NOTES TO FINANCIAL STATEMENTS
(Stated in US Dollars)
|
1.
|
Organization and nature of operations
|
Domain Extremes Inc. (“the
Company”), a development stage company, was organized under the laws of the State of Nevada on January 23, 2006. The Company
is in the development stage as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 915. Among the disclosures required by FASB ASC 915 are that the Company’s financial statements be identified
as those of a development stage company, and that the statements of earnings, retained earnings and stockholders’ equity
and cash flows disclose activity since the date of the Company’s inception. The fiscal year end is December 31.
The Company's
financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The Company has not generated significant revenue since inception
and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable
future. Since January 23, 2006, the Company has generated revenue of $97,983 and has incurred an accumulated deficit of $663,380.
The Company is currently devoting
its efforts to develop websites on the Internet and through which to generate advertising income. The Company’s ability
to continue as a going concern is dependent upon its ability to develop additional sources of capital, develop websites, generate
advertising income, and ultimately, achieve profitable operations. The accompanying financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
|
2.
|
Summary of principal accounting policies
|
Basis of presentation
The
accompanying financial statements of the Company have been prepared in accordance with generally accepted accounting principles
in the United States of America.
Use of estimates
The preparation of the financial
statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures 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.
Cash and cash equivalents
The Company considers all short-term
highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or
less to be cash equivalents.
DOMAIN EXTREMES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal accounting policies (Continued)
|
Impairment of long-lived assets
The Company accounts for the impairment
of long-lived assets, such as plant and equipment, leasehold land and intangible assets, under the provisions of FASB Accounting
Standard Codification Topic 360 (“ASC 360”) “Property, Plant and Equipment – Overall” (formerly known
as SFAS No. 144, “Accounting for the Impairment of Long-Lived Assets” (“SFAS 144”)). ASC 360 establishes
the accounting for impairment of long-lived tangible and intangible assets other than goodwill and for the disposal of a business. Pursuant
to ASC 360, the Company periodically evaluates, at least annually, whether facts or circumstances indicate that the carrying value
of its depreciable assets to be held and used may not be recoverable. If such circumstances are determined to exist,
an estimate of undiscounted future cash flows produced by the long-lived asset, or the appropriate grouping of assets, is compared
to the carrying value to determine whether impairment exists. In the event that the carrying amount of long-lived assets exceeds
the undiscounted future cash flows, then the carrying amount of such assets is adjusted to their fair value. The Company reports
an impairment cost as a charge to operations at the time it is recognized.
Income taxes
The Company utilizes FASB Accounting
Standard Codification Topic 740 (“ASC 740”) “Income taxes” (formerly known as SFAS No. 109, "Accounting
for Income Taxes"), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences
of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized
for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting
amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the
amount expected to be realized.
ASC 740 “Income taxes”
(formerly known as Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an interpretation of Statement of Financial
Accounting Standards No. 109
(“FIN 48”)) clarifies the accounting for uncertainty in tax positions. This interpretation
requires that an entity recognizes in the financial statements the impact of a tax position, if that position is more likely than
not of being sustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured
at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in
the period in which the change in judgement occurs. The Company has elected to classify interest and penalties related to unrecognized
tax benefits, if and when required, as part of income tax expense in the statements of operations. The adoption of ASC 740 did
not have a significant effect on the financial statements.
DOMAIN EXTREMES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal accounting policies (Continued)
|
Comprehensive income
The Company has adopted FASB Accounting
Standard Codification Topic 220 (“ASC 220”) “Comprehensive income” (formerly known as SFAS No. 130, “Reporting
Comprehensive Income”), which establishes standards for reporting and display of comprehensive income, its components and
accumulated balances. Accumulated other comprehensive income represents the accumulated balance of foreign currency translation
adjustments of the Company.
Stock-based compensation
The Company has adopted FASB Accounting
Standard Codification Topic 718 (“ASC 718”), ”Stock Compensation” (formerly known as SFAS 123(R), Share-Based
Payment), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees
and directors including stock option grants based on estimated fair values. ASC 718 requires companies to estimate the fair value
of share-based payment awards on the date of grant using an option-pricing model. The value of the award’s portion that is
ultimately expected to vest is recognized as expense over the requisite service periods. Prior to the adoption of ASC 718, we accounted
for share-based awards to employees and directors using the intrinsic value method. Under the intrinsic value method, share-based
compensation expense was only recognized by us if the exercise price of the stock option was less than the fair market value of
the underlying stock at the date of grant.
The Company accounts for stock-based
compensation to non-employees and consultants in accordance with the provisions of ASC 505-50 “Equity –Based Payments
to Non-employees”. Measurement of share-based payment transactions with non-employees shall be based on the fair value of
whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value
of the share-based payment transactions should be determined at the earlier of performance commitment date or performance completion
date.
Issuance of shares for service
The Company accounts for the issuance
of equity instruments to acquire goods and services based on the fair value of the goods and services or the fair value of the
equity instrument at the time of issuance, whichever is more reliably measurable.
DOMAIN EXTREMES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal accounting policies (continued)
|
Foreign currencies translation
The functional currency of the Company
is Hong Kong dollars (“HK$”). The Company maintains its financial statements in the functional currency. Monetary assets
and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates
of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are
translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses
arising from foreign currency transactions are included in the determination of net income for the respective periods.
For financial reporting purposes,
the financial statements of the Group which are prepared using the functional currency have been translated into United States
dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated
at the average exchange rates and stockholders’ equity is translated at historical exchange rates. Any translation adjustments
resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income,
a component of stockholders’ equity.
Fair value of financial instruments
The carrying values of the Company’s
financial instruments, including cash and cash equivalents, trade and other receivables, deposits, trade and other payables approximate
their fair values due to the short-term maturity of such instruments. The carrying amounts of borrowings approximate their fair
values because the applicable interest rates approximate current market rates.
Earnings per share
Basic 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. The average market price during the year is used to compute
equivalent shares.
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.
DOMAIN EXTREMES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal accounting policies (continued)
|
Website Development
Costs
The Company recognized the costs associated
with developing a website in accordance with ASC 350-50 “Website Development Cost” that codified the American Institute
of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) NO. 98-1, “Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use”. Relating to website development costs the Company
follows the guidance pursuant to the Emerging Issues Task Force (EITF) NO. 00-2, “Accounting for Website Development Costs”.
The website development costs are divided into three stages, planning, development and production. The development stage can further
be classified as application and infrastructure development, graphics development and content development. In short, website development
cost for internal use should be capitalized except content input and data conversion costs in content development stage.
Costs associated with the website
consist primarily of website development costs paid to third party and directors. These capitalized costs will be amortized based
on their estimated useful life over three years upon the website becoming operational. Internal costs related to the development
of website content will be charged to operations as incurred. Web-site development costs related to the customers are charged to
cost of sales.
Revenue recognition
The Company recognized revenues from
advertising insertion revenue in the period in which the advertisement is displayed, provided that evidence of an arrangement exists,
the fees are fixed or determinable and collection of the resulting receivable is reasonably assured. If fixed-fee advertising is
displayed over a term greater than one month, revenues are recognized ratably over the period as described below. The majority
of insertion orders have terms that begin and end in a quarterly reporting period. In the cases where at the end of a quarterly
reporting period the term of an insertion order is not complete, the Company recognizes revenue for the period by pro-rating the
total arrangement fee to revenue and deferred revenue based on a measure of proportionate performance of its obligation under the
insertion order. The Company measures proportionate performance by the number of placements delivered and undelivered as of the
reporting date.
DOMAIN EXTREMES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal accounting policies (continued)
|
Recently issued accounting pronouncements
On January 5, 2016, the FASB issued
ASU 2016-01 (“ASU 2016-01”), Recognition and Measurement of Financial Assets and Financial Liabilities, which
amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This amendment requires
all equity investments to be measured at fair value, with changes in the fair value recognized through net income (other than those
accounted for under equity method of accounting or those that result in consolidation of the investee). This standard will
be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Group
does not expect this standard to have a material impact on its consolidated financial statements.
On February 25, 2016, the FASB issued
ASU No. 2016-02 (“ASU 2016-02”), Leases. ASU 2016-02 specifies the accounting for leases. For operating leases, ASU
2016-02 requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the
lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that
the cost of the lease is allocated over the lease term, on a generally straight-line basis. In addition, this standard requires
both lessees and lessors to disclose certain key information about lease transactions. ASU 2016-02 is effective for public companies
for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted.
The Group does not expect this standard to have a material impact on its consolidated financial statements.
On March 30, 2016, the FASB issued
ASU 2016-09 (“ASU 2016-09”), Compensation – Stock Compensation: Improvements to Employee Share-Based Payment
Accounting, which relates to the accounting for employee share-based payments. This standard addresses several aspects of the accounting
for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity
or liabilities; and (c) classification on the statement of cash flows; (d) accounting for forfeitures of share-based payments.
This standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal
years. The Group does not expect this standard to have a material impact on its consolidated financial statements.
In June 2016, the FASB issued Accounting
Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to
measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions,
and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement
of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2018. The Group does not expect this standard
to have a material impact on its consolidated financial statements.
DOMAIN EXTREMES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal accounting policies (continued)
|
Recently issued accounting pronouncement
(Continued)
In August 2016, the FASB issued
Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts
and Cash Payments, which clarifies the presentation and classification of certain cash receipts and cash payments in the statement
of cash flows. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2017, and
interim periods within those fiscal years. Early adoption is permitted. The Group does not expect this standard to have a material
impact on its consolidated financial statements.
In November 2016, the FASB issued
Accounting Standards Update (“ASU”) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The
guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and
amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted
cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period
and end-of-period total amounts shown on the statement of cash flows. The standard is effective for fiscal years beginning after
December 15, 2017, and interim period within those fiscal years. Early adoption is permitted, including adoption in an interim
period. The standard should be applied using a retrospective transition method to each period presented. The Group does not expect
this standard to have a material impact on its consolidated financial statements.
In January 2017, the FASB issued
Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition
of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating
whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard is effective for
fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted.
The standard should be applied prospectively on or after the effective date. The Group does not expect this standard to have a
material impact on its consolidated financial statements.
In January 2017, the FASB issued
Accounting Standards Update (“ASU”) 2017-04, “Simplifying the Test for Goodwill Impairment.” The guidance
removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment
will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount
of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning
after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing
dates after January 1, 2017. The Group does not expect this standard to have a material impact on its consolidated financial
statements.
DOMAIN EXTREMES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Stated in US Dollars)
The Company’s financial statements
have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred a net loss of $79,929 (from operations) for the year
ended December 31, 2016 and an accumulated deficit of $663,380. It also sustained operating losses in prior years as well. These
factors raise substantial doubt as to its ability to remain a going concern and obtain debt and/or equity financing and achieve
profitable operations.
The Company intends to raise additional
operating funds through equity and/or debt offerings. However, there can be no assurance management will be successful in its endeavors.
Ultimately, the Company will need to achieve profitable operations in order to continue as a going concern.
There are no assurances that the
Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2)
obtain additional financing through either private placement, public offerings and/or bank financing necessary to support its working
capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank
financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional
financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available,
the Company may be required to curtail its operations.
|
|
For the year ended
December 31,
2016
|
|
|
For the year ended
December 31, 2015
|
|
|
For the period
January 23, 2006
(inception)
through
December 31, 2016
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Bank interest income
|
|
|
–
|
|
|
|
–
|
|
|
|
26
|
|
Gain on exchange
|
|
|
–
|
|
|
|
–
|
|
|
|
383
|
|
Sundry income
|
|
|
11,077
|
|
|
|
–
|
|
|
|
35,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,077
|
|
|
|
–
|
|
|
|
36,333
|
|
The Company is incorporated in the
United States, and is subject to United States federal and state income taxes. The Company did not generate taxable income in the
United States for the years ended December 31, 2016 and 2015.
The Company’s operations
are carried out in Hong Kong, the PRC, and is subject to Hong Kong profit tax at 16.5% in 2016 (2015: 16.5%). No provision for
Hong Kong income or profit tax has been made as the Company has no assessable profit for the period. The cumulative tax losses
will represent a deferred tax asset. The Company will provide a valuation allowance in full amount of the deferred tax asset since
there is no assurance of future taxable income.
DOMAIN EXTREMES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Stated in US Dollars)
|
5.
|
Income taxes (Continued)
|
The cumulative net operating loss
carry forward is approximately $663,380 and $583,451 as at December 31, 2016 and 2015 respectively, and will expire beginning in
the year 2026. Annual use of the net operating loss may be limited by Internal Revenue Code section 382 due to an ownership change.
The cumulative tax effect at the expected rate of 34%
of significant items comprising our net deferred tax amount is as follows:
|
|
Year ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
Deferred tax asset attributable to Net operating loss carryover
|
|
|
225,549
|
|
|
|
198,373
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(225,549
|
)
|
|
|
(198,373
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
–
|
|
|
|
–
|
|
Capitalization
The Company has the authority to
issue 200,000,000 shares of common stock, $0.001 par value. The total number of shares of the Company’s common stock outstanding
as of December 31, 2016 and 2015 are 179,522,531 and 179,522,531 respectively.
Equity transactions
Following is the equity
transactions during the year ended December 31, 2015.
On November 16, 2015, we issued
34,979,700 shares of our common stock to Francis Bok, Stephen Tang and Angel Lai valued at US$132,923 in lieu of cash compensation
for director and secretary service from October 1, 2012 to September 30, 2015.
There is no changes in
equity transactions during the year ended December 31, 2016.
DOMAIN EXTREMES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Stated in US Dollars)
|
7.
|
Accrued expenses and other payables
|
Accrued expenses and other payables
as of December 31, 2016 and 2015 are summarized as follows:
|
|
Year ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
Accrued audit fee
|
|
|
2,308
|
|
|
|
1,923
|
|
Other payables
|
|
|
29,152
|
|
|
|
26,537
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
31,460
|
|
|
|
28,460
|
|
|
8.
|
Advance from related parties
|
The amounts due to related parties
as of December 31, 2016 and 2015 represent advanced payment due to the Company’s directors and shareholder. The amounts due
to directors and shareholder are interest free without collateral and maturity date, and repayable upon demand.
|
9.
|
Commitments and contingencies
|
There has been no legal proceedings
in which the Company is a party during the years ended December 31, 2016 and 2015.
|
10.
|
Current vulnerability due to certain concentrations
|
The Company's operations are carried
out in Hong Kong, Special Administration Region of the PRC. Accordingly, the Company's business, financial condition and results
of operations may be influenced by the political, economic and legal environments in Hong Kong, and by the general state of the
PRC's economy. The Company's business may be influenced by changes in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
There were no events or transactions
other than those disclosed in this report, if any, that would require recognition or disclosure in our Financial Statements for
the year ended December 31, 2016.