Fintech Scion Ltd - Quarter Report: 2022 March (Form 10-Q)

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

FORM 10-Q

(Mark One)

For the quarterly period ended   March 31, 2022

For the transition period from _______ to _______

Commission File Number: 000-55685

HWGC HOLDINGS 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 May 10, 2022, the registrant has one class of common equity, and the number of shares issued and outstanding of such common equity was 5,409,310. 

HWGC HOLDINGS LIMITED

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED March 31, 2022

TABLE OF CONTENTS

FINANCIAL INFORMATION

HWGC HOLDINGS LIMITED  
CONDENSED CONSOLIDATED BALANCE SHEETS 
(In U.S. dollars)

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

HWGC HOLDINGS 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. 

HWGC HOLDINGS 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. 

HWGC HOLDINGS LIMITED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
(Unaudited)
(In U.S. dollars)

HWGC Holdings Limited (“the Company”) formerly known as Vitaxel Group Limited, 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 in developing online shopping platforms geared to the Company 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, 2021, 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 March 31, 2022, results of operations for the three months ended March 31, 2022 and 2021, and cash flows for the three months ended March 31, 2022 and 2021. All significant intercompany transactions and balances are eliminated on consolidation. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations for the entire fiscal year.

Recently issued accounting pronouncements  

On March 28, 2022, the FASB issued ASU 2022-01,1 which clarifies the guidance in ASC 8152 on fair value hedge accounting of interest rate risk for portfolios of financial assets. The ASU amends the guidance in ASU 2017-123 that, among other things, established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible by allowing the entities to apply the portfolio layer method to portfolios of all financial assets, including both prepayable and non-prepayable financial assets. ASU 2022-01’s amendments are effective for public business entities, fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. We do not expect the adoption of these amendments to have a material effect on our consolidated financial statements.

These unaudited condensed 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 March 31, 2022, the Company reported a net loss of $123,352 and had negative working capital of $4,724,673. The Company had an accumulated deficit of $9,722,171 as of March 31, 2022 due to the fact that the Company incurred losses during the years prior to March 31, 2022.

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.

These unaudited condensed 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:

The Company capitalizes all leased assets pursuant to ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize right-of-use assets and lease liability, initially measured at present value of the lease payments, on its balance sheet for leases with terms longer than 12 months and classified as either financing or operating leases.

The Company’s leases consist of operating lease for office space and office equipment, with operating lease for terms between 2 to 5 years. As the operating lease does not provide implicit interest rate, management estimated a current borrowing rate of 3.5% in determining the present value of the lease.

Right-of-use assets consist of the following:

Lease liabilities consist of the following:

Property and equipment, net consist of the following:

Depreciation expenses charged to the statements of operations and comprehensive loss for the periods ended March 31, 2022 and 2021 were $2,867 and $4,433 respectively.

Accrued expense and other payables consist of the following:

Schedule of related party balances and transactions

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

The Company recognized management fee income of $nil and $120,000 charged to GL for the three months ended March 31, 2022 and 2021 respectively.

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

HWGC Holdings Limited is the holding company for Vitaxel SDN BHD (“VitaxelSB”), 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.

VitaxelSB 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 involved in e-commerce business, through its platforms: Vionmarket, VTrips and VMall. Vionmarket is a rebate website that provide retail sales direct to consumers. However, Vionmarket do not develop or manufacture the products and services. VTrips is a platform that provides concessionary and travel packages to the public and members of Vitaxel. VMall is an e-commerce platform launched in prior year first quarter.

We presently have approximately 5,700 total members. As of March 31, 2022, 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.

Recent Developments

On April 8, 2022, Financial Industry Regulatory Authority, Inc. (“FINRA”) notified the Company that (i) the change of the Company’s name from “Vitaxel Group Limited” to “HWGC Holdings Limited” and (ii) the 1-for-10 reverse stock split of the Company’s common stock took effect on the Over-The-Counter Market on April 11, 2022. On May 9, 2022, the trading symbol of the Company was changed to “HWGC” to reflect the name change of the Company .

As a result of the filing of the Certificate of Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada on March 8, 2022, the authorized share capital of the Company increased to 425,000,000 shares, consisting of 400,000,000 shares of common stock and 25,000,000 shares of preferred stock.

On March 10, 2022, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation of the Relative Rights and Preferences of The Redeemable Convertible Preferred Stock (the “Certificate of Designation”). Pursuant to the Certificate of Designation, the Board of Directors of the Company authorized the creation 25,000,000 shares of Redeemable Convertible Preferred Stock, par value $0.0001 per share (the “RCPS”). The RCPS is ranked senior to all classes or series of the Company’s common stock and does not have any voting rights. However, the holders of the RCPS are entitled to receive, when declared by the Board of Directors, cumulative cash dividends at the rate of 6% per annum on each $1.00 per RCPS. Commencing on the date of issuance, the dividends on the RCPS shall accrue and be cumulative, payable annually in arrears on the 30^th business day on each anniversary of the issue date. Dividends will accumulate whether or not the Company has earnings or whether funds are legally available or declared by the Board, and no interest will be payable on any dividends which may be in arrears. Each share of RCPS shall be convertible into one share of common stock of the Company, upon the Board approving the initiation of the listing process to list the shares of the Company on any stock exchange, or upon the written approval of the Company. The Company may also, at its option, redeem the RCPS for cash at a redemption price of $1.00 per share plus any accumulated and unpaid dividends thereon. Notwithstanding, all outstanding RCPS shall be redeemable by the Company on the second anniversary of the issuance date thereof.

Results of Operations

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The following discussion should be read in conjunction with our unaudited consolidated financial statements in Item 1, Financial Statements, for the three months ended March 31, 2022 and 2021 and the related notes thereto.

Revenue

We recognized $17 and $134 revenues for the periods ended March 31, 2022 and 2021, respectively. The decrease in revenue was attributable to decrease in sales in VitaxelSB in the current period compared to the same period last year.

Cost of Sales

Cost of sales for the period ended March 31, 2022 was $11 compared to $98 for the period ended March 31, 2021. The decrease was attributable to the decrease in sales.

Gross Profit

Gross profit for the period ended March 31, 2022 was $6 compared to $36 for the period ended March 31, 2021. The decrease was attributable to the decrease in sales.in current period as compared to the same period last year.

Operating Expenses

For the period ended March 31, 2022, we incurred total operating expenses in the amount of $127,055, composed of selling expenses of $nil and general and administrative expenses totalling $127,055. Whilst, for the period ended March 31, 2021, we incurred total operating expenses in the amount of $122,163, composed of selling expenses of $23 and general and administrative expenses totalling $122,140. The decrease of $23 or 100% for the selling expenses, along with the decrease of $4,915 or 4% for the administrative expenses, caused total operating expenses to decrease by $4,892 or 4%

Liquidity and Capital Resources

As of March 31, 2022, we had a cash balance of $47,588. During the period ended March 31, 2022, net cash used in operating activities totalled $108,483. Net cash used in investing activities totalled $nil. Net cash provided by financing activities during the period totalled $119,316. The resulting change in cash for the period was a increase of $10,555, which was primarily due to proceeds from related parties.

As of March 31, 2022, we had current liabilities of $4,850,403, which was composed of amount due to related parties of $4,371,719, commission payables of $125,507, accounts payable of $3,213, accruals and other payable of $329,679 and lease obligation of $20,285. 

We had net liabilities of $4,679,662 and $4,585,965 as of March 31, 2022 and December 31, 2021, respectively.

Going Concern

For the period ended March 31, 2022, the Company reported a net loss of $123,352 and had negative working capital of $4,724,673. The Company had an accumulated deficit of $9,722,171 as of March 31, 2022 due to the fact that the Company incurred losses during the years prior to March 31, 2022.

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.

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, until the destination areas (in particular South-East Asia and Europe) reopen their countries to allow foreign visitors again.

Our multi-level marketing (“MLM”) business is 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 the Annual Report on Form 10-K for the year ended December 31, 2021 filed on March 29, 2022, we provided an update that the Malaysian Government issued a National Recovery Plan to cater for both the pandemic period and post-pandemic period. The National Recovery Plan, which basically spell out 4 different phases of control order, are still in effect until to date of this report; Phase 4 are no longer having all states under lockdown and that all business and social activities within the country are permitted to operate. Although to date, many restrictions have been lifted, the Company is still uncertain of the effect of the post-pandemic, where the Company may still expect long-term disruptions on its existing 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 March 29, 2022, 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 and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of March 31, 2022. Based upon the participation in that evaluation, it has been concluded that the disclosure controls and procedures were effective as of March 31, 2022.

Changes in Internal Controls

During the fiscal quarter ended March 31, 2022, 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.

Smaller reporting companies are not required to provide the information required by this item.

Not applicable.

None.

Not applicable.

On March 2, 2022, the Company filed the Certificate of Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada, which implemented: (i) a change of the Company’s name from “Vitaxel Group Limited” to “HWGC Holdings Limited” (the “Name Change”) (ii) a 1-for-10 reverse stock split of the Company’s common stock (the “Reverse Stock Split”) and (iii) an increase in the authorized share capital from 71,000,000 shares, consisting of 70,000,000 shares of common stock and 1,000,000 shares of preferred stock, to 425,000,000 shares, consisting of 400,000,000 shares of common stock and 25,000,000 shares of preferred stock. On April 11, 2022, the Company’s common stock started trading on the Reverse Stock Split basis and under the name, “HWGC Holdings Limited.”

On May 9, 2022, the ticker symbol of the Company became HWGC to reflect the new name of the Company.

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.