Statement Regarding Forward-Looking Information
The following management's discussion and analysis should be read in conjunction
with the historical financial statements and the related notes thereto contained
in this report. The management's discussion and analysis contains
forward-looking statements, such as statements of our plans, objectives,
expectations and intentions. Any statements that are not statements of
historical fact are forward-looking statements. When used, the words "believe,"
"plan," "intend," "anticipate," "target," "estimate," "expect" and the like,
and/or future tense or conditional constructions ("will," "may," "could,"
"should," etc.), or similar expressions, identify certain of these
forward-looking statements. These forward-looking statements are subject to
risks and uncertainties that could cause actual results or events to differ
materially from those expressed or implied by the forward-looking statements.
The Company's actual results and the timing of events could differ materially
from those anticipated in these forward-looking statements as a result of
several factors. The Company does not undertake any obligation to update
forward-looking statements to reflect events or circumstances occurring after
the date of this report.
The following discussion highlights the Company's results of operations and the
principal factors that have affected our financial condition, as well as our
liquidity and capital resources for the periods described, and provides
information that management believes is relevant for an assessment and
understanding of the statements of financial condition and results of operations
presented herein. The following discussion and analysis are based on the
Company's unaudited financial statements contained in this Quarterly Report,
which we have prepared in accordance with United States generally accepted
accounting principles. You should read this discussion and analysis together
with such financial statements and the related notes thereto.
Overview and Recent Developments
HWGC Holdings Limited is a holding company that runs and operates the e-commerce
business through its two wholly-owned subsidiaries, VitaxelSB and Vionmall, both
of which are incorporated in Malaysia.
VitaxelSB is a global direct selling, multi-level marketing ("MLM") company
offering travel, entertainment, lifestyle and other products and services
principally through electronic commerce commonly referred to as e-commerce.
Vionmall is involved in e-commerce business, through its platforms: Vionmarket,
VTrips and VMall. Vionmarket is a rebate website that provide retail sales
direct to consumers. However, Vionmarket does not develop or manufacture the
products and services. VTrips is a platform that provides concessionary and
travel packages to the public and members of VitaxelSB. VMall is an e-commerce
platform launched in the first quarter of 2021.
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We presently have approximately 5,700 total members. As of June 30, 2022,
approximately: 62.3% of our members reside in Malaysia, 28.9% of our members
reside in Singapore, 3.7% members reside in China, approximately 2.7% members
reside in Hong Kong and approximately 2.4% members reside in other countries.
Impact of Current Coronavirus (COVID-19) Pandemic on the Company
We have experienced and are continuing to experience significant disruptions to
our business operations due to circumstances related to COVID-19. The
government-imposed quarantines, office closings, travel restrictions negatively
impacted our business operations, as specifically related to the travel,
entertainment and lifestyle industry.
Specifically, our multi-level marketing ("MLM") business is negatively impacted
due to the fact that being a business built on fostering personal relationship
and expanding new contacts, most distributors are unable to carry out the more
important aspects of regular face to face visits and appointments, promotional
events and direct coaching to continuously improve their team's skills,
motivation and knowledge of our products. Fortunately, we are still able to
connect to our leaders via calls, emails and different forms of announcement
using an online communication such as Skype and Zoom to keep the leaders and
members abreast with our status and development. As such, our MLM operation is
still ongoing, however, slower than usual. Until the countries in South Asia and
in Europe allow foreign visitors to travel without restrictions, we anticipate
continuing of these significant disruptions which reduces our revenue.
In the Annual Report on Form 10-K for the year ended December 31, 2021 filed on
March 29, 2022, we provided an update that the Malaysian Government issued a
National Recovery Plan to cater for both the pandemic period and post-pandemic
period. As of the date of this Quarterly Report, the National Recovery Plan,
which basically spells out 4 different phases of control order, is still in
effect; Although to date, many restrictions have been lifted, the Company is
still uncertain of the effect of the post-pandemic, where the Company may still
expect long-term disruptions on its existing operations.
Share Exchange Agreements with HWGG Capital and Fintech Scion Limited
On July 21, 2022, the Company entered into a share exchange agreement (the "HWGG
Share Exchange Agreement") with HWGG Capital P.L.C., a Labuan company ("HWGG
Capital"), and all of the shareholders of HWGG Capital (the "Shareholders").
Subject to the closing conditions set forth in the HWGG Share Exchange
Agreement, each Shareholder irrevocably agreed to transfer and assign to the
Company all HWGG Capital's shares held by such Shareholders in exchange for an
aggregate of 91,666,667 newly issued shares of the Company's Common Stock.
Following the closing of the share exchange (the "HWGG Transaction"), HWGG
Capital will be a wholly owned subsidiary of the Company.
Subject to the terms and conditions of the HWGG Share Exchange Agreement, at the
closing of the HWGG Transaction, each issued and outstanding share of HWGG
Capital shall be exchanged for such number of shares of newly issued shares
Common Stock (the "Exchange Shares") for an aggregate of $55,000,000. The number
of Exchange Shares will be calculated based on a $0.60 share price.
The consummation of the HWGG Transaction is subject to certain closing
conditions, including, among other matters: (a) approval by the Labuan Finance
Services Authority of the change in ownership of the Company; (b) the Securities
and Exchange Commission (the "SEC") declaring effective the HWGC Holding's
statement on Form S-4 that will be filed in connection with the registration of
the Exchange Shares; (c) the accuracy of the parties' respective representations
and warranties in the HWGG Share Exchange Agreement, subject to specified
materiality qualifications; compliance by the parties with their respective
pre-closing obligations in the HWGG Share Exchange Agreement in all material
respects.
On August 9, 2022, the Company entered into another share exchange agreement
(the "Fintech Share Exchange Agreement") with Fintech Scion Limited ("Fintech"),
a private limited company incorporated in the United Kingdom, and all of the
shareholders of Fintech. Subject to the closing conditions set forth in the
Fintech Share Exchange Agreement, each shareholder of Fintech irrevocably agreed
to transfer and assign to the Company all Fintech's shares held by such
shareholders in exchange for an aggregate of 101,666,667 newly issued shares of
the Company's common stock, par value $0.0001 per share (the "Common Stock").
Following the closing of the share exchange (the "Fintech Transaction"), Fintech
will be a wholly owned subsidiary of the Company.
Subject to the terms and conditions of the Fintech Share Exchange Agreement, at
the closing of the Fintech Transaction, each issued and outstanding share of
HWGG Capital shall be exchanged for such number of shares of newly issued shares
Common Stock (the "Exchange Shares") for an aggregate of $61,000,000. The number
of Exchange Shares will be calculated based on a $0.60 share price.
The consummation of the Fintech Transaction is subject to certain closing
conditions, including, among other matters: (a) any required notices have been
sent to the United Kingdom's Financial Conduct Authority regarding the change in
ownership of Fintech; (b) the SEC declaring effective the registration statement
on Form S-4 that will be filed in connection with the registration of the shares
of Common Stock to be issued to the shareholders of HWGG Capital in accordance
with the terms of the HWGG Share Exchange Agreement; (c) the accuracy of the
parties' respective representations and warranties in the Fintech Share Exchange
Agreement, subject to specified materiality qualifications; (d) compliance by
the parties with their respective pre-closing obligations in the Share Exchange
Agreement in all material respects; and (e) the absence of a Seller Material
Adverse Effect (as defined in the Fintech Share Exchange Agreement).
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Results of Operations
Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021
The following discussion should be read in conjunction with our unaudited
consolidated financial statements in Item 1, Financial Statements, for the three
months ended June 30, 2022 and 2021 and the related notes thereto.
Revenue
We recognized $308 and $4,128 revenues for the periods ended June 30, 2022 and
2021, respectively. The overall decrease in revenue was attributable to the
decrease in sales in VTrip from Vionmall in current period.
Cost of Sales
Cost of sales for the period ended June 30, 2022 was $281 compared to $4,008 for
the period ended June 30, 2021. The decrease was due to decrease in revenue in
current period.
Gross Profit
Gross profit for the period ended June 30, 2021 was $120 compared to $573 for
the period ended June 30, 2020. The decrease was due to product sales of
VitaxelSB in the same period last year has a higher margin as compare to sales
from Vionmall in current period.
Operating Expenses
For the period ended June 30, 2022, we incurred total operating expenses in the
amount of $188,834, composed solely of general and administrative expenses.
Whilst, for the period ended June 30, 2021, we incurred total operating expenses
in the amount of $107,554, composed solely of general and administrative
expenses. The decrease of $81,280 or 76% for the administrative expenses
represent the decrease in total operating expenses.
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
The following discussion should be read in conjunction with our unaudited
consolidated financial statements in Item 1, Financial Statements, for the six
months ended June 30, 2022 and 2021 and the related notes thereto.
Revenue
We recognized $325 and $4,262 revenues for the periods ended June 30, 2022 and
2021, respectively. Revenue in previous period is mainly contributed by VTrip
sales as compared to the same period in current year, which were contributed by
Vitaxel's product sale. The decrease in revenue is attributable to the decrease
in VTrip sales in the current period compared to the same period last year.
Cost of Sales
Cost of sales for the period ended June 30, 2022 was $292 compared to $4,106 for
the period ended June 30, 2021. The decrease was due to decrease in revenue in
current period.
Gross Profit
Gross profit for the period ended June 30, 2022 was $33 compared to $156 for the
period ended June 30, 2021. The decrease was attributable to the decrease in
revenue in current period as compared to the same period last year.
Operating Expenses
For the period ended June 30, 2022, we incurred total operating expenses in the
amount of $315,889, composed solely of general and administrative expenses.
Whilst, for the period ended June 30, 2021, we incurred total operating expenses
in the amount of $229,717, composed of selling expenses of $23 and general and
administrative expenses totalling $229,694. The decrease of $23 or 100% for the
selling expenses, along with the increase of $86,195 or 38% for the
administrative expenses, caused total operating expenses to increase by $86,172
or 38%.
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Liquidity and Capital Resources
As of June 30, 2022, we had a cash balance of $11,422. During the period ended
June 30, 2022, net cash used in operating activities totalled $115,095. Net cash
used in investing activities totalled $15,698. Net cash provided by financing
activities during the period totalled $106,486. The resulting change in cash for
the period was a decrease of $25,611, which was primarily due to payments made
for operating activities during the period.
As of June 30, 2022, we had current liabilities of $4,731,425, which was
composed of amount due to related parties of $4,254,691, commission payables of
$119,652, accounts payable of $817, accruals and other payable of $338,583 and
lease obligation of $17,682.
As of June 30, 2021, we had a cash balance of $40,950. During the period ended
June 30, 2021, net cash provided by operating activities totalled $25,343. Net
cash used in investing activities totalled $Nil. Net cash provided by financing
activities during the period totalled $29,621. The resulting change in cash for
the period was a decrease of $5,601, which was primarily due to repayments to
related parties in current period.
As of June 30, 2021, we had current liabilities of $4,771,114, which was
composed of amount due to related parties of $4,253,641, commission payables of
$127,140, accounts payable of $76, accruals and other payable of $340,560 and
lease obligation of $49,697.
We had net liabilities of $4,611,133 and $4,666,942 as of June 30, 2022 and June
30, 2021, respectively.
The continuation of the Company as a going concern is dependent upon improving
the profitability and the continuing financial support from its stockholders or
other capital sources. Management believes that the continuing financial support
from the existing shareholders or external debt financing will provide the
additional cash to meet the Company's obligations as they become due. There is
no certainty that further funding will be available as needed.
These factors raise substantial doubt about the ability of the Company to
continue operating as a going concern.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, financings, or other
relationships with unconsolidated entities or other persons.
Critical Accounting Policies and Estimates
There are no material changes from the critical accounting policies set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". Please refer to Note 2 Summary of Significant Accounting Policies
of the Financial Statements on Form 10-K filed with the SEC on March 29, 2022,
for disclosures regarding the critical accounting policies related to our
business.
Recently Issued Accounting Standards
The recently issued accounting pronouncement are included in Note 2 Unaudited
Interim Financial Statements for disclosures on accounting policies related to
our business.
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FINTECH SCION LIMITED 
