DQWS 10-Q
DSwiss Inc (DQWS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
OF THE SECURITIES EXCHANGE ACT OF 1934
For
The Quarterly Period Ended
or
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________to _______________
Commission
File Number
(Exact name of registrant issuer as specified in its charter)
| (State or other jurisdiction | (I.R.S. Employer | |
| of incorporation or organization) | Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s
phone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading Symbol(s) | Name of each exchange on which registered: | ||
| The OTC Market – Pink Sheets |
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.
☒ 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 (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit and post such files).
YES ☐ ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
Accelerated Filer ☐ Accelerated Filer ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
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, 2021 | |
| Common Stock, $.0001 par value |
TABLE OF CONTENTS
| 1 |
DSWISS, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| F-1 |
PART I FINANCIAL INFORMATION
Item 1. Unaudited condensed consolidated financial statements:
DSWISS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2021, and December 31, 2020
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| September 30, 2021 | December 31, 2020 | |||||||
| Unaudited | Audited | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Other receivable, prepaid expenses and deposit | ||||||||
| Income tax receivables | ||||||||
| Inventories | ||||||||
| Total Current Assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Property and equipment, net | $ | $ | ||||||
| Intangible assets, net | ||||||||
| Operating lease right -of-use, net | ||||||||
| Total Non-Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Other payables and accrued liabilities | ||||||||
| Operating lease liability | ||||||||
| Amounts due to a director | ||||||||
| Finance lease liability | ||||||||
| Current tax liabilities | ||||||||
| Total Current Liabilities | ||||||||
| NON- CURRENT LIABILITIES | ||||||||
| Finance lease liability | $ | $ | ||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ par value, shares authorized, issued and outstanding | - | - | ||||||
| Common stock, $par value, shares authorized, and shares issued and outstanding as of September 30, 2021 and December 31, 2020 respectively | $ | $ | ||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive losses | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL DSWISS, INC. STOCKHOLDERS’ EQUITY | $ | $ | ( | ) | ||||
| NON-CONTROLLING INTEREST | ||||||||
| TOTAL STOCKHOLDERS’ EQUITY | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| F-2 |
DSWISS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| REVENUE | ||||||||||||||||
| COST OF REVENUE | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| GROSS PROFIT | ||||||||||||||||
| OTHER INCOME | ||||||||||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OPERATING EXPENSES | ( | ) | ( | ) | ( | ) | ||||||||||
| FINANCE COST | ( | ) | ( | ) | ( | ) | ||||||||||
| OTHER OPERATING EXPENSES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| PROFIT / (LOSS) BEFORE INCOME TAX | ( | ) | ( | ) | ||||||||||||
| INCOME TAX PROVISION | - | - | ||||||||||||||
| NET INCOME / (LOSS) | ( | ) | ( | ) | ||||||||||||
| Non-Controlling Interest | ( | ) | ||||||||||||||
| Other comprehensive (loss)/income | - | - | - | - | ||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ||||||||||
| TOTAL COMPREHENSIVE INCOME / (LOSS) | ( | ) | ( | ) | ||||||||||||
| NET INCOME/LOSS PER SHARE – BASIC AND DILUTED (Cent) | - | - | ||||||||||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED | ||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| F-3 |
DSWISS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
| Nine months Ended September 30, 2021 (Unaudited) |
| COMMON SHARES | ||||||||||||||||||||||||||||
| Number of shares | Amount | ADDITIONAL PAID-IN CAPITAL | ACCUMULATED OTHER COMPREHENSIVE LOSS | ACCUMULATED (DEFICIT) | NON- CONTROLLING INTEREST | TOTAL EQUITY | ||||||||||||||||||||||
| Balance as of December 31, 2020
(audited) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | ( | ) | - | ( | ) | ( | ) | ||||||||||||||||||
| Net profit for the period | - | - | - | - | ( | ) | ||||||||||||||||||||||
| Balance as of September
30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Three months Ended September 30, 2021 (Unaudited) |
| COMMON SHARES | ||||||||||||||||||||||||||||
| Number of shares | Amount | ADDITIONAL PAID-IN CAPITAL | ACCUMULATED OTHER | ACCUMULATED (DEFICIT) | NON- CONTROLLING INTEREST | TOTAL EQUITY | ||||||||||||||||||||||
| Balance as of June 30, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | ( | ) | - | ( | ) | ( | ) | ||||||||||||||||||
| Net profit for the period | - | - | - | - | ( | ) | ||||||||||||||||||||||
| Balance as of September 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Nine months Ended September 30, 2020 (Unaudited) |
| COMMON SHARES | ||||||||||||||||||||||||||||
| Number of shares | Amount | ADDITIONAL PAID-IN CAPITAL |
ACCUMULATED OTHER COMPREHENSIVE LOSS |
ACCUMULATED (DEFICIT) |
NON- CONTROLLING INTEREST |
TOTAL EQUITY |
||||||||||||||||||||||
Balance as of December 31, 2019 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | ||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||
Balance as of September 30, 2020 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Three months Ended September 30, 2020 (Unaudited) |
| COMMON SHARES | ||||||||||||||||||||||||||||
| Number of shares | Amount | ADDITIONAL PAID-IN CAPITAL | ACCUMULATED OTHER COMPREHENSIVE LOSS | ACCUMULATED (DEFICIT) | NON- CONTROLLING INTEREST | TOTAL EQUITY | ||||||||||||||||||||||
| Balance as of June 30, 2020 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||
| Net loss for the period | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Balance as of September 30, 2020 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| F-4 |
DSWISS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| Nine months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net profit / (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization for intangible assets | ||||||||
| Waiver of accounts payable | - | ( | ) | |||||
| Accounts receivable written-off | - | |||||||
| Plant and equipment written-off | - | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts payable | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Other payables and accrued liabilities | ( | ) | ||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ||||||
| Amount due to director | ( | ) | ||||||
| Prepayments, deposits & other receivables | ||||||||
| Cash generated from operations | ||||||||
| Tax refund | ( | ) | - | |||||
| Tax paid | ( | ) | ( | ) | ||||
| Net cash generated from operating activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITY: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activity | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITY: | ||||||||
| Repayment of finance lease | ( | ) | ( | ) | ||||
| Net cash used in financing activity | ( | ) | ( | ) | ||||
| Effect of exchange rate changes | ( | ) | ||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOWS INFORMATION | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| F-5 |
DSWISS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND ORGANIZATION
DSwiss, Inc. is organized as a Nevada limited liability company, incorporated on May 28, 2015. For the purposes of financial statement presentation, DSwiss, Inc. and its subsidiaries are herein referred to as “the Company” or “we”. The principal activity of the Company and its subsidiaries is to supply high quality beauty products directly to clients through wholly owned subsidiaries. Our beauty supplies include, but are not limited to, beverages to assist in weight loss, anti-aging cream, and products designed to improve the overall health and wellness of clients.
The accompanying unaudited condensed consolidated financial statements of DSwiss, Inc. at September 30, 2021 and 2020 have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial statements, instructions to Form 10-Q, and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2020. In management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation to make our financial statements not misleading have been included. The results of operations for the periods ended September 30, 2021 and 2020 presented are not necessarily indicative of the results to be expected for the full year. The December 31, 2020 balance sheet has been derived from our audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2020.
We
have historically conducted our business through DSwiss Sdn Bhd, a private limited liability company, incorporated in Malaysia. DSwiss
Holding Limited, incorporated in Seychelles, is an investment holding company with
We
have invested in DSwiss Biotech Sdn Bhd, a Company incorporated in Malaysia, and owned
The Company, through its subsidiaries and its variable interest entities (“VIEs”), mainly supplies high quality beauty products. Details of the Company’s subsidiaries and associates:
| Company name | Place and date of incorporation | Particulars of issued capital | Principal activities | Proportional of
ownership interest and voting power held | ||||||||
| 1. | May 28, 2015 | % | ||||||||||
| 2. | May 28, 2015 | % | ||||||||||
| 3. | March 10, 2011 | % | ||||||||||
| 4. | March 17, 2016 | % | ||||||||||
(1) Based on the contractual arrangements between the Company and other investors, the Company has the power to direct the relevant activities of these entities unilaterally, and hence the Company has control over these entities.
| F-6 |
DSWISS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
2. GOING CONCERN UNCERTAINTIES
The accompanying financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
As
of September 30, 2021, the Company suffered an accumulated deficit of $
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These 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 in the Company not being able to continue as a going concern.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
Basis of consolidation
The condensed consolidated financial statements include the accounts of the Company and its subsidiaries in which the Company is the primary beneficiary. All inter-company accounts and transactions have been eliminated upon consolidation.
Use of estimates
In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets, and revenues and expenses during the periods reported. Actual results may differ from these estimates.
Revenue recognition
The Company follows the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
Revenue from trading of retail goods is recognized when title and risk of loss are transferred and there are no continuing obligations to the customer. Title and the risks and rewards of ownership transfer to and accepted by the customer when the products are delivered to the customers. Revenue is recorded net of sales discounts, returns, allowances, and other adjustments that are based upon management’s best estimates and historical experience and are provided for in the same period as the related revenues are recorded.
The Company mainly derives its revenue from the sale of healthy food products. The Company also provides lab
test services as another source of revenue. Generally, the Company recognizes revenue when products are sold and accepted
by the customers and there are no continuing obligations to the customer.
Cost of revenue
Cost of revenue includes the raw material, repacking fees, packing materials and inbound freight charges. It excludes purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs and other costs of distribution network in cost of revenues.
| F-7 |
DSWISS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
Selling and distribution expenses
Selling and distribution expenses are primarily comprised of travelling and accommodation, transportation fees such as petrol, toll and parking and shipping and handling fees.
Cash and cash equivalents
The Company consider all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalent.
Inventories
Inventories consisting of products available for sell, are stated at the lower of cost or market value. Cost of inventory is determined using the first-in, first-out (FIFO) method. Inventory reserve is recorded to write down the cost of inventory to the estimated market value due to slow-moving merchandise and damaged goods, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. The Company takes ownership, risks and rewards of the products purchased. Write downs are recorded in cost of revenues in the Condensed Consolidated Statements of Operations and Comprehensive Income.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and impairment. Depreciation of plant, equipment and software are calculated on the straight-line method over their estimated useful lives or lease terms generally as follows:
| Classification | Estimated useful lives | |
| Computer and software | ||
| Furniture and fittings | ||
| Office equipment | ||
| Motor vehicle |
Intangible assets
Intangible
assets are stated at cost less accumulated amortization. Intangible assets represented the registration costs of trademarks in Hong Kong,
China, and Malaysia, which are amortized on a straight-line basis over a useful life of
The Company follows ASC Topic 350 in accounting for intangible assets, which requires impairment losses to be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by the assets are less than the assets’ carrying amounts. There were no impairment losses recorded on intangible assets for the nine months ended September 30, 2021.
Leases
Prior to November 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases. Effective November 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The implementation of ASC 842 did not have a material impact on the Company’s consolidated financial statements and did not have a significant impact on our liquidity. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. (see Note 14).
Income taxes
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC Topic 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
The Company conducts major businesses in Malaysia. The Company is subject to tax in these jurisdictions. As a result of its business activities, the Company will file tax returns that are subject to examination by the foreign tax authority.
| F-8 |
DSWISS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
The Company calculates net income per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
Foreign currencies translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the Condensed Consolidated Statements of Operations and Comprehensive Income.
The reporting currency of the Company is United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. In addition, the Company’s subsidiaries and VIEs in Malaysia and Hong Kong, maintains their books and record in their local currency, Ringgits Malaysia (“RM”) and Hong Kong Dollars (“HK$”) respectively, which is functional currency as being the primary currency of the economic environment in which the entity operates.
In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of stockholders’ equity.
Translation of amounts from RM into US$1, HK$ into US$1 and RMB into US$1 has been made at the following exchange rates for the respective periods:
| As
of and for the nine months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Period-end RM : US$1 exchange rate | ||||||||
| Period-average RM : US$1 exchange rate | ||||||||
| Period-end HK$ : US$1 exchange rate | ||||||||
| Period-average HK$ : US$1 exchange rate | ||||||||
| Period-end RMB : US$1 exchange rate | ||||||||
| Period-average RMB : US$1 exchange rate | ||||||||
| F-9 |
DSWISS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
Related parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
Fair value of financial instruments:
The carrying value of the Company’s financial instruments: cash and cash equivalents, trade receivables, deposits, trade payable, other payables, and accounts payable approximate at their fair values because of the short-term nature of these financial instruments.
The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Segment reporting
ASC Topic 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. For the nine months ended September 30, 2020, the Company operates in four reportable operating segments in Malaysia, China and Hong Kong.
Recent accounting pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
| F-10 |
DSWISS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
4. VIE STRUCTURE AND ARRANGEMENTS
On
June 27, 2016, DSwiss (HK) Limited (“DSHK”) entered into a Management Services Agreement (the “Management Services
Agreement I”) which entitles DSHK to substantially entitled to all of the economic benefits of DSwiss Biotech Sdn Bhd (“DSBT”)
in consideration of services provided by DSHK to DSBT. Pursuant to the Management Services Agreement I, DSHK has the exclusive right
to provide to DSBT management, financial and other services related to the operation of DSBT’s business, and DSBT is required to
take all commercially reasonable efforts to permit and facilitate the provision of the services provided by DSHK. As compensation for
providing the services, DSHK is entitled to receive a fee from DSBT, upon demand, equal to
The Management Services Agreement I also provide DSHK, or its designee, with a right of first refusal to acquire all or any portion of the equity of DSBT upon any proposal by the sole shareholder of DSBT to transfer such equity. In addition, at the sole discretion of DSHK, DSBT is obligated to transfer to DSHK, or its designee, any part or all of the business, personnel, assets and operations of DSBT which may be lawfully conducted, employed, owned or operated by DSHK, including:
(a) business opportunities presented to, or available to DSBT may be pursued and contracted for in the name of DSHK rather than DSBT, and at its discretion, DSHK may employ the resources of DSBT to secure such opportunities;
(b) any tangible or intangible property of DSBT, any contractual rights, any personnel, and any other items or things of value held by DSBT may be transferred to DSHK at book value;
(c) real property, personal or intangible property, personnel, services, equipment, supplies and any other items useful for the conduct of the business may be obtained by DSHK by acquisition, lease, license or otherwise, and made available to DSBT on terms to be determined by agreement between DSHK and DSBT;
(d) contracts entered into in the name of DSBT may be transferred to DSHK, or the work under such contracts may be subcontracted, in whole or in part, to DSHK, on terms to be determined by agreement between DSHK and DSBT; and
(e) any changes to, or any expansion or contraction of, the business may be carried out in the exercise of the sole discretion of DSHK, and in the name of and at the expense of, DSHK; provided, however, that none of the foregoing may cause or have the effect of terminating (without being substantially replaced under the name of DSHK) or adversely affecting any license, permit or regulatory status of DSBT.
In addition, DSHK entered into certain agreements with Jervey Choon, (the “DSBT shareholder”), including
| (i) | a Call Option Agreement allowing DSHK to acquire the shares of DSBT as permitted by Malaysia laws; |
| (ii) | a Shareholders’ Voting Rights Proxy Agreement that provides DSHK with the voting rights of the DSBT; and |
| (ii) | an Equity Pledge Agreement that pledges the shares in DSBT. |
This VIE structure provides DSHK, a wholly-owned subsidiary of DSwiss Holding Limited, which is the wholly-owned subsidiary of DSwiss Inc, with control over the operations and benefits of DSBT without having a direct equity ownership in DSBT.
| F-11 |
DSWISS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
5. STOCKHOLDERS’ EQUITY
As of September 30, 2021, the Company had a total of of its common stock issued and outstanding. There are shares of preferred stock issued and outstanding.
6. PROPERTY AND EQUIPMENT
| September 30, 2021 | December 31, 2020 | |||||||
| Computers and software | $ | $ | ||||||
| Furniture and fittings | ||||||||
| Office equipment | ||||||||
| Motor vehicles | ||||||||
| Total property and equipment | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Effect of translation exchange | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expense for the three months and nine months ended September 30, 2021 were $
Depreciation
expense for the three months and nine months ended September 30, 2020 were $
7. INTANGIBLE ASSETS
| September 30, 2021 | December 31, 2020 | |||||||
| Trademarks | $ | $ | ||||||
| Amortization | ( | ) | ( | ) | ||||
| Effect of translation exchange | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
Amortization
for the three months and nine months ended September 30, 2021 was $
Amortization
for the three months and nine months ended September 30, 2020 was $
8. OTHER RECEIVABLE, PREPAID EXPENSES AND DEPOSITS
| September 30, 2021 | December 31, 2020 | |||||||
| Prepaid expenses | $ | $ | ||||||
| Deposits | ||||||||
| Total prepaid expenses and deposits | $ | $ | ||||||
9. INVENTORIES
| September 30, 2021 | December 31, 2020 | |||||||
| Finished goods, at cost | $ | $ | ||||||
| Total inventories | $ | $ | ||||||
10. OTHER PAYABLES AND ACCRUED LIABILITIES
| September 30, 2021 | December 31, 2020 | |||||||
| Other payables | $ | $ | ||||||
| Accrued audit fees | ||||||||
| Accrued other expenses | ||||||||
| Accrued professional fees | ||||||||
| Total payables and accrued liabilities | $ | $ | ||||||
| F-12 |
DSWISS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
11. FINANCE LEASE LIABILITY
The
Company purchased a motor vehicle under a finance lease agreement with the effective interest rate of
| As of | As of | |||||||
| September 30, 2021 | December 31, 2020 | |||||||
| Finance lease | $ | $ | ||||||
| Less: interest expense | ( | ) | ( | ) | ||||
| Net present value of finance lease | ||||||||
| Current portion | ||||||||
| Non-current portion | ||||||||
| Total | $ | $ | ||||||
As of September 30, 2021 the maturities of the finance lease for each of the years are as follows:
| 2021 | ||||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Total | $ |
12. INCOME TAXES
For the nine months ended September 2021 and 2020, the local (United States) and foreign components of income/(loss) before income taxes were comprised of the following:
| 2021 | 2020 | |||||||
| Tax jurisdictions from: | ||||||||
| - Local | $ | ( | ) | $ | ( | ) | ||
| - Foreign, representing | ||||||||
| Seychelles | ( | ) | ( | ) | ||||
| Hong Kong | ( | ) | ( | ) | ||||
| Malaysia | ||||||||
| PRC | - | |||||||
| Profit / (Loss) before income tax | $ | $ | ( | ) | ||||
The provision for income taxes consisted of the following:
| 2021 | 2020 | |||||||
| Current: | ||||||||
| - Local | $ | $ | ||||||
| - Foreign | - | |||||||
| Deferred: | ||||||||
| - Local | - | - | ||||||
| - Foreign | - | - | ||||||
| Income tax expense | $ | $ | ||||||
The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The Company has subsidiaries that operate in various countries: United States, Seychelles, Hong Kong, Malaysia and PRC that are subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
The
Company is registered in the State of Nevada and is subject to the tax laws of the United States of America. As of September 30, 2021,
the operations in the United States of America incurred $
Seychelles
Under the current laws of the Seychelles, DSwiss Holding Limited is registered as an international business company which governs by the International Business Companies Act of Seychelles and there is no income tax charged in Seychelles.
Hong Kong
DSwiss
(HK) Limited is subject to Hong Kong Profits Tax, which is charged at the statutory income tax rate of
Malaysia
DSwiss
Sdn Bhd and DSwiss Biotech Sdn Bhd are subject to Malaysia Corporate Tax, which is charged at the statutory income tax rate range from
| F-13 |
DSWISS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
13. CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major customers
For three months ended September 30, 2021 and 2020, the customers who accounted for 10% or more of the Company’s revenues and its accounts receivable balance at period-end are presented as follows:
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Revenues | Percentage
of revenues | Accounts receivable, trade | ||||||||||||||||||||||
| Customer A | $ | $ | % | % | $ | |||||||||||||||||||
| Customer B | $ | $ | % | % | $ | |||||||||||||||||||
| Customer C | $ | $ | % | % | $ | |||||||||||||||||||
| Customer D | $ | $ | % | % | $ | |||||||||||||||||||
| $ | $ | % | % | $ | ||||||||||||||||||||
For nine months ended September 30, 2021 and 2020, the customers who accounted for 10% or more of the Company’s revenues and its accounts receivable balance at period-end are presented as follows:
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Revenues | Percentage
of revenues |
Accounts
receivable, trade |
||||||||||||||||||||||
| Customer A | $ | $ | % | % | $ | - | ||||||||||||||||||
| Customer B | $ | $ | % | % | $ | |||||||||||||||||||
| Customer C | $ | $ | % | % | $ | |||||||||||||||||||
| Customer D | $ | $ | % | $ | ||||||||||||||||||||
| $ | $ | % | % | $ | ||||||||||||||||||||
(b) Major vendors
For three months ended September 30, 2021 and 2020, the vendors who accounted for 10% or more of the Company’s purchases and its accounts payable balance at period-end are presented as follows:
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Purchases | Percentage
of purchases | Accounts payable, trade | ||||||||||||||||||||||
| Vendor A | $ | $ | % | % | $ | |||||||||||||||||||
| Vendor B | $ | $ | % | % | $ | |||||||||||||||||||
| Vendor C | $ | $ | % | % | $ | |||||||||||||||||||
| $ | $ | % | % | $ | ||||||||||||||||||||
For nine months ended September 30, 2021 and 2020, the vendors who accounted for 10% or more of the Company’s revenues and its accounts receivable balance at period-end are presented as follows:
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Purchases | Percentage
of purchases | Accounts payable, trade | ||||||||||||||||||||||
| Vendor A | $ | $ | % | % | $ | |||||||||||||||||||
| Vendor B | $ | $ | % | % | $ | |||||||||||||||||||
| Vendor C | $ | $ | % | % | $ | |||||||||||||||||||
| $ | $ | % | % | $ | ||||||||||||||||||||
All vendors are located in Malaysia.
(c) Credit risk
Financial instruments that are potentially subject to credit risk consist principally of accounts receivable. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.
(d) Exchange rate risk
The Company cannot guarantee that the current exchange rate will remain stable, therefore there is a possibility that the Company could post the same amount of income for two comparable periods and because of the fluctuating exchange rate actually post higher or lower income depending on exchange rate of RM converted to US$ and HK$ converted into US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
| F-14 |
DSWISS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
14. LEASE RIGHT-OF-USE ASSET AND LEASE LIABILITIES
The Company officially adopted ASC 842 for the period on and after January 1, 2019 as permitted by ASU 2016-02. ASC 842 originally required all entities to use a “modified retrospective” transition approach that is intended to maximize comparability and be less complex than a full retrospective approach. On July 30, 2018, the FASB issued ASU 2018-11 to provide entities with relief from the costs of implementing certain aspects of the new leasing standard, ASU 2016-02 of which permits entities may elect not to recast the comparative periods presented when transitioning to ASC 842. As permitted by ASU 2018-11, the Company elect not to recast comparative periods, thusly.
As
of January 1, 2019, the Company recognized approximately US$
A single lease cost is recognized over the lease term on a generally straight-line basis. All cash payments of operating lease cost are classified within operating activities in the statement of cash flows.
The operating lease right and lease liability as follow:
As of September 30, 2021, operating lease right of use asset as follow:
| Right-Of-Use Assets | ||||
| As of January 1, 2021 | $ | |||
| Amortization for the three months ended March 31, 2021 | ( | ) | ||
| Foreign exchange translation | ( | ) | ||
| Balance as of March 31, 2021 | $ | |||
| Amortization for the three months ended June 30, 2021 | ( | ) | ||
| Foreign exchange translation | ( | ) | ||
| Balance as of June 30, 2021 | $ | |||
| Amortization for the three months ended September 30, 2021 | ( | ) | ||
| Foreign exchange translation | ( | ) | ||
| Balance as of September 30, 2021 | $ |
For
the three months ended September 30, 2021 and 2020, the amortization of the operating lease right of use asset are $
As of September 30, 2021, operating lease liability as follow:
| Lease Liability | ||||
| As of January 1, 2021 | $ | |||
| Imputed interest | ||||
| Gross repayment | ( | ) | ||
| Foreign exchange translation | ( | ) | ||
| Balance as of March 31, 2021 | $ | |||
| Imputed interest | ||||
| Gross repayment | ( | ) | ||
| Foreign exchange translation | ( | ) | ||
| Balance as of June 30, 2021 | $ | |||
| Imputed interest | ||||
| Gross repayment | ( | ) | ||
| Foreign exchange translation | ( | ) | ||
| Balance as of September 30, 2021 | ||||
| Less: lease liability current portion |
Maturities of operating lease obligation as follow:
| Year ending | |||||
| December 31, 2021 | |||||
| Total | $ | ||||
Other information:
| Year ended September 30, 2021 | Year ended December 31, 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flow from operating lease | $ | $ | ||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | ||||||||
| Remaining lease term for operating lease (years) | ||||||||
| Weighted average discount rate for operating lease | % | % | ||||||
Lease
expenses were $
15. RELATED PARTY TRANSACTIONS
For the period ended September 30, 2021 the Company has the following transactions with related party:
For the period ended September 30, 2021
(Unaudited) | For the period ended September 30, 2020
(Unaudited) | |||||||
| Professional Fees: | ||||||||
| - Related party A | $ | $ | ||||||
| Sales | ||||||||
| - Related party B | $ | $ |
- | |||||
| - Related party C | ||||||||
| - Related party D | ||||||||
| Total | $ | $ | ||||||
The
related party A, is a wholly owned subsidiary of a
The related party B’s director and shareholder is the founder of the Company.
The related party C’s director and shareholder is the founder of the Company.
The related party D’s director is the founder of the Company. The shareholder of related party D is related party C.
The related party transaction is generally transacted in an arm-length basis at the current market value in the normal course of business.
16. GOING CONCERN
As
of September 30, 2021, the Company suffered an accumulated deficit of $
17. SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after September 30, 2021 up through the date the Company issued the consolidated financial statements.
18. SIGNIFICANT EVENTS
During the fiscal year, the World Health Organization declared the Coronavirus (COVID-19) outbreak to be a pandemic, which has caused severe global social and economic disruptions and uncertainties, including markets where the Company operates.
The Company considers this outbreak as non-adjusting-events. The consequences brought about by Covid-19 continue to evolve and whilst the Company actively monitoring and managing its operations to respond to these changes, the Company does not consider it practicable to provide any quantitative estimate on the potential impact it may have on the Company.
| F-15 |
Item 2. Management’s discussion and analysis of financial condition and results of operations
The information contained in this quarter report on Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended December 31, 2020 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this Form 10-Q.
The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form S-1 Amendment No.8, dated July 20, 2016 in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this transition report on Form 10-Q. The following should also be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto that appear elsewhere in this report.
Company Overview
DSwiss, Inc., a Nevada corporation (“the Company”) was incorporated under the laws of the State of Nevada on May 28, 2015. DSwiss Holding Limited owns 100% of DSwiss (HK) Limited, a Hong Kong Company, which owns 100% of DSwiss Sdn Bhd, the operating Malaysia Company of which is described below. In 2016, DSwiss (HK) Limited invested in DSwiss Biotech Sdn Bhd, incorporated in Malaysia, and owned 40% equity interest. DSwiss (HK) Limited also invested in DS Asia Co., Ltd, incorporated in Thailand, and owned 49% equity interest. We have incorporated a new company namely DSwiss International Trading (Shenzhen) Limited in China, with 100% equity interest owned by DSwiss (HK) Limited. On April 5, 2019, DS Asia Co., Ltd was officially deregistered. On Nov, 2020, DSwiss International Trading (Shenzhen) Limited was officially deregistered.
Our Company is a beauty supply company formed with the goal of supplying high quality medical, health and beauty products directly to our clients. Our beauty supplies include, but are not limited to, beverages to assist in burning and reducing fat, anti-aging creams, and products designed to improve the overall health and physical appearance of our clients. Currently we supply our products in Malaysia, Singapore, Thailand, Indonesia, Hong Kong and China. However, we have intentions to expand to Myanmar, Macau, Vietnam and Cambodia, and subsequent to that we will make efforts to expand throughout the world a premier biotech-nutraceutical company, supplying high-quality medical, health and beauty products, including beverages to assist in weight management, anti-aging creams, and products designed to improve the overall health system in our body.
At this time, we operate exclusively online through our website: http://www.dswissbeauty.com/
Our Company continuously strives to improve the already high standard of our goods and services through ongoing research and market development. We are going to penetrate into South East Asia markets through the recruitment of distributors and via the social media like Facebook and Instagram. We foresee to spend a substantial amount in marketing and advertising in the coming year. At DSwiss we are determined to bring new products to markets that we have not yet explored.
Products which meet the definition of a medicinal scope need to be registered with the Drug Control Authority (DCA), Ministry of Health Malaysia. Manufacturing, marketing, importation and the sale of unregistered products is a violation of the Drug Control Regulations and Cosmetics Act 1984 of Malaysia and enforcement action can be taken.
At DSwiss, research and development are an ongoing effort whose purpose is to ensure our products on the forefront of quality and effectiveness. Equipped with state-of-the-art machinery, our innovative research and development team are constantly exploring on new development and product lines that will enable us to provide the highest quality standard and remain competitive in the industry.
DSwiss’s products are certified and approved by the Ministry of Health (“MOH”) Malaysia. Due to the stringent requirements from MOH Malaysia, we strive to upkeep the highest possible standard in our products to provide assurance and as a prove of our continuing commitment to providing quality products.
We always strive to offer products as high quality as possible, and hope that this assurance from an esteemed regulatory body will also serve to prove our continuing commitment to providing quality goods.
DSwiss have own brand Quantum Resonant Magnetic Analyzer which is DSwiss Quantum Resonant Magnetic Analyzer. DSwiss Quantum Resonant Magnetic Analyzer is a Hi-tech innovation project, which is related to medical, bio-informatics, electronic engineering, etc. It is based on quantum medical, and scientifically analyzes the human cell’s weak magnetic field collected by advanced electronic device. The analyzer can work out the customer’s health situation and main problem. According to the checking result, the analyzer can figure out the reasonable treatment recommendation. The quantum resonant magnetic analyzer is the individualized guide of comprehensive healthy consulting and updated healthy sciences, and its characteristics and advantages are comprehensive, non-invasive, practical, simple, quick, economical and easy to popularize. We can see DSwiss Quantum Resonant Magnetic Analyzer can help our customers to more concern about their health and skin condition.
Our expected growth is planned to occur primarily through the implementation of our social media marketing strategy. DSwiss already has a strong relationship with social media (eg. Facebook, Instagram and Wechat). The global presence social media has helped provide to us has been an invaluable resource, and as we continue to expand our business operations and spread our brand awareness, we intend to primarily utilize social media to reach our customers. The benefits of social media are countless, but perhaps the most imperative to our future success is our ability to connect with customers directly, to receive their feedback almost instantaneously. On that note, the feedback we have received from our clients has been overwhelmingly positive, which has helped us to create a robust brand image.
While DSwiss has been focused almost exclusively upon pursuing operations within Asia, we do have plans to expand outward and become a household name across the world. Our strategy to do so going forward is by forming partnerships with local companies in various countries that may be willing to stock our products or promote them to their own customers. We believe that by forging strategic relationships and partnerships we can expand our operations across the globe at a greater pace and with greater certainty than we would if we tried to expand on our own.
Results of Operation
For the Three Months and Nine Months Ended September 30, 2021 and September 30, 2020.
For the three and nine months ended September 30, 2021, we realized revenue in the amount of $729,180 and $1,277,102 while for the three and nine months ended September 30, 2020, we realized revenues in the amount of $249,705 and $998,157. Our gross profits for the three and nine months ended September 30, 2021 were $156,051and $307,076 which is more than $91,686 and $262,806 for the three and nine months ended September 30, 2020. We believe that in order to retain and maintain more customers in the future we must increase our marketing efforts and or develop new products.
| 2 |
*Our gross margins may not be comparable to those of other entities, since some entities include all the costs related to their distribution network in cost of revenue. Our cost of revenue includes only the purchase cost of products and packing materials, and does not include any allocation of inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs, and the other costs associated with the distribution network.
Our net income for three months ended September 30, 2021 was $77,695 and our net income for nine months ended September 30, 2021 was $ 86,845 while the net loss for the three and nine months ended September 30, 2020 were $10,912 and $3,027. We attribute this increase in profit due to increase product sales and market share.
The increases in general and administrative expenses are a result of advertising and compliance costs as a public company.
Liquidity and Capital Resources
For the nine months ended September 30, 2021, we had cash and cash equivalents of $195,032. We have positive operating cash flows and our working capital has been and will continue to be significant. We need to meet our working capital requirements and to make capital investments in connection with ongoing operations. The Company expects its current capital resources to meet our basic operating requirements for approximately twelve months.
Operating Activities
For the nine months ended September 30, 2021, net cash generated from operating activities was $62,439, compared to net cash generated from operating activities of $56,647 in the prior year. The operating cash flow performance primarily reflects decrease in prepaid expenses and deposits compared and increase in account payable to the prior year.
Investing Activities
For the nine months ended September 30, 2021, net cash used in investing activities was $4,399 reflecting the cost in purchase of property, plant and equipment. For the nine months ended September 30, 2020, net cash used in investing activities was $1,984.
Financing Activities
For the nine months ended September 30, 2021, net cash used for financing activities was $6,208 resulted from the repayment of finance lease. For the nine months ended September 30, 2020, net cash used for financing activities was $5,956 resulted from the repayment of finance lease.
| 3 |
Capital Expenditures
Our capital expenditures primarily relate to the acquisition of property and equipment. There is a $4,399 used to purchase the computer and software and office equipment for the nine months periods ended September 30, 2021. Our capital expenditure for the nine months periods ended September 30, 2020 was $1,984.
Credit Facilities
We do not have any credit facilities or other access to bank credit.
Contractual Obligations, Commitments and Contingencies
We currently have a lease agreement in place with respect to office premises in Malaysia to commence our business operations.
Off-balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders as of September 30, 2021.
| 4 |
Additional Information
VIE STRUCTURE AND ARRANGEMENTS
On June 27, 2016, DSwiss (HK) Limited (“DSHK”) entered into a Management Services Agreement (the “Management Services Agreement I”) which entitles DSHK to substantially entitled to all of the economic benefits of DSwiss Biotech Sdn Bhd (“DSBT”) in consideration of services provided by DSHK to DSBT. Pursuant to the Management Services Agreement I, DSHK has the exclusive right to provide to DSBT management, financial and other services related to the operation of DSBT’s business, and DSBT is required to take all commercially reasonable efforts to permit and facilitate the provision of the services provided by DSHK. As compensation for providing the services, DSHK is entitled to receive a fee from DSBT, upon demand, equal to 100% of the annual net profits of DSBT during the term of the Management Services Agreement I. DSHK may also request ad hoc quarterly payments of the aggregate fee, which payments will be credited against DSBT’s future payment obligations.
The Management Services Agreement I also provide DSHK, or its designee, with a right of first refusal to acquire all or any portion of the equity of DSBT upon any proposal by the sole shareholder of DSBT to transfer such equity. In addition, at the sole discretion of DSHK, DSBT is obligated to transfer to DSHK, or its designee, any part or all of the business, personnel, assets and operations of DSBT which may be lawfully conducted, employed, owned or operated by DSHK, including:
(a) business opportunities presented to, or available to DSBT may be pursued and contracted for in the name of DSHK rather than DSBT, and at its discretion, DSHK may employ the resources of DSBT to secure such opportunities;
(b) any tangible or intangible property of DSBT, any contractual rights, any personnel, and any other items or things of value held by DSBT may be transferred to DSHK at book value;
(c) real property, personal or intangible property, personnel, services, equipment, supplies and any other items useful for the conduct of the business may be obtained by DSHK by acquisition, lease, license or otherwise, and made available to DSBT on terms to be determined by agreement between DSHK and DSBT;
(d) contracts entered into in the name of DSBT may be transferred to DSHK, or the work under such contracts may be subcontracted, in whole or in part, to DSHK, on terms to be determined by agreement between DSHK and DSBT; and
(e) any changes to, or any expansion or contraction of, the business may be carried out in the exercise of the sole discretion of DSHK, and in the name of and at the expense of, DSHK; provided, however, that none of the foregoing may cause or have the effect of terminating (without being substantially replaced under the name of DSHK) or adversely affecting any license, permit or regulatory status of DSBT.
In addition, DSHK entered into certain agreements with Jervey Choon, (the “DSBT shareholder”), including
| (i) | a Call Option Agreement allowing DSHK to acquire the shares of DSBT as permitted by Malaysia laws; |
| (ii) | a Shareholders’ Voting Rights Proxy Agreement that provides DSHK with the voting rights of the DSBT; and |
| (iii) | an Equity Pledge Agreement that pledges the shares in DSBT. |
This VIE structure provides DSHK, a wholly-owned subsidiary of DSwiss Holding Limited, which is the wholly-owned subsidiary of DSwiss Inc, with control over the operations and benefits of DSBT without having a direct equity ownership in DSBT.
| 5 |
Item 3 Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 4 Controls and Procedures.
Evaluation of Disclosure Controls and Procedures:
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2016. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30 2021, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of September 30, 2021, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
Changes in Internal Control over Financial Reporting:
There were no changes in our internal control over financial reporting during the quarter ending September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 6 |
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to us.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under 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.
| 7 |
ITEM 6. Exhibits
| Exhibit No. | Description | |
| 31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer* | |
| 32.1 | Section 1350 Certification of principal executive officer * | |
| 101.INS | Inline XBRL Instance Document* | |
| 101.SCH | Inline XBRL Schema Document* | |
| 101.CAL | Inline XBRL Calculation Linkbase Document* | |
| 101.DEF | Inline XBRL Definition Linkbase Document* | |
| 101.LAB | Inline XBRL Label Linkbase Document* | |
| 101.PRE | Inline XBRL Presentation Linkbase Document* | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
| 8 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DSWISS, INC. | ||
| (Name of Registrant) | ||
| Date: November 15, 2021 | ||
| By: | /s/ Leong Ming Chia | |
| Title: | President,
Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and Director | |
| (Principal Executive Officer, Principal Financial Officer) | ||
| 9 |