NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS DESCRIPTION
Weyland Techs CreateApp platform enables small-medium-sized businesses ("SMBs") to create a mobile application ("app") without the need of technical knowledge, high investment or background in IT.
We believe that SMBs can increase sales, reach more customers and promote their products and services via a simple easy to build mobile app at an affordable price and in a cost-effective manner.
On April 23, 2018, The Company completed the incorporation of PT Weyland Indonesia Perkasa (WIP), a company incorporated in Indonesia. WIP is the corporate entity used for the eWallet business, AtoZPay.
Digital Wallet or eWallet a digital financial services business, a distinguishing characteristic of GSEA compared to the United States is the substantially lower percentage of the population with bank accounts, credit cards, or debit cards. This creates the need for alternative payment methods, specifically e-wallets. GSEA is poised for its own payments transformation in much the same way that China has shifted to online payments, according to IDC. Online payments in GSEA is divided into four broad payment modes: e-wallets, such as our AtoZPay platform, credit cards, debit cards and online banking. Of these, the e-wallet mode is expected to grow the fastest over the next five years, according to IDC. Drivers for GSEAs e-wallet industry include the mismatch between internet penetration and banking penetration, which creates a structural opportunity for e-wallets; the increasing integration of e-wallets with use cases such as online games and e-commerce; and the opportunity to offer broader digital financial services using e-wallets as a foundation.
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
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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 is focused on mobile commerce enablement via our enhanced platform built in 2017, and offered on a Platform-as-a-Service (PaaS) basis, and the companys e-wallet initiative. 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.
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.
ASSOCIATES
Associates are all entities over which the group has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. The groups investment in associates includes goodwill identified on acquisition. The groups share of its associates post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised as a reduction in the carrying amount of the investment. Where the groups share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, the group
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does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the group and its associates are eliminated to the extent of the groups interest in the associates. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed, where necessary, to ensure consistency with the policies adopted by the group.
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 on a usage basis.
As of December 31, 2017, sales included a concentration from a major customer although accounts receivable had a nil balance.
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 six months or less and are readily convertible to known amounts of cash.
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 Companys CreateApp Platform operates as a Platform as a Service (PaaS) by providing the infrastructure allowing users to develop their own applications and IT services, which users can access anywhere via a web or desktop browser. The Company recognizes revenue on a pay to use subscription basis when our customers use our platform. For the territories licensed to our distributors and on a white label basis, we derive royalty income from the end user use of our platform on a white label basis.
The Company maintains the CreateApp software platform at its own cost. Any enhancements and minor customization for our resellers/distributors are not separately billed. Major new proprietary features are billed to the customer separately as Development income while re-usable features are
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added to the features available to all customers on subsequent releases of our platform.
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 2017, the FASB has issued Accounting Standards Update (ASU) No. 2017-01, 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 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 2017, the FASB issued ASU 2017-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2017-02 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 2017-02 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.
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In April 2017, the FASB released ASU 2017-09, 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, 2017, 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 2017, FASB issued Accounting Standards Update No. 2017-10, 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, 2017, 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 2017, the FASB issued ASU No. 2017-11 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, 2017 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.
In May 2017, FASB issued ASU No. 2017-12Revenue 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 2017, the FASB issued ASU No. 2017-15, 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 2017, the FASB issued ASU No. 2017-17, 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, 2017, 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.
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In November 2017, the FASB issued ASU No. 2017-18, "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 June 30, 2018 and 2017, the company has the following amounts related to intangible assets:
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As of June 30,
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2018
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2017
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Software acquired
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$
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1,764,330
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$
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1,764,330
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Other intangible assets
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5,000
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5,000
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1,769,330
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1,769,330
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Less: accumulated amortization
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963,166
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611,233
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Net intangible assets
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$
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806,164
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$
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1,158,097
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No significant residual value is estimated for these intangible assets. Amortization expense for six months ended June 30, 2018 and 2017 totaled $175,966 for both periods.
NOTE 4 INVESTMENT IN ASSOCIATE
On April 23, 2018, the Company participated in the incorporation of a company in Indonesia with the name of PT Weyland Perkasa Indonesia (WIP), an Indonesian limited liability company of which the Company holds a 49% equity interest. The results of operations of WIP from April 23, 2018 to June 30, 2018, was not material and have not been included.
The following amounts are outstanding at June 30, 2018:
Deposits paid for new AtoZ Payment platform of WIP
1,668,138
Amount due from WIP
542,000
________
2,210,138
NOTE 5 ACCRUALS AND OTHER PAYABLE
Accruals and other payable consisted of the following:
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As of June 30,
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2018
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2017
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Accruals
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$
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219,985
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$
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289,070
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Other payables
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5,513
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121,316
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$
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225,498
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$
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410,386
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NOTE 6 - STOCKHOLDERS EQUITY
Common Shares
As of June 30, 2018 and 2017, authorized common shares of the Company consists of 250,000,000 shares with par value of $0.0001 each.
Issuance of Common Stock
During the three months ended June 30, 2018, 2,722,495 shares with par value of $ 0.0001 per share were issued for consultancy services received including shares issued in exchange for the CreateApp Software Licensing Agreement announced on April 8, 2017 and 148,724 shares with par value of $0.0001 per share were issued to various stockholders.
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 21%. The Company generated taxable income for the year ended December 31, 2017 and 2016, and which is subject to U.S. federal corporate income tax rate of 21% and 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 six months ended June 30, 2018 and years ended December 31, 2017 and 2016, and therefore, Weyland Tech Limited was not subject to Hong Kong profits tax.
The Companys effective income tax rates were 21% and 34% for the years ended December 31, 2017 and 2016, 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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2017
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2016
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U.S. statutory tax rate
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21.0%
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34.0%
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15
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Hong Kong profit tax rate
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16.5%
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16.5%
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Foreign income not registered in the Hong Kong
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(16.5%)
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(16.5%)
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Others
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0.0%
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0.0%
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Effective tax rate
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21.0%
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|
|
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34.0%
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NOTE 9 COMMITMENTS AND CONTINGENCIES
Operating lease
The Company did not have any operating lease as of June 30, 2018.
Legal proceedings
The Company is currently undergoing civil litigation in Singapore where a dispute has arisen between a shareholder and the Company in relation to the ownership of approximately 3,500,000 shares of the Companys common stock. Currently, the Company is pursuing alternative means of dispute resolution which if successful is expected to be able to resolve the aforementioned litigation proceedings by the third quarter of 2018. Given that the matter is still in discussion and negotiation stages, no assurances can be given about the outcome of these proceedings. In the meanwhile, the Company believes that there are unlikely to be any negative repercussions to the other shareholders.
Additionally, the Company has settled a suit against another shareholder in Singapore, in a confidential settlement that is favorable and non-dilutive to the Company.
NOTE 10 SUBSEQUENT EVENTS
There were no events or transactions other than those disclosed in this report that would require recognition or disclosure in our consolidated financial statements for the six months ended June 30, 2018.
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