DSWISS, INC. The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report. 22 Certain statements in this Report constitute forward-looking statements. These forward-looking statements include statements, which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words "may," "will," "should," "anticipate," "estimate," "plan," "potential," "project," "continuing," "ongoing," "expects," "management believes," "we believe," "we intend," or the negative of these words or other variations on these words or comparable terminology. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events. OverviewDSwiss, Inc. , aNevada corporation ("the Company") was incorporated under the laws of theState of Nevada onMay 28, 2015 .DSwiss Holding Limited owns 100% ofDSwiss (HK) Limited , aHong Kong Company , which owns 100% ofDSwiss Sdn Bhd , the operatingMalaysia Company of which is described below. In 2016,DSwiss (HK) Limited invested inDSwiss Biotech Sdn Bhd , incorporated inMalaysia , and owned 40% equity interest. We have incorporated a new company namelyDSwiss International Trading (Shenzhen) Limited inChina , with 100% equity interest owned byDSwiss (HK) Limited . OnNovember 9, 2020 ,DSwiss International Trading (Shenzhen) Limited was officially deregistered. Our Company is a beauty supply company formed with the goal of supplying high quality beauty products directly to our clients. Our beauty supplies include, but are not limited to, beverages to assist in burning and reducing fat, anti-aging creams, and products designed to improve the overall health and physical appearance of our clients. Currently we supply our products inMalaysia ,Singapore ,Thailand ,Indonesia ,Hong Kong andChina . However, we have intentions to expand toMyanmar ,Macau ,Vietnam andCambodia , and subsequent to that we will make efforts to expand throughout the world a premier biotech-nutraceutical company, supplying high-quality health and beauty products, including beverages to assist in weight management, anti-aging creams, and products designed to improve the overall health system in our body.
At this time, we operate exclusively online through our website: http://www.dswissbeauty.com/
Our Company continuously strives to improve the already high standard of our goods and services through ongoing research and market development. We are going to penetrate intoSouth East Asia markets through the recruitment of distributors and via the social media like Facebook and Instagram. We foresee to spend a substantial amount in marketing and advertising in the coming year. AtDSwiss we are determined to bring new products to markets that we have not
yet explored. Products which meet the definition of a functional food and cosmetics related products need to be registered or notified with theDrug Control Authority (DCA),Ministry of Health Malaysia . Manufacturing, marketing, importation and the sale of unregistered products is a violation of the Drug Control Regulations and Cosmetics Act 1984 ofMalaysia and enforcement action can be taken. AtDSwiss , research and development is an ongoing effort whose purpose is to ensure our products on the forefront of quality and effectiveness. Equipped with state of the art machinery, our innovative research and development team are constantly exploring on new development and product lines that will enable us to provide the highest quality standard and remain competitive in the industry.DSwiss's products are certified and approved by theMinistry of Health ("MOH")Malaysia . Due to the stringent requirements from MOH Malaysia, we strive to upkeep the highest possible standard in our products to provide assurance and as a prove of our continuing commitment to providing quality products. We always strive to offer products as high quality as possible, and hope that this assurance from an esteemed regulatory body will also serve to prove our continuing commitment to providing quality goods. 23DSwiss have own brand Quantum Resonant Magnetic Analyzer which is DSwiss Quantum Resonant Magnetic Analyzer. DSwiss Quantum Resonant Magnetic Analyzer is a Hi-tech innovation project, which is related to medical, bio-informatics, electronic engineering, etc. It is based on quantum medical, and scientifically analyzes the human cell's weak magnetic field collected by advanced electronic device. The analyzer can work out the customer's health situation and main problem. According to the checking result, the analyzer can figure out the reasonable treatment recommendation. The quantum resonant magnetic analyzer is the individualized guide of comprehensive healthy consulting and updated healthy sciences, and its characteristics and advantages are comprehensive, non-invasive, practical, simple, quick, economical and easy to popularize. We can see DSwiss Quantum Resonant Magnetic Analyzer can help our customers to more concern about their health and skin condition. Our expected growth is planned to occur primarily through the implementation of our social media marketing strategy.DSwiss already has a strong relationship with social media (eg. Facebook, Instagram and Wechat). The global presence social media has helped provide to us has been an invaluable resource, and as we continue to expand our business operations and spread our brand awareness, we intend to primarily utilize social media to reach our customers. The benefits of social media are countless, but perhaps the most imperative to our future success is our ability to connect with customers directly, to receive their feedback almost instantaneously. On that note, the feedback we have received from our clients has been overwhelmingly positive, which has helped us to create a robust brand image. WhileDSwiss has been focused almost exclusively upon pursuing operations withinAsia , we do have plans to expand outward and become a household name across the world. Our strategy to do so going forward is by forming partnerships with local companies in various countries that may be willing to stock our products or promote them to their own customers. We believe that by forging strategic relationships and partnerships we can expand our operations across the globe at a greater pace and with greater certainty than we would if we tried to expand on our own. Results of Operations
Revenues for the year ended
The Company generated revenue of$1,347,718 and$273,659 for the year endedDecember 31, 2020 and 2019 respectively. Revenue has increased by$1,074,059 which is a 392.48% increase comparatively. The revenue mainly represented the supplies of beauty products to the customers. We contribute our increase in revenue towards the success in local and oversea marketing effort.
Cost of Revenue and Gross Margin
Cost of revenue for the Company year endedDecember 31, 2020 amounted to$980,243 as compared to$181,925 for the year endedDecember 31, 2019 . Increase of$798,318 in cost of revenue was contributed by increasing packing material cost and product purchase price. As a result, the gross profit has increased from$91,734 for the year endedDecember 31, 2019 to$367,475 for the year endedDecember 31, 2020 , while the gross margin of the Company decreased from 33.52% in year endedDecember 31, 2019 to 27.27% in year endedDecember 31, 2020 , which is a net increase of decrease of 6.25%. Operating Expenses Selling, general and administrative expenses for the year endedDecember 31, 2020 and 2019 amounted to$287,995 and$242,157 respectively, the increase of$47,860 which is 19.76% higher comparatively which was contributed by the increase of group operations. Operating expenses for the year endedDecember 31, 2020 and 2019 amounted to$1,216 and$94,769 respectively, the decrease of$93,553 which is 98.72% lower comparatively, such decrease was associated with the Company stringent cost control.
Other operating expenses for the year ended
24 Other Income
The Company recorded an amount of$104,976 and$63,592 as other income for the year endedDecember 31, 2020 and 2019 respectively. This income is derived from the interest income earned and exchange gain.
Net Profit/Loss and Net Profit/Loss Margin
The net profit for the year was 30,045 for the year endedDecember 31, 2020 . The net loss for the year was 295,463 for the year endedDecember 31, 2019 . The increase in net profit of$325,508 which is a 110.17% higher comparatively due to higher contribution on revenue and stringent cost control. Taking into the profit for the year endedDecember 31, 2020 , the accumulated loss for the Company has decreased from$1,490,845 to$1,483,170 .
Liquidity and Capital Resources
As ofDecember 31, 2020 , we had working capital deficit of$142,357 consisting of cash and cash equivalent of$158,004 as compared to working capital deficit of$182,311 and our cash and cash equivalent of$48,353 as ofDecember 31, 2019 . Net cash generated from operating activities for the year endedDecember 31, 2020 was$58,913 as compared to net cash used in operating activities of$179,671 for the year endedDecember 31, 2019 . The cash generated from operating activities are mainly from prepayments, deposits, and other receivables. Net cash used in investing activity for the year endedDecember 31, 2020 was$2,045 as compared to net cash used in investing activity for the year ended, 2019 were$2,082 . The cash used in investing activities are mainly for purchase of plant and equipment. Net cash provided by financing activities for the year endedDecember 31, 2020 was$105,143 as compared to net cash provided by financing activities$78,475 for the year endedDecember 31, 2019 . The net cash provided by financing activities were the advances from a director. The revenues generated from our current business operations alone may not be sufficient to fund our operations or planned growth. We will likely require additional capital to continue to operate our business, and to further expand our business. Sources of additional capital through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or revolving credit facilities. We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. Our inability to raise additional funds when required may have a negative impact on our operations, business development and financial results.
Critical Accounting Policies and Estimates
Leases
The company determines if an arrangement is a lease at inception. Operating
leases are included in operating in operating lease right-of-use ("ROU") as
assets, operating lease non-current liabilities, and operating lease current
liabilities in our consolidated balance sheet. Finance leases are property and
equipment, other current liabilities, and other non-current liabilities inthe consolidated balance sheet.
ROU assets represent the right to use an asset for the lease term and lease liability represent the obligation to make lease payment arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over lease term. As most of the leases doesn't provide an implicit rate. The company generally use the incremental borrowing rate on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating ROU asset also includes any lease payments made and exclude lease incentives. Lease expense for lease payment is recognized on a straight -line basis over lease term. The Company adopted Public Bank Berhad's base rate lending rate as a reference for discount rate. 25 Leases that transfer substantially all the rewards and risks of ownership to the lessee, other than legal title, are accounted for as finance leases. Substantially all of the risks or benefits of ownership are deemed to have been transferred if any one of the four criteria is met: (i) transfer of ownership to the lessee at the end of the lease term, (ii) the lease containing a bargain purchase option, (iii) the lease term exceeding 75% of the estimated economic life of the leased asset, (iv) the present value of the minimum lease payments exceeding 90% of the fair value. At the inception of a finance lease, the Company as the lessee records an asset and an obligation at an amount equal to the present value of the minimum lease payments. The leased asset is amortized over the shorter of the lease term or its estimated useful life if title does not transfer to the Company, while the leased asset is depreciated in accordance with the Company's depreciation policy if the title is to eventually transfer to the Company. The periodic rent payments made during the lease term are allocated between a reduction in the obligation and interest element using the effective interest method in accordance with the provisions of ASC Topic 835-30, "Imputation of Interest". Use of estimates In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets, and revenues and expenses during the periods reported. Actual results may differ from these estimates. Cash and cash equivalents Cash and cash equivalents are carried at cost and 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. Revenue recognition
In accordance with the Accounting Standard Codification Topic 605 "Revenue
Recognition" ("ASC 605"), the Company recognizes revenue when the following four
criteria are met: (1) delivery has occurred or services rendered; (2) persuasive
evidence of an arrangement exists; (3) there are no continuing obligations to
the customer; and (4) the collection of related accounts receivable is probable.
Revenue is measured at the fair value of the consideration received or receivable, net of discounts and taxes applicable to the revenue.
Revenue from supplies of beauty products is recognized when title and risk of loss are transferred and there are no continuing obligations to the customer. Title and the risks and rewards of ownership transfer to and accepted by the customer when the products are collected by the customer at the Company's office. Revenue is recorded net of sales discounts, returns, allowances, and other adjustments that are based upon management's best estimates and historical experience and are provided for in the same period as the related revenues are recorded. Based on limited operating history, management estimates that there was no sale return for the period reported. Cost of revenues
Cost of revenues includes the purchase cost of retail goods for re-sale to customers and the packing materials (such as boxes). It excludes purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs and other costs of distribution network in cost of revenues. 26 Shipping and handling fees
Shipping and handling fees, if billed to customers, are included in revenue. Shipping and handling fees associated with inbound and outbound freight are expensed as incurred and included in selling and distribution expenses.
Shipping and handling fees are expensed as incurred for the year ended
Selling, general and administrative expenses
Selling, general and administrative expenses are primarily comprised of travelling and accommodation fees such as petrol, toll and parking and shipping and handling fees.
Cash and cash equivalents Cash and cash equivalents are carried at cost and 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. Inventories Inventories consisting of products available for sell, are stated at the lower of cost or market value. Cost of inventory is determined using the first-in, first-out (FIFO) method. Inventory reserve is recorded to write down the cost of inventory to the estimated market value due to slow-moving merchandise and damaged goods, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. The Company takes ownership, risks and rewards of the products purchased. Write downs are recorded in cost of revenues in the Condensed Consolidated Statements of Operations and Comprehensive Income. Property and equipment
Property and equipment are stated at cost less accumulated depreciation and impairment. Depreciation of plant, equipment and software are calculated on the straight-line method over their estimated useful lives or lease terms generally as follows: Classification Estimated useful lives Computer and software 5 years Furniture and Fittings 5 years Office equipment 10 years Motor vehicle 5 years Intangible assets Intangible assets are stated at cost less accumulated amortization. Intangible assets represented the registration costs of trademarks inMalaysia andHong Kong which are amortized on a straight-line basis over a useful life of ten years. The Company follows ASC Topic 350 in accounting for intangible assets, which requires impairment losses to be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by the assets are less than the assets' carrying amounts. There were no impairment losses recorded on intangible assets for the year endedDecember 31, 2020 . Income taxes
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 periods in which those temporary differences are expected
to be recovered or settled. Any effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the
enactment date.
27
ASC 740 prescribes a comprehensive model for how companies should recognize,
measure, present, and disclose in their financial statements uncertain tax
positions taken or expected to be taken on a tax return. Under ASC 740, tax
positions must initially be recognized in the financial statements when it is
more likely than not the position will be sustained upon examination by the tax
authorities. Such tax positions must initially and subsequently be measured as
the largest amount of tax benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement with the tax authority assuming full
knowledge of the position and relevant facts.
The Company conducts major businesses in
The Company did not have any unrecognized tax positions or benefits and there was no effect on the financial conditions or results of operations for the year endedDecember 31, 2020 and year endedDecember 31, 2019 . The Company and its subsidiary are subject to local and various foreign tax jurisdictions. The Company's tax returns remain open subject to examination by major tax jurisdictions. Net profit per share The Company calculates net profit per share in accordance with ASC Topic 260 "Earnings per share". Basic profit per share is computed by dividing the net profit by the weighted average number of common shares outstanding during the period. Diluted profit per share is computed similar to basic profit per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
Foreign currencies translation
Transactions denominated in currencies other than the functional currency are
translated into the functional currency at the exchange rates prevailing at the
dates of the transaction. Monetary assets and liabilities denominated in
currencies other than the functional currency are translated into the functional
currency using the applicable exchange rates at the balance sheet dates. The
resulting exchange differences are recorded in the Condensed Consolidated
Statements of Operations and Comprehensive Income.
The reporting currency of the Company is United States Dollars ("US$") and the
accompanying financial statements have been expressed in US$. In addition, the
Company's subsidiaries and VIEs in Malaysia , Hong Kong, China and Thailand
maintains their books and record in their local currency, Ringgits Malaysia
("MYR"), Hong Kong Dollars ("HK$") and Chinese Renminbi ("RMB") respectively,
which is functional currency as being the primary currency of the economic
environment in which the entity operates.
In general, for consolidation purposes, assets and liabilities of its
subsidiaries whose functional currency is not US$ are translated into US$, in
accordance with ASC Topic 830-30, "Translation of Financial Statement", using
the exchange rate on the balance sheet date. Revenues and expenses are
translated at average rates prevailing during the period. The gains and losses
resulting from translation of financial statements of foreign subsidiary are
recorded as a separate component of accumulated other comprehensive income
within the statements of stockholders' equity.
Translation of amounts from MYR into
As of and for the year ended December 31,
2020 2019
Year-end MYR :US$1 exchange rate 4.02 4.09 Year-average MYR :US$1 exchange rate 4.08 4.15 Year-end HK$ :US$1 exchange rate 7.75 7.79 Year-average HK$ :US$1 exchange rate 7.75 7.81 Year-end RMB :US$1 exchange rate 6.54 6.96 Year-average RMB :US$1 exchange rate 6.90
7.01
28
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, accounts payable and accrued liabilities, and amount due to a director 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.
Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Recent accounting pronouncements
FASB issues various Accounting Standards Updates relating to the treatment and recording of certain accounting transactions. OnJune 10, 2014 , theFinancial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-10, Development Stage Entities (Topic 915) Elimination of Certain Financial Reporting Requirements, including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which eliminates the concept of a development stage entity (DSE) entirely from current accounting guidance. The Company has elected adoption of this standard, which eliminates the designation of DSEs and the requirement to disclose results of operations and cash flows since inception. The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations. 29
Off-Balance Sheet Arrangements
As ofDecember 31, 2020 , we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.
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