NOTES
TO CONSOLIDATED FINANCIAL STATEMENT
(Amount
expressed in United States Dollars (“US$”), except for number of shares)
1.
ORGANIZATION AND BUSINESS BACKGROUND
Anvia
Holdings Corporation (formerly Dove Street Acquisition Corporation) was incorporated on July 22, 2016 under the laws of the state
of Delaware. The Company is engaged in the development and commercialization of web-based technology, the “Anvia Loyalty”
and “Anvia Learning” mobile applications, and other intellectual property (collectively the “Anvia Technology”),
as evidenced by the introduction of the Anvia Technology into the stream of commerce, and the Company’s commercial relationships
with third parties.
On
January 10, 2017, the Company effected a change of control by cancelling an aggregate of 19,500,000 shares of common stock of
existing shareholders, issuing 5,000,000 shares of common stock to its sole officer and director; electing new officer and director
and accepting the resignations of its then existing officers and directors. In connection with the change of control, the sole
shareholder of the Company and its board of directors unanimously approved the change of the Company’s name from Dove Street
Acquisition Corporation to Anvia Holdings Corporation.
The
principal office address is located at 100 Challenger Road, Suite 830, Ridgefield Park, NJ 07660
The
corporate structure is depicted below:
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
These
accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United
States of America (“US GAAP”).
Going
concern
The
Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States
of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has generated minimal revenue and has sustained operating losses since inception to
date and allow it to continue as a going concern. The continuation of the Company as a going concern is dependent upon the ability
of the Company to obtain necessary financing to continue operations, and the attainment of profitable operations. The Company
incurred a net loss of $3,356,216 for the year ended December 31, 2019, incurred a net current liability of $9,433,896 and an
accumulated loss of $6,233,697 as of December 31, 2019. These factors, among others, raise a substantial doubt regarding the Company’s
ability to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
The accompanying consolidated financial statements do not include any adjustments to reflect the recoverability and classification
of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as
a going concern.
Use
of estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates
and assumptions related to the valuation of accounts receivable, accounts payable, accrued liabilities, payable to related party,
valuation of beneficial conversion features in convertible debt, valuation of derivatives, and deferred income tax asset valuation
allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors
that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent
there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash
and cash equivalents
Cash
and cash equivalents represent cash on hand, demand deposits placed with banks or other financial institutions and all highly
liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Plant
and equipment
Plant
and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated
on the straight-line basis to write off the cost over the following expected useful lives of the assets concerned. The principal
annual rates used are as follows:
|
Categories
|
|
Principal Annual Rates/Expected Useful Life
|
|
|
Computer and software
|
|
|
20
|
%
|
|
Furniture and fittings
|
|
|
20
|
%
|
|
Building
|
|
|
[N/A]
|
|
|
Renovation
|
|
|
20
|
%
|
|
Motor vehicle
|
|
|
20
|
%
|
Fully
depreciated plant and equipment are retained in the financial statements until they are no longer in use.
Intangible
assets
Intangible
assets are stated at cost less accumulated amortization. Intangible assets represented the registration costs of trademarks, which
are amortized on a straight-line basis over a useful life of five 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 was no impairment losses recorded on intangible assets for the year ended December 31, 2019.
Deferred
income
Deferred
income refers to fees received in advance for services which have not yet been performed. Deferred income is classified on the
consolidated balance sheet as current liability.
Revenue
recognition
The
Company provides vocational training, consulting services for assets and education for construction tradesman that need qualifications
for roofing, plumbing, home renovation, electrical and carpentry. The Company’s training packages vary in price according
to the different types of vocational training and education programs purchased by the customers. The Company recognizes revenue
upon the completion of the vocational training courses and education programs offered to its customers. The Company recognizes
as revenue any deposits previously received, as they are non-refundable upon commencement of the vocational training courses.
The
Company’s revenue recognition policy is based on the revenue recognition criteria established in accordance with Accounting
Standards Codification (ASC) 605. The criteria and how the Company satisfies each element are as follows: (1) persuasive evidence
of an arrangement – the Company and the customer enters into a signed contract; (2) delivery has occurred – as noted
above, upon the commencement of the training course, the deposit is non-refundable per the terms of the signed contract and upon
completion of the course, the Company has provided all services to be delivered to the customer under the contract; (3) the price
is fixed and determinable – the signed contract indicates a fixed dollar amount for the training for the courses enrolled
by the customer; (4) collectability is reasonable assured – the Company receives as payment a deposit and the balance of
the training upon the completion of the training course.
Comprehensive
income
ASC
Topic 220, “Comprehensive Income” establishes standards for reporting and display of comprehensive income,
its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner
sources. Accumulated other comprehensive income, as presented in the accompanying statements of stockholders’ equity consists
of changes in unrealized gains and losses on foreign currency translation and cumulative net change in the fair value of available-for-sale
investments held at the balance sheet date. This comprehensive income is not included in the computation of income tax expense
or benefit.
Income
tax expense
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 years 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 disclosed 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 and is subject to tax in their own jurisdictions. As a result of its business activities,
the Company will file separate tax returns that are subject to examination by the foreign tax authorities.
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 statement of operations.
The
functional currency of the Company is the United States Dollars (“US$”) and the accompanying financial statements
have been expressed in US$. In addition, the Company maintains its books and record in a local currency, Malaysian Ringgit (“MYR”
or “RM”) and Australian Dollars (“AUD”), which is functional currency as being the primary currency of
the economic environment in which the entity operates.
In
general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ 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.
Translation
of amounts from the local currency of the Company into US$1 has been made at the following exchange rates for the respective years:
|
|
|
As
of and for the year ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Year-end
US$1 : MYR exchange rate
|
|
|
4.0918
|
|
|
|
4.1300
|
|
|
Yearly
average US$1 : MYR exchange rate
|
|
|
4.1416
|
|
|
|
4.0307
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-end
AUD : US$1 exchange rate
|
|
|
0.7030
|
|
|
|
0.7046
|
|
|
Yearly
average AUD : US$1 exchange rate
|
|
|
0.6952
|
|
|
|
0.7482
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-end
US$1 : Philippine Pesos exchange rate
|
|
|
50.6107
|
|
|
|
52.5000
|
|
|
Yearly
average US$1 : Philippine Pesos exchange rate
|
|
|
51.7675
|
|
|
|
N/A
|
|
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 receivable, deposits and other receivables,
amount due to related parties and other payables 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
As
of December 31, 2019, and 2018, the Company did not have any nonfinancial assets and liabilities that are recognized or disclosed
at fair value in the financial statements, at least annually, on a recurring basis, nor did the Company have any assets or liabilities
measured at fair value on a non-recurring basis.
Earnings
(Loss) per share
The
Company computes net earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires
presentation of both basic and diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS
is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares
outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during
the period using the treasury stock method and convertible note and preferred stock using the if-converted method. In computing
diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the
exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Recent
accounting pronouncements
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does 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.
In
May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (“ASU
2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)”,
and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective
for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early
adoption is not permitted. In August 2015, the FASB issued an Accounting Standards Update to defer by one year the effective dates
of its new revenue recognition standard until annual reporting periods beginning after December 15, 2017 (2018 for calendar-year
public entities) and interim periods therein. This adoption will not have a material impact on our financial statements.
In
June 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements-Going concern (Subtopic 205-40) which provides
guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing
and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. This guidance
in ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning
after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements
have not previously been issued. This adoption will not have a material impact on our financial statements.
In
February 2015, the FASB issued ASU 2015-02 “Consolidation (Topic 810): Amendments to the Consolidation Analysis.”
ASU 2015-02 changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types
of legal entities. It is effective for annual reporting periods, and interim periods within those years, beginning after December
15, 2015. Early adoption is permitted, including adoption in an interim period. This adoption will not have a material impact
on our financial statements.
In
July 2015, the FASB issued ASU 2015-11, Inventory, which requires an entity to measure inventory within the scope at the lower
of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less
reasonably predictable costs of completion, disposal, and transportation. The effective date for the standard is for fiscal years
beginning after December 15, 2016. Early adoption is permitted. We will recognize our inventories at cost or net realizable value,
whichever lower.
In
February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required recognize the following for all leases (with
the exception of short-term leases) at the commencement date: 1) A lease liability, which is a lessee’s obligation to make
lease payments arising from a lease, measured on a discounted basis; and 2) A right-of-use asset, which is an asset that represents
the lessee’s right to use, or control the use of, a specified asset for the lease term. The new lease guidance simplified
the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities.
Lessees will no longer be provided with a source of off-balance sheet financing. The amendments in this ASU are effective for
fiscal years beginning after December 15, 2019, including interim periods within those years. The Company is evaluating this ASU
and has not determined the effect of this standard on its ongoing financial reporting.
In
January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition
of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of
transferred assets and activities is a business. We will adopt the new standard effective January 1, 2018, on a prospective basis
and do not expect the standard to have a material impact on our consolidated financial statements.
3.
OTHER RECEIVABLES AND DEPOSITS
|
|
|
As
at December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Other
receivables
|
|
$
|
449,872
|
|
|
$
|
1,399,023
|
|
|
Amount
owing by related parties
|
|
|
56,342
|
|
|
|
-
|
|
|
|
|
$
|
506,214
|
|
|
$
|
1,399,023
|
|
The
amount owing by related parties is unsecured, interest-free with no fixed repayment term.
4.
AMOUNT OWING BY DIRECTORS
The
amount owing by directors is unsecured, interest-free with no fixed repayment term.
5.
PLANT AND EQUIPMENT, NET
Plant
and equipment consisted of the following:
|
|
|
As of December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Computer and software
|
|
$
|
1,275,594
|
|
|
$
|
1,166,812
|
|
|
Furniture and fittings
|
|
|
689,150
|
|
|
|
263,978
|
|
|
Building
|
|
|
294,064
|
|
|
|
269,232
|
|
|
Renovation
|
|
|
1,540
|
|
|
|
16,834
|
|
|
Motor vehicles
|
|
|
198,484
|
|
|
|
25,122
|
|
|
|
|
|
2,458,832
|
|
|
|
1,741,978
|
|
|
(Less): Accumulated depreciation
|
|
|
(1,895,365
|
)
|
|
|
(1,256,928
|
)
|
|
Property, plant and equipment, net
|
|
$
|
563,467
|
|
|
$
|
485,050
|
|
Depreciation
expense for the year ended December 31, 2019 and 2018 were $638,435 and $$117,595 respectively.
6.
INTANGIBLE ASSETS, NET
Intangible
assets consisted of the following:
|
|
|
As
of December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Trade
mark
|
|
$
|
74,285
|
|
|
$
|
13,082
|
|
|
Software
|
|
|
317,203
|
|
|
|
-
|
|
|
|
|
|
391,488
|
|
|
|
13,082
|
|
|
|
|
|
|
|
|
|
|
|
|
(Less):
Accumulated amortisation
|
|
|
(173,322
|
)
|
|
|
(5,556
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets, net
|
|
$
|
218,166
|
|
|
$
|
7,526
|
|
Amortization
expense for the year ended December 31, 2019 and 2018 were $167,766 and $1,459, respectively.
7.
OTHER INVESTMENTS
|
|
|
As
at December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Other
investments, at cost
|
|
$
|
522,304
|
|
|
$
|
1,325,553
|
|
|
Impairment
|
|
|
-
|
|
|
|
(1,165,199
|
)
|
|
|
|
$
|
522,304
|
|
|
$
|
160,354
|
|
8.
OTHER PAYABLES AND ACCRUED LIABILITIES
|
|
|
As
at December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Amount
owing to related parties
|
|
$
|
2,744,750
|
|
|
$
|
70,244
|
|
|
Accrued
other expenses
|
|
|
1,963,971
|
|
|
|
693,811
|
|
|
|
|
$
|
4,708,721
|
|
|
$
|
764,055
|
|
The
amount owing by related parties is unsecured, interest-free with no fixed repayment term.
9.
CONVERTIBLE NOTES PAYABLES, NET OF DEBT DISCOUNT
On
June 5, 2018, the Company entered into an Equity Financing Agreement and Registration Rights Agreement with GHS Investments,
LLC (the “GHS”) pursuant to which GHS has agreed to purchase up to $10,000,000 in shares of Company common stock.
The obligations of GHS to purchase the shares of Company common stock are subject to the conditions set forth in the Equity Financing
Agreement, including, without limitation, the condition that a registration statement on Form S-1 registering the shares of Company
common stock to be sold to GHS be filed with the Securities and Exchange Commission and become effective. The Registration Rights
Agreement provides that the Company shall use commercially reasonable efforts to file the registration statement within 30 days
after the date of the Registration Rights Agreement and have the registration statement become effective within 90 days after
it is filed. The purchase price of the shares of Company common stock will be equal to 80% of the market price (as determined
in the Equity Financing Agreement) calculated at the time of purchase. In connection with the Equity Financing Agreement, the
Company executed a convertible promissory note in the principal amount of $40,000 (the “GHS Note”) as payment of the
commitment fee for the Equity Financing Agreement. The GHS Note bears interest at the rate of 8% and must be repaid on or before
March 5, 2019. For the three months ended March 31, 2019, the Company has accrued and recorded an interest expense of $ 955.99
on the GHS Note. The commitment fee in the principal amount of $ 40,000 is paid from the company according the date in the agreement.
On
June 21, 2018, the Company executed a $333,000 Convertible Promissory Note (the “Note”) with Labrys Fund, an unrelated
party (the “Lender”), bearing an interest rate of 12%, unsecured, and due on December 21, 2018 (the “Maturity
Date”). This note in paid on time from the Company. The total consideration received against the Note was $303,000, with
the Note bearing $30,000 Original Issue Discount (the “OID”) and $3,000 for legal expenses. Any interest payable is
in addition to the OID, and that OID (or prorated OID, if applicable) remained payable regardless of time and manner of payment
by the Company. The Maturity Date was December 21, 2018 the date upon which the principal sum of this promissory note, as well
as any unpaid interest and other fees, have been due and paid on December 18, 2019.
For
both the three months and twelve months ended December 31, 2018, the Company has recognized interest expense of 30,000 related
to the amortization of the OID, interest expense of $ 17,915.18 on the Note and $321,073 related to the amortization of the beneficial
conversion feature discount as it related to this Note.
On
November 15, 2018, the Company executed a $250,000 Convertible Promissory Note (the “Note”) with EMA Fund, an
unrelated party (the “Lender”), bearing an interest rate of 12%, unsecured, and due on May 15, 2019 (the “Maturity
Date”). The total consideration received against the Note was $222,500, with the Note bearing $25,000 Original Issue Discount
(the “OID”) and $2,500 for legal expenses. Any interest payable is in addition to the OID, and that OID (or prorated
OID, if applicable) remains payable regardless of time and manner of payment by the Company. The Maturity Date is the date upon
which the principal sum of this promissory note, as well as any unpaid interest and other fees, shall be due and payable. The
Note may be prepaid at any time before May 15, 2019 without any prepayment penalties. This note is paid on May 10, 2019. Any amount
of principal or interest on this Note which is not paid when due, shall bear interest at the rate of the lesser of (i) twenty-four
percent (24%) per annum or (ii) the maximum amount allowed by law from the due date thereof until the same is paid (the “Default
Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis
of a 365-day year and the actual number of days elapsed.
The
Lender has the right in its sole and absolute discretion, from time to time, and at any time on or following the 180th
calendar day after the date Note and ending on the later of (i) the Maturity Date and (ii) the date of payment of the Default
Interest, each in respect of the remaining principal amount of this Note to convert all or part of the outstanding and unpaid
principal amount of this Note into fully paid and non-assessable shares of Common Stock of the Company as per the Conversion formula:
Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. The Conversion
Price is the lesser of 60% of the lowest trade price for the last 25 days prior to the issuance of the Note or 60% of the lowest
market price over the 25 days prior to conversion. Total debt outstanding at March 31, 2019 pursuant to the convertible note payable
resulted in potential conversion of debt into 565,321 common shares of common stock. The Note contains certain representations,
warranties, covenants and events of default, and increases in the conversion discount and amount of the principal and interest
rates under the Note in the event of such defaults.
In
connection with the issuance of the Note, the Company recorded a debt discount related to the OID in the amount of $25,000 which
will be amortized to interest expense over the term of the loan. In accordance with ASC 815, the conversion feature meets the
definition of a derivative and therefore requires bifurcation and is accounted for as a derivative liability. For the six months
June 30, 2019, the Company has recognized interest expense of $ 18,611.11 related to the amortization of the OID, interest expense
of $ 10,684.93 on the Note and $ 167,500.00 related to the amortization of the embedded conversion option liabilities discount
as it related to this Note.
Under
the provisions of ASC 815-40, convertible instruments issued by the Company qualify for derivative treatment due to the variable
conversion formula. The embedded conversion features of the Note is bifurcated and recorded as a liability which is revalued at
fair value each reporting date. If the fair value of the embedded conversion feature exceeds the face value of the related debt,
net of other discounts, the excess is recorded as a change in fair value on the issuance date. Embedded conversion features are
valued at their fair value, rather than by the intrinsic value method. The Company calculated the estimated fair values of the
liabilities for embedded conversion feature at November 15, 2018, December 31, 2018 and June 30, 2019 with the Black-Scholes option
pricing model using the closing price of the Company’s common stock at each respective date and the ranges for volatility,
expected term and risk-free interest indicated above. As a result, the Company recorded a change in the fair value of the liabilities
for embedded conversion option derivative instruments for the three months and six months respectively ended June 30, 2019 of
$1,527,954.22 and $ 658,390.08, which are included in other incomes.
Additionally,
in connection with the Note, the Company also issued 31,250 shares of common stock of the Company to the holder as a commitment
fee for this note on November 15, 2018. The commitment shares fair value was calculated as $31,250 being the fair value of common
stock on the date of issuance (Note 9) and recorded as restricted stock receivable in the accompanying consolidated financial
statements at December 31, 2018.
The
Maturity Date was May 15, 2019 the date upon which the principal sum of this promissory note, as well as any unpaid interest and
other fees, have been due and paid on May 10, 2019.
On
November 29, 2018, the Company executed a $660,000 Convertible Promissory Note (the “Note”) with LABRYS Fund,
an unrelated party (the “Lender”), bearing an interest rate of 12%, unsecured, and due on May 29, 2019 (the “Maturity
Date”). The total consideration received against the Note was $600,000, with the Note bearing $60,000 Original Issue Discount
(the “OID”) and $6,000 for legal expenses. Any interest payable is in addition to the OID, and that OID (or prorated
OID, if applicable) remains payable regardless of time and manner of payment by the Company. The Maturity Date is the date upon
which the principal sum of this promissory note, as well as any unpaid interest and other fees, shall be due and payable. The
Note may be prepaid at any time before May 29, 2019 without any prepayment penalties. Any amount of principal or interest on this
Note which is not paid when due, shall bear interest at the rate of the lesser of (i) twenty-four percent (24%) per annum or (ii)
the maximum amount allowed by law from the due date thereof until the same is paid (the “Default Interest”). Interest
shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual
number of days elapsed.
The
Lender has the right in its sole and absolute discretion, from time to time, and at any time on or following the 180th
calendar day after the date Note and ending on the later of (i) the Maturity Date and (ii) the date of payment of the Default
Interest, each in respect of the remaining principal amount of this Note to convert all or part of the outstanding and unpaid
principal amount of this Note into fully paid and non-assessable shares of Common Stock of the Company as per the Conversion formula:
Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. The Conversion
Price is the lesser of 60% of the lowest trade price for the last 25 days prior to the issuance of the Note or 60% of the lowest
market price over the 25 days prior to conversion. Total debt outstanding at March 31, 2019 pursuant to the convertible note payable
resulted in potential conversion of debt into 1,483,523 common shares of common stock. The Note contains certain representations,
warranties, covenants and events of default, and increases in the conversion discount and amount of the principal and interest
rates under the Note in the event of such defaults.
In
connection with the issuance of the Note, the Company recorded a debt discount related to the OID in the amount of $60,000 which
will be amortized to interest expense over the term of the loan. In accordance with ASC 815, the conversion feature meets the
definition of a derivative and therefore requires bifurcation and is accounted for as a derivative liability. For the six months
ended June 30, 2019, the Company has recognized interest expense of $ 49,333.00 related to the amortization of the OID, interest
expense of $ 30,161.11 on the Note and $ 493,333.00 related to the amortization of the beneficial conversion feature discount
as it related to this Note.
Under
the provisions of ASC 815-40, convertible instruments issued by the Company qualify for derivative treatment due to the variable
conversion formula. The embedded conversion features of the Note is bifurcated and recorded as a liability which is revalued at
fair value each reporting date. If the fair value of the embedded conversion feature exceeds the face value of the related debt,
net of other discounts, the excess is recorded as a change in fair value on the issuance date. Embedded conversion features are
valued at their fair value, rather than by the intrinsic value method. The Company calculated the estimated fair values of the
liabilities for embedded conversion feature at November 29, 2018, December 31, 2018, March 31, 2019 and June 30, 2019 with the
Black-Scholes option pricing model using the closing price of the Company’s common stock at each respective date and the
ranges for volatility, expected term and risk-free interest indicated above. As a result, the Company recorded a change in the
fair value of the liabilities for embedded conversion option derivative instruments for the three months and six months respectively
ended June 30, 2019 of $ 4,046,703.94 and $(-778,068.14), which are included in other income and other expenses.
Additionally, in connection with the Note,
the Company also issued 1,000,000 shares of common stock of the Company to the holder as a security deposit, provided however,
the shares are returned to the Company’s treasury as the Note is fully repaid and satisfied prior to the Maturity Date. The
refundable shares fair value was calculated as $1,030,000.00 being the fair value of common stock on the date of issuance (Note
9) and recorded as restricted stock receivable in the accompanying consolidated financial statements at December 31, 2018.
The Company also issued 120,000 shares of common
stock of the Company to the holder as a commitment fee for this note. The commitment shares fair value was calculated as $123,600
being the fair value of common stock on the date of issuance (Note 9) and recorded as restricted stock receivable in the accompanying
consolidated financial statements at December 31, 2018.
The Maturity Date was May 29, 2019 the date
upon which the principal sum of this promissory note, as well as any unpaid interest and other fees, have been due and paid on
May 24, 2019.
On January 15, 2019, the Company executed
a $110,000 Convertible Promissory Note (the “Note”) with TFK Investments, an unrelated party (the “Lender”),
bearing an interest rate of 12%, unsecured, and due on July 15, 2019 (the “Maturity Date”). The total consideration
received against the Note was $97,500, with the Note bearing $12,500 Original Issue Discount (the “OID”). Any interest
payable is in addition to the OID, and that OID (or prorated OID, if applicable) remains payable regardless of time and manner
of payment by the Company. The Maturity Date is the date upon which the principal sum of this promissory note, as well as any unpaid
interest and other fees, shall be due and payable. The Note may be prepaid at any time before July 15, 2019 without any prepayment
penalties. Any amount of principal or interest on this Note which is not paid when due, shall bear interest at the rate of the
lesser of (i) twenty-four percent (24%) per annum or (ii) the maximum amount allowed by law from the due date thereof until the
same is paid (the “Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and
shall be computed on the basis of a 365-day year and the actual number of days elapsed.
The Lender has the right in its sole and absolute
discretion, from time to time, and at any time on or following the 180th calendar day after the date Note and ending
on the later of (i) the Maturity Date and (ii) the date of payment of the Default Interest, each in respect of the remaining principal
amount of this Note to convert all or part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable
shares of Common Stock of the Company as per the Conversion formula: Number of shares receivable upon conversion equals the dollar
conversion amount divided by the Conversion Price. The Conversion Price is the lesser of 60% of the lowest trade price for the
last 25 days prior to the issuance of the Note or 60% of the lowest market price over the 25 days prior to conversion. Total debt
outstanding at March 31, 2019 pursuant to the convertible note payable resulted in potential conversion of debt into 243,810 common
shares of common stock. The Note contains certain representations, warranties, covenants and events of default, and increases in
the conversion discount and amount of the principal and interest rates under the Note in the event of such defaults.
In connection with the issuance of the Note,
the Company recorded a debt discount related to the OID in the amount of $12,500 which will be amortized to interest expense over
the term of the loan. In accordance with ASC 815, the conversion feature meets the definition of a derivative and therefore requires
bifurcation and is accounted for as a derivative liability. For the six months June 30, 2019, the Company has recognized interest
expense of $ 12,500 related to the amortization of the OID, interest expense of $ 5,822.44 on the Note and $ 290,552.26 related
to the amortization of the embedded conversion option liabilities discount as it related to this Note.
Under the provisions of ASC 815-40, convertible
instruments issued by the Company qualify for derivative treatment due to the variable conversion formula. The embedded conversion
features of the Note are bifurcated and recorded as a liability which is revalued at fair value each reporting date. If the fair
value of the embedded conversion feature exceeds the face value of the related debt, net of other discounts, the excess is recorded
as a change in fair value on the issuance date. Embedded conversion features are valued at their fair value, rather than by the
intrinsic value method. The Company calculated the estimated fair values of the liabilities for embedded conversion feature at
June 30, 2019 with the Black-Scholes option pricing model using the closing price of the Company’s common stock at each respective
date and the ranges for volatility, expected term and risk-free interest indicated above. As a result, the Company recorded a change
in the fair value of the liabilities for embedded conversion option derivative instruments for the three months and six months
ended June 30, 2019 respectively of $ 686,523.85 and $ 290,552.26, which are included in other incomes.
Additionally, in connection with the Note,
the Company also issued 20,000 shares of common stock of the Company to the holder as a commitment fee for this note on January
15, 2019. The commitment shares fair value was calculated as $18,800 being the fair value of common stock on the date of issuance
(Note 9) and recorded as restricted stock receivable in the accompanying consolidated financial statements at March 31, 2018.
In connection with the Note, the Company also
issued 100,000 shares of common stock of the Company to the holder as a security deposit, provided however, the shares must be
returned to the Company’s treasury as the Note is fully repaid and satisfied prior to the Maturity Date. The refundable shares
fair value was calculated as $94,000.00 being the fair value of common stock on the date of issuance (Note 9) and recorded as restricted
stock receivable in the accompanying consolidated financial statements at March 31,2019.
The Maturity Date was July 15, 2019 the date
upon which the principal sum of this promissory note, as well as any unpaid interest and other fees, have been due and paid on
June 28, 2019.
On February 19, 2019, the Company executed
a $103,000 Convertible Promissory Note (the “Note”) with Power UP, an unrelated party (the “Lender”), bearing
an interest rate of 8%, unsecured, and due on August 19, 2019 (the “Maturity Date”). The total consideration received
against the Note was $103,000 and no OID. The Maturity Date is the date upon which the principal sum of this promissory note, as
well as any unpaid interest and other fees, shall be due and payable. The Note may be prepaid at any time before August 19, 2019
without any prepayment penalties. Any amount of principal or interest on this Note which is not paid when due, shall bear interest
at the rate of the lesser of (i) twenty-four percent (24%) per annum or (ii) the maximum amount allowed by law from the due date
thereof until the same is paid (the “Default Interest”). Interest shall commence accruing on the date that the Note
is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed.
The Lender has the right in its sole and absolute
discretion, from time to time, and at any time on or following the 180th calendar day after the date Note and ending
on the later of (i) the Maturity Date and (ii) the date of payment of the Default Interest, each in respect of the remaining principal
amount of this Note to convert all or part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable
shares of Common Stock of the Company as per the Conversion formula: Number of shares receivable upon conversion equals the dollar
conversion amount divided by the Conversion Price. The Conversion Price is the lesser of 65% of the lowest trade price for the
last 25 days prior to the issuance of the Note or 65% of the lowest market price over the 25 days prior to conversion. Total debt
outstanding at March 31, 2019 pursuant to the convertible note payable resulted in potential conversion of debt into 207,598 common
shares of common stock. The Note contains certain representations, warranties, covenants and events of default, and increases in
the conversion discount and amount of the principal and interest rates under the Note in the event of such defaults.
In connection with the issuance of the Note,
the Company has not recorded any debt discount related to the OID as it is not applicable for this note. In accordance with ASC
815, the conversion feature meets the definition of a derivative and therefore requires bifurcation and is accounted for as a derivative
liability.
For the six months June 30, 2019, the Company
has recognized, interest expense of $ 28,639.64.46 on the Note and $ 135,523.18 related to the amortization of the embedded conversion
option liabilities discount as it related to this Note.
Under the provisions of ASC 815-40, convertible
instruments issued by the Company qualify for derivative treatment due to the variable conversion formula. The embedded conversion
features of the Note is bifurcated and recorded as a liability which is revalued at fair value each reporting date. If the fair
value of the embedded conversion feature exceeds the face value of the related debt, net of other discounts, the excess is recorded
as a change in fair value on the issuance date. Embedded conversion features are valued at their fair value, rather than by the
intrinsic value method. The Company calculated the estimated fair values of the liabilities for embedded conversion feature at
June 30, 2019 with the Black-Scholes option pricing model using the closing price of the Company’s common stock at each respective
date and the ranges for volatility, expected term and risk-free interest indicated above. As a result, the Company recorded a change
in the fair value of the liabilities for embedded conversion option derivative instruments for the three months and six months
ended June 30, 2019 respectively of $ 591,888.19 and $ 135,523.18, which are included in other incomes.
The Maturity Date was August 19, 2019 the date
upon which the principal sum of this promissory note, as well as any unpaid interest and other fees, have been due and paid on
June 28, 2019.
On March 15, 2019, the Company executed
a $150,000 Convertible Promissory Note (the “Note”) with First Fire, an unrelated party (the “Lender”),
bearing an interest rate of 12%, unsecured, and due on September 15, 2019 (the “Maturity Date”). The total consideration
received against the Note was $121,440, with the Note bearing $15,000 Original Issue Discount (the “OID”) and $13,560
legal & finance cost. Any interest payable is in addition to the OID, and that OID (or prorated OID, if applicable) remains
payable regardless of time and manner of payment by the Company. The Maturity Date is the date upon which the principal sum of
this promissory note, as well as any unpaid interest and other fees, shall be due and payable. The Note may be prepaid at any time
before September 15, 2019 without any prepayment penalties. Any amount of principal or interest on this Note which is not paid
when due, shall bear interest at the rate of the lesser of (i) twenty-four percent (24%) per annum or (ii) the maximum amount allowed
by law from the due date thereof until the same is paid (the “Default Interest”). Interest shall commence accruing
on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed.
The Lender has the right in its sole and absolute
discretion, from time to time, and at any time on or following the 180th calendar day after the date Note and ending
on the later of (i) the Maturity Date and (ii) the date of payment of the Default Interest, each in respect of the remaining principal
amount of this Note to convert all or part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable
shares of Common Stock of the Company as per the Conversion formula: Number of shares receivable upon conversion equals the dollar
conversion amount divided by the Conversion Price. The Conversion Price is the lesser of 60% of the lowest trade price for the
last 25 days prior to the issuance of the Note or 60% of the lowest market price over the 25 days prior to conversion. Total debt
outstanding at September 30, 2019 pursuant to the convertible note payable resulted in potential conversion of debt into 166,667
common shares of common stock. The Note contains certain representations, warranties, covenants and events of default, and increases
in the conversion discount and amount of the principal and interest rates under the Note in the event of such defaults.
In connection with the issuance of the Note,
the Company recorded a debt discount related to the OID in the amount of $15,000 which will be amortized to interest expense over
the term of the loan. In accordance with ASC 815, the conversion feature meets the definition of a derivative and therefore requires
bifurcation and is accounted for as a derivative liability. The Company recognized a debt discount related to the bifurcated embedded
conversion option derivative liability in the amount of $ $ 452,315.07 using the Black-Scholes pricing model, which will be amortized
to interest expense over the term of the Note, using effective interest method. The key valuation assumptions used consist, in
part, of the price of the Company’s common stock of $3.48 at issuance date, a risk-free interest rate of 2.49%, expected
annualized volatility of the Company’s stock of 352.45%.
For the nine months September 30, 2019, the
Company has recognized interest expense of $ 15,000 related to the amortization of the OID, interest expense of $ 25,000 on the
Note and $ 1,262,174.61related to the amortization of the embedded conversion option liabilities discount as it related to this
Note.
Under the provisions of ASC 815-40, convertible
instruments issued by the Company qualify for derivative treatment due to the variable conversion formula. The embedded conversion
features of the Note is bifurcated and recorded as a liability which is revalued at fair value each reporting date. If the fair
value of the embedded conversion feature exceeds the face value of the related debt, net of other discounts, the excess is recorded
as a change in fair value on the issuance date. Embedded conversion features are valued at their fair value, rather than by the
intrinsic value method. The Company calculated the estimated fair values of the liabilities for embedded conversion feature at
September 30, 2019 with the Black-Scholes option pricing model using the closing price of the Company’s common stock at each
respective date and the ranges for volatility, expected term and risk-free interest indicated above.
As a result, the Company recorded a change
in the fair value of the liabilities for embedded conversion option derivative instruments for the three months and nine months
ended September 30, 2019 respectively of $ 452,315 and $ 1,262,174. 54 which are included in other incomes.
Additionally, in connection with the Note,
the Company also issued 19,480 shares of common stock of the Company to the holder as a commitment fee for this note on March 15,
2019. The commitment shares fair value was calculated as $52,401.2 being the fair value of common stock on the date of issuance
(Note 9) and recorded as restricted stock receivable in the accompanying consolidated financial statements at September 30, 2019.
In connection with the Note, the Company also
issued 97,402 shares of common stock of the Company to the holder as a security deposit, provided however, the shares must be returned
to the Company’s treasury if the Note is fully repaid and satisfied prior to the Maturity Date. The refundable shares fair
value was calculated as $262,011.38 being the fair value of common stock on the date of issuance (Note 9) and recorded as restricted
stock receivable in the accompanying consolidated financial statements at September 30 ,2019.
This note is paid partially during the month
of July and August 2019 in the amount of $100,000. As of today December 30, 2019, the outstanding note due to be paid is $ 50,000
plus the respective interest.
On March 15, 2019, the Company executed
a $110,000 Convertible Promissory Note (the “Note”) with Crown Bridge, an unrelated party (the “Lender”),
bearing an interest rate of 12%, unsecured, and due on September 15, 2019 (the “Maturity Date”). The total consideration
received against the Note was $96,500, with the Note bearing $11,000 Original Issue Discount (the “OID”) and $2,500
legal cost. Any interest payable is in addition to the OID, and that OID (or prorated OID, if applicable) remains payable regardless
of time and manner of payment by the Company. The Maturity Date is the date upon which the principal sum of this promissory note,
as well as any unpaid interest and other fees, shall be due and payable. The Note may be prepaid at any time before September 15,
2019 without any prepayment penalties. Any amount of principal or interest on this Note which is not paid when due, shall bear
interest at the rate of the lesser of (i) twenty-four percent (24%) per annum or (ii) the maximum amount allowed by law from the
due date thereof until the same is paid (the “Default Interest”). Interest shall commence accruing on the date that
the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed.
The Lender has the right in its sole and absolute
discretion, from time to time, and at any time on or following the 180th calendar day after the date Note and ending
on the later of (i) the Maturity Date and (ii) the date of payment of the Default Interest, each in respect of the remaining principal
amount of this Note to convert all or part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable
shares of Common Stock of the Company as per the Conversion formula: Number of shares receivable upon conversion equals the dollar
conversion amount divided by the Conversion Price. The Conversion Price is the lesser of 60% of the lowest trade price for the
last 25 days prior to the issuance of the Note or 60% of the lowest market price over the 25 days prior to conversion. Total debt
outstanding at July 23, 2019 pursuant to the convertible note payable resulted in potential conversion of debt into 191,169 common
shares of common stock. The Note contains certain representations, warranties, covenants and events of default, and increases in
the conversion discount and amount of the principal and interest rates under the Note in the event of such defaults.
In connection with the issuance of the Note,
the Company recorded a debt discount related to the OID in the amount of $11,000 which will be amortized to interest expense over
the term of the loan. In accordance with ASC 815, the conversion feature meets the definition of a derivative and therefore requires
bifurcation and is accounted for as a derivative liability.
The Company recognized a debt discount related
to the bifurcated embedded conversion option derivative liability in the amount of $331,697.72 using the Black-Scholes pricing
model, which will be amortized to interest expense over the term of the Note, using effective interest method. The key valuation
assumptions used consist, in part, of the price of the Company’s common stock of $3.48 at issuance date, a risk-free interest
rate of 2.49%, expected annualized volatility of the Company’s stock of 352.45%.
For the nine months September 30, 2019, the
Company has recognized interest expense of $ 11,000 related to the amortization of the OID, interest expense of $ 4,701.37 on the
Note and $ 925,594.71 related to the amortization of the embedded conversion option liabilities discount as it related to this
Note.
Under the provisions of ASC 815-40, convertible
instruments issued by the Company qualify for derivative treatment due to the variable conversion formula. The embedded conversion
features of the Note is bifurcated and recorded as a liability which is revalued at fair value each reporting date. If the fair
value of the embedded conversion feature exceeds the face value of the related debt, net of other discounts, the excess is recorded
as a change in fair value on the issuance date. Embedded conversion features are valued at their fair value, rather than by the
intrinsic value method. The Company calculated the estimated fair values of the liabilities for embedded conversion feature at
July 23, 2019 with the Black-Scholes option pricing model using the closing price of the Company’s common stock at each respective
date and the ranges for volatility, expected term and risk-free interest indicated above.
As a result, the Company recorded a change
in the fair value of the liabilities for embedded conversion option derivative instruments for the three months and nine months
ended September 30, 2019 respectively of $ 331,697.72 and $ 925,594.71 which are included in other incomes.
Additionally, in connection with the Note,
the Company also issued 20,000 shares of common stock of the Company to the holder as a commitment fee for this note on March 15,
2019. The commitment shares fair value was calculated as $53,800 being the fair value of common stock on the date of issuance (Note
9) and recorded as restricted stock receivable in the accompanying consolidated financial statements at September 30, 2019.
In connection with the Note, the Company also
issued 100,000 shares of common stock of the Company to the holder as a security deposit, provided however, the shares must be
returned to the Company’s treasury if the Note is fully repaid and satisfied prior to the Maturity Date. The refundable shares
fair value was calculated as $269,000 being the fair value of common stock on the date of issuance (Note 9) and recorded as restricted
stock receivable in the accompanying consolidated financial statements at September 30, 2019 but those shares are returned back
to the company on November 11, 2019 so the transactions is cancelled in this date.
This note is paid totally on July 23, 2019.
On March 15, 2019, the Company executed
a $250,000 Convertible Promissory Note (the “Note”) with Auctus Fund, an unrelated party (the “Lender”),
bearing an interest rate of 12%, unsecured, and due on September 15, 2019 (the “Maturity Date”). The total consideration
received against the Note was $222,250.00, with $27,750 legal & finance cost. The Maturity Date is the date upon which the
principal sum of this promissory note, as well as any unpaid interest and other fees, shall be due and payable. The Note may be
prepaid at any time before September 15, 2019 without any prepayment penalties. Any amount of principal or interest on this Note
which is not paid when due, shall bear interest at the rate of the lesser of (i) twenty-four percent (24%) per annum or (ii) the
maximum amount allowed by law from the due date thereof until the same is paid (the “Default Interest”). Interest shall
commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number
of days elapsed.
The Lender has the right in its sole and absolute
discretion, from time to time, and at any time on or following the 180th calendar day after the date Note and ending
on the later of (i) the Maturity Date and (ii) the date of payment of the Default Interest, each in respect of the remaining principal
amount of this Note to convert all or part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable
shares of Common Stock of the Company as per the Conversion formula: Number of shares receivable upon conversion equals the dollar
conversion amount divided by the Conversion Price. The Conversion Price is the lesser of 60% of the lowest trade price for the
last 25 days prior to the issuance of the Note or 60% of the lowest market price over the 25 days prior to conversion. Total debt
outstanding at September 30, 2019 pursuant to the convertible note payable resulted in potential conversion of debt into 255,060
common shares of common stock. The Note contains certain representations, warranties, covenants and events of default, and increases
in the conversion discount and amount of the principal and interest rates under the Note in the event of such defaults.
In connection with the issuance of the Note,
the Company has not recorded a debt discount related to the OID as it is not applicable. In accordance with ASC 815, the conversion
feature meets the definition of a derivative and therefore requires bifurcation and is accounted for as a derivative liability.
The Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount
of $ $ 753,858.45 using the Black-Scholes pricing model, which will be amortized to interest expense over the term of the Note,
using effective interest method. The key valuation assumptions used consist, in part, of the price of the Company’s common
stock of $3.48 at issuance date, a risk-free interest rate of 2.49%, expected annualized volatility of the Company’s stock
of 352.45%. For the nine months September 30, 2019, the Company has recognized interest expense of $ 17,813.38 on the Note and
$ 2,103,624.35 related to the amortization of the embedded conversion option liabilities discount as it related to this Note.
Under the provisions of ASC 815-40, convertible
instruments issued by the Company qualify for derivative treatment due to the variable conversion formula. The embedded conversion
features of the Note is bifurcated and recorded as a liability which is revalued at fair value each reporting date. If the fair
value of the embedded conversion feature exceeds the face value of the related debt, net of other discounts, the excess is recorded
as a change in fair value on the issuance date. Embedded conversion features are valued at their fair value, rather than by the
intrinsic value method. The Company calculated the estimated fair values of the liabilities for embedded conversion feature at
September 30, 2019 with the Black-Scholes option pricing model using the closing price of the Company’s common stock at each
respective date and the ranges for volatility, expected term and risk-free interest indicated above.
As a result, the Company recorded a change
in the fair value of the liabilities for embedded conversion option derivative instruments for the three months and nine months
ended September 30, 2019 respectively of $ 753,858.45 and $ 2,103,624.35 which are included in other incomes.
Additionally, in connection with the Note,
the Company also issued 32,467 shares of common stock of the Company to the holder as a commitment fee for this note on March 15,
2019. The commitment shares fair value was calculated as $87,336.23 being the fair value of common stock on the date of issuance
(Note 9) and recorded as restricted stock receivable in the accompanying consolidated financial statements at September 30, 2019.
In connection with the Note, the Company also
issued 162,337 shares of common stock of the Company to the holder as a security deposit, provided however, the shares must be
returned to the Company’s treasury if the Note is fully repaid and satisfied prior to the Maturity Date. The refundable shares
fair value was calculated as $436,686.53 being the fair value of common stock on the date of issuance (Note 9) and recorded as
restricted stock receivable in the accompanying consolidated financial statements at September 30,2019.
This note is not paid yet, and it is due.
On June 3, 2019, the Company executed
a $128,000 Convertible Promissory Note (the “Note”) with Power UP, an unrelated party (the “Lender”), bearing
an interest rate of 8%, unsecured, and due on December 4, 2019 (the “Maturity Date”). The total consideration received
against the Note was $128,000 and no OID. The Maturity Date is the date upon which the principal sum of this promissory note, as
well as any unpaid interest and other fees, shall be due and payable. The Note may be prepaid at any time before December 4, 2019
without any prepayment penalties. Any amount of principal or interest on this Note which is not paid when due, shall bear interest
at the rate of the lesser of (i) twenty-four percent (24%) per annum or (ii) the maximum amount allowed by law from the due date
thereof until the same is paid (the “Default Interest”). Interest shall commence accruing on the date that the Note
is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed.
The Lender has the right in its sole and absolute
discretion, from time to time, and at any time on or following the 180th calendar day after the date Note and ending
on the later of (i) the Maturity Date and (ii) the date of payment of the Default Interest, each in respect of the remaining principal
amount of this Note to convert all or part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable
shares of Common Stock of the Company as per the Conversion formula: Number of shares receivable upon conversion equals the dollar
conversion amount divided by the Conversion Price. The Conversion Price is the lesser of 65% of the lowest trade price for the
last 25 days prior to the issuance of the Note or 65% of the lowest market price over the 25 days prior to conversion. Total debt
outstanding at June 30, 2019 pursuant to the convertible note payable resulted in potential conversion of debt into 197,570 common
shares of common stock. The Note contains certain representations, warranties, covenants and events of default, and increases in
the conversion discount and amount of the principal and interest rates under the Note in the event of such defaults.
In connection with the issuance of the Note,
the Company has not recorded any debt discount related to the OID as it is not applicable for this note. In accordance with ASC
815, the conversion feature meets the definition of a derivative and therefore requires bifurcation and is accounted for as a derivative
liability.
For the six months June 30, 2019, the Company
has recognized, interest expense of $ 13,220.82 on the Note which is compound of of $ 420.82 and of $ 12, 800.00.00 respectively
interest expenses till at June 27, 2019 with 8% interest rate and interest expenses for Prepayment on June 27, 2019 with 10 % interest
rate on the total the “Note “received.
Under the provisions of ASC 815-40, convertible
instruments issued by the Company qualify for derivative treatment due to the variable conversion formula. The embedded conversion
features of the Note is bifurcated and recorded as a liability which is revalued at fair value each reporting date. If the fair
value of the embedded conversion feature exceeds the face value of the related debt, net of other discounts, the excess is recorded
as a change in fair value on the issuance date. Embedded conversion features are valued at their fair value, rather than by the
intrinsic value method. The Company has not calculated the estimated fair values of the liabilities for embedded conversion feature
at June 30, 2019 with the Black-Scholes option pricing model as the note is paid enter June 30, 2019.
The Maturity Date was December 4, 2019 the
date upon which the principal sum of this promissory note, as well as any unpaid interest and other fees, have been due and paid
on June 28, 2019.
On June 4, 2019, the Company executed
a $2,000,000 Convertible Promissory Note (the “Note”) with LABRYS Fund, an unrelated party (the “Lender”),
bearing an interest rate of 10%, unsecured, and due on December 4, 2019 (the “Maturity Date”). The total consideration
received against the Note was $1,787,500, with the Note bearing $200,000 Original Issue Discount (the “OID”) and $12,500
for legal expenses. Any interest payable is in addition to the OID, and that OID (or prorated OID, if applicable) remains payable
regardless of time and manner of payment by the Company. The Maturity Date is the date upon which the principal sum of this promissory
note, as well as any unpaid interest and other fees, shall be due and payable. The Note may be prepaid at any time before December
4, 2019 without any prepayment penalties. Any amount of principal or interest on this Note which is not paid when due, shall bear
interest at the rate of the lesser of (i) twenty-four percent (24%) per annum or (ii) the maximum amount allowed by law from the
due date thereof until the same is paid (the “Default Interest”). Interest shall commence accruing on the date that
the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed.
The Lender has the right in its sole and absolute
discretion, from time to time, and at any time on or following the 180th calendar day after the date Note and ending
on the later of (i) the Maturity Date and (ii) the date of payment of the Default Interest, each in respect of the remaining principal
amount of this Note to convert all or part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable
shares of Common Stock of the Company as per the Conversion formula: Number of shares receivable upon conversion equals the dollar
conversion amount divided by the Conversion Price. The Conversion Price is the lesser of 60% of the lowest trade price for the
last 25 days prior to the issuance of the Note or 60% of the lowest market price over the 25 days prior to conversion. Total debt
outstanding at December 31, 2019 pursuant to the convertible note payable resulted in potential conversion of debt into 1,995,917
common shares of common stock. The Note contains certain representations, warranties, covenants and events of default, and increases
in the conversion discount and amount of the principal and interest rates under the Note in the event of such defaults.
In connection with the issuance of the Note,
the Company recorded a debt discount related to the OID in the amount of $200,000 which will be amortized to interest expense over
the term of the loan. In accordance with ASC 815, the conversion feature meets the definition of a derivative and therefore requires
bifurcation and is accounted for as a derivative liability. The Company recognized a debt discount related to the bifurcated embedded
conversion option derivative liability in the amount of $ $ 5,865,296.47 using the Black-Scholes pricing model, which will be amortized
to interest expense over the term of the Note, using effective interest method. The key valuation assumptions used consist, in
part, of the price of the Company’s common stock of $1.08 at issuance date, a risk-free interest rate of 2.210 %, expected
annualized volatility of the Company’s stock of 6151.60 %.
For the twelve months ended December 31, 2019,
the Company has recognized interest expense of $ 200,000 related to the amortization of the OID, interest expense of $ 95,712.33
on the Note and $ 3,333,332.98 related to the amortization of the beneficial conversion feature discount as it related to this
Note.
Under the provisions of ASC 815-40, convertible
instruments issued by the Company qualify for derivative treatment due to the variable conversion formula. The embedded conversion
features of the Note is bifurcated and recorded as a liability which is revalued at fair value each reporting date. If the fair
value of the embedded conversion feature exceeds the face value of the related debt, net of other discounts, the excess is recorded
as a change in fair value on the issuance date. Embedded conversion features are valued at their fair value, rather than by the
intrinsic value method. The Company calculated the estimated fair values of the liabilities for embedded conversion feature at
June 11, 2019 and December 31, 2019 with the Black-Scholes option pricing model using the closing price of the Company’s
common stock at each respective date and the ranges for volatility, expected term and risk-free interest indicated above. As a
result, the Company recorded a change in the fair value of the liabilities for embedded conversion option derivative instruments
for the three months and twelve months respectively ended December 31, 2019 the profit of $ 3,397,260.27 and the profit of $5,087,228.67
which are included in other incomes and other expenses.
Additionally, in connection with the Note,
the Company also issued 111,731 shares of common stock of the Company to the holder as a commitment fee for this note. The commitment
shares fair value was calculated as $120,669.48 being the fair value of common stock on the date of issuance (Note 9) and recorded
as restricted stock receivable in the accompanying consolidated financial statements at December 31, 2019.
This note is paid on May 29, 2020 in the
amount of $350,000 to Labrys Fund, the Plaintiff pursuant to a Settlement Agreement and Release between the Plaintiff and
the Company and approved by the District Court of Massachusetts.
10. AMOUNT OWING TO DIRECTORS
The amount owing to directors is unsecured,
interest-free with no fixed repayment term.
11.
LOAN AND BORROWINGS
The
term loan of the Group is secured by certain fixed assets of the Group with interest bearing.
|
|
|
As at December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Secured: -
|
|
$
|
|
|
|
$
|
|
|
|
Term loan
|
|
|
1,475,183
|
|
|
|
-
|
|
|
|
|
|
1,475,183
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Analyzed as:
|
|
$
|
|
|
|
$
|
|
|
|
Current portion
|
|
|
1,269,147
|
|
|
|
-
|
|
|
Non-current portion
|
|
|
206,036
|
|
|
|
-
|
|
|
|
|
|
1,475,183
|
|
|
|
-
|
|
12.
HIRE PURCHASE
The
Company purchased motor vehicles under hire purchase agreements with monthly principal and interest payable. The obligation under
the hire purchase are as follows:
|
|
|
As at December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Present value of hire purchase liabilities:
|
|
$
|
|
|
|
$
|
|
|
|
Not later than one year
|
|
|
21,469
|
|
|
|
-
|
|
|
Later than one year but not later than two years
|
|
|
96,025
|
|
|
|
-
|
|
|
|
|
|
117,494
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Analyzed as:
|
|
$
|
|
|
|
$
|
|
|
|
Current portion
|
|
|
21,469
|
|
|
|
-
|
|
|
Non-current portion
|
|
|
96,025
|
|
|
|
-
|
|
|
|
|
|
117,494
|
|
|
|
-
|
|
13.
RIGHT-OF-USE ASSET AND OPERATING 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 Jan 1, 2019, the Company recognized approximately US$9,013,956, 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, 2019, with discounted rate of 6.75%, 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
initial recognition of operating lease right and lease liability as follow:
|
Gross lease payable
|
|
$
|
16,026,145
|
|
|
Less: imputed interest
|
|
|
(7,012,189
|
)
|
|
Initial recognition as of January 1, 2019
|
|
$
|
9,013,956
|
|
As
of December 31, 2019, operating lease right of use asset as follow:
|
Initial recognition as of January 1, 2019
|
|
$
|
9,013,956
|
|
|
Accumulated amortization
|
|
|
(375,226
|
)
|
|
Balance as of December 31, 2019
|
|
$
|
8,638,730
|
|
As
of December 31, 2019, operating lease liability as follow:
|
Initial recognition as of January 1, 2019
|
|
$
|
9,013,956
|
|
|
Less: gross repayment
|
|
|
(541,110
|
)
|
|
Add: Imputed interest
|
|
|
429,639
|
|
|
Balance as of December 31, 2019
|
|
$
|
8,902,485
|
|
|
Less: lease liability current portion
|
|
|
(327,754
|
)
|
|
Lease liability non-current portion
|
|
|
8,574,731
|
|
For
the year ended December 31, 2019, the amortization of the operating lease right of use asset are $375,226. As the Company adopt
ASC 842 on January 1, 2019, the Company did not incur nor accrued any amortization of operating lease right for the year ended
December 31, 2018.
Maturities
of operating lease obligation as follow:
|
Year ending
|
|
|
|
|
December 31, 2020
|
|
$
|
255,682
|
|
|
December 31, 2021
|
|
|
273,441
|
|
|
December 31, 2022
|
|
|
311,101
|
|
|
December 31, 2023
|
|
|
331,380
|
|
|
December 31, 2024
|
|
|
340,698
|
|
|
December 31, 2025 and onwards
|
|
|
7,390,183
|
|
|
Total
|
|
$
|
8,902,485
|
|
Other
information:
Lease
expenses were $796,581 for the year ended December 31, 2019, respectively. As the Company adopt ASC 842 on and after January 1,
2019, the Company did not incur nor accrued any lease expenses for the year ended December 31, 2018.
|
|
|
Nine months ended December
31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
|
Operating cash flow from operating lease
|
|
$
|
111,471
|
|
|
$
|
-
|
|
|
Right-of-use assets obtained in exchange for operating lease liabilities
|
|
|
8,638,730
|
|
|
|
-
|
|
|
Remaining lease term for operating lease (years)
|
|
|
20
|
|
|
|
-
|
|
|
Weighted average discount rate for operating lease
|
|
|
6.75
|
%
|
|
|
-
|
|
14. INCOME TAX
Provision
for income taxes consisted of the following:
|
|
|
As of December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Local
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Foreign
|
|
|
130,536
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
|
|
|
|
|
|
|
|
|
|
Local
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Foreign
|
|
|
(3,878
|
)
|
|
|
-
|
|
|
|
|
|
126,658
|
|
|
|
-
|
|
Effective tax rates of the foreign jurisdiction
which the foreign subsidiaries operate are as follows:
|
|
|
Tax rate %
|
|
United states
|
|
21%
|
|
Australia
|
|
27.5%-30%
|
|
Malaysia
|
|
24%
|
|
Philippine
|
|
30%
|
15. FOREIGN CURRENCY EXCHANGE RATE
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 post higher or lower income depending on exchange rate converted
into US$ at the end of the financial year. The exchange rate could fluctuate depending on changes in political and economic environments
without notice.
16. SIGNIFICANT EVENTS
Significant
events occurred during the period are as follows:
|
|
-
|
On
31 August 2019, Entrepreneur Culture Incorporated Sdn Bhd was resold to the former owner
and Egnitus Inc. was dissolved by the Company.
|
|
|
-
|
On
October 1, 2019 Anvia (Australia) Pty Ltd reversed the acquisition of VocTrain Pty Ltd
due to the fact that it was not paid on time. The shares issued to the former shareholders
of the VocTrain Pty Ltd are cancelled.
|
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 December
31, 2019 up through the date June 10, 2020 was the Company presented these audited consolidated financial statements. The subsequent
events are as follows:
|
|
-
|
During
the period, the Company paid on May 29, 2020, $350,000 to Labrys Fund, the Plaintiff
pursuant to a Settlement Agreement and Release between the Plaintiff and the Company
and approved by the District Court of Massachusetts.
|
|
|
-
|
On
June 4, 2020, shares issued to LABRYS as commitment fees are cancelled subsequent to
the loan is repaid. The number of shares that are cancelled were 111,731 units.
|
