ITEM
1.
|
FINANCIAL
STATEMENTS (UNAUDITED)
|
VITAXEL
GROUP LIMITED
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
U.S. dollars)
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
(Unaudited)
|
|
|
2017
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,175,170
|
|
|
$
|
691,199
|
|
Account receivable, net
|
|
|
507
|
|
|
|
—
|
|
Amount due from related parties
|
|
|
262,549
|
|
|
|
136,010
|
|
Inventories
|
|
|
20,395
|
|
|
|
28,525
|
|
Other receivables, prepayments and other current assets
|
|
|
77,360
|
|
|
|
44,305
|
|
Total current assets
|
|
|
2,535,981
|
|
|
|
900,039
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Long term investments
|
|
|
—
|
|
|
|
—
|
|
Property and equipment, net
|
|
|
209,517
|
|
|
|
231,058
|
|
Total non-current assets
|
|
|
209,517
|
|
|
|
231,058
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
2,745,498
|
|
|
$
|
1,131,097
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Amounts due to related parties
|
|
$
|
5,819,034
|
|
|
$
|
2,370,003
|
|
Commission payables
|
|
|
146,274
|
|
|
|
152,871
|
|
Accounts payable
|
|
|
17,952
|
|
|
|
31,406
|
|
Accrued expense and other payables
|
|
|
365,786
|
|
|
|
492,813
|
|
Total current liabilities
|
|
|
6,349,046
|
|
|
|
3,047,093
|
|
TOTAL LIABILITIES
|
|
|
6,349,046
|
|
|
|
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
|
|
|
(8,870,547
|
)
|
|
|
(6,776,474
|
)
|
Accumulated other comprehensive income
|
|
|
211,791
|
|
|
|
105,271
|
|
Total stockholders’ equity
|
|
|
(3,603,548
|
)
|
|
|
(1,915,996
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
2,745,498
|
|
|
$
|
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
September 30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
REVENUE
|
|
$
|
8,250
|
|
|
$
|
13,803
|
|
|
$
|
31,338
|
|
|
$
|
554,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE
|
|
|
(3,859
|
)
|
|
|
(7,389
|
)
|
|
|
(10, 929
|
)
|
|
|
(185,146
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
4,391
|
|
|
|
6,414
|
|
|
|
20,409
|
|
|
|
369,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expense
|
|
|
151
|
|
|
|
(433
|
)
|
|
|
(7,244
|
)
|
|
|
(691
|
)
|
General and administrative expenses
|
|
|
(325,562
|
)
|
|
|
(290,608
|
)
|
|
|
(1,249,118
|
)
|
|
|
(4,504,102
|
)
|
Total operating expenses
|
|
|
(325,411
|
)
|
|
|
(291,041
|
)
|
|
|
(1,256,362
|
)
|
|
|
(4,504,793
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(321,020
|
)
|
|
|
(284,627
|
)
|
|
|
(1,235,953
|
)
|
|
|
(4,135,790
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME/(EXPENSE), NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
160,374
|
|
|
|
200
|
|
|
|
154,833
|
|
|
|
43,630
|
|
Other expense
|
|
|
(592,228
|
)
|
|
|
(24,441
|
)
|
|
|
(712,953
|
)
|
|
|
(24,635
|
)
|
Total other income / (expense), net
|
|
|
(431,854
|
)
|
|
|
(24,241
|
)
|
|
|
(558,120
|
)
|
|
|
19,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(752,873
|
)
|
|
$
|
(308,868
|
)
|
|
$
|
(1,794,073
|
)
|
|
$
|
(4,116,595
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
77,578
|
|
|
|
214,920
|
|
|
|
106,520
|
|
|
|
(12,019
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL COMPREHENSIVE LOSS
|
|
$
|
(675,295
|
)
|
|
$
|
(93,948
|
)
|
|
$
|
(1,687,552
|
)
|
|
$
|
(4,128,614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
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 September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,794,073
|
)
|
|
$
|
(4,116,595
|
)
|
Items not involving cash:
|
|
|
|
|
|
|
|
|
Depreciation – property and equipment
|
|
|
18,796
|
|
|
|
19,367
|
|
Impairment on long term investments
|
|
|
596,324
|
|
|
|
—
|
|
Impairment on amount due from related parties
|
|
|
21,864
|
|
|
|
—
|
|
Impairment on amount due from associate company
|
|
|
150,535
|
|
|
|
—
|
|
Issuance of employee equity incentive plan
|
|
|
—
|
|
|
|
3,409,604
|
|
Property, plant and equipment written off
|
|
|
3,327
|
|
|
|
—
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
(507
|
)
|
|
|
1,944
|
|
Other receivables, prepayments and other current assets
|
|
|
(33,055
|
)
|
|
|
(1,124
|
)
|
Inventories
|
|
|
8,130
|
|
|
|
26,496
|
|
Amount due from associated company
|
|
|
—
|
|
|
|
(112,119
|
)
|
Amount due from related parties
|
|
|
—
|
|
|
|
12,216
|
|
Accounts Payable
|
|
|
(13,454
|
)
|
|
|
377
|
|
Commission payables
|
|
|
(6,597
|
)
|
|
|
30,808
|
|
Accrued expense and other payables
|
|
|
(127,027
|
)
|
|
|
162,508
|
|
Net cash used in from operating activities
|
|
|
(1,175,737
|
)
|
|
|
(566,518
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Amount due from associated company
|
|
|
(47,511
|
)
|
|
|
—
|
|
Purchase of long term investments
|
|
|
(596,324
|
)
|
|
|
—
|
|
Purchase of property and equipment
|
|
|
(582
|
)
|
|
|
(39,216
|
)
|
Net cash used in investing activities
|
|
|
(644,417
|
)
|
|
|
(39,216
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds (repayments) from directors
|
|
|
(40,491
|
)
|
|
|
3,683
|
|
Proceeds from related parties
|
|
|
3,238,095
|
|
|
|
620,254
|
|
Net cash provided by financing activities
|
|
|
3,197,604
|
|
|
|
623,937
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATES ON CASH
|
|
|
106,521
|
|
|
|
46,843
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
1,483,971
|
|
|
|
65,046
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
691,199
|
|
|
|
105,432
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
2,175,170
|
|
|
$
|
170,478
|
|
|
|
|
|
|
|
|
|
|
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,
the Company has made all adjustments necessary to present a fair statements of the financial position as of September 30,
2018, results of operations for the three and nine months ended September 30, 2018 and 2017, and cash flows for the nine months
ended September 30, 2018 and 2017. All significant intercompany transactions and balances are eliminated on consolidation. The
results of operations for the nine months ended September 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 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.
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 adoption of this guidance had no impact on its consolidated financial
statements.
In
August 2018, the FASB issued ASU 2018-13,
Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
,
which improves fair value disclosure requirements by removing disclosures that are not cost beneficial, clarifying disclosures’
specific requirements and adding relevant disclosure requirements. This ASU is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range
and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description
of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the
initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective
date. Early adoption is permitted and an entity can choose to early adopt any removed or modified disclosures upon issuance of
this ASU and delay adoption of the additional disclosures until their effective date. The Company is still evaluating the impact
that the adoption of ASU 2018-13 will have on the condensed consolidated financial statements and has not yet decided whether
or not to early adopt the amendments.
Revenue Recognition
Effective January 1, 2018, the
Company recognizes revenue pursuant to FASB Accounting Standards Codification 606 (“ASC 606”)
Revenue from
Contracts with Customers
, the standard applies five step model (i) The standard applies to a company’s contracts with
customers (ii) The unit of account for revenue recognition under the new standard is a performance obligation (a good or service)
and the performance obligations will be accounted for separately if they are distinct (iii) The transaction price is determined
based on the amount of consideration that a company expects to be entitled to from a customer (iv) The transaction price is allocated
to all the separate performance obligations in an arrangement, and (v) Revenue will be recognized when an entity satisfies each
performance obligation by transferring control of the promised goods or services to the customer. Goods or services can transfer
at a point in time or over time.
Product sales − The Company
recognizes revenue when it satisfies each performance obligation by transferring control of the goods to the independent members
or purchasers of the products. Product sales are recognized net of product returns, discounts and taxes. A reserve for product
returns is accrued based on historical experience. There was no deferred revenue accrued as of September 30, 2018.
Membership fee − The Company
recognizes the membership fee revenue over the term of the membership, which is 12 months. The revenue will not be recognized
until the 10 days cooling-off period is expired.
ASC was adopted January 1, 2018
and applied using the partial retrospective method. There was no impact from the adoption of ASC 606 on the Company’s accounting
for revenue.
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 September 30, 2018, the Company reported a net loss of $1,794,073 and negative working capital of $3,813,065.
The Company had an accumulated deficit of $8,870,547 as of September 30, 2018 due to the fact that the Company incurred losses
during the years prior to September 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:
|
|
|
September 30,
2018
|
|
|
December 31,
2017
|
|
Deposits (1)
|
|
|
$
|
26,243
|
|
|
$
|
11,157
|
|
Prepayments (2)
|
|
|
|
50,624
|
|
|
|
1,679
|
|
Others (3)
|
|
|
|
493
|
|
|
|
31,469
|
|
|
|
|
$
|
77,360
|
|
|
$
|
44,305
|
|
(1) Deposits
represented payments for rental, utilities, and valuer’s retainer fees.
(2) Prepayments
mainly consists of prepayment for inventories, insurance, consultancy fee and IT related fees.
(3) Others
mainly consists other miscellaneous payments
Long-term
investment consists of the following:
|
|
September 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
|
|
|
$
|
—
|
|
Impairment on carrying amount
|
|
|
(596,324
|
)
|
|
|
—
|
|
Foreign currency translation adjustment
|
|
|
(42,462
|
)
|
|
|
—
|
|
Total other long-term investments
|
|
$
|
—
|
|
|
$
|
—
|
|
Total Long-Term Investments
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(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 September 30, 2018, the Company has provided impairment on the amount due from Vitaxel Corporation Thailand Co., Ltd
of $150,535.
|
|
(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
(approximately US$638,786 as calculated at the date of transaction), from certain shareholders of HWGG. This resulted in ownership
by the Company of approximately 1.53% of HWGG
The President of the Company, Dato’ Lim Hui Boon, is also the President of HWGG.
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. The Company does not rely on quoted market prices
since the HWGG stock is highly illiquid and inactive and said prices are not necessarily indicative or representative
of fair market value of HWGG stock. Thus the management deemed that the stock has no readily determinable fair value.
As
of period ended September 30, 2018, the Company has carried the investment in HWGG at its cost minus impairment.
|
6.
|
PROPERTY
AND EQUIPMENT, NET
|
Property
and equipment, net consist of the following:
|
|
September 30,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
Office equipment
|
|
$
|
36,226
|
|
|
$
|
36,471
|
|
Computer equipment
|
|
|
104,860
|
|
|
|
102,862
|
|
Furniture and fittings
|
|
|
7,592
|
|
|
|
7,978
|
|
Electrical & fitting
|
|
|
—
|
|
|
|
375
|
|
Motor vehicle
|
|
|
16,602
|
|
|
|
16,983
|
|
Software and website
|
|
|
14,221
|
|
|
|
11,580
|
|
Renovations
|
|
|
102,863
|
|
|
|
108,860
|
|
|
|
|
282,364
|
|
|
|
285,109
|
|
Less: Accumulated depreciation
|
|
|
(72,847
|
)
|
|
|
(54,051
|
)
|
Balance at end of period/year
|
|
$
|
209,517
|
|
|
$
|
231,058
|
|
Depreciation
expenses charged to the statements of operations and comprehensive loss for the periods ended September 30, 2018 and 2017 were
$18,796 (3 months $4,371) and $19,367 (3 months $8,468) respectively.
7.
|
ACCRUED
EXPENSE AND OTHER PAYABLES
|
Accrued
expense and other payables consist of the following:
|
|
September 30,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
Provisions and accruals
|
|
$
|
45,626
|
|
|
$
|
148,326
|
|
Others (1)
|
|
|
320,160
|
|
|
|
344,487
|
|
Balance at end of period/year
|
|
$
|
365,786
|
|
|
$
|
492,813
|
|
|
(1)
|
Other
payables mainly consist of members allocated redemption points for commissions.
|
8.
|
RELATED
PARTY BALANCES AND TRANSACTIONS
|
|
|
September 30,
2018
|
|
|
December 31,
2017
|
|
Amount due from related parties
|
|
|
|
|
|
|
|
|
Ho Wah Genting Berhad (1)
|
|
$
|
5,076
|
|
|
$
|
—
|
|
Ho Wah Genting Group Sdn Berhad (2)
|
|
|
257,473
|
|
|
|
18,149
|
|
Beedo Sdn Bhd (3)
|
|
|
—
|
|
|
|
14,837
|
|
Balance at end of year
|
|
$
|
262,549
|
|
|
$
|
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
|
|
$
|
262,549
|
|
|
$
|
136,010
|
|
|
|
|
|
|
|
|
|
|
Amount of due to related parties
|
|
|
|
|
|
|
|
|
Dato’ Lim Hui Boon (5)
|
|
$
|
—
|
|
|
$
|
40,491
|
|
Ho Wah Genting Holiday Sdn Bhd (6)
|
|
|
2,197
|
|
|
|
1,703
|
|
Genting Highlands Taxi Services Sdn Bhd (7)
|
|
|
—
|
|
|
|
11,820
|
|
VSpark Malaysia Sdn Bhd (8)
|
|
|
29
|
|
|
|
4,967
|
|
Grande Legacy Inc. (9)
|
|
|
5,816,807
|
|
|
|
2,311,022
|
|
Balance at end of year
|
|
|
5,819,034
|
|
|
|
2,370,003
|
|
Total Amount due to related parties
|
|
$
|
5,819,034
|
|
|
$
|
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 $15,208 (2017 - $9,635) to HWGB for the nine months ended September 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 $5,069.
|
(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 nine months ended September
30, 2018.
|
(4)
|
The
Company recognized product sales of $nil (2017 - $440,000) to an associated company, Vitaxel Corp. (Thailand) Limited for
the nine months ended September 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.
On
July 1, 2018, the Company signed an amendment to licensing agreement with GL, providing the revised terms of royalty payment.
GL shall pay the Company royalty equal to 55% of net profits on a quarterly basis, commencing July 1, 2018. During the nine months
ended September 30, 2018, the Company recognized $nil royalty income due GL incurring losses for the 3 months ended September
30, 2018.
On
July 1, 2018, Vitaxel SB has entered into a management and administrative services agreement with GL. The agreement is to provide
certain management and administrative support services for the operation of GL. For these services, Vitaxel SB shall charge a
monthly management fee of $40,000 to GL. The Company recognized management fee income of $120,000 charged to GLfor the nine months
ended September 30, 2018.
During
the nine months ended September 30, 2018, the Company incurred general and administrative expenses of $295,647 related to the
operations of GL for no fee.
There were no share issuances during the nine months ended September 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 Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 19, 2017
as amended on January 3, 2018 and 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, resulting in the Company becoming the indirect owner of all of the issued
and outstanding shares of the capital stock of GL. In consideration for such sale, the Company agreed to issue to the Sellers an
aggregate of 75,000,000 shares 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 satisfaction of both of the following conditions:
i.
The completion of the financial statements of GL being audited; and
ii.The issuance of 75,000,000 shares of the Company to the Sellers within 30 days of the Company obtaining shareholder
approval of the amendment to the Articles of Incorporation of the Company for increasing the amount of authorized shares.
On September 21, 2018, the
Company received legal letter from the shareholders of GL to terminate the acquisition agreement and alleging that the Company
exceeded its time to satisfy said conditions, which were to be completed by June 15, 2018.
As at date of this report, the Company is still exploring its legal rights in the above transaction and whether
it wishes to pursue said rights or remedies.
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 and its subsidiaries on a consolidated basis, unless otherwise indicated or the context
requires otherwise.
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 September 30, 2018, we had approximately 8,217 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.
Termination of Legacy Transaction
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 January 3, 2018 and June 11, 2018. Pursuant to the terms of the Agreement,
the Sellers were to sell to Purchaser all their shares of Grand Legacy, Inc., a British Virgin Islands company (“GL”),
which would have resulted in the Company becoming the indirect owner of all of the issued and outstanding shares of the capital
stock of GL. The closing of the transaction was to occur upon completion of the financial statements of GL being audited and the
issuance of 75,000,000 consideration shares to sellers within 30 days of shareholder approval of the amendment to the Company’s
Articles of Incorporation increasing our capitalization.
On September 21, 2018,
the Company received legal letter from the shareholders of GL declaring the agreement terminated, and alleged that the Company
exceeded its allotted time to satisfy the closing conditions.
While the Company’ disagrees with GL’s assessment, as at date of this Report, the Company has
not made a final determination as to what actions it will take, if any, or whether it would like to allow the foregoing transaction
to terminate.
Results
of Operations –Three Months Ended September 30, 2018 Compared to Three Months Ended September 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 September 30, 2018 and 2017 and the related notes thereto.
Revenue
We
recognized $8,250 and $13,803 revenues for the periods ended September 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 September 30, 2018 was $3,859 compared to $7,389 for the period ended September 30, 2017. The decrease
is comparable to the decrease of revenue and attributable to lower sales.
Gross
Profit
Gross
profit for the period ended September 30, 2018 was $4,391 compared to $6,414 for the period ended September 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 September 30, 2018, we
incurred total operating expenses in the amount of $325,411, composed of selling expenses of -$151 and general and administrative
expenses totaling $325,562. Whilst, for the period ended September 30, 2017, we incurred total operating expenses in the amount
of $291,041 which was composed of selling expenses of $433 and general and administrative expenses totaling 290,608. The decrease
of $584 or 135% for the selling expenses, along with the decrease of $34,954 or 12% for the administrative expenses, caused total
operating expenses to decrease by $34,954 or 12%.
Results
of Operations –Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
The
following discussion should be read in conjunction with our unaudited consolidated financial statements in Item 1,
Financial
Statements
, for the nine months ended September 30, 2018 and 2017 and the related notes thereto.
Revenue
We
recognized $31,338 and $554,149 revenues for the periods ended September 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 September 30, 2018 was $10,929 compared to $185,146 for the period ended September 30, 2017. The
decrease is comparable to the decrease of revenue and attributable to lower sales.
Gross
Profit
Gross
profit for the period ended September 30, 2018 was $20,409 compared to $369,003 for the period ended September 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 September 30, 2018,
we incurred total operating expenses in the amount of $1,256,362, composed of selling expenses of $7,244 and general and administrative
expenses totaling $1,249,118. Whilst, for the period ended September 30, 2017, we incurred total operating expenses in the amount
of $4,504,793 which was composed of selling expenses of $691 and general and administrative expenses totaling $4,514,102. The increase
of $6,553 or 948% for the selling expenses, along with the decrease of $3,254,984 or 72% for the administrative expenses, caused
total operating expenses to decrease by $3,248,431 or 72%. 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 September 30, 2018, we had a cash
balance of $2,175,170. During the period ended September 30, 2018, net cash used in operating activities totaled $1,175,737. Net
cash used in investing activities totaled $644,417. Net cash provided by financing activities during the period totaled $3,197,604.
The resulting change in cash for the period was an increase of $1,483,971, which was primarily due to related parties proceeds
during the period.
As
of September 30, 2018, we had current liabilities of $6,349,046, which was composed of amount due to related parties of $5,819,034,
commission payables of $146,274, accounts payable of $17,952 and accruals and other payable of $365,786.
As of September 30, 2017, we had a cash
balance of $170,478. During the period ended September 30, 2017, net cash used in operating activities totaled $566,518. Net cash
used in investing activities totaled $39,216. Net cash provided by financing activities during the period totaled $623,937. The
resulting change in cash for the period was an increase of $65,046, which was primarily due to related parties proceeds during
the period.
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 $3,603,548 and $1,915,996 as of September 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 licensees starting the last quarter of 2018. Management is also evaluating other options, including obtaining financing
through private placements, charging licensees administration fees, and entering additional licensing 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.