NVGI Noble Vici Group Inc (CE)

ITEM 2        Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We were incorporated under the laws of the State of Delaware on July 6, 2010 under the name “Advanced Ventures Corp.” Effective January 6, 2014, we changed our name to “Gold Union Inc.” Effective March 26, 2018, we changed our name to Noble Vici Group, Inc. and our trading symbol was changed to NVGI. On August 8, 2018, we consummated the acquisition of Noble Vici Private Limited, a corporation organized under the laws of Singapore (“NVPL”), which was wholly owned by Eldee Tang, our sole director and Chief Executive Officer. NVPL is engaged in the IoT, Big Data, Blockchain and E-commerce business. As a result of our acquisition of NVPL, we entered into the IoT, Big Data, Blockchain and E-commerce business. We are headquartered in Singapore and operate a branch office in Taiwan. Certain of our resellers are operating “V-More” branded satellite offices in Shenzhen, China.

History

As Advanced Ventures Corp., we acquired a patent (U.S. Patent Number: 6,743,209) (the “Patent”), for a catheter with a integral anchoring mechanism. During the second fiscal quarter of 2014, we elected to discontinue our business of exploiting the Patent and began to consider other business opportunities that may bring quicker and greater value to our stockholders. We initially considered entering into the business of trading precious metal bullion primarily in the Asia Pacific region. Therefore, effective January 6, 2014, we changed our name to “Gold Union Inc.” to more adequately reflect our initial intended business operations.

Effective March 7, 2012, we increased the number of our authorized shares of common stock to three billion shares (3,000,000,000) and engaged in a forward stock split of its common shares whereby each one share of our common stock was split into fifteen shares of our common stock.

On December 31, 2015, we consummated a Share Exchange Agreement with G.U. International Limited, a limited company incorporated under the laws of the Republic of Seychelles and our wholly owned subsidiary (“GUI”), and Kao Wei-Chen, an individual representing herself and 8 other individuals (collectively, the “Golden Corridor Shareholders”), which agreement was amended several times to extend the closing date of the acquisition (collectively, the “Share Exchange Agreement”). Pursuant to the Share Exchange Agreement, we, through GUI, purchased 480 shares of Phnom Penh Golden Corridor Trading Co. Limited (the “GC Shares”), from 9 private Golden Corridor Shareholders, representing 48% of the issued and outstanding shares of common stock of Golden Corridor. As consideration, we issued to the Golden Corridor Shareholders 2,500,000,000 shares of our common stock, at a value of US $0.002 per share, for an aggregate value of US $5,000,000.

As a result of our acquisition of the GC Shares, we ceased our metal bullion trading business and entered into the real estate development and rental business located in the Kingdom of Cambodia. Golden Corridor owns three parcels of land located at National Road 44, Phum Phkung, Chbarmorn Commune, Chbarmorn District, Kampong Speu Province, Kingdom of Cambodia, measuring an aggregate of 172,510 square meters (collectively, the “Properties”). We intended to develop the Properties into an industrial park for rental income.

Due to difficulties in entering the real estate development and rental business, on February 2, 2018, we engaged in a corporate reorganization and distributed the GC Shares to our shareholders. On March 18, 2018, our subsidiary, G.U. Asia Limited was dissolved.

Change in Control

On January 29, 2018, Eldee Tang entered into Share Sale Agreements with four shareholders and former affiliates of the Company to purchase up to 1,675,000,000 shares of the Company’s common stock at a per share purchase price of US$0.00008, for an aggregate price of US$134,000. On June 15, 2018, the Company effectuated a 1 for 1,000 reverse stock split whereby every 1,000 shares of the Company’s common stock were reduced to one share. The parties effectuated Mr. Tang’s purchase of 750,000 shares such securities (expressed on a post reverse split basis) effective June 15, 2018. Mr. Tang hopes to purchase the balance of the 925,000 shares from Kao Wei-Chen, a former affiliate of the Company, in the near future. The foregoing description of the Share Sale Agreement with Kao Wei-Chen is qualified in its entirety by reference to such agreement which is filed as Exhibit 10.2 to this Quarterly Report and is incorporated herein by reference.

In connection with the contemplated change in control, on March 27, 2018, Lim Yew Chuan, the director, Chief Executive Officer, Chief Financial Officer and Secretary of Noble Vici Group, Inc. (the “Company”), resigned from all of his positions as director, Chief Executive Officer, Chief Financial Officer and Secretary of the Company. Concurrently, Eldee Tang was appointed to serve as the Chief Executive Officer and Director of the Company, together with other members of the new management team.

Effective June 15, 2018, we:

Acquisition of NVPL, TDA and NDA

On August 8, 2018, we consummated the acquisition of Noble Vici Private Limited, a corporation organized under the laws of Singapore (“NVPL”), in accordance with the terms of a Share Exchange Agreement. NVPL is wholly owned by Eldee Tang, our Chief Executive Officer and Director. Pursuant to the Share Exchange Agreement, we purchased One Million and One (1,000,001) shares of NVPL (the “NVPL Shares”), representing all of the issued and outstanding shares of common stock of NVPL, in consideration of One Hundred Forty Million (140,000,000) shares of our common stock, at a value of US $1.70 per share, for an aggregate value of US $238,000,000. It is our understanding that Mr. Tang is not a U.S. Person within the meaning of Regulations S. Accordingly, the Shares are being sold pursuant to the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended, Regulation D and Regulation S promulgated thereunder. As a result of our acquisition of NVPL, we entered into the IoT, Big Data, Blockchain and E-commerce business.

On September 17, 2018, we consummated the acquisition of a 51% controlling interest in The Digital Agency Private Limited, a private limited company organized under the laws of Singapore (“TDA”), and a start-up digital marketing company, in accordance with the terms of that certain Share Exchange Agreement by and among the Company, NIApplications Private Limited (formerly, “Noble Infotech Applications Private Limited”), a private limited company organized under the laws of Singapore and our wholly owned subsidiary (“NIA”), TDA and Mok Jo Han (“the “TDA Share Exchange Agreement”). Pursuant to the terms of the TDA Share Exchange Agreement, we acquired 51 ordinary shares of TDA, representing approximately fifty-one percent (51%) of the issued and outstanding ordinary shares of TDA, in exchange for 510,000 shares of common stock of the Company, par value $0.0001 (the “TDA Shares”), representing an exchange ratio of ONE (1) ordinary share of TDA for Ten Thousand (10,000) shares of common stock of the Company, at a valuation of $2.00 per share of the Company, for an aggregate value of $1,020,000. It is our understanding that Mr. Mok is not a U.S. Person within the meaning of Regulations S. The TDA Shares were sold pursuant to the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation S promulgated thereunder.

On September 17, 2018, we consummated the acquisition of a 51% controlling interest in Noble Digital Apps Sendirian Berhad, a private limited company organized under the laws of Malaysia (“NDA”), and a start-up digital apps and big data company in accordance with the terms of that certain Share Exchange Agreement by and among the Company, NIA, NDA, Cheng Bok Woon, Tan Yew Fui, and Yong Swee Sun (“the “NDA Share Exchange Agreement”). Pursuant to the terms of the NDA Share Exchange Agreement, we acquired 510 ordinary shares of NDA, representing approximately fifty-one percent (51%) of the issued and outstanding ordinary shares of NDA, in exchange for 510,000 shares of common stock of the Company, par value $0.0001 (the “NDA Shares”), representing an exchange ratio of ONE (1) ordinary share of NDA for One Thousand (1,000) shares of common stock of the Company, at a valuation of $2.00 per share of the Company, for an aggregate value of $1,020,000. It is our understanding that Mr. Cheng, Mr. Tan and Mr. Yong are not U.S. Person within the meaning of Regulations S. The NDA Shares were sold pursuant to the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation S promulgated thereunder.

Issuance of shares to sales affiliates

On September 17, 2018, and September 25, 2018, we approved the issuance of Nine Million One Hundred Thirty Five Thousand Seven Hundred Ninety Four (9,135,794) shares and Five Hundred Sixty Seven Thousand Sixty-Four (567,064) shares of our common stock, par value $0.0001, respectively, representing a total of approximately 6.3% of our issued and outstanding common stock, at a per share price of One Dollars and Ninety Nine Cents (US $1.99), to approximately 460 sales associates for prior sales and marketing services provided to us and our subsidiaries and affiliates. As a condition of receipt of such securities, each recipient executed a Stockholder Representation Letters, which contained, among other things, restrictions prohibiting the transfer of such securities for a minimum period of 18 months up to a maximum period of 66 months after the execution of such letter. For ease of administration, the recipients appointed Noble Infotech Limited (“NIL”) as nominee to hold, manage, administer and effectuate the distribution of such securities upon the expiration of the applicable restricted periods. The shares were issued on October 18, 2018 to NIL. The securities were issued pursuant to the exemption provided by Regulation S promulgated under the Securities Act of 1933, as amended. The foregoing description of the Stockholder Representation Letters are qualified in its entirety by reference to such agreements which are filed as Exhibit 10.3 to this Quarterly Report and are incorporated herein by reference.

On December 3, 2018, we approved the issuance of up to an aggregate of Ten Million Eight Hundred Thirty Eight Thousand One Hundred Forty One (10,838,141) shares of our common stock, par value $0.0001, representing approximately 7.1% of our issued and outstanding common stock, at a per share price of Two Dollars (US $2.00), to about 690 sales associates for prior sales and marketing services provided to us and our subsidiaries and affiliates. As a condition of receipt of such securities, each recipient was required to execute one of two standard forms of Stockholder Representation Letters, which contained, among other things, restrictions prohibiting the transfer of such securities for a minimum period of 18 or 24 months up to a maximum period of 72 months after the execution of such letter. For ease of administration, the recipients appointed Venvici Partners Limited (“VVP”) as nominee to hold, manage, administer and effectuate the distribution of such securities upon the expiration of the applicable restricted periods. The shares were issued on January 4, 2019 to VVP. The securities were issued pursuant to the exemption provided Regulation S promulgated under the Securities Act of 1933, as amended. The foregoing description of the Stockholder Representation Letters and the appointment of VVP as trustee are qualified in its entirety by reference to such agreements which are filed as Exhibits 10.4 and 10.5 to this Quarterly Report and are incorporated herein by reference.

On March 11, 2019, our Board of Directors, approved the issuance of up to an aggregate of Fifteen Million (15,000,000) shares of our common stock, par value $0.0001, representing approximately 8.4% of our issued and outstanding common stock (collectively, the “Shares”), at a per share price of Two Dollars (US $2.00), to about 700 sales associates for prior sales and marketing services provided to us and our subsidiaries and affiliates. As a condition of receipt of such securities, each recipient was required to execute one of two standard forms of Stockholder Representation Letters, which contained, among other things, restrictions prohibiting the transfer of such securities for a minimum period of 18 months up to a maximum period of 66 months after the execution of such letter. For ease of administration, the recipients appointed Venvici Partners Limited (“VVP”) as nominee to hold, manage, administer and effectuate the distribution of the Shares upon the expiration of the applicable restricted periods. For so long as VVP is the stockholder of record of the Shares, VVP shall serve as the attorney in fact to vote such Shares at any annual, special or other meeting of the stockholders of the Company, and at any adjournment or adjournments thereof, or pursuant to any consent in lieu of a meeting or otherwise, with respect to any matter that may be submitted for a vote of stockholders of the Company. The securities will be issued pursuant to the exemption provided by Regulation S promulgated under the Securities Act of 1933, as amended. The foregoing description of the Stockholder Representation Letters and the appointment of VVP as trustee are qualified in its entirety by reference to such agreements which are filed as Exhibits 10.6 and 10.7 to this Quarterly Report and are incorporated herein by reference.

V-More Merchant Acquisition Agreements

On March 19, 2019, we entered into a V-More Merchant Acquisition Agreement with each of the Consultants pursuant to which each Consultant agreed to provide certain services related to the identification, due diligence, acquisition and retention of potential merchants in certain designated territories for inclusion in our V-More platform. As consideration for these services, each Consultant received up to an aggregate of Fourteen Million Three Hundred Twenty Thousand (14,320,000) shares of our common stock, for an aggregate of up to Forty-Two Million Nine Hundred Sixty Thousand (42,960,000) shares of our common stock, subject to the achievement of certain performance milestones and certain clawback rights. We registered Twenty-One Million Four Hundred Eighty Thousand (21,480,000) shares of the amount of shares issuable under the V-More Merchant Acquisition Agreement on a Registration Statement on Form S-8 filed with the Securities and Exchange Commission on March 19, 2019. The foregoing description of the V-More Merchant Acquisition Agreements is qualified in its entirety by reference to the V-More Merchant Acquisition Agreements dated March 19, 2019, which are filed as Exhibits 10.8, 10.9 and 10.10 to this Quarterly Report and incorporated herein by reference.

Consulting Agreement

During the period from March 19, 2019 till December 31, 2019, one of V-More’s merchants and vendors, Fame Reserve Limited, a subcontractor of Ms. Sukullayanee Suwunnavid (the “Digital Consultant”), which distributes digital vouchers, ran a promotion through V-More platform to promote and sell their digital vouchers (the “Promotion”). As a consideration for purchasing these vouchers for the promotion, the Board approved the issuance of up to an aggregate of Ten Million (10,000,000) shares of our common stock, par value $0.0001, of our issued and outstanding common stock, at a per share price of Two Dollars (US$2.00).

In connection to the Promotion, we entered into a Consulting Agreement with pursuant to which the Digital Consultant agreed to supply certain digital offerings and services to our customers, including without limitation, order fulfilment services with respect to orders from our customers received through the Digital Consultant’s online platform and its related digital offerings. We issued Ten Million (10,000,000) shares of the Corporation’s Common Stock, par value $0.0001 (the “Shares”), at a per share price of US$2.00, as payment in full for the Services and the satisfaction of all of our obligations to the Digital Consultant with respect to such services. These securities were registered on a Registration Statement on Form S-8 filed with the Securities and Exchange Commission on March 19, 2019. The foregoing description of the Consulting Agreement is qualified in its entirety by reference to the V-Consulting Agreement dated March 19, 2019, which is filed as Exhibit 10.11 to this Quarterly Report and incorporated herein by reference.

Our current corporate structure is as below:

Our Operations and Future Plans

Ecommerce Platform

We are focused on providing users with innovative tools to live and interact in the modern mobile world through our ecosystem of IoT, Big Data, Blockchain and E-commerce products and services. We integrate blockchain technology with our E-commerce platform to connect consumers and merchants in a dynamic global marketplace via blockchain transactions. We onboard users, consumers and referrers through our Affiliate Incentivized Marketing to Advertising Dollar Sharing (formerly known as Affiliate Incentivized Marketing (AIM)) model while merchants are onboarded via our Merchant Incentivized Marketing (MIM) model. Some products and services offered in our ecosystem include procurement of discounted goods and services, referral reward system, mobile games and digital marketing, financial markets apps and a “Business Centre” within the same app. Our E-commerce platform not only offers users the ability to make online purchases, but also the convenience of an O2O (Online to Offline) platform whereby consumers can transact at a discount online while goods and services are distributed at a physical location. This drives traffic to the already weakened retail industry. The Business Centre within our ecosystem is offered through a mobile app and allows users to create their own referral platform within our ecosystem.

Advertising Dollar Sharing (ADS)

We have rebranded our Affiliate Incentivized Marketing to Advertising Dollar Sharing. Similar to the AIM model, the ADS business model also involves driving online and physical traffic and increasing sales and marketing of targeted products and services. Its enhanced function includes distribution of advertising dollars via ADS system to agencies, affiliate marketers, advertiser, users and referrals.

Sale and Distribution of IoT Smart Devices / VMore System Private Limited

In addition to the E-commerce platform, we intend to focus on the sales and distribution of IoT smart devices and appliances. In September, 2019, we began to sell our first IoT appliance, our smart coffee dispensing machines (the V-More Express (“VX”)). Our initial plans of beginning machine distribution on or about the third calendar quarter of 2020 were delayed by the COVID-19 pandemic. We are currently monitoring the situation and hope to begin machine distribution and their progressive operation in Singapore once the economy begins to return to normalcy. We hope to derive income from sales of our VX IoT hardware, the core consumables in VX and the advertising services we provide to our customers in connection with the VX.

Features of the VX; Revenue Sources:

Machine Capacity: The VX offers 9 types of beverage, holds 60 litres of distilled water tank and is able to produce 400 cups of beverages. VX currently offers barista-grade coffee in 9 different varieties in both hot and ice options. VX can be modified to allow for other offerings to be sold. We expect to adopt regional pricing for core products sales, aligning to each specific market’s demand and supply.

AdTech: In addition to sales of core products, we expect to rely on advertisements placed through the VX to drive revenue. We intend to seek advertisers that are proximate to each specific VX to display their advertisements through our smart machine. We believe that the use of local advertisements (Proximate Location Ads, or PLA) will drive relevant traffic to nearby physical merchants as well as online merchants. Advertisements can be static or dynamic and may be interactive, allowing user interaction. We expect to provide services to advertisers to assist them in creating and placing effective ads in the VX.

Smart Technology: The VX features a 42 inch touch screen with Smart Digital Panel Advertising Technology (“SDPAT”) that allows users to interact with advertisements via its interactive touch screen. Through the VX, we hope to capture users’ spending behaviour, advertisement interactions and other quantitative data, while developing our Big Data analytics. Data from our machines can be integrated with our ecommerce platform to facilitate the offering of discounts, rewards or other products and services across our e-commerce platform. We believe that additional data will allow us to: (i) deliver and improve our offerings and services of our online VMore E-commerce platform; (ii) improve synergy with offline merchants; (iii) improve the efficacy of our advertising services; and (iv) improve sales of products offered by the VX.

VX Operations

Our VX business operations are segregated into the following core functions to address the needs of our advertisers, VX IoT hardware purchasers and consumers.

Sales and Marketing Team. Our team will focus on the sale of the VX IoT hardware. Its targeted industries are primarily from real estate and property owners such as commercial offices, retails and buildings, where the VX will be installed. In addition to the sale of VX, the team will also create brand awareness of the VX and its core offerings in the VX.

Advertiser Onboarding Team. Once an advertiser engages us online to have its advertisement placed in VX, a member of our advertiser onboarding team will initiate the first of several communications with the merchant to introduce the advertiser to the technology involved in our PLA ecosystem. Before the advertisement goes live on the VX, the team will work with the advertiser to build and create the advertisement. We will provide tools such as an app to ensure the advertisement traffic monitoring and management are aligned. All advertisements will be proximate locality based, ensuring relevance for targeted traffic to be driven.

Operation and Maintenance Team(O&M). Once the VX are deployed, O&M team will monitor the performance of each VX deployed for its ingredients supply, hardware status and data collection efficiency. Maintenance of the hardware for performance to prevent downtime and refilling the ingredients into the VX will be undertaken by the O&M team.

Customer/User Service Representatives. Our customer service representatives will be reachable via the app or email 24 hours a day, seven days a week. The customer service team will also work with our technology team to improve the experience of VX owners, consumers and advertisers on the mobile application based on their feedback.

Technology. We employ technology to improve the experience we offer to VX owners, users and advertisers, increase the rate at which our users use our V-More Pro platform and enhance the efficiency of our business operations. A component of our strategy is to continue developing and refining our technology. With the future use of blockchain technology for recording and collecting data, we believe the security of transactional records will be increased, protecting the accuracy of data held by VX owners, advertisers and users. We believe that basing transactional data on a private blockchain network will facilitate a smoother and faster transaction completion.

We expect to use an algorithm to analyze data collected through our VX ecosystem. As the volume of transactions grow organically through increased deployment of VXs, we expect to increase the amount of data that we can collect and analyze. We believe that such data will allow us to continue to improve the experience of our VX owners, advertisers and consumers which, in turn, will help us improve the way the ecosystem flows.

Cybersecurity.    We have integrated our technology with encryption algorithm “SHA3-256” & RSA Public/Private-Key, which is designed to withstand timing attacks. It also accepts any 32-byte string as a valid public key and does not require validation. We believe that the security of transaction records within our current system is adequate.

Advertising Dollar Sharing (ADS).    We believe our ADS model will allow users and advertisers to benefit from reduced costs to consumers and higher traffic for advertisers. We expect users to benefit from discounts and advertising dollar rebates offered through our PLA ecosystem from online and offline merchants, referrals, and internal marketing efforts, with advertisers benefitting from increased retail sales volume offline or online.

Core Product/User Scale.   We hope to include other products from mass market merchants, such as food and other beverages, as part of our product and service offerings. We believe that outreach to the mass market will be more effective to drive traffic for the advertisers/merchants where simple to complex transactions can be achieved through adoption of an incentivized model.

Brand. A substantial portion of our VX owners, advertisers and users are acquired through agencies, word-of-mouth & social network/platforms. We believe that relying on the referral process, in turn, will improve the quality of our user base, advertisers and VX owners as well as brand awareness. We expect that higher confidence in our brand will facilitate acquiring more users, advertisers and VX owners for our ecosystem.

We operate our IoT Smart Device business through VMore System Private Limited (“VSPL”), our wholly owned subsidiary. VMSPL was incorporated in Singapore on July 22, 2019, and operates with our subsidiary AIM System Private Limited (“ASPL”), a Singapore private limited corporation incorporated on April 1, 2019, as described below:

VX vendor

We expect to rely on Barista Uno Private Limited (“BUPL”) to provide VSPL with VX IoT hardware and coffee sourcing, distribution, and logistical upstream and downstream fulfilment services. Eldee Tang, our Chief Executive Officer, Interim Chief Financial Officer, Interim Secretary and Director owns 31% of BUPL. As a result of the Covid-19 pandemic, Singapore has enacted heightened measures since April 7, 2020, that have restricted movement in people, goods and services for most businesses in Singapore. As a result, we our sales operations for VX related offerings were materially and adversely impacted. Our expected recovery timeline will depend on the policies of the Singapore Government moving forward, such as lifting of the movement restriction measures. We expect such impact to continue at least throughout the balance of calendar year 2021.

Trends, Markets and Regions

Advertisement Spending

*It is estimated that advertising spending worldwide will surpass 560 billion U.S. dollars in 2019, representing a growth of roughly four percent compared with the previous year. North America is expected to remain the largest regional ad market, closely followed by Asia Pacific. Western Europe ranks third, with ad spends amounting to approximately half of these of North America. (*Source: https://www.statista.com/statistics/ 236943/global-advertising-spending/) **Meanwhile, digital advertising spending worldwide – which includes both desktop and laptop computers as well as mobile devices – stood at an estimate at 194.6 billion U.S. dollars in 2016. This figure is forecast to constantly increase in the coming years, reaching a total of 335 billion U.S. dollars by 2020. (**Source: https://www.statista.com/statistics/237974/online-advertising-spending-worldwide/)

In addition to the advertising spending study, we examined various consumer models such as cashback models for direct compensation to affiliate marketing (e.g., https://www.shopback.sg), discounted coupons sales model (e.g. https://www.groupon.com) and incentivized reward model (e.g. https://www.dollarshaveclub.com).

We believe that advertising spending, including digital advertising spending will continue to increase in the near future. We intend to innovate the way advertisement is used in the marketplace through digital advertisements and effective channeling relevant traffic.

Market and Region: Bank and Unbanked in Southeast Asia

*With a population of 570 million and a booming GDP expected to reach $4.7 trillion by 2025, the six largest countries in Southeast Asia represent one of the world’s largest and fastest-growing regions. Within the region, we believe that the financial services industry holds tremendous if fundamental underlying challenges are addressed. For example, cash is still the primary means of transaction. More than 70% of the adult population is either “underbanked” or “unbanked,” with limited access to financial services. (*Source: https://www.bain.com/insights/fufilling-its-promise/)

*Currently, only 50% of adults in ASEAN have an account at a financial institution. ASEAN is discussing a specific financial inclusion target for 2020. There is a consensus to set the target at around 70% for 2020. Rates of financial “exclusion” are higher among the poor, those living in rural areas, and those who are less-educated. Interestingly, neither gender nor age are relevant factors that explain financial exclusion in ASEAN countries. In ASEAN countries, only 29% of workers reported receiving their monthly salaries through an account from a financial institution, while the remaining 71% is paid in cash by their employers. (Source: http://blogs.worldbank.org/eastasiapacific/how-to-scale-up-financial-inclusion-in-asean-countries).

We believe the unbanked population in the ASEAN region represents an untapped opportunity, as individuals without accounts at financial institutions are limited in their ability to shop or engage in other financial transactions online. We intend to focus on the ASEAN region, especially the unbanked market which is generally not the main focus of many large corporations. We believe that our model of converting VX spending into reward incentives and rebates that are redeemable on our platform allows the unbanked market to access our online platform for new and additional spending experiences without the requirement of having an account at a financial institution.

Other Initiatives

We are generally pursuing a plan of expansion and hope to achieve revenue growth through mass adoption by users and merchants of our platform/ecosystem. We seek to increase our user and merchant base through user incentive programs and brand awareness marketing programs, among other things. We expect to focus on users and merchants located in China and the Asia Pacific region in the foreseeable future. There can be no assurance, however, that we will be able to successfully grow our revenues in the future, if ever.

Effective May 27, 2021, we granted Accell Technologies, Inc. (“ATI”) an exclusive license to use, market and sell our E-commerce Aggregator, Reward, AIM and AdTech system (“System”) in North America and South America for a period of 10 years (the “ATI License Agreement”). Pursuant to the terms of the ATI License Agreement, ATI is obligated to pay a royalty fee of 10% of gross revenues, not to exceed 20% of EBITDA on a per country basis in addition to other set up and software maintenance fees. ATI completed its evaluation of our System, and we expect ATI to complete the general software requirements specification (“SRS”) submission during the calendar quarter ended September 30, 2021. However due to the Covid 19 pandemic situation and restrictions, ATI faces delay in completing the SRS. ATI hopes to complete the SRS by the end of calendar quarter ended December 31, 2021. The foregoing description of the ATI License Agreement is qualified in its entirety by reference to such agreement which is filed as Exhibit 10.15 to this Quarterly Report.

Effective June 25, 2021, we appointed GreatSolutions Pte. Ltd., a Singapore corporation, (“GSP”) to serve as our authorized distributor of our new biodegradable waste recycling machine for the territory of Singapore in accordance with the terms of agreed within Authorized Distributor Agreement (the “Authorized Distributor Agreement”). Pursuant to the terms of the Authorized Distributor Agreement, agreed to purchase 100 units of our machines as well as other related products and pay a license fee of One Million Dollars for the first year of the term. The term of the Authorized Distributor Agreement will begin upon the successful commission of the first machine in Singapore. We are in the process of working with the relevant governmental agencies to have the machines commissioned for use in Singapore. On July 12, 2021, we received $100,000 as a portion of the license fee. The foregoing description of the Authorized Distributor Agreement is qualified in its entirety by reference to such agreement which is filed as Exhibit 10.16 to this Quarterly Report.

INTELLECTUAL PROPERTY AND PATENTS

We expect to rely on patents, trade secrets, copyrights, know-how, trademarks, license agreements and contractual provisions to establish our intellectual property rights and protect our “VMore Express” brand and services. These legal means, however, afford only limited protection and may not adequately protect our rights. Litigation may be necessary in the future to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others. Litigation could result in substantial costs and diversion of resources and management attention. Any unauthorized disclosure or use of our intellectual property could make it more expensive to do business and harm our operating results.

The laws of Singapore and our target countries may not protect our brand and services and intellectual property to the same extent as U.S. laws, if at all. We may be unable to fully protect our intellectual property rights in these countries. Further, companies in the internet, social media technology and other industries may own large numbers of patents, copyrights and trademarks and may frequently request license agreements, threaten litigation or file suit against us based on allegations of infringement or other violations of intellectual property rights.

We intend to seek the widest possible protection for significant product and process developments in our major markets through a combination of trade secrets, trademarks, copyrights and patents, if applicable. We anticipate that the form of protection will vary depending upon the level of protection afforded by the particular jurisdiction. Initially, we expect that our revenue will be derived principally from our operations in Singapore and other parts of Southeast Asia where intellectual property protection may be more limited and difficult to enforce. In such instances, we may seek protection of our intellectual property through measures taken to increase the confidentiality of our findings.

We intend to register trademarks as a means of protecting the brand names of VMSPL, its products, and systems. We intend protect our trademarks against infringement and also seek to register design protection where appropriate.

We rely on trade secrets and unpatentable know-how that we seek to protect, in part, by confidentiality agreements. We expect that, where applicable, we will require our employees to execute confidentiality agreements upon the commencement of employment with us. We expect these agreements to provide that all confidential information developed or made known to the individual during the course of the individual's relationship with us is to be kept confidential and not disclosed to third parties except in specific limited circumstances. The agreements will also provide that all inventions conceived by the individual while rendering services to us shall be assigned to us as the exclusive property of our company. There can be no assurance, however, that all persons who we desire to sign such agreements will sign, or if they do, that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets or unpatentable know-how will not otherwise become known or be independently developed by competitors.  

COMPETITION

We operate in a highly competitive and fragmented industry that is sensitive to price and service. We compete with leading beverage companies such as Luckin Coffee (China), Toastbox (Singapore) which may offer substantially the same or similar product offerings as us. We also compete with businesses that focus on particular merchant categories or markets as well as traditional cash payments and other popular online shopping websites and apps, and other traditional media companies that provide discounts on products and services. We believe the principal competitive factors in our market include the following:

Although we believe we compete favorably on the factors described above, we anticipate that larger, more established companies may directly compete with us as we continue to demonstrate the viability of a local online-to-offline & offline-to-online solution provider. Many of our current and potential competitors have longer operating histories, significantly greater financial, technical, marketing and other resources, larger product and services offerings, larger customer base and greater brand recognition. These factors may allow our competitors to benefit from their existing customer or subscriber base with lower acquisition costs or to respond more quickly than we can to new or emerging technologies and changes in customer requirements. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build a larger subscriber base or to monetize that subscriber base more effectively than us. Our competitors may develop products or services that are similar to our products and services or that achieve greater market acceptance than our products and services. In addition, although we do not believe that merchant payment terms are a principal competitive factor in our market, they may become such a factor and we may be unable to compete fairly on such terms.

We hope to achieve revenue growth through mass adoption by users and merchants of our platform/ecosystem. We seek to increase our user and merchant base through user incentive programs and brand awareness marketing programs, among other things. We expect to focus on users and merchants located in China and the Asia Pacific region in the foreseeable future.

On January 31, 2021, we terminated our service office lease at 1 Raffles Place, #33-02, One Raffles Place Tower One, Singapore 048616. Our new principal is located at 45 Ubi Crescent, Singapore 408590.

On October 1, 2018, we purchased a building subject to a sixty year leasehold located at 45 Ubi Crescent, Singapore 408590 to serve as our primary operational center. The four storey building is approximately 13,000 square feet with a remaining lease term of thirty-eight years. The purchase price of S$4,480,000 (approximately US$3,295,819) was financed by a loan with Ethoz Capital Limited in the principal amount of S$3,136,000 (approximately US$2,307,073) at an annual rate of 3.75%, payable over 120 months commencing October 1, 2018. The loan is personally guaranteed by our Chief Executive Officer and Director, Eldee Tang. The foregoing description of the loan is qualified in its entirety by reference to the Secured Term Loan Facility dated September 14, 2018, which is filed as Exhibit 10.13 to this Quarterly Report and incorporated herein by reference.

On January 19, 2019, we opened a branch office in Taiwan to service merchants and customers of our online platform, V-more, located within the Greater China Region. Our Taiwan branch office also oversees the operations of a V-More branded office located in China and is operated by one of our sales affiliates. The Taiwan branch office is currently operated through our subsidiary VESG. The Taiwan branch office is a party to a lease agreement, a summary of which is as follows:

In addition to our Taiwan office and China affiliate office, certain of our sales affiliates also operate additional V-More branded affiliate offices in the following regions: Indonesia, Thailand and Malaysia. We hope to memorialize the terms of operations of these affiliate offices in the near future.

Intellectual Property

We continue to own the rights, title and interests in Patent for a receptacle catheter with integral anchoring means, which Patent is associated with our former business. The Patent was issued on September 1, 2004 and will expire on September 6, 2022. We do not expect to exploit these Patents in the near future.

Results of Operations

The COVID-19 pandemic and the effects arising from efforts to contain the outbreak have materially and adversely affected our business and financial performance for the six months ended September 30, 2021. Our unaudited condensed consolidated financial statements for the six months ended September 30, 2021, includes a note about our ability to continue as a going concern due to consecutive quarterly losses from operations from the last year ended March 31, 2021, and continuing into the fiscal quarter ended September 30, 2021, as a result of COVID-19. If COVID-19 continues to adversely affect our business and financial performance, we may not be able to generate sufficient cash flow to meet our operating expenses.

In response to the outbreak and related government-imposed restrictions impacting goods and services movement and fulfilment, we have taken a series of cost containment measures, including telecommute working for some employees, reducing pay and benefits for remaining employees, human resource actions and cutting back capital spending. The above measures have affected our operating capacity and work efficiency, and negatively impacted our sales and marketing activities as well as our business performance. The extent to which COVID- 19 affects our business performance will depend on the future development of the epidemic, including new actions taken by the government to contain the outbreak, which is highly uncertain and unpredictable. In addition, if the economy of Southeast Asia as a whole is negatively impacted by the outbreak, our operating performance will also be adversely affected.

Singapore Covid-19 pandemic circuit breaker & heightened measures (restricted movement of people, goods and services) were officially imposed by the Singapore Government on April 7, 2020. However, prior to this date (on 24 March, 2020), the Multi-Ministry Task Force had announced more stricter measures to combat the spread of COVID-19, after a huge spike in cases originating from returning Singaporeans in the community occurred. These measures included the closure of entertainment venues, tuition and enrichment centres and places of worship. Malls, retail establishments and tourist attractions were required to reduce their crowd density in order to stay open. Gatherings of more than 10 people outside of work and school were prohibited. As of today, some measures are relaxed within a controlled environment while other measures are tightened. As Singapore is our key country of operation and management, the circuit breaker measures have significantly and adversely impacted our operations and revenues.

In light of the uncertainty as to when we can resume full operations and the uncertain customer demand environment, we are seeking financing from equity investors and financial institutions for current and projected future working capital and growth expansion purposes. In addition, we have also re-aligned our targeted sectors and increased product bundling in our business plan. Based on our revised business plan and updated forecast, we believe the Company will have sufficient operating cash flows to operate as a going concern over the next 12 months.

Comparison of the three months ended September 30, 2021 and September 30, 2020

The following table sets forth certain operational data for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020:

Net Revenue. We generated net revenues of $21,481 and $119,837 for the three months ended September 30, 2021 and 2020, respectively. For the three months ended September 30, 2021, net revenues were generated in Singapore with 67% of the total net revenues from VX vending income. The decrease in net revenues for the three months ended September 30, 2021 was due to COVID-19 related government imposed restrictions impacting goods and services movement and fulfilment, and our reduction in manpower resources from cost cutting measures, thereby impacting our operation. For the three months ended September 30, 2020, 90% of net revenues were generated in Singapore. None of the other countries accounted for more than 10% of our net revenues. In the near future, we hope to increase our focus on VX machine sales and increase the full ecosystem adoption from IoT to VMore e-commerce.

For the three months ended September 30, 2021 and 2020, the following geographic regions accounted for 10% or more of our total net revenues:

Major customers.

For the three months ended September 30, 2021 and 2020, no customers accounted for 10% or more of our total net revenues.

Major Vendors.

For the three months ended September 30, 2021 and 2020, no vendors account for more than 10% of the Company’s purchases.

Gross Profit/Loss. We achieved a gross profit of $7,035 and gross profit of $93,728 for the three months ended September 30, 2021, and 2020, respectively. The attributing factor for the decreased in gross profit was due to lower sales activities during the Covid-19 pandemic climate. We expect to continue to focus on the new IoT product line.

During the three months ended September 30, 2021, and 2020, we incurred operating expenses of $127,645 and $989,210 respectively. Our operating expenses for the three months ended September 30, 2021, were mainly attributable to general and operating expenses. Our operating expenses for the three months ended September 30, 2020 includes sales and marketing expense of $155,780 and general and operating expenses of $833,430. The overall decrease in operating expenses was due to the streamlining of processes to improve efficiencies and cost cutting measures taken, impacting all sales and marketing activities during the Covid-19 pandemic.

Net Loss. We recorded a net loss of $16,851 and $855,577 for the three months ended September 30, 2021, and 2020, respectively. The decrease in net loss is primarily attributable to a decrease in operating expenses, a decrease in our cost of revenue combined with the overall decrease in revenue during the Covid-19 pandemic. We hope to make progressive changes to our business model over the next few months to improve our net income during the Covid-19 pandemic situation.

Comparison of the six months ended September 30, 2021 and September 30, 2020

The following table sets forth certain operational data for the six months ended September 30, 2021, as compared to the six months ended September 30, 2020:

Net Revenue. We generated net revenues of $102,338 and $250,075 for the six months ended September 30, 2021 and 2020, respectively. For the six months ended September 30, 2021, 97% of the net revenues were generated in Singapore with 54% of the total net revenues from service income. The decrease in net revenues for the six months ended September 30, 2021 was due to COVID-19 related government imposed restrictions impacting goods and services movement and fulfilment, and our reduction in manpower resources from cost cutting measures, thereby impacting our operation. For the six months ended September 30, 2020, 89% of net revenues were generated in Singapore. None of the other countries accounted for more than 10% of our net revenues.

For the six months ended September 30, 2021 and 2020, the following geographic regions accounted for 10% or more of our total net revenues:

Major customers.

For the six months ended September 30, 2021 and 2020, no customers accounted for 10% or more of our total net revenues.

Major Vendors.

For the six months ended September 30, 2021 and 2020, no vendors account for more than 10% of the Company’s purchases.

Gross Profit/Loss. We achieved a gross profit of $53,008 and gross profit of $164,759 for the six months ended September 30, 2021, and 2020, respectively. The attributing factor for the decreased in gross profit was due to lower sales activities during the Covid-19 pandemic climate. We expect to continue to focus on the new IoT product line.

During the six months ended September 30, 2021, and 2020, we incurred operating expenses of $645,232 and $2,038,080 respectively. Our operating expenses for the six months ended September 30, 2021, were mainly attributable to general and operating expenses. Our operating expenses for the six months ended September 30, 2020 includes sales and marketing expense of $433,581 and general and operating expenses of $1,594,499.The overall decrease in operating expenses was due to the streamlining of processes to improve efficiencies and cost cutting measures taken, impacting all sales and marketing activities during the Covid-19 pandemic.

Net Loss. We recorded a net loss of $599,742 and $1,677,568 for the six months ended September 30, 2021, and 2020, respectively. The decrease in net loss is primarily attributable to a decrease in operating expenses, a decrease in our cost of revenue combined with the overall decrease in revenue during the Covid-19 pandemic. We hope to make progressive changes to our business model over the next few months to improve our net income during the Covid-19 pandemic situation.

Liquidity and Capital Resources

As of September 30, 2021, we had current assets of $5,190,285 and current liabilities of $12,456,148. Our current assets consisted of $50,867of cash and cash equivalents, $128,565 of deposits, prepayment and other receivable, $173,212 of account receivable, purchase deposits of $1,694,382, deferred costs of $3,128,262, and inventories of $14,997. Our current liabilities consisted of $4,168,564 of accrued liabilities and account payables, $56,015 of commission liabilities, $4,130,609 of deferred revenue, $1,433,449 of amount due to Eldee Tang, our Chief Executive Officer and Director, $280,317 of amount due to a related party for which it represents an unsecured non-interest bearing advance from our former shareholder Ms. Kao Wei-Chen, $28,407 of income tax payable and $2,358,787 of current portion of borrowings.

As of March 31, 2021, we had current assets of $5,291,014 and current liabilities of $10,532,553. Our current assets consisted of $48,214 of cash and cash equivalents, deferred cost of $3,160,539, $79,951 of accounts receivable, purchase deposits of $1,711,865, $275,293 of deposits, prepayment and other receivables, inventories of $15,152. Our current liabilities consisted of $4,288,981 of account payables and accrued liabilities, $4,085,010 of deferred revenue, $1,488,322 of amount due to Eldee Tang, our Chief Executive Officer and Director, $280,317 of amount due to related party consisting of unsecured non-interest bearing advances from our shareholder Ms. Kao Wei-Chen, income tax payable of $ 28,976 and current portion of borrowing of $360,947.

We had accumulated deficits of $139,976,303 and $139,375,793 as of September 30, 2021 and March 31, 2021, respectively. The increase in accumulated deficit is mainly due to the decrease in sales volume resulting from government imposed restrictions on the movement of goods and services globally and locally.

Net Cash (Used in) Generated from Operating Activities

Net cash used in operating activities was $371,038 for the six months ended September 30, 2021, and consisted primarily of a net loss of $599,742, adjusted for amortization of intangible of $1,149, depreciation of property, plant and equipment of $110,101, a decrease in deposits, prepayment and other receivable of $250,540, an increase in commission liabilities of $56,579, an increase in deferred revenue of $88,198, offset by an increase in account receivable of $95,027, a decrease in accrued liabilities and account payables of $77,389, and a decrease in tax payable of $105,447.

Net cash used in operating activities was $540,509 for the six months ended September 30, 2020, and consisted primarily of a net loss of $1,677,568, adjusted for amortization of intangible of $1,135, depreciation of property, plant and equipment of $121,472, a decrease in account receivable of $17,255, a decrease in deposits, prepayment and other receivable of $25,603, an increase in accrued liabilities and account payables of $895,214, an increase in deferred revenue of $204,327, an increase in tax payable of $44,911, offset by an increase in deferred costs of $166,463 and a decrease in commission liabilities of $6,395.

Net Cash Used In Investing Activities

There were no investing activities for the six months ended September 30, 2021. Net cash used in investing activities was $74,679 for the six months ended September 30, 2020, and consisted primarily of purchase of property, plant and equipment of $74,679.

Net Cash Generated From (Used in) Financing Activities

Net cash generated from financing activities for the six months ended September 30, 2021, was $448,718 and consisted primarily of proceeds from finance lease of $2,374,768, repayment to a director of $40,074, repayment of loan of $1,872,951 and repayment of finance lease of $13,025. Net cash generated from financing activities for the six months ended September 30, 2020, was $374,315 and consisted primarily of advance from a director of $501,958, repayment of loan of $95,692 and repayment of finance lease of $31,951.

We have never paid dividends on our Common Stock. Our present policy is to apply cash to investments in product development, acquisitions or expansion; consequently, we do not expect to pay dividends on Common Stock in the foreseeable future.

The success of our growth strategy is dependent upon the availability of additional capital resources on terms satisfactory to management as we are not generating sufficient revenues from our business operations. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions, capital leases and stockholder advances. There can be no assurance that we can raise such additional capital resources on satisfactory terms. We believe that our current cash and other sources of liquidity discussed above are adequate to support operations for at least the next 12 months. We anticipate continuing to rely on equity sales of our common shares and shareholder loans in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our plan of operations.

Off-Balance Sheet Arrangements

We have no outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

Going Concern

The unaudited condensed financial statements contain an explanatory paragraph expressing substantial doubt about our ability to continue operating as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which states that we will realize our assets and satisfy any liabilities and commitments in the ordinary course of business.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations and require management's subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following accounting policies are critical in the preparation of our financial statements.

These accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates.

Intangible assets represented the acquired game right from a related party, which are stated at acquisition cost, less accumulated amortization. The Company amortizes its intangible assets with definite lives over their estimated useful lives and reviews these assets for impairment when an indicator for potential impairment exists. The Company is currently amortizing its intangible assets with definite lives over periods of 3 years.

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

The Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Under ASU 2014-09, the Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

The Company accounts for a contract with a customer when the contract is committed in writing, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration to collect is substantially probable.

The Company continues to derive its revenues from sales contracts with its customers with revenues being recognized upon delivery of products. Persuasive evidence of an arrangement is demonstrated via sales contract and invoice; and the sales price to the customer is fixed upon acceptance of the sales contract and there is no separate sales rebate, discount, or volume incentive. The Company recognizes revenue when title and ownership of the goods are transferred upon shipment to the customer by the Company to consider control of goods are transferred to its customer and collectability of payment is reasonably assured. The Company’s revenues are recognized at a point in time after all performance obligations are satisfied.

The Company records revenues from the sales of third-party products on a “gross” basis pursuant to ASC 605-45 Revenue Recognition - Principal Agent Considerations, when we are the primary obligor in the arrangement with the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC 605-45 are present in the arrangement, revenue is recognized net of related direct costs.

Product sales are recorded net of good and service taxes and product returns.

The Company maintains a membership program, whereby certain members earn commission credits, based on the sales volume of certain other members who are sponsored directly or indirectly by the member. Commission credits are redeemable on future spending of the products purchased or playing online games. Commission credits are recorded and classified as operating expense when the products are delivered and revenue is recognized. The estimated liability for unredeemed commission credit is included in commission liability on the accompanying balance sheets. Management reviews the adequacy for the accrual for unredeemed commission credits by periodically evaluating the historical redemption and projected trends.

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 consolidated statement of operations.

The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company’s operating subsidiaries in Singapore and Seychelles maintain their books and record in its local currency, Singapore Dollars (“S$”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ 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 year. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.

Translation of amounts from S$ into US$1 has been made at the following exchange rates for the six months ended September 30, 2021 and 2020:

The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.

Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the consolidated financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, approximate their fair values because of the short maturity of these instruments.

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.