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, 2019 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, DSwiss
Asia Co., Ltd was officially deregistered.
Our Company is a medical, health and beauty supplies company formed with the
goal of supplying high quality medical, health and beauty products directly to
our clients. Our medical, health and 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 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 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.
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 Six Months Ended June 30, 2020 and June 30, 2019.
For the three and six months ended June 30, 2020, we realized revenue in the
amount of $220,910 and $748,452, while for the three and six months ended June
30, 2019, we realized revenues in the amount of $24,428 and $43,240. Our gross
profits for the three and six months ended June 30, 2020 were $51,114 and
$171,120, which is more than $32,216 and $141,386 for the three and six months
ended June 30, 2019. The decrease in gross profit margin for the three and six
months ended June 30, 2020 were due to unfavourable purchasing. 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.
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*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, 2020 was $12,418 and our net profit
for six months ended June 30, 2020 was $7,885, while the net loss for the three
and six months ended June 30, 2019 were $97,570 and $217,273. 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 six months ended June 30, 2020, we had cash and cash equivalents of
$97,941. 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 six months ended June 30, 2020, net cash generated in operating
activities was $42,885, compared to net cash used of $82,557 in the prior year.
The operating cash flow performance primarily reflects increase in prepaid
expenses and deposits compared and decrease in account payable to the prior
year.
Investing Activities
For the six months ended June 30, 2020, net cash used in investing activities
was $2,212, reflecting the cost in purchase of property, plant and equipment.
For the six months ended June 30, 2019, net cash used in investing activities
was $601.
Financing Activities
For the six months ended June 30, 2020, net cash used for financing activities
was $3,732 resulted from the repayment of hire purchase and advance from
directors. For the six months ended June 30, 2019, net cash used for financing
activities was $20,323 resulted from the repayment of hire purchase.
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Capital Expenditures
Our capital expenditures primarily relate to the acquisition of property and
equipment. There is a $2,212 used to purchase the computer and software and
office equipment for the six months periods ended June 30, 2020. Our capital
expenditure for the six months periods ended June 30, 2019 was $601.
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, 2020.
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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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