ITEM
1.
|
FINANCIAL STATEMENTS
|
VITAXEL GROUP LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In U.S. dollars)
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
(Unaudited)
|
|
|
2017
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,341,112
|
|
|
$
|
691,199
|
|
Account receivable, net
|
|
|
292
|
|
|
|
—
|
|
Amount due from related parties
|
|
|
293,387
|
|
|
|
136,010
|
|
Inventories
|
|
|
21,429
|
|
|
|
28,525
|
|
Other receivables, prepayments and other current assets
|
|
|
68,442
|
|
|
|
44,305
|
|
Total current assets
|
|
|
2,724,662
|
|
|
|
900,039
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Long term investments
|
|
|
610,944
|
|
|
|
—
|
|
Property and equipment, net
|
|
|
219,271
|
|
|
|
231,058
|
|
Total non-current assets
|
|
|
830,215
|
|
|
|
231,058
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
3,554,877
|
|
|
$
|
1,131,097
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Amounts due to related parties
|
|
$
|
5,920,172
|
|
|
$
|
2,370,003
|
|
Commission payables
|
|
|
150,678
|
|
|
|
152,871
|
|
Accounts payable
|
|
|
495
|
|
|
|
31,406
|
|
Accrued expense and other payables
|
|
|
411,785
|
|
|
|
492,813
|
|
Total current liabilities
|
|
|
6,483,130
|
|
|
|
3,047,093
|
|
TOTAL LIABILITIES
|
|
|
6,483,130
|
|
|
|
3,047,093
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 8(1))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Preferred stock par value $0.0001: 1,000,000 shares authorized; and 0 outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock par value $0.0001: 70,000,000 shares authorized; 54,087,903 and 54,087,903 shares issued and outstanding, respectively
|
|
|
5,409
|
|
|
|
5,409
|
|
Additional paid-in capital
|
|
|
4,749,798
|
|
|
|
4,749,798
|
|
Accumulated deficit
|
|
|
(7,817,673
|
)
|
|
|
(6,776,474
|
)
|
Accumulated other comprehensive income
|
|
|
134,213
|
|
|
|
105,271
|
|
Total stockholders’ equity
|
|
|
(2,928,253
|
)
|
|
|
(1,915,996
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
3,554,877
|
|
|
$
|
1,131,097
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
VITAXEL GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In U.S. dollars)
|
|
For the Three Months Ended
June 30,
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
REVENUE
|
|
$
|
10,373
|
|
|
$
|
74,556
|
|
|
$
|
23,088
|
|
|
$
|
558,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE
|
|
|
(4,528
|
)
|
|
|
(38,773
|
)
|
|
|
(7,070
|
)
|
|
|
(177,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
5,845
|
|
|
|
35,783
|
|
|
|
16,018
|
|
|
|
380,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expense
|
|
|
(6,714
|
)
|
|
|
(155
|
)
|
|
|
(7,395
|
)
|
|
|
(258
|
)
|
General and administrative expenses
|
|
|
(616,620
|
)
|
|
|
(227,549
|
)
|
|
|
(923,556
|
)
|
|
|
(4,213,494
|
)
|
Total operating expenses
|
|
|
(623,334
|
)
|
|
|
(227,704
|
)
|
|
|
(930,951
|
)
|
|
|
(4,213,752
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(617,489
|
)
|
|
|
(191,921
|
)
|
|
|
(914,933
|
)
|
|
|
(3,833,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME/(EXPENSE), NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
(5,541
|
)
|
|
|
33,188
|
|
|
|
(5,541
|
)
|
|
|
43,630
|
|
Other expense
|
|
|
(15,440
|
)
|
|
|
(108
|
)
|
|
|
(120,725
|
)
|
|
|
(194
|
)
|
Total other income / (expense), net
|
|
|
(20,981
|
)
|
|
|
33,080
|
|
|
|
(126,266
|
)
|
|
|
43,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(638,470
|
)
|
|
$
|
(158,841
|
)
|
|
$
|
(1,041,199
|
)
|
|
$
|
(3,790,044
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
114,579
|
|
|
|
95,974
|
|
|
|
28,942
|
|
|
|
(226,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL COMPREHENSIVE LOSS
|
|
$
|
(523,891
|
)
|
|
$
|
(62,867
|
)
|
|
$
|
(1,012,257
|
)
|
|
$
|
(4,016,983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic and diluted
|
|
|
54,087,903
|
|
|
|
54,087,903
|
|
|
|
54,087,903
|
|
|
|
54,087,903
|
|
Net Loss per share - basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.07
|
)
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
VITAXEL GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(In U.S. dollars)
|
|
For the Period Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,041,199
|
)
|
|
$
|
(3,790,044
|
)
|
Items not involving cash:
|
|
|
|
|
|
|
|
|
Depreciation – property and equipment
|
|
|
14,425
|
|
|
|
10,899
|
|
Impairment on amount due from associate company
|
|
|
154,225
|
|
|
|
—
|
|
Issuance of employee equity incentive plan
|
|
|
—
|
|
|
|
3,409,604
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
(292
|
)
|
|
|
1,944
|
|
Other receivables, prepayments and other current assets
|
|
|
(24,137
|
)
|
|
|
(45,846
|
)
|
Inventories
|
|
|
7,096
|
|
|
|
21,214
|
|
Accounts Payable
|
|
|
(30,911
|
)
|
|
|
(8,251
|
)
|
Commission payables
|
|
|
(2,193
|
)
|
|
|
40,979
|
|
Accrued expense and other payables
|
|
|
(81,028
|
)
|
|
|
222,148
|
|
Net cash used in from operating activities
|
|
|
(1,004,014
|
)
|
|
|
(137,353
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Amount due from associated company
|
|
|
(51,201
|
)
|
|
|
—
|
|
Purchase of long term investments
|
|
|
(610,944
|
)
|
|
|
—
|
|
Purchase of property and equipment
|
|
|
(2,638
|
)
|
|
|
(15,617
|
)
|
Net cash used in investing activities
|
|
|
(664,783
|
)
|
|
|
(15,617
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds (repayments) from directors
|
|
|
(40,491
|
)
|
|
|
5,427
|
|
Proceeds from related parties
|
|
|
3,330,259
|
|
|
|
81,143
|
|
Net cash provided by financing activities
|
|
|
3,289,768
|
|
|
|
86,570
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATES ON CASH
|
|
|
28,942
|
|
|
|
(14,137
|
)
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
1,649,913
|
|
|
|
(80,537
|
)
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
691,199
|
|
|
|
105,432
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
2,341,112
|
|
|
$
|
24,895
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest expenses
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash paid for income tax
|
|
$
|
—
|
|
|
$
|
—
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
VITAXEL GROUP LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
(In U.S. dollars)
1.
|
ORGANIZATION AND BUSINESS
|
Vitaxel Group Limited (the “Company”
or “Vitaxel”), incorporated in Nevada, is engaged in direct selling industry and online shopping platform primarily
through its operating entities in Malaysia.
Vitaxel SDN BHD (“Vitaxel
SB”), was incorporated in Malaysia on August 10, 2012 and 100% owned by the Company. It is primarily engaged in the direct
selling industry utilizing a multi-level marketing model with an emphasis on travel, entertainment and lifestyle products and services.
Vitaxel Online Mall SDN BHD (“Vionmall”),
was incorporated in Malaysia on September 22, 2015 and 100% owned by the Company. It is primarily in developing online shopping
platforms geared to Vitaxel and its members and the third-party suppliers of products and services.
Vitaxel Singapore PTE. Ltd. (“Vitaxel
Singapore”) was incorporated in Singapore on February 16, 2016. This subsidiary was disposed on August 21, 2017.
2.
|
UNAUDITED INTERIM FINANCIAL STATEMENTS
|
The accompanying unaudited condensed
consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) for interim financial information under Article 8 of Regulation S-X.
They do not include all information and foot notes required by U.S. GAAP for complete financial statements. Except as disclosed
herein, there have been no material changes in the information disclosed in the notes to the consolidated financial statement for
the year ended December 31, 2017, included in the Company’s Form 10-K filed with the SEC. The interim unaudited consolidated
financial statements should be read in conjunction with those audited consolidated financial statements included in Form10-K.
In the opinion of management,
we have made all adjustments necessary to present a fair statements of the financial position as of June 30, 2018, results of operations
for the three and six months ended June 30, 2018 and 2017, and cash flows for the six months ended June 30, 2018 and 2017. All
significant intercompany transactions and balances are eliminated on consolidation. The results of operations for the six months
ended June 30, 2018 are not necessarily indicative of the results of operations for the entire fiscal year.
Recent Pronouncements
From time to time, new accounting
pronouncements are issued that we adopt as of the specified effective date. The Company believes that the impact of recently issued
standards that are not yet effective may have an impact on our results of operations and financial position.
In February 2016, the FASB issued
ASU No. 2016-02, Leases, to improve financial reporting about leasing transactions. This ASU will require organizations that lease
assets (“lessees”) to recognize a lease liability and a right-of-use asset on its balance sheet for all leases with
terms of more than twelve months. A lease liability is a lessee’s obligation to make lease payments arising from a lease,
measured on a discounted basis and a right-of-use asset represents the lessee’s right to use, or control use of, a specified
asset for the lease term. The amendments in this ASU simplify the accounting for sale and leaseback transactions primarily because
lessees must recognize lease assets and lease liabilities. This ASU leaves the accounting for the organizations that own the assets
leased to the lessee (“lessor”) largely unchanged except for targeted improvements to align it with the lessee accounting
model and Topic 606, Revenue from Contracts with Customers. ASU No. 2016-02 is effective for reporting periods beginning after
December 15, 2018. We do not expect the adoption of this guidance to have an impact on our consolidated financial statements.
In April 2016, the FASB issued
ASU 2016 – 10 “Revenue from Contract with Customers: identifying Performance Obligations and Licensing”. The
amendments in this Update clarify the two following aspects (a) contracts with customers to transfer goods and services in exchange
for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right
to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s
intellectual property (which is satisfied over time). The amendments in this Update are intended to reduce the degree of judgement
necessary to comply with Topic 606. This guidance is effective for reporting periods beginning after December 15, 2017. We do not
expect the adoption of this guidance to have an impact on our consolidated financial statements.
In August 2016, the FASB issued
ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments”. The new
guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.
ASU 2016-15 is effective for the Company beginning in the first quarter of fiscal 2019. Early adoption is permitted, provided that
all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method.
The Company is currently evaluating the impact of adopting this guidance.
In November 2016, the FASB issued
ASU 2016-18, “Statement of Cash Flows (Topic 230) Restricted Cash”. The new guidance requires that the reconciliation
of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include restricted cash and restricted
cash equivalents. If restricted cash is presented separately from cash and cash equivalents on the balance sheet, companies will
be required to reconcile the amounts presented on the statement of cash flows to the amounts on the balance sheet. Companies will
also need to disclose information about the nature of the restrictions. The guidance is effective for fiscal years beginning after
December 15, 2017, and interim periods within those fiscal years. The Company has determined that the adoption of this guidance
has no impact on its consolidated financial statements.
In January 2017, FASB issued
ASU 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business”. The amendments in this Update
is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions
should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas
of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning
after December 15, 2017, including interim periods within those periods. The Company has determined that the adoption of this guidance
has no impact on its consolidated financial statements.
On May 10, 2017, the Financial
Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) 2017-09 “Compensation—Stock
Compensation (Topic 718): Scope of Modification Accounting”, which provides guidance to clarify when to account for a change
to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is
required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as
a result of the change in terms or conditions. The guidance is effective prospectively for all companies for annual periods beginning
on or after December 15, 2017. Early adoption is permitted. The Company has determined that the adoption of this guidance has no
impact on its consolidated financial statements.
These unaudited consolidated
financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization
of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
For the period ended June 30
2018, the Company reported a net loss of $1,041,199 and negative working capital of $3,758,468. The Company had an accumulated
deficit of $7,817,673 as of June 30, 2018 due to the fact that the Company incurred losses during the years prior to June 30, 2018.
The continuation of the Company
as a going concern is dependent upon improving the profitability and the continuing financial support from its stockholders or
other capital sources. Management believes that the continuing financial support from the existing shareholders or external debt
financing will provide the additional cash to meet the Company’s obligations as they become due.
These consolidated financial
statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the outcome of the Company’s ability to continue as
a going concern.
4.
|
OTHER RECEIVABLES, PREPAYMENTS AND OTHER ASSETS
|
Other receivables, prepayments
and other assets consist of the following:
|
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
Deposits (1)
|
|
|
$
|
11,174
|
|
|
$
|
11,157
|
|
Prepayments (2)
|
|
|
|
55,416
|
|
|
|
1,679
|
|
Others (3)
|
|
|
|
1,852
|
|
|
|
31,469
|
|
|
|
|
$
|
68,442
|
|
|
$
|
44,305
|
|
(1) Deposits represented payments
for rental, utilities, and construction funds to government department.
(2) Prepayments mainly consists
of prepayment for insurance, consultancy fee and IT related fees.
(3) Others mainly consists other miscellaneous payments
Long-term investment consists
of the following:
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
Investment in associated companies
|
|
|
|
|
|
|
|
|
Vitaxel Corporation Thailand Co., Ltd (1)
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
27,539
|
|
|
$
|
27,539
|
|
Share of loss in investment in an associated company
|
|
|
(25,716
|
)
|
|
|
(25,716
|
)
|
Foreign currency translation adjustment
|
|
|
(1,823
|
)
|
|
|
(1,823
|
)
|
Total investment in associated companies
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Other long-term investments
|
|
|
|
|
|
|
|
|
Ho Wah Genting Group Ltd (2)
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
638,786
|
|
|
$
|
—
|
|
Foreign currency translation adjustment
|
|
|
(27,792
|
)
|
|
|
—
|
|
Total other long-term investments
|
|
$
|
610,994
|
|
|
$
|
—
|
|
Total Long-Term Investments
|
|
$
|
610,994
|
|
|
$
|
—
|
|
|
(1)
|
On
April 20, 2016, the Company invested 958,000 Thai Baht or $27,539 to Vitaxel Corporation Thailand Co., Ltd., a company registered
in Thailand, and holds 47.99% shares of it. The long-term investment is accounted using the equity method.
|
The
Company entered into a Sale and Purchase Agreement dated July 2, 2018 to sell the all the total and outstanding shares of Vitaxel
Corp (Thailand) Co. Ltd. for total proceeds of $10,000. The disposal has been completed as of the date of this report.
As of June 30, 2018, the Company has provided impairment on the amount due from Vitaxel Corporation Thailand Co., Ltd of $154,225.
|
(2)
|
During
the first quarter of 2018, the Company acquired 7,663,246 shares of common stock of Ho Wah Genting Group Limited (“HWGG”),
which is listed on the U.S. OTC (Pink) Market (stock code: HWGG), for consideration of MYR2,466,993, equivalent to $638,786, from
certain shareholders of HWGG.
|
The President of the Company, Dato’ Lim Hui Boon, is also the President of HWGG. The
relation are disclosed in note 9 RELATED PARTY TRANSACTIONS.
In the absence of active market participants and liquidity
for HWGG stock based on the review of the trading history of this stock, management concluded that there is no active market for
the stock. A quoted market price in an inactive market is not representative of fair value of the stock. Thus the management deemed
that the stock has no readily determinable fair value.
The Company has carried the investment in HWGG at its cost minus
impairment, if any. As of period ended June 30, 2018, management is evaluating the value of the investment and will make necessary
adjustment in future filing.
6.
|
PROPERTY AND EQUIPMENT, NET
|
Property and equipment, net consist of the following:
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
Office equipment
|
|
$
|
37,315
|
|
|
$
|
36,471
|
|
Computer equipment
|
|
|
103,221
|
|
|
|
102,862
|
|
Furniture and fittings
|
|
|
8,094
|
|
|
|
7,978
|
|
Electrical & fitting
|
|
|
375
|
|
|
|
375
|
|
Motor vehicle
|
|
|
17,009
|
|
|
|
16,983
|
|
Software and website
|
|
|
12,712
|
|
|
|
11,580
|
|
Renovations
|
|
|
109,021
|
|
|
|
108,860
|
|
|
|
|
287,747
|
|
|
|
285,109
|
|
Less: Accumulated depreciation
|
|
|
(68,476
|
)
|
|
|
(54,051
|
)
|
Balance at end of period/year
|
|
$
|
219,271
|
|
|
$
|
231,058
|
|
Depreciation expenses charged to the statements of
operations for the periods ended June 30, 2018 and 2017 were $14,425 (3 months $4,393) and $10,899 (3 months $5,449) respectively.
7.
|
ACCRUED EXPENSE AND OTHER PAYABLES
|
Accrued expense and other payables
consist of the following:
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
Provisions and accruals
|
|
$
|
73,578
|
|
|
$
|
148,326
|
|
Others (1)
|
|
|
338,207
|
|
|
|
344,487
|
|
Balance at end of period/year
|
|
$
|
411,785
|
|
|
$
|
492,813
|
|
|
(1)
|
Other payables mainly consist of members allocated redemption
points for commissions.
|
8.
|
RELATED PARTY BALANCES AND TRANSACTIONS
|
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
Amount due from related parties
|
|
|
|
|
|
|
|
|
Ho Wah Genting Berhad (1)
|
|
$
|
5,145
|
|
|
$
|
—
|
|
Ho Wah Genting Group Sdn Berhad (2)
|
|
|
265,842
|
|
|
|
18,149
|
|
Beedo Sdn Bhd (3)
|
|
|
22,400
|
|
|
|
14,837
|
|
Balance at end of year
|
|
$
|
293,387
|
|
|
$
|
32,986
|
|
|
|
|
|
|
|
|
|
|
Amount of due from an associated company
|
|
|
|
|
|
|
|
|
Vitaxel Corporation (Thailand) Limited (4)
|
|
$
|
—
|
|
|
$
|
103,024
|
|
Balance at end of year
|
|
|
—
|
|
|
|
103,024
|
|
Total Amount due from related parties
|
|
$
|
293,387
|
|
|
$
|
136,010
|
|
|
|
|
|
|
|
|
|
|
Amount of due to related parties
|
|
|
|
|
|
|
|
|
Dato’ Lim Hui Boon (5)
|
|
$
|
—
|
|
|
$
|
40,491
|
|
Ho Wah Genting Holiday Sdn Bhd (6)
|
|
|
4,307
|
|
|
|
1,703
|
|
Genting Highlands Taxi Services Sdn Bhd (7)
|
|
|
4,408
|
|
|
|
11,820
|
|
VSpark Malaysia Sdn Bhd (8)
|
|
|
3
|
|
|
|
4,967
|
|
Grande Legacy Inc. (9)
|
|
|
5,911,454
|
|
|
|
2,311,022
|
|
Balance at end of year
|
|
|
5,920,172
|
|
|
|
2,370,003
|
|
Total Amount due to related parties
|
|
$
|
5,920,172
|
|
|
$
|
2,370,003
|
|
The related party balances are unsecured, interest-free
and repayable on demand.
|
(1)
|
The
President of the Company, Dato’ Lim Hui Boon, is also the Group President of Ho Wah Genting Berhad (“HWGB”),
a company listed in Bursa Malaysia Main Market.
|
The Company recognized rent
expenses of $10,203 (2017 - $9,635) to HWGB for the six months ended June 30, 2018.
The Company has lease commitment
under an operating lease for its corporate office facility with HWGB. The lease expires by December 31, 2018 and the remaining
commitment for fiscal 2018 is $10,203.
|
(2)
|
The President of the Company, Dato’ Lim Hui Boon, is also the Group President of Ho Wah Genting Group Sdn Berhad (“HWGGSB”), a subsidiary of HWGG.
|
|
(3)
|
The President of the Company, Dato’ Lim Hui Boon, is a major shareholder of Beedo SDN BHD, holding 51% of share interest.
|
The Company recognized website
maintenance expenses of $nil (2017 - $51,553) to Beedo SDN BHD for the six months ended June 30, 2018.
|
(4)
|
The Company recognized product sales of $nil (2017 - $440,000) to an associated company, Vitaxel Corp. (Thailand) Limited for the six months ended June 30, 2018.
|
|
(5)
|
The amount due to the President of the Company, Dato’ Lim Hui Boon, as at December 31, 2017 were advances made to the Company.
|
|
(6)
|
A former director of the Company, Lim Chun Hoo, is also a director of Ho Wah Genting Holiday Sdn Bhd. On March 31, 2017, Lim Chun Hoo has resigned from the Company.
|
|
(7)
|
A director of the Company, Lim Wee Kiat, is also a director of Genting Highlands Taxi Services Sdn Bhd.
|
|
(8)
|
A director of a subsidiary (Vitaxel Online Mall Sdn Bhd), Liew Jenn Lim, is also a director of VSpark Malaysia Sdn Bhd.
|
The Company has engaged with
VSpark Malaysia Sdn Bhd during the year for marketing purposes. There were no transactions during the period.
|
(9)
|
A director of the Company, Leong Yee Ming, is also a director of Grande Legacy Inc.
|
On January 5, 2017, the Company
executed a license agreement with Grande Legacy Inc (“GL”). The agreement grants GL exclusive use of Vitaxel Marks
to operate a Vitaxel business in countries other than Malaysia, Singapore and Thailand. However, GL is still in the process of
obtaining online payment gateway for its credit card sales, GL is currently engaging Vitaxel SB to collect credit card sales proceeds
on behalf.
During the six months ended June
30, 2018, the Company incurred general and administrative expenses of $295,647 related to the operations of GL for no fee.
There are no share issuances during the six months
ended June 30, 2018.
10.
|
PROPOSED TRANSACTIONS
|
The
Company entered into a Share Sale Agreement (the “Agreement”) effective December 15, 2017 with Lim Hui Sing and Leong
Yee Ming (together, the “Sellers”) and Vitaxel SB (the “Purchaser”), as previously described in the Current
Report on Form 8-K filed with the Securities and Exchange Commission on December 19, 2017 as amended on June 11, 2018. Pursuant
to the terms of the Agreement, the Sellers will sell to the Purchaser all their shares in GL, a British Virgin Islands company,
so that the Company shall become the indirect owner of all of the issued and outstanding shares of the capital stock of Grande
Legacy. In consideration for such sale, the Company shall issue to each of the Sellers 37,500,000 shares of the Company. Leong
Yee Ming is the Chief Executive Officer and a director of the Company.
On
January 3, 2018 the parties to the Agreement executed and delivered an amendment (the “Amendment”) to the Agreement
which provided that the acquisition of GL shall close upon:
i.
The completion of the financial statements of GL being audited; and
ii.The
75,000,000 consideration shares being issued to the Sellers within 30 days of the shareholders of the Company approving the amendment
to the Articles of Incorporation of the Company for increasing the amount of authorized shares.
As of date of this financial
statement, the transaction has not yet been closed due to conditions precedent have not been met.
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Statement Regarding Forward-Looking Information
The following management’s discussion
and analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in
this report. The management’s discussion and analysis contains forward-looking statements, such as statements of our plans,
objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements.
When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,”
“estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,”
“may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking
statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to
differ materially from those expressed or implied by the forward-looking statements. The Company’s actual results and the
timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors.
The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring
after the date of this report.
The following discussion highlights the
Company’s results of operations and the principal factors that have affected our financial condition, as well as our liquidity
and capital resources for the periods described, and provides information that management believes is relevant for an assessment
and understanding of the statements of financial condition and results of operations presented herein. The following discussion
and analysis are based on the Company’s unaudited financial statements contained in this Quarterly Report, which we have
prepared in accordance with United States generally accepted accounting principles. You should read this discussion and analysis
together with such financial statements and the related notes thereto.
As used in this Quarterly Report, the terms
“we,” “us,” “Company,” and “our” mean Vitaxel Group Limited, unless otherwise indicated.
Overview; Recent Events
We are a global direct selling, multi-level
marketing (“MLM”) company offering travel, entertainment, lifestyle and other products and services principally through
electronic commerce commonly referred to as e-commerce. Through Vionmall, which went live in January 2016 for Vitaxel members and
April 2016 for general public, we employ online shopping web sites for retail sales direct to consumers. We do not develop or manufacture
the products and services which we offer. Our principal offices are located in Kuala Lumpur, Malaysia.
Unlike the traditional MLM business model
where most of the business model concentrates on particular products and/or services, our business model allows our members to
own a sub-domain through Vionmall where they can promote their own products and services (separate from our products and services).
We believe that this model is the first of its kind in Asia.
As of June 30, 2018, we had approximately
8,144 total members in Malaysia, Thailand and Singapore.
While sales within our local markets may
fluctuate due to economic, market and regulatory conditions, competitive pressures, political and social instability or for Company-specific
reasons, we believe that our geographic diversity and intended further geographic diversity mitigates and will continue to mitigate
our exposure to any one particular market.
Results of Operations –Three Months
Ended June 30, 2018 Compared to Three Months Ended June 30, 2017
The following discussion should be read
in conjunction with our unaudited consolidated financial statements in Item 1,
Financial Statements
, for the three months
ended June 30, 2018 and 2017 and the related notes thereto.
Revenue
We recognized $10,373 and $74,556 revenues
for the periods ended June 30, 2018 and 2017, respectively. The decrease in revenue is attributable to a decrease in our sales
due to fewer customers in the current period compared to the same period last year.
Cost of Sales
Cost of sales for the period ended June
30, 2018 was $4,528 compared to $38,773 for the period ended June 30, 2017. The decrease is comparable to the decrease of revenue
and attributable to lower sales.
Gross Profit
Gross profit for the period ended June
30, 2018 was $5,845 compared to $35,783 for the period ended June 30, 2017. The decrease is attributable to the lower revenue for
the current period as compared to the same period last year.
Operating Expenses
For the period ended June 30, 2018, we
incurred total operating expenses in the amount of $623,334, composed of selling expenses of $6,714 and general and administrative
expenses totalling $616,620. Whilst, for the period ended June 30, 2017, we incurred total operating expenses in the amount of
$227,704 which was composed of selling expenses of $155 and general and administrative expenses totalling 227,549. The increase
of $6,559 or 4232% for the selling expenses, along with the increase of $389,071 or 171% for the administrative expenses, caused
total operating expenses to increase by $395,630 or 174%. During the 3 months ended June 30, 2018, the Company has provided impairment
on the amount due from associated company and also incurred professional fees for evaluating potential listing in the Canadian
markets.
Results of Operations –Six Months
Ended June 30, 2018 Compared to Six Months Ended June 30, 2017
The following discussion should be read
in conjunction with our unaudited consolidated financial statements in Item 1,
Financial Statements
, for the three months
ended June 30, 2018 and 2017 and the related notes thereto.
Revenue
We recognized $23,088 and $558,029 revenues
for the periods ended June 30, 2018 and 2017, respectively. The decrease in revenue is attributable to a decrease in our sales
due to fewer customers in the current period compared to the same period last year.
Cost of Sales
Cost of sales for the period ended June
30, 2018 was $7,070 compared to $177,757 for the period ended June 30, 2017. The decrease is comparable to the decrease of revenue
and attributable to lower sales.
Gross Profit
Gross profit for the period ended June
30, 2018 was $16,018 compared to $380,272 for the period ended June 30, 2017. The decrease is attributable to the lower revenue
for the current period as compared to the same period last year.
Operating Expenses
For the period ended June 30, 2018, we
incurred total operating expenses in the amount of $930,951, composed of selling expenses of $7,395 and general and administrative
expenses totalling $923,556. Whilst, for the period ended June 30, 2017, we incurred total operating expenses in the amount of
$4,213,752 which was composed of selling expenses of $258 and general and administrative expenses totalling 4,213,494. The increase
of $7,137 or 2766% for the selling expenses, along with the decrease of $3,289,938 or 78% for the administrative expenses, caused
total operating expenses to decrease by $3,282,801 or 78%. In 2017, the Company issue 3,100,290 common shares under the Equity
Incentive Plan as bonus for its employee and this result in $3,409,604 expense to be absorbed by the Company.
Liquidity and Capital Resources
As of June 30, 2018, we had a cash balance
of $2,341,112. During the period ended June 30, 2018, net cash used in operating activities totalled $1,004,104. Net cash used
in investing activities totalled $664,783. Net cash provided by financing activities during the period totalled $3,289,768. The
resulting change in cash for the period was an increase of $1,649,913, which was primarily due to related parties proceeds during
the period.
As of June 30, 2018, we had current liabilities
of $6,483,130, which was composed of amount due to related parties of $5,920,172, commission payables of $150,678, accounts payable
of $495 and accruals and other payable of $411,785.
As of June 30, 2017, we had a cash balance
of $24,895. During the period ended June 30, 2017, net cash used in operating activities totalled $137,353. Net cash used in investing
activities totalled $15,617. Net cash provided by financing activities during the period totalled $86,570. The resulting change
in cash for the period was and decrease of $80,537, which was primarily due to cash outflow from operating activities, investing
activities and financing activities.
As of December 31, 2017, we had current
liabilities of $3,047,093, which was composed of amount due to related parties of $2,370,003, commission payables of $152,871,
accounts payable of $31,406 and accruals and other payables of $492,813.
We had net liabilities of $2,928,253 and
$1,915,996 as of June 30, 2018 and December 31, 2017, respectively.
Management estimates that the general operating
costs for the next 12 months will be approximately $1,500,000. At present, the Company may not have sufficient capital resources
to meet its anticipated operating and capital requirements for the next 12 months. The Company anticipates receiving royalty payments
from its licencees starting the third quarter of 2018. Management is also evaluating other options, including obtaining financing
through private placements, charging licensees administration fees, and entering additional licencing agreements. The Company will
continue to monitor the current economic and financial market conditions and evaluate their impact on the Company’s liquidity
and future prospects.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements
including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other
benefits.
Critical Accounting Policies and Estimates
There are no material changes from the
critical accounting policies set forth in “Management’s Discussion and Analysis of Financial Condition and Results
of Operations”. Please refer to Note 2 Summary of Significant Accounting Policies of the Financial Statements for disclosures
regarding the critical accounting policies related to our business.
Contractual Obligations
Not applicable.