Item 7.
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Managements Discussion and Analysis of
Financial Condition and Results of Operations.
|
The following discussion should be read in conjunction with our
audited consolidated financial statements and the related notes for the years
ended December 31, 2015 and December 31, 2014 that appear elsewhere in this
annual 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 annual report, particularly in the
section entitled "Risk Factors" beginning on page 9 of this annual report.
Our audited consolidated financial statements are stated in
United States Dollars and are prepared in accordance with United States
Generally Accepted Accounting Principles.
Operating Results
On July 26, 2012, we acquired 100% of the equity interests of
the Vegfab Agricultural Technology Co. Ltd. (the Vegfab) for the sum of
US$5,500,000. The acquisition was accounted for as a business combination under
the purchase method of accounting. Vegfabs results of operations were included
in our results beginning July 27, 2012. Due to recurring losses from operations
and in order to conserve operating resources, our management decided to sell
Vegfab on June 30, 2015. Therefore, the operating loss reduced to $302,934 only.
Our plan of operations for fiscal 2016 includes the following
budgeted expenditures:
12 Month Capital Requirements Forecast
|
USD
2
|
|
Beginning January 1,
2016
|
Capital required for expansion plans
1
|
$1,500,000
|
Salaries
|
$140,000
|
Accounting and Legal Expenses
|
$75,000
|
Public company reporting costs
|
$17,500
|
Selling, general and administrative expense
|
$100,000
|
Contingency
|
$100,000
|
Total
|
$1,932,500
|
|
1.
|
Capital for plan to acquire factory in China, further
R&D expenses.
|
|
|
|
|
2.
|
Based on 2015 average exchange rate of
$0.128617.
|
As of April 14, 2016 we will require additional financing of
approximately $2,000,000 to execute our business strategy for fiscal 2016. If we
are unable to raise sufficient financing, we intend to scale back our business
in order to accommodate available financing or revenue streams derived from our
current operations.
Results of Operation for the Years Ended December 31,
2015 Compared to the Year Ended December 31, 2014
Results of Operation
Our operating results for the years ended December 31, 2015 and
2014 are summarized as follows:
|
|
Year
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Sales, net
|
$
|
81,145
|
|
$
|
449,505
|
|
Cost of sales
|
$
|
72,145
|
|
$
|
2,292,885
|
|
Gross Profit (Loss)
|
$
|
9,000
|
|
$
|
(1,8743,380
|
)
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
$
|
644,187
|
|
$
|
1,743,835
|
|
Impairment loss on fixed assets
|
$
|
0
|
|
$
|
3,512,930
|
|
Impairment loss on goodwill
|
$
|
|
|
$
|
|
|
Loss from operations
|
$
|
(635,187
|
)
|
$
|
(7,100,145
|
)
|
Total Other income (expenses)
|
$
|
332,253
|
)
|
$
|
8,952
|
|
Provision for income taxes expense (benefit)
|
$
|
Nil
|
|
$
|
Nil
|
|
Net loss
|
$
|
|
|
$
|
7,091,193
|
|
Net loss attributable to non-controlling
interest
|
$
|
0
|
|
$
|
2,170
|
|
Net loss attributable to
TRANSAKT LTD.
|
$
|
302,934
|
|
$
|
7,089,023
|
|
Revenues & Cost of Sales
Sales for the year ended December 31, 2015 has decreased by
approximately $368,360, or 82%, to $81,145 from $449,505 for the same period in
2014. The decrease in net revenue was primarily due to the disposal of Vegfab on
June 30,2015. The sales revenue was coming from plant factory equipment selling
to Singapore .
Cost of sales for the year ended December 31, 2015 totaled
$72,145 or approximately 89% of net sales compared to $2,292,885 or
approximately 510.1% of net sales for the year ended December 31, 2014. Gross
profit as a percentage of net sales was 11% for the year ended December 31,
2015, compared to -410.1% for the same period of 2014.
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended
December 31, 2015 totaled $644,187 or approximately 800% of net sales compared
to operating expenses of $1,743,835 or approximately 388% of net sales during
the year ended December 31, 2014. The decrease in operating expenses was
primarily due to the disposal of Vegfab on June 30, 2016.
Loss from Operations
Loss from operations for the year ended December 31, 2015
totaled $302,934 compared to a loss of $7,100,145 for the year ended December
31, 2014, representing a decrease of $6,794,128. The decrease in loss from
operations was primarily due to the disposal of Vegfab on June 30, 2016.
Other Income (expenses)
Other income (expenses) decreased approximately $75,166 to
$332,253 for the year ended December 31, 2015 from $8,952 for the same period in
2014. The increase in net other income was primarily due to the gain on disposal of Vegefab, loss from long-term investment, partially offset
by the increase in gain on disposal of fixed assets.
Net Loss
As a result of the above factors, we have net loss attributable
to the Companys common stockholders of approximately $302,934 for the year
ended December 31, 2015 as compared to approximately $7.09 million for the year
ended December 31, 2014, representing a decrease of approximately $6.79 million
or approximately 95.73% .
Inflation
Our opinion is that inflation has not had, and is not expected
to have, a material effect on our operations.
Climate Change
Our opinion is that neither climate change, nor governmental
regulations related to climate change, have had, or are expected to have, any
material effect on our operations.
Liquidity
Working Capital
|
|
At
|
|
|
At
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Current assets
|
$
|
114,681
|
|
$
|
1,231,433
|
|
Current liabilities
|
$
|
234,373
|
|
$
|
1,127,398
|
|
Working capital
|
$
|
(119,692
|
)
|
$
|
104,035
|
|
Cash Flows
|
|
Fiscal year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Net cash used in operating
activities
|
$
|
508,656
|
|
$
|
2,408,645
|
|
Net cash used in investing activities
|
$
|
628
|
|
$
|
140,540
|
|
Net cash provided by
financing activities
|
$
|
460,523
|
|
$
|
23,032
|
|
Net cash flow used in operating activities was $508,656 in
2015, compared to $2,408,645 in 2014, a decrease of $1,899,989. The decrease in
net cash flow used in operating activities was mainly due to the disposal of
Vegfab in current year.
Net cash flow used in investing activities was $628 for 2015,
compared to net cash flow used in investing activities of $140,540 for 2014, a
decrease of $139,912. The decrease in net cash flow used in investing activities
in 2015 was mainly due to the disposal of Vegefab in the current year.
Net cash flow provided by financing activities was $460,523 for
2015, compared to net cash flow provided by financing activities of $23,032 for
2014, an increase of $437,491. The increase in net cash flow provided by
financing activities of continuing operations in 2015 was mainly due to The
Company received short-term loans from shareholders of $191000 during 2015,
whereas the Company also had repaid $285,365 from others during the same year.
Our working capital was ($119,692) as of December 31, 2015
compared to $104,035 as of December 31, 2014.
In managements opinion, our working capital is not currently
sufficient for our present requirements. However, we will continue to evaluate
alternative sources of capital to meet our growth requirements, including other
asset or debt financing, issuing equity securities and entering into other
financing arrangements. There can be no assurance, however, that any of the
contemplated financing arrangements described herein will be available and, if
available, can be obtained on terms favorable to us.
Historically, operations and short-term financing have been
sufficient to meet our cash needs. We believe that we will be raise capital
through private placement offerings of our equity securities to provide the
necessary cash flow to meet anticipated working capital requirements. However,
our actual working capital needs for the long and short -term will depend upon
numerous factors, including operating results, competition, and the availability
of credit facilities, none of which can be predicted with certainty. Future
expansion will be limited by the availability of financing products and raising
capital.
Capital Expenditure
Total capital expenditures were $628 and $168,754 for the years
ended December 31, 2015 and 2014, respectively.
Currency Exchange Fluctuations
The Company financial statements are presented in the U.S.
dollar ($), which is the Companys reporting currency, while its functional
currency is New Taiwan dollar (NTD), Canadian Dollar (CAD), and Hong Kong Dollar
(HKD). Transactions in foreign currencies are initially recorded at the
functional currency rate ruling at the date of transaction. Any differences
between the initially recorded amount and the settlement amount are recorded as
a gain or loss on foreign currency transaction in the consolidated statements of
income. Monetary assets and liabilities denominated in foreign currency are
translated at the functional currency rate of exchange ruling at the balance
sheet date. Any differences are taken to profit or loss as a gain or loss on
foreign currency translation in the statements of income.
In accordance with ASC 830, Foreign Currency Matters, the
Company translates the assets and liabilities into U.S. dollar ($) using the
rate of exchange prevailing at the balance sheet date and the statements of
operations and cash flows are translated at an average rate during the reporting
period. Adjustments resulting from the translation from NTD, CAD, and HKD into
U.S. dollar are recorded in stockholders equity as part of accumulated other
comprehensive income.
Cash Requirements
We used cash in operations of $508,656 for the year ended
December 31, 2015. We continue to be dependent on the proceeds of equity and
non-equity financing to fund our operations. No assurances can be given that our
actual cash requirements will fall within our budget that anticipated revenues
will be realized when needed, that lines of credit will be available to us if
required, or that additional capital will be available to us. We anticipate that
over the next twelve months, we will need a minimum of $2,000,000 to sustain our
current operations and market our products effectively.
Research and Development
No significant research and development expenses were incurred
in 2015 or 2014.
Off-Balance Sheet Arrangements
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 are material to
stockholders.
Critical Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
TransAKT Bio Agritech Ltd., collectively referred to within as the Company. All
material inter-company accounts, transactions, and profits have been eliminated
in consolidation.
Discontinued operations
Certain prior period amounts have been reclassified in these
consolidated financial statements to conform to the presentation of discontinued
operations of Taiwan Halee International Co. Ltd.
Going Concern
We has incurred a net loss attributable to the Companys common
stockholders of $302,934 and $7,563,565 during the years ended December 31, 2015
and 2014, respectively, and has an accumulated deficit of $21,830,086 and
$21,514,222 as of December 31, 2015 and December 31, 2014, respectively.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. This basis
of accounting contemplates the recovery of the Companys assets and the
satisfaction of liabilities in the normal course of business. This presentation
presumes funds will be available to finance ongoing research and development,
operations and capital expenditures and permit the realization of assets and the
payment of liabilities in the normal course of operations for the foreseeable
future.
The ability of the Company to continue research and development
projects and realize the capitalized value of proprietary technologies and
related assets is dependent upon future commercial success of the technologies
and raising sufficient funds to continue research and development as well as to
effectively market its products. Through December 31, 2015, the Company has not
realized commercial success of the technologies, nor have they raised sufficient
funds to continue research and development or to market its products.
There can be no assurances that there will be adequate
financing available to the Company and the consolidated 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 this uncertainty.
The Company has taken certain restructuring steps to provide
the necessary capital to continue its operations. These steps included: (1)
Tightly budgeting and controlling all expenses; (2) Expanding the companys
operations into China, expanding product lines and recruiting a strong sales
team to significantly increase sales revenue and profit in 2016; (3) Cooperate
with local partners in Guangdong province, China to research and develop new
products. (4)The Company plans to continue actively seeking additional funding
opportunities to improve and expand upon our product lines.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States (GAAP) requires
management to make certain 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 reporting period. Actual results could differ
from those estimates.
Revenue Recognition
Revenues are recognized when finished products are shipped to
customers and both title and the risks and rewards of ownership are transferred
and collectability is reasonably assured. The Companys revenues are recorded
upon confirmed acceptance after inspection by the customers of the Company.
Exchange Gain (Loss):
During the years ended December 31, 2015 and 2014, the
transactions of TransAKT Bio Agritech Ltd. were denominated in foreign currency
and were recorded in Hong Kong Dollar (HKD) at the rates of exchange in effect
when the transactions occur. Exchange gains and losses are recognized for the
different foreign exchange rates applied when the foreign currency assets and
liabilities are settled.
Translation Adjustment
The Company financial statements are presented in the U.S.
dollar ($), which is the Companys reporting currency, while its functional
currency is Hong Kong Dollar (HKD). Transactions in foreign currencies are
initially recorded at the functional currency rate ruling at the date of
transaction. Any differences between the initially recorded amount and the
settlement amount are recorded as a gain or loss on foreign currency transaction
in the consolidated statements of income. Monetary assets and liabilities
denominated in foreign currency are translated at the functional currency rate
of exchange ruling at the balance sheet date. Any differences are taken to
profit or loss as a gain or loss on foreign currency translation in the
statements of income.
In accordance with ASC 830, Foreign Currency Matters, the
Company translates the assets and liabilities into U.S. dollar ($) using the
rate of exchange prevailing at the balance sheet date and the statements of
operations and cash flows are translated at an average rate during the reporting
period. Adjustments resulting from the translation from HKD into U.S. dollar are
recorded in stockholders equity as part of accumulated other comprehensive
income.
Comprehensive Income
Comprehensive income includes accumulated foreign currency
translation gains and losses. The Company has reported the components of
comprehensive income on its statements of stockholders equity.
Advertising
Advertising expenses consist primarily of costs of promotion
for corporate image and product marketing and costs of direct advertising. The
Company expenses all advertising costs as incurred.
Income Taxes
The Company accounts for income taxes in accordance with ASC
740, Income Taxes, which requires that the Company recognize deferred tax
liabilities and assets based on the differences between the financial statement
carrying amounts and the tax basis of assets and liabilities, using enacted tax
rates in effect in the years the differences are expected to reverse. Deferred
income tax benefit (expense) results from the change in net deferred tax assets
or deferred tax liabilities. A valuation allowance is recorded when, in the
opinion of management, it is more likely than not that some or all of any
deferred tax assets will not be realized.
Statement of Cash Flows
Cash flows from the Company's operations are based upon the
local currencies. As a result, amounts related to assets and liabilities
reported on the statement of cash flows will not necessarily agree with changes
in the corresponding balances on the balance sheet.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk are accounts receivable and other receivables
arising from its normal business activities. The Company has a diversified
customer base. The Company controls credit risk related to accounts receivable
through credit approvals, credit limits and monitoring procedures. The Company
routinely assesses the financial strength of its customers and, based upon
factors surrounding the credit risk, establishes an allowance, if required, for
un-collectible accounts and, as a consequence, believes that its accounts
receivable credit risk exposure beyond such allowance is limited.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and cash in time
deposits, certificates of deposit and all highly liquid debt instruments with
original maturities of three months or less.
Allowance for Doubtful Accounts
The Company maintains reserves for potential credit losses on
accounts receivable and other receivable. Management reviews the composition of
accounts receivable and analyzes historical bad debts, customer concentrations,
customer credit worthiness, current economic trends and changes in customer
payment patterns to evaluate the adequacy of these reserves. Allowance for
doubtful debts amounted to $0 and $30,459 as at December 31, 2015 and December
31, 2014, respectively.
Inventory
Inventories are valued at the lower of cost (determined on a
weighted average basis) or market. The Management compares the cost of
inventories with the market value and allowance is made for writing down their
inventories to market value, if lower.
Property, Plant & Equipment
Property and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to earnings as incurred; additions, renewals
and betterments are capitalized. When property and equipment are retired or
otherwise disposed of, the related cost and accumulated depreciation are removed
from the respective accounts, and any gain or loss is included in operations.
Depreciation of property and equipment is provided using the straight-line
method for substantially all assets with estimated lives of:
Furniture and Fixtures
|
|
3 - 5 years
|
|
Machine and equipment
|
|
3 - 10 years
|
|
Computer Hardware and
Software
|
|
3 - 5 years
|
|
Automobile
|
|
3 - 5 years
|
|
Leasehold improvement
|
|
30 years
|
|
The cost and related accumulated depreciation of assets sold or
otherwise retired are eliminated from the accounts and any gain or loss is
included in the statements of operations. The cost of maintenance and repairs is
charged to expenses as incurred, whereas significant renewals and betterments
are capitalized.
Long-term assets of the Company are reviewed annually as to
whether their carrying value has become impaired, pursuant to the guidelines
established in FASB ASC Topic 360, Property, Plant, and Equipment (formerly
SFAS No. 144). The Company also re-evaluates the periods of amortization to
determine whether subsequent events and circumstances warrant revised estimates
of useful lives.
Fair Value of Financial Instruments
In the first quarter of fiscal year 2008, the Company adopted
Accounting Standards Codification subtopic 820-10, Fair Value Measurements and
Disclosures (ASC 820-10). ASC 820-10 defines fair value, establishes a
framework for measuring fair value, and enhances fair value measurement
disclosure. ASC 820-10 delays, until the first quarter of fiscal year 2009, the
effective date for ASC 820-10 for all non-financial assets and non-financial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). The adoption of
ASC 820-10 did not have a material impact on the Companys financial position or
operations.
Effective October 1, 2008, the Company adopted Accounting
Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures
(ASC 820-10) and Accounting Standards Codification subtopic 825-10, Financial
Instruments (ASC 825-10), which permits entities to choose to measure many
financial instruments and certain other items at fair value. Neither of these
statements had an impact on the Companys unaudited condensed consolidated
financial position, results of operations or cash flows. The carrying value of
cash and cash equivalents, accounts payable and short-term borrowings, as
reflected in the balance sheets, approximate fair value because of the
short-term maturity of these instruments.
Stock-based Compensation
The Company records stock-based compensation expense pursuant
to ASC 718-10, "
Share Based Payment Arrangement
, which requires
companies to measure compensation cost for stock-based employee compensation
plans at fair value at the grant date and recognize the expense over the
employee's requisite service period. The Companys expected volatility
assumption is based on the historical volatility of Companys stock or the
expected volatility of similar entities. The expected life assumption is
primarily based on historical exercise patterns and employee post-vesting
termination behavior. The risk-free interest rate for the expected term of the
option is based on the U.S. Treasury yield curve in effect at the time of grant.
Stock-based compensation expense is recognized based on awards
expected to vest, and there were no estimated forfeitures as the Company has a
short history of issuing options. ASC 718-10 requires forfeitures to be
estimated at the time of grant and revised in subsequent periods, if necessary,
if actual forfeitures differ from those estimates.
Net Loss Per Share
The Company has adopted Accounting Standards Codification
subtopic 260-10, Earnings Per Share (ASC 260-10) which specifies the
computation, presentation and disclosure requirements of earnings per share
information. Basic earnings per share have been calculated based upon the
weighted average number of common shares outstanding. Common equivalent shares
are excluded from the computation of the diluted loss per share if their effect
would be anti-dilutive.
Goodwill and intangible assets
Goodwill is calculated as the purchase premium after adjusting
for the fair value of net assets acquired. Goodwill is not amortized but is
reviewed for potential impairment on an annual basis, or when events or
circumstances indicate a potential impairment, at the reporting unit level. A
reporting unit, as defined under applicable accounting guidance, is a business
segment or one level below a business segment. Under applicable accounting
guidance, the goodwill impairment analysis is a two-step test. The first step of
the goodwill impairment test involves comparing the fair value of each reporting
unit with its carrying amount including goodwill. If the fair value of the
reporting unit exceeds its carrying amount, goodwill of the reporting unit is
considered not impaired; however, if the carrying amount of the reporting unit
exceeds its fair value, the second step must be performed to measure potential
impairment.
The second step involves calculating an implied fair value of
goodwill for each reporting unit for which the first step indicated possible
impairment. The implied fair value of goodwill is determined in the same manner
as the amount of goodwill recognized in a business combination, which is the
excess of the fair value of the reporting unit, as determined in the first step,
over the aggregate fair values of the assets, liabilities and identifiable
intangibles as if the reporting unit was being acquired in a business
combination. Measurement of the fair values of the assets and liabilities of a
reporting unit is consistent with the requirements of the fair value
measurements accounting guidance, which defines fair value 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. The adjustments
to measure the assets, liabilities, and intangibles at fair value are for the
purpose of measuring the implied fair value of goodwill and such adjustments are
not reflected in the consolidation balance sheet. If the implied fair value of
goodwill exceeds the goodwill assigned to the reporting unit, there is no
impairment. If the goodwill assigned to a reporting unit exceeds the implied
fair value of goodwill, an impairment charge is recorded for the excess. An
impairment loss recognized cannot exceed the amount of goodwill assigned to a
reporting unit. An impairment loss establishes a new basis in the goodwill and
subsequent reversals of goodwill impairment losses are not permitted under
applicable accounting guidance.
The goodwill in the amount of $5,163,739 recorded in the
consolidated balance sheet as of December 31, 2012 (see Note 15) was generated
from the acquisition of Vegfab by TransAKT Taiwan Limited on July 26, 2012. In
2013, the Company recorded a goodwill write-down of $5,163,739, which eliminated
all remaining goodwill of the Company. Goodwill was determined to have been
impaired because of the current financial condition of the Company and the
Companys inability to generate future operating income without substantial
sales volume increases, which are highly uncertain. Furthermore, the Companys
anticipated future cash flows indicate that the recoverability of goodwill is
not reasonably assured. The goodwill write-down was included as a component of
operating expense in 2013.
For intangible assets subject to amortization, an impairment
loss is recognized if the carrying amount of the intangible asset is not
recoverable and exceeds fair value. The carrying amount of the intangible asset
is considered not recoverable if it exceeds the sum of the undiscounted cash
flows expected to result from the use of the asset.
Reclassifications
Except for the classification for discontinued operations,
certain classifications have been made to the prior year financial statements to
conform to the current year presentation. The reclassifications have no impact
on the Companys 2013 Consolidated Statements of Operations and Comprehensive
Income and Consolidated Statements of Cash Flows..
Recent accounting pronouncements
The FASB has issued Accounting Standards Update (ASU) No.
2015-01 about Simplifying Income Statement Presentation by Eliminating the
Concept of Extraordinary Items. The objective is to reduce the cost and
complexity of income statement presentation by eliminating the concept of
extraordinary items while maintaining or improving the usefulness of the
information provided to the users of financial statements. The extraordinary
items must met two criterias: unusual nature and infrequency of occurrence. If
an event or transaction meets the criteria for extraordinary classification, an
entity is required to segregate the extraordinary item from the results of
ordinary operations and show the item separately in the income statement, net of
tax, after income from continuing operations. The entity also is required to
disclose applicable income taxes and either. This amendment will be effective
for annual periods, and interim periods within those annual periods, beginning
after December 15, 2015. The Board decided to permit early adoption provided
that the guidance is applied from the beginning of the fiscal year of adoption.
In February 18, 2015, FASB issued ASU 2015-02Consolidation
(Topic 810). The amendments in this Update affect reporting entities that are
required to evaluate whether they should consolidate certain legal entities. All
legal entities are subject to re-evaluation under the revised consolidation
model. Specifically, the amendments: (1) Modify the evaluation of whether
limited partnerships and similar legal entities are variable interest entities
(VIEs) or voting interest entities; (2) Eliminate the presumption that a general
partner should consolidate a limited partnership; (3) Affect the consolidation
analysis of reporting entities that are involved with VIEs, particularly those
that have fee arrangements and related party relationships; (4) Provide a scope
exception from consolidation guidance for reporting entities with interests in
legal entities that are required to comply with or operate in accordance with
requirements that are similar to those in Rule 2a-7 of the Investment Company
Act of 1940 for registered money market funds. The amendments in this Update are
effective for public business entities for fiscal years, and for interim periods
within those fiscal years, beginning after December 15, 2015. The adoption of
this standard is not expected to have a material impact on the Companys
consolidated financial position and results of operations.
The FASB has issued ASU No. 2015-03 about Simplifying the
Presentation of Debt Issuance Costs. The objective is to require that debt
issuance costs related to a recognized debt liability be presented in the
balance sheet as a direct deduction from the carrying amount of that debt
liability, consistent with debt discounts. The recognition and measurement
guidance for debt issuance costs are not affected by the amendments in this
Update. For public business entities, the amendments in this Update are
effective for financial statements issued for fiscal years beginning after
December 15, 2015, and interim periods within those fiscal years. For all other
entities, the amendments in this Update are effective for financial statements
issued for fiscal years beginning after December 15, 2015, and interim periods
within fiscal years beginning after December 15, 2016. Early adoption of the
amendments in this Update is permitted for financial statements that have not
been previously issued.
The FASB has issued ASU No. 2015-05 about Intangibles-Goodwill
and Other-Internal-Use Software. The objective is to provide a guidance about
whether a cloud computing arrangement includes a software license. If a cloud
computing arrangement includes a software license, then the customer should
account for the software license element of the arrangement consistent with the
acquisition of other software licenses. If a cloud computing arrangement does
not include a software license, the customer should account for the arrangement
as a service contract. The amendment will not change GAAP for a customers
accounting for service contracts. In addition, the guidance in this Update
supersedes paragraph 350-40-25-16. Consequently, all software licenses within
the scope of Subtopic 350-40 will be accounted for consistent with other
licenses of intangible assets. For public business entities, the Board decided
that the amendments will be effective for annual periods, including interim
periods within those annual periods, beginning after December 15, 2015. For all
other entities, the amendment will be effective for annual periods beginning
after December 15, 2015, and interim periods in annual periods beginning after
December 15, 2016. Early adoption is permitted for all entities.
The FASB has issued ASU No. 2015-06 about Topic 260, Earnings
Per Share, which contains guidance that addresses master limited partnerships
that originated from Emerging Issues Task Force (EITF) Issue No. 07-4. This
amendment in this Update specify that for purposes of calculating historical
earnings per unit under the two-class method, the earnings (losses) of a
transferred business before the date of a dropdown transaction should be
allocated entirely to the general partner. In that circumstance, the previously
reported earnings per unit of the limited partners (which is typically the
earnings per unit measure presented in the financial statements) would not
change as a result of the dropdown transaction. Qualitative disclosures about
how the rights to the earnings (losses) differ before and after the dropdown
transaction occurs for purposes of computing earnings per unit under the
two-class method also are required. The amendments in this Update are effective
for fiscal years beginning after December 15, 2015, and interim periods within
those fiscal years. Earlier application is permitted.
The FASB has issued ASU No. 2015-07 about Topic 820, Fair Value
Measurement, which permits a reporting entity, as a practical expedient, to
measure the fair value of certain investments using the net asset value per
share of the investment. The amendments in this Update remove the requirement to
categorize within the fair value hierarchy all investments for which fair value
is measured using the net asset value per share practical expedient. The
amendments also remove the requirement to make certain disclosures for all
investments that are eligible to be measured at fair value using the net asset
value per share practical expedient. Rather, those disclosures are limited to
investments for which the entity has elected to measure the fair value using
that practical expedient. The amendments in this Update apply to reporting
entities that elect to measure the fair value of an investment within the
related scope by using the net asset value per share (or its equivalent)
practical expedient.
The FASB has issued No. 2015-15Subtopic 835-30, Interest -
Imputation of Interest: Presentation and Subsequent Measurement of Debt
Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC
Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting. This
amendment adds SEC paragraphs pursuant to the SEC Staff Announcement at thereon
June 18, 2015, Emerging Issues Task Force meeting about the presentation and
subsequent measurement of debt issuance costs associated with line-of-credit
arrangements.
The FASB has issued No. 2015-16Topic 805, Business
Combinations: Simplifying the Accounting for Measurement-Period Adjustments,
which aims to identify, evaluate, and improve areas of generally accepted
accounting principles (GAAP) for which cost and complexity can be reduced while
maintaining or improving the usefulness of the information provided to users of
financial statements. The amendments in this Update require that an acquirer
recognize adjustments to provisional amounts that are identified during the
measurement period in the reporting period in which the adjustment amounts are
determined. The amendments in this Update require that the acquirer record, in
the same periods financial statements, the effect on earnings of changes in
depreciation, amortization, or other income effects, if any, as a result of the
change to the provisional amounts, calculated as if the accounting had been
completed at the acquisition date. The amendments in this Update require an
entity to present separately on the face of the income statement or disclose in
the notes the portion of the amount recorded in current-period earnings by line
item that would have been recorded in previous reporting periods if the
adjustment to the provisional amounts had been recognized as of the acquisition
date. For public business entities, the amendments in this Update are effective
for fiscal years beginning after December 15, 2015, including interim periods
within those fiscal years. For all other entities, the amendments in this Update
are effective for fiscal years beginning after December 15, 2016, and interim
periods within fiscal years beginning after December 15, 2017.
The FASB has issued No. 2015-17Topic 740, Income Taxes:
Balance Sheet Classification of Deferred Taxes, which aims to identify,
evaluate, and improve areas of generally accepted accounting principles (GAAP)
for which cost and complexity can be reduced while maintaining or improving the
usefulness of the information provided to users of financial statements. The
amendments in this Update require that deferred tax liabilities and assets be
classified as noncurrent in a classified statement of financial position. The
amendments in this Update apply to all entities that present a classified
statement of financial position. The current requirement that deferred tax
liabilities and assets of a tax-paying component of an entity be offset and
presented as a single amount is not affected by the amendments in this Update.
The amendments in this Update will align the presentation of deferred income tax
assets and liabilities with International Financial Reporting Standards (IFRS).
For public business entities, the amendments in this Update are effective for
financial statements issued for annual periods beginning after December 15,
2016, and interim periods within those annual periods. For all other entities,
the amendments in this Update are effective for financial statements issued for
annual periods beginning after December 15, 2017, and interim periods within
annual periods beginning after December 15, 2018. Earlier application is
permitted for all entities as of the beginning of an interim or annual reporting
period.
Other accounting standards that have been issued or proposed by
the FASB or other standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the Companys
consolidated financial statements upon adoption.
Tabular Disclosure of Contractual Obligations
Operating Leases
There is no lease contract for our company in 2015.
Contractual Obligations
As a smaller reporting company, we are not required to
provide tabular disclosure obligations.
Item 8.
|
Financial Statements and Supplementary
Data
|
TRANSAKT LTD. AND SUBSIDIARIES
|
|
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
|
DECEMBER 31, 2015 AND 2014 AND
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
TransAKT Ltd.
We have audited the accompanying consolidated balance sheets of
TransAKT Ltd. and its subsidiaries (the Company) as of December 31, 2015, and
the related consolidated statements of operations and comprehensive income
(loss), change in shareholders deficit, and cash flows for the years then
ended. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in
all material respects, the consolidated financial positions of TransAKT Ltd. as
of December 31, 2015, and the consolidated results of their operations and their
consolidated cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, the Company has accumulated deficit
of $(21,830,086) at December 31, 2015, including net losses of $(302,934) during
the years ended December 31, 2015. Management's plans in regard to these matters
are also described in Note 2. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ AWC (CPA) Limited
Hong Kong, SAR
April 14, 2016
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
TransAKT Ltd.
We have audited the accompanying consolidated balance sheets of
TransAKT Ltd. and its subsidiaries (the Company) as of December 31, 2014, and
the related consolidated statements of operations and comprehensive income
(loss), change in shareholders equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in
all material respects, the consolidated financial positions of TransAKT Ltd. as
of December 31, 2014, and the consolidated results of their operations and their
consolidated cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, the Company has accumulated deficit
of $(21,514,222) at December 31, 2014, including net losses of $(7,091,193)
during the years ended December 31, 2014. Management's plans in regard to these
matters are also described in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ KCCW Accountancy Corp.
Diamond Bar, California
April 9, 2015
F-2
TRANSAKT LTD.
|
CONSOLIDATED BALANCE SHEETS
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and
cash equivalents
|
$
|
103,250
|
|
$
|
208,922
|
|
Restricted cash
|
|
-
|
|
|
628
|
|
Accounts
receivable -Trade, net
|
|
-
|
|
|
63,773
|
|
-Related parties
|
|
-
|
|
|
389,985
|
|
Other
receivable, net
|
|
-
|
|
|
26,899
|
|
Inventory
|
|
-
|
|
|
61,639
|
|
Advance
to suppliers
|
|
-
|
|
|
113,924
|
|
Due from related parties
|
|
-
|
|
|
285,365
|
|
Prepayments
|
|
11,431
|
|
|
80,298
|
|
Total Current Assets
|
|
114,681
|
|
|
1,231,433
|
|
Property & equipment, net
|
|
-
|
|
|
-
|
|
Deposits
|
|
-
|
|
|
32,029
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
114,681
|
|
$
|
1,263,462
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable
|
$
|
-
|
|
$
|
932,638
|
|
Accrued
expenses
|
|
43,373
|
|
|
116,647
|
|
Amount due to a director
|
|
191,000
|
|
|
-
|
|
Construction payable
|
|
-
|
|
|
75,201
|
|
Loan payable to related
party
|
|
-
|
|
|
2,912
|
|
Total Current Liabilities
|
|
234,373
|
|
|
1,127,398
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
234,373
|
|
|
1,127,398
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
Preferred
stock, 200,000,000 shares authorized for
issuance,
$0.001 par value, 0 share
issued and outstanding
|
|
-
|
|
|
-
|
|
Common stock, 700,000,000 shares
authorized for issuance,
$0.001 par
value, 613,447,306 shares
issued
and outstanding at December
31, 2015 and 2014, respectively
|
|
613,447
|
|
|
613,447
|
|
Additional paid-in
capital
|
|
24,534,404
|
|
|
24,534,404
|
|
Accumulated deficit
|
|
(21,830,086
|
)
|
|
(21,514,222
|
)
|
Other comprehensive
income
|
|
(437,457
|
)
|
|
(484,635
|
)
|
Stock
subscription receivable
|
|
(1,200,000
|
)
|
|
(1,200,000
|
)
|
Treasury stock,
common stock, at cost, 45,000,000 shares at December 31, 2015 and 2014,
respectively
|
|
(1,800,000
|
)
|
|
(1,800,000
|
)
|
Total
Stockholders' Equity
|
|
(119,692
|
)
|
|
148,994
|
|
Non-controlling interest
|
|
-
|
|
|
(12,930
|
)
|
Total
Equity
|
|
(119,692
|
)
|
|
136,064
|
|
|
|
|
|
|
|
|
Total Liabilities and
Equity
|
$
|
114,681
|
|
$
|
1, 263,462
|
|
The accompanying notes are an integral part of the financial
statements
F-3
TRANSAKT LTD.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, net
|
$
|
81,145
|
|
$
|
449,505
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
72,145
|
|
|
2,292,885
|
|
Gross profit (loss)
|
|
9,000
|
|
|
(1,843,380
|
)
|
Selling, general and
administrative expenses
|
|
644,187
|
|
|
1,743,835
|
|
Impairment loss on fixed assets
|
|
-
|
|
|
3,512,930
|
|
Impairment loss on goodwill
|
|
-
|
|
|
-
|
|
Loss from operations
|
|
(635,187
|
)
|
|
(7,100,145
|
)
|
Other income (expense)
|
|
|
|
|
|
|
Interest
income
|
|
-
|
|
|
365
|
|
Interest expense
|
|
(38
|
)
|
|
(2,766
|
)
|
Loss on
disposal of investments
|
|
(1,000,000
|
)
|
|
|
|
Gain on disposal of
investments
|
|
1,283,275
|
|
|
-
|
|
Gain on
written-off of non-controlling interest
|
|
12,930
|
|
|
-
|
|
Currency exchange gain
(loss)
|
|
(13
|
)
|
|
1,680
|
|
|
|
|
|
|
|
|
Gain on disposal of fixed
assets
|
|
-
|
|
|
6,590
|
|
Other
income
|
|
36,099
|
|
|
3,083
|
|
Total other income
(expenses)
|
|
332,253
|
|
|
8,952
|
|
Loss before income taxes
|
|
(302,934
|
)
|
|
(7,091,193
|
)
|
|
|
|
|
|
|
|
Provision for income taxes
expense (benefit)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Net loss
|
|
(302,934
|
)
|
|
(7,091,193
|
)
|
Net loss attributable to non-controlling
interest
|
|
-
|
|
|
(2,170
|
)
|
Net loss attributable to
TRANSAKT LTD.
|
$
|
(302,934
|
)
|
$
|
(7,089,023
|
)
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
Basic and diluted income (loss) common
stockholders per share Net loss
|
$
|
0
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
Weighted average number of
shares outstanding:
|
|
|
|
|
|
|
Basic and diluted
|
|
613,447,306
|
|
|
568,447,306
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(302,934
|
)
|
$
|
(7,091,193
|
)
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
47,178
|
|
|
(475,058
|
)
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
(255,756
|
)
|
|
(7,566,251
|
)
|
Comprehensive income (loss)
attributable to the non-controlling interest
|
|
-
|
|
|
(2,686
|
)
|
|
|
|
|
|
|
|
Comprehensive income (loss)
attributable to TRANSAKT LTD.
|
$
|
(255,756
|
)
|
$
|
(7,563,565
|
)
|
The accompanying notes are an integral part of the financial
statements
F-4
TRANSAKT LTD.
|
CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIT
|
FOR THE YEARS ENDED DECEMBER 31, 2015
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
Stock
|
|
|
Accumulated
|
|
|
Other
|
|
|
Treasury
|
|
|
Stock at
|
|
|
Non-
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-in
|
|
|
Subscription
|
|
|
Deficit
|
|
|
Comprehen
|
|
|
Shares
|
|
|
Cost
|
|
|
controlling
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Receivable
|
|
|
|
|
|
sive
|
|
|
|
|
|
Amount
|
|
|
Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2012
|
|
403,526,905
|
|
$
|
403,527
|
|
$
|
10,497,536
|
|
$
|
-
|
|
$
|
(3,911,792
|
)
|
$
|
151,287
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
7,140,558
|
|
Treasury stock
obtained
from
disposal of Harlee
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(45,000,000
|
)
|
|
(1,800,000
|
)
|
|
-
|
|
|
(1,800,000
|
)
|
Stock option
issued
to employee
|
|
|
|
|
|
|
|
56,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,643
|
|
Common stock
issued for
cash on
September 16, 2013
|
|
140,678,401
|
|
|
140,678
|
|
|
8,660,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,800,785
|
|
Common stock
issued for cash on
November 26, 2013
|
|
69,242,000
|
|
|
69,242
|
|
|
5,320,118
|
|
|
(1,200,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,189,360
|
|
Formation of subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
516
|
|
|
516
|
|
Foreign
currency
translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(161,380
|
)
|
|
|
|
|
|
|
|
(4
|
)
|
|
(161,384
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,513,407
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,756
|
)
|
|
(10,524,163
|
)
|
Balance at
December 31, 2013
|
|
613,447,306
|
|
$
|
613,447
|
|
$
|
24,534,404
|
|
$
|
(1,200,000
|
)
|
$
|
(14,425,199
|
)
|
$
|
(10,093
|
)
|
|
(45,000,000
|
)
|
$
|
(1,800,000
|
)
|
$
|
(10,24 4
|
)
|
$
|
7,702,315
|
|
Foreign currency
translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(474,542
|
)
|
|
|
|
|
|
|
|
(516
|
)
|
|
(475,058
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,089,023
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,170
|
)
|
|
(7,091,193
|
)
|
Balance at
December 31,
2014
|
|
613,447,306
|
|
$
|
613,447
|
|
$
|
24,534,404
|
|
$
|
(1,200,000
|
)
|
$
|
(21,514,222
|
)
|
$
|
(484,635
|
)
|
|
(45,000,000
|
)
|
$
|
(1,800,000
|
)
|
$
|
(12,93 0
|
)
|
$
|
136,064
|
|
Foreign
currency
translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposal of subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,930
|
)
|
|
|
|
|
|
|
|
|
|
|
12,930
|
|
|
-
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(302,934
|
)
|
|
47,178
|
|
|
|
|
|
|
|
|
|
|
|
(255,756
|
)
|
Balance at
December 31,
2015
|
|
613,447,306
|
|
$
|
613,447
|
|
$
|
24,534,404
|
|
$
|
(1,200,000
|
)
|
$
|
(21,830,086
|
)
|
$
|
(437,457
|
)
|
|
(45,000,000
|
)
|
$
|
(1,800,000
|
)
|
$
|
-
|
|
$
|
( 119,692
|
)
|
The accompanying notes are an integral part of the financial
statements
F-5
TRANSAKT LTD.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
|
|
|
2015
|
|
|
2014
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
Net loss
available to common stockholders
|
$
|
(302,934
|
)
|
$
|
(7,089,023
|
)
|
Adjustments to reconcile net
loss to net cash used in operating activities:
|
|
|
|
|
|
|
Minority interest
|
|
-
|
|
|
(2,170
|
)
|
Gain on
disposal of assets
|
|
-
|
|
|
(6,590
|
)
|
Loss on disposal of
investments
|
|
1,000,000
|
|
|
-
|
|
Gain on
disposal of investments
|
|
(1,283,275
|
)
|
|
-
|
|
Impairment loss on fixed
assets
|
|
-
|
|
|
3,512,930
|
|
Impairment loss on goodwill
|
|
-
|
|
|
-
|
|
Bad debt expense
|
|
401,550
|
|
|
359,115
|
|
Depreciation expense
|
|
-
|
|
|
383,085
|
|
Common stock issued for
service
|
|
-
|
|
|
-
|
|
Stock
Option issued to employee
|
|
-
|
|
|
-
|
|
Loss on long-term
investment
|
|
-
|
|
|
-
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (Increase) in
accounts receivable
|
|
453,758
|
|
|
(22,575
|
)
|
Decrease (Increase) Increase in other
receivable
|
|
26,899
|
|
|
(73,801
|
)
|
Decrease (Increase) in
inventory
|
|
61,639
|
|
|
601,831
|
|
Decrease (Increase) in advance to
suppliers
|
|
113,924
|
|
|
138,614
|
|
Decrease (Increase) in
prepayments
|
|
68,867
|
|
|
167,978
|
|
Decrease (Increase) in deposits
|
|
32,029
|
|
|
(3,498
|
)
|
Increase
(Decrease) in accounts payable and accrued expenses
|
|
(1,081,113
|
)
|
|
(375,094
|
)
|
Increase (Decrease) in customer deposits
|
|
-
|
|
|
553
|
|
Net cash
used in operating activities
|
|
(508,656
|
)
|
|
(2,408,645
|
)
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
Restricted cash
|
|
(628
|
)
|
|
(655
|
)
|
Acquisition of property and equipment
|
|
-
|
|
|
(51,720
|
)
|
Cash received from
disposal of fixed assets
|
|
-
|
|
|
28,869
|
|
Payment
for factory construction
|
|
-
|
|
|
(117,034
|
)
|
Net cash used in
investing activities
|
|
(628
|
)
|
|
(140,540
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Non-controlling interest
|
|
(12,930
|
)
|
|
-
|
|
Repayment of loan from
others
|
|
285,365
|
|
|
-
|
|
|
|
|
|
|
|
|
Principal payments under
capital lease obligations
|
|
-
|
|
|
(55,980
|
)
|
The accompanying notes are an integral part of the financial
statements
F-6
TRANSAKT LTD.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
|
(CONTINUED)
|
|
|
2015
|
|
|
2014
|
|
Net
proceeds of short-term loans from shareholders
|
|
(2,912
|
)
|
|
225,139
|
|
|
|
|
|
|
|
|
Net
repayment of amount due to shareholders
|
|
191,000
|
|
|
(146,127
|
)
|
Proceeds from issuance of
common stock
|
|
-
|
|
|
-
|
|
Net cash
provided by financing activities
|
|
460,523
|
|
|
23,032
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
(56,911
|
)
|
|
(451,515
|
)
|
|
|
|
|
|
|
|
Net increase (decrease) in
cash and cash equivalents
|
|
(105,672
|
)
|
|
(2,977,668
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning
|
|
208,922
|
|
|
3,186,590
|
|
Ending
|
$
|
103,250
|
|
$
|
208,922
|
|
|
|
|
|
|
|
|
Supplemental disclosure of
cash flows
|
|
|
|
|
|
|
Cash paid during the year
for:
|
|
|
|
|
|
|
Income tax
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
-
|
|
Interest
expense
|
$
|
38
|
|
$
|
2,766
|
|
|
|
|
|
|
|
|
Non-cash
transactions:
|
|
|
|
|
|
|
Gain
on written-off of non-controlling interest
|
$
|
(12,930
|
)
|
$
|
|
|
|
|
|
|
|
-
|
|
Transfer
from construction in progress to property and equipment
|
$
|
-
|
|
$
|
-
|
|
The accompanying notes are an integral part of the financial
statements
F-7
TRANSAKT LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,
2015
NOTE 1 ORGANIZATION
TransAKT Ltd. (the Company) was incorporated under the laws
of the Province of Alberta on June 3, 1997. The Company completed the
acquisition of Green Point Resources Inc. on October 18, 2000 whereby it became
a publicly traded company listed on the Canadian Venture Exchange. In 2004 the
Company voluntarily delisted from the TSX Venture Exchange and retained a
listing on the Over the Counter Bulletin Board in the United States.
In October 2004 the Company purchased certain assets of IP
Mental Inc., a Taiwan based Voice over Internet Protocol (VoIP) company. The
company name was changed from TransAKT Corp. to TransAKT Ltd. on September 29,
2006. The Company designs and develops Voice over Internet Protocol (VoIP)
solutions and mobile payment terminals for the consumer electronics
industry.
On November 15, 2006 TransAKT Ltd and the shareholders of
Taiwan Halee International Co. Ltd. (HTT), entered into a Share Exchange
Agreement in which TransAKT Ltd. acquired 100% of Taiwan Halee International Co.
Ltd.s outstanding common stock. HTT was incorporated under the laws of Republic
of China in 1985. HTT is engaged in designing, manufacturing and distribution of
Taiwan telecommunications equipment. The acquisition has been accounted for as a
reverse acquisition under the purchase method of accounting. Accordingly, the
merger of the two companies has been recorded as a recapitalization of HTT, with
HTT being treated as the continuing entity.
On August 12, 2010, the Company filed the Registration
Statement (Form S-4) in connection with the continuation of the Company from
Alberta to Nevada. Based upon the number of common shares of TransAKT Ltd., a
Nevada corporation (TransAKT Nevada), to be issued to the shareholders of
TransAKT Ltd., an Alberta corporation (TransAKT Alberta), on a one-for-one
basis upon completion of the Continuation and based on 102,645,120 shares of
common stock of TransAKT Ltd., an Alberta corporation, issued and outstanding as
of August 12, 2010.
The Articles of Conversion of TransAKT Nevada provides that the
authorized capital of the TransAKT will be 300,000,000 shares of common stock,
par value $0.001 per share and 200,000,000 shares of preferred stock, par value
$0.001 per share.
On July 26, 2012, the Company acquired 100% equity of Vegfab
Agricultural Technology Co. Ltd. (the Vegfab), a company incorporated under
the laws of the Republic of China (ROC, Taiwan). Vegfab is mainly engaged in
selling agricultural equipment used to grow vegetables using simulated sunlight
from LED lamps in hydroponic systems (see Note 10).
On January 4, 2013, the Company entered into a Share Purchase
and Sale Agreement with a shareholder pursuant to which the Company sold to him
100% of all issued and outstanding securities of its wholly owned subsidiary
Taiwan Halee International Corporation (HTT). In consideration of the sale of
HTT, the shareholder has transferred to the Company 45,000,000 previously issued
common voting shares of TransAKT with a deemed value of $0.04 per share or $1.8
million in the aggregate (see Note 14).
On October 30, 2013, Million Talented Ltd., a related party 50%
owned by the Companys president and director, contributed $516 (equals to HKD
4,000) to obtain 40% ownership of TransAKT Bio Agritech Ltd., formerly named as
TransAKT (H.K) Ltd., (TransAKT H.K.). TransAKT H.K. was incorporated in Hong
Kong on November 20, 2007. It had no operation until 2013. TransAKT H.K.'s
primary business is conducting research and development on new agricultural
technology relating to the Companys business.
8
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
TransAKT (BVI) Limited and its wholly owned subsidiaries, TransAKT Bio Agritech
Ltd., collectively referred to within as the Company. All material intercompany
accounts, transactions, and profits have been eliminated in consolidation.
Disposal of subsidiaries
Certain prior period amounts have been reclassified in these
consolidated financial statements to reflect the disposal of the subsidiaries,
TransAKT Holding Limited and TransAKT Taiwan Limited, and their related assets
and liabilities.
Going Concern
The Company has incurred a net loss of $302,934 and $7,091,193
during the years ended December 31, 2015 and 2014, respectively, and has an
accumulated deficit of $21,830,086 and $21,514,222 as of December 31, 2015 and
December 31, 2014, respectively.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. This basis
of accounting contemplates the recovery of the Companys assets and the
satisfaction of liabilities in the normal course of business. This presentation
presumes funds will be available to finance ongoing research and development,
operations and capital expenditures and permit the realization of assets and the
payment of liabilities in the normal course of operations for the foreseeable
future.
The ability of the Company to continue research and development
projects and realize the capitalized value of proprietary technologies and
related assets is dependent upon future commercial success of the technologies
and raising sufficient funds to continue research and development as well as to
effectively market its products. Through December 31, 2015, the Company has not
realized commercial success of the technologies, nor have they raised sufficient
funds to continue research and development or to market its products.
There can be no assurances that there will be adequate
financing available to the Company and the consolidated 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 this uncertainty.
The Company has taken certain restructuring steps to provide
the necessary capital to continue its operations. These steps included: (1)
Tightly budgeting and controlling all expenses; (2) Expanding the companys
operations into China, expanding product lines and recruiting a strong sales
team to significantly increase sales revenue and profit in 2015; (3) The Company
plans to continue actively seeing additional funding opportunities to improve
and expand upon our product lines.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States (GAAP) requires
management to make certain 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 reporting period. Actual results could differ
from those estimates.
9
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Revenue Recognition
Revenues are recognized when finished products are shipped to
customers and both title and the risks and rewards of ownership are transferred
and collectability is reasonably assured. The Companys revenues are recorded
upon confirmed acceptance after inspection by the customers of the Company.
Exchange Gain (Loss):
During the years ended December 31, 2015 and 2014, the
transactions of TransAKT Bio Agritech Ltd. were denominated in foreign currency
and were recorded in Hong Kong Dollar (HKD) at the rates of exchange in effect
when the transactions occur. Exchange gains and losses are recognized for the
different foreign exchange rates applied when the foreign currency assets and
liabilities are settled.
Translation Adjustment
The Company financial statements are presented in the U.S.
dollar ($), which is the Companys reporting currency, while its functional
currency is Hong Kong Dollar (HKD). Transactions in foreign currencies are
initially recorded at the functional currency rate ruling at the date of
transaction. Any differences between the initially recorded amount and the
settlement amount are recorded as a gain or loss on foreign currency transaction
in the consolidated statements of income. Monetary assets and liabilities
denominated in foreign currency are translated at the functional currency rate
of exchange ruling at the balance sheet date. Any differences are taken to
profit or loss as a gain or loss on foreign currency translation in the
statements of income.
In accordance with ASC 830, Foreign Currency Matters, the
Company translates the assets and liabilities into U.S. dollar ($) using the
rate of exchange prevailing at the balance sheet date and the statements of
operations and cash flows are translated at an average rate during the reporting
period. Adjustments resulting from the translation from HKD into U.S. dollar are
recorded in stockholders equity as part of accumulated other comprehensive
income.
Comprehensive Income
Comprehensive income includes accumulated foreign currency
translation gains and losses. The Company has reported the components of
comprehensive income on its statements of stockholders equity.
Advertising
Advertising expenses consist primarily of costs of promotion
for corporate image and product marketing and costs of direct advertising. The
Company expenses all advertising costs as incurred.
Income Taxes
The Company accounts for income taxes in accordance with ASC
740, Income Taxes, which requires that the Company recognize deferred tax
liabilities and assets based on the differences between the financial statement
carrying amounts and the tax basis of assets and liabilities, using enacted tax
rates in effect in the years the differences are expected to reverse. Deferred
income tax benefit (expense) results from the change in net deferred tax assets
or deferred tax liabilities. A valuation allowance is recorded when, in the
opinion of management, it is more likely than not that some or all of any
deferred tax assets will not be realized.
10
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Statement of Cash Flows
In accordance with generally accepted accounting principles
(GAAP), cash flows from the Company's operations are based upon the local
currencies. As a result, amounts related to assets and liabilities reported on
the statement of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheet.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk are accounts receivable and other receivables
arising from its normal business activities. The Company has a diversified
customer base. The Company controls credit risk related to accounts receivable
through credit approvals, credit limits and monitoring procedures. The Company
routinely assesses the financial strength of its customers and, based upon
factors surrounding the credit risk, establishes an allowance, if required, for
un-collectible accounts and, as a consequence, believes that its accounts
receivable credit risk exposure beyond such allowance is limited.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and cash in time
deposits, certificates of deposit and all highly liquid debt instruments with
original maturities of three months or less.
Allowance for Doubtful Accounts
The Company maintains reserves for potential credit losses on
accounts receivable and other receivable. Management reviews the composition of
accounts receivable and analyzes historical bad debts, customer concentrations,
customer credit worthiness, current economic trends and changes in customer
payment patterns to evaluate the adequacy of these reserves. Allowance for
doubtful debts amounted to $0 and $30,459 as at December 31, 2015 and December
31, 2014, respectively.
Inventory
Inventories are valued at the lower of cost (determined on a
weighted average basis) or market. The Management compares the cost of
inventories with the market value and allowance is made for writing down their
inventories to market value, if lower. As of December 31, 2015, no inventory was
recorded. As of December 31, 2014, inventory consisted of raw materials,
work-in-process, and finished goods.
11
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Property, Plant & Equipment
Property and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to earnings as incurred; additions, renewals
and betterments are capitalized. When property and equipment are retired or
otherwise disposed of, the related cost and accumulated depreciation are removed
from the respective accounts, and any gain or loss is included in operations.
Depreciation of property and equipment is provided using the straight-line
method for substantially all assets with estimated lives of:
|
Furniture and Fixtures
|
3 - 5
years
|
|
Machine and equipment
|
3 - 10 years
|
|
Computer Hardware and
Software
|
3 - 5 years
|
|
Automobile
|
3 - 5 years
|
|
Leasehold improvement
|
30 years
|
The cost and related accumulated depreciation of assets sold or
otherwise retired are eliminated from the accounts and any gain or loss is
included in the statements of operations. The cost of maintenance and repairs is
charged to expenses as incurred, whereas significant renewals and betterments
are capitalized.
Long-term assets of the Company are reviewed annually as to
whether their carrying value has become impaired, pursuant to the guidelines
established in FASB ASC Topic 360, Property, Plant, and Equipment The Company
also re-evaluates the periods of amortization to determine whether subsequent
events and circumstances warrant revised estimates of useful lives.
Fair Value of Financial Instruments
In the first quarter of fiscal year 2008, the Company adopted
Accounting Standards Codification subtopic 820-10, Fair Value Measurements and
Disclosures (ASC 820-10). ASC 820-10 defines fair value, establishes a
framework for measuring fair value, and enhances fair value measurement
disclosure. ASC 820-10 delays, until the first quarter of fiscal year 2009, the
effective date for ASC 820-10 for all non-financial assets and non-financial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). The adoption of
ASC 820-10 did not have a material impact on the Companys financial position or
operations.
Effective October 1, 2008, the Company adopted Accounting
Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures
(ASC 820-10) and Accounting Standards Codification subtopic 825-10, Financial
Instruments (ASC 825-10), which permits entities to choose to measure many
financial instruments and certain other items at fair value. Neither of these
statements had an impact on the Companys unaudited condensed consolidated
financial position, results of operations or cash flows. The carrying value of
cash and cash equivalents, accounts payable and short-term borrowings, as
reflected in the balance sheets, approximate fair value because of the
short-term maturity of these instruments.
Stock-based Compensation
The Company records stock-based compensation expense pursuant
to ASC 718-10, "
Share Based Payment Arrangement
, which requires
companies to measure compensation cost for stock-based employee compensation
plans at fair value at the grant date and recognize the expense over the
employee's requisite service period. The Companys expected volatility
assumption is based on the historical volatility of Companys stock or the
expected volatility of similar entities. The expected life assumption is
primarily based on historical exercise patterns and employee post-vesting
termination behavior. The risk-free interest rate for the expected term of the
option is based on the U.S. Treasury yield curve in effect at the time of grant.
Stock-based compensation expense is recognized based on awards
expected to vest, and there were no estimated forfeitures as the Company has a
short history of issuing options. ASC 718-10 requires forfeitures to be
estimated at the time of grant and revised in subsequent periods, if necessary,
if actual forfeitures differ from those estimates.
12
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Net Loss Per Share
The Company has adopted Accounting Standards Codification
subtopic 260-10, Earnings Per Share (ASC 260-10) which specifies the
computation, presentation and disclosure requirements of earnings per share
information. Basic earnings per share have been calculated based upon the
weighted average number of common shares outstanding. Common equivalent shares
are excluded from the computation of the diluted loss per share if their effect
would be anti-dilutive.
Intangible assets
Intangible assets include a patent. With the adoption of FASB
ASC Topic 350, Intangibles, intangible assets with a definite life are
amortized on a straight-line basis. The patent is being amortized over its
estimated life of 10 years. Intangible assets with a definite life are tested
for impairment whenever events or circumstances indicate that a carrying amount
of an asset (asset group) may not be recoverable. An impairment loss would be
recognized when the carrying amount of an asset exceeds the estimated
undiscounted cash flows used in determining the fair value of the asset. The
amount of the impairment loss to be recorded is calculated by the excess of the
assets carrying value over its fair value. Fair value is generally determined
using a discounted cash flow analysis. Costs related to internally develop
intangible assets are expensed as incurred.
Reclassifications
Except for the classification for discontinued operations,
certain classifications have been made to the prior year financial statements to
conform to the current year presentation. The reclassifications have no impact
on the Companys 2013 Consolidated Statements of Operations and Comprehensive
Income and Consolidated Statements of Cash Flows.
Recent accounting pronouncements
The FASB has issued Accounting Standards Update (ASU) No.
2015-01 about Simplifying Income Statement Presentation by Eliminating the
Concept of Extraordinary Items. The objective is to reduce the cost and
complexity of income statement presentation by eliminating the concept of
extraordinary items while maintaining or improving the usefulness of the
information provided to the users of financial statements. The extraordinary
items must met two criterias: unusual nature and infrequency of occurrence. If
an event or transaction meets the criteria for extraordinary classification, an
entity is required to segregate the extraordinary item from the results of
ordinary operations and show the item separately in the income statement, net of
tax, after income from continuing operations. The entity also is required to
disclose applicable income taxes and either. This amendment will be effective
for annual periods, and interim periods within those annual periods, beginning
after December 15, 2015. The Board decided to permit early adoption provided
that the guidance is applied from the beginning of the fiscal year of adoption.
In February 18, 2015, FASB issued ASU 2015-02Consolidation
(Topic 810). The amendments in this Update affect reporting entities that are
required to evaluate whether they should consolidate certain legal entities. All
legal entities are subject to re-evaluation under the revised consolidation
model. Specifically, the amendments: (1) Modify the evaluation of whether
limited partnerships and similar legal entities are variable interest entities
(VIEs) or voting interest entities; (2) Eliminate the presumption that a general
partner should consolidate a limited partnership; (3) Affect the consolidation
analysis of reporting entities that are involved with VIEs, particularly those
that have fee arrangements and related party relationships; (4) Provide a scope
exception from consolidation guidance for reporting entities with interests in
legal entities that are required to comply with or operate in accordance with
requirements that are similar to those in Rule 2a-7 of the Investment Company
Act of 1940 for registered money market funds. The amendments in this Update are
effective for public business entities for fiscal years, and for interim periods
within those fiscal years, beginning after December 15, 2015. The adoption of
this standard is not expected to have a material impact on the Companys
consolidated financial position and results of operations.
13
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent accounting pronouncements (continued)
The FASB has issued ASU No. 2015-03 about Simplifying the
Presentation of Debt Issuance Costs. The objective is to require that debt
issuance costs related to a recognized debt liability be presented in the
balance sheet as a direct deduction from the carrying amount of that debt
liability, consistent with debt discounts. The recognition and measurement
guidance for debt issuance costs are not affected by the amendments in this
Update. For public business entities, the amendments in this Update are
effective for financial statements issued for fiscal years beginning after
December 15, 2015, and interim periods within those fiscal years. For all other
entities, the amendments in this Update are effective for financial statements
issued for fiscal years beginning after December 15, 2015, and interim periods
within fiscal years beginning after December 15, 2016. Early adoption of the
amendments in this Update is permitted for financial statements that have not
been previously issued.
The FASB has issued ASU No. 2015-05 about Intangibles-Goodwill
and Other-Internal-Use Software. The objective is to provide a guidance about
whether a cloud computing arrangement includes a software license. If a cloud
computing arrangement includes a software license, then the customer should
account for the software license element of the arrangement consistent with the
acquisition of other software licenses. If a cloud computing arrangement does
not include a software license, the customer should account for the arrangement
as a service contract. The amendment will not change GAAP for a customers
accounting for service contracts. In addition, the guidance in this Update
supersedes paragraph 350-40-25-16. Consequently, all software licenses within
the scope of Subtopic 350-40 will be accounted for consistent with other
licenses of intangible assets. For public business entities, the Board decided
that the amendments will be effective for annual periods, including interim
periods within those annual periods, beginning after December 15, 2015. For all
other entities, the amendment will be effective for annual periods beginning
after December 15, 2015, and interim periods in annual periods beginning after
December 15, 2016. Early adoption is permitted for all entities.
The FASB has issued ASU No. 2015-06 about Topic 260, Earnings
Per Share, which contains guidance that addresses master limited partnerships
that originated from Emerging Issues Task Force (EITF) Issue No. 07-4. This
amendment in this Update specify that for purposes of calculating historical
earnings per unit under the two-class method, the earnings (losses) of a
transferred business before the date of a dropdown transaction should be
allocated entirely to the general partner. In that circumstance, the previously
reported earnings per unit of the limited partners (which is typically the
earnings per unit measure presented in the financial statements) would not
change as a result of the dropdown transaction. Qualitative disclosures about
how the rights to the earnings (losses) differ before and after the dropdown
transaction occurs for purposes of computing earnings per unit under the
two-class method also are required. The amendments in this Update are effective
for fiscal years beginning after December 15, 2015, and interim periods within
those fiscal years. Earlier application is permitted.
The FASB has issued ASU No. 2015-07 about Topic 820, Fair Value
Measurement, which permits a reporting entity, as a practical expedient, to
measure the fair value of certain investments using the net asset value per
share of the investment. The amendments in this Update remove the requirement to
categorize within the fair value hierarchy all investments for which fair value
is measured using the net asset value per share practical expedient. The
amendments also remove the requirement to make certain disclosures for all
investments that are eligible to be measured at fair value using the net asset
value per share practical expedient. Rather, those disclosures are limited to
investments for which the entity has elected to measure the fair value using
that practical expedient. The amendments in this Update apply to reporting
entities that elect to measure the fair value of an investment within the
related scope by using the net asset value per share (or its equivalent)
practical expedient.
The FASB has issued No. 2015-15Subtopic 835-30, Interest -
Imputation of Interest: Presentation and Subsequent Measurement of Debt
Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC
Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting. This
amendment adds SEC paragraphs pursuant to the SEC Staff Announcement at thereon
June 18, 2015, Emerging Issues Task Force meeting about the presentation and
subsequent measurement of debt issuance costs associated with line-of-credit
arrangements.
14
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent accounting pronouncements (continued)
The FASB has issued No. 2015-16Topic 805, Business
Combinations: Simplifying the Accounting for Measurement-Period Adjustments,
which aims to identify, evaluate, and improve areas of generally accepted
accounting principles (GAAP) for which cost and complexity can be reduced while
maintaining or improving the usefulness of the information provided to users of
financial statements. The amendments in this Update require that an acquirer
recognize adjustments to provisional amounts that are identified during the
measurement period in the reporting period in which the adjustment amounts are
determined. The amendments in this Update require that the acquirer record, in
the same periods financial statements, the effect on earnings of changes in
depreciation, amortization, or other income effects, if any, as a result of the
change to the provisional amounts, calculated as if the accounting had been
completed at the acquisition date. The amendments in this Update require an
entity to present separately on the face of the income statement or disclose in
the notes the portion of the amount recorded in current-period earnings by line
item that would have been recorded in previous reporting periods if the
adjustment to the provisional amounts had been recognized as of the acquisition
date. For public business entities, the amendments in this Update are effective
for fiscal years beginning after December 15, 2015, including interim periods
within those fiscal years. For all other entities, the amendments in this Update
are effective for fiscal years beginning after December 15, 2016, and interim
periods within fiscal years beginning after December 15, 2017.
The FASB has issued No. 2015-17Topic 740, Income Taxes:
Balance Sheet Classification of Deferred Taxes, which aims to identify,
evaluate, and improve areas of generally accepted accounting principles (GAAP)
for which cost and complexity can be reduced while maintaining or improving the
usefulness of the information provided to users of financial statements. The
amendments in this Update require that deferred tax liabilities and assets be
classified as noncurrent in a classified statement of financial position. The
amendments in this Update apply to all entities that present a classified
statement of financial position. The current requirement that deferred tax
liabilities and assets of a tax-paying component of an entity be offset and
presented as a single amount is not affected by the amendments in this Update.
The amendments in this Update will align the presentation of deferred income tax
assets and liabilities with International Financial Reporting Standards (IFRS).
For public business entities, the amendments in this Update are effective for
financial statements issued for annual periods beginning after December 15,
2016, and interim periods within those annual periods. For all other entities,
the amendments in this Update are effective for financial statements issued for
annual periods beginning after December 15, 2017, and interim periods within
annual periods beginning after December 15, 2018. Earlier application is
permitted for all entities as of the beginning of an interim or annual reporting
period.
Other accounting standards that have been issued or proposed by
the FASB or other standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the Companys
consolidated financial statements upon adoption.
NOTE 3 INVENTORY
Inventory consists of the following:
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
Raw Materials seeds
|
$
|
-
|
|
$
|
-
|
|
Work in process -vegetables
|
|
-
|
|
|
58,125
|
|
Finished goods - vegetables
|
|
-
|
|
|
3,514
|
|
Finished goods - complete growing systems
& parts
|
|
-
|
|
|
554,226
|
|
Reserve for inventory
valuation
|
|
-
|
|
|
(554,226
|
)
|
|
$
|
-
|
|
$
|
61,639
|
|
15
NOTE 4 ADVANCE TO SUPPLIERS
Advance to suppliers consist of the following:
|
|
December 31, 2014
|
|
|
December 31, 2015
|
|
Prepayment for fluids and plants
|
|
-
|
|
$
|
113,924
|
|
|
$
|
-
|
|
$
|
113,924
|
|
NOTE 5 PREPAYMENTS
Prepayments consist of the following:
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
Deductible value-added tax
(VAT)
|
$
|
-
|
|
|
79,952
|
|
Prepaid expenses
|
|
11,431
|
|
|
346
|
|
|
$
|
11,431
|
|
$
|
80,298
|
|
NOTE 6 PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following:
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
Machine and equipment
|
$
|
-
|
|
$
|
273,789
|
|
Furniture and fixtures
|
|
-
|
|
|
23,455
|
|
Leasehold improvements
|
|
-
|
|
|
-
|
|
Total cost
|
|
-
|
|
|
297,244
|
|
Accumulated depreciation
|
|
-
|
|
|
(297,244
|
)
|
|
$
|
-
|
|
$
|
-
|
|
Depreciation expenses were $0 and $383,085 for the years ended
December 31, 2015 and 2014, respectively.
NOTE 7 – IMPAIRMENT OF PROPERTY, PLANT, AND EQUIPMENT
On December 31, 2014, management committed to a plan to abandon the factory that was recorded under property, plant, and equipment. Due to the location and nature of the factory, it is not expected the factory could reasonably generate enough sales proceeds to suffice the cost that have incurred. The Company’s plan is to continue using the factory until February 15, 2015, at which time the factory will be abandoned. The factory, built in 2013 for approximately $1.4 million, was initially assigned a thirty-year estimated useful life. As a result of the commitment to a plan to abandon the factory, the Company has reduced the factory and machinery and equipment’s estimated remaining useful life ended at December 31, 2014 in accordance with ASC 250, and recognized an impairment loss on fixed assets of $3,512,930 based on its carrying value at December 31, 2014.
On June 24, 2015, the Company disposed the subsidiaries in Taiwan. Afterwards, there were no property, plant and equipment carry in the Company’s balance sheet and no impairment of property, plant, and equipment were recorded for 2015.
16
NOTE 8 ACCRUED EXPENSES
Accrued expenses consist of the following:
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
Accrued payroll
|
$
|
11,355
|
|
$
|
42,307
|
|
Accrued employee benefits and pension
expenses
|
|
386
|
|
|
31,993
|
|
Accrued utilities
|
|
-
|
|
|
39,242
|
|
Accrued professional fees
|
|
30,030
|
|
|
949
|
|
Accrued taxes
|
|
-
|
|
|
1,621
|
|
Others
|
|
1,602
|
|
|
535
|
|
|
$
|
43,373
|
|
$
|
116,647
|
|
NOTE 9 - RELATED PARTY TRANSACTIONS
Related party sales
The Company had sales to Guangdong Dong Rong Metal Mold
Machinery, Co., Ltd., (Dong Rong), a company owned by a relative of our
director and officer, in an aggregate amount of $0 and $28,552 for the years
ended December 31, 2015 and 2014, respectively. Accounts receivable due from
Dong Long was $0 and $389,985 as of December 31, 2015 and 2014,
respectively.
During 2014, the Company purchased wholesale products for
resale from Guangdong Dongrong Metal Products, Co., Ltd., a company owned by a
relative of our director and major shareholder. The aggregate amount of the
purchases was $72,145.
Due from related parties
The Companys officers and shareholders have advanced funds to
the Company for working capital purposes. The Company has not entered into any
agreement on the repayment terms for these advances. As of December 31, 2015 and
2014, there was $191,000 and $2,912 advances outstanding.
In 2013, the Company advanced funds bearing interest rate of 8%
per annum from a shareholder in an aggregate amount of NTD 28,780,933, or
equivalent to $969,630. The Company has repaid both principal and interest
during the same year. The interest expense of $60,765 was recorded under other
expense from continuing operations before income taxes.
As of December 31, 2015 and 2014, $0 and $285,365 was due from a former officer and shareholder, respectively. The balance as of December 31, 2014 amounts $285,365 were repaid in full in the first quarter of 2015.
17
NOTE 10 INCOME TAXES
The Company is registered in the State of Nevada and has
operations in primarily two tax jurisdictions - Taiwan and the United States.
For the operations in the U.S., the Company has incurred net accumulated
operating losses for income tax purposes. The Company believes that it is more
likely than not that these net accumulated operating losses will not be utilized
in the future. Therefore, the Company has provided full valuation allowance for
the deferred tax assets arising from the losses in the U.S. as of December 31,
2015 and 2014. Accordingly, the Company has no net deferred tax assets on the
U.S. operations.
United States of America
For the year ended December 31, 2015, the Company had net
operating loss carry-forwards of approximately $1,135,598 that may be available to
reduce future years taxable income through 2035, Future tax benefits which may
arise as a result of these losses have not been recognized in these financial
statements, as their realization is determined not likely to occur and
accordingly, the Company has recorded a valuation allowance for the deferred tax
asset relating to these tax loss carry-forwards.
The provision for Federal income tax consists of the following years ended December 31:
|
|
2015
|
|
|
2014
|
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
Current Operations
|
$
|
478,497
|
|
$
|
185,728
|
|
Less: Valuation allowance
|
|
(478,497
|
)
|
|
(185,728
|
)
|
Net provision for Federal income taxes
|
$
|
-
|
|
$
|
-
|
|
Deferred taxes:
The tax effect of temporary differences that give rise to the
Companys deferred tax asset as of December 31, 2015 and 2014 are as follows:
U.S:
|
|
2015
|
|
|
2014
|
|
Deferred tax asset
non-current:
|
|
|
|
|
|
|
Net operating loss carry forward
|
$
|
1,135,598
|
|
$
|
657,101
|
|
Valuation allowance
|
|
(1,135,598
|
)
|
|
(657,101
|
)
|
Net deferred tax asset
|
$
|
-
|
|
$
|
-
|
|
The following is a reconciliation of the statutory tax rate to
the effective tax rate for the years ended December 31, 2015 and 2014:
|
|
|
2015
|
|
|
2014
|
|
|
U.S. Federal tax at statutory
rate
|
|
34%
|
|
|
34%
|
|
|
Valuation allowance
|
|
(34%)
|
|
|
(34%)
|
|
|
Foreign income tax- Taiwan
|
|
17%
|
|
|
17%
|
|
|
Other (a)
|
|
(17%)
|
|
|
(17%)
|
|
|
Effective tax rate
|
|
0%
|
|
|
0%
|
|
(a) Other represents expenses incurred
by the Company that are not deductible for Taiwan income taxes and changes in
valuation allowance for Taiwanese entities for the years ended December 31, 2015
and 2014.
18
NOTE 11 - COMMITTMENTS
Operating Leases
The Company leases various office, warehouse, store, and
factory facilities under operating leases that expire on various dates through
2020. Rental expense for these leases consisted of approximately $2,078 and
$134,000 for the years ended December 31, 2015 and 2014, respectively.
Effective June 30, 2015, the Company sold its subsidiaries,
Transakt Taiwan Ltd.,Vegfab Agricultural Technology Co. Ltd., and TransAKT
Holdings Ltd. (Turks & Caicos), which held the leases. As a result of the
disposal the Company has no further lease commitments.
Sale-leaseback Transaction:
As of December 31, 2015, the Company did not have any
sale-leaseback transaction.
NOTE 12 COMMON STOCK
On June 21, 2011, the Company issued 55,500,000 shares of its
common stock for $0.015 per share to individuals for aggregate gross proceeds of
$832,500.
On June 21, 2011, the Company converted its outstanding related
party notes payable totaling $523,908 into 34,927,218 shares of Common Stock.
The deemed price of the shares issued was $0.015.
On June 21, 2011, the Company issued an aggregate of 266,667
shares of common stock, at a deemed price of $0.015 per share, to pay $4,000 for
services.
On May 17, 2012, the Company issued an aggregate of 39,854,567
shares of common stock at a price of $0.03 per share, pursuant to the closing of
a private placement, for aggregate gross proceeds of approximately $1,200,000.
On June 25, 2012, the Company amended its articles of
incorporation to increase the authorized number of shares of common stock from
300,000,000 to 700,000,000 shares of common stock, par value of $0.001 per
share.
On July 26, 2012, the Company issued 150,000,000 shares of
common stock as a part of consideration for acquisition of Vegfab Agricultural
Technology Co., Ltd. (Note 10).
In July, 2012, the Company issued 18,333,333 shares of common
stock to the Companys president, pursuant to the acquisition of Vegfab
Agricultural Technology Co., Ltd. The Company agreed to pay its president share
compensation of 10% of the value of the acquisition that he secured for the
company.
On January 4, 2013, the Company entered into a Share Purchase
and Sale Agreement with Mr. Pan Yen Chu pursuant to which the Company sold to
Mr. Pan 100% of all issued and outstanding securities of its wholly owned
subsidiary Taiwan Halee International Corporation (HTT). In consideration of
the sale of HTT, Mr. Pan has transferred to the Company 45,000,000 previously
issued common voting shares of TransAKT with a deemed value of $0.04 per share
or $1.8 million in the aggregate. The transfer of common shares was completed on
January 7, 2013. In connection with the sale HTT, the 45,000,000 common shares
of the Company received as consideration will be returned to treasury. The
45,000,000 shares constitute approximately 11.5% of the Companys currently
issued and outstanding common stock.
19
NOTE 12 COMMON STOCK (CONTINUED)
On September 16, 2013, the Company issued 140,678,401 shares of
common stock to fifty-seven individuals for aggregate proceeds of $9,300,785 at
deemed prices as follows:
|
1.
|
30,986 shares at US$0.03 per share;
|
|
|
|
|
2.
|
4,017,557 shares at US$0.04 per share;
|
|
|
|
|
3.
|
29,768,176 shares at US$0.045 per share;
|
|
|
|
|
4.
|
21,961,580 shares at US$0.05 per share;
|
|
|
|
|
5.
|
4,525,102 shares at US$0.06 per share; and
|
|
|
|
|
6.
|
80,375,000 shares at US$0.08 per
share.
|
The Company paid $500,000 of commission to an individual for
the above private placements.
On November 26, 2013, the Company issued 69,242,000 shares of
common stock to nine individuals for aggregate proceeds of $5,389,360 at deemed
prices as follows:
|
1.
|
5,000,000 shares at US$0.05 per share;
|
|
|
|
|
2.
|
64,242,000 shares at US$0.08 per
share;
|
NOTE 13 SHARE-BASED COMPENSATION
On April 19, 2013, the Company granted to Mr. Christian
Nielsen, accounting manager stock options to purchase 1,000,000 of the Companys
common stock for services performed for the Company, at an exercise price of
$0.03 per share. The options have a five-year contractual term and are vested at
the date of grant.
In accordance with the guidance provided in ASC Topic 718,
Stock Compensation, the compensation costs associated with these options are
recognized, based on the grant-date fair values of these options, over the
requisite service period, or vesting period. Accordingly, the Company recognized
a compensation expense of $56,643 for the period ended December 31, 2013.
The Company estimated the fair value of these options using the
Black-Scholes-Merton option pricing model based on the following
weighted-average assumptions:
Date of grant
|
|
19-Apr-13
|
|
Fair value of common stock on
date of grant (A)
|
$
|
0.06
|
|
Exercise price of the options
|
$
|
0.03
|
|
Expected life of the options
(years)
|
|
2.50
|
|
Dividend yield
|
|
0.00%
|
|
Expected volatility
|
|
223.57
|
%
|
Risk-free interest rate
|
|
0.27
|
%
|
Expected forfeiture per year
(%)
|
|
0.00
|
%
|
Weighted-average fair value of the options
(per unit)
|
$
|
0.0566
|
|
20
NOTE 13 SHARE-BASED COMPENSATION (CONTINUED)
The fair value of the Company's common stock was obtained from
the closing price on the OTC Bulletin (A) Board as of the dates of grant.
Fair value hierarchy of the above assumptions can be
categorized as follows:
(1)
|
Level 1 inputs include:
|
|
|
|
Fair value of common stock on date of grant- Obtained
from the closing price of the Companys common stock quoted on the OTC
Bulletin Board as of the date of grant.
|
|
|
(2)
|
Level 2 inputs include:
|
|
|
|
Expected volatility- Based on historical volatility of
the closing price of the Companys common stock quoted on the OTC Bulletin
Board.
|
|
|
|
Risk-free rate- The risk-free rate of return reflects the
interest rate for United States Treasury Note with similar
time-to-maturity to that of the options.
|
|
|
(3)
|
Level 3 inputs include:
|
|
|
|
Expected lives- The expected lives of options granted
were derived from the output of the option valuation model and represented
the period of time that options granted are expected to be
outstanding.
|
|
|
|
Expected forfeitures per year- The expected forfeitures
are estimated at the dates of grant and will be revised in subsequent
periods pursuant to actual forfeitures, if significantly different from
the previous estimates.
|
The estimates of fair value from the model are theoretical
values of stock options and changes in the assumptions used in the model could
result in materially different fair value estimates. The actual value of the
stock options will depend on the market value of the Companys common stock when
the stock options are exercised.
Options issued and outstanding as of December 31, 2015 and
their activities during the twelve months then ended are as follows:
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
Number of
|
|
|
Weighted-Average
|
|
|
Contractual Life
|
|
|
|
|
Underlying
|
|
|
Exercise Price Per
|
|
|
Remaining in
|
|
|
|
|
Shares
|
|
|
Share
|
|
|
Years
|
|
|
Outstanding as of January 1,
2015
|
|
-
|
|
$
|
-
|
|
|
|
|
|
Granted
|
|
1,000,000
|
|
|
0.03
|
|
|
|
|
|
Expired
|
|
-
|
|
|
-
|
|
|
|
|
|
Forfeited
|
|
-
|
|
|
-
|
|
|
|
|
|
Outstanding as of December
31, 2015
|
|
1,000,000
|
|
|
0.03
|
|
|
2.7
|
|
|
Exercisable as of December 31, 2015
|
|
1,000,000
|
|
|
0.03
|
|
|
2.7
|
|
|
Vested and expected to vest
|
|
1,000,000
|
|
|
0.03
|
|
|
2.7
|
|
As of December 31, 2015, the aggregate intrinsic value of
options outstanding was $7,198.
21
NOTE 14 NON-CONTROLLING INTEREST
On October 30, 2013, the Company invested a subsidiary,
TransAKT H.K. The Company has a 60% interest and Million Talented Ltd. holds a
40% interest. During 2015, Million Talented Ltd. transferred the 40% TransAKT
H.K. back to the Company. The Company recorded a gain on non-controlled interest
written-off and non-controlling interest was no longer exist.
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
Beginning Balance
|
$
|
(12,930
|
)
|
$
|
(10,244
|
)
|
Formation of subsidiary
|
|
-
|
|
|
-
|
|
Net loss attributed to
non-controlling interest
|
|
-
|
|
|
(2,170
|
)
|
Other comprehensive income attributable to
non-controlling interest
|
|
-
|
|
|
(516
|
)
|
Gain on written-off of
non-controlling interest
|
|
12,930
|
|
|
-
|
|
|
$
|
-
|
|
$
|
(12,930
|
)
|
NOTE 15 BUSINESS ACQUSITION AND DISPOSAL
On July 26, 2012, TransAKT Ltd. acquired 100% of the equity
interests of the Vegfab Agricultural Technology Co. Ltd. (the Vegfab) for for
the sum of US$5,500,000. The purchase price is being paid by the delivery to
Vegfab of: (i) US$1,000,000 in cash; and (ii) 150,000,000 common voting shares
issued by TransAKT Ltd., with a deemed value of US$0.03 per share. The
acquisition was accounted for as a business combination under the purchase
method of accounting. Vegfabs results of operations were included in the
Companys results beginning July 27, 2012. The purchase price has been allocated
to the assets acquired and the liabilities assumed based on their fair value at
the acquisition date as summarized in the following:
Purchase price
|
$
|
5,500,000
|
|
|
|
|
|
Allocation of the purchase price:
|
|
|
|
Cash and cash equivalents
|
|
9,468
|
|
Accounts receivable, net
|
|
21,929
|
|
Inventory
|
|
107,267
|
|
Due from related party
|
|
187,912
|
|
Prepaid expenses
|
|
343,019
|
|
Property, plant, and equipment, net
|
|
313,586
|
|
Other assets
|
|
8,300
|
|
Short-term loan
|
|
(126,971
|
)
|
Accounts payable
|
|
(97,084
|
)
|
Advance from customers
|
|
(265,090
|
)
|
Capital lease obligation
|
|
(166,075
|
)
|
Fair value of net assets acquired
|
|
336,261
|
|
|
|
|
|
Goodwill
|
$
|
5,163,739
|
|
22
NOTE 15 BUSINESS ACQUSITION AND DISPOSAL (CONTINUED)
Vegfab contributed net revenues of $335,164 and $195,323, and
net loss of $3,559,087 and $483,330 for the year ended December 31, 2013 and for
the period from July 27, 2012 through December 31, 2012, respectively.
In 2013, the Company recorded a goodwill write-down of
$5,163,739, which eliminated all remaining goodwill of the Company. Goodwill was
determined to have been impaired because of the current financial condition of
the Company and the Companys inability to generate future operating income
without substantial sales volume increases, which are highly uncertain.
Furthermore, the Companys anticipated future cash flows indicate that the
recoverability of goodwill is not reasonably assured. The goodwill write-down
was included as a component of operating expense in 2013.
On June 24, 2015, the Company disposed the investments on the
above subsidiaries, TransAKT Taiwan Ltd. and Vegfab Agricultural Technology Co.
The Company received $100,000 and got rid of all assets and liabilities from
these subsidiaries. Since these subsidiaries provided negative equity of
$1,183,275, the Company recorded $1,283,275 gain on disposal of investment.
On June 24, 2015, the company also disposed another investment
with a prepaid deposit of $1,000,000. This investment became valueless and was
fully written-off with $1,000,000 loss on disposal of investment.
NOTE 16 SUBSEQUENT EVENTS
The Company evaluated all events or transactions that occurred
after December 31, 2015 up through the date the Company issued these financial
statements, there were no material subsequent events that were required to make
disclosure.
23