UNITED STATES  

SECURITIES AND EXCHANGE COMMISSION  

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2017 

or  

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________________________ to ___________________________

 

Commission file number 333-199965

 

HO WAH GENTING GROUP LIMITED

 

(Exact name of registrant as specified in its charter)

 

Nevada   47-1662242

(State or other jurisdiction of 

incorporation or organization) 

 

(I.R.S. Employer 

Identification No.)

 

Wisma Ho Wah Genting, No. 35, Jalan Maharajalela,
50150 Kuala Lumpur, Malaysia
N/A
(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code   + 603-2141-6422

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

 Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

Yes ☒  No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
   
Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☒
  Emerging Growth Company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).              

 Yes ☒  No

 

As of August 15, 2017, the Registrant has 500,027,774 shares of common stock outstanding.

 

 

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION   F-2
ITEM 1. FINANCIAL STATEMENTS   F-2
CONSOLIDATED BALANCE SHEETS     F-3
CONSOLIDATED STATEMENTS OF OPERATIONS   F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS   F-5
NOTES TO FINANCIAL STATEMENTS   F-6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   2
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   5
ITEM 4. CONTROLS AND PROCEDURES   6
     
PART II – OTHER INFORMATION   6
ITEM 1. LEGAL PROCEEDINGS   6
ITEM 1A. RISK FACTORS   6
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   6
ITEM 3. DEFAULTS UPON SENIOR SECURITIES   6
ITEM 4. MINE SAFETY DISCLOSURES   7
ITEM 5. OTHER INFORMATION   7
ITEM 6. EXHIBITS   7
     
SIGNATURES   8

 

F- 1  

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

HO WAH GENTING GROUP LIMITED  

CONSOLIDATED FINANCIAL STATEMENTS   

For the six months ended June 30, 2017

 

CONTENTS:    
     
Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016   F-3
     
Consolidated Statement of Income & Other Comprehensive Income for the six months ended June 30, 2017 and 2016 (unaudited)   F-4
     
Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016 (unaudited)   F-5
     
Notes to the interim Financial Statements (unaudited)   F-6

 

F- 2  

 

 

HO WAH GENTING GROUP LIMITED  

CONSOLIDATED BALANCE SHEETS 

(Stated in US Dollars)

 

    As of
June 30,
2017 (unaudited)
    As of
December 31,
2016
 
             
ASSETS                
CURRENT ASSETS                
Cash and cash equivalents   $ 39,337     $ 363,015  
Account receivables     150,408        
Other receivables     1,928,586       746,386  
Deposits and prepayment     41,528       1,165  
Amount due from related parties     910,676       1,152,014  
Amount due from a director           23,503  
Short-term investments     13,222       12,660  
Total Current Assets     3,083,757       2,298,743  
                 
PROPERTY AND EQUIPMENT, NET     64,098       60,064  
TOTAL ASSETS   $ 3,147,855     $ 2,358,807  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
CURRENT LIABILITIES                
Other payables     3,731,833       2,440,117  
Accruals     3,811       4,454  
Amounts due to related parties           266,807  
Total Current Liabilities     3,735,644       2,711,378  
Total Liabilities     3,735,644       2,711,378  
                 
STOCKHOLDERS’ DEFICIT                
Common stock (Par value of $0.0002: 750,000,000 shares authorized; and  500,027,774 shares issued and outstanding as of June 30, 2017 and December 31, 2016)     100,006       100,006  
Additional paid in capital     302,166       302,166  
Accumulated deficit     (759,618 )     (533,282 )
Accumulated other comprehensive loss     (230,339 )     (221,461 )
Total Stockholders’ Equity (Deficit)     (587,785 )     (352,571 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $ 3,147,859     $ 2,358,807  

 

The accompanying notes are an integral part of these interim financial statements

 

F- 3  

 

 

HO WAH GENTING GROUP LIMITED  

  CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS  

(In U.S. dollars)  

(Unaudited) 

 

    For the Three Months Ended
June 30,
    For the Six Months Ended
June 30,
 
    2017     2016     2017     2016  
                                 
REVENUE   $ 285,812     $ 71,297     $ 342,963     $ 118,625  
                                 
COST OF REVENUE     (79,746 )     (6,367 )     (80,419 )     (12,458 )
                                 
GROSS PROFIT     206,066       64,930       262,544       106,167  
                                 
OPERATING EXPENSES                                
Administrative expenses     (181,146 )     (127,815 )     (452,253 )     (258,324 )
                                 
PROFIT/(LOSS) FROM OPERATIONS     24,920       (62,885 )     (189,709 )     (152,157 )
                                 
OTHER INCOME/(EXPENSE), NET                                
Interest Income     346             665       (379 )
Other Income     (918 )     5,793       (3,212 )     5,671  
Other Expense     (15,258 )     (387 )     (31,876 )      
Exchange (loss)/gain     (2,115 )     (626 )     (2,204 )     (612 )
Total Other Income / (Expense), net     (17,944 )     4,780       (36,627 )     4,680  
                                 
NET INCOME /(LOSS) BEFORE TAXES     6,976       (58,105 )     (226,336 )     (147,477 )
                                 
Income tax expense           (749 )           (733 )
                                 
NET INCOME/(LOSS)   $ 6,976     $ (58,854 )   $ (226,336 )   $ (148,210 )
                                 
OTHER COMPREHENSIVE INCOME/(LOSS)                                
Foreign currency translation adjustment     6,185       (150,974 )     8,878       (30,489 )
                                 
TOTAL COMPREHENSIVE INCOME /(LOSS)   $ 13,161     $ (209,828 )   $ (217,458 )   $ (117,721 )
                                 
Net loss contributed to non-controlling interest           (3,884 )           (9,782 )
Net loss contributed to shareholders     6,976       (54,970 )     (226,336 )     (138,428 )
Total net loss     6,976       (58,854 )     (226,336 )     (148,210 )
                                 
Total comprehensive income /(loss) contributed to non-controlling interest           (13,783 )           (7,770 )
Total comprehensive income /(loss) contributed to shareholders     13,161       (196,045 )     (217,458 )     (109,951 )
                                 
Net loss per share - basic and diluted   $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )
                                 
Weighted average number of shares outstanding during the period - basic and diluted     500,027,774       200,375,532       500,027,774       200,375,532  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

F- 4  

 

 

HO WAH GENTING GROUP LIMITED  

CONSOLIDATED STATEMENT OF CASH FLOWS  

(UNAUDITED) 

 

    Six months ended
June 30,
 
    2017     2016  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss   $ (226,336 )   $ (154,725 )
Adjusted to reconcile net loss to net cash used in operating activities:                
Depreciation – property and equipment     1,260       4,448  
Changes in operating assets and liabilities                
Accounts receivable     (150,408 )        
Other receivables, deposits and prepayment     (1,222,563 )     (43,667 )
Other payables and accrued expenses     1,291,073       913,572  
Net cash provided by (used in) operating activities     (306,974 )     719,628  
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of property, plant and equipment     (2,647 )     (29,071 )
Net cash provided by (used in) investing activities     (2,647 )     (29,071 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Loss attributable to non-controlling interest           (8,754 )
Amount due from related parties     241,338       (418,182 )
Amount due from director     23,503        
Amounts due to related party     (266,807 )      
Amount due to directors           (513,687 )
Net cash provided by (used in)  financing activities     (1,966 )     (940,623 )
                 
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS     (12,091 )     60,416  
                 
NET DECREASE IN CASH AND CASH EQUIVALENTS     (323,678 )     (189,650 )
                 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     363,015       471,907  
                 
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 39,337     $ 282,257  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                
                 
Cash paid for interest expenses   $     $  
                 
Cash paid for income tax   $     $  

 

The accompanying notes are an integral part of these interim financial statements.

 

F- 5  

 

 

HO WAH GENTING GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. ORGANIZATION AND BUSINESS

 

Ho Wah Genting Group Limited (“HWGG”), a Nevada corporation (formerly Computron, Inc.) through Ho Wah Genting Group SDN BHD (“Malaysia HWGG”), a Malaysia company and our wholly owned subsidiary, is engaged to promote travel and entertainment services to members to our partnering resorts and cruises in the Asia region and develop and invest in real estate property.

 

On September 2, 1985, Malaysia HWGG was incorporated under the laws of Malaysia as a private company limited by shares with the name “Ho Wah Genting Holdings SDN. BHD” for the purpose of functioning as a holding company to obtain ownership interests in Malaysian businesses across various industries. Throughout the years, we have expanded our business operations and undergone multiple name changes and restructuring to fit our evolving business objectives. First on February 17, 1989, the company changed its name to “Ho Wah Genting Group (M) SDN. BHD.” On October 2, 1990, the company changed its name to “Ho Wah Genting Group SDN. BHD.” On December 22, 1990 its name was changed to “Ho Wah Genting Group Berhad” and was converted to a public company limited by shares. Lastly, on January 18, 1995, the company converted back into a private company limited by shares and changed its name to “Ho Wah Genting Group Sdn. Bhd.”

 

From 1985 to 2005, Malaysia HWGG was involved in wire and cable, taxi, travel agent and tour bus charterers and general insurance agent services. In August 2006, Malaysia HWGG shifted its operations to primarily focus on commercial and residential property investment by purchasing a condominium in Kuala Lumpur, Malaysia and renting it out for revenue.

 

In 2015, Malaysia HWGG entered the travel and entertainment services business by launching the Exclusive Travel Membership program in Malaysia.

 

On June 25, 2015, Malaysia HWGG acquired 65% of the equity interests of Beedo SDN BHD (“Beedo”). On July 7, 2015, Beedo increased its issued and paid-up shares from 2,500 to 1,000,000. HWGG acquired an additional 508,375 shares on that date, making its balance of shares 510,000 and effectively diluting its shareholding in Beedo from 65% to 51%. Beedo is mainly engaged in the provision of information technology services. On August 12, 2016, HWGG completed the disposal of its subsidiary, Beedo, by wholly transferring the shares it owns to a related party, Dato’ Lim Hui Boon, for the consideration of $ 118,881 (RM 510,000).

 

REVERSE MERGER

 

On October 28, 2016, Computron acquired all the issued and outstanding shares of Malaysia HWGG, a privately held Malaysia corporation, pursuant to the Share Exchange Agreement and Malaysia HWGG became the wholly owned subsidiary of Computron in a reverse merger, or the Merger. Pursuant to the Merger, all of the issued and outstanding shares of Malaysia HWGG common stock were converted, at an exchange ratio of 0.56-for-1, into an aggregate of 799,680,000 (560,000 pre- forward split) shares of Computron common stock and Malaysia HWGG became a wholly owned subsidiary of Computron. The holders of Computron’s common stock as of immediately prior to the Merger held an aggregate of 200,375,532 (140,319 pre-forward split) shares of Computron’s common stock. The accompanying financial statements share and per share information has been retroactively adjusted to reflect the exchange ratio in the Merger. Subsequent to the Merger, Computron’s name was changed from “Computron, Inc.” to “Ho Wah Genting Group Limited.”.

 

On November 4, 2016, we completed and closed a share exchange (the “Share Exchange”) under a Share Exchange Agreement (the “Share Exchange Agreement”) of the same date by and among us, Malaysia HWGG and the shareholders of Malaysia HWGG pursuant to which Malaysia HWGG became a wholly owned subsidiary of ours. In the Share Exchange, all of the outstanding shares of Malaysia HWGG were converted into shares of our Common Stock.

 

F- 6  

 

 

HO WAH GENTING GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

In connection with the Share Exchange and pursuant to the Split-Off Agreement (defined below), we transferred our pre-Share Exchange assets and liabilities to our pre-Share Exchange majority stockholder, in exchange for the surrender by him and cancellation of 5,000,000 shares of our Common Stock.

 

Under generally accepted accounting principles in the United States, (“U.S. GAAP”) because Malaysia HWGG’s former stockholders received the greater portion of the voting rights in the combined entity and Malaysia HWGG’s senior management represents all of the senior management of the combined entity, the Merger was accounted for as a recapitalization effected by a share exchange, wherein Malaysia HWGG is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of Malaysia HWGG have been brought forward at their book value and no goodwill has been recognized. Accordingly, the assets and liabilities and the historical operations that are reflected in Malaysia HWGG's consolidated financial statements are those of Malaysia HWGG and are recorded at the historical cost basis of Malaysia HWGG.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information article 8 of Regulation S-X.

 

This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. The Company’s financial statements are expressed in U.S. dollars.

 

Principles of consolidation

 

The unaudited consolidated financial statements include the accounts of HWGG and its subsidiary, Beedo, collectively referred to within as the Company. All material intercompany accounts, transactions, and profits have been eliminated in consolidation.

 

Use of estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

Foreign currency translation and transactions

 

The functional currency of the Company is the Malaysian Ringgit (“MYR”) and reporting currency of the Company is the United States Dollar (“USD”). The financial statements of the Company are translated into USD using the exchange rate as of the balance sheet date for assets and liabilities and average exchange rate for the year for income and expense items. Translation gains and losses are recorded in accumulated other comprehensive income or loss as a component of shareholders’ equity.

 

Cash and cash equivalents

 

The Company considers highly-liquid investments with maturities of three months or less, when purchased, to be cash equivalents.

  

F- 7  

 

 

HO WAH GENTING GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Investments

 

The Company invests its excess cash primarily in equity instruments of high-quality corporate issuers listed on the Main Board of Bursa Malaysia. Such securities are classified as short-term investments and are valued at the last reported sales price on the balance sheet date. If no sale price was reported on that date, they are valued at the last reported bid price. Changes in the value of these investments are recognized as unrealized gain or loss in the statement of income and other comprehensive income.

 

Fair value of financial instruments

 

FASB ASC 820, “Fair Value Measurement,” specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:

 

Level 1 Inputs – Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access. 

 

Level 2 Inputs – Inputs other than the quoted prices in active markets that are observable either directly or indirectly.

 

Level 3 Inputs – Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.

 

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurements. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. As of June 30, 2017 and December 31, 2016, short term investments classified as held-for-trading were required to be reported at fair value on a recurring basis. Carrying values of non-derivative financial instruments, including cash, accounts receivables, payables and accrued liabilities, approximate their fair values due to the short term nature of these financial instruments. There were no changes in methods or assumptions during the periods presented.

 

Property and equipment, net

 

Property and equipment are carried at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following estimated useful lives:

 

  Leasehold building 50 years
     
  Computer and software 5 years
     
  Furniture and fixtures 5 years
     
  Leasehold improvement 10 years

 

Revenue recognition

 

The Company provides rental, Information technology and junket operation services to customer. The Company has recognized lease revenue based upon its annual rental over the life of the operating lease. Lease revenue is recognized using the straight-line method in accordance with ASC Topic 970-605, “Real Estate – General – Revenue Recognition” (“ASC Topic 970-605”). Revenue from the provision of information technology services is recognized when (a) there is persuasive evidence that an arrangement exists, (b) delivery has occurred, (c) the vendor’s fee is fixed or determinable and (d) collectability is probable in accordance with ASC Topic 985-605, “Software – Revenue Recognition” (“ASC 985-605”). Junket operation revenue is recognized when service is performed, vendor’s fee is fixed or determinable and collectability is probable.

 

F- 8  

 

 

HO WAH GENTING GROUP LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Income taxes

 

Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the combined financial statements.Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. 

 

The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes are classified as a component of the provisions for income taxes. The Company did not recognize any income tax due to uncertain tax positions or incur any interest and penalties related to potential underpaid income tax expense as of June 30, 2017 and December 31, 2016, respectively.  

 

Comprehensive loss

 

Comprehensive loss includes net loss and cumulative foreign currency translation adjustments and is reported in the Consolidated Statement of income and comprehensive loss.

 

Loss per share

 

The loss per share is computed using the weighted average number of shares outstanding during the fiscal years. For the three and six months ended June 30, 2017 and 2016, there is no dilutive effect due to net loss for the periods.

 

Segment reporting

 

ASC Topic 280 requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. During the periods ended June 30, 2017, the Company operated in three reportable business segments: (1) investment property holding which generates rental income from the leasing out of its leasehold building, (2) exclusive travel membership (ETM) and junket operations (3) information technology services, which generates revenue from the provision of information technology services.

 

The others which comprise of general operating and administrative expenses, and other income/expenses not directly attributable to the sources of revenue of the Company for the three and six months ended June 30, 2017 and 2016.

 

Related party transactions

 

A related party is generally defined as:

 

(i) any person that holds the Company’s securities including such person’s immediate families,

 

(ii) the Company’s management,

 

(iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or

 

(iv) anyone who can significantly influence the financial and operating decisions of the Company.

 

F- 9  

 

 

HO WAH GENTING GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

 

Recently issued accounting pronouncements

 

Revenue Recognition:  In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. 

 

Financial instrument : In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is not permitted. Accordingly, the standard is effective for us on January 1, 2018. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

 

Leases : In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-2”), which provides guidance on lease amendments to the FASB Accounting Standard Codification. This ASU will be effective for us beginning in January 1, 2019. We are currently in the process of evaluating the impact of the adoption of ASU 2016-2 on our consolidated financial statements.

 

Financial Instruments - Credit Losses: In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): The amendments in this Update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss, which will be more decision useful to users of the financial statements. ASU 2016-13 is effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is allowed as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is still evaluating the effect that this guidance will have on the Company’s consolidated financial statements and related disclosures.

 

The Financial Accounting Standards Board and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2017. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.

  

3. GOING CONCERN UNCERTAINTIES

 

These consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

 

For the period ended June 30, 2017, the Company reported a net loss of $217,458 and working capital deficit of $651,887. The Company had an accumulated deficit of $759,618 as of June 30, 2017.

 

F- 10  

 

 

HO WAH GENTING GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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.

 

These consolidation financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the Company’s ability to continue as a going concern.

 

4. HELD FOR TRADING SECURITIES

 

    Estimated  
    Fair Value  
    As of
June 30, 2017
(Unaudited)
    As of
December 31, 2016
 
             
Short-term investments:                
Quoted shares in Malaysia   $ 13,222     $ 12,660  

 

Realized gains and realized losses were not significant for either of the three month and six month ended June 30, 2017.

 

5. OTHER RECEIVABLES, NET

 

Other receivables consist of the following:

 

          As of
June 30,
2017
    As of
December 31,
2016
 
                   
Other receivables     (1 )   $ 1,928,586       746,386  
Deposits and Prepayment     (2 )     41,528       1,165  
            $ 1,970,114     $ 747,551  

 

(1) Deposits represented payments for telephone, electricity, water, maintenance fee, rental & utility and parking.
   
(2) Prepayment represented prepayments for maintenance fee, sinking fund and fire assurance.

 

F- 11  

 

 

HO WAH GENTING GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

6. PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net consist of the following:

 

    As of
June 30,
2017
    As of
December 31, 
2016
 
             
Leasehold building   $ 73,674     $ 70,543  
Computer and software     6,803       3,979  
Furniture and fixtures     527       505  
                 
      81,004       75,027  
                 
Less: Accumulated depreciation     (16,906 )     (14,963 )
                 
 Balance at end of period   $ 64,098     $ 60,064  

 

Depreciation expenses was $1,260 (3 months $667) and $4,448 (3 months $2,224) for the six months ended June 30, 2017 and 2016, respectively.

 

7. OTHER PAYABLES AND ACCRUALS

 

    As of
June 30,
2017
    As of
December 31, 
2016
 
             
Other payables     3,731,833       2,440,117  
Accruals     3,811       4,454  
    $ 3,735,644     $ 2,444,571  

 

8. INCOME TAX

 

The Company and its subsidiary are Malaysia incorporated companies and required to pay corporate income tax at 25% of taxable income.

 

Income tax expenses for the Company are summarized as follows:

 

    For the three months ended     For the six months ended  
    June 30,
2017
    June 30, 
2016
    June 30,
2017
    June 30, 
2016
 
                         
Current:                                
Provision for Malaysian income tax   $     $ 749     $     $ 733  
Provision for U.S. income tax                        
Deferred:                                
Provision for Malaysian income tax                        
Provision for U.S. income tax                        
    $     $ 749     $     $ 733  

 

F- 12  

 

 

HO WAH GENTING GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Malaysia

 

Malaysia HWGG recorded a loss before income tax of $226,336 and $147,477 for the period ended June 30, 2017 and 2016, respectively. A reconciliation of the provision for income taxes with amounts determined by applying the Malaysian income tax rate of 25% and 25% for the period ended June 30, 2017 and 2016, respectively, to income before income taxes are as follows: 

 

    For the three months ended     For the six months ended  
    June 30,
2017
    June 30, 
2016
    June 30,
2017
    June 30, 
2016
 
                         
Profit (loss) before income tax   $ 6,976     $ (58,854 )   $ (226,336 )   $ (147,477 )
Permanent difference     6,976       58,854       226,336       147,477  
Taxable income   $     $     $     $  
Malaysian income tax rate     24 %     24 %     24 %     24 %
Current tax expenses   $     $ (749 )   $     $ 733  
Less: Valuation allowance                        
Income tax expenses   $     $     $     $ 733  

 

United States of America

 

HWGG is a company incorporated in State of Nevada and recorded a loss before income tax of $ and for the period ended June 30, 2017 and 2016, respectively. A reconciliation of the provision for income taxes with amounts determined by applying the United States Federal income tax rate of 34% for the period ended June 30, 2017 and 2016, respectively, to income before income taxes are as follows:

 

   

For the three months ended 

    For the six ended  
    June 30,
2017
    June 30, 
2016
    June 30,
2017
    June 30, 
2016
 
                         
Profit (loss) before income tax   $ 6,976     $ (58,854 )   $ (226,336 )   $ (147,477 )
Permanent difference     6,976       58,854       226,336       147,477  
Taxable income   $     $     $     $  
USA income tax rate     34 %     34 %     34 %     34 %
Current tax expenses   $     $     $     $  
Less: Valuation allowance                              
Income tax expenses   $     $     $     $  

 

No deferred tax has been provided as there are no material temporary differences arising during the periods ended June 30, 2017 and 2016.

 

F- 13  

 

 

HO WAH GENTING GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

9. RELATED PARTY TRANSACTIONS

 

As of June 30, 2017 and December 31, 2016, amounts due from related parties were as follows:

 

    As of
June 30,
2017
    As of
December 31, 
2016
 
             
Ho Wah Genting Berhad   $     $ 544,096  
Ho Wah Genting Holiday Sdn Bhd     67,537        
Vitaxel SDN BHD     819,850       585,619  
Vitaxel Online Mall SDN BHD     23,289       22,299  
    $ 910,676     $ 1,152,014  

 

Our President. Dato Lim Hui Boon, is also the Group President and shareholder of Ho Wah Genting Berhad. Liew Jenn Lim, one of our directors since March 1, 2017, has also been a director of Vitaxel Online Mall Sdn Bhd since January 25, 2016. Lim Chun Hoo, our Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and director, was a director of Vitaxel Group Limited, parent company of its wholly owned subsidiary Vitaxel SDN BHD, until his resignation from that position on March 31, 2017.  

 

The amounts due from related companies are unsecured, interest-free and repayable on demand.

 

As of June 30, 2017 and December 31, 2016, amounts due from directors were as follows:

 

    As of
June 30,
2017
    As of
December 31, 
2016
 
                 
Lim Chun Hoo   $     $ 23,503  

 

The amounts due from a director were unsecured, interest-free and repayable on demand. 

 

As of June 30, 2017 and December 31, 2016, amounts due to related parties were as follows:

 

    As of
June 30,
2017
    As of
December 31, 
2016
 
             
Dato’ Lim Boon Hui   $     $ 208,830  
Beedo SDN BHD           57,977  
    $     $ 266,807  

 

During the periods ended June 30, 2017 and 2016, the Company recognized rental income of $ 2,703 (3 months $1,352) and $5,407 (3 months $2,704) respectively from Ho Wah Genting Berhad. The president of the Company, Dato’ Lim Hui Boon, is also the Group President of Ho Wah Genting Berhad. In addition, two sons of Dato’ Lim Hui Boon are directors of Ho Wah Genting Berhad.

 

During the periods ended June 30, 2017 and 2016, the Company recognized revenues consisting of (1) junket commission from Ho Wah Genting Holiday SDN BHD was $7,680 and $15,592 respectively, and the following expenses it is $nil in the first quarter and second quarter ended June 30, 2017 (2) management fees from ETM or Exclusive Travel Membership Program of $87,539 and (3) RCM Membership of $183,705.

 

F- 14  

 

 

HO WAH GENTING GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

From January 1, 2016 to June 30, 2016, the Company, through its subsidiary Beedo SDN BHD recognized revenue from the provision of information technology services of $9,558 from Ho Wah Genting Holiday SDN BHD and $29,023 from Vitaxel SDN BHD. Beedo SDN BHD was disposed of by the Company after August 12, 2016 and stopped earning revenue from the provision of information technology services.

 

10. EARNINGS (LOSS) PER SHARE

 

The Company has adopted ASC Topic No. 260,  “Earnings Per Share,”  (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement, and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year.

 

The following table sets forth the computation of basic and diluted earnings per share:

 

    For the three month ended     For the six month ended  
    June 30,
2017
    June 30, 
2016
    June 30,
2017
    June 30, 
2016
 
                         
Net loss applicable to common shares   $ 6,976     $ (54,970 )   $ (226,336 )   $ (138,428 )
                                 
Weighted average common shares outstanding (Basic) / (Diluted)     500,027,774       200,375,532       500,027,774       200,375,532  
                                 
Loss per share   $ 0.00     $ 0.00     $ 0.00       0.00  

 

The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding. 

 

11. SEGMENT INFORMATION

 

The Company’s operating businesses are organized based on the business activities from which the Company earns revenues. Our reported segments for the period ended June 30, 2017 and year ended December 31, 2016 are described as follows:

 

Investment property holding

 

The Company generates rental income from the leasing out of its leasehold building.

 

Information technology services

 

The Company generates revenue from the provision of information technology services. This line of business commenced in the year 2015. This line of business ended on August 12, 2016 when the Company completed the disposal of its subsidiary, Beedo.

 

Exclusive Travel Membership

 

The company generates revenue from management fee billing on the member 10% for the deposit that put into the account.

 

Junket income

 

The company generates revenue from junket commission provided by Ho Wah Genting Malaysia Berhad.

 

Others

 

These comprise of general operating and administrative expenses, and other income/expenses not directly attributable to the sources of revenue of the Company for the periods ended June 30, 2017 and 2016.

 

The Company’s reportable segments are managed separately based on the fundamental differences in their operations.

 

F- 15  

 

 

HO WAH GENTING GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Information with respect to these reportable business segments for the periods ended June 30, 2017 and 2016 was as follows:

 

    For the three months ended     For the six months ended  
    June 30,
2017
    June 30, 
2016
    June 30,
2017
    June 30, 
2016
 
                         
Revenues:                                
                                 
Investment property holding   $ 1,350     $     $ 2,700     $  
Information technology services           71,297             118,625  
                                 
ETM and junket operations     284,462             340,263        
Others                        
    $ 285,812     $ 71,297     $ 342,963     $ 118,625  
                                 
Cost of revenues:                                
Investment property holding   $     $     $     $  
Information technology services           6,367             12,458  
ETM and junket operations     79,746             80,419        
Others                        
    $ 79,746     $ 6,367     $ 80,419     $ 12,458  
                                 
Depreciation:                                
Investment property holding   $     $     $     $  
Information technology services           2,224             4,448  
ETM and junket operations     667             1,260        
Others                        
    $ 667     $ 2,224     $ 1,260     $ 4,448  
                                 
Net income (loss):                                
Investment property holding   $ 1,350     $     $ 2,700     $  
Information technology services           (58,854 )           (148,210 )
ETM and junket operations     5,626             (223,636 )      
Others                        
    $ 6,976     $ (58,854 )   $ (226,336 )   $ (148,210 )

  

    June 30, 2017  
    Investment
property
holding
    Information
technology
services
    Junket
operation
    Others     Total  
Identifiable long-lived assets, net   $ 56,729     $     $     $ 3,572     $ 64,098  

 

F- 16  

 

 

HO WAH GENTING GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

    December 31, 2016  
    Investment
property
holding
    Information
technology
services
    Junket
operation
    Others     Total  
Identifiable long-lived assets, net   $ 56,317     $     $     $ 3,747     $ 60,064  

 

The Company does not allocate any operating and administrative expenses, other income/expenses to its reportable segments because these activities are managed at a corporate level. In addition, the specified amounts for income tax expense are not included in the measure of segment profit or loss reviewed by the chief operating decision maker and these specified amounts are not regularly provided to the chief operating decision maker. Therefore, the Company has not disclosed income tax expense for each reportable segment.

 

Asset information by reportable segment is not reported to or reviewed by the chief operating decision maker and, therefore, the Company has not disclosed asset information for each reportable segment. The Company’s operations are located in Malaysia. All revenues are derived from customers in Malaysia. All of the Company’s operating assets are located in Malaysia. 

 

12. FAIR VALUE MEASUREMENTS

 

Fair Value of Financial Assets

 

The Company’s financial assets measured at fair value on a recurring basis subject to disclosure requirements at June 30, 2017 and December 31, 2016 were as follows:

 

    Balance at
June 30,
2017
(Unaudited)
    Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
(Unaudited)
    Significant
Other
Observable
Inputs
(Level 2)
(Unaudited)
    Significant
Unobserved
Inputs
(Level 3)
(Unaudited)
 
Short-term investments:                                
Quoted shares in Malaysia   $ 13,222     $ 13,222     $     $  
Total short-term investments     13,222       13,222              
Total financial assets measured at fair value   $ 13,222     $ 13,222     $     $  

 

          Quoted Prices              
          in Active     Significant        
          Markets for     Other     Significant  
    Balance at     Identical     Observable     Unobserved  
    December 31,     Assets     Inputs     Inputs  
    2016     (Level 1)     (Level 2)     (Level 3)  
Short-term investments:                                
Quoted shares in Malaysia   $ 12,660     $ 12,660     $     $  
Total short-term investments     12,660       12,660              
Total financial assets measured at fair value   $ 12,660     $ 12,660     $     $  

 

13. SUBSEQUENT EVENTS

 

In accordance with ASC 855-10, Company management reviewed all material events through the date of this report and determined that there are no additional material subsequent events to report.

 

Reverse Stock Split

 

On July 12, 2017, the Board of Directors of Ho Wah Genting Group Limited (“ HWGG ”) authorized and approved an amendment (the “ Amendment ”) to HWGG’s Amended and Restated Articles of Incorporation, which authorized a two-to-one reverse stock split (the “Reverse Split”) of HWGG’s outstanding common stock, par value $0.0001 per share, with a record date of July 14, 2017 (the “ Record Date ”). In connection with the reverse stock split, the Board of Directors of HWGG, also authorized and approved a related increase in the par value of the HWGG common stock from $0.0001 per share to $0.0002 per share. We expect that the Reverse Stock Split will (i) increase the marketability and liquidity of our common stock; (ii) address the reluctance of brokerage firms and institutional investors to recommend lower-priced stocks to their clients or to hold in their own portfolios; and (iii) enable us to strengthen the quotation of our common stock on the OTC Markets, Inc. QB Tier.

 

On August 9, 2017 we received approval from the Financial Industry Regulatory Authority (“FINRA”) to effectuate the Reverse Split at the open of business on August 11, 2017.

 

F- 17  

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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.

 

All references to “we,” “us,” “our” and the “Company” are references to Ho Wah Genting Group Limited, a Nevada corporation (formerly Computron, Inc.), 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.

 

As a result of the share exchange consummated on November 4, 2016 (the “Share Exchange”) with Ho Wah Genting Group Sdn. Bhd, a Malaysian private company limited by shares formed in September 2, 1985 (“HWGG”), and the shareholders of HWGG, and the change in business and operations of the Company, from engaging in the business of computer support services to the business of (1) promoting travel and entertainment through the e-commerce business model by offering a unique membership program that offers its members exclusive travel discounts and rebates, (2) providing junket operator services and (3) developing and investing in real property, a discussion of the past financial results of the Company prior to the Share Exchange is not pertinent, and under generally accepted accounting principles in the United States (“U.S. GAAP”) the historical financial results of HWGG, the accounting acquirer, prior to the Share Exchange are considered the historical financial results of the Company after the Share Exchange. 

 

The following discussion highlights the Company’s results of operations and the principal factors that have affected its financial condition as well as its liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the financial condition and results of operations presented herein. The following discussion and analysis is based on the Company’s reviewed financial statements contained in this Report, which have been prepared in accordance with U.S. GAAP. You should read the discussion and analysis together with such financial statements and the related notes thereto.

 

Basis of Presentation

 

The reviewed consolidated financial statements for the periods ended June 30, 2017 and 2016 include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the consolidated results of operations for such periods have been included in these audited consolidated financial statements. All such adjustments are of a normal recurring nature.

 

Overview; Recent Events

 

We are an investment holding company currently engaged in promoting entertainment membership, junket operating and marketing of real estate property through our wholly owned subsidiary Malaysia HWGG.

 

Results of Operations

 

The following discussion should be read in conjunction with the consolidated financial statements of HWGG for the periods ended June 30, 2017 and 2016 and the related notes thereto.

 

2  

 

 

Results of Operations for the Six Months Ended June 30 , 2017 and 2016.

 

Revenue

 

We have recognized revenue of $342,963 and $118,625 for the six months ended June 30, 2017 and 2016, respectively, with an increase of $224,338, or approximately 189%. The increase for the six months ended June 30, 2017 was due to increase in exclusive travel membership business and the new income derive from billing on member for management fee.

 

Cost of Sales

 

Cost of sales for the six months ended June 30, 2017 was $673, compared to $12,458 for the six months ended June 30, 2016, a decrease of $11,785. The decrease for the year ended June 30, 2017 was due to cost of sales relating to the information technology entity Beedo that had been disposed no longer incurred.

 

Gross Profit

 

Gross profit was $342,290 for the six months ended June 30, 2017, compared to gross profit of $106,167 for the six months ended June 30, 2016, an increase of $236,123, or 222%. The increase was attributable to the increase in revenue due to our expansion and development of our businesses.

 

Operating Expenses

 

For the six months ended June 30, 2017, we incurred total operating expenses in the amount of $531,999. For the six months ended June 30, 2016, we incurred total operating expenses in the amount of $258,324. Operating expenses increased by $273,675, or 106%, which was mainly due to the increase in discount rewards by $119,294, RCM dividends $72,986, commission payables by $11,486 due to the increase in our customer base and consultants’ fees of $22,023, traveling expenses by $10,930, launching expenses by $22,434 and employee salaries by $14,522.

 

Liquidity and Capital Resources

 

As of June 30, 2017, we had a cash balance of $39,337, accounts receivables of $150,408. During the six months ended June 30, 2017, net cash used in operating activities totaled $306,974. Net cash used in investing activities totaled $2,647. Net cash used in financing activities during the period totaled $2,647. The resulting change in cash for the period was an decrease of $323,678, which was primarily due to cash in from other payables and accrued expenses.

 

As of June 30, 2016, we had a cash balance of $282,257. During the six months ended June 30, 2016, net cash provided by operating activities totaled $719,628. Net cash used in investing activities totaled $29,071. Net cash provided by financing activities during the period totaled $940,623. The resulting change in cash for the period was an increase of $189,650, which was primarily due to cash out to amount due from related parties.

 

As of June 30, 2017, we had current liabilities of $3,735,644, which was comprised of other payables and accruals of $3,725,644, and amount due to related party of $0.

 

As of December 31, 2016, we had current liabilities of $2,711,378, which was comprised of other payables and accrual of $2,444,571 and amounts due to related party of $266,807.

 

We had total stockholders’ deficit of $587,789 and $352,571 as of June 30, 2017, December 31, 2016, respectively.

 

Going Concern Consideration

 

These consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

 

3  

 

 

For the period ended June 30, 2017, the Company reported a net loss of $226,336 and working capital deficit of $651,887. The Company had an accumulated deficit of $759,618 as of June 30, 2017.

 

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.

 

These consolidation financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the Company’s ability to continue as a going concern.  

 

Off-Balance Sheet Arrangements

 

We have no “off-balance sheet arrangements” (as the term is defined in Item 303(a)(4)(ii) of Regulation S-K) including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.

 

Critical Accounting Policies and Estimates

 

Use of Estimates and Assumptions

 

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

 

Fair Value Measurements

 

The Company applies the provisions of ASC Subtopic 820-10, “Fair Value Measurements”, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

 

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

 

  Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

  Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

 

  Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

 

4  

 

 

As of June 30, 2017 and December 31, 2016, short term investments classified as held-for-trading were required to be reported at fair value on a recurring basis subject to the disclosure requirements of ASC 820.

 

Recent Accounting Pronouncements

 

Revenue Recognition:     In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. 

 

Financial instrument : In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is not permitted. Accordingly, the standard is effective for us on January 1, 2018. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

 

Leases : In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-2”), which provides guidance on lease amendments to the FASB Accounting Standard Codification. This ASU will be effective for us beginning in January 1, 2019. We are currently in the process of evaluating the impact of the adoption of ASU 2016-2 on our consolidated financial statements. 

 

Financial Instruments - Credit Losses: In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): The amendments in this Update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss, which will be more decision useful to users of the financial statements. ASU 2016-13 is effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is allowed as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is still evaluating the effect that this guidance will have on the Company’s consolidated financial statements and related disclosures.

 

The Financial Accounting Standards Board and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2017. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item.

 

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ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our principal executive and principal financial officer concluded that our disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for accurate and timely decisions regarding required disclosure.

 

As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of Lim Chun Hoo, our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of June 30, 2017. Based upon, and as of the date of this evaluation, Lim Chun Hoo determined that our disclosure controls and procedures were not effective and reflected the following material weaknesses:

 

  a) We did not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of GAAP commensurate with our complexity and our financial accounting and reporting requirements. We have limited experience in the areas of financial reporting and disclosure controls and procedures. Also, we do not have an independent audit committee. As a result, there is a lack of monitoring of the financial reporting process and there is a reasonable possibility that material misstatements of the financial statements, including disclosures, will not be prevented or detected on a timely basis; and

 

  b) Due to our small size, we do not have a proper segregation of duties in certain areas of our financial reporting process. The areas where we have a lack of segregation of duties include cash receipts and disbursements, approval of purchases and approval of accounts payable invoices for payment. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis.

 

Changes in Internal Control over Financial Reporting

 

During the fiscal quarter ended June 30, 2017, there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results.

 

ITEM 1A. RISK FACTORS

 

There have been no material changes to the risk factors that we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, that we filed with the Securities and Exchange commission on April 17, 2017.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

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ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable to our operations.

 

ITEM 5. OTHER INFORMATION

 

Reverse Stock Split

 

On July 12, 2017, the Board of Directors of Ho Wah Genting Group Limited (“ HWGG ”) authorized and approved an amendment (the “ Amendment ”) to HWGG’s Amended and Restated Articles of Incorporation, which authorized a two-to-one reverse stock split (the “Reverse Split”) of HWGG’s outstanding common stock, par value $0.0001 per share, with a record date of July 14, 2017 (the “ Record Date ”). In connection with the reverse stock split, the Board of Directors of HWGG, also authorized and approved a related increase in the par value of the HWGG common stock from $0.0001 per share to $0.0002 per share. We expect that the Reverse Stock Split will (i) increase the marketability and liquidity of our common stock; (ii) address the reluctance of brokerage firms and institutional investors to recommend lower-priced stocks to their clients or to hold in their own portfolios; and (iii) enable us to strengthen the quotation of our common stock on the OTC Markets, Inc. QB Tier.

 

On August 9, 2017 we received approval from the Financial Industry Regulatory Authority (“FINRA”) to effectuate the Reverse Split at the open of business on August 11, 2017.

 

ITEM 6. EXHIBITS

 

Exhibit
No.
  Exhibit Description
31.1   Certification of the Chief Executive and Financial Officer required under Rule 13a-14(a)/15d-14(a) of the Exchange Act
     
32.1   Certification of the Chief Executive and Financial Officer required under Section 1350 of the Exchange Act
     
101.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Schema
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase
     
101.DEF   XBRL Taxonomy Extension Definition Linkbase
     
101.LAB   XBRL Taxonomy Extension Label Linkbase
     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  HO WAH GENTING GROUP LIMITED
   
Date August 21, 2017 By: /s/ Lim Chun Hoo
  Lim Chun Hoo
  Chief Executive and Chief Financial Officer

 

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Exhibit 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER  

PURSUANT TO SECTION 302(A) OF THE SARBANES-OXLEY ACT OF 2002

 

I, Lim Chun Hoo, certify that:

 

  1. I have reviewed this annual report on Form 10-Q of Ho Wah Genting Group Limited;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 21, 2017 By: /s/ Lim Chun Hoo
  Name: Lim Chun Hoo
  Title: Chief Executive Officer and Chief Financial Officer
    (Principal Executive, Financial and Accounting Officer)

 

 

Exhibit 32.1

 

STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

 

In connection with the Quarterly Report on Form 10-Q of Ho Wah Genting Group Limited (the “Company”) for the quarter ended June 30, 2017 (the “Report”), I, Lim Chun Hoo, Chief Executive Officer and Chief Financial Officer, certify as follows:

 

  A) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o(d)), and

 

  B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

Date: August 21, 2017 By: /s/ Lim Chun Hoo
  Name: Lim Chun Hoo
  Title: Chief Executive Officer and Chief Financial Officer
    (Principal Executive, Financial and Accounting Officer)