G-Mes Holdings Earnings 2018-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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. x YES    ¨ NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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).  x YES    ¨ NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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    x NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. ¨ YES    ¨ NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

G-MES HOLDINGS INC.

INDEX TO UNAUDITED INTERIM FINANCIAL STATEMENTS

September 30, 2018

Table of Contents

G-MES HOLDINGS INC.

Consolidated Balance Sheets

(Unaudited) 

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

G-MES HOLDINGS INC.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

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

G-MES HOLDINGS INC.

Consolidated Statements of Cash Flow

(Unaudited)

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

G-MES HOLDINGS INC.

Notes to the Unaudited Consolidated Financial Statements

September 30, 2018

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

G-MES Holdings Inc. (“we”, “our”, and the “Company) was incorporated in Nevada on August 15, 2016. The Company, through its subsidiary, G-MES International Pte. Ltd., mainly engages in construction support and management, with particular specialization in provision of floor safety solutions.

Overview of Corporate Structure

Details of the Company’s subsidiary:

Recent Developments

On or about September 15, 2016, the Company acquired 100% of the outstanding shares of G-MES International Pte. Ltd. (“G-MES International”) in a share exchange pursuant to the terms of a Share Exchange Agreement, dated September 15, 2016 (the “Share Exchange Agreement”), with the shareholders (including Saw Peng Hao, the Company’s current Chairman of the Board and Chief Executive Officer) of G-MES International, pursuant to which the Company issued an aggregate of 30,000,000 shares of common stock of the Company to the shareholders of G-MES International in exchange for all of the outstanding shares of G-MES International (the “Share Exchange”). As a result of the Share Exchange, G-MES International is now the wholly owned subsidiary of the Company, and the Company is engaged in the business of providing floor safety solutions to the public and residential housing sectors in the Republic of Singapore. In addition, as a result of the Share Exchange, the Company’s current Chief Executive Officer received 30,000,000 shares of common stock of the Company, constituting 96% of the issued and outstanding shares of common stock of the Company as of December 31, 2016.

As Saw Peng Hao founded and controlled the Company prior to the Share Exchange, and also was the sole owner of and controlled G-MES International prior to the Share Exchange, the Share Exchange transaction was between entities under common control, and G-MES International is now a wholly owned subsidiary of the Company after completion of the Share Exchange. Accordingly, the Company has reported its results of operations for the periods at issue in a manner similar to a pooling of interests and has consolidated financial results since the initial date that the Company and G-MES International were under common control. Assets and liabilities were combined based on their carrying values, and no recognition of goodwill was made. The Company has presented earnings per share based on parent Company shares issued to the former sole shareholder of the subsidiary, G-MES International.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.

Basis of Consolidation

These consolidated financial statements include the accounts of G-MES HOLDINGS INC. and its subsidiary. All material intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation and Re-measurement

The Company’s functional currency and reporting currency is U.S. dollar. The functional currency of the Company’s subsidiaries is Singapore dollars. All transactions initiated in Singapore dollars (“SGD”) are translated into U.S. dollars (“USD”) in accordance with ASC 830-30, ”Translation of Financial Statements,” as follows:

Adjustments arising from such translations are included in accumulated other comprehensive income in shareholders’ equity.

Cash and Cash Equivalents

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.

Accounts Receivable

The Company’s accounts receivable consists of trade receivables from customers. The Company evaluates the collectability of its accounts receivable on an on-going basis and write off the amount when it is considered to be uncollectible. The Company does not have allowance for doubtful accounts. As of September 30, 2018, and December 31, 2017, the Company recorded bad debt of $3,992 and $0, respectively.

Financial Instruments

The Company’s financial instruments consist primarily of cash, accounts receivable, inventory, prepaid expenses and deposits, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.

Leases

Leases, on terms for which the Company assumes substantially all the risks and rewards of ownership, are accounted for as capital leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments.

Operating leases are recognized in general and administrative expenses on a straight-line basis.

Concentrations of Credit Risks

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

Related Parties

The Company follows ASC 850, ”Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. See note 6.

Inventories

Inventories comprises of mainly chemical solutions that are used for treatment of floorings to achieve slip resistance results. It consists entirely of ready-to-use finished goods directly imported from the principal vendor in United States, are stated at the lower of cost or market. Cost is computed using weighted average cost, which approximates actual cost. Inventories on hand are evaluated on an on-going basis to determine if any items are obsolete or in excess of future needs. Items determined to be obsolete are reserved for. The Company provides for the possible inability to sell its inventories by providing an excess inventory reserve. As at September 30, 2018 and December 31, 2017, the Company had inventory of $17,935 and $32,654, respectively, and determined that no reserve was required.

Long-Lived Assets

Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation. Cost includes all direct costs necessary to acquire and prepare assets for use, including internal labor and overhead in some cases.

The costs of repairs and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. When assets are retired or sold, the asset cost and related accumulated depreciation are eliminated with any remaining gain or loss recognized in net earnings.

Depreciation of plant and equipment, which includes assets under capital leases, is provided on the straight-line method over estimated useful lives, generally as follows:

Investment property is not depreciated since it is a purchased property before the construction is completed. As of the end of the years, the property was still under construction and not available for intended use.

Revenue Recognition

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company derives its revenues from the rendering of business advisory services, such as training, implementation, consulting, and other customer-specific services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

·         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. 

Service income is derived progressively based on the amount of work rendered. A contract site typically comprises of hundreds to thousands of units that requires the application of the chemical solutions. Revenue from service income is recognized progressively based on the number of units completed.

Sales income is derived from direct sales of bottled chemical solutions only. It could be sold in bulk or in retail packs.

Cost of Sales

Cost of sales are direct costs incurred to earn revenue, which consists of purchase cost of floor safety chemical solutions for treatment to floorings to achieve slip resistance results.

Employee benefit costs

As required by law, the Company makes contributions to the Central Provident Fund (CPF), a defined contribution plan regulated and managed by the Government of Singapore. CPF contributions are recognized as expense in the same year to which the contribution relates.

Employee entitlements to annual leave are recognized when they accrue to the employees. An accrual is made for the estimated liability for annual leave as a result of services rendered by the employees up to the statement of financial position date.

A liability for bonus is recognized where the entity is contractually obliged or where there is constructive obligation based on past practice.

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, ”Accounting for Income Taxes.” The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

Earnings (Loss) per Share

The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, “Earnings per Share.” Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. As at September 30, 2018, the Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.

Recent Accounting Pronouncements

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

NOTE 3 – GOING CONCERN

As shown in the accompanying consolidated financial statements, the Company has an accumulated deficit of $206,099 as of September 30, 2018. The Company also experienced insufficient cash flows from operations and will be required continuous financial support from the shareholders. The Company will need to raise capital to fund its operations until it is able to generate sufficient revenue to support the future development. Moreover, the Company may be continuously raising capital through the sale of debt and equity securities.

The Company’s ability to achieve these objectives cannot be determined at this stage. If the Company is unsuccessful in its endeavors, it may be forced to cease operations. These consolidated financial statements do not include any adjustments that might result from this uncertainty which may include adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

These factors have raised substantial doubt about the Company’s ability to continue as a going concern. There can be no assurances that the Company will be able to obtain adequate financing or achieve profitability. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2018 and December 31, 2017 consisted of the following:

During the nine months ended September 30, 2018 and 2017, the Company recognized depreciation of $63,184 and $30,075, respectively. Please see Note 7 and Note 8 for the carrying amounts of assets pledged.

The Company leases certain equipment under capital lease agreements that expire at various dates through October 2024 (see Note 8). Assets recorded under capital leases and included in property and equipment are:

NOTE 5 – STOCKHOLDERS’ EQUITY

Authorized Stock

The Company has authorized 20,000,000 preferred shares with a par value of $0.001 per share.

The Company has authorized 300,000,000 common shares with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

Preferred Share Issuances

As at September 30, 2018 and December 31, 2017, the Company did not have preferred shares issued and outstanding.

Common Share Issuances

During the nine months ended June 30 ,2018, the Company issued as follows:

·         3,273,000 shares of common stock for conversion of debt and accrued interest of $233,361. 

·         825,000 shares of common stock for $206,250.

As at September 30, 2018 and December 31, 2017, the Company had 35,618,000 and 31,520,000 shares of common stock issued and outstanding, respectively.

NOTE 6 – RELATED PARTY TRANSACTIONS

During the nine months ended September 30, 2018, the Company borrowed a total amount of $10,870 from the director of the Company and repaid $18,411. This loan is a non-interest bearing and due on demand. As of September 30, 2018, and December 31, 2017, the Company owed $32,827 and $41,115, respectively.

NOTE 7 – LOANS PAYABLE

The Company had the following loans payable outstanding as of September 30, 2018 and December 31, 2017:

As of September 30, 2018, investment property of carrying amount of $403,377 and three motor vehicles of carrying amount of $50,534 were pledged as security and personal guarantee by the director was provided for the loans.

As of December 31, 2017, investment property of carrying amount of $388,938 and three motor vehicles of carrying amount of $72,801 were pledged as security and personal guarantee by the director was pledged as security for the loans.

During the nine months ended September 30, 2018 and 2017, interest expense was $21,786 and $14,052, respectively.

NOTE 8 – CAPITAL LEASES

The Company leases commercial vehicles under non-cancellable capital lease arrangements. The term of those capital leases is 2 - 7 years and annual interest rate is 2.98 – 4.88%. At September 30, 2018 and December 31, 2017, capital lease obligations included in current liabilities were $31,111 and $20,013, respectively, and capital lease obligations included in long-term liabilities were $114,222 and $103,230, respectively.

At September 30, 2018, future minimum lease payments under the capital lease obligations, are as follows:

As of September 30, 2018, four motor vehicles of carrying amount of $145,972 were pledged as security for the loans.

As of December 31, 2017, five motor vehicles of carrying amount of $122,585 were pledged as security for the loans.

NOTE 9 – CONVERTIBLE NOTES PAYABLE

The Company had the following convertible notes payable outstanding as of September 30, 2018 and December 31, 2017:

During the year ended December 31, 2016, the Company issued a total of $120,200 notes with the following terms:

During the year ended December 31, 2017, the Company issued a total of $99,000 notes with the following terms:

During the nine months ended September 30, 2018 and 2017, interest expense was $43,797 and $27,228, respectively. As of September 30, 2018, and December 31, 2017, accrued interest was $0 and $9,381, respectively.

During the nine months ended September 30, 2018, the Company converted notes with principal amounts and accrued interest of $233,361 into 3,273,000 shares of common stock.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

From time to time the Company may become a party to litigation matters involving claims against the Company. Management believes that it is adequately insured for its operations and there are no current matters that would have a material effect on the Company’s financial position, cash flows or results of operations. The Company believes that the following matters will have no material effect on the Company’s financial position, cash flows and results of operations:

Rent

The Company leases the premise situated at 280 Woodlands Industrial Park E5 #09-44 Singapore 757322, for a fixed term of 24 months, with monthly lease rates of SGD$2,088 (approximately $1,480). Lease expenses for the nine months ended September 30, 2018 and 2017 were $11,673 and $16,305, respectively.

Legal proceeding

On or about November 1, 2017, the Company’s subsidiary, G-MES International Pte Ltd, was served with a statutory demand (the “Demand”) by a purported creditor, Koh Siew Min (the “Alleged Creditor”), alleging that it was owed approximately US$15,000. The Company denied the Demand. The Company subsequently took out an injunction (HC/OS 185/2018) with the High Court of the Republic of Singapore. The case was heard by High Court Judge, Justice Quentin Loh on July 16, 2018, an injunction was granted, and it was held that the demand was an abuse of process.

NOTE 11 – EARNINGS PER SHARE

The following is a reconciliation of the numerator and denominator used in the basic and diluted earnings per share ("EPS") calculations.

Diluted earnings per share is calculated using net income available to common stockholders divided by the diluted weighted average number of common shares outstanding during each period determined using the treasury stock method and the if-converted method.

During the nine months ended September 30, 2018, all convertible notes were converted into common stock. As of September 30, 2018, the Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.

Management evaluated all events subsequent to the balance sheet date through the date the consolidated financial statements were available to be issued, and determined there were no events or transactions that require recognition or disclosure.

Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements. All statements other than statements of historical or current facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategy, proposed new products and services, research and development costs, timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated products and services, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, forward-looking statements can be identified by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “would,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this quarterly report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this quarterly report and are subject to a number of risks, and except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, prospective investors should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in, or implied by, the forward-looking statements due to a variety of factors, including, but not limited to:

Forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this document are made as of the date of this document and we do not undertake any obligation to update forward-looking statements to reflect new information, subsequent events or otherwise, except as required by law. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. We qualify all of our forward-looking statements by these cautionary statements.

Overview

G-MES Holdings Inc., incorporated under the laws of the State of Nevada on August 15, 2016, is focused on providing home safety and floor safety products and services in Southeast Asia through its wholly owned Singapore subsidiary, G-MES International PTE Ltd (“G-MES International”). G-MES International is the exclusive Singapore distributor for the SlipDoctor™ range of products manufactured by SoftTec Products, LP (the “Supplier”) based in Carrollton, Texas, pursuant to an exclusive master distributor agreement with the Supplier permitting G-MES International to market, sell and distribute the Supplier’s products in Singapore until June of 2019, and obtain exclusivity to China, Hong Kong, Japan, Korea and the Southeast Asia region. The SlipDoctor™ range of products has been branded by the Company in Singapore as the “SlipMedic” range of products.

These products cover a wide range of slip resistance products that improve floor safety, and these products provide slip resistance that surpasses guidelines recommended by the ADA/OSHA for floor safety. The products include floor treatment formulas catering to different flooring materials and application requirements including home and residential, industrial, swimming pool, and marine applications.

Our Singapore subsidiary, G-MES International, was acquired by the Company in September of 2016 shortly after the Company’s incorporation. Our CEO, Mr. Saw Peng Hao, founded and controlled the Company prior to the acquisition of G-MES International, and he also was the sole owner of and controlled G-MES International prior to our acquisition of it. Since the acquisition transaction was between entities under common control, and G-MES International is now a wholly owned subsidiary of the Company after completion of the acquisition, the Company has reported its results of operations herein in a manner similar to a pooling of interests and has consolidated financial results since the initial date that the Company and G-MES International were under common control beginning in August 15, 2016. Our results of operations prior to the Company’s incorporation in August of 2016 include the results of operations of our Singapore subsidiary prior to that date.

The address of our principal executive office is 280 Woodlands Industrial Park E5, #09-44, Harvest @ Woodlands Building, Singapore 757322. Our telephone number is +65-6659-6808. Our website is www.gmesholdings.com.

We have not been subject to any bankruptcy, receivership or similar proceeding.

Plan of Operation

G-MES International is currently one of the largest floor safety solution providers in Singapore in terms of market share, and our plan is to acquire manufacturing rights to the Supplier’s products and expand the distribution of the products to the regional market, including other countries in Southeast Asia, Hong Kong, mainland China, and Japan. There is no assurance that we will be able to acquire those manufacturing rights, or that if we do so, that we will be able to expand distribution of the products outside of Singapore.

During the next 12 months, the Company intends to develop trade distribution channels with key retailers and strategic distribution partners outside of Singapore in order to grow into geographic markets outside of Singapore and increase the Company’s customer base. The Company plans to hire sales and field personnel to distribute the Company’s products outside of Singapore, specifically in more-developed regions like Hong Kong, commercial centers in mainland China and large cities in other Southeast Asian countries. The Company intends to initially focus its expansion efforts on the Hong Kong market as population demographics in Hong Kong are similar to those in Singapore. The Company also intends to conduct a marketing campaign internationally and explore expansion into the Americas, namely wetter geographic areas and commercial centers in Central and South America with markets for the Company’s anti-slip products and services. Finally, the Company plans to invest in product development, plant manufacturing, marketing, branding, and sales activities along with other operational support activities. Additional capital resources will be necessary to pursue these activities.

Results of Operations

Three months ended September 30, 2018 and 2017

The following summary of our results of operations should be read in conjunction with our consolidated financial statements for the three months ended September 30, 2018 and 2017, which are included herein.

Our operating results for the three months ended September 30, 2018 and 2017, and the changes between those periods for the respective items are summarized as follows:

Revenue

The following table presents revenues for the three months ended September 30, 2018 and 2017:

For the three months ended September 30, 2018, our total revenues decreased $32,922 or 10% due to reallocation of leads-generating marketing resources. We recognized revenues from both government and private sector projects, where customers use our services of performing anti-slip chemical treatments on floorings and tiles and purchase those treatment products directly.

Service income decreased $29,999 or 9% in 2018 from $324,377 in 2017. The decrease in service income was primarily due to reallocation of leads-generating marketing resources. Retail sales decreased $2,923 or 15% in 2018 from $19,100 in 2017. The decrease in retail sales is primarily due to reallocation of leads-generating marketing resources.

Gross Profit

Gross profit decreased $4,092 or 1% in 2018 from $320,156 in 2017. The reason for the change in gross profit was primarily due to a decrease in revenue. Cost of revenue consists of chemical solution costs and retail pack product packaging costs.

Cost of revenue decreased by 124% during 2018 compared to 2017. The change was primarily due to improvement in wastage control on the inventories.

Operating Income (Loss)

Operating income increased $8,579 or 27% during 2018 as compared to 2017. The following table presents operating expenses for the three months ended September 30, 2018 and 2017:

Other Income (Expense)

The following table presents other income and expenses for the three months ended September 30, 2018 and 2017:

Interest expense increased during 2018, as compared to 2017, due to increases in bank loans and capital leases during the three months ended September 30, 2018 as compared to 2017.

Other income consists mainly of employment credits provided by the Ministry of Manpower, rebates provided by vendors and interest income.

Net income

Net income increased by $25,473, during 2018, from $2,673 in 2017.

Nine months ended September 30, 2018 and 2017

The following summary of our results of operations should be read in conjunction with our consolidated financial statements for the nine months ended September 30, 2018 and 2017, which are included herein.

Our operating results for the nine months ended September 30, 2018 and 2017, and the changes between those periods for the respective items, are summarized as follows:

Revenue

The following table presents revenues for the nine months ended September 30, 2018 and 2017:

For the nine months ended September 30, 2018, our total revenues increased $79,323 or 10% due to the continued marketing and advertising efforts. We recognized revenues from both government and private sector projects, where customers use our services of performing anti-slip chemical treatments on floorings and tiles and purchase those treatment products directly.

Service income increased $35,577 or 5% in 2018 from $781,255 in 2017. The increase in service income was primarily due to an increase in government tenders awarded. Retail sales increased $43,746 or 89% in 2018 from $93,127 in 2017. The increase in retail sales is primarily due to an introduction of social media marketing.

Gross Profit

Gross profit increased $97,896 or 13% in 2018 from $769,037 in 2017. The reason for the change in gross profit was primarily due to an increase in revenue. Cost of revenue consists of chemical solution costs and retail pack product packaging costs.

Cost of revenue decreased by $18,573 or 30% during 2018 compared to 2017. The change was primarily due to improvement in wastage control on the inventories.

Operating Income (Loss)

Operating income increased $197,579 or 206% during 2018 as compared to 2017. The following table presents operating expenses for the nine months ended September 30, 2018 and 2017:

Other Income (Expense)

The following table presents other income and expenses for the nine months ended September 30, 2018 and 2017:

Interest expense increased during 2018, as compared to 2017, due to increases in bank loans and capital leases during the nine months ended 2018 as compared to 2017.

Other income consists mainly of employment credits provided by the Ministry of Manpower, rebates provided by vendors and interest income.

Net income (loss)

Net income increased by $160,541 during 2018, from a loss of $94,453 in 2017.

Liquidity and Capital Resources

Working Capital

The following table presents our work capital position as at September 30, 2018 and December 31, 2017:

The change in working capital during the nine months ended September 30, 2018, was primarily due to an increase in current assets of $99,112 and a decrease in liabilities of $344,556. Current assets increased primarily due to an increase in cash of $122,196 offset by a decrease in inventory of $14,719. Current liabilities decreased primarily due to a decrease in convertible notes payable of $219,200 and accounts payable of $119,856. The decrease in accounts payable is due to the decrease in operating expenses.

As of September 30, 2018, we had a working capital of $333,514 consisting of cash on hand of $145,046, as compared to a working capital deficit of $110,154 and cash of $22,850 as of December 31, 2017. This was due to an increase in manpower costs. Our Day Sales Outstanding (“DSO”) ratio for the period ended September 30, 2018, and for the year ended December 31, 2017, were 145 days and 150 days, respectively.

Cash Flow

We fund our operations with cash generated from sales, capital contributions, debt, and issuances of common stock.

The following tables presents our cash flow for the nine months ended September 30, 2018 and 2017: