Item 7.
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, 2016 and December 31, 2015 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. The resulting adjustment to our operating losses was
not reflected until fiscal 2016, when we incurred operating losses of $258,313
compared to $635,187 incurred during fiscal 2015.
Our plan of operations for fiscal 2017 includes the following
budgeted expenditures:
12 Month Capital Requirements Forecast
|
USD
2
|
|
Beginning January 1,
2017
|
Capital required for expansion plans
1
|
$1,000,000
|
Salaries
|
$115,000
|
Accounting and Legal Expenses
|
$75,000
|
Public company reporting costs
|
$17,500
|
Selling, general and administrative expense
|
$100,000
|
Contingency
|
$100,000
|
Total
|
$1,407,500
|
|
1.
|
Capital for plan to acquire factory in China, further
R&D expenses.
|
|
|
|
|
2.
|
Based on 2016 average exchange rate of
$0.128625.
|
As of April 17, 2017 we will require additional financing of
approximately $1,400,000 to execute our business strategy for fiscal 2017. 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,
2016 Compared to the Year Ended December 31, 2015
Results of Operation
Our operating results for the years ended December 31, 2016 and
2015 are summarized as follows:
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Sales, net
|
$
|
-
|
|
$
|
81,145
|
|
Cost of sales
|
$
|
-
|
|
$
|
72,145
|
|
Gross Profit(Loss)
|
$
|
-
|
|
$
|
9,000
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
$
|
258,313
|
|
$
|
644,187
|
|
Loss from operations
|
$
|
(258,313
|
)
|
$
|
(635,187
|
)
|
Total Other income (expenses)
|
$
|
(41,187
|
)
|
$
|
332,253
|
|
Provision for income taxes expense (benefit)
|
$
|
Nil
|
|
$
|
Nil
|
|
Net loss
|
$
|
(299,500
|
)
|
$
|
(302,934
|
)
|
Net loss attributable to non-controlling
interest
|
$
|
-
|
|
$
|
-
|
|
Net loss attributable to
TRANSAKT LTD.
|
$
|
(299,500
|
)
|
$
|
(302,934
|
)
|
Revenues & Cost of Sales
There was no sales revenue for the year ended December 31, 2016
compare to $81,145 from the same period in 2015. The decrease in net revenue was
primarily due to the disposal of Vegfab on June 30, 2015.
Cost of sales was zero for the year ended December 31, 2016
since the zero sales in 2016.
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended
December 31, 2016 totaled $258,313 compared to operating expenses of $644,187
during the year ended December 31, 2015 down by 60% The decrease in operating
expenses was primarily due to the disposal of Vegfab on June 30, 2015.
Loss from Operations
Loss from operations for the year ended December 31, 2016
totaled $258,313 compared to $635,187 from the same period in 2015 decreased by
$376,874. The decrease was primarily due to the disposal of Vegfab on June 30,
2015.
Other Income (expenses)
Other (expense) / income increased approximately $(373,440) to
$(41,187) for the year ended December 31, 2016 from $332,253 for the same period
in 2015. The increase in net other expense was primarily due to the increase in
interest expense on convertible note and decrease of gain on disposal of
investments.
Net loss
As a result of the above factors, we have net loss attributable
to the Companys common stockholders of approximately $299,500 for the year
ended December 31, 2016 as compared to a loss of $302,934 for the year ended
December 31, 2015, representing a decrease of approximately $3,434.
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,
|
|
|
|
2016
|
|
|
2015
|
|
Current assets
|
$
|
648,601
|
|
$
|
114,681
|
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
1,063,504
|
|
$
|
234,373
|
|
|
|
|
|
|
|
|
Working capital
|
$
|
(414,903
|
)
|
$
|
(119,692
|
)
|
Cash Flows
|
|
Fiscal year ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Net cash used in operating
activities
|
$
|
277,938
|
|
$
|
508,656
|
|
Net cash used in investing activities
|
$
|
-
|
|
$
|
628
|
|
Net cash provided by
financing activities
|
$
|
809,000
|
|
$
|
460,523
|
|
Net cash flow used in operating activities was $277,938 in
2016, compared to $508,656 in 2015, a decrease of $230,718. The decrease in net
cash flow used in operating activities was mainly due to the disposal of Vegfab
in June 30, 2015.
There is no net cash flow used in investing activities for
2016, compared to net cash flow used in investing activities of $628 for 2015, a
decrease of $628.
Net cash flow provided by financing activities was $809,000 for
2016, compared to net cash flow provided by financing activities of $460,523 for
2015, an increase of $348,477. The increase in net cash flow provided by
financing activities of continuing operations in 2016 was mainly due to the
issuance of convertible note to our CEO-Mr. Ho for one million during 2016.
Our working capital was ($414,903) as of December 31, 2016
compared to ($119,692) as of December 31, 2015.
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 $0 and $628 for the years ended December 31, 2016 and 2015, respectively.
Currency Exchange Fluctuations
The Company financial statements are presented in the U.S. dollar ($), which is the Company’s 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 $277,938 for the year ended December 31, 2016. 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 $1,400,000 to sustain our current operations and market our products effectively.
Research and Development
No significant research and development expenses were incurred in 2016 or 2015.
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.
Going Concern
We has incurred a net loss attributable to the Company’s common stockholders of $299,500 and $302,934 during the years ended December 31, 2016 and 2015, respectively, and has an accumulated deficit of $22,129,586 and
$21,830,086 as of December 31, 2016 and December 31, 2015, 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 Company’s 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, 2016, 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 company’s operations into China,
expanding product lines and recruiting a strong sales team to significantly increase sales revenue and profit in 2017; (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 Company’s revenues are recorded upon confirmed
acceptance after inspection by the customers of the Company.
Exchange Gain (Loss):
During the years ended December 31, 2016 and 2015, 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 Company’s 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.
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 Company’s 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 Company’s 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 Company’s expected volatility assumption is based on the historical volatility of Company’s 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.
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 ASU affects public and private companies, not-for-profit organizations, and
employee benefit plans that hold financial assets or owe financial liabilities.
The new guidance makes targeted improvements to existing U.S.
GAAP by:
-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 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;
-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;
-Eliminating the requirement to disclose the fair value of
financial instruments measured at amortized cost for organizations that are not
public business entities;
-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
-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. For private companies, not-for-profit organizations, and employee
benefit plans, the new guidance becomes effective for fiscal years beginning
after December 15, 2018, and for interim periods within fiscal years beginning after December 15, 2019.
The new guidance permits early adoption of the own credit
provision. In addition, the new guidance permits early adoption of the provision
that exempts private companies and not-for-profit organizations from having to
disclose fair value information about financial instruments measured at
amortized cost.
The FASB has issued Accounting Standards Update No. 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting
. The amendments are intended to improve the
accounting for employee share-based payments and affect all organizations that
issue share-based payment awards to their employees.
Several aspects of the accounting for share-based payment award
transactions are simplified, including: (
a
) income tax consequences;
(
b
) classification of awards as either equity or liabilities; and
(
c
) classification on the statement of cash flows.
The amendments also simplify two areas specific to private
companies:
1. Practical Expedient for Expected Term: In lieu of estimating
the period of time that a share-based award will be outstanding, private
companies can now apply a practical expedient to estimate the expected term for
all awards with performance or service conditions that have certain
characteristics.
2. Intrinsic Value: Private companies can now make a one-time
election to switch from measuring all liability-classified awards at fair value
to measuring them at intrinsic value. Previously, private companies were
provided an option to measure all liability-classified awards at intrinsic
value, but some private companies were unaware of that option.
Accounting for employee share-based awards was identified by
the Private Company Council (PCC) as an area of concern among private company
stakeholders. The PCC worked with the FASB to discuss and analyze the issues
that private companies have encountered in this area when applying the standard.
The PCC also asked the FASB staff to conduct outreach with users as a part of
the FASBs pre-agenda research on the topic.
The FASB also considered the conclusions in the Financial
Accounting Foundations Post-Implementation Review Report on Statement 123(R),
Share-Based Payment
. Though the report concluded that the prior standard
achieved its purpose, it noted that certain areas within Statement 123(R) may be
costly and difficult to apply.
For public companies, the amendments are effective for annual
periods beginning after December 15, 2016, and interim periods within those
annual periods. For private companies, the amendments are effective for annual
periods beginning after December 15, 2017, and interim periods within annual
periods beginning after December 15, 2018. Early adoption is permitted for any
organization in any interim or annual period.
The FASB has issued Accounting Standards Update (ASU) No.
2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments,
to address diversity in how certain cash
receipts and cash payments are presented and classified in the statement of cash
flows.
The amendments provide guidance on the following eight specific
cash flow issues:
-
Debt Prepayment or Debt Extinguishment Costs;
-
Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with
Coupon Interest Rates That Are Insignificant in Relation to the Effective
Interest Rate of the Borrowing;
-
Contingent Consideration Payments Made after a Business Combination;
-
Proceeds from the Settlement of Insurance Claims;
-
Proceeds from the Settlement of Corporate-Owned Life Insurance Policies,
including Bank-Owned;
-
Life Insurance Policies;
-
Distributions Received from Equity Method Investees;
-
Beneficial Interests in Securitization Transactions; and
-
Separately Identifiable Cash Flows and Application of the Predominance
Principle.
The amendments are effective for public business entities for
fiscal years beginning after December 15, 2017, and interim periods within those
fiscal years. For all other entities, the amendments are effective for fiscal
years beginning after December 15, 2018, and interim periods within fiscal years
beginning after December 15, 2019. Early adoption is permitted, including
adoption in an interim period.
The amendments should be applied using a retrospective
transition method to each period presented. If it is impracticable to apply the
amendments retrospectively for some of the issues, the amendments for those
issues would be applied prospectively as of the earliest date practicable.
FASB Amends the Accounting for Intra-Entity Transfers of
Assets.
The FASB has issued Accounting Standards Update No. 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than
Inventory
. Current GAAP prohibits the recognition of current and deferred
income taxes for an intra-entity asset transfer until the asset has been sold to
an outside party. This prohibition on recognition is an exception to the
principle of comprehensive recognition of current and deferred income taxes in
GAAP.
The amendments require an entity to recognize the income tax
consequences of an intra-entity transfer of an asset other than inventory when
the transfer occurs. The amendments eliminate the exception for an intra-entity
transfer of an asset other than inventory. Two common examples of assets
included in the scope of the amendments are intellectual property and property,
plant, and equipment.
The amendments do not include new disclosure requirements;
however, existing disclosure requirements might be applicable when accounting
for the current and deferred income taxes for an intra-entity transfer of an
asset other than inventory.
The amendments align the recognition of income tax consequences
for intra-entity transfers of assets other than inventory with International
Financial Reporting Standards. IAS 12,
Income Taxes
, requires recognition
of current and deferred income taxes resulting from an intra-entity transfer of
any asset (including inventory) when the transfer occurs.
The amendments are effective for public business entities for
annual reporting periods beginning after December 15, 2017, including interim
reporting periods within those annual reporting periods. For all other entities,
the amendments are effective for annual reporting periods beginning after
December 15, 2018, and interim reporting periods within annual periods beginning
after December 15, 2019. Early adoption is permitted for all entities in the
first interim period if an entity issues interim financial statements.
The amendments should be applied on a modified retrospective
basis through a cumulative-effect adjustment directly to retained earnings as of
the beginning of the period of adoption.
The FASB has issued Accounting Standards Update (ASU) No.
2016-19,
Technical Corrections and Improvements.
The amendments cover a
wide range of Topics in the Accounting Standards Codification. The amendments
generally fall into one of the types of categories listed below.
-
Amendments related to differences between original guidance (e.g., FASB
Statements, EITF Issues, etc.) and the Codification. These amendments
principally carry forward pre-Codification guidance or subsequent amendments
into the Codification. Many times, either the writing style or phrasing of the
original guidance did not directly translate into the Codification format and
style. As a result, the meaning of the guidance might have been
unintentionally altered. Alternatively, amendments in this category may relate
to guidance that was codified without some text, reference, or phrasing that,
upon review, was deemed important to the guidance.
-
Guidance clarification and reference corrections that provide clarification
through updating wording, correcting references, or a combination of both. In
most cases, the feedback suggested that, without these enhancements, guidance
may be misapplied.
-
Simplification amendments that streamline or simplify the Codification
through minor structural changes to headings or minor editing of text to
improve the usefulness and understandability of the Codification.
-
Minor improvements to the guidance that are not expected to have a
significant effect on current accounting practice or create a significant
administrative cost to most entities.
Tabular Disclosure of Contractual Obligations
Operating Leases
We were not party to any leases agreement during the year ended
December 31, 2016.
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, 2016 AND 2015 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, 2016 and
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, 2016 and 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 $(22,129,586) at December 31, 2016, including net loss of $299,500 during the
years ended December 31, 2016. 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/ Centurion ZD CPA Limited
Hong Kong, SAR
April 17, 2017
F-1
TRANSAKT LTD.
CONSOLIDATED BALANCE SHEETS
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and
cash equivalents
|
$
|
638,601
|
|
$
|
103,250
|
|
Prepayments
|
|
10,000
|
|
|
11,431
|
|
Total Current Assets
|
|
648,601
|
|
|
114,681
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
648,601
|
|
$
|
114,681
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accrued
expenses
|
$
|
63,504
|
|
$
|
43,373
|
|
Amount due to a director
|
|
-
|
|
|
191,000
|
|
Convertible Promissory
Note
|
|
1,000,000
|
|
|
-
|
|
Total Current Liabilities
|
|
1,063,504
|
|
|
234,373
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
1,063,504
|
|
|
234,373
|
|
|
|
|
|
|
|
|
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, 28,439,904 shares and 30,672,404*
shares
issued and outstanding at December 31,
2016
and
2015*, respectively
|
|
28,440
|
|
|
30,672
|
|
Additional paid-in
capital
|
|
23,319,411
|
|
|
25,117,179
|
|
Accumulated deficit
|
|
(22,129,586
|
)
|
|
(21,830,086
|
)
|
Other comprehensive
income
|
|
(433,168
|
)
|
|
(437,457
|
)
|
Stock
subscription receivable
|
|
(1,200,000
|
)
|
|
(1,200,000
|
)
|
Treasury stock,
common stock, at cost, 0 share and
2,232,500* shares at December 31, 2016 and 2015*, respectively
|
|
-
|
|
|
(1,800,000
|
)
|
|
|
|
|
|
|
|
Total Stockholders'
Equity
|
|
(414,903
|
)
|
|
(119,692
|
)
|
|
|
|
|
|
|
|
Total Equity
|
|
(414,903
|
)
|
|
(119,692
|
)
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
$
|
648,601
|
|
$
|
114,681
|
|
The accompanying notes are an integral part of the financial
statements
* All shares outstanding for all periods have been retroactively
restated to reflect TransAKTs 1-for-20 reverse stock split, which was effective
on June 23, 2016.
F-2
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF
OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Sales, net
|
$
|
-
|
|
$
|
81,145
|
|
Cost of sales
|
|
-
|
|
|
72,145
|
|
|
|
|
|
|
|
|
Gross profit
|
|
-
|
|
|
9,000
|
|
Selling, general and administrative
expenses
|
|
258,313
|
|
|
644,187
|
|
Loss from operations
|
|
(258,313
|
)
|
|
(635,187
|
)
|
Other income (expense)
|
|
|
|
|
|
|
Interest expense
|
|
(37,333
|
)
|
|
(38
|
)
|
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
loss
|
|
(3,854
|
)
|
|
(13
|
)
|
Other income
|
|
-
|
|
|
36,099
|
|
Total other income
|
|
(41,187
|
)
|
|
332,253
|
|
Loss before income taxes
|
|
(299,500
|
)
|
|
(302,934
|
)
|
Provision for income taxes expense (benefit)
|
|
-
|
|
|
-
|
|
Net loss
|
|
(299,500
|
)
|
|
(302,934
|
)
|
Net loss attributable to TRANSAKT LTD.
|
$
|
(299,500
|
)
|
$
|
(302,934
|
)
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
Basic and diluted income (loss) common
stockholders per share*
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding:
|
|
|
|
|
|
|
Basic and diluted
|
|
22,670,938
|
|
|
30,672,404
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
Net profits (loss)
|
$
|
(299,500
|
)
|
$
|
(302,934
|
)
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
4,289
|
|
|
47,178
|
|
Comprehensive income (loss)
|
|
(295,211
|
)
|
|
(255,756
|
)
|
Comprehensive income (loss) attributable to
TRANSAKT LTD.
|
$
|
(295,211
|
)
|
$
|
(255,756
|
)
|
The accompanying notes are an integral part of the financial
statements
* All shares outstanding for all periods have been retroactively
restated to reflect TransAKTs 1-for-20 reverse stock split, which was effective
on June 23, 2016.
F-3
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS
DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2016
|
|
Common Stock
|
|
|
Additional
|
|
|
Stock
|
|
|
Accumulated
|
|
|
Other
|
|
|
Treasury
|
|
|
Stock at
|
|
|
Non-
|
|
|
Total
|
|
|
|
Shares*
|
|
|
Amount*
|
|
|
Paid-in
|
|
|
Subscription
|
|
|
Deficit
|
|
|
Comprehensive
|
|
|
Shares*
|
|
|
Cost
|
|
|
controlling
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital*
|
|
|
Receivable
|
|
|
|
|
|
Income
|
|
|
|
|
|
Amount
|
|
|
Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
30,672,404
|
|
$
|
30,672
|
|
$
|
25,117,179
|
|
$
|
(1,200,000
|
)
|
$
|
(21,514,222
|
)
|
$
|
(484,635
|
)
|
|
(2,232,500
|
)
|
$
|
(1,800,000
|
)
|
$
|
(12,930
|
)
|
$
|
136,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposal of subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,930
|
)
|
|
|
|
|
|
|
|
|
|
|
12,930
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(302,934
|
)
|
|
47,178
|
|
|
|
|
|
|
|
|
|
|
|
(255,756
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
30,672,404
|
|
$
|
30,672
|
|
$
|
25,117,179
|
|
$
|
(1,200,000
|
)
|
$
|
(21,830,086
|
)
|
$
|
(437,457
|
)
|
|
(2,232,500
|
)
|
$
|
(1,800,000
|
)
|
$
|
-
|
|
$
|
(119,692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of treasury shares
|
|
(2,232,500
|
)
|
|
(2,232
|
)
|
|
(1,797,768
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,232,500
|
|
|
1,800,000
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(299,500
|
)
|
|
4,289
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(295,211
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
28,439,904
|
|
$
|
28,440
|
|
$
|
23,319,411
|
|
$
|
(1,200,000
|
)
|
$
|
(22,129,586
|
)
|
$
|
(433,168
|
)
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
(414,903
|
)
|
* All shares outstanding for all periods have been retroactively
restated to reflect TransAKTs 1-for-20 reverse stock split, which was effective
on June 23, 2016.
The accompanying notes are an integral part of the financial
statements
F-4
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
|
|
2016
|
|
|
2015
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net profits (loss) available to common stockholders
|
$
|
(299,500
|
)
|
$
|
(302,934
|
)
|
Adjustments to reconcile
net loss to net cash used in operating activities:
|
|
|
|
|
|
|
Loss on
disposal of investments
|
|
-
|
|
|
1,000,000
|
|
Gain on disposal of
investments
|
|
-
|
|
|
(1,283,275
|
)
|
Bad debt
expense
|
|
-
|
|
|
401,550
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
Decrease (Increase) in
accounts receivable
|
|
-
|
|
|
453,758
|
|
Decrease (Increase) Increase in other
receivable
|
|
-
|
|
|
26,899
|
|
Decrease (Increase) in
inventory
|
|
-
|
|
|
61,639
|
|
Decrease (Increase) in advance to
suppliers
|
|
-
|
|
|
113,924
|
|
Decrease (Increase) in
prepayments
|
|
1,431
|
|
|
68,867
|
|
Decrease (Increase) in deposits
|
|
-
|
|
|
32,029
|
|
Increase (Decrease) in
accounts payable and accrued expenses
|
|
20,131
|
|
|
(1,081,113
|
)
|
Net cash used in
operating activities
|
|
(277,938
|
)
|
|
(508,656
|
)
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Restricted cash
|
|
-
|
|
|
(628
|
)
|
Net cash used in
investing activities
|
|
-
|
|
|
(628
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Non-controlling interest
|
|
-
|
|
|
(12,930
|
)
|
Repayment of loan from
others
|
|
-
|
|
|
285,365
|
|
Net
proceeds of short-term loans from shareholders
|
|
-
|
|
|
(2,912
|
)
|
Net repayment of amount
due to shareholders
|
|
(191,000
|
)
|
|
191,000
|
|
Proceeds
from issuance of Convertible Promissory Note
|
|
1,000,000
|
|
|
-
|
|
Net cash provided by
financing activities
|
|
809,000
|
|
|
460,523
|
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
4,289
|
|
|
(56,911
|
)
|
|
|
|
|
|
|
|
Net increase (decrease) in
cash and cash equivalents
|
|
535,351
|
|
|
(105,672
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning
|
|
103,250
|
|
|
208,922
|
|
Ending
|
$
|
638,601
|
|
$
|
103,250
|
|
|
|
|
|
|
|
|
Supplemental disclosure of
cash flows
|
|
|
|
|
|
|
Cash paid during the year
for:
|
|
|
|
|
|
|
Interest expense
|
$
|
37,333
|
|
$
|
38
|
|
Non-cash transactions:
|
|
|
|
|
|
|
Gain
on written-off of non-controlling interest
|
$
|
-
|
|
$
|
(12,930
|
)
|
The accompanying notes are an integral part of the financial
statements
F-5
TRANSAKT LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016
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 12).
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.
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.
F-6
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 $299,500 and $302,934
during the years ended December 31, 2016 and 2015, respectively, and has an
accumulated deficit of $22,129,586 and $21,830,086 as of December 31, 2016 and
December 31, 2015, 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, 2016, 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 2017; (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.
F-7
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, 2016 and 2015, 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.
F-8
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.
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.
F-9
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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.
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.
Recent accounting pronouncements
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 ASU affects public and private companies, not-for-profit organizations, and
employee benefit plans that hold financial assets or owe financial liabilities.
The new guidance makes targeted improvements to existing U.S.
GAAP by:
-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 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;
F-10
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent accounting pronouncements
-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;
-Eliminating the requirement to disclose the fair value of
financial instruments measured at amortized cost for organizations that are not
public business entities;
-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
-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. For private companies, not-for-profit organizations, and employee
benefit plans, the new guidance becomes effective for fiscal years beginning
after December 15, 2018, and for interim periods within fiscal years beginning
after December 15, 2019.
The new guidance permits early adoption of the own credit
provision. In addition, the new guidance permits early adoption of the provision
that exempts private companies and not-for-profit organizations from having to
disclose fair value information about financial instruments measured at
amortized cost.
The FASB has issued Accounting Standards Update No. 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting
. The amendments are intended to improve the
accounting for employee share-based payments and affect all organizations that
issue share-based payment awards to their employees.
Several aspects of the accounting for share-based payment award
transactions are simplified, including: (
a
) income tax consequences;
(
b
) classification of awards as either equity or liabilities; and
(
c
) classification on the statement of cash flows.
The amendments also simplify two areas specific to private
companies:
1. Practical Expedient for Expected Term: In lieu of estimating
the period of time that a share-based award will be outstanding, private
companies can now apply a practical expedient to estimate the expected term for
all awards with performance or service conditions that have certain
characteristics.
2. Intrinsic Value: Private companies can now make a one-time
election to switch from measuring all liability-classified awards at fair value
to measuring them at intrinsic value. Previously, private companies were
provided an option to measure all liability-classified awards at intrinsic
value, but some private companies were unaware of that option.
Accounting for employee share-based awards was identified by
the Private Company Council (PCC) as an area of concern among private company
stakeholders. The PCC worked with the FASB to discuss and analyze the issues
that private companies have encountered in this area when applying the standard.
The PCC also asked the FASB staff to conduct outreach with users as a part of
the FASBs pre-agenda research on the topic.
F-11
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent accounting pronouncements
The FASB also considered the conclusions in the Financial
Accounting Foundations Post-Implementation Review Report on Statement 123(R),
Share-Based Payment
. Though the report concluded that the prior standard
achieved its purpose, it noted that certain areas within Statement 123(R) may be
costly and difficult to apply.
For public companies, the amendments are effective for annual
periods beginning after December 15, 2016, and interim periods within those
annual periods. For private companies, the amendments are effective for annual
periods beginning after December 15, 2017, and interim periods within annual
periods beginning after December 15, 2018. Early adoption is permitted for any
organization in any interim or annual period.
The FASB has issued Accounting Standards Update (ASU) No.
2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments,
to address diversity in how certain cash
receipts and cash payments are presented and classified in the statement of cash
flows.
The amendments provide guidance on the following eight specific
cash flow issues:
-
Debt Prepayment or Debt Extinguishment Costs;
-
Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with
Coupon Interest Rates That Are Insignificant in Relation to the Effective
Interest Rate of the Borrowing;
-
Contingent Consideration Payments Made after a Business Combination;
-
Proceeds from the Settlement of Insurance Claims;
-
Proceeds from the Settlement of Corporate-Owned Life Insurance Policies,
including Bank-Owned;
-
Life Insurance Policies;
-
Distributions Received from Equity Method Investees;
-
Beneficial Interests in Securitization Transactions; and
-
Separately Identifiable Cash Flows and Application of the Predominance
Principle.
The amendments are effective for public business entities for
fiscal years beginning after December 15, 2017, and interim periods within those
fiscal years. For all other entities, the amendments are effective for fiscal
years beginning after December 15, 2018, and interim periods within fiscal years
beginning after December 15, 2019. Early adoption is permitted, including
adoption in an interim period.
The amendments should be applied using a retrospective
transition method to each period presented. If it is impracticable to apply the
amendments retrospectively for some of the issues, the amendments for those
issues would be applied prospectively as of the earliest date practicable.
F-12
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent accounting pronouncements
FASB Amends the Accounting for Intra-Entity Transfers of
Assets.
The FASB has issued Accounting Standards Update No. 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than
Inventory
. Current GAAP prohibits the recognition of current and deferred
income taxes for an intra-entity asset transfer until the asset has been sold to
an outside party. This prohibition on recognition is an exception to the
principle of comprehensive recognition of current and deferred income taxes in
GAAP.
The amendments require an entity to recognize the income tax
consequences of an intra-entity transfer of an asset other than inventory when
the transfer occurs. The amendments eliminate the exception for an intra-entity
transfer of an asset other than inventory. Two common examples of assets
included in the scope of the amendments are intellectual property and property,
plant, and equipment.
The amendments do not include new disclosure requirements;
however, existing disclosure requirements might be applicable when accounting
for the current and deferred income taxes for an intra-entity transfer of an
asset other than inventory.
The amendments align the recognition of income tax consequences
for intra-entity transfers of assets other than inventory with International
Financial Reporting Standards. IAS 12,
Income Taxes
, requires recognition
of current and deferred income taxes resulting from an intra-entity transfer of
any asset (including inventory) when the transfer occurs.
The amendments are effective for public business entities for
annual reporting periods beginning after December 15, 2017, including interim
reporting periods within those annual reporting periods. For all other entities,
the amendments are effective for annual reporting periods beginning after
December 15, 2018, and interim reporting periods within annual periods beginning
after December 15, 2019. Early adoption is permitted for all entities in the
first interim period if an entity issues interim financial statements.
The amendments should be applied on a modified retrospective
basis through a cumulative-effect adjustment directly to retained earnings as of
the beginning of the period of adoption.
The FASB has issued Accounting Standards Update (ASU) No.
2016-19,
Technical Corrections and Improvements.
The amendments cover a
wide range of Topics in the Accounting Standards Codification. The amendments
generally fall into one of the types of categories listed below.
F-13
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent accounting pronouncements
-
Amendments related to differences between original guidance (e.g., FASB
Statements, EITF Issues, etc.) and the Codification. These amendments
principally carry forward pre-Codification guidance or subsequent amendments
into the Codification. Many times, either the writing style or phrasing of the
original guidance did not directly translate into the Codification format and
style. As a result, the meaning of the guidance might have been
unintentionally altered. Alternatively, amendments in this category may relate
to guidance that was codified without some text, reference, or phrasing that,
upon review, was deemed important to the guidance.
-
Guidance clarification and reference corrections that provide clarification
through updating wording, correcting references, or a combination of both. In
most cases, the feedback suggested that, without these enhancements, guidance
may be misapplied.
-
Simplification amendments that streamline or simplify the Codification
through minor structural changes to headings or minor editing of text to
improve the usefulness and understandability of the Codification.
-
Minor improvements to the guidance that are not expected to have a
significant effect on current accounting practice or create a significant
administrative cost to most entities.
NOTE 3 CONVERTIBLE PROMISSORY NOTE
Convertible Promissory Note consists of the following:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Convertible Promissory Note
|
|
1,000,000
|
|
|
-
|
|
|
$
|
1,000,000
|
|
$
|
-
|
|
On July 15, 2016, the Company entered into Securities Purchase
Agreement with the President, Chief Executive Officer and Director, Mr. Ho
Kang-Wing, Pursuant to the agreement the Company issued to Mr. Ho a Convertible
Promissory Note in consideration of $1,000,000 in cash. An interest rate is 8%
per annum. Maturity date is July 14, 2018. The fair value measurement of the
convertible promissory note was recorded in carrying amount because the
convertible promissory note was issued to the existing shareholder, the current
fair value calculation models did not reflect the fair value of the note in this
transaction and this note was subsequently converted to common stock on February
28, 2017.
NOTE 4 PREPAYMENTS
Prepayments consist of the following:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Prepaid expenses
|
|
10,000
|
|
|
11,431
|
|
|
$
|
10,000
|
|
$
|
11,431
|
|
F-14
NOTE 5 ACCRUED EXPENSES
Accrued expenses consist of the following:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Accrued payroll
|
$
|
-
|
|
$
|
11,355
|
|
Accrued employee benefits and pension
expenses
|
|
-
|
|
|
386
|
|
Accrued professional fees
|
|
26,171
|
|
|
30,030
|
|
Accrued interest expenses
|
|
37,333
|
|
|
-
|
|
Others
|
|
-
|
|
|
1,602
|
|
|
$
|
63,504
|
|
$
|
43,373
|
|
NOTE 6 - RELATED PARTY TRANSACTIONS
Related party transaction
On July 15, 2016, the Company entered into Securities Purchase
Agreement with the President, Chief Executive Officer and Director, Mr. Ho
Kang-Wing, Pursuant to the agreement the Company issued to Mr. Ho a Convertible
Promissory Note in consideration of $1,000,000 in cash. An interest rate is 8%
per annum. Maturity date is July 14, 2018. (see Note 3)
There was no related party transaction for the year ended
December 31, 2016.
Due to 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, 2016 and
2015, there was $Nil and $191,000 advances outstanding.
Interest expense of $37,333 for convertible promissory note was
accrued under accrued expenses as of December 31, 2016. The interest expense was
payable to Mr. Ho Kang-Wing, the President, Chief Executive Officer and Director
of the Company.
NOTE 7 INCOME TAXES
The Company is registered in the State of Nevada and has
operations in primarily two tax jurisdictions -The United States and Hong Kong.
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,
2016 and 2015. Accordingly, the Company has no net deferred tax assets on the
U.S. operations.
United States of America
For the year ended December 31, 2016, the Company had net
operating loss carry-forwards of approximately $1,281,924 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.
F-15
The provision for Federal income tax consists of the following
years ended December 31:
|
|
2016
|
|
|
2015
|
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
Current Operations
|
$
|
146,326
|
|
$
|
478,497
|
|
Less: Valuation allowance
|
|
(
146,326
|
)
|
|
(479,497
|
)
|
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, 2016 and 2015 are as
follows:
U.S:
|
|
2016
|
|
|
2015
|
|
Deferred tax asset non-current:
|
|
|
|
|
|
|
Net operating loss carry forward
|
$
|
1,281,924
|
|
$
|
1,135,598
|
|
Valuation allowance
|
|
(1,281,924
|
)
|
|
(1,135,598
|
)
|
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, 2016 and 2015:
|
|
2016
|
|
2015
|
|
U.S. Federal tax at statutory rate
|
34%
|
|
34%
|
|
Valuation allowance
|
(34%)
|
|
(34%)
|
|
Foreign income tax- HK
|
16.5%
|
|
16.5%
|
|
Other (a)
|
(16.5%)
|
|
(16.5%)
|
|
Effective tax rate
|
0%
|
|
0%
|
(a) Other represents expenses incurred
by the Company that are not deductible for HK income taxes and changes in
valuation allowance for HK entities for the years ended December 31, 2016 and
2015.
F-16
NOTE 8 COMMITMENTS
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 $0 and $2,078 for the years ended December 31, 2016 and 2015,
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, 2016, the Company did not have any sale-leaseback transaction.
NOTE 9- 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 12).
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.
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;
|
F-17
|
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;
|
On June 23, 2016, the company made a stock reverse split of 20
to 1. The issued and outstanding common stock was consolidated from 613,447,306
shares to 30,672,404 shares with fractional share round up to 1 share.
On October 4, 2016, the company cancelled the treasury stock of
common shares 2,232,500.
NOTE 10 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)
|
|
1.50
|
|
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
|
|
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:
F-18
(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, 2016 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,
2016
|
|
-
|
|
$
|
-
|
|
|
|
|
|
Granted- Before reverse split
|
|
1,000,000
|
|
|
0.03
|
|
|
|
|
|
Granted- After
reverse split
|
|
50,000
|
|
|
0.6
|
|
|
|
|
|
Expired
|
|
-
|
|
|
-
|
|
|
|
|
|
Forfeited
|
|
-
|
|
|
-
|
|
|
|
|
|
Outstanding as of December 31, 2016
|
|
50,000
|
|
|
0.6
|
|
|
1.5
|
|
|
Exercisable as of December
31, 2016
|
|
50,000
|
|
|
0.6
|
|
|
1.5
|
|
|
Vested and expected to vest
|
|
50,000
|
|
|
0.6
|
|
|
1.5
|
|
As of December 31, 2016, the aggregate intrinsic value of
options outstanding was $0.
F-19
NOTE 11 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, 2016
|
|
|
December 31, 2015
|
|
Beginning Balance
|
$
|
-
|
|
$
|
(12,930
|
)
|
Gain on written-off of non-controlling
interest
|
|
-
|
|
|
12,930
|
|
|
$
|
-
|
|
$
|
-
|
|
NOTE 12 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
|
|
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.
F-20
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 13 EARNINGS PER SHARE
The Company calculates earnings per share in accordance with
ASC 260, Earnings Per Share, which requires a dual presentation of basic and
diluted earnings per share. Basic earnings per share are computed using the
weighted average number of shares outstanding during the fiscal year. The
following table sets forth the computation of basic and diluted net income per
common share: The following table sets forth the computation of basic and
diluted net income per common share:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Numerator
|
|
|
|
|
|
|
Net
(loss)/income
|
$
|
(299,500
|
)
|
$
|
(302,934
|
)
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
Weighted average shares Basic EPS
|
|
|
|
|
|
|
Weighted average shares Diluted EPS
|
|
|
|
|
|
|
|
|
22,670,938
|
|
|
30,672,404
|
|
Net income (loss) per share Basic and
Diluted
|
|
|
|
|
|
|
EPS - basic and diluted
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
NOTE 14 SUBSEQUENT EVENTS
The Company evaluated all events or transactions that occurred
after December 31, 2016 up through the date the Company issued these financial
statements.
On February 28, 2017, Mr. Ho Kangwing (the holder of
convertible promissory note) elected to convert the entire outstanding amount of
the Note into 105,066,666 common shares of the Company including the accumulated
interest. Therefore, the issued and outstanding common shares of the Company
were increased to 133,506,570 shares at that date.
F-21