Fintech Scion Ltd - Quarter Report: 2020 September (Form 10-Q)

UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended   September 30, 2020

For the transition period from _______ to _______

Commission File Number: 000-55685

VITAXEL GROUP LIMITED 
(Exact name of registrant as specified in its charter)

Bangunan Cheong Wing Chan 
Level 4, 41-51, Jalan Maharajalela, 50150 
Kuala Lumpur, Malaysia 
(Address of principal executive offices)

+ 603 – 2143 – 2889
(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.  

Yes ☒  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). Yes ☒  No ☐

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

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 16, 2020, the registrant has one class of common equity, and the number of shares issued and outstanding of such common equity was 54,087,903. 

VITAXEL GROUP LIMITED

FORM 10-Q 

FOR THE QUARTERLY PERIOD ENDED September 30, 2020 

TABLE OF CONTENTS

FINANCIAL INFORMATION

VITAXEL GROUP LIMITED  
CONDENSED CONSOLIDATED BALANCE SHEETS 
(In U.S. dollars)

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) 

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) 

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)

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. Vitaxel SB 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. Vionmall is primarily engaged in developing online shopping platforms geared to Vitaxel and its members and the third-party suppliers of products and services.

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, 2019, included in the Company’s Form 10-K filed with the Security and Exchange Commission (“SEC”). The interim unaudited consolidated financial statements should be read in conjunction with those audited consolidated financial statements included in Form 10-K.

In the opinion of management, the Company has made all adjustments necessary to present a fair statement of the financial position as of September 30, 2020, results of operations for the nine months ended September 30, 2020 and 2019, and cash flows for the nine months ended September 30, 2020 and 2019. All significant intercompany transactions and balances are eliminated on consolidation. The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the results of operations for the entire fiscal year. 

Recently issued accounting pronouncements

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 adoption of ASU 2018-13 did not to have a material impact on the consolidated financial statements.

In December 2019, the FASB issued ASU2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, with the intent to reduce the complexity in accounting for income taxes. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, and early adoption is permitted. The accounting update removes certain exceptions to the general principles in ASC 740 as well as provides simplification by clarifying and amending existing guidance. The Company is currently assessing the impact of the new standard on the consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management, to have a material impact on the Company’s present and future consolidated financial statements.

Reclassification: Certain reclassifications have been made to the prior period amounts to conform to the current period’s presentation.

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, 2020, the Company reported a net loss of $56,834 and had negative working capital of $4,698,432. The Company had an accumulated deficit of $9,644,752 as of September 30, 2020 due to the fact that the Company incurred losses during the years prior to September 30, 2020.

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. There is no certainty that further funding will be available as needed. These factors raise substantial doubt about the ability of the Company to continue operating as a going concern.

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. The impact on the Company is not currently determinable but management continues to monitor the situation.

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.

Other receivables, prepayments and other current assets consist of the following:

(1)         Deposits represented payments for rental and utilities. 

(2)         Prepayments mainly consists of prepayment for insurance and IT related fees. 

(3)         Others mainly consists other miscellaneous payments

Property and equipment, net consist of the following:

Depreciation expenses charged to the statements of operations and comprehensive loss for the periods ended September 30, 2020 and 2019 were $19,633 (3 months $6,386) and $22,875 (3 months $6,691) respectively.

Accrued expense and other payables consist of the following:

The related party balances are unsecured, interest-free and repayable on demand.

The Company recognized rent expenses of $nil and $15,239 to HWGB for the nine months ended September 30, 2020 and 2019 respectively.

During the year ended December 31, 2019, the Company has mutually agreed to terminate the lease with HWGB.

The Company recognized management fee income of $360,000 and $360,000 charged to GL for the nine months ended September 30, 2020 and 2019 respectively.

The Company also recognized royalty income of $294 and $11,906 charged to GL for the nine months ended September 30, 2020 and 2019 respectively.

The Company billed GL for sales of $17,363 and $49,350 for the nine months ended September 30, 2020 and 2019 respectively.

On September 29, 2020, the Company signed a tenancy agreement for its office lease at a monthly fee of $3,780 for a period of one year starting from October 1, 2020 to September 30, 2021.

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 contain 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

Vitaxel Group Limited is the holding company for Vitaxel SDN BHD (“Vitaxel”), and Vitaxel Online Mall SDN BHD (“Vionmall”), both of which are wholly owned subsidiaries of the Company, Incorporated under the laws of the Country of Malaysia.

Vitaxel is 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.

Vionmall is an e-commerce business for retail sales direct to consumers. We do not develop or manufacture the products and services which we offer. 

We presently have approximately 5,700 total members. As of September 30, 2020, approximately: 62.3% of our members reside in Malaysia, 28.9% of our members reside in Singapore, 3.7% members reside in China, approximately 2.7% members reside in Hong Kong and approximately 2.4% members reside in other countries

Results of Operations

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

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, 2020 and 2019 and the related notes thereto.

Revenue

We recognized $3,006 and $41,054 revenues for the periods ended September 30, 2020 and 2019, respectively. The overall decrease in revenue was attributable to decrease in sales from VTrip under Vionmall in current period as compare to the same period last year whilst offset by the product sales in VitaxelSB and from the Vionmall’s VMall e-commerce site in current period.

Cost of Sales

Cost of sales for the period ended September 30, 2020 was $1,466 compared to $39,351 for the period ended September 30, 2019. The decrease was due to decrease in revenue in current period.

Gross Profit

Gross profit for the period ended September 30, 2020 was $1,540 compared to $1,703 for the period ended September 30, 2019. The increase was due to product sales of Vionmall’s VMall e-commerce site in current period has a higher margin as compare to VTrip sales in the same period last year.

Operating Expenses

For the period ended September 30, 2020, we incurred total operating expenses in the amount of $138,956, composed of selling expenses of $30 and general and administrative expenses totalling $138,926. Whilst, for the period ended September 30, 2019, we incurred total operating expenses in the amount of $210,719, composed of selling expenses of $174 and general and administrative expenses totalling $210,545. The decrease of $144 or 83% for the selling expenses, along with the decrease of $71,619 or 34% for the administrative expenses, caused total operating expenses to decrease by $71,763 or 34%.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

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, 2020 and 2019 and the related notes thereto.

Revenue

We recognized $18,650 and $60,214 revenues for the periods ended September 30, 2020 and 2019, respectively. The overall decrease in revenue was attributable to decrease in sales from VTrip under Vionmall in current period as compare to the same period last year whilst offset by the product sales in VitaxelSB and from the Vionmall’s VMall e-commerce site in current period.

Cost of Sales

Cost of sales for the period ended September 30, 2020 was $14,300 compared to $52,898 for the period ended September 30, 2019. The decrease was due to decrease in revenue in current period.

Gross Profit

Gross profit for the period ended September 30, 2020 was $4,350 compared to $7,316 for the period ended September 30, 2019. The decrease was due to decrease in revenue in current period.

Operating Expenses

For the period ended September 30, 2020, we incurred total operating expenses in the amount of $521,565, composed of selling expenses of $620 and general and administrative expenses totalling $520,945. Whilst, for the period ended September 30, 2019, we incurred total operating expenses in the amount of $733,487, composed of selling expenses of $208 and general and administrative expenses totalling $733,279. The increase of $412 or 198% for the selling expenses, along with the decrease of $212,334 or 29% for the administrative expenses, caused total operating expenses to decrease by $211,922 or 29%.

Liquidity and Capital Resources

As of September 30, 2020, we had a cash balance of $31,471. During the period ended September 30, 2020, net cash used in operating activities totalled $40,392. Net cash used in investing activities totalled $4,317. Net cash provided by financing activities during the period totalled $14,151.  The resulting change in cash for the period was a decrease of $31,965, which was primarily due to operating expenses in current period.  

As of September 30, 2020, we had current liabilities of $4,800,121, which was composed of amount due to related parties of $4,331,368, commission payables of $126,822, accounts payable of $104 and accruals and other payable of $341,827. 

As of September 30, 2019, we had a cash balance of $54,913. During the period ended September 30, 2019, net cash used in operating activities totalled $310,583. Net cash used in investing activities totalled $24,823. Net cash used in financing activities during the period totalled $612,520. The resulting change in cash for the period was a decrease of $949,484, which was primarily due to repayment to related parties during the period.

As of September 30, 2019, we had current liabilities of $4,707,848, which was composed of amount due to related parties of $4,240,355, commission payables of $133,658, and accruals and other payable of $333,835.

We had net liabilities of $4,652,801 and $4,668,067 as of September 30, 2020 and December 31, 2019, respectively.

Management estimates that the general operating costs for the next 12 months will be approximately $600,000. At present, the Company may not have sufficient capital resources to meet its anticipated operating and capital requirements for the next 12 months. 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.

Recent Developments: 

Impact of Current Coronavirus (COVID-19) Pandemic on the Company

As many parts of the world is currently under lockdown or restrictive movement orders due to the current COVID-19 pandemic, we believe that all companies related to the travel, entertainment and lifestyle industry have been negatively impacted. Our Company is not spared either. We do not foresee any income contribution from this business from January 2020 until the destination areas (in particular South-East Asia and Europe) reopen their countries to allow foreign visitors again.

Our MLM business is also negatively impacted due to the fact that being a business built on fostering personal relationship and expanding new contacts, most distributors are unable to carry out the more important aspects of regular face to face visits and appointments, promotional events and direct coaching to continuously improve their team’s skills, motivation and knowledge of our products. Fortunately, we are still able to connect to our leaders via calls, emails and backoffice announcements and other form of online communication such as Skype and Zoom to keep the leaders and members abreast with our status and development. As such, our MLM operation is still ongoing amid slower than usual.

In our previously Form 8-K and Form 10-Q, filed on April 22, 2020 and August 19, 2020 respectively, we announced that in connection with the COVID-19 pandemic, the Malaysian government has enforced a Movement Control Order (the “MCO”) effective March 18, 2020, closing all offices within the country that are non-essential forcing all of the Company’s staff to work from home. Subsequently, the MCO was replaced with the Conditional Movement Control Order on May 4, 2020 easing restrictions on most of Malaysia’s economic sectors until June 9, 2020. The Company opened its offices, but on an alternative day basis allowing staff to work on the Company’s backlogs. Afterwards, the Malaysian government announced the Recovery Movement Control Order beginning on June 10 and lasting till August 31, 2020, allowing most business to reopen and further eases COVID regulations on the country’s list of restricted activities. On August 28,2020, the Malaysian government extended the Recovery Movement Control Order to last till December 31, 2020.

The Company’s management will continue to monitor the situation in Malaysia and ensure compliance towards enforced control order. Due to the uncertainties surrounding the economy in Malaysia and the enforcement of movement control, amid relaxed restrictions, at the time of issuance of this Report on Form 10Q, the Company is unable to reasonably estimate the full extent of the impact of COVID-19 pandemic on its future business, financial conditions, and results of operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons.

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 on Form 10-K filed with the SEC on April 6, 2020, for disclosures regarding the critical accounting policies related to our business.

Recently Issued Accounting Standards

The recently issued accounting pronouncement are included in Note 2 Unaudited Interim Financial Statements for disclosures on accounting policies related to our business. 

Not applicable.

Evaluation of Disclosure Controls and Procedures

We maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our principal executive and principal financial officers concluded that our disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for accurate and timely decisions regarding required disclosure.

As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of Leong Yee Ming, our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, as of September 30, 2020. Based upon their participation in that evaluation, it is concluded that the disclosure controls and procedures were effective as of September 30, 2020.

Changes in Internal Controls

During the fiscal quarter ended September 30, 2020, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

PART II - OTHER INFORMATION

As of the date of this Quarterly Report, our management is not aware of any proceedings to which any of our directors, officers, or affiliates, or any associate of any such director, officer, affiliate, or security holder is a party adverse to our company or has a material interest adverse to us.

The company is necessarily subject to a number of risks which should be considered when reviewing this Quarterly Report. Some of the risks relating to the Company are set forth in our Annual Report on Form 10K for the period ended December 31, 2019, which should be reviewed in conjunction herewith.

Not applicable.

None.

Not applicable.

On 13 July 2020, Mr. Lim Wee Kiat notified the Company that he is resigning from the Board of Directors as well as the position of Chief Financial Officer and Secretary of the Company, effective immediately. His resignation was not due to any matter related to the Company’s operations, policies or practices, his experiences while serving on the Board or any disagreement with the Board or management team.

With effect of Mr Lim Wee Kiat’s resignation, Mr Leong Yee Ming, Director and Chief Executive Officer of the Company will takeover the position previously held by Mr. Lim Wee Kiat for the role of Chairman, Chief Financial Officer and Secretary while maintaining his position as the Chief Executive Officer.

The following exhibits are included as part of this report:

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.