NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS DESCRIPTION
Weyland Tech, specializes in providing e-commerce solutions and services that facilitate multi-channel B2C (business-to-consumer) and B2B (business-to-business) transactions. Its solutions and services enabled e-commerce transactions with speed and efficiency, and allowed an interactive and engaging customer experience as well as targeted marketing and advertising.
The Company expects to continue development of its platform through a Cooperation agreement in Jaipur, India where costs are competitively lower than more developed countries.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements have been prepared on a historical cost basis to reflect the financial position and results of operations of the Company in accordance with the accounting principles generally accepted in the United States of America (US GAAP).
USE OF ESTIMATES
The preparation of the Companys financial statements in conformity with generally accepted accounting principles of the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Actual results could differ from those estimates.
CERTAIN RISKS AND UNCERTAINTIES
The Company relies on cloud based hosting through a global accredited hosting provider. Management believes that alternate sources are available; however, disruption or termination of this relationship could adversely affect our operating results in the near-term.
SEGMENT REPORTING
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by our chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.
The Company specializes in providing e-commerce solutions and services that facilitate multi-channel B2C (business-to-consumer) and B2B (business-to-business) transactions. We identify our reportable segments as those customer groups that represent more than 10% of our combined revenue or gross profit or loss of all reported operating segments. We manage our business on the basis of the one reportable segment e-commerce solutions and service provider. The accounting policies for segment reporting are the same as for the Company as a whole. We do not segregate assets by segments since our chief operating decision maker, or decision making group, does not use assets as a basis to evaluate a segments performance.
F-6
IDENTIFIABLE INTANGIBLE ASSETS
Identifiable intangible assets are recorded at cost and are amortized over 3-10 years. Similar to tangible property and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company classifies its long-lived assets into: (i) computer and office equipment; (ii) furniture and fixtures, (iii) leasehold improvements, and (iv) finite lived intangible assets.
Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be fully recoverable. It is possible that these assets could become impaired as a result of technology, economy or other industry changes. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, relief from royalty income approach, quoted market values and third-party independent appraisals, as considered necessary.
The Company makes various assumptions and estimates regarding estimated future cash flows and other factors in determining the fair values of the respective assets. The assumptions and estimates used to determine future values and remaining useful lives of long-lived assets are complex and subjective. They can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as the Companys business strategy and its forecasts for specific market expansion.
ACCOUNTS RECEIVABLE AND CONCENTRATION OF RISK
Accounts receivable, net is stated at the amount the Company expects to collect, or the net realizable value. The Company provides a provision for allowances that includes returns, allowances and doubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Companys estimate of the provision for allowances will change.
The Companys CreateApp business effective 1 September 2015 is based on a nil accounts receivable balance as subscriptions are collected through a US based payment gateway on a usage basis.
The Companys legacy data storage business accounts receivable balance was written off at December 31, 2016. As of December 31, 2016, sales included a concentration from a major customer although accounts receivable had a nil balance (2015: $722,700). For the year ended December 31, 2016 and 2015, the Company had sales in excess of 10% of $12,566,093 and $2,356,501 with two major customers, respectively.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash on hand, demand deposits, and other short-term highly liquid investments placed with banks, which have original maturities of three months or less and are readily convertible to known amounts of cash.
F-7
EARNINGS PER SHARE
Basic (loss) earnings per share is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per share.
FASB Accounting Standard Codification Topic 260 (ASC 260), Earnings Per Share, requires that employee equity share options, non-vested shares and similar equity instruments granted to employees be treated as potential common shares in computing diluted earnings per share. Diluted earnings per share should be based on the actual number of options or shares granted and not yet forfeited, unless doing so would be anti-dilutive. The Company uses the treasury stock method for equity instruments granted in share-based payment transactions provided in ASC 260 to determine diluted earnings per share. Antidilutive securities represent potentially dilutive securities which are excluded from the computation of diluted earnings or loss per share as their impact was antidilutive.
REVENUE RECOGNITION
The Company recognizes revenue from providing hosting and integration services and licensing the use of its technology platform to its customers. The Company recognizes revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer (for licensing, revenue is recognized when the Companys technology is used to provide hosting and integration services); (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of fees is probable. We account for our multi-element arrangements, such as instances where we design a custom website and separately offer other services such as hosting, which are recognized over the period for when services are performed.
COST OF SERVICE
Cost of service results from 1) sales commissions to resellers 2) sourcing technical and engineering personnel in Asia on an hourly or project basis in order to customize multi-site SMB mobile apps and medium to large scale customized apps. 3) cloud based hosting services.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes in accordance with Accounting Standards Codification (ASC) 740, Income Taxes (ASC 740). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.
RECENT ACCOUNTING PRONOUNCEMENTS
In January 2016, the FASB has issued Accounting Standards Update (ASU) No. 2016-01, Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to existing U.S. GAAP by: (1) requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair
F-8
value recognized in net income. Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and. (4) Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as own credit) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. he Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.
In April 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement of cash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.
In April 2016, FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.
In May 2016, the FASB issued ASU No. 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815); Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, which is rescinding certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive ActivitiesOil and Gas, effective upon adoption of Topic 606. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.
F-9
In May 2016, FASB issued ASU No. 2016-12Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.
In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control, to provide guidance on the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.
In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows: Restricted Cash". The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.
The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.
NOTE 3 - INTANGIBLE ASSETS
As of December 31, 2016 and 2015, the company has the following amounts related to intangible assets:
|
|
|
| |
|
|
As of December 31,
|
|
|
2016
|
|
2015
|
Software developed
|
$
|
1,764,330
|
$
|
750,000
|
Other intangible assets
|
|
5,000
|
|
-
|
|
|
1,769,330
|
|
750,000
|
Less : accumulated amortization
|
|
(435,266)
|
|
(83,333)
|
Net intangible assets
|
$
|
1,334,064
|
$
|
666,667
|
F-10
No significant residual value is estimated for these intangible assets. Amortization expense for the years ended December 31, 2016 and 2015 totaled $351,933 and $83,333, respectively.
The remaining amortization period of the Companys amortizable intangible assets is approximately 2.67 years as of December 31, 2016. The estimated future amortization of the intangible assets is as follows:
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| |
For the years ending December 31,
|
|
Estimated Amortization Expenses
|
2017
|
|
$ 351,933
|
2018
|
|
268,600
|
2019
|
|
101,933
|
2020
|
|
101,933
|
2021
|
|
101,933
|
Thereafter
|
|
407,732
|
Total
|
|
$ 1,334,064
|
NOTE 4 - THE JOINT VENTURE
On November 26, 2015, the Company and Ranosys Technologies Pvt. Ltd (Ranosys) agreed to enter into the Joint Venture through CreateApp India Pvt Ltd. (CreateApp), an India limited liability company of which the Company and Ranosys are 50% members. The results of operations of CreateApp from November 26, 2015 were not material. The Joint Venture was claimed to be not successful subsequently and changed into strategic software development cooperation.
NOTE 5 ACCRUALS AND OTHER PAYABLE
Accruals and other payable consisted of the following:
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|
|
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|
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As of December 31,
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|
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2016
|
|
2015
|
Accruals
|
$
|
177,949
|
$
|
301,675
|
Other payables
|
|
13,588
|
|
-
|
|
$
|
191,537
|
$
|
301,675
|
NOTE 6 - STOCKHOLDERS EQUITY
Common Shares
As of December 31, 2016 and 2015, authorized common shares of the Company consists of 250,000,000 shares with par value of $0.0001 each.
Issuance of Common Stock
F-11
During the period from January 1, 2015 to June 8, 2015, 580,067,155 shares with par value of $0.0001 per share were issued to various stockholders.
During the period from September 2, 2015 to December 31, 2015, 1,163,600 shares with par value of $ 0.0001 per share were issued for legal and professional services, and 10,838,764 shares with par value of $ 0.0001 per share were issued to various stockholders.
During the year ended December 31, 2016, 9,747,440 shares with par value of $ 0.0001 per share were issued to various stockholders.
Cancellation of Common Stock
During the year ended December 31, 2016, 1,598,000 shares with par value of $0.0001 per share were cancelled by various stockholders.
Stock Reverse Split
On September 1, 2015, the Board of Directors approved a reverse stock split of the Companys issued and outstanding shares of common stock, par value $0.0001 per share at a ratio of 1-for-1,000, as a result, the number of shares of the Companys authorized Common Stock was correspondingly reduced from 626,323,723 shares to 626,324 shares without changes in par value per share. The Company has retroactively restated all shares and per share data for all the periods presented.
Employee Stock Option Plan
The Company has a stock option and incentive plan, the
Stock Option Plan
. The exercise price for all equity awards issued under the Stock Option Plan is based on the fair market value of the common share price which is the closing price quoted on the Pink Sheets on the last trading day before the date of grant. The stock options generally vest on a monthly basis over a two-year to three-year period, and have a five year life.
Stock-Based Compensation
A summary of the Company
s stock option activity during the year ended December 31, 2016 is presented below:
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Number of options
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Weighted Average Exercise Price
|
Weighted Average Grant-date Fair Value
|
Weighted Average Remaining Contractual Life (Years)
|
Aggregate Intrinsic Value
|
Options Outstanding
, December 31, 2014
|
|
250,000
|
0.6
|
2.8
|
0.67
|
$0
|
Less: Option expired
|
|
(250,000)
|
0.6
|
2.8
|
|
|
Options Outstanding
, December 31, 2015
|
|
-
|
-
|
-
|
-
|
-
|
Options Outstanding
, December 31, 2016
|
|
-
|
-
|
-
|
-
|
-
|
All options outstanding are fully expired as of December 31, 2016. No new options were granted in the fiscal year 2016 or 2015.
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NOTE 7 EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per common share for the year ended December 31, 2016 and 2015, respectively:
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|
|
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|
| |
|
|
|
For the Years Ended December 31, 31,
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2016
|
|
|
2015
|
|
|
Numerator - basic and diluted
|
|
|
|
|
|
|
|
|
Net profit
|
|
$
|
566,948
|
|
$
|
733,721
|
|
|
Denominator
|
|
|
|
|
|
|
|
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Weighted average number of common shares outstanding basic and diluted
|
|
|
18,510,393
|
|
|
229,809,001
|
|
|
Profit per common share basic and diluted
|
|
$
|
0.031
|
|
$
|
0.003
|
|
|
NOTE 8 - INCOME TAXES
The Company and its subsidiaries file separate income tax returns.
The United States of America
Weyland Tech, Inc. is incorporated in the State of Delaware in the U.S., and is subject to a gradual U.S. federal corporate income tax of 15% to 35%. The Company generated taxable income for the year ended December 31, 2016 and 2015, and which is subject to U.S. federal corporate income tax rate of 34%, respectively.
Hong Kong
Weyland Tech Limited is incorporated in Hong Kong and Hong Kongs profits tax rate is 16.5%. Weyland Tech Limited did not earn any income that was derived in Hong Kong for the years ended December 31, 2016 and 2015, and therefore, Weyland Tech Limited was not subject to Hong Kong profits tax.
The Companys effective income tax rates were 34% and 39.8% for the years ended December 31, 2016 and 2015, respectively. Income tax mainly consists of foreign income tax at statutory rates and the effects of permanent and temporary differences.
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| |
|
For the year ended December 31,
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|
|
2016
|
|
|
2015
|
|
U.S. statutory tax rate
|
|
|
34.0%
|
|
|
|
34.0%
|
|
Hong Kong profit tax rate
|
|
|
16.5%
|
|
|
|
16.5%
|
|
Foreign income not registered in the Hong Kong
|
|
|
(16.5%)
|
|
|
|
(16.5%)
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|
Others
|
|
|
0.0%
|
|
|
|
5.8%
|
|
Effective tax rate
|
|
|
34.0%
|
|
|
|
39.8%
|
|
F-13
As of December 31, 2016 and 2015, the Company has a deferred tax asset of $229,479 and nil, resulting from certain net operating losses in U.S., respectively. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those net operating losses are available. The Company considers projected future taxable income and tax planning strategies in making its assessment. At present, the Company concludes that it is more-likely-than-not that the Company will be able to realize all of its tax benefits in the near future and therefore a valuation allowance has been provided for the full value of the deferred tax asset. A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion or all of the valuation allowance. As of December 31, 2016 and 2015, the valuation allowance was $714,964 and nil, respectively. $714,964 and nil of increase in the valuation allowance for each of the years ended December 31, 2016 and 2015, respectively.
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|
|
|
|
|
| |
|
|
|
As of December 31,
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|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset from operating losses carry-forwards
|
|
$
|
944,443
|
|
|
$
|
-
|
|
Valuation allowance
|
|
|
(714,964)
|
|
|
|
-
|
|
Deferred tax asset, net
|
|
$
|
229,479
|
|
|
$
|
-
|
|
NOTE 9 COMMITMENTS AND CONTINGENCIES
Operating lease
The Company did not have any operating lease as of December 31, 2016.
Legal proceedings
Other than as disclosed in Part I, Item 3 of the Companys 10-K above, as of December 31, 2016, the Company is not aware of any material outstanding claim and litigation against them.
NOTE 10 SUBSEQUENT EVENTS
The Company has evaluated all transactions from December 31, 2016 through the financial statement issuance date for subsequent event disclosure consideration and noted no significant subsequent event that needs to be disclosed.
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