UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: September 30, 2018

 

or

 

o

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File Number: 333-209166

 

TRON GROUP INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

(State or other jurisdiction

of incorporation or organization)

 

(IRS Employer

Identification No.)

 

K-2-8 2 nd Floor, Kuchai Business Park

Jalan 1/127 off Jalan, Kuchai Lama

Kuala Lumpur, Malaysia

 

58200

(Address of principal executive offices)

 

(Zip Code)

 

+603 7987 8688

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x YES    o NO

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o YES    x NO

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

o

 

Accelerated filer

o

Non-accelerated filer

o

 

Smaller reporting company

x

 

(Do not check if a smaller reporting company)

Emerging growth company

o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) o YES    x NO

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. o YES    x NO

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at September 30, 2018

Common Stock, $0.0001 par value

 

163,329,385

 

 
 
 
 

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

 

3

 

Item 2.

Management’s Discussion and Analysis of Financial Condition or Plan of Operation

 

8

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

11

 

Item 4.

Controls and Procedures

 

11

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

13

 

Item 1A.

Risk Factors

 

13

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

13

 

Item 3.

Defaults Upon Senior Securities

 

13

 

Item 4.

Mine Safety Disclosures

 

13

 

Item 5.

Other Information

 

13

 

Item 6.

Exhibits

 

13

 

SIGNATURES

 

14

 

 
2
 
Table of Contents

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Unaudited Condensed Consolidated Financial Statements

 

TRON GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amount expressed in United States Dollars (“US$”), except for number of shares)

.

 

 

 

September 30,

2018

 

 

December 31,

2017

 

 

 

(Unaudited)

 

 

(Audited)

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and bank balances

 

$ 62,761

 

 

$ 99,730

 

Accounts receivable, net

 

 

138,825

 

 

 

88,911

 

Other receivables, deposits & prepayments

 

 

211,672

 

 

 

54,920

 

Current tax assets

 

 

3,314

 

 

 

2,027

 

Inventories

 

 

116,399

 

 

 

162,522

 

Total current assets

 

 

532,971

 

 

 

408,110

 

 

 

 

 

 

 

 

 

 

Non-current asset:

 

 

 

 

 

 

 

 

Property, plant & equipment

 

 

181,103

 

 

 

257,818

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 714,074

 

 

$ 665,928

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Account payable, trade

 

$ 248,418

 

 

$ 310,849

 

Amount owing to a related party

 

 

8,350,796

 

 

 

8,359,553

 

Amount owing to director

 

 

99,524

 

 

 

23,472

 

Current portion of obligation under finance lease

 

 

12,795

 

 

 

17,729

 

Other payables & accrued liabilities

 

 

1,286,798

 

 

 

907,034

 

Total current liabilities

 

 

9,998,331

 

 

 

9,618,637

 

 

 

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Non-current portion of obligation under finance lease

 

 

-

 

 

 

8,752

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

$ 9,998,331

 

 

$ 9,627,389

 

Stockholders’ deficit:

 

 

 

 

 

 

 

 

Authorized:

 

 

 

 

 

 

 

 

Common stock, a par value of $0.001 500,000,000 common shares, authorized Issued and outstanding: 163,329,385 shares issued and outstanding respectively

 

$ 163,329

 

 

$ 163,329

 

Additional paid in capital

 

 

2,697,901

 

 

 

2,697,901

 

Accumulated other comprehensive income

 

 

1,062,637

 

 

 

941,267

 

Accumulated deficit

 

 

(12,220,656 )

 

 

(11,879,174 )

Total stockholders’ deficit

 

 

(8,296,789 )

 

 

(8,076,677 )

Non-controlling interest

 

 

(987,468 )

 

 

(884,784 )

 

 

 

 

 

 

 

 

 

Total deficit

 

$ (9,284,257 )

 

$ (8,961,461 )

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND DEFICIT

 

$ 714,074

 

 

$ 665,928

 

 

The accompanying notes are an integral part of these financial statements

 

 
3
 
Table of Contents

  

TRON GROUP INC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

 

(Amount expressed in United States Dollars (“US$”), except for number of shares)

 

 

 

Three Months ended

September 30

 

 

Nine Months ended

September 30

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues, net

 

$ 315,819

 

 

$ 338,394

 

 

$ 903,754

 

 

$ 1,375,276

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

(148,280 )

 

 

(192,935 )

 

 

(475,018 )

 

 

(1,131,755 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

167,539

 

 

 

145,459

 

 

 

428,736

 

 

 

243,521

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

(247,150 )

 

 

(255,144 )

 

 

(947,853 )

 

 

(869,033 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(79,611 )

 

 

(109,685 )

 

 

(519,117 )

 

 

(625,512 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense)/income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(203 )

 

 

(588 )

 

 

(869 )

 

 

(1,403 )

Other income

 

 

1,629

 

 

 

9,304

 

 

 

7,580

 

 

 

9,441

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

$ (78,185 )

 

$ (100,969 )

 

$ (512,406 )

 

$ (617,474 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

 

(78,185 )

 

 

(100,969 )

 

 

(512,406 )

 

 

(617,474 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to non-controlling interests

 

 

25,008

 

 

 

23,473

 

 

 

170,924

 

 

 

21,466

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to the Company

 

$ (53,177 )

 

$ (77,496 )

 

$ (341,482 )

 

$ (596,008 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income/(expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- Foreign exchange adjustment gain/(loss)

 

 

230,798

 

 

 

(218,907 )

 

 

189,610

 

 

 

(448,409 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE PROFIT/(LOSS)

 

$ 152,613

 

 

$ (296,403 )

 

$ (322,796 )

 

$ (1,044,417 )

Comprehensive (profit)/loss attributable to non-controlling interest

 

 

(58,056 )

 

 

106,675

 

 

 

102,684

 

 

 

375,886

 

Comprehensive profit/(loss) attributable to the Company

 

$ 94,557

 

 

$ (189,728 )

 

$ (220,112 )

 

$ (668,531 )

 

The accompanying notes are an integral part of these financial statements

 

 
4
 
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TRON GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Amount expressed in United States Dollars (“US$”), except for number of shares )

 

 

 

Nine months

ended

September 30,

2018

 

 

Nine months

ended

September 30,

2017

 

 

 

(unaudited)

 

 

(unaudited)

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$ (512,406 )

 

$ (617,474 )

Adjustments for :

 

 

 

 

 

 

 

 

Depreciation

 

 

74,142

 

 

 

86,961

 

Property plant & equipment written off

 

 

8,756

 

 

 

-

 

Operating loss before working capital changes

 

 

(429,508 )

 

 

(530,513 )

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Inventories

 

 

46,123

 

 

 

(248,976 )

Account receivables, net

 

 

(206,666 )

 

 

(469,364 )

Account payable, other payable and accrued liabilities

 

 

317,333

 

 

 

755,303

 

Current tax assets

 

 

(1,287 )

 

 

-

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

(274,005 )

 

 

(493,550 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

(3,907 )

 

 

(16,842 )

Net cash used in investing activities

 

 

(3,907 )

 

 

(16,842 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Advances from/(Repayment to) directors

 

 

76,052

 

 

 

(3,809 )

Repayments on finance lease

 

 

(13,686 )

 

 

(11,478 )

Advances from a related party

 

 

(8,757 )

 

 

715,176

 

Net cash generated from financing activities

 

 

53,609

 

 

 

699,889

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

187,334

 

 

 

(466,692 )

(Decrease)/Increase in cash

 

 

(36,969 )

 

 

(277,193 )

Cash, beginning

 

 

99,730

 

 

 

352,238

 

Cash, ending

 

$ 62,761

 

 

$ 75,043

 

 

 

 

 

 

 

 

 

 

Supplementary cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

869

 

 

$

1,324

 

Income taxes paid

 

$

1,287

 

 

$

-

 

 

The accompanying notes are an integral part of these financial statements.

 

 
5
 
Table of Contents

 

TRON GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Amount expressed in United States Dollars (“US$”), except for number of shares)

 

 

 

Common stock

 

 

 Additional

 

 

Accumulated

other

 

 

 

 

 

 Total Tron Group

 

 

Non -

 

 

 

 

 

 

No. of

share

 

 

Amount

 

 

paid in

capital

 

 

comprehensive

income

 

 

Accumulated deficit

 

 

stockholders’

deficit

 

 

 

controlling

interests

 

 

Total

deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2017

 

 

163,329,385

 

 

$ 163,329

 

 

$ 2,697,901

 

 

$ 941,267

 

 

$ (11,879,174 )

 

$ (8,076,677 )

 

$ (884,784 )

 

$ (8,961,461 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(341,482 )

 

 

(341,482 )

 

 

(170,924 )

 

 

(512,406 )

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

121,370

 

 

 

-

 

 

 

121,370

 

 

 

68,240

 

 

 

189,610

 

Balance as of September 30, 2018

 

 

163,329,385

 

 

$ 163,329

 

 

$ 2,697,901

 

 

$ 1,062,637

 

 

$ (12,220,656 )

 

$ (8,296,789 )

 

$ (987,468 )

 

$ (9,284,257 )

 

The accompanying notes are an integral part of these financial statements.

 

 
6
 
Table of Contents

 

TRON GROUP INC.

NOTE TO THE CONDENSED FINANCIAL STATEMENTS

(Amount expressed in United States Dollars (“US$”), except for number of shares)

 

ITEM 1. BASIS OF PRESENTATION

 

Unaudited Interim Financial Statements

 

These unaudited interim financial statements may not include all information and footnotes required by US GAAP for complete financial statement disclosure. However, except as disclosed herein, there have been no material changes in the information contained in the notes to the audited financial statements for the year ended December 31, 2017, included in the Company’s Form 10-K and filed with the Securities and Exchange Commission. These unaudited interim financial statements should be read in conjunction with the audited financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for fair presentation and consisting solely of normal recurring adjustments have been made. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

 

Going Concern

 

These financial statements have been prepared on a going concern basis. The Company had incurred net loss during the nine months ended September 30, 2018 amounted to $512,406 and had net current liabilities and stockholders’ deficit of $9,465,360 and $8,296,789. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.

 

Management has plans to seek additional capital through a private placement of its common stock or further director loans as needed. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue.

 

Related Party Transactions

 

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Parties are also considered to be related if they are subject to common control or common significant influence. The amount due to a related party represented the advances from a Company in which a shareholder has substantial financial interest. Such advances are non-interest bearing and due upon demand.

 

Recent Accounting Pronouncements

 

Recent pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the financial statements of the Company.

 

Subsequent Event

 

In accordance with ASC 855, Subsequent Events, the Company has evaluated subsequent events through the date of issuance of the unaudited interim financial statements.

 

 
7
 
Table of Contents

  

Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our consolidated unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

 

Unless otherwise specified in this quarterly report, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to shares of our common stock.

 

As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean TRON Group Inc., unless otherwise indicated.

 

Corporate Overview

 

We were incorporated under the name Plush Corporation on October 20, 2015, under the laws of the State of Nevada. Our business consisted of designing, marketing and selling luxury accessories for men online. Management has decided not to pursue this line of business, and has discontinued operations involving luxury accessories.

 

November 3, 2016, a majority of stockholders of our company and our board of directors approved a change of name of our company from Plush Corp. to TRON Group Inc., an increase to authorized capital from 75,000,000 shares of common stock, par value $0.001 to 500,000,000 shares of common stock, par value $0.001 and a forward stock split of our issued and outstanding shares of common stock on a basis of one (1) old share for twenty (20) new shares of common stock.

 

A Certificate of Amendment increasing our authorized capital and changing the name of our company was filed with the Nevada Secretary of State with an effective date of December 6, 2016.

 

The name change and forward stock split became effective with the OTC Markets at the opening of trading on December 28, 2016, and our trading symbol was changed to “TGRP”.

 

On January 26, 2018, TRON Group Inc. entered into a Share Exchange Agreement to acquired 6,401,500 shares of capital stock of Talk Focus Sdn Bhd (“Talk Focus”) and in exchange issued 3,329,385 restricted shares of its Common Stock at $0.25 per share in acquiring 64.015% in the equity shares of Talk Focus (the “Reverse Merger”) from Eric Yap, the director of TRON Group Inc. Upon completion of the Share Exchange Transaction, the Company’s major shareholder, Eric Yap, also the prior shareholder of Talk Focus then owned approximately 51.05% of the Common Stock of TGRP.

 

The acquisition of Talk Focus was accounted for as a recapitalization effected by a share exchange, wherein Talk Focus is considered the acquirer for accounting and financial reporting purposes (legal acquiree) with no adjustment to the historical basis of its assets and liabilities. Talk Focus’s Shareholders become the majority shareholders and have control of the Company. TRON Group Inc. was a non-operating public shell prior to the acquisition and as a result of the acquisition of Talk Focus, the Company is no longer a shell company. Pursuant to Securities and Exchange Commission (“SEC”) rules, the merger or acquisition of a private operating company into a non-operating public shell with nominal net assets is considered a capital transaction in substance, rather than a business combination. The historical financial statements for periods prior to December 31, 2017 are those of Talk Focus, except that the equity section and earnings per share have been retroactively restated to reflect the recapitalization.

 

The Company is organized for investment holding and its principal place of operation is located at K-2-8, 2 nd floor, Jalan Kuchai Maju 10, Kuchai Entrepreneurs Park, Jalan 1/127 Kuchai Lama, 58200 Kuala Lumpur.

 

Currently, the Company, through its subsidiaries, is principally engaged in the provision of telecommunication related services in Malaysia.

 

 
8
 
Table of Contents

 

Summary of the Company’s subsidiaries

 

 

 

 

 

 

 

 

 

Effective interests

owned by the Company

 

 

 

Name of entities  

 

  Place of

incorporation

 

Date of

incorporation

 

Issued

capital  

 

Nature of

business

 

Sep

2018

 

 

Dec

2017

 

1.

 

Talk Focus Sdn. Bhd.

 

Malaysia

 

November 10, 2006

 

10,000,000 issued shares of ordinary shares of MYR 1 each

 

Provision of telecommunication related services

 

 

64.015 %

 

 

64.015 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiaries of Talk Focus

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.

 

Technology Revolution On Net Distribution Sdn. Bhd.

 

Malaysia

 

July 11, 2011

 

100 issued shares of ordinary shares of MYR 1 each

 

Dormant

 

 

64.015 %

 

 

64.015 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.

 

Technology Revolution On Net Marketing Sdn. Bhd.

 

Malaysia

 

July 11, 2011

 

100 issued shares of ordinary shares of MYR 1 each

 

Dormant

 

 

64.015 %

 

 

64.015 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.

 

Technology Revolution On Net System Sdn. Bhd.

 

Malaysia

 

December 12, 2011

 

100 issued shares of ordinary shares of MYR 1 each

 

Dormant

 

 

64.015 %

 

 

64.015 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.

 

TF Learning Centre Sdn. Bhd.

 

Malaysia

 

March 18, 2016

 

2 issued shares of ordinary shares of MYR 1 each

 

Dormant

 

 

64.015 %

 

 

64.015 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.

 

Tronexus Global Sdn. Bhd.

 

Malaysia

 

April 13, 2016

 

1,000 issued shares of ordinary shares of MYR 1 each

 

Sales of prepaid sim-cards, reload coupons and other related products through a referral program module

 

 

64.015 %

 

 

64.015 %

 

Results of Operations

 

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

 

The following comparative analysis on results of operations was based primarily on the comparative audited consolidated financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our revenues are derived mainly from our active company, Talk Focus Sdn Bhd’s mobile telecommunication services.

 

Three months ended September 30, 2018 compared to three months ended September 30, 2017.

 

 

Three Months Ended

 

September 30,

 

Change

 

2018

 

2017

 

Amount

 

%

 

Revenue

 

$

315,819

 

$

338,394

 

$

(22,575

)

 

(7

%)

Cost of revenues

 

$

(148,280)

 

$

(192,935)

 

$

44,655

 

(23

%)

Operating expenses

 

$

(247,151)

 

$

(255,144)

 

$

7,993

 

(3

%)

Net loss

 

$

(78,186)

 

$

(100,969)

 

$

22,783

 

(23

%)

 

Revenue has dropped by 7% to $315,819 in the quarter three months ended September 30, 2018 as compared to $ 338,394 in the quarter three months ended September 30, 2017 in prior year due to a drop in sales in 2018 as compared to 2017.

 

Cost of revenue has dropped significantly by 23% to $148,280 in the quarter three months ended September 30, 2018 from $192,935 in the quarter three months ended September 30, 2017, due to a promotion which gave out free data and voice calls to our subscribers which was going on in 3 rd Quarter of 2017 but not in the 3 rd Quarter of 2018.

 

For the three months ended September 30, 2018, our net loss has reduced to $78,186 from $100,969 due to reduced cost of revenue caused by the lack of free data and voice calls for the 3 rd Quarter of 2018.

 

Nine months ended September 30, 2018 compared nine months ended September 30, 2017.

 

 

 

Nine Months Ended

 

 

 

 

 

 

 

 

 

September 30,

 

 

Change

 

 

 

2018

 

 

2017

 

 

Amount

 

 

%

 

Revenue

 

$ 903,754

 

 

$ 1,375,276

 

 

$ (471,522 )

 

(34

%)

Cost of revenues

 

$ (475,018 )

 

$ (1,131,755 )

 

$ 656,737

 

 

(58

%)

Operating expenses

 

$ (947,854 )

 

$ (869,033 )

 

$ (78,821 )

 

 

9 %

Net loss

 

$ (512,406 )

 

$ (617,474 )

 

$ 105,068

 

 

(17

%)

 

Revenue has dropped significantly by 34% to $903,754 in nine months ended September 30, 2018, as compared to $1,375,276 in the nine months ended September 30, 2017 in prior year mainly due to substantially lower sales in 2018.

 

Cost of revenue has dropped significantly by 58% to $475,018 in nine months ended September 30, 2018 from $1,131,755 in the nine months ended September 30, 2017, due to signing a new agreement with much lower cost with the main supplier on June 1, 2017, and priority which gave out free data and voice calls to our subscribers in 3 rd Quarter of 2017

 

Operating expenses has increased by $78,821 due to increase in professional fee and licensed fees.

 

For the nine months ended September 30, 2018, our net loss has reduced slightly compared to September 30, 2017 due to reduced cost of revenue caused by signing a new agreement with much lower cost with the main supplier on June 1, 2017 but it is offset by the lowered sales for the three months period ended September 30, 2018.

 

Liquidity and Capital Resources

 

The following table provides selected financial data about our company as of September 30, 2018 and September 30, 2017, respectively.

 

 
9
 
Table of Contents

 

Working Capital

 

 

 

September 30,

 

 

December 31,

 

 

Change

 

 

 

2018

 

 

2017

 

 

Amount

 

 

%

 

Cash

 

$ 62,761

 

 

$ 99,730

 

 

$ (36,969 )

 

(37

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

$ 532,971

 

 

$ 408,110

 

 

$ 124,861

 

 

 

31 %

Total current liabilities

 

$ 9,998,331

 

 

$ 9,618,637

 

 

$ 379,694

 

 

 

4 %

Working capital deficit

 

$ (9,465,360 )

 

$ (9,210,527 )

 

$ (254,833 )

 

(2

%)

 

On September 30, 2018, our Company’s cash balance was $62,761 and total current assets were $532,971. On December 31, 2017, our Company’s cash balance was $99,730 and total current assets were $408,110. Current assets increase mainly due to increase in trade and other receivables amounting to $206,666 and reduction in cash and inventories amounting to $36,969 and $46,123 respectively.

 

On September 30, 2018, our Company had current liabilities of $9,998,331 compared with total liabilities of $9,618,637 as at December 31, 2017. The increase is due mainly to the increase in other payable and accrued liabilities by $303,712 and amount due to directors by $76,052.

 

On September 30, 2018, our Company had working capital deficiency of $9,465,360 compared with working capital deficiency of $9,210,527 as at December 31, 2017. The increase in working capital deficiency was primarily attributed to an increase in liabilities as explained above.

 

Cash Flows

 

 

 

Nine Months Ended

 

 

 

 

 

 

 

September 30,

 

 

Change

 

 

 

2018

 

 

2017

 

 

Amount

 

 

%

 

Net cash used in operating activities

 

$ (274,008 )

 

$ (493,550 )

 

$ 219,542

 

 

(44

%)

Net cash used in investing activities

 

$ (3,907 )

 

$ (16,842 )

 

$ 12,935

 

 

(77

%)

Net cash provided by financing activities

 

$ 53,611

 

 

$ 699,889

 

 

$ (646,278 )

 

 

92 %

Foreign currencies translation adjustment

 

$ 187,335

 

 

$ (466,692 )

 

$ 654,027

 

 

(59

%)

(Decrease)/Increase in cash

 

$ (36,969 )

 

$ (277,195 )

 

$ 240,226

 

 

(87

%)

 

Cash Flow from Operating Activities

 

During the nine months ended September 30, 2018, our Company used $274,008 in operating activities, compared to $493,550 net cash generated from operating activities during the nine months ended September 30, 2017. The cash used in operating activities for the nine months ended September 30 2018, was attributed to a loss of 512,406 offset by positive cash flow from working capital changes.

 

Cash Flow from Investing Activities

 

During the nine months ended September 30, 2018, the cash used in investing activities decreases mainly attributable to reduced purchase of equipment during the period.

 

Cash Flow from Financing Activities

 

During the nine months ended September 30, 2018, our Company received $53,611 from financing activities compared to $699,889 received from financing activities during the nine months ended September 30, 2017. The cash flow for financing activities for the nine months ended September 30, 2018 was due to lower repayment to a related party compared to advances from a related party for the current period.

 

 
10
 
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Plan of Operation and Funding

 

We expect that working capital requirements will continue to be funded through a combination of our existing funds, loans from officers, and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.

 

Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of inventory; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. We will have to raise additional funds in the next twelve months in order to sustain and expand our operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock. We have and will continue to seek to obtain short-term loans from our officers and directors, although no future arrangement for additional loans has been made. We do not have any agreements with our officers and directors concerning these loans. We do not have any arrangements in place for any future equity financing.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, and capital expenditures or capital resources that are material to stockholders.

 

Critical Accounting Policies

 

Use of estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our senior management, including our Chief Executive Officer, and our Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2018, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 , as amended (the “Exchange Act”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of September 30, 2018 that our disclosure controls and procedures were not effective such that the information relating to us required to be disclosed in our Securities and Exchange Commission (“SEC”) reports: (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) is accumulated and communicated to our management, including our chief executive officer to allow timely decisions regarding required disclosure.

 

 
11
 
Table of Contents

 

Management’s Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

 

 

·

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

 

 

·

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

 

 

·

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

 

Our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2018, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework – 2013 (COSO 2013 Framework) and SEC guidance on conducting such assessments.

 

Based upon such evaluation, our management concluded that we did not maintain effective internal control over financial reporting as of September 30, 2018, based on the COSO framework criteria, as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of majority of independent members of our board of directors; (2) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives affecting authorization, recordkeeping, custody of assets, and reconciliations; (4) ineffective controls over year-end financial disclosure and reporting processes; and (5) management dominated by two individuals without adequate compensating controls. The aforementioned material weaknesses were identified by our Chief Executive Officer and Chief Financial Officer in connection with the review of our financial statements as of September 30, 2018.

 

Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
12
 
Table of Contents

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is: (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us.

 

Item 1A. Risk Factors

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

None.

 

 
13
 
Table of Contents

 

Item 6. Exhibits

 

Exhibit

Number

 

Description

(31)

 

Rule 13a-14 (d)/15d-14d) Certifications

31.1*

 

Section 302 Certification by the Principal Executive Officer

31.2*

 

Section 302 Certification by the Principal Financial Officer and Principal Accounting Officer

(32)

 

Section 1350 Certifications

32.1*

 

Section 906 Certification by the Principal Executive Officer

32.2*

 

Section 906 Certification by the Principal Financial Officer and Principal Accounting Officer

101 *

 

Interactive Data File

101.INS**

 

XBRL Instance Document

101.SCH**

 

XBRL Taxonomy Extension Schema Document

101.CAL**

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF**

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB**

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE**

 

XBRL Taxonomy Extension Presentation Linkbase Document

___________

* Filed herewith.

** XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 
14
 
Table of Contents

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

TRON GROUP INC.

 

(Registrant)

 

 

Dated: Nov 14, 2018

By:

/s/ Eric Yap

 

Eric Yap

 

Chief Executive Officer and Director

 

(Principal Executive Officer)

 

 

Dated: Nov 14, 2018

By:

/s/ Man Tat Teh

 

Man Tat Teh

 

Chief Financial Officer

 

(Principal Financial Officer and

Principal Accounting Officer)

 

 

15

 

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