss of revenue streams and user base in the short term, and would harm our business prospects, financial condition, and results of operations.

We have established current business model by acquisitions of requisite technology infrastructure and intellectual properties; future acquisitions may not be successful or may not realize the long-term performance we expect from business integration.

Corporate and product acquisition is an important part of our growth strategy. We may not be able to identify suitable targets given the relatively narrow scope of our business. We may not be able to close an acquisition or lose to other competitors due to inadequate capital funding. If we make strategic acquisitions to expand our existing business lines or develop new business services or products, the target may be loss-making; we may incur significant operating expenses and capital expenditure which will adversely impact our financial results. The acquired business may compete directly or indirectly with one or more of our existing strategic partners or collaborators, thus negatively impacting other existing revenue streams. There is no assurance that we will be able to realize the expected benefits of synergies and growth opportunities in connection with these acquisitions. Acquisition could be dilutive to earnings, or in the event of acquisitions made through the issuance of commons stocks, may be dilutive to our existing shareholders.

New lines of business or new products and services may subject us to additional risks.

From time to time, we may implement new lines of business or offer new services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service.

In forming PT Kinerja SP, a new wholly-owned subsidiary in an effort to develop our KFUND brand and tap into peer-to-peer micro-lending market, we anticipate the launching cost will be approximately $175,000. There is no assurance that the business will materialize in the near future. Failure to successfully launch the business, integrate it into our existing operations and manage risks related to the new business could have a material adverse effect on our business, results of operations and financial condition.

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services, and brand.

Our proprietary technology, domain name and licenses and other intellectual property rights are critical to our success. We rely on, and expect to continue to rely on, existing KinerjaPay IP backed by PT Kinerja, any proprietary technology developed internally and other intellectual property rights acquired through various third party collaborative relationships to build our continuing business and brand. However, various events outside of our control may pose a threat to our intellectual property rights, as well as to our products and services. Effective protection of our proprietary technology, domain names, and licenses is expensive and difficult to maintain, both in terms of application and maintenance costs, as well as the costs of defending and enforcing those rights. Our intellectual property rights may be infringed, misappropriated, or challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. Our agreements with employees and third parties that place restrictions on the use and disclosure of any intellectual property rights may be insufficient or may be breached, or we may not enter into sufficient agreements with such individuals in the first instance, in either case potentially resulting in the unauthorized use or disclosure of our proprietary technology and other intellectual property, including to our competitors, which could cause us to lose any competitive advantage resulting from this intellectual property.

Cyber-attacks or other security breaches could have a material adverse effect on our business.

In the normal course of business, we collect, process and store certain personal and other sensitive information from users of our electronic payment service and virtual marketplace, which makes it an attractive target and potentially vulnerable to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. While we have taken steps to protect the confidential information that we have access to, our security measures could be breached. Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or other unauthorized access to our platform could cause confidential borrower and lender information to be stolen and used for criminal purposes. Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with borrowers and lenders could be severely damages, we could incur significant liability and our business and operations could be adversely affected.

We face increasing competition in the Indonesian e-commerce market.

We compete in the Indonesian market, which is characterized by vigorous competition, changing technology, changing customer needs, evolving industry standards, and frequent introductions of new products and services. We expect competition to intensify in the future as existing and new competitors introduce new services or enhance existing services. We compete against many companies to attract customers, and some of these companies have greater financial resources and substantially larger bases of customers than we do, which may provide them with significant competitive advantages. These companies may devote greater resources to the development, promotion, and sale of products and services, and they may offer lower prices or more effectively introduce their own innovative products and services that adversely impact our growth. Mergers and acquisitions by these companies may lead to even larger competitors with more resources. We also expect new entrants to offer competitive products and services. Certain merchants have long-standing exclusive, or nearly exclusive, relationships with our competitors to accept payment cards and other services that we offer. These relationships may make it difficult or cost-prohibitive for us to conduct material amounts of business with them. Competing services tied to established brands may engender greater confidence in the safety and efficacy of their services. If we are unable to differentiate ourselves from and successfully compete with our competitors, our business will be materially and adversely affected. We may, from time to time, make adjustments to pricing, service scope or marketing strategies that are unwelcomed by our users as we respond to changing competitive landscape in the market, which could reduce activity on our Portal and harm our business.

Our notable competitors in the electronic payment services sector include payment processors such as Doku and Veritrans. Our notable competitors in the virtual marketplace sector include Tokopedia, Bukalapak, Shopee, Lazada, Zalora, OLX, and Blibli.

We have limited or no experience competing in certain international markets, where we hope to compete, beyond Indonesia.

We intend to expand our business in selected international markets, initially in the Southeast Asian region. We may face challenges in expanding our international and cross-border businesses and operations which may expose us to greater political, intellectual property, regulatory, exchange rate fluctuation and other risks. We will face risks associated with expanding into markets in which we have limited or no experience, in which we may be less well-known or have fewer available local resources and in which we may need to localize our business practices, culture and operations. We may be unable to attract a sufficient number of customers and other participants, fail to anticipate competitive conditions or face difficulties in operating effectively in these new markets. We may also face protectionist policies that could, among other things, hinder our ability to execute our business strategies and put us at a competitive disadvantage relative to domestic companies in other jurisdictions. The expansion of our international and cross-border businesses will also expose us to risks inherent in operating businesses globally, including:

Our business is subject to extensive regulation and oversight in a variety of areas, all of which are subject to change and uncertain interpretation.

We are currently subject to Indonesian electronic fund transfer and money laundering regulations in our capacity as a money transfer agent. As we seek to build a trusted and secure platform for e-commerce, and as we expand our network of users and facilitate their transactions and interactions with one another or otherwise evolve our products and services, we will increasingly be subject to laws and regulations relating to the payment processing, collection, use, retention, privacy, security, and transfer of information, including the personally identifiable information of our employees and users. In the future, we may be further subject to:

If we are found to be engaged in any unauthorized banking business, we may be subject to monetary penalties and be required to cease business. We may not be able to respond quickly or effectively to regulatory, legislative, and other developments, and these changes may in turn impair our ability to offer our existing or planned features, products, and services and/or increase our cost of doing business. In addition, if our practices are not consistent or viewed as not consistent with legal and regulatory requirements, including changes in laws, regulations, and industry standards or new interpretations or applications of existing laws, regulations, and standards, we may become subject to audits, inquiries, adverse media coverage, investigations, or criminal or civil sanctions, all of which may have an adverse effect on our reputation, business, results of operations, and financial condition.

It may be difficult to enforce a U.S. judgment against us, our officers and directors and the foreign persons named in this Annual Report on Form 10-K in the United States or in foreign countries, or to assert U.S. securities laws claims in foreign countries or serve process on our officers and directors and these experts.

While we are incorporated in the State of Delaware, currently a majority of our directors and executive officers are not residents of the United States, and the foreign persons named in this Annual Report on Form 10-K are located in Indonesia. Other than our cash assets held in our U.S. bank accounts, all of our operating assets are located outside the United States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability provisions of the U.S. federal securities laws against us or any of these persons in a U.S. or foreign court, or to effect service of process upon these persons in the United States. Additionally, it may be difficult for an investor, or any other person or entity, to assert U.S. securities law claims in original actions instituted in foreign countries in which we operate. Foreign courts may refuse to hear a claim based on a violation of U.S. securities laws on the grounds that foreign countries are not necessary the most appropriate forum in which to bring such a claim. Even if a foreign court agrees to hear a claim, it may determine that foreign law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by foreign countries law. There is little binding case law in foreign countries addressing the matters described above.

Our reported financial statements and results may be materially and adversely affected by changes in accounting principles generally accepted in the United States.

Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board (FASB), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial statements and results and could materially and adversely affect the transactions completed before the announcement of a change. Additionally, the adoption of new or revised accounting principles may require that we make significant changes to our systems, processes, and controls. Changes in any new standards may result in materially different financial statements and results and may require that we change how we process, analyze, and report financial information and that we change financial reporting controls.

Servicing our Notes may require a significant amount of cash, and we may not have sufficient cash or the ability to raise the funds necessary to repay the Notes at maturity.

In consideration of the acquisition of PT Kinerja Indonesia in August 2018, the Company issued a Promissory Note of $1,200,000 with interest of 6.00% per annum. The note is due twenty-four months from August 31, 2018. Our ability to repay full principal with interest upon note maturity will depend on our ability to generate sufficient cash flow from operations and equity financing to fulfill debt repayment. Our inability to repay the note in full at maturity will lead to default and we may be responsible for additional cost related to collection and attorney fee. The Company currently runs working capital deficit as of December 31, 2018, we may not have sufficient funds to repay the indebtedness at maturity.

The conversion of some or all of our currently outstanding convertible notes in shares of our common stock will dilute the ownership interests of existing stockholders.

The conversion of some or all of our currently outstanding convertible notes in shares of our common stock will dilute the ownership interests of existing stockholders. As of December 31, 2018, we had $1,304,853 outstanding notes convertible into up to our common stock based on then applicable conversion prices, which are subject to adjustment based upon applicable discounts based upon the closing market price of our common stock on the respective dates of conversion. Each holder of the notes has agreed to a 4.99% beneficial ownership conversion limitation (subject to certain noteholders’ ability to increase such limitation to 9.99% upon 60 days’ notice to us), and each note may not be converted during the first six-month period from the date of issuance. Any sales in the public market of the common stock issuable upon such conversion or any anticipated conversion of our convertible notes into shares of our common stock could adversely affect prevailing market prices of our common stock.

The accounting method for convertible debt securities that may be settled in cash could have a material adverse effect on our reported financial results.

Under Financial Accounting Standards Board Accounting Standards Codification 470-20, Debt with Conversion and Other Options (“ASC 470-20”), we are required to separately account for the liability and equity components of our convertible notes because they may be settled entirely or partially in cash upon conversion in a manner that reflects our economic interest cost. The effect of ASC 470-20 on the accounting for our convertible notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ deficit on our consolidated balance sheet, and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of our convertible notes. As a result, we will be required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the discounted carrying value of our convertible debt or notes to their face amount over the terms. We will report higher net loss in our financial results in part because ASC 470-20 will require interest to include both the current period’s amortization of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of our convertible notes.

In addition, because our convertible notes may be settled entirely or partly in cash, under certain circumstances, these are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion are not included in the calculation of diluted earnings per share except to the extent that the conversion value exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of our convertible notes, then our diluted earnings per share would be adversely affected.

Risks Related to Our Common Stock

If we issue additional shares in the future, it will result in the dilution of our existing stockholders.

Our articles of incorporation authorize the issuance of up to 500,000,000 shares of our common stock with a par value of $0.0001 per share. As of April 22, 2019, we have approximately 236,931,976 shares of Common Stock available for issuance. Our Board of Directors may choose to issue some or all of such shares for business acquisition and for funding of operations without stockholder approval. The issuance of any such shares will reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current stockholders. Further, such issuance may result in a change of control of our company.

Our articles of incorporation authorizes the issuance of up to 10,000,000 shares of our preferred stock with a par value of $0.0001 per share. 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. As of April 22, 2019, 400,000 shares of Series A Convertible Preferred Shares issued were fully converted to 1,666,667 shares of Common Stock; 500,000 shares of Series B Preferred Shares was issued and outstanding. On November 2, 2018, we filed a Registration Statement on Form S-1 for the offering of up to 300,000 shares of Series C Preferred Stock at an offering price of $25.00 per share. The Registration Statement is pending, and we will file an amendment in response to limited SEC comments as soon as practicable after filing this Form 10-K.

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 (the “Securities Act”), 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.

Mr. Ng, our Controlling Shareholder and Chairman controls approximately 54.47% 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 22, 2019, Mr. Ng, our controlling stockholder, executive officer and director has voting control of 54.47% of our voting capital stock, consisting of 1,266,667 shares of our Common Stock (of which 400,000 shares of Common Stock pledged to secure loan to Mr. Ng) and 500,000 shares of Series B Preferred Stock entitled to a number of votes equal to 51% of all matters subject to vote by the holders of Common Stock. Subject to any fiduciary duties owed to our other stockholders under Delaware law, the stockholder 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 others. For example, these stockholders may support proposals and actions with which others 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. Reference is made to the disclosure under “Description of Our Capital Stock - Series B Preferred Stock” below.

We have never paid cash dividends and do not intend to pay dividends on any investments in the shares of stock of our Company in the foreseeable future.

We have never paid any cash dividends, and currently do not intend to pay any dividends for the foreseeable future. The Board of Directors has not directed the payment of any dividends and does not anticipate paying dividends on the shares for the foreseeable future and intends to retain any future earnings to the extent necessary to develop and expand our business. Payment of cash dividends, if any, will depend, among other factors, on our earnings, capital requirements, and the general operating and financial condition, and will be subject to legal limitations on the payment of dividends out of paid-in capital. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock’s price. This may never happen, and investors may lose all of their investment in our company.

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 (the “SEC”) 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 exempted, the rules require:

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

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:

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 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.

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 $0.30 to a high of $2.74 during the last three fiscal years. Many factors could impact future price of our common shares, including:

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.

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.

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.

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:

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.

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 Delaware General Corporation Law (“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.