QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 2020
or
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to ____________
Commission File Number 333-208237
FELLAZO CORP.
(Exact name of registrant as specified in its charter)
Nevada
30-0840869
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
8th Floor, Wisma Huazong, Lot 15285,
0.7km Lebuhraya Sungei Besi, 43300
Seri Kembangan, Selangor Darul Ehsan, Malaysia
(Address of principal executive offices)
(Zip Code)
+603 89638 5638
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
None
None
None
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 every Interactive Data File required to be submitted 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 such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
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 Exchange Act) YES ☐ NO ☒
Fellazo Corp has 86,264,000 common shares issued and outstanding as of November 23, 2020.
Common stock, $0.001 par value, 1,000,000,000 shares authorized; 86,264,000 shares issued and outstanding as of February 29, 2020 and August 31, 2019, respectively
86,264
86,264
Additional paid-in capital
36,122
36,122
Accumulated deficit
(1,005,266
)
(889,870
)
Accumulated other comprehensive loss
165
(209
)
Total Fellazo Corp. Stockholders' Deficit
(882,715
)
(767,693
)
Non-controlling interest
(32,280
)
(10,434
)
Total Stockholders' Deficit
(914,995
)
(778,127
)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
$
19,113
$
73,572
The accompanying notes are an integral part of these unaudited consolidated financial statements.
NOTE 1 – ORGANIZATION, DESCRIPTION OF BUSINESS AND GOING CONCERN
Fellazo Corp. (“the Company”, “we”, “us” or “our”) was incorporated in the State of Nevada on May 28, 2014.
During the quarter ending February 29, 2020, the Company had continued its transformation process into an IT based company specialized in Mobile Application Developments with worldwide clientele and a portfolio investment company in primary industries such as healthcare, energy, development and capital market. The Company had commenced to be engaged in the industry of “Healthcare and Personal Wellness” products and related products. Activities include but not limited to sourcing raw materials or partly or fully finished products, manufacturing, wholesale and trading of these products.
Our office is located at 8th Floor, Wisma Huazong, Lot 15285, 0.7km Lebuhraya SungeiBesi, 43300 Seri Kembangan, Selangor Darul Ehsan, Malaysia.
Going Concern Uncertainties
The accompanying 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.
As of February 29, 2020, the Company had an accumulated deficit of $1,005,266, and net loss of $137,631 for the six months ended February 29, 2020. Losses have principally occurred as a result of the substantial resources required for general and administrative expenses associated with our operations. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders or external financing. Management believes the existing stockholders will provide the additional cash to meet with the Company’s obligations as they become due. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by U.S. GAAP for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended August 31, 2019.
Principles of Consolidation
The accompanying consolidated financial statements include the financial statements of the Company and its 49% owned subsidiary Fellazo Berhad, an entity under common control. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
The Company holds both the power to direct the most significant activities of FB, as well as an economic interest in FB and, as such, is deemed to be the primary beneficiary or consolidator of FB. The determination of the VIE’s primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party’s relationship with or involvement in the entity, an estimate of the entity’s expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity.
Revenue recognition
The Company commenced its operation in mid-October 2019. At this initial stage revenue is earned from the trading of raw bird-nest only.
The Company’s revenue recognition procedures consist of the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations pursuant to each of its sales transactions:
·
identify the contract with a customer;
·
identify the performance obligations in the contract;
·
determine the transaction price;
·
allocate the transaction price to performance obligations in the contract; and
·
recognize revenue as the performance obligation is satisfied.
However at this initial stage of our operations which started with trading of raw bird-nest, the management is using this initial stage as exposure of the management to the bird-nest business in order to learn and experience with our suppliers whom are bird-nest farmers or their agents, determination of quality of the raw material, the process of raw bird-nest cleaning of the different class of the raw material and market for these clean bird-nest.
Thus at this initial stage we have not entered into any formal contract with our suppliers and purchasers, most of the suppliers and purchasers are known to our management or introduced to the management by closed business friends.
Cost of Goods Sold – Trading of Raw Bird-Nest
At this initial stage of business operations which the management considered as exposure, gaining of knowledge and experience of the overall bird-nest business, our Cost of goods sold only include the actual cost of the raw bird-nest.
Foreign Currency Translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.
The reporting currency of the Company is the United States Dollar (“USD”). The Company’s subsidiary in Malaysia maintains their books and records in their local currency, the Malaysia Ringgit (“RM”), which is the functional currency as being the primary currency of the economic environment in which these entities operate.
In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not the USD are translated into USD, in accordance with ASC 830, “Translation of Financial Statements”, 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 statement of stockholders’ equity.
Our Management Agent, Swipypay Berhad (a company established in Malaysia) is 80% owned by our Director – Mr Yap Kit Chuan. Total outstanding amount due to our Management Agent was $923,308 and $824,699 as at February 29, 2020 and August 31, 2019 respectively. The additional amount of $98,609 incurred in the six months ended February 29, 2020 consisted of operating expenses paid on behalf of the Company of $155,377 and advance from a related party of $298,572, repayment to related party of $4,368 and expense paid for related party of $350,642. The difference of amount was a result of change of exchange rate.
During the six months ended February 29, 2020, we had purchased $9,290 (RM38,790.51) worth of raw bird-nest from Swipypay Berhad (also an agent for bird-nest farmers).
NOTE 4 – PREPAID EXPENSES AND DEPOSIT
Prepaid expense and deposit consist of the following:
February 29,
August 31,
2020
2019
Prepaid expenses
$
6,362
$
19,105
Deposit
6,518
-
$
12,880
$
19,105
During the six months ended February 29, 2020, the Company recorded deposit of $6,518 (RM 27,467), an initial deposit for our OEM personal cleansing and nourishing facial products, these initial batches of the products would generally be used for marketing purposes such as trial samples for potential customers.
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited consolidated financial statements are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our consolidated financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this quarterly report, the terms “we”, “us”, “our”, “our company” or “the Company” mean Fellazo Corp., and Fellazo Berhad, a Malaysian company, of which we own 49%, unless otherwise indicated.
Overview of Corporate History
Fellazo Corp. was incorporated in the State of Nevada on May 28, 2014. The Company’s fiscal year end is August 31.
Overview of Current Business
During the quarter ending February 29, 2020, the Company is still in the process of commencement of its operations with heavy emphasis into healthcare - primarily bird-nest based health supplement and bird-nest related health products, which include manufacturing and retail (retail chain and online). With our expertise in online applications platform, we expect to develop an online network platform to market and sell our products, and also create a system to source and purchase raw materials we required.
Since October 2019, the Company’s 49% subsidiary Fellazo Berhad (FB) started purchasing raw bird-nests directly from bird-nest farmers or their agents and re-selling them to bird-nest processors; wherever possible these raw bird-nests are delivered directly from the farmer to the processor.
Due to outbreak of Covid-19 pandemic and government imposed lockdown, we ceased operations mid-January 2020, and have yet to recover sales, even with partial lifting of lockdown; only total of 17 invoices were issued for the year ending August 31, 2020, and some sales were made to our own directors during the recent quarter.
In view of the still unknown market, economy sentiment and further regional and district lockdowns, and with bird-nest recently being considered a prestige product, the market may take a longer time to recover.
On August 1, 2020; FB had executed an Addendum and Update to the existing Management Agent agreement with Swipypay Berhad to include the additional functions, and the monthly management fee was increased from $5,000 to $10,000; this was in anticipation of FB’s increase in operational volume in the near future.
Our office is located at 8th Floor, Wisma Huazong, Lot 15285, 0.7 km Lebuhraya Sungei Besi, 43300 Seri Kembangan, Selangor Darul Ehsan, Malaysia and the bird-nest show factory is located at Level B1 in the same office building. Our corporate website is http://fellazo.com.
Results of Operations
The following summary of our results of operations should be read in conjunction with our financial statements included elsewhere in this quarterly report.
Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Comparison of the three months ended February 29, 2020 and February 28, 2019
Three months ended
February 29,
February 28,
2020
2019
Change
%
Revenue
$
18,273
$
-
$
18,273
-
Cost of revenue
13,442
-
13,442
-
General and administrative expenses
79,909
44,014
35,895
82
%
Net loss
$
75,078
$
44,014
$
31,064
71
%
For the three months ended February 29, 2020, we had revenue of $18,273 and cost of revenue of $13,442, as compared to $0 and $0 for the same period in 2019. The Company started with trading of raw bird-nest and it is an initial stage of our operations.
Our general and administrative expenses were $79,909 for the three months ended February 29, 2020, as compared to $44,014 for the same period in 2019. The increase in general and administrative expenses was primarily due to increased management fees and traveling expense.
Comparison of the six months ended February 29, 2020 and February 28, 2019
For the six months ended February 29, 2020, we had revenue of $56,138 and cost of revenue of $40,531, as compared to $0 and $0 for the same period in 2019. The Company started with trading of raw bird-nest and it is an initial stage of our operations.
Our general and administrative expenses were $153,238 for the six months ended February 29, 2020, as compared to $88,824 for the same period in 2019. The increase in general and administrative expenses was primarily due to increased management fees and traveling expense.
Liquidity and Capital Resources
Working Capital
February 29,
August 31,
2020
2019
Change
%
Current assets
$
19,113
$
73,572
$
(54,459
)
(74
%)
Current liabilities
$
934,108
$
851,699
$
82,409
10
%
Working capital deficiency
$
(914,995
)
$
(778,127
)
$
(136,868
)
18
%
The Company’s current assets consists of cash and cash equivalents of $6,233 and prepaid expense and deposit of $12,880 at February 29, 2020, as compared to cash and cash equivalents of $54,467 and prepaid expense of $19,105 at August 31, 2019.
As at February 29, 2020, current liabilities consisted of accounts payable and accrued liabilities of $10,800 and due to a related party of $923,308, as compared to August 31, 2019, current liabilities consisted of accounts payable and accrued liabilities of $27,000 and due to a related party of $824,699. The increase in current liabilities is primarily due to the operating expenses paid by the related party.
Cash Flows
Six Months Ended
February 29,
February 28,
2020
2019
Change
Cash provided by (used in) operating activities
$
7,779
$
(37
)
$
7,816
Cash used in financing activities
(56,438
)
-
(56,438
)
Effects on changes in foreign exchange rate
425
205
220
Net change in cash and cash equivalents
$
(48,234
)
$
168
$
(48,402
)
Cash Flow from Operating Activities
Cash flows provided by operations was $7,779 during the six months ended February 29, 2020, compared with cash used in operating activities of $37 during the same period in 2019. The increase in cash provided by operating activities is mainly due to an expense paid by related party.
Cash Flow from Financing Activities
During the six months ended February 29, 2020, the Company received $298,572 from a related party, and repaid $4,368 to a related party and paid $350,642 for expenses on behalf of a related party. During the six months ended February 28, 2019, the Company did not have any financing activities,
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations are based upon our unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. We review the accounting policies used in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses and related disclosure of contingent liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates.
For a complete description of our critical accounting policies and estimates, refer to our 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on August 10, 2020.
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of February 29, 2020. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms as a result of the following material weaknesses:
(1) lack of a functioning audit committee and lack of a majority of outside directors on the Company’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
(2) inadequate segregation of duties consistent with control objectives;
(3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of U.S. GAAP and SEC disclosure requirements; and
(4) ineffective controls over period end financial disclosure and reporting processes.
The specific material weakness identified by our management was ineffective controls over certain aspects of the financial reporting process because of a lack of a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements and inadequate segregation of duties. A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements would not be prevented or detected on a timely basis.
We expect to be materially dependent upon third parties to provide us with accounting consulting services for the foreseeable future which we believe mitigates the impact of the material weaknesses discussed above. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP and establish an audit committee and implement internal controls and procedures, there are no assurances that the material weaknesses and significant deficiencies in our disclosure controls and procedures will not result in errors in our financial statements which could lead to a restatement of those financial statements.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended February 29, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
As of the date of this Quarterly Report on Form 10-Q, we are not a party to any legal proceedings that could have a material adverse effect on the Company’s business, financial condition or operating results. Further, to the Company’s knowledge no such proceedings have been threatened against the Company.
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.
FELLAZO CORP.
(Registrant)
Dated: November 27, 2020
/s/ YAP KIT CHUAN
YAP KIT CHUAN
President, CEO, CFO, Treasurer,
Secretary and Chairman of the Board of Directors of the Company
(Principal Executive Officer,
Principal Financial Officer and Principal Accounting Officer)
17
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