Quarterly Report (10-q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For The Quarterly Period Ended June 30, 2022

 

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________to _______________

 

Commission File Number 333-208083

 

DSwiss, Inc.

(Exact name of registrant issuer as specified in its charter)

 

Nevada		47-4215595
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

 

Unit 18-11, 18-12 & 18-01, Tower A, Vertical Business Suite,

Avenue 3, Bangsar South, No.8 Jalan Kerinchi, 59200, Kuala Lumpur, Malaysia

(Address of principal executive offices, including zip code)

 

Registrant’s phone number, including area code (603) 2770-4032

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class:		Trading Symbol(s)		Name of each exchange on which registered:
Common Stock		DQWS		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.

 

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 (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 ☐ 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. 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 ☐ Non-accelerated Filer ☐ Smaller reporting company ☒ Emerging growth company ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

 

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 June 30, 2022
Common Stock, $.0001 par value		206,904,585

 

 

 

 

TABLE OF CONTENTS

 

		Page
PART I	FINANCIAL INFORMATION
ITEM 1.	UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	F-2
	Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months and Six Months Ended June 30, 2022 and 2021	F-3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2022	F-4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	F-5
	Notes to the Condensed Consolidated Financial Statements	F-6 – F-17
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2-5
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	6
ITEM 4.	CONTROLS AND PROCEDURES	6
PART II	OTHER INFORMATION
ITEM 1	LEGAL PROCEEDINGS	7
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	7
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	7
ITEM 4	MINE SAFETY DISCLOSURES	7
ITEM 5	OTHER INFORMATION	7
ITEM 6	EXHIBITS	8
SIGNATURES		9

 

1

 

 

DSWISS, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

	Page
Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	F-2
Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months and Six Months Ended June 30, 2022 and 2021	F-3
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2022	F-4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	F-5
Notes to the Condensed Consolidated Financial Statements	F-6 - F-17

 

F-1

 

 

PART I FINANCIAL INFORMATION

 

Item 1. Unaudited condensed consolidated financial statements:

 

DSWISS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2022 and December 31, 2021

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

 

		June 30,2022				December 31, 2021
		Unaudited				Audited
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	238,156			$	234,546
Accounts receivable			29,422				2,053
Other receivables, prepaid expenses and deposit			22,197				53,693
Tax recoverable			2,620				814
Inventories			11,723				17,131
Total Current Assets			304,118				308,237
NON-CURRENT ASSETS
Plant and equipment, net			79,628				92,970
Intangible assets, net			3,956				4,498
Operating lease right -of-use, net			66,031				92,606
Total Non-Current Assets			149,615				190,074
TOTAL ASSETS		$	453,733			$	498,311
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	34,649			$	10,901
Other payables and accrued liabilities			167,441				205,359
Finance lease liability			16,183				16,697
Amount due to a director			38,338				40,509
Operating lease liability			43,425				45,270
Current tax liabilities			-				175
Total Current Liabilities			300,036				318,911
NON- CURRENT LIABILITIES
Finance lease liability			46,872				58,055
Operating lease liability			22,606				47,336
Total non-current liabilities			69,478				105,391
TOTAL LIABILITIES		$	369,514			$	424,302
STOCKHOLDERS’ EQUITY
Preferred stock, $0.0001 par value, 200,000,000 shares authorized, None issued and outstanding			-				-
Common stock, $0.0001 par value, 600,000,000 shares authorized, 206,904,585 shares issued and outstanding as of June 30, 2022 and December 31, 2021 respectively		$	20,690			$	20,690
Additional paid-in capital			1,395,426				1,395,426
Accumulated other comprehensive losses			(38,009	)			(32,985	)
Accumulated deficit			(1,289,659	)			(1,309,711	)
TOTAL DSWISS, INC. STOCKHOLDERS’ EQUITY		$	88,448			$	73,420
NON-CONTROLLING INTEREST			(4,229	)			589
TOTAL STOCKHOLDERS’ EQUITY			84,219				74,009
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	453,733			$	498,311

 

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 SIX MONTHS ENDED JUNE 30, 2022 AND 2021

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

(Unaudited)

 

		Three months ended June 30								Six months ended June 30
		2022				2021				2022				2021
		$				$				$				$
REVENUE			739,595				258,044				1,187,232				547,922
COST OF REVENUE			(663,012	)			(223,818	)			(995,387	)			(396,897	)
GROSS PROFIT			76,583				34,226				191,845				151,025
OTHER INCOME			709				3,810				5,393				5,773
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			(83,902	)			(53,223	)			(156,241	)			(124,134	)
OPERATING EXPENSES			(348	)			(518	)			(788	)			(696	)
FINANCE COST			(1,615	)			(1,142	)			(3,644	)			(1,601	)
LEASE EXPENSES			(10,564	)			(6,791	)			(21,437	)			(21,217	)
(LOSS)/PROFIT BEFORE INCOME TAX			(19,137	)			(23,638	)			15,128				9,150
TAXATION			-				-				-				-
NET (LOSS)/PROFIT			(19,137	)			(23,638	)			15,128				9,150
Non-Controlling Interest			8,281				12,974				4,924				4,050
Other comprehensive income/(loss)
- Foreign currency translation adjustment			(4,327	)			524				(5,024	)			826
TOTAL COMPREHENSIVE (LOSS)/INCOME			(15,183	)			(10,140	)			15,028				14,026
NET (LOSS)/INCOME PER SHARE – BASIC AND DILUTED			(0.00007	)			(0.00005	)			0.000007				0.00007
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED			206,904,585				206,904,600				206,904,585				206,904,600

 

See accompanying notes to condensed consolidated financial statements.

 

F-3

 

 

DSWISS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2022

(Currency expressed in United States Dollars (“US$”))

(unaudited)

 

Six Months Ended June 30, 2022 (Unaudited)

 

		COMMON STOCK
		Number of shares				Amount				ADDITIONAL PAID-IN CAPITAL				ACCUMULATED COMPREHENSIVE LOSS				ACCUMULATED DEFICIT				NON- CONTROLLING INTEREST				TOTAL EQUITY
Balance as of December 31, 2021 (audited)			206,904,585				20,690				1,395,426				(32,985	)			(1,309,711	)			589				74,009
Foreign currency translation adjustment			-				-				-				(5,024	)			-				106				(4,918	)
Net profit/(loss)			-				-				-				-				20,052				(4,924	)			15,128
Balance as of June 30, 2022 (unaudited)			206,904,585				20,690				1,395,426				(38,009	)			(1,289,659	)			(4,229	)			84,219

 

Six Months Ended June 30, 2021 (Unaudited)

 

		COMMON STOCK
		Number of shares				Amount				ADDITIONAL PAID-IN CAPITAL				ACCUMULATED COMPREHENSIVE LOSS				ACCUMULATED DEFICIT				NON- CONTROLLING INTEREST				TOTAL EQUITY
Balance as of December 31, 2020 (audited)			206,904,600				20,690				1,395,426				(28,177	)			(1,483,170	)			25,727				(69,504	)
Foreign currency translation adjustment			-				-				-				826				-				(1,823	)			(997	)
Net profit/(loss)			-				-				-				-				13,200				(4,050	)			9,150
Balance as of June 30, 2021 (unaudited)			206,904,600				20,690				1,395,426				(27,351	)			(1,469,970	)			19,854				(61,351	)

 

F-4

 

 

DSWISS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021

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

(Unaudited)

 

		Six months ended June 30,
		2022				2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit		$	15,128			$	9,150
Adjustments to reconcile net profit to net cash used in operating activities:
Depreciation and amortization			37,129				32,591
Amortization for intangible assets			515				519
Changes in operating assets and liabilities:
Accounts payable			24,332				(707	)
Accounts receivable			(27,479	)			(50,165	)
Other payables and accrued liabilities			(3,917	)			(2,220	)
Inventories			4,490				13,872
Other receivables, prepaid expenses and deposits			3,361				32,178
Lease liabilities			(21,612	)			(23,088	)
Right of use			761				-
Tax payable			340				-
Cash generated from operations			33,048				12,130
Tax paid			(494	)			(202	)
Reversal of deferred tax liabilities			(1,927	)			-
Net cash generated from operating activities			30,627				11,928
CASH FLOWS FROM INVESTING ACTIVITY:
Purchase of plant and equipment			(6,903	)			(2,886	)
Net cash used in investing activity			(6,903	)			(2,886	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment to directors			-				(1,674	)
Advance from related parties			-				275
Repayment of finance lease			(7,690	)			(4,148	)
Net cash used in financing activities			(7,690	)			(5,547	)
Effect of exchange rate changes on cash and cash equivalent			(12,424	)			1,835
Net increase in cash and cash equivalents			3,610				5,330
Cash and cash equivalents, beginning of period			234,546				158,004
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	238,156			$	163,334
SUPPLEMENTAL CASH FLOWS INFORMATION
Income taxes paid		$	(494	)		$	(623	)
Interest paid		$	(433	)		$	446

 

See accompanying notes to condensed consolidated financial statements.

 

F-5

 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2022

(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 is premier biotech-nutraceutical, beauty supplies, and medical consumables supplies. The Company sells medical consumable supplies, food supplements, skincare, and other related beauty products in Malaysia and around the ASEAN region. We are globally recognized Turnkey Private Label Manufacturing Services for nutraceutical and skincare OEM/ODM products.

 

Our professionals manage from custom formulation of scientifically proven and naturally effective, sourcing raw materials, production, quality control, stability, and safety test, clinical testing by third-party labs, packaging, and shipping, including import and export.

 

Our manufacturing facilities which compliant with GMP (Good Manufacturing Practise), FDA (Food Drug Association), HACCP (Hazard Analysis and Critical Control Point), JAKIM HALAL, and Mesti.

 

The accompanying unaudited condensed consolidated financial statements of DSwiss, Inc. at June 30, 2022 and 2021 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, 2021. 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 June 30, 2022 and 2021 presented are not necessarily indicative of the results to be expected for the full year. The December 31, 2021 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, 2021.

 

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 100% equity interest in DSwiss (HK) Limited, a company incorporated in Hong Kong, which subsequent hold 100% equity interest in DSwiss Sdn. Bhd. On August 31, 2015, DSwiss, Inc. was restructured to be the holding company parent to, and succeed to the operations of, DSwiss Holding Limited. The former unit holder of DSwiss Holding Limited became the unit holder of DSwiss, Inc. and DSwiss Holding Limited became a wholly-owned subsidiary of DSwiss, Inc. This transaction was accounted for as a transaction among entities under common control and the assets, liabilities, revenues and expenses of DSwiss Holding Limited were carried over to and combined with DSwiss, Inc. at historical cost, and as if the transfer occurred at the beginning of the period. Prior periods have been retrospectively adjusted for comparative purposes.

 

We have invested in DSwiss Biotech Sdn Bhd, a Company incorporated in Malaysia, and owned 40% equity interest.

 

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.

DSwiss Holding Limited

Seychelles, May 28, 2015

1 share of ordinary share of US$1 each

Investment holding

100

%

2.

DSwiss (HK) Limited

Hong Kong, May 28, 2015

1 share of ordinary share of HK$1 each

Supply of beauty products

100

%

3.

DSwiss Sdn Bhd

Malaysia, March 10, 2011

2 shares of ordinary share of RM 1 each

Supply of beauty products

100

%

4.

DSwiss Biotech Sdn Bhd(1)

Malaysia, March 17, 2016

250,000 shares of ordinary share of RM 1 each

Supply of biotech products

40

%

 

(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 SIX MONTHS ENDED JUNE 30, 2022

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

(UNAUDITED)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements for the period ended June 30, 2022, the Company has accumulated deficit of $1,289,659. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The Company’s ability to continue as a going concern is dependent upon improving its profitability and the continuing financial support from its shareholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stock holders, in the case of equity financing.

 

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 collected by the customer at the Company’s office. 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. Generally, the Company recognizes revenue when OEM, Home brand and medical consumables product are sold and accepted by the customers and there are no continuing obligations to the customer.

 

Cost of revenue

 

Cost of revenue includes the purchase cost of retail goods for re-sale to customers and packing materials (such as boxes). 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 SIX MONTHS ENDED JUNE 30, 2022

(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.

 

Plant and equipment

 

Plant 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		5 years
Furniture and fittings		5 years
Office equipment		10 years
Motor vehicle		5 years
Plant and machinery		10 years

 

Intangible assets

 

Intangible assets are stated at cost less accumulated amortization. Intangible assets represented the registration costs of trademarks in Malaysia and Hong Kong, which are amortized on a straight-line basis over a useful life of ten years.

 

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 six months ended June 30, 2022.

 

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 10).

 

Income taxes

 

The provision of income taxes is determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 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 much of its businesses activities in Hong Kong and is subject to tax in this jurisdiction. As a result of its business activities, the Company will file separate tax returns that are subject to examination by the foreign tax authorities.

 

F-8

 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2022

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

(UNAUDITED)

 

Net income/(loss) per share

 

The Company calculates net income/(loss) per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income/(loss) per share is computed by dividing the net income/(loss) by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income/(loss) 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$1 and HK$ into US$1 has been made at the following exchange rates for the respective periods:

  

		As of and for the six months ended June 30,
		2022				2021
Period-end RM : US$1 exchange rate			4.41				4.14
Period-average RM : US$1 exchange rate			4.29				4.07
Period-end HK$ : US$1 exchange rate			7.85				7.76
Period-average HK$ : US$1 exchange rate			7.83				7.77

 

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.

 

F-9

 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2022

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

(UNAUDITED)

 

Fair value of financial instruments:

 

The carrying value of the Company’s financial instruments: cash and cash equivalents, accounts receivable, deposits, accounts 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 six months ended June 30, 2022, the Company operates in three reportable operating segment in Malaysia and Hong Kong.

 

Recent accounting pronouncements

 

FASB issues various Accounting Standards Updates relating to the treatment and recording of certain accounting transactions. On June 10, 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-10, Development Stage Entities (Topic 915) Elimination of Certain Financial Reporting Requirements, including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which eliminates the concept of a development stage entity (DSE) entirely from current accounting guidance. The Company has elected adoption of this standard, which eliminates the designation of DSEs and the requirement to disclose results of operations and cash flows since inception.

 

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 SIX MONTHS ENDED JUNE 30, 2022

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

(UNAUDITED)

 

3. 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, on ad hoc basis, quarterly payments of the aggregate fee, which payments will be credited against DSBT’s future payment obligations.

 

The Management Services Agreement I also provides 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.

 

4. STOCKHOLDERS’ EQUITY

 

As of June 30, 2022, the Company had a total of 206,904,585 of its common stock issued and outstanding. There are no shares of preferred stock issued and outstanding.

 

5. PLANT AND EQUIPMENT

  

		June 30, 2022				December 31, 2021
Computer and software		$	103,477			$	102,050
Furniture and fittings			6,144				6,144
Office equipment			15,733				13,126
Motor vehicle			133,003				133,003
Plant and machinery			2,869				-
Total plant and equipment		$	261,226			$	254,323
Accumulated depreciation			(172,797	)			(157,105	)
Effect of translation exchange			(8,801	)			(4,248	)
Plant and equipment, net		$	79,628			$	92,970

 

Depreciation expense for the three months and six months ended June 30, 2022 were $8,191 and $15,692 respectively.

 

Depreciation expense for the three months and six months ended June 30, 2021 were $4,817 and $9,553 respectively.

 

F-11

 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2022

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

(UNAUDITED)

 

6. INTANGIBLE ASSETS

  

		June 30, 2022				December 31, 2021
Trademarks		$	12,077			$	12,077
Amortization			(7,650	)			(7,135	)
Effect of translation exchange			(471	)			(444	)
Intangible assets, net		$	3,956			$	4,498

 

Amortization for the three months and six months ended June 30, 2022 was $257 and $515 respectively.

 

Amortization for the three months and six months ended June 30, 2021 was $519 and $519 respectively.

 

7. OTHER RECEIVABLES, PREPAID EXPENSES AND DEPOSITS

  

		June 30, 2022				December 31, 2021
Prepaid expenses		$	2,545			$	977
Deposits			19,652				52,716
Total prepaid expenses and deposits		$	22,197			$	53,693

 

8. INVENTORIES

  

		June 30, 2022				December 31, 2021
Finished goods, at cost		$	11,723			$	17,131
Total inventories		$	11,723			$	17,131

 

9. OTHER PAYABLES AND ACCRUED LIABILITIES

  

		June 30, 2022				December 31, 2021
Other payables		$	137,013			$	164,529
Accrued audit fees			15,906				21,342
Accrued other expenses			10,091				14,136
Accrued professional fees			4,431				5,352
Total payables and accrued liabilities		$	167,441			$	205,359

 

F-12

 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2022

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

(UNAUDITED)

 

10. FINANCE LEASE LIABILITY

 

The Company purchased motor vehicles with finance lease. The first finance lease agreement commenced on July 31, 2018 with the effective interest rate of 3.62% per annum, due through June, 2025, with principal and interest payable monthly. The second finance lease agreement commenced on December 3, 2021 with the effective interest rate of 3.70% per annum, due through November, 2026, with principal and interest payable monthly. The obligation under the finance lease is as follows:

 

		As of June 30,				As of December 31,
		2022				2021
Finance lease		$	68,074			$	81,676
Less: interest expense			(5,019	)			(6,924	)
Net present value of finance lease			63,055				74,752
Current portion			16,183				16,697
Non-current portion			46,872				58,055
Total		$	63,055			$	74,752

 

As of June 30, 2022 the maturities of the finance lease for each of the years are as follows:

  

2022			7,363
2023			16,511
2024			17,219
2025			13,143
2026			8,819
Total		$	63,055

 

11. AMOUNT DUE TO A DIRECTOR

 

As of June 30, 2022 and December 31, 2021, a director of the Company advanced $38,338 and $40,509, respectively to the Company, which is unsecured, interest-free with no fixed repayment term, for working capital purpose.

 

12. INCOME TAXES

 

For the six months ended June 2022 and 2021, the local (United States) and foreign components of profit before income taxes were comprised of the following:

  

		For the six months ended June 30, 2022				For the six months ended June 30, 2021
Tax jurisdictions from:
- Local		$	(20,770	)		$	(17,845	)
- Foreign, representing
Seychelles			(2,169	)			(1,428	)
Hong Kong			(2,064	)			(2,779	)
Malaysia			40,131				31,202
Profit before income tax		$	15,128			$	9,150

 

F-13

 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2022

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

(UNAUDITED)

 

The provision for income taxes consisted of the following:

  

		For the six months ended June 30, 2022				For the six months ended June 30, 2021
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 and Malaysia 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 June 30, 2022, the operations in the United States of America incurred $449,749 of cumulative net operating losses which can be carried forward to offset future taxable income, at the tax rate of 21%. The net operating loss carry forwards begin to expire in 2038, if unutilized. The Company has provided for a full valuation allowance of $94,447 against the deferred tax assets on the expected future tax benefits from the net operating loss carry forwards as the management believes it is more likely than not that these assets will not be realized in the future.

 

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 16.5% on its assessable income. As of June 30, 2022, the operations in the Hong Kong incurred $629,215 of cumulative net operating losses which can be carried forward to offset future taxable income, at the tax rate of 16.5%. The Company has provided for a full valuation allowance of $103,820 against the deferred tax assets on the expected future tax benefits from the net operating loss carry forwards as the management believes it is more likely than not that these assets will not be realized in the future.

 

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 17% to 24% on its assessable income. As of June 30, 2022, the operations in the Malaysia incurred $232,667 of cumulative net operating losses which can be carried forward to offset future taxable income, at the tax rate of 17%. The Company has provided for a full valuation allowance of $39,553 against the deferred tax assets on the expected future tax benefits from the net operating loss carry forwards as the management believes it is more likely than not that these assets will not be realized in the future.

 

F-14

 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2022

(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 June 30, 2022 and 2021, 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:

 

		2022				2021				2022				2021				2022				2021
		Revenues								Percentage of revenues								Accounts receivable, trade
Customer A		$	-			$	11,709				-	%			5	%		$	-				-
Customer B		$	346,253			$	108,534				46	%			42	%			-				-
Customer C		$	155,407			$	91,714				21	%			36	%		$	6,843				43,562
		$	501,660			$	211,957				67	%			83	%		$	6,843				43,562

 

For six months ended June 30, 2022 and 2021, 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:

 

		2022				2021				2022				2021				2022				2021
		Revenues								Percentage of revenues								Accounts receivable, trade
Customer A		$	-			$	46,154				-	%			8	%		$	-			$	-
Customer B		$	416,432			$	281,913				35	%			51	%		$	-			$	-
Customer C		$	255,238			$	136,227				21	%			25	%		$	6,843			$	43,562
		$	671,670			$	464,294				56	%			84	%		$	6,843			$	43,562

 

(b) Major vendors

 

For three months ended June 30, 2022 and 2021, 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:

 

		2022				2021				2022				2021				2022				2021
		Purchase								Percentage of purchases								Accounts payable, trade
Vendor A		$	-			$	12,380				-	%			6	%		$	-			$	-
Vendor B		$	304,423			$	129,203				45	%			58	%		$	-			$	-
Vendor C		$	88,841			$	-				13	%			-	%		$	26,426			$	-
Vendor D		$	131,131			$	-				20	%			-	%		$	-			$	-
		$	524,395			$	141,583				78	%			64	%		$	26,426			$	-

 

For six months ended June 30, 2022 and 2021, 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:

 

		2022				2021				2022				2021				2022				2021
		Purchase								Percentage of purchases								Accounts payable, trade
Vendor A		$	-			$	29,295				-	%			7	%		$	-			$	-
Vendor B		$	407,162			$	258,625				41	%			65	%		$	-			$	-
Vendor C		$	159,895			$	3,833				16	%			1	%		$	26,426			$	-
Vendor D		$	187,012				-				19	%			-	%		$	-			$	-
		$	754,069			$	318,425				76	%			73	%		$	26,426			$	-

 

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 accounts receivable 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-15

 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2022

(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, 2022, the Company recognized approximately US$92,606, lease liability as well as right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. Lease liabilities are measured at present value of the sum of remaining rental payments as of January 1, 2022, with discounted rate of 5.4% adopted from Public Bank Berhad’s base lending rate as a reference for discount rate.

 

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 June 30, 2022 and December 31, 2021, operating lease right of use asset as follow:

 

		As of June 30, 2022				As of December 31, 2021
As of beginning of the period/year		$	92,606			$	47,653
Add: New lease commenced on 1 January 2022			-				92,606
Accumulated amortization			(21,437	)			(46,571	)
Effect of translation exchange			(5,138	)			(1,082	)
Balance as of end of the period/year		$	66,031			$	92,606

 

As of June 30, 2022 and December 31, 2021, the amortization of the operating lease right of use asset are $21,437 and $44,486 respectively.

 

As of June 30, 2022, operating lease liability as follow:

 

As of January 1, 2022		$	92,606
Less: gross repayment			(23,503	)
Add: imputed interest			2,066
Effect of translation exchange			(5,138	)
Balance as of June 30, 2022		$	66,031
Less: lease liability current portion			(43,425	)
Lease liability non-current portion		$	22,606

 

Maturities of operating lease obligation as follow:

Year ending
December 31, 2022			43,425
December 31, 2023			22,606
Total		$	66,031

 

Other information:

 

		As of June 30, 2022				As of December 31, 2021
		(unaudited)				(audited)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating lease		$	21,437			$	44,486
Right-of-use assets obtained in exchange for operating lease liabilities			43,425				45,270
Remaining lease term for operating lease (years)			2				-
Weighted average discount rate for operating lease			5.4	%			4.47	%

 

As of June 30, 2022 and December 31, 2021, lease expenses were $21,437 and $44,486 respectively.

 

F-16

 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2022

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

(UNAUDITED)

 

15. RELATED PARTY TRANSACTIONS

 

For the period ended June 30, 2022 the Company has the following transactions with related party:

  

		For the period ended June 30, 2022 (Unaudited)				For the period ended June 30, 2021 (Unaudited)
Professional Fees:
- Related party A		$	3,000			$	3,000
Sales
- Related party B		$	255,239			$	136,227
- Related party C			7,572				5,863
- Related party D			-				152
Total		$	265,811			$	145,242

 

The related party A, is a wholly owned subsidiary of a 7.33% shareholder of the Company.

 

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. SEGMENTED INFORMATION

 

ASC 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 services categories, business segments and major customers in financial statements. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes.

 

The Company had no inter-segment sales for the periods presented. Summarized financial information concerning the Company’s reportable segments is shown as below:

 

By Geography*:

 

		For the period ended June 30, 2022
		Nevada				Seychelles				Hong Kong				Malaysia				Total
Revenues		$	-			$	-			$	-			$	1,187,232			$	1,187,232
Cost of revenues			-				-				-				(995,387	)			(995,387	)
Depreciation and amortization			-				-				(515	)			(37,129	)			(37,644	)
Net (loss)/profit before taxation			(20,770	)			(2,169	)			(2,064	)			40,131				15,128
Total assets		$	27,187			$	7,055			$	14,711			$	404,780			$	453,733

 

		For the period ended June 30, 2021
		Nevada				Seychelles				Hong Kong				Malaysia				Total
Revenues		$	-			$	-			$	-			$	547,922			$	547,922
Cost of revenues			-				-				-				(396,897	)			(396,897	)
Depreciation and amortization			-				-				(519	)			(32,591	)			(33,110	)
Net (loss)/profit before taxation			(17,845	)			(1,428	)			(2,779	)			31,202				9,150
Total assets		$	7,366			$	6,475			$	11,818			$	293,775			$	319,434

 

*	Revenues and costs are attributed to countries based on the location of customers.

 

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 June 30, 2022 up through the date the Company issued the consolidated financial statements.

 

18. SIGNIFICANT EVENTS

 

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

 

The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for the period ended June 30, 2022.

 

F-17

 

 

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, 2021 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 is the leading corporation for premier nutraceutical biotechnology in USA, and has gone into Asian countries such as China, Hong Kong, Singapore, Thailand, and Malaysia with our high quality functional health supplement, skin care solution, wellness products and private labelled supplies turnkey provider (OEM/ODM). Our unique and innovative patented biotechnology, natural ingredients into products & services that has been proven to give better, faster and visible positive results to the end user including health improvement, slimming, anti-aging and beauty effects.

 

Currently, we are fulfilling in Talent Development, product research and development, and providing Original Equipment Manufacturer (OEM) and Original Design Manufacturer (ODM) services into functional food and beauty product of which is currently under research and development with Malaysia biotech and research professionals. Our professionals manage from custom formulation of scientifically-proven and naturally-effective, sourcing raw materials, production, quality control, stability and safety test, clinical testing by third-party labs, packaging and shipping including import and export, all licenses needed so customer can concentrate on what they should do. In 2020, with our experience and expertise, we have successfully expanded our client base in OEM/ODM services and developed products and Business-to-business (B2B) DNA genotyping private label services that exceed the clients’ expectation.

 

DSwiss has continuously expanding through launching health and beauty projects to provide premier experiences to the customers. DSwiss has shown a solid growth and is set to advance the biotechnology industry to drive nutraceutical and skincare biotechnology growth.

 

At this time, we operate exclusively online through our website: http://www.dswissbeauty.com.

 

Products which meet the definition of a functional food and cosmetics related products need to be registered or notified 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 is 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.

 

Our expected growth is planned to occur primarily through the implementation of our social media marketing strategy. DSwiss already has a strong relationship with new retail tech company (eg. Facebook, E-Marketplace). 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.

 

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Results of Operation

 

For the Three Months and Six Months Ended June 30, 2022 and June 30, 2021.

 

For the three and six months ended June 30, 2022, we realized revenue in the amount of $739,595 and $1,187,232, while for the three and six months ended June 30, 2021, we realized revenues in the amount of $258,044 and $547,922. Our gross profits for the three and six months ended June 30, 2022 were $76,583 and $191,845, which is more than $34,226 and $151,025 for the three and six months ended June 30, 2021.

 

*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 loss for three months ended June 30, 2022 was $19,137 and our net profit for six months ended June 30, 2021 was $15,128, while the net loss for three months ended June 30, 2021 was $23,638 and net profit for six months ended June 30, 2021 was $9,150. We attribute this increase in profit due to increase in 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 six months ended June 30, 2022 and 2021, we had cash and cash equivalents of $238,156 and $163,334 respectively. We have positive operating cash flow and our working capital has been and will continue to be significant. As a result, we have increased our sales resulting an increase in our overall revenue. 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 six months ended June 30, 2022 and 2021, net cash generated from operating activities was $30,627, compared to net cash generated from operating activities was $11,928 in the prior period. The operating cash flow performance primarily reflects increase in accounts payable, other payables and accrued liabilities to the prior period.

 

Investing Activities

 

For the six months ended June 30, 2022 and 2021, net cash used in investing activities were $6,903 and $2,886 respectively, reflecting the cost in purchase of plant and equipment.

 

Financing Activities

 

For the six months ended June 30, 2022 and 2021, net cash used in financing activities were $7,690 and $5,547 respectively resulted from the repayment of finance lease and advance from related parties.

 

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Capital Expenditures

 

Our capital expenditures primarily relate to the acquisition of plant and equipment. There were $6,903 and $2,886 used to purchase the computer and software and office equipment for the three months periods ended June 30, 2022 and 2021 respectively.

 

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 June 30, 2022.

 

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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.

 

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 provides 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.

 

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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 June 30, 2022, 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 June 30, 2022, 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 June 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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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.

 

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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.

 

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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: August 12, 2022
	By:	/s/ Leong Ming Chia
	Title:	President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and Director
		(Principal Executive Officer, Principal Financial Officer)

 

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