Item
1. Business.
As
used in this Annual Report on Form 10-K (this “Report”), references to the “Company,” the “Registrant,”
“we,” “our,” “us” or “KinerjaPay Corp”, unless the context otherwise indicates.
Forward-Looking
Statements
This
Report contains forward-looking statements. For this purpose, any statements contained in this Report that are not statements
of historical fact may be deemed to be forward-looking statements. Forward-looking information includes statements relating to
future actions, prospective products, future performance or results of current or anticipated products, sales and marketing efforts,
costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business
strategies, cost savings, objectives of management, and other matters. You can identify forward-looking statements by those that
are not historical in nature, particularly those that use terminology such as “may,” “will,” “should,”
“expects,” “anticipates,” “contemplates,” “estimates,” “believes,”
“plans,” “projected,” “predicts,” “potential,” or “continue” or the
negative of these similar terms.
Corporate
Developments Since Inception
The
Company was incorporated in Delaware on February 12, 2010 under the name Solarflex Corp. for the purpose of developing, manufacturing
and selling a solar photovoltaic element, a device that converts light into electrical flow (also known as a photovoltaic cell)
based on certain proprietary technology to enable an increase in solar energy conversion and provide energy at a lower cost.
Its
business plan was to use the Equipment to: (i) develop a working prototype of its photovoltaic cell for testing and evaluation;
(ii) enter into arrangements with third parties for a manufacturing process to produce the photovoltaic elements for sale to solar
panel producers; and (iii) enter into distribution agreements for the commercial sale of our products.
From
the date of the Asset Purchase Agreement through mid 2015, the Equipment was not in working order, nor was there any estimated
timeline for our ability to use the Equipment to manufacture of photovoltaic cells exploiting our solar panel technology. As a
result, it is determined that it was not in the best interests of the Company or its shareholders to continue to devote resources
towards efforts to commercially exploit its photovoltaic cell technology through the use of the Equipment or otherwise.
The
Company did not generate any revenues from the sale of any solar photovoltaic element, nor did we successfully manufacturer or
construct a working prototype.
On
November 10, 2015, the Company entered into an Asset Purchase Rescission Agreement with IEC (the “Rescission Agreement”)
pursuant to which: (i) we transferred and assigned all right, title and interest in the Equipment back to IEC; (ii) IEC returned
333,333 of the 2,000,000 Shares back to the Company; (iii) IEC transferred and assigned the remaining 1,666,667 Shares to Mr.
Edwin Witarsa Ng, a resident of Indonesia, who was appointed as Chairman of our Board of Directors, in consideration for a cash
payment by Mr. Ng of $20,000 to IEC. The rationale for the Rescission Agreement was based upon the Registrant’s determination
not to pursue the use and commercial exploitation of the Equipment in furtherance of its former solar energy business plan.
Recent
Developments
On
December 1, 2015, the Company entered into a license agreement (the “License Agreement”) with PT Kinerja Indonesia,
an entity organized under the laws of Indonesia and controlled by Mr. Ng (“PT Kinerja”), for an exclusive, world-wide
license to use and commercially exploit certain technology and intellectual property (the “KinerjaPay IP”) and its
website, KinerjaPay.com. Pursuant to the License Agreement, the Company was granted the exclusive, world-wide rights to the KinerjaPay
IP, an e-commerce platform that provides users with the convenience of e-wallet service for bill transfer and online shopping
having advanced functionality features, among others, and is among the first portals to allow users the convenience to top-up
phone credit.
In
furtherance of its business plan, The Company agreed in the License Agreement to: (i) change the name of the Company to KinerjaPay
Corp.; (ii) implement a reverse split of the Company’s shares of common stock on a one-for-thirty (1:30) basis; and (iii)
raise equity capital in the minimum offering amount of $500,000 and the maximum offering amount of $2,500,000 through the offering
of units at a price of $0.50, each Unit, each consisting of 1 share of common stock and 1 class A warrant exercisable for a period
of 24 months to purchase 1 additional share of common stock at $1.00. The Unit Offering is only being made to “accredited
investors” who are not U.S. Persons pursuant to Regulation S promulgated by the SEC under the Securities Act of 1933, as
amended (the “Act”). On January 20, 2016, the Company closed the Minimum Offering after it received subscription proceeds
in excess of $500,000. To date, the Company has raised $1,105,000 pursuant to the Unit Offering, which is continuing.
On
March 10, 2016, the Company’s name changed to KinerjaPay Corp. and its one-for-thirty (1:30) reverse stock split became
effective.
On
August 31, 2016, the Registrant and its wholly-owned Indonesian subsidiary, PT. Kinerja Pay Indonesia, entered into
a Cooperation and Service Agreement with Black Grace Investment Ltd, organized under the laws of the British Virgin Island (“Black
Grace”) and its affiliate, PT. Pay Secure Online Indonesia, organized under the laws of Indonesia. Pursuant to this Agreement,
PT/ PaySec granted PT. Kinerja Pay the right to use the PT. PaySec’s payment services (“Payment Services”) under
a revenue sharing arrangement. As consideration for the use of the Payment Services, the Registrant agreed to issue 200,000 restricted
shares to Black Grace or its designee. As further consideration for the use of the Payment Services, the Parties agreed that to
share the net revenues generated from the use of the Payment Services and e-wallet and payment gateway technology on a 50/50 basis.
On September 8, 2016, the Company entered
into a second Cooperation and Service Agreement with PT. Indonesia EnamDua, organized under the laws of Indonesia (“PT.IED”),
which owns 62hall.co.id, an integrated wholeseller and online shop that sells online a wide range of products and services,
an online search engine and extensive customer services. Pursuant to this Agreement, the parties agreed to share resources in
connection with the development of PT, Kinerja Pay’s new e-commerce portal, KinerjaMall.com. In consideration for PT.IED’s services,
the parties agreed to allocate the profits, defined as an item’s selling price on KinerjaMall.com minus the cost price of the
item sold 90% to the Company and 10% to PT.IED. The Company has not generated revenues as a result of this Corporation and Service
Agreement.
At
the end of March 2017, we started, in cooperation with third parties, providing monthly billing services to PLN
customers which could serve potentially 10 millions accounts nation-wide. During April 2017, we expanded our payment channel
by cooperation with large state-companies in Indonesia such as PT Pos Indonesia and PT Pegadaian, as well as leading multi
finance companies including Columbia Cash & Credit, Mega Auto Finance and WOM Finance. In addition, beginning of
May 2017, we also extended our payment channel to include minimart chains such as Indomaret and Alfamart, as well as PT 24
Jam Online. We believe that by expanding our network of payment channels, we will serve unbanked Indonesian customers
and businesses to shop and pay bills quicker, safer, and more conveniently.
At
the end of May 2017, David Weild, former Vice Chairman of NASDAQ, joined KinerjaPay’s Advisory Board. In July 2017, the
Company also recruited as CEO for its wholly-owns subsidiary PT KinerjaPay Mr. Deddy Oktomeo who will manage the company’s
growth of its e-commerce. Along with these managerial changes, the Company launchedseveral new initiatives including the expansion
of our e-commerce platform by launching KinerjaGames, and secured the partnership with leading Indonesian charity institution
supporting local social welfare, among others Baznas, Rumah Zakat and Dompet Dhuafa.
At
the end of July 2017, the Company entered into a Cooperation and Service Agreement with Ace Legends, Pte. Ltd, organized under
the laws of Singapore (“ACE”). Pursuant to the agreement, ACE, a game developer, will develop games for the Company.
As of December 31, 2017, the gaming system is still in its development stage.
During
the third quarter of 2017, the Company continued developing its digital payment and e-commerce platform. In October 2017,
we entered into a partnership with a global smartphone-enabled ‘Ride Hailing’ service, Uber Technologies, Inc.
These partnerships are expected to generate new users and increase sales transactions on our KinerjaPay platform.
On
November 3, 2017, the Company signed an investment agreement with Tangiers Global, LLC (“Tangiers”), of which Tangiers
shall invest up to $10,000,000 by purchasing the Company’s Common Stock.
Our
E-Commerce Portal KinerjaPay.com
Indonesia
represents one of the largest opportunities in the e-commerce sector. It is the fourth largest country in the world in term
of the population size with GDP just slightly under $1 trillion, yet its citizens are largely underserved by the banking
industry and less than 10% have credit cards. The Company believes to have has found a way to bridge this gap, for both
consumers and businesses.
The
Company’s principal products and services are: (i) electronic payment service (the “EPS”); and (ii) virtual
marketplace (the “Marketplace”) both of which are available on its portal under the domain name KinerjaPay.com (the
“Portal”). The Android-based mobile app does not only serve as an extension of desktop or laptop access to
the website, but has additional in-app services that cater to mobile users, such as social engagement and digital entertainment
(the “Mobile App”). The Company believe that in combining its EPS function (“PAY”) with the ability to
buy and sell products via its virtual marketplace (“Buy”) enhanced by a gamification component (“Play”)
its customers and merchants are enticed to return more often and increase their loyalty to its services.
From
December 1, 2015, the date KinerjaPay Corp acquired the exclusive license, until April 11, 2016, the date that its Indonesian
subsidiary was formed and we opened a bank account to conduct its operations in Indonesia, weengaged in capital raising activities
to fund our e-commerce business operations, but generated no revenues. While the Company began operating activities in May 2016,
it did not have in place the infrastructure to conduct billing and collections. The Company began generating revenues from sales
of its Portal services in 2017.
On
August 22, 2016, the Registrant’s wholly-owned Indonesian subsidiary, PT Kinerja Pay Indonesia, entered into an addendum
(the “Addendum”), effective as of July 1, 2016, between the Registrant and its subsidiary, on the one hand, and PT.
Kinerja Indonesia. Pursuant to the Addendum, the Registrant’s subsidiary agreed to utilize certain payment services of PT.
Kinerja Indonesia as described below. The reason for entering into the Addendum was due to the fact that the PT. Kinerja Indonesia
has already successfully established the requisite infrastructure for billing, collections, payments and related payment services
(the “Payment Services”) in the furtherance of its various businesses, including its e-Wallet and Web Portal business
that were the subject of the License Agreement between the Registrant and PT Kinerja Indonesia dated December 1, 2015. In lieu
of the Company devoting the time, efforts and resources to develop its own Payment Services, which the Registrant recently determined
would not only delay its ability to timely commence billing and collections as well as be unnecessarily duplicative of the Payment
Service infrastructure in place at PT Kinerja, this would also require incurring costs in hiring and maintaining additional personnel.
Pursuant
to the terms of the Addendum, in consideration for the payment of an administrative fee of $200 per month, PT Kinerja Indonesia,
our licensor, shall: (i) collect payments from the users of the licensed web portal, Kinerjapay.com, including cash deposits,
bank transfers, debit cards payments, credit cards payments, and other forms of payment for transactions related to purchases
or payments made for the use of PT. Kinerja licensed web portal; and (ii) distribute the appropriate payments to vendors, less
the commissions chargeable for all transactions generated by the users while using the licensed web portal, kinerjappay.com, following
receipt of payments made by the vendors, which commissions shall then be paid to our subsidiary, PT. Kinerja Pay Indonesia.
We
recognize our revenuespursuant to ASC 605at net revenues since we are an agent and not a principal to the various transactions
with other financial institutions and or technology companies through our leased portal. We have eight different revenue streams.
Gross revenue from the various steams were as follows: Mobile phone prepaid $2,291,067, Kinerja Store $463, Payment Gateway Services
$9, Instant Pay Fees Collection $68,431, Marketplace Merchant Partners $203, Marketplace Merchant Users $11, Remittance $29,180,
and Unipin $3,179. Gross cost of goods sold exceeded gross revenues for the year ended December 31, 2017. We recognize revenue
when the four criteria of revenue have been met which includes:(1) Persuasive evidence of an arrangement, (2) services and or
delivery being rendered, (3) the price is fixed or determinable and (4) collectability is reasonably assured.
Our
Electronic Payment Service
Through
our Portal and Mobile App, operated by PT Kinerja Indonesia, we will provide EPS to consumers and merchants. Our EPS provides
an affordable, secure and reliable method to consumers and merchants, as well as friends and family, to pay and transfer
money using electronic devices (e.g., mobile, tablets and personal computers). In addition, consumers, merchants and
businesses of all sizes can accept payments from merchant websites and mobile devices. Our EPS service enables consumers to
conveniently pay utility bills, phone bills, credit card payments and add credit to their cell phone accounts. The Company
developed a proprietary digital e-wallet software, which provides users with the ability to complete EPS transactions safely
and conveniently. The e-wallet acts as an escrow account as payments will only be released to the seller once the buyer has
received the product.
Based
upon published information, we believe that at present, approximately 35% of the Indonesian population has no bank account and
these persons represent a significant target market of potential users for our EPS.
Based
on data from Alexa.com, a website analytics provider, customers for our Portal spend an average of 30 minutes on our Portal,
which we believe is partly due to our unique gamification features. The Company believe this opens potentially significant
opportunities for additional monetization and enhanced revenues. The Company plans to expand our Portal functionality to
offer advertising packages to our merchants and partners. The Company also intends to engage mobile publishers such as Google
and Facebook to use our Portal as a channel for advertising.
The
Company provides its customers with the option of using their account at our Portal to both purchase and be paid for goods,
as well as transfer and withdraw funds. Our business plan is to provide our customers with the capability of funding a
purchase using a bank account, a credit or debit card account. We also plan to offer merchants an end-to-end payments
solution that provides authorization and settlement capabilities. Our services provide merchants with the ability to connect
with their customers and manage and hopefully minimize their collection risk. For the safety of our customers, we have
introduced an application-generated token to confirm outgoing payments for more secure transactions.
Our
Virtual Marketplace
We launched our virtual marketplace
during 2017 as a free platform for buyers to explore and discover products and sellers to establish a low-cost online presence
for their product. We link buyers and sellers of various products from our local Indonesian markets. We organized and designed
our Marketplace using our proprietary software to enable sellers to offer their products for sale and buyers to find and buy it
virtually at a great value anytime. Our Marketplace includes a “Max 3-Steps” concept to streamline the shopping experience.
Users just choose an item, check out and make a payment using an e-wallet function aimed accelerating the check out procedure
and making the shopping experience more convenient.
We
believe that our Marketplace will provide our customers with a safe and convenient way to purchase whatever they are looking for
in their local vicinity or nationwide.
Users
may access our Marketplace anytime, anywhere through traditional devices such as desktop and laptop computers or from devices
such as Smartphones and tablets using our Mobile App or our mobile-optimized website.
In
addition to a typical online marketplace that offers a broad range of products, we try to differentiate ourselves by focusing
on computer related products as well as mobile phone prepaid vouchers utilized by approximately 98% of Indonesia mobile users
representing a prepaid voucher market size of approximately US$4B, according to research conducted by AdPlus, a leading digital
media network in Indonesia.
Our
EPS service and Marketplace combine enhanced functionality and gamification, which incorporates game-design elements and game
principles in non-game contexts for the purpose of keeping our users more often and longer engaged with our services.
We
plan to expand our Marketplace to include more items and more creative ways to attract customers in purchasing and exchanging
their goods. More proprietary games will be offered with more attractive bonuses that can later be used to redeem in our Marketplace.
We believe that our gamification component will entice consumers to return and increase their loyalty to our Portal and Marketplace.
Our
Market Opportunity in Indonesia
Indonesia,
the world’s fourth most-populous country, having a population estimated to be 266 million people, is rapidly becoming the
major economic power in the Southeast Asia region. Over 50% of its population is below the age of 30 and as a result, we believe
that the young Indonesian population is highly adaptive to new technology. Indonesia’s e-commerce growth rate has built-in
factors such as fast increase in year-to-year internet users and rapidly growing discretionary spending among the middle class.
In addition, the rise of inexpensive Smartphones and tablets is rapidly broadening internet access and pushing the Indonesian
e-commerce market toward a critical point in terms of scale and profitability, in spite of significant challenges due to poor
infrastructure and payment systems.
We
believe that due to the aforementioned factors, among others, Indonesia will experience significant growth in e-commerce transactions.
The number of internet users is excepted to surpass 125 million by 2017 and Smartphone ownership is to approximately 40 to 50%
in the same period.
The
e-commerce market in Indonesia, where our business operates and where our initial marketing efforts will be focused, is reported
to be the fastest growing in the Southeast Asian region. According to a joint report released by idEA, Google Indonesia, and Taylor
Nelson Sofres (TNS),
We
believe that Indonesia provides many opportunities for e-commerce business as compared to other emerging Asian economies. At present,
this archipelago nation’s e-market is projected to reach $130 billion by 2020 only surpassed by China and India. With an
estimated annual growth rate of 50% in e-commerce and strong mobile-first initiatives, retailers have a unique opportunity in
Indonesia to focus on developing truly mobile platforms to help facilitating e-commerce market growth, particularly in the Consumer Packaged
Goods (CPGs) sectors.
Indonesia’s current e-commerce
market is similar to that of early-stage Chinese e-commerce market, with a large pool of entrepreneurial sellers providing goods
to be purchased based strongly on social media recommendations. Similarly, e-commerce in Indonesia also mimics the early-stage
US e-commerce market, which was marked by customers who are anxious to trust online payments and retailers. We believe that Indonesia’s
e-commerce market is enormous potentials by combining a hybrid of opportunities as found in the US and China’s e-commerce
economies, which we believe will propel
Indonesia’s
e-commerce market onto the global stage.
Sales
and Marketing
Our
primary marketing focus will be to emphasize our key differentiator which we believe is combining our EPS option PAY with the
ability to buy and sell products via our Marketplace BUY enhanced by a gamification component PLAY, which entices consumers to
return and increase their loyalty to our Portal and Marketplace.
We
expect to commence a nationwide marketing campaign to promote the Kinerjapay.com Portal and Marketplace to Indonesian consumers
and merchants during the second quarter of 2017. We intend to use marketing techniques including advertising on Facebook®,
YouTube®, Twitter®, AdWords®, AdChoices® and Instagram®. Early January 2017, the holiday campaigns held by
KinerjaPay was able to help securing a milestone of reaching 100,000 users.
We
developed a referral program called MGM - Member Get Member, which is aimed at incentivizing current members to refer our platform
to friends and family. In addition, we used venues such as online business workshops, promotional stands in shopping malls to
acquire new merchants.
The
Company will focus its sales and marketing efforts in the following areas:
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KPAY:
on payment gateway, electronic wallet and payment with QR Code.
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KMALL:
on e-commerce marketplace especially on B2B and C2C.
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KGAMES:
on game portal promoting local game developer.
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Proprietary
Technology, Domain Name and Licenses
We
entered into a License Agreement with PT Kinerja Indonesia, a company incorporated under the laws of Indonesia and controlled
by Mr. Ng, our CEO and controlling shareholder.
Pursuant
to the License Agreement, we have been granted the license on an exclusive, world-wide basis to commercially exploit the KinerjaPay
IP and its e-commerce payment portal website, www.KinerjaPay.com, which contains application codes, infrastructure architecture,
infrastructure design and processes/sub-processes. Specifically, our proprietary technologies and intellectual property includes:
integrated proprietary payment solutions, built-in marketplace and gamification concepts and modules. The License is in perpetuity
but may be terminated by either the Company or PT Kinerja Indonesia if there is a material breach of any representation, warranty,
covenant or agreement and the other party is not in material breach.
The
success of our business is depended on the effectiveness of this License Agreement. We are a licensee and expect to be a licensee
in the future.
We
will endeavor to protect our propriety technology, domain name, customer base and trade secrets to the extent reasonably and commercially
practicable because such protection may be considered as critical to our success. To that end, we will rely principally on the
laws in Indonesia and, to a lesser extent on available international protection, if any.
We
plan to register our domain name both domestically and internationally, but have not yet done so, nor can there be any assurance
that we will be able to do so or that such registration will be adequate. As we expand our markets, we may seek to further protect
our proprietary rights, to the extent that they may exist, a process that can be both expensive and time consuming and may not
be successful. If we are unable to register or protect our domain name, we could be adversely affected in any jurisdiction in
which our trademarks and/or domain names are not registered or protected.
From
time to time, third parties may claim that we have infringed their intellectual property rights. The listing or sale by our users
of items that allegedly infringe the intellectual property rights of rights owners, including pirated or counterfeit items, may
harm its business.
Sources
and availability of required equipment and bandwidth
The
Company’s wholly-owned subsidiary, PT Kinerja Pay Indonesia has engaged PT Kinerja Indonesia, our Licensor, to provide all
necessary R&D, technical support, servers, procurement/logistic and IT operational services, equipment bandwidth and other
technology support.
Dependence
on one or a few major customers
Our
e-commerce portal is primarily used by individual customers. The Company is 100% dependent on PT Kinerja Indonesia to conduct
all collections from individual, and to maintain the licensed portal.
Research
and Development
In
2015, through PT Kinerja Indonesia, our Licensor, we began developing a proprietary Beta version utilizing software programmers
in Indonesia. Our research and development resulted in our launching of the beta version of our KinerjaPay website, in addition
to an android-based mobile version. We continue to improve the functionality of our KinerjaPay website and expect to incur costs
related to expanding our servers’ capacity, network infrastructure, data center, and other security products.
Competition
We
face intense competition in our business from numerous venues. We will need to continue to invest significant resources in technology
and marketing to compete effectively. These expansions will require substantial expenditures, which may reduce our margins and
may have a material adverse effect on our business, financial position, operating results and cash flows and reduce the market
price of our common stock. Some competitors may have other alternative revenue sources and may therefore be able to allocate more
resources to marketing, adopt more competitive fees and devote more resources to website, mobile platforms and applications and
systems development than we can. Our competitors may be able to innovate faster and more efficiently, and new technologies may
increase the competitive pressures if competitors offer more efficient or lower-cost services.
We
believe that we have a better understanding of the local culture and commerce in Indonesia than foreign competitors. We also believe
that one of our unique competitive advantage is to better be able to operate under local regulatory authorities.
Customers
can use competing online, mobile and offline channels including but not limited to, retailers, catalog and classifieds. Online
shopping comparison websites (e. g. Shopping.com, Rakuten, Nextag.com, Pricegrabber.com, Shopzilla,) allow consumers to search
the Internet for specified products. We plan to use search engines and paid search advertising to help potential customers find
our website, but those sites may also send users to other shopping destinations.
We
mainly compete on the basis of price, product selection and services. In addition, we face the following principal competitive
factors:
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ability
to attract, retain and engage buyers and sellers;
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volume
of transactions and price and selection of goods;
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trust
in our electronic payment service;
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customer
service;
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website,
Mobile App and application ease-of-use and accessibility;
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reliability
and security of our technology and system;
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reliability
of payment; and
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level
of service fees.
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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. 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.
There
has been a recent surge in competitors that focus on specific items or industries such as travel, fashion or consumable goods.
At present, there are relatively few competitors operating in the market segments we operate, especially in mobile phone prepaid
top up vouchers, a segment in which we may be one of the first and hope to be able to maintain our market dominate. We believe
our fee structure to be very competitive.
We
also face intense competition for our electronic payment solution service from alternative payment gateways and comparable payment
solution services that are provided by banks or telecommunication companies. These are typically stand-alone providers and depend
on other marketplace platform to generate their payment or transaction service. We believe to differentiate ourselves by offering
online transaction services with e-wallet features and our own Marketplace.
We
may be unable to compete successfully against current and future competitors. 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.
Government
Regulation
There
are currently few laws or regulations in Indonesia that are specifically related to the sale of goods and services on the Internet.
We currently are subject to Indonesian regulations in our role as a money transfer agent and are therefore subject to Indonesian
electronic fund transfer and money laundering regulations. We received the requisite GeoTrust Certificate in March 2014 in which
entire user transactions have been protected by 256-bit encryption. This is understood to provide a safe platform for online transaction.
We believe to be in compliance with all existing Indonesian governmental regulations applicable to e-commerce operator that facilitate
online transactions between sellers and buyers.
Any
application of existing laws and regulations related to banking, currency exchange, online gaming, electronic contracting, consumer
protection and privacy is at present unclear. Our potential liability in case our customers are in violation of any applicable
laws on pricing, taxation, impermissible content, intellectual property infringement, unfair or deceptive practices or quality
of services is also unclear. In addition, we may become subject to new laws and regulations directly applicable to the Internet
or our specific e-commerce activities. Any existing or potential new legislation applicable to specific e-commerce activities
could expose us to substantial liability, including significant expenses necessary to comply with these laws and regulations,
and reduce and/or limit the use of the Internet on which we depend.
An
increase in the taxation of e-commerce transactions may make the Internet less attractive for consumers and businesses, which
could have a material adverse effect on our business, results of operations and financial condition.
To
date, we have not incurred any expenses related to us being in compliance with any governmental laws in Indonesia pertaining to
the use of our e-commerce portal as a payment option for online shopping and other transactions.
Employees
Mr.
Edwin Witarsa Ng, CEO and Chairman and Windy Johan, our CFO, constitute our management team, together with Mr. Deddy Oktomeo,
CEO of our wholly-owned Indonesian subsidiary. They are not obligated to contribute any specific number of hours per week to our
operations and intent to devote only as much time as they deem necessary to the Company’s affairs until such time that we
generate significant revenues. We have not entered into employment agreements with Messrs. Ng, Johan or Oktomeo.
PT
Kinerja Indonesia, our Licensor and controlled by Mr. Ng, provides all necessary R&D, technical support, procurement/logistic
and IT operational services and other technology support needed to operate our Portal. In addition, PT KinerjaPay, our Indonesian
subsidiary, is expected to hire more employees, principally dedicated to our sales, marketing and billing and collection activities.
The Company believes, based upon the availability of highly-skilled technical and sales people in Indonesia, that its Licensor
will encounter no difficulties to hire and retain the personnel required to fulfill these positions.
Our
employees and the employees of our contractor PT Kinerja Indonesia are not subject to any collective bargaining agreement.
Transfer
Agent
Our
stock transfer agent is Transfer Online, Inc., with offices located at 512 SE Salmon Street, Portland, OR 97214. Their telephone
number is (503) 227 2950, their fax number is (503) 227 6874, and their website is transferonline.com.
Item
1A. Risk Factors.
You
should consider carefully the risks described below, together with all of the other information in this Form 10-K, before making
a decision to invest in our common stock. If any of the following risks actually occurs, our business, financial condition and
results of operations could suffer. In this case, the trading price of our common stock could decline and you may lose all or
part of your investment in our common stock.
Risks
Associated With Our Business
Our
Independent Registered Public Accounting Firm expressed substantial doubt as to our ability to continue as a going concern in
2017.
The
audited financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments
that might result if we cease to continue as a going concern. We believe that in order to continue as a going concern, including
the costs of being a public company, we will need approximately $30,000 per year simply to cover the administrative, legal and
accounting fees. We plan to fund these expenses primarily through cash flow, the sale of restricted shares of our Common Stock,
and the issuance of convertible notes.
During
the year ended December 31, 2017, we raised $952,000 from the private sale of equity securities. We expect to raise an
additional $4.5 million during 2018. 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.
On
November 3, 2017, the Company signed an investment agreement with Tangiers Global, LLC (“Tangiers”), of which Tangiers
shall invest up to $10,000,000 by purchasing the Company’s Common Stock. To date, the Company has not filed a rgistration
statement with the SEC with respect to the investment agreement.
Our
limited operating history does not afford investors a sufficient history on which to base an investment decision.
On
December 1, 2015, we were granted an exclusive, world-wide license by PT Kinerja Indonesia, our licensor, to KinerjaPay IP
and its website, KinerjaPay.com, an e-commerce Portal that provides users with the convenience of EPS for bill transfer and
our Marketplace. The Portal was first launched by PT Kinerja Indonesia in February 2015 and only has a limited operating
history. See the disclosure under “Description of Business” and in the additional disclosure under “Risk
Factors” below. As a result of its limited operating history, the Portal may not generate revenues for us or become
profitable in the near future, if at all. If we are unable to reach profitability, our stock price would decline and our
ability to continue to raise capital, either equity or debt, may be adversely effected. The long-term revenue and income
prospects of our business and the market for electronic online payments have not been proven. We will encounter risks and
difficulties commonly faced by early-stage companies in new and rapidly evolving markets.
We
plan to make significant investments using our recently raised equity capital in our wholly-owned Indonesian subsidiary, PT Kinerja
Pay Indonesia, which entity will conduct all of our business activities related to out Portal. Notwithstanding our ability to
having raised equity capital to date and our expectation to be able to raise up to an additional $4.5 million during the next
twelve months, we may not be able to achieve profitability in the foreseeable future, if at all. Our ability to achieve profitability
will depend on, among other things, market acceptance of our Portal and our ability to generate revenues and compete effectively
with other e-commerce businesses operating in Indonesia and potentially in the wider Southeast Asian market. We cannot assure
you that the relatively new market for our EPS and our Marketplace will remain viable in Indonesia. We expect to make substantial
investments during the next 12 months to:
●
Drive consumer and merchant awareness to our EPS and Marketplace;
●
Persuade consumers and merchants to sign up for and use our EPS product and use our Marketplace;
●
Improve our system infrastructure to handle seamless processing of transactions;
●
Continue to develop our Portal; and
●
Broaden our customer base.
We
may fail to implement successfully these objectives. This would adversely impact our ability to generate revenues. There can be
no assurance at this time that we will be able to generate significant revenues and operate profitably or that we will have adequate
working capital to meet our obligations as they become due. Investors must consider the risks and difficulties frequently encountered
by early stage companies, particularly in rapidly evolving markets. Such risks include the following:
●
competition;
●
need for acceptance of our Portal;
●
ability to develop a brand identity;
●
ability to anticipate and adapt to a competitive market;
●
ability to effectively manage rapidly expanding operations;
●
amount and timing of operating costs and capital expenditures relating to expansion of our business, operations, and infrastructure; and
●
dependence upon key personnel to market our product and the loss of one of our key managers may adversely affect the marketing of our product.
We
cannot be certain that our business strategy will be successful or that we will successfully address these risks. In the event
that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could
be materially and adversely effected.
Our
revenues will be dependent upon acceptance of our Portal by the Indonesian Consumers. The failure of such acceptance will cause
us to curtail or cease operations.
Uncertainty
exists as to whether our Portal will be accepted by the Indonesian consumer. A number of factors may limit the market acceptance
of our Portal, including the availability of alternative electronic payment portals and the fees for our services relative to
alternative electronic payment services and other virtual marketplaces. There is a risk that potential customers and merchants
will be encouraged to continue to use other portals and/or electronic payment services instead.
We
recognize our revenues pursuant to ASC 605at net revenues since we are an agent and not a principal to the various
transactions with other financial institutions and or technology companies through our leased portal. We have eight different
revenue streams. Gross revenue from the various steams were as follows: Mobile phone prepaid $2,291,067, Kinerja Store $463,
Payment Gateway Services $9, Instant Pay Fees Collection $68,431, Marketplace Merchant Partners $203, Marketplace Merchant
Users $11, Remittance $29,180, and Unipin $3,179. Gross cost of goods sold exceeded gross revenues for the year ended
December 31, 2017. We recognize revenue when the four criteria of revenue have been met which includes:(1) Persuasive
evidence of an arrangement, (2) services and or delivery being rendered, (3) the price is fixed or determinable and (4)
collectability is reasonably assured.
We
expect to continue to incur operating losses until such time as our revenues reach a mature level and we are able to generate
sufficient cash flow to meet our operating expenses. There can be no assurance that the market will adopt our Portal. In the event
that we are not able to successfully market and significantly increase the number of Portal users, or if we are unable to charge
the necessary fees, our financial condition and results of operations will be materially and adversely affected.
Software
failures, breakdowns in the operations of the servers and communications systems upon which we must rely or glitches or malfunctions
in our Portal technology could hurt our reputation, revenues and profitability.
Our
success depends on the efficient and uninterrupted operation of the servers and communications systems owned and operated by PT
Kinerja Indonesia, an entity controlled by our controlling shareholder and CEO, Mr. Ng. We have entered into an agreement with
PT Kinerja Indonesia to operate all of the servers, as well as provide hosting and maintenance services and the infrastructure
systems, upon which we rely. A failure of these systems and services could impede our business by delays in processing of data,
delivery of databases and services, client data and day-to-day management of our business. While all of our operations will have
disaster recovery plans in place, they might not adequately protect us. Despite any precautions we undertake and PT Kinerja
Indonesia already has in place, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses,
break-ins and similar events at their computer facilities could result in interruptions in the flow of data to our customers.
In addition, any failure by the computer environment to provide our required data communications capacity could result in interruptions
in our service. In the event of a server failure, we could be required to transfer our client/customer data operations to an alternative
provider of server hosting services. Such a transfer could result in delays in our ability to deliver our services to our customers.
To
the extent that glitches or errors cause our Portal to malfunction and our customers’ use of our Portal is interrupted,
our reputation could suffer and our potential revenues could decline or be delayed until such glitches or errors are remedied,
which will not be within our control. We may also be subject to liability for the glitches and malfunctions. There can be no assurance
that, despite the expertise of PT Kinerja Indonesia, glitches and/or errors in our service or new releases or upgrades will not
occur, resulting in loss of future revenues or delay in market acceptance, diversion of development resources, damage to our reputation,
potential litigation, or increased service costs, any of which would have a material adverse effect upon our business, operating
results and financial condition.
Long-term
disruptions in the Portal infrastructure provided by PT Kinerja Indonesia caused by events such as natural disasters, the outbreak
of war, the escalation of hostilities and acts of terrorism, particularly involving locations in Indonesia for which we will have
no control, could adversely effect our e-commerce business. Although, we plan to carry property and business interruption insurance
for our business operations, our coverage might not be adequate to compensate us for all losses that may occur.
We
face risks related to the storage of customers’ confidential and proprietary information.
Our
Portal, which is maintained by PT Kinerja Indonesia, is designed to maintain the confidentiality and security of our customers’
confidential and proprietary data that are stored on their server systems, which may include sensitive personal data. However,
any accidental or willful security breaches or other unauthorized access to these data could expose us to liability for the loss
of such information, time-consuming and expensive litigation and other possible liabilities as well as negative publicity which
may be expected to adversely effect our business and operations. Techniques used to obtain unauthorized access or to sabotage
systems change frequently and generally are difficult to recognize and react to. We rely on PT Kinerja Indonesia, which may be
unable to anticipate these techniques or implement adequate preventative or reactionary measures.
We
might incur substantial expense to further develop and commercially exploit our Portal which may never become sufficiently successful.
Our
growth strategy requires the successful expansions of our e-commerce business. Although management will take every precaution
to ensure that our Portal will, with a high degree of likelihood, achieve market acceptance and therefore commercial success,
there can be no assurance that this will be the case. The causes for commercial failure can be numerous, including:
●
market demand for our EPS and Marketplace proves to be smaller than we expect;
●
competitive e-commerce providers, either presently operating in the Indonesian market or who are to join our market may have superior features, more competitive prices and/or fees, better performance and, as a result, greater market acceptance;
●
further Portal development turns out to be more costly than anticipated or takes longer;
●
our Portal requires significant adjustment to changing market conditions, rendering the Portal uneconomic or extending considerably the likely investment return period;
●
additional regulatory requirements are imposed which increase the overall costs of running our Portal;
●
Customers may be unwilling to adopt and/or use our Portal.
Card
association rules may change or certain practices could negatively affect our business and, if we do not comply with these rules,
could result in our inability to accept credit cards. If we are unable to accept credit cards, our competitive position would
be critically damaged.
We
are not a bank and as a result we are barred from belonging to and directly access the credit card associations or the bank payment
network. We must therefore rely on banks and their service providers to process our transactions. We must comply with the operating
rules of the credit card associations and bank payment networks as they apply to merchants. The associations’ member banks
set these rules, and the associations interpret the rules. Some of those member banks compete with us. Credit card associations
could adopt new operating rules or interpretations of existing rules which we may find difficult or even impossible to comply
with, in which case we could lose our ability to give customers the option of using credit cards to support their payments. If
we were unable to accept credit cards our competitive position would be critically damaged.
We
face considerable risks of loss due to fraud and/or disputes between senders and recipients. If we are unable to deal effectively
with losses from fraudulent transactions, our losses from fraud would increase, and our business would be materially adversely
effected.
We
face significant risks of loss due to fraud and disputes between senders and recipients, including:
●
unauthorized use of credit cards and bank account information and identity theft;
●
merchant fraud and other disputes;
●
system security breaches;
●
fraud by employees; and
●
use of our system for illegal purposes.
When
a sender pays a merchant for goods or services through our Portal using a credit card and the cardholder is defrauded or otherwise
disputes the charge, the full amount of the disputed transaction gets charged back to us and our credit card processor levies
additional fees against us, unless we can successfully challenge the chargeback. Chargebacks may arise from the unauthorized use
of a cardholder’s card number or from a cardholder’s claim that a merchant failed to perform. If our chargeback rate
becomes excessive, credit card associations also can require us to pay fines and could terminate our ability to accept their cards
for payments. We cannot assure you that chargebacks will not arise in the future.
We
have taken measures to detect and reduce the risk of fraud, but we cannot assure you of these measures’ effectiveness. If
these measures do not succeed, our business will be adversely effected.
We
may incur chargebacks and other losses from merchant fraud, payment disputes and insufficient funds, and our liability from these
items could have a material adverse effect on our business and result in our losing the right to accept credit cards for payment
as a result of which our ability to compete could be impaired, and our business would suffer.
We
may incur losses from merchant fraud, including claims from customers that merchants have not performed, that their goods or services
do not match the merchant’s description or that the customer did not authorize the purchase. Our liability for such items
could have a material adverse effect on our business, and if they become excessive, could result in our losing the right to accept
credit cards for payment.
Unauthorized
use of credit cards and bank accounts could expose us to substantial losses. If we are unable to detect and prevent unauthorized
use of cards and bank accounts, our business would suffer.
The
highly automated nature of our Portal makes us an attractive target for fraud. In configuring our Portal technology, we face an
inherent trade-off between customer convenience and security. We believe that several of our current and former competitors in
the electronic payments business have gone out of business or significantly restricted their businesses largely due to losses
from this type of fraud. We expect that technically knowledgeable criminals will continue to attempt to circumvent our anti-fraud
systems. There can be no assurance that we will not incur chargebacks in the future.
Security
and privacy breaches in our Portal may expose us to additional liability and result in the loss of customers, either of which
events could harm our business and cause our stock price to decline.
Our
inability, or the inability of PT Kinerja Indonesia, as the case may be, to protect the security and privacy of our electronic
transactions could have a material adverse effect on our profitability. A security or privacy breach could:
●
expose us to additional liability;
●
increase our expenses relating to resolution of these breaches; and
●
discourage customers from using our product.
The
type and scale of electronic payments that we handle for our customers makes us vulnerable to employee fraud or other internal
security breaches and, as a result, our business would suffer. We cannot assure you that our internal security systems will prevent
material losses from employee fraud and that our system applications designed for data security will effectively counter evolving
security risks or address the security and privacy concerns of existing and potential customers. Any failures in our security
and privacy measures could have a material adverse effect on our business, financial condition and results of operations.
Our
Portal might be used for illegal or improper purposes, which could expose us to additional liability and harm our business.
Despite
measures we have taken to detect and prevent identify theft, unauthorized uses of credit cards and similar misconduct, our electronic
online payment portal remains susceptible to potentially illegal or improper uses. These may include illegal online gaming, fraudulent
sales of goods or services, illicit sales of prescription medications or controlled substances, software and other intellectual
property piracy, money laundering, bank fraud, child pornography trafficking, prohibited sales of alcoholic beverages and tobacco
products and online securities fraud. Despite measures we have taken to detect and lessen the risk of this kind of conduct, we
cannot assure you that these measures will succeed. Our business could suffer if customers use our system for illegal or improper
purposes.
In
addition, we classify merchants who historically have experienced significant chargeback rates as higher risk. The legal status
of many of these higher risk accounts is uncertain, and if these merchants are prohibited or restricted from operating in the
future, our revenue from fees generated from these accounts would decline. Proposed legislation has been introduced in Indonesia
that operation of an Internet gaming business, sales of alcoholic beverages and other activities violates Indonesian law, and
to prohibit payment processors such as us from processing payments for those activities. If merchants accept these illegal activities,
we could be subject to civil and criminal lawsuits, administrative action and prosecution for, among other things, money laundering
or for aiding and abetting violations of law. We would lose the revenues associated with these accounts and could be subject to
material penalties and fines, both of which would seriously harm our business.
We
face substantial and increasing competition in the Indonesian e-commerce market.
The market in which we operate is intensely
competitive. We currently and potentially compete with a wide variety of electronic payment providers and online and offline companies
marketplaces providing goods and services to consumers and merchants . The Internet and mobile networks provide new, rapidly evolving
and intensely competitive channels for electronic payment services and marketplaces to sell all types of goods and services. We
compete in two-sided markets, and must attract both buyers and sellers to use our Marketplace. Consumers who purchase or
sell goods through our Marketplace have more and more alternatives, and merchants have more channels to reach consumers. We expect
competition to continue to intensify. Online and offline businesses increasingly are competing with each other and our competitors
include a number of online and offline retailers with significant resources, large user communities and well-established brands.
Moreover, the barriers to entry into these channels can be low, and businesses easily can launch online sites or mobile platforms
and applications at nominal cost by using commercially available software or partnering with any of a number of successful e-commerce
companies. As we respond to changes in the competitive environment, we may, from time to time, make pricing, service or marketing
decisions or acquisitions that may be controversial with and lead to dissatisfaction among users, which could reduce activity
on our Portal and harm our profitability.
Some
of our competitors are well known, more established and better capitalized than us and we may be unable to establish market
share. As such, they may have at their disposal greater marketing strength and economies of scale and, as they may have additional
products and/or services at more competitive price. They may also have more resources to expend to create more innovative payment
processing products in competition with ours. Accordingly, we may not be successful in competing effectively for market share.
The
market we operate in emerging, intensely competitive and characterized by rapid technological change. We compete with existing
electronic payment services and virtual marketplaces, including, among others:
●
Tokopedia
●
Bukalapak
●
Lazada
●
Zalora
●
OLX
●
Blibli
●
Payment processors such as Doku and Veritrans
Our
competitors may respond to new technologies and changes in customer requirements faster and more effectively than we can. These
competitors have offered, and may continue to offer, their services for free in order to gain market share and we may be forced
to lower our prices in response.
Our
status under certain Indonesian and international financial services regulation is unclear. Violation of or compliance with present
or future regulation could be costly, expose us to substantial liability, force us to change our business practices or force us
to cease offering our current product.
We
operate in an industry subject to government regulation. We currently are subject to Indonesian regulations in our role as money
transfer agent and are therefore subject to Indonesian electronic fund transfer and money laundering regulations. In the future,
we might be subjected to:
●
banking regulations;
●
additional money transmitter regulations and money laundering regulations;
●
international banking or financial services regulations or laws governing other regulated industries; or
●
U.S. and international regulation of Internet transactions.
If
we are found to be in violation of any current or future regulations, we could be:
●
exposed to financial liability, including substantial fines which could be imposed on a per transaction basis and disgorgement
of our profits;
●
forced to change our business practices; or
●
forced to cease doing business altogether or with the residents of one or more states or countries.
However,
we cannot assure you that the steps we have taken to address any regulatory concerns will be effective. If we are found to be
engaged in an unauthorized banking business, we might be subject to monetary penalties and might be required to cease doing business.
Even if the steps we have taken to resolve any concerns are deemed sufficient by the regulatory authorities, we could be subject
to fines and penalties for our prior activities. The need to comply with laws prohibiting unauthorized banking activities could
also limit our ability to enhance our services in the future.
Our
financial success will remain highly sensitive to changes in the rate at which our customers fund payments using credit cards
rather than bank account transfers. Our profitability could be harmed if the rate at which customers fund using credit cards goes
up.
We
pay significant transaction fees when senders fund payment transactions using credit cards, nominal fees when customers fund payment
transactions by electronic transfer of funds from bank accounts and no fees when customers fund payment transactions from an existing
account balance with us. Senders may resist funding payments by electronic transfer from bank accounts because of the greater
protection offered by credit cards, including the ability to dispute and reverse merchant charges, because of frequent flier miles
or other incentives offered by credit cards or because of generalized fears regarding privacy or loss of control in surrendering
bank account information to a third party.
We
rely on financial institutions to process our payment transactions. Should any of these institutions decide to stop processing
our payment transactions, our business could suffer.
Not
being a bank, we cannot belong to and directly access the credit card associations or the bank payment network. As a result, we
must rely on banks or their independent service operators to process our transactions. Bank Central Asia (“BCA”) currently
processes our bank transactions and our credit card transactions. BCA also provides payment processing services to some of our
competitor and offers credit card processing services directly to online merchants. If we could not obtain processing services
on acceptable terms, and if we could not switch to another processor quickly and smoothly, our business could suffer materially.
Increases
in credit card processing fees could increase our costs, affect our profitability, or otherwise limit our operations.
From
time to time, credit card associations increase the interchange fees that they charge for each transaction using their cards.
Our credit card processors have the right to pass any increases in interchange fees on to us. Any such increased fees could increase
our operating costs and reduce our profit margins. Furthermore, our credit card processors require us to pledge cash as collateral
with respect to our acceptance of certain credit cards and the amount of cash that we are required to pledge could be increased
at any time.
Customer
complaints or negative publicity about our product and customer service could affect use of our product adversely and, as a result,
our business could suffer.
Customer
complaints or negative publicity about our Portal could diminish consumer confidence in our EPS and Marketplace. Breaches of our
customers’ privacy and our security measures could have the same effect. Measures we sometimes take to combat risks of fraud
and breaches of privacy and security, such as freezing customer funds, can damage relations with our customers. These measures
heighten the need for prompt and accurate customer service to resolve irregularities and disputes. We may receive negative media
coverage, as well as public criticism regarding customer disputes. Effective customer service requires significant personnel expense,
and if not managed properly, could impact our profitability significantly. The number of customer service and sales representatives
that PT Kinerja Indonesia employees is expected to increase throughout 2018. Any inability to manage or train our customer service
representatives properly could compromise our ability to handle customer complaints effectively. If we do not handle customer
complaints effectively, our reputation may suffer and we may lose our customers’ confidence.
We
have limited experience in managing and accounting accurately for large amounts of customer funds. Our failure to manage these
funds properly would harm our business.
Our
ability to manage customer funds requires a high level of internal controls. We have neither an established operating history
nor proven management experience in maintaining, over a long term, these internal controls. As our business continues to grow,
we must strengthen our internal controls accordingly. Our success requires customer’s confidence in our ability to handle
large and growing transaction volumes and amounts of customer funds. Any failure to maintain controls or to manage customer funds
could diminish customer use of our Portal severely.
Compliance
with changing regulations concerning corporate governance and public disclosure may result in additional expenses.
In
recent years, there have been several changes in laws, rules, regulations and standards relating to corporate governance and public
disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Sarbanes-Oxley
Act of 2002 (“Sarbanes-Oxley”) and various other new regulations promulgated by the SEC and rules promulgated by the
national securities exchanges. The Dodd-Frank Act, enacted in July 2010, expands federal regulation of corporate governance matters
and imposes requirements on publicly-held companies, including us, to, among other things, provide stockholders with a periodic
advisory vote on executive compensation and also adds compensation committee reforms and enhanced pay-for-performance disclosures.
While some provisions of the Dodd-Frank Act were effective upon enactment, others will be implemented upon the SEC’s adoption
of related rules and regulations. The scope and timing of the adoption of such rules and regulations is uncertain and accordingly,
the cost of compliance with the Dodd-Frank Act is also uncertain.
In
addition, Sarbanes-Oxley specifically requires, among other things, that we maintain effective internal control over financial
reporting and disclosure of controls and procedures.
These
and other new or changed laws, rules, regulations and standards are, or will be, subject to varying interpretations in many cases
due to their lack of specificity. As a result, their application in practice may evolve over time as new guidance is provided
by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs
necessitated by ongoing revisions to disclosure and governance practices. Our efforts to comply with evolving laws, regulations
and standards are likely to continue to result in increased general and administrative expenses and a diversion of management
time and attention from revenue-generating activities to compliance activities. Further, compliance with new and existing laws,
rules, regulations and standards may make it more difficult and expensive for us to maintain director and officer liability insurance,
and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. Members of our board
of directors and our principal executive officer and principal financial officer could face an increased risk of personal liability
in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified directors
and executive officers, which could harm our business. We continually evaluate and monitor regulatory developments and cannot
estimate the timing or magnitude of additional costs we may incur as a result.
Online
payment processing liability is inherent in the industry and insurance is expensive and difficult to obtain, we may be exposed
to large lawsuits.
Our
business exposes us to potential liability risks, which are inherent in the e-commerce business. While we will take precautions
we deem to be appropriate to avoid potential liability suits against us, there can be no assurance that we will be able to avoid
significant liability exposure. Liability insurance for electronic payment processing industry is generally expensive. We plan
to obtain liability professional indemnity insurance coverage for our Portal services. There can be no assurance that we will
be able to obtain such coverage on acceptable terms, or that any insurance policy will provide adequate protection against potential
claims. A successful liability claim brought against us may exceed any insurance coverage secured by us and could have a material
adverse effect on our results or ability to continue our Portal.
We
may need to raise additional capital to fund continuing operations and an inability to raise the necessary capital or to do so
on acceptable terms could threaten the success of our business.
We
currently anticipate that our available capital resources will not be sufficient to meet our expected working capital and capital
expenditure requirements for the year ended December 31, 2018. We anticipate that we may require an additional funding during
the remainder of 2018.
However,
such resources may not be sufficient to fund the long-term growth of our business.
Any
additional equity financing may be dilutive to our stockholders, new equity securities may have rights, preferences or privileges
senior to those of existing holders of our Shares. Debt or equity financing may subject us to restrictive covenants and significant
interest costs. If we obtain funding through a strategic collaboration or licensing arrangement, we may be required to relinquish
our rights to our product or marketing territories. If we are unable to obtain financing necessary to support our operations,
we may be required to defer, reduce or eliminate certain planned expenditures or significantly curtail our operations.
We
may need to increase the size of our organization, and may experience difficulties in managing growth.
At
present, we are a small reporting company. We expect to experience a period of expansion in headcount, infrastructure and overhead
and anticipate that further expansion will be required to address potential growth and market opportunities. Future growth will
impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate
new managers. Our future financial performance and its ability to compete effectively will depend, in part, on its ability to
manage any future growth effectively.
The
loss of key personnel could adversely affect our business. We may not be able to hire and retain qualified personnel to support
our growth.
Our
success depends to a significant extent upon Mr. Edwin Ng, our CEO and controlling shareholder, and other key personnel. The loss
of the services of such personnel and the inability to hire and retain of such personnel could adversely affect our business and
our ability to implement our growth plan. We cannot assure you that the services of the members of our management team will continue
to be available to us, or that we will be able to find suitable replacements. We do not have key man insurance on any
members of our management team. If any member of our management team were to die and we are unable to replace them for a prolonged
period of time, we may be unable to carry out our long-term business plan and our future prospect for growth, and our business,
may be harmed. Our success is dependent upon our ability to attract, train, manage and retain qualified personnel. There is substantial
competition for qualified personnel, and an inability to recruit or retain qualified personnel may impact our ability to implement
our strategy to grow our business.
We
plan to grant stock options or other forms of equity awards in the future as a method of attracting and retaining employees, motivating
performance and aligning the interests of employees with those of our stockholders. There are currently no options and/or equity
awards outstanding. If we are unable to adopt, implement and maintain equity compensation arrangements that provide sufficient
incentives, we may be unable to retain our existing employees and attract additional qualified candidates. If we are unable to
retain our existing employees, including qualified technical personnel, and attract additional qualified candidates, our business
and results of operations could be adversely effected.
We
may not be able to successfully expand our business through acquisitions.
We
review corporate and product acquisitions as a part of our growth strategy. If we decided to undertake an acquisition, we may
not be able to successfully integrate it in order to realize the full benefit of such acquisition. Factors which may affect our
ability to grow successfully through acquisitions include:
●
inability to identify suitable targets given the relatively narrow scope of our business;
●
inability to obtain acquisition or additional working capital financing due to our financial condition;
●
difficulties and expenses in connection with integrating the acquired companies and achieving the expected benefits;
●
diversion of management’s attention from current operations;
●
the possibility that we may be adversely affected by risk factors facing the acquired companies;
●
acquisitions could be dilutive to earnings, or in the event of acquisitions made through the issuance of our common shares to
the shareholders of the acquired company, dilutive to our existing shareholders;
● potential losses resulting from undiscovered liabilities of acquired companies not covered
by the indemnification we may obtain from the seller; and
●
loss of key employees of the acquired companies.
We
have limited experience competing in international markets, where we hope to compete, beyond Indonesia. Our international expansion
plans will expose us to greater political, intellectual property, regulatory, exchange rate fluctuation and other risks, which
could harm our business.
We
intend to expand use of our EPS and Marketplace in selected international markets, initially in the Southeast Asian region. If
we are unable to execute our expansion into international markets, our business could suffer. Accordingly, we anticipate devoting
significant resources and management attention to expanding international opportunities. Expanding internationally subjects us
to a number of risks, including:
●
greater difficulty in managing foreign operations;
●
expenses associated with localizing our products, including offering customers the ability to transact business in major currencies
in addition to the Indonesian Rupiah;
●
laws and business practices that favor local competitors;
●
multiple and changing laws, tax regimes and government regulations;
●
foreign currency restrictions and exchange rate fluctuations;
●
changes in a specific country’s or region’s political or economic conditions; and
●
differing intellectual property laws.
Risks
Related to Our Common Stock
We
are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights.
We
have offered and sold our Common Stock to investors pursuant to certain exemptions from the registration requirements of the Securities
Act of 1933, as well as those of various state securities laws. The basis for relying on such exemptions is factual; that is,
the applicability of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making
the offering. We have not received a legal opinion to the effect that any of our prior offerings were exempt from registration
under any federal or state law. Instead, we have relied upon the operative facts as the basis for such exemptions, including information
provided by investors themselves.
If
any prior offering did not qualify for such exemption, an investor would have the right to rescind its purchase of the securities
if it so desired. It is possible that if an investor should seek rescission, such investor would succeed. A similar situation
prevails under state law in those states where the securities may be offered without registration in reliance on the partial preemption
from the registration or qualification provisions of such state statutes. If investors were successful in seeking rescission,
we would face severe financial demands that could adversely affect our business and operations. Additionally, if we did not in
fact qualify for the exemptions upon which it has relied, we may become subject to significant fines and penalties imposed by
the SEC and state securities agencies.
Edwin
Ng, our Control Shareholder and Chairman controls approximately 20.44% 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 19, 2018, our control shareholder, executive officer and director has voting control for 3,000,000 shares of our Common
Stock representing approximately 20.44% of our outstanding Shares, excluding Shares underlying options and warrants. Subject to
any fiduciary duties owed to our other stockholders under Delaware law, these stockholders may be able to exercise significant
influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate
transactions, and will have some control over our management and policies. Some of these persons may have interests that are different
from yours. For example, these stockholders may support proposals and actions with which you may disagree. The concentration of
ownership could delay or prevent a change in control of the Company or otherwise discourage a potential acquirer from attempting
to obtain control of the Company, which in turn could reduce the price of our stock. In addition, these stockholders could use
their voting influence to maintain our existing management and directors in office, delay or prevent changes in control of the
Company, or support or reject other management and board proposals that are subject to stockholder approval, such as amendments
to our employee stock plans and approvals of significant financing transactions.
The
availability of a large number of authorized but unissued shares of Common Stock may lead to dilution of existing stockholders.
We
are authorized to issue 500,000,000 shares of Common Stock, $0.0001 par value per share. As of April 19, 2018, we have approximately
483,176,622 shares of Common Stock available for issuance. Additional shares may be issued by our board of directors without further
stockholder approval. The issuance of large numbers of shares, possibly at below market prices, is likely to result in substantial
dilution to the interests of other stockholders. In addition, issuances of large numbers of shares may adversely affect the market
price of our Common Stock.
Our
Certificate of Incorporation, as amended, authorizes 10,000,000 shares of preferred stock, $0.0001 par value per share none of
which are issued and outstanding to date. The board of directors is authorized to provide for the issuance of these unissued shares
of preferred stock in one or more series, and to fix the number of shares and to determine the rights, preferences and privileges
thereof. Accordingly, the board of directors may issue preferred stock which may convert into large numbers of shares of Common
Stock and consequently lead to further dilution of other shareholders.
We
have never paid cash dividends and do not anticipate doing so in the foreseeable future.
We
have never declared or paid cash dividends on our common shares. We currently plan to retain any earnings to finance the growth
of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition,
results of operations and capital requirements, as well as other factors deemed relevant by our board of directors.
Our
Common Stock is subject to the “Penny Stock” rules of the SEC and the trading market in our stock is limited, which
makes transactions in our stock cumbersome and may reduce the value of an investment.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for
the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price
of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules
require:
●
That a broker or dealer approve a person’s account for transactions in penny stocks; and
● The broker or dealer receives a written agreement to the transaction, setting forth the
identity and quantity of the penny stock to be purchased.
In
order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
●
Obtain financial information and investment experience objectives of the person; and
●
Make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission
relating to the penny stock market, which, in highlight form:
●
Sets forth the basis on which the broker or dealer made the suitability determination; and
●
That the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally,
brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make
it more difficult for investors to dispose of our Common Stock and cause a decline in the market value of our stock. Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to
be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny
stocks.
Financial
Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may limit a shareholder’s ability
to trade our Common Stock.
In addition to the “penny stock”
rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer
must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative
low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information
about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of
these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable
for some customers. FINRA requirements make it more difficult for broker-dealers to make a market, which may limit your ability
to buy and sell our stock and have an adverse effect on the market for our Shares.
Our
stock is thinly traded, sale of your holding may take a considerable amount of time.
The
shares of our Common Stock are traded on the OTCQB Market, meaning that the number of persons interested in purchasing our Common
Stock at or near bid prices may be relatively small or non-existent. As a consequence, there may be periods of several days or
more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady
volume of trading activity that will generally support continuous sales without an adverse effect on share price. There can be
no assurance that a broader or more active public trading market for our Common Stock will develop or be sustained. Due to these
conditions, we can give you no assurance that you will be able to sell your shares at or near bid prices or at all if you need
money or otherwise desire to liquidate your shares.
Shares
eligible for future sale may adversely affect the market.
From
time to time, certain of our stockholders may be eligible to sell all or some of their shares of Common Stock by means of ordinary
brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations.
In general, pursuant to amended Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current
public information requirement. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity
securities), current public information and notice requirements. Any substantial sales of our Common Stock pursuant to Rule 144
may have a material adverse effect on the market price of our Common Stock.
If
we fail to maintain effective internal controls over financial reporting, the price of our Common Stock may be adversely affected.
Our
internal control over financial reporting may have weaknesses and conditions that could require correction or remediation, the
disclosure of which may have an adverse impact on the price of our Common Stock. We are required to establish and maintain appropriate
internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established,
could adversely affect our public disclosures regarding our business, financial condition or results of operations. In addition,
management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to
be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual
or perceived weaknesses that need to be addressed in our internal control over financial reporting or disclosure of management’s
assessment of our internal controls over financial reporting may have an adverse impact on the price of our Common Stock.
We
are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 and if we fail to comply in a
timely manner, our business could be harmed and our stock price could decline.
Rules
adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls
over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered
public accounting firm. The standards that must be met for management to assess the internal controls over financial reporting
as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed
standards.
We
expect to incur expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us to predict
how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over financial
reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may
not be able to complete the assessment and remediation process on a timely basis. In addition, although attestation requirements
by our independent registered public accounting firm are not presently applicable to us, we could become subject to these requirements
in the future and we may encounter problems or delays in completing the implementation of any resulting changes to internal controls
over financial reporting. In the event that our Chief Executive Officer or Chief Financial Officer determine that our internal
control over financial reporting is not effective as defined under Section 404, we cannot predict how the market prices of our
shares will be affected; however, we believe that there is a risk that investor confidence and share value may be negatively affected.
Our
share price could be volatile and our trading volume may fluctuate substantially.
The
price of our Common Shares has been and may in the future continue to be extremely volatile, with the sale price fluctuating from
a low of $0.04 to a high of $3.50 during the last three fiscal years. Many factors could have a significant impact on the future
price of our common shares, including:
●
our inability to raise additional capital to fund our operations;
●
our failure to successfully implement our business objectives and strategic growth plans;
●compliance
with ongoing regulatory requirements;
●
market acceptance of our product;
●
changes in government regulations; and
●
actual or anticipated fluctuations in our quarterly financial and operating results; and the degree of trading liquidity in our
common shares.
Our
annual and quarterly results may fluctuate, which may cause substantial fluctuations in our common stock price.
Our
annual and quarterly operating results may in the future fluctuate significantly depending on factors including the volume of
electronic transactions, new Portal updates by us and other competitors, gain or loss of significant customers, pricing of our
Portal fees, the timing of expenditures and economic conditions. Revenues related to our electronic payment processing are required
to be recognized upon satisfaction of all applicable revenue recognition criteria. The recognition of revenues from our Portal
fees is dependent on a number of factors, including, but not limited to, the terms of any license agreement and the timing of
Portal transactions by our customers.
Any
unfavorable change in these or other factors could have a material adverse effect on our operating results for a particular quarter
or year, which may cause downward pressure on our common stock price. We expect quarterly and annual fluctuations to continue
for the foreseeable future.
Delaware
law contains provisions that could discourage, delay or prevent a change in control of our Company, prevent attempts to replace
or remove current management and reduce the market price of our stock.
Provisions
in our certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition involving us that our
stockholders may consider favorable. For example, our certificate of incorporation authorizes our board of directors to issue
up to ten million shares of “blank check” preferred stock without further stockholder approval. The board of directors
has the authority to attach special rights, including voting and dividend rights, to this preferred stock. With these rights,
preferred stockholders could make it more difficult for a third party to acquire us.
We
are also subject to the anti-takeover provisions of the DGCL. Under these provisions, if anyone becomes an “interested stockholder,”
we may not enter into a “business combination” with that person for three years without special approval, which could
discourage a third party from making a takeover offer and could delay or prevent a change in control of us. An “interested
stockholder” is, generally, a stockholder who owns 15% or more of our outstanding voting stock or an affiliate of ours who
has owned 15% or more of our outstanding voting stock during the past three years, subject to certain exceptions as described
in the DGCL.
Our
quarterly operating results fluctuate and may not predict our future performance accurately. Variability in our future performance
could cause our stock price to fluctuate and decline.
We
expect our quarterly results will fluctuate in the future as a result of a variety of factors, many of which are beyond our control.
These factors include:
●
changes in our costs, including interchange and transaction fees charged by credit card associations,
and our transaction losses;
●
changes in our pricing policies or those of our competitors;
●
relative rates of acquisition of new customers;
●
seasonal patterns, including increases during the holiday season;
●
delays in the introduction of new or enhanced services, software and related products by us or our competitors or market acceptance
of these products and services; and
●
other changes in operating expenses, personnel and general economic conditions.
As
a result, period-to-period comparisons of our operating results may not be meaningful, and you should not rely on them as an indication
of our future performance.