UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the quarterly period ended June 30, 2017
   
[    ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
   
  For the transition period from [          ] to [          ]

 

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Commission File Number: 000-50431

 

MEDIAN GROUP INC.

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(Exact name of small business issuer as specified in its charter)

 

Texas 7310 32-0034926
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(State or other jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification No.)
     

 

Unit 17-01, Level 17, Tower 2, Bank Rakyat Twin Tower, No.33, Jalan Rakyat,

50470 Kuala Lumpur, Malaysia

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(Address of Company's principal executive offices) (Zip Code)

 

Tel: +603 2714 2020 Fax: +603 2714 2121

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(Company's Telephone Number, Including Area Code)

 

(Former Name, Former Address and Former Fiscal Year if Changed Since Last Report)

 

 

Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ x ]     No [    ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ x ]     No [ ]

Indicate by check whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act. (check one)

Large Accelerated Filer [  ]  Accelerated Filer[  ]   Non-Accelerated Filer [  ]   Smaller Reporting Company  [ x ]

SEC 1296 (03-10) Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [   ]     No[ x ]

The number of common equity shares outstanding as of July 15, 2017 was 11,593,899,627 shares of Common Stock, no par value.

 

 

 


FORWARD-LOOKING STATEMENTS
 
This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995 . These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors” that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
 
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
 
Our financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States Dollars.
 
As used in this quarterly report, the terms "we", "us", "our", "MGI", and "the Company" mean Median Group Inc. and its subsidiaries unless otherwise indicated.

 

 

- 1 -

 

 

 

PART I

 

   
Item 1. Condensed Consolidated Financial Statements

 

 

MEDIAN GROUP INC.

 

Median Group Inc.

Condensed Consolidated Financial Statements

(Unaudited)

(Expressed In United States Dollars)

 

 

Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016 (Audited)

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2017 and 2016

 

Condensed Consolidated Statements of Comprehensive Loss for the three months and six months ended June 30, 2017 and 2016

 

Condensed Consolidated Statement of Stockholders’ Equity for the six months ended 30 June 2017

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016

 

Notes to Condensed Consolidated Financial Statements

 

 

 

 

F-1

 

 

 

 

MEDIAN GROUP INC

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2017 AND DECEMBER 31, 2016

 

     

June 30

2017

 

December 31

2016

  Notes   (Unaudited)   (Audited)
      US$   US$
ASSETS          
Current assets:             
Cash and cash equivalents     84,594   797,230
Accounts receivables     8,488   -
Prepayments and deposits     150,653   113,981
Amount due from a related party 8   1,020,804   2,229
Total current assets     1,264,539   913,440
           
Non-current assets:          
Intangible assets - goodwill     541,307   -
Fixed assets 4   45,393   -
      586,700   -
           
Total assets     1,851,239   913,440
           
LIABILITIES AND STOCKHOLDERS' DEFICITS          
Current liabilities:          
Accounts payable     36,655   -
Other payables and accruals 7   667,210   651,880
Amounts due to related parties 8   933,455   806,812
Total current liabilities     1,637,320   1,458,692
           
Long-term debts:          
Long term loan 9   2,000,000   2,000,000
Total non-current liabilities     2,000,000   2,000,000
           
Total liabilities     3,637,320   3,458,692
           
Commitments and contingencies 12        
           
Stockholders ' equity:          
Common stock, no par value, 85,000,000,000 shares authorized, 11,593,899,627 (2016: 11,427,232,960) shares issued and outstanding 5   4,728,563   4,095,230
Accumulated deficits     (6,557,475)   (6,519,665)
Accumulated other comprehensive income     (120,108)   (120,817)
Total Median Group Inc. stockholders' deficits     (1,949,020)   (2,545,252)
Non-controlling interest     162,939   -
Total stockholders’ deficits     (1,786,081)   (2,545,252)
Total liabilities and stockholders’ deficits     1,851,239  

913,440

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 

F-2

 

 

 

MEDIAN GROUP INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)

 

     

Three Months Ended

June 30

 

Six Months Ended

June 30

      2017   2016   2017   2016
  Note   US$   US$   US$   US$
                   
Net Revenue     329,189   12,479   335,055   33,376
Cost of revenue     (173,766)   (11,231)   (177,173)   (24,849)
                   
Gross profit     155,423   1,248   157,882   8,527
                   
Operating expenses:                  
Administration expenses     (50,629)   (57,335)   (93,115)   (198,383)
Selling and distribution expenses     -   -   -   -
Total operating expenses     (50,629)   (57,335)   (93,115)   (198,383)
                   
Operating income/(loss) from operations     104,794   (56,087)   64,767   (189,856)
                   
Other income / (expenses)                  
Other income     29,717   53   50,839   518
Finance charges     (37)   (77)   (80)   (157)
Interest expenses     (40,000)   (40,000)   (80,000)   (80,000)
                   
Income/(Loss) before taxation     94,474   (96,111)   35,526   (269,495)
Recovery of tax     19   -   19   -
Net income/(loss)     94,493   (96,111)   35,545   (269,495)
Less: Net income/(loss) attributable to non-controlling interests     73,355   (44,624)   73,355   (70,759)
Net income/(loss) attributable to Median Group Inc.     21,138   (51,487)   (37,810)   (198,736)
                   
                   
Net loss per share attributable to Median Group Inc. Shareholders – Basic and diluted                  
Continuing operations     (0.00)   (0.00)   (0.00)   (0.00)
Discontinued operations     (0.00)   (0.00)   (0.00)   (0.00)
      (0.00)   (0.00)   (0.00)   (0.00)
                   
Basic and diluted weighted average number of common shares *     11,456,536,989   11,307,232,960   11,441,965,925   11,307,232,960

 

 

* Weighted average number of shares used to compute basic and diluted loss per share for the three months and six months ended June 30, 2017 and 2016 are the same since the effect of dilutive securities are anti-dilutive.

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

F-3

 

 

 

MEDIAN GROUP INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)

 

 

     

Three Months Ended

June 30

 

Six Months Ended

June 30

      2017   2016   2017   2016
  Note   US$   US$   US$   US$
                   
Net income/(loss)     94,493   (96,111)   35,545   (269,495)
                   
Other comprehensive income, net of tax                  
Foreign currency translation gain/(loss)     14,348   (3,488)   1,875   3,051
Total comprehensive income/(loss)     108,841   (99,599)   37,420   (266,444)
Less: Net income/(loss) attributable to non-controlling interests     73,355   (44,624)   73,355   (70,759)
Less: Other comprehensive income/(loss) attributable to non-controlling interests – foreign currency translation income (loss)     1,166   (3,585)   1,166   6,622
Total comprehensive income/(loss) attributable to Median Group Inc.     34,320   (51,390)   (37,101)   (202,307)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

F-4

 

 

 

MEDIAN GROUP INC
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2017

(UNAUDITED)

 

 

    Number of Shares   Common Stock Amount   Accumulated Other Comprehensive Income   Accumulated Deficits   Non-controlling Interest   Total
Stockholders’ Equity
    US$   US$   US$   US$   US$   US$
                         
Balance at January 1, 2017 (Audited)   11,427,232,960   4,095,230   (120,817)   (6,519,665)   -   (2,545,252)
Issue of shares   166,666,667   633,333   -   -   88,418   721,751
Other comprehensive income – foreign currency translation gain   -   -   709   -   1,166   1,875
                         
Net income/(loss) for the period   -   -   -   (37,810)   73,355   35,545
                         
Balance at June 30, 2017   11,593,899,627   4,728,563   (120,108)   (6,557,475)   162,939   (1,786,081)
                         

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

F-5

 

 

 

MEDIAN GROUP INC

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)

 

 

           
     

Six Months Ended

June 30

      2017   2016
      US$   US$
Cash flows from operating activities:          
Net income/(loss)     35,545   (269,495)
Adjusted for non cash items:          
Depreciation     -   1,573
      35,545   (267,922)
Changes in asset and liabilities          
(Increase)/decrease in assets          
Accounts receivables     (6,739)   6,970
Prepayments and deposits     167,352   6,310
Amount due from a related party     (847,176)   (89,214)
Increase/(decrease) in liabilities:          
Asset of operations held for sale – net liabilities     -   -
Accounts payable     34,509   (6,273)
Other payables and accruals     (311,744)   245,058
Net cash used in operating activities     (928,253)   (105,071)
           
Cash flows used in investing activities          
Purchase of fixed assets     -   (197,098)
Net cash used in investing activities     -   (197,098)
           
Cash flows from financing activities :          
Cash acquired on acquisition of subsidiary     87,099   -
Amounts due to related parties     126,643   226,832
Net cash from financing activities     213,742   226,832
           
Effect of exchange rate in comprehensive income     1,875   3,051
Net decrease in cash and cash equivalents     (712,636)   (72,286)
Cash and cash equivalents - net, beginning     797,230   77,164
           
Cash and cash equivalents - net, ending     84,594   4,878
           
Supplemental disclosure of cash flow information:          
Interests paid     -   -
           
Income tax paid     -   -
           
Supplemental disclosure of non-cash investing and financing activities:          
Issuance of shares for the acquisition of subsidiary     633,333   -
           

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

F-6

 

 

 

MEDIAN GROUP INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 ORGANIZATION

 

Median Group Inc. (the "Company") is a Texas corporation, incorporated on October 1, 2002.

 

In January 2006, the Company established a wholly owned subsidiary Ren Ren Media Group Limited, a company incorporated in Hong Kong, as its operating company in Hong Kong. In March 2007, the Company acquired all the outstanding shares of Good World Investments Limited, a British Virgin Islands corporation that holds 50% of Beijing Ren Ren Health Culture Promotion Limited, a company incorporated in China in the advertising and media business in China.

 

In May 2009, the Group established a 50/50 joint venture company, ATC Marketing Limited, which is to be in the business of marketing and distributing of convergent multimedia communication and internet devices.

 

In June 2012, the Company acquired 100% equity interests of A-Team Resources Sdn. Bhd. (“A-Team”), a distributor of electronics and light appliances, at a consideration price of $2,011,607 by the issuance of 558,779,837 shares, at a price of $0.0036 per share.

 

On January 15, 2014, the Company sold its subsidiaries namely Ren Ren Media Group Limited, A-Team Resources Sdn Bhd, Good World Investments Limited and Beijing Ren Ren Health Culture Promotion Limited (the “Disposed Subsidiaries”) containing its light appliances distribution business and advertising business in China.

 

On January 31, 2014, the Group closed the transaction to acquire 63.2% of Clixster Mobile Sdn. Bhd. (“CMSB”), a company incorporated in Malaysia in exchange of 10,193,609,664 shares of common stock of the Company. CMSB is a mobile virtual network provider and principally engaged in providing cellular and mobile broadband services in Malaysia. CMSB was treated as the acquirer for accounting purpose since the original stockholders of CMSB owned a majority (85%) of the shares of the Company’s common stock immediately following the completion of the transaction. CMSB was the legal acquiree but deemed to be the accounting acquirer. The Company was the legal acquirer but deemed to be the accounting acquiree in the reverse merger. The historical financial statements prior to the acquisition are those of the accounting acquirer (CMSB). Historical stockholders’ equity of the acquirer prior to the merger are retroactively restated (a recapitalization) for the equivalent number of shares received in the merger. Operations prior to the merger are those of the acquirer. After completion of the transaction, the Company’s consolidated financial statements include the assets and liabilities, the operations and cash flow of the Company and its subsidiaries.

 

During the year, on July 28, 2015, the Company disposed of its 63.2% of CMSB to refocus the business of the Group to sell post-paid rather than prepaid telecom services for the mobile network virtual operator (“MNVO”) operation, with a gain of approximately $5 million.

 

As announced in a Form 8-K on December 16, 2015 on December 11, 2015 the Company acquired a 51% interests in Naim Indah Mobile Communication Sdn. Bhd. (“NIMC”), a company engaged in providing mobile communication services through MVNO platform. NIMC has a registered capital of RM2,000,001 (or about US$480,000) of which the Company is required to pay RM1,000,001 (or about US$240,000) for its 51% interests. NIMC has an exclusive agreement with MyAngkasa Holdings Sdn. Bhd. (“MyAngkasa”) for the provision of telecom services to members of the National Cooperative Malaysia Bhd and known as Angkatan Koperasi Kebangsaan Malaysia Berhad (“Angkasa”). Further details can be found in Note 13 of the financial statements enclosed herein this report. The Company intends to focus on post-paid customers in working with Angkasa. Our director Ahmad Shukri Abudl Ghani is a 30% shareholder of NIMC. MyAngkasa is a shareholder of the Company holding 50 million shares or about 0.44% of the issued share capital of the Company.

 

In October 2016, the Company raised $1,320,000 from independent third parties by issuing 120,000,000 shares at $0.011 per share. This fund raised was used for working capital.

 

On December 2, 2016, the Company disposed its 51% interest in NIMC for a fair market value of RM1,000,001 or about US$224,574 to a company owned by directors of the Company, and realized a gain of $194,947. On or about the same date, our subsidiary company, Median Digital Sdn. Bhd (formerly Grid Mobile Sdn. Bhd.) (“MDSB”) entered into a Master Distribution Agreement with NIMC whereby NIMC would appoint MDSB to be its preferred distributor of its mobile products and services in Malaysia for two years. Under this Master Distribution Agreement, MDSB would need to pay a refundable deposits of RM3,000,000 or about $668,747 to NIMC and MDSB would not procure, engage or appoint any other company that offers the same services as NIMC.

 

On June 15, 2017 the Company acquired 51% equity interest in GNS Technology (M) Sdn. Bhd. (“GNS Malaysia”) by the issuance of 166,666,667 new shares in the Company. GNS is engaged in the provision of network design, construction and maintenance services for fibre optics backbone and Fiber-to-the-Home (FTTH”) broadband services. Pursuant to the acquisition agreement, the Vendors are entitled to an additional consideration of US$1,500,000 provided that GNS Malaysia accumulated audited profits record at least US$3,000,000 for the 5 year period from December 31, 2017 to December 31, 2022. The additional consideration shall be paid by the issuance of new shares in the Company at a price equal to the higher of (i) US$0.006 per share and (ii) the 20 days average closing share price immediately prior to the parties agreeing on the accumulated audited profits stated above.

 

The principal activities of GNS Malaysia are provision of network design, construction and maintenance services for fiber optics backbone and Fiber-to-the-Home (FTTH) broadband services. Currently GNS Malaysia is currently engaged in the provisioning of the design and construction of network monitoring center in Malaysia. The goodwill arising on the acquisition of GNS Malaysia is $541,307. The management believes that based on the business plans and the forecasted results of the GNS Malaysia that the goodwill will not need to provide for any diminution in value.

 

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS

 

Basis of Presentation  

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the U.S. Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2016. As permitted under the rules of the SEC for interim reporting, they do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended December 31, 2016 included in the Company Form 10-K filed with the Securities and Exchange Commission.

 

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position and results of operations for the interim period presented have been included. Operating results for the interim period are not necessary indicative of the results that may be expected for the respective full year.

 

 

F-7

 

 

 


MEDIAN GROUP INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

 

Principles of Consolidation

 

The condensed consolidated financial statements for the period ended June 30, 2017 include the financial statements of the Company and its wholly owned subsidiaries Alpha Sunray Sdn. Bhd and Median Digital Sdn. Bhd (formerly Grid Mobile Sdn. Bhd.) and also include 51% equity interest subsidiary GNS Technology (M) Sdn. Bhd. from the date of acquisition on June 15, 2017.

 

The results of subsidiaries acquired or sold during the period are consolidated from their effective dates of acquisition or through their effective dates of disposition, respectively.

 

All significant inter-company transactions and balances have been eliminated on consolidation.

 

Use of Estimates

 

The preparation of condensed consolidated 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 disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Net Loss Per Share

 

Basic earnings per share were computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted loss per common share for the period ended June 30, 2017 and 2016 respectively, are not presented as it would be anti-dilutive.

 

Fair Value Measurements and Disclosures
 
ASC 820 "Fair Value Measurements and Disclosures" codified SFAS No. 107, "Disclosures about Fair Value of Financial Instruments". ASC 820 applies to all entities, transactions, and instruments that require or permit fair value measurements, with specific exceptions and qualifications. The Company is required to disclose estimated fair values of financial instruments. Unless otherwise indicated, the fair values of all reported assets and liabilities, which represent financial instruments, none of which are held for trading purposes, approximate their respective carrying values of such amounts.

 

Cash and Cash Equivalents

 

The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents.

 

Intangible Assets

 

The Company evaluates intangible assets for impairment, at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets, other long-lived assets and, goodwill is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss.

 

Impairment of long-lived assets

 

In accordance with the provisions of ASC Topic 360, “ Impairment or Disposal of Long-Lived Assets ”, all long-lived assets such as plant and equipment held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the year/period presented.

 

 

F-8

 

 

 


MEDIAN GROUP INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

 

Revenue

 

The Company recognizes its revenue in accordance with the Securities and Exchange Commissions ("SEC") Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements" ("SAB 104"). Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. The recognition of revenues involves certain management judgments. The amount and timing of our revenues could be materially different for any period if management made different judgments or utilized different estimates.

 

Revenue is measured at the fair value of the consideration received or receivable, net of discounts and taxes applicable to the revenue.

 

Prepaid telecom revenues are collected by its distributors and/or resellers through the sale of our branded prepaid or reload cards, which are sold in a form of SIM/reload cards to its final customers through its distributors and/or resellers. The sale of Sim, prepaid or reload cards is recognized as revenue when the products are delivered to its distributors and/or resellers, based upon their request. Prepaid cards will expire two years after the date of card production if they have never been activated. The proceeds from the expired cards are recognized as revenue upon expiration of cards.

 

Cost of revenue

 

Cost of revenue consists primarily of cost of SIM and prepaid/reload cards, telecommunication services and traffic charges which are directly attributable to the delivery of telecom service upon the activation of prepaid and/or reload cards.

 

Comprehensive Income

 

ASC Topic 220, “Comprehensive Income” establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated comprehensive income, as presented in the accompanying statements of stockholders’ equity consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

 

Segment Reporting

 

ASC Topic 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. The Company operates in one reportable operating segment in Malaysia during the period ended June 30, 2017.

 

Related Parties

 

Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

 

 

F-9

 

 

 


MEDIAN GROUP INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

 

Income Taxes

 

The Company accounts for income taxes under ASC 740 “Income Taxes”. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements 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 in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

 

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

 

(a) Current Tax
 

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

 

Current taxes are recognized in the statement of income except to the extent that the tax relates to items recognized outside the statement of income, either in other income or directly in equity.

 

(b) Deferred Tax
 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in 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 income in the period that includes the enactment date. The Company records a valuation allowance for deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

 

Foreign Currency Translation

 

The accounts of the Company's Hong Kong and Malaysia subsidiaries are maintained in Hong Kong dollars (HK) and Malaysia Ringgit (RM), respectively. Such financial statements are translated into U.S. Dollars (USD) in accordance with ASC 830 “Foreign Currency Translation” which codified Statement of Financial Accounts Standards ("SFAS") No. 52, "Foreign Currency Translation," with the respective currency as the functional currency. According to the Statement, all assets and liabilities were translated at the exchange rate on the balance sheet date, stockholder's equity are translated at the historical rates and statement of operations items are translated at the weighted average exchange rate for the year. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive Income”. As of June 30, 2017, the comprehensive loss was $120,108.

 

Recently Issued Accounting Pronouncements

 

The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact to its financial position, results of operations or cash flows .

 

Reclassifications

 

Certain comparative amounts have been reclassified to conform to the current period’s presentation.

 

 

F-10

 

 

 

MEDIAN GROUP INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 3 UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN

 

The Company's condensed consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of June 30, 2017, the Company has incurred an accumulated deficits totaling $6,557,475 and its current liabilities exceed its current assets by $372,781. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The Company is actively pursuing additional funding and potential merger or acquisition candidates and strategic partners, which would enhance stockholders' investment. Management believes that the above actions will allow the Company to continue operations through the next fiscal year.

 

 

NOTE 4 PROPERTY AND EQUIPMENT, NET

 

Property and equipment is summarized as following:

 

   

June 30

2017

 

December 31

2016

    US$   US$
Cost        
Furniture, fixtures and equipment   23,043   -
Motor vehicle   25,392   -
    48,435   -
Accumulated depreciation   3,042   -
Balance at end of period   45,393   -
          

 

NOTE 5 STOCKHOLDERS’ EQUITY

 

Common Stock

On October 17, 2016, the Company issued 120,000,000 shares of the Company to 3 independent parties at a price of $0.011 per share to raise a total cash proceed of approximately $1,320,000. The proceeds for this placement shall be used for working capital of the Company.

 

On June 15, 2017 the Company issued 166,666,667 shares at the then market price of $0.0038 per share for a total share consideration of 633,333 to satisfy the consideration for acquiring 51% equity interest in GNS Technology (M) Sdn. Bhd.

 

As of June 30, 2017, the Company had a total of 11,593,899,627 shares of its common stock issued and outstanding.
 

 

NOTE 6 STOCK OPTIONS

 

The Company adopted ASC 718 “Compensation – Stock Compensation” and requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value.

 

 

2007 Stock Incentive Plan
On February 19, 2007, the Company adopted the 2007 Stock Incentive Plan (the "2007 Plan") allowing for the awarding of options to acquire shares of common stock. This plan provides for the grant of incentive stock options to key employees, directors and consultants. Options issued under this plan will expire over a maximum term of ten years from the date of grant.

 

On March 8, 2007, the Company registered 38,400,000 shares underlying stock options under the 2007 Stock Incentive Plan with the SEC pursuant to a registration statement on Form S-8.

 

During the years 2007 to 2013, the Company had issued a total of 6,522,309 shares to its staff and consultants for their service provided.

 

During the years from 2014 to 2016, the Company did not issue any share options under the 2007 Plan.

 

As at June 30, 2017 and December 31, 2016, there were i) no outstanding stock options and ii) 31,877,691 shares available to be issued under the 2007 Plan.

 

 

F-11

 

 

 

MEDIAN GROUP INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 7 OTHER PAYABLES AND ACCRUALS

 

Other payables and accruals consist of the following:

 

   

June 30

2017

 

December 31

2016

    US$   US$
         
Potential tax penalty liability   410,000   410,000
Other payables and accruals   257,210   241,880
    667,210   651,880
          

 

NOTE 8 AMOUNTS DUE TO RELATED PARTIES

 

   

June 30

2017

 

December 31

2016

    US$   US$
         
  Amounts due from related parties:        
  - Trade   -   -
  - Non-trade   1,020,804   2,229
      1,020,804   2,229
            
  Amounts due to related parties:        
  - Trade   -   -
  - Non-trade   933,455   806,812
      933,455   806,812
            

The trade receivables due from related parties which the two of our directors have interests, is non-secured, non-interest bearing and repayable on demand. The funds were advanced to the related parties in respect of paying a deposits under the Master Distribution Agreement (Note 10(b)).

 

The non-trade receivable amount due from a related party, a director of the Company, is unsecured, non-interest bearing and repayable on demand.

 

The amounts due to related parties are unsecured, non-interest bearing and repayable on demand. Imputed interest on these amounts is considered insignificant.

             

 

NOTE 9 SHAREHOLDER LOAN  
   

June 30

2017

  December 31 2016  
    US$   US$  
           
Shareholder loan   2,000,000   2,000,000  
           
This long term shareholder loan is due to a shareholder of the Company. This loan is unsecured and repayable on November 25, 2018, and bears interest of 8% per annum. The accrued interest for the six months ended June 30, 2017 was $80,000 (2016: $80,000).
                 

 

NOTE 10 RELATED PARTY TRANSACTIONS

 

(a) For the six months period ended June 30, 2017, the Company paid no remuneration (2016: NIL) to its directors and its officers for their services provided to the Company.
(b) In early December 2016, the Company entered into a Master Distribution Agreement with a company beneficially owned by two of our directors. Pursuant to the agreement, the Company would pay a refundable deposit of RM3 million or about US$677,000 to be the preferred distributor of telecom products and services (including access to the MVNO platform) in the territory of Malaysia for a period of two years. The Company may receive certain rebates if it achieves sales of over RM10 million (about US$2,257,000) for each anniversary year, and such rebates shall vary by products and services to be agreed by the parties.

 

 

F-12

 

 

 

MEDIAN GROUP INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 11 INCOME TAXES

 

No provision was made for income tax for the six months ended June 30, 2017 and 2016, since the Company and its subsidiaries had significant net operating loss. In the six months ended June 30, 2017 and 2016, the Company and its subsidiaries incurred net operating profit/(losses) for tax purposes of approximately $35,545 and $(269,495), respectively. Total net operating losses carry forward as at June 30, 2017 and 2016, (i) for Federal and State purpose were $12,212,959 and $11,810,918, respectively and (ii) for its entities outside of the United States $59,484 and $281,728. The net operating loss carry-forwards may be used to reduce taxable income through the year 2025. The availability of the Company's net operating loss carry-forwards are subject to limitation if there is a 50% or more change in the ownership of the Company's stock.

 

There was no significant difference between reportable income tax and statutory income tax. The gross deferred tax asset balance as at June 30, 2017 and December 31, 2016 was approximately $5,019,852 and $5,170,610 respectively. A full valuation allowance has been established against the deferred tax assets, as the utilization of the loss carry-forwards cannot reasonably be assured.

 

A reconciliation between the income tax computed at the Malaysia statutory rate and the Group's provision for income tax is as follows:

 

    2017   2016
         
Malaysia statutory rate   24%   25%
Tax allowance   -   -
Valuation allowance – Loss carryforward under Malaysia rate   (24%)   (25%)
         
Provision for income tax   -   -

 

 

NOTE 12 COMMITMENTS AND CONTINGENCIES

 

The Company’s commitments and contingencies are set out below as follows:-

 

(a) The Company has operating lease of its corporate office in Malaysia for 3 years ending April 1, 2019. The annual lease is RM406,998 (approximately US$90,720).

 

(b) Pursuant to the acquisition of 51% equity interest in GNS Technology (M) Sdn. Bhd. (“GNS Malaysia”), the Company shall pay the vendors an additional consideration of US$1,500,000 provided that GNS Malaysia accumulated audited profits record at least US$3,000,000 for the 5 year period from December 31, 2017 to December 31, 2022. The additional consideration shall be paid by the issuance of new shares in the Company at a price equal to the higher of (i) US$0.006 per share and (ii) the 20 days average closing share price immediately prior to the parties agreeing on the accumulated audited profits stated above.

 

 

NOTE 13 SUBSEQUENT EVENTS

 

The Company evaluated subsequent events through the date the financial statements were issued and filed with this Form 10-Q. There were no subsequent events that required recognition or disclosure.

 

 

F-13

 

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward Looking Statements

 

THIS FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF MANAGEMENT OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT ESTIMATE THE HAPPENING OF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACT. FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH AS "MAY", "SHALL", "COULD", "EXPECT", "ESTIMATE", "ANTICIPATE", "PREDICT", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN COMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND CONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS, HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.

 

THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT TO UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND OTHER CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA AND OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM AND AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE EXTENT THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY FROM ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED ON THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. WE CANNOT GUARANTY THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.

 

 

Critical Accounting Policy and Estimates

 

Our Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations section discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our consolidated financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in our Quarterly Report on Form 10-Q for the period ended June 30, 2017.

 

 

- 2 -

 

 

 

Overview

 

DESCRIPTION OF BUSINESS

 

OUR BACKGROUND. The Company was incorporated in Texas on October 1, 2002 and in 2005 changed its business focus to advertising and media in the emerging China market. Under the then new management, the Company commenced to position the Company to capitalize on the growth of the Chinese advertising market where global companies are rushing into China to try to grab and hold the attention of its 1.3 billion citizens.

 

Our mission then was to become one of China's new age media companies through the use of new technologies and devices combined with traditional media of TV, Newspapers, Magazines, Billboards and Internet to reach today's mobile society. In order to facilitate this, the Company established 3 strategic business units being "Advertising", "Telecommunications and Mobile Computing", and "Products and Services". However due to limited financial resources we were not able to implement our business plans in the China media sector.

 

In June 2012, the Group acquired A-Team Resources Sdn. Bhd. a company that distributes light appliances products in South East Asia and Middle East to strengthen our Products and Services Business Unit. In January 2014 the Company disposed the loss making light appliances and advertising operation to streamline the operation and to focus on its new acquisition on telecom services business unit.

 

On January 31, 2014 the Company acquired 63.2% in Clixster Mobile Sdn Bhd (“CMSB”), a mobile virtual network operator (“MVNO”) in order to expand our telecommunication business unit with a focus on provision of mobile telecom service through a MVNO platform initially in Malaysia and then to other regions.

 

The operation in CMSB incurred significant losses in 2014 and in 2016. The Group determined to re-focus the operation in the higher margin post-paid rather than pre-paid telecom services. As a result, on July 28, 2015, the Group disposed of its investment in CMSB to refocus its MVNO business from pre-paid to post-paid telecom services and a digital service provider.

 

In September, 2015, New China Electronics Limited, a company wholly owned by our director, Mr. Ching Chiat Kwong, acquired a total of 7,130,134,431 shares representing about 63.06% interests in the Company to become the controlling shareholder of the Company. On January 8, 2016, New China then transferred 350,000,000 shares to each of Andrew Hwan Lee and Ahmad Shukri Bin Abdul Ghani, both directors of the Company. New China then held 6,430,134,431 shares representing 56.87% in the Company.

 

On September 27, 2015 the Board approved the change of company name from Clixster Mobile Group Inc. to Median Group Inc. and the name change was effected on October 7, 2015.

 

In December 2015, the Company acquired 51% interests in Naim Indah Mobile Communications Sdn Bhd (“NIMC”). NIMC is a newly established MVNO holding all the necessary licenses to operate as an MNVO. Currently, we are in advance discussion with a Malaysian telecom operator to roll out our MVNO services. It is planned that the roll out will commence in July 2017.

 

On June 15, 2017 the Company acquired 51% equity interest in GNS Technology (M) Sdn. Bhd. (“GNS Malaysia”) by the issuance of 166,666,667 new shares in the Company. GNS is engaged in the provision of network design, construction and maintenance services for fibre optics backbone and Fiber-to-the-Home (FTTH”) broadband services. Pursuant to the acquisition agreement, the Vendors are entitled to an additional consideration of US$1,500,000 provided that GNS Malaysia accumulated audited profits record at least US$3,000,000 for the 5 year period from December 31, 2017 to December 31, 2022. The additional consideration shall be paid by the issuance of new shares in the Company at a price equal to the higher of (i) US$0.006 per share and (ii) the 20 days average closing share price immediately prior to the parties agreeing on the accumulated audited profits stated above.

 

At the date of this report, the Group will mainly concentrate on its Telecommunications and Mobile Business Unit and the network design and construction business. The Group will terminate and streamline its adverting business unit and product services unit until a viable business opportunity is available. The revenue generated from the telecom services and the newly acquired network design, construction and maintenance service for broadband services during this period was $6,120 and $328,935, respectively.

 

OUR BUSINESS REVIEW AND FUTURE STRATEGY. The Group has 3 business units namely “Advertising”, “Products and Services” and “Telecommunication and Mobile Computing”. The management has determined to only focus our business in the Telecommunications and Mobile Computing business unit going forward, and have the Advertising and Products and Services business units remain inactive until viable business opportunities are presented.

 

 

- 3 -

 

 

 

2017 Products & Services Overview

 

Telecommunications Unit.

 

In 2006, the Company announced the establishment of the Telecommunications and Mobile Computing Division to focus on the new media advertising where we would take advantage of new convergent devices for telecommunications advertising. We have seen over the years the importance of advertising through social media using telecommunication services.

 

In 2016, this was another year of preparation and restructuring of our operations and raising the necessary capital to conduct our business. We were successfully in raising $1,320,000 in October 2016 for our working capital. In December 2016, we signed a Master Distribution Agreement with our then 51% subsidiary, Naim Indah Mobile Communications Sdn. Bhd. (“NIMC”) for us to sell telecom services on NIMC’s MVNO telecom platform. As a result of the Master Distribution Agreement, we determined to concentrate on the provision of services rather than the running of the MVNO Platform itself, and in December 2016 we sold NIMC to a company owned by two of our directors. In the first quarter of 2017, we derived $5,866 in telecom services. We will continue to pursue the sale of telecom services and concentrate on postpaid customers, where the margins are higher, through our partner networks.

 

PROSPECTS.  Through a long and rigorous effort, the Company has successfully consolidate and streamline our business and build a strong foundation to set the stage for an exciting future. This coming year is a significant year for us. After the successful restructuring of the Company, a new entity with a new set of business focus has emerged, where there will be a great emphasis on mobile digital business.

 

MGI shall focus on the business of providing mobile digital service on the MVNO platform across South East Asian countries. NIMC is poised to be the first MVNO that specifically catered for these markets, operating as a digital service provider (DSP). A digital service provider applies the principles of Internet service delivery, meaning its delivery architecture is integrated, seamless, intelligent, automated, simple and in real time.

 

Towards Becoming A Digital Service Provider

 

The decision to become a DSP rests solely on providing the needs of a new generation of consumers. There has been a great shift in consumers’ behaviors. The way purchases are made, the types of media consumed, the way information are obtained and the way trust and relationships are built. These have created new rules of consumer engagement where mobile platform is highly utilized, allowing consumers to communicate, transact and gain almost instantaneous feedback and response. E-commerce now is evolving into M-Commerce (mobile-commerce) and into S-Commerce (social-commerce) allowing customers to instantly transact and share.

 

We must seize the opportunity to build our business model around this market segment through our offerings with three main differentiators:

 

(i) An advanced set of products and services that will disrupt the market landscape;

 

(ii) A customer engagement model that is currently not offered by others; and

 

(iii) A technology superiority and scalability that will support future growth.

 

The first challenge to become a digital service provider involves a change in the mindset and culture; we need to view ourselves not as a communication service provider but as a genuine digital competitor. We need to shift away from serving as a channel and toward creating a platform, and the way for us to capitalize on the opportunities in the digital services domain and its associated revenue is to build our business as a digital service provider. Our journey towards becoming a DSP has progressed well over the past 3 months where we are building a solid eco-system that will enable us to offer attractive and disruptive services to the market.

 

 

- 4 -

 

 

 

Key Business Focus: Digital Service Provider

 

While MVNO remains as its business focus, the Company would now focus on developing its Next Generation Intelligent Network (NGIN) and Business Support System (BSS) as a platform to support White Label MVNO businesses. This platform is aimed to provide a leading-edge telecommunication services as part of our Digital Services eco-system alongside the financial technology (“fintech”) solutions vis-a-vis an integrated mobile payment equipped with virtual account and digital wallet connected to membership, debit, prepaid and/or credit cards.

 

Our Mission Critical System

 

The NGIN and BSS systems are required to provide a real-time unified charging across all services and devices, and payment methods with differentiated service offerings with a quick time-to-market advantage to allow NIMC to quickly capitalize and execute on market opportunities. Our BSS platform combines payment methods, with ‘on demand’ payments for some services and recurring subscription models for others.

 

* Online charging system (OCS) is the central system that governs all subscribers’ charging and rating. It is a system that allows an operator to charge their customers, in real time, based on event or session service usage.
* Policy & Charging Rules Function (PCRF) , a software component designated in real-time to determine policy rules that accesses subscriber databases and other specialized functions, such as a charging system PCRF supports the creation of rules and then automatically making policy decisions for each subscriber active on the network.
* Business Support Systems   (BSS) are the components that we use to run its business operations towards customers. Together with operations support systems (OSS), these are used to support various end-to-end telecommunication services. BSS and OSS have their own data and service responsibilities.
* Enterprise Resource Planning (ERP) is a system that handles all essential business functions such as accounting, HR, sales, marketing, service, warehousing, and more. The SAP B1 system provides a complete visibility and better control help us run our end-to-end business processes professionally.

 

We are now at the final stage of negotiating the purchase of these systems from the respective solution provider. We expect to complete the deployment of these systems by the end of Q2.

 

Infrastructure Provider

 

The principal activities of GNS are provision of network design, construction and maintenance services for fiber optics backbone and Fiber-to-the-Home (FTTH) broadband services.

 

The telecommunications industry comprised of many types of companies at different levels within the industry, all making products and/or providing a service to supply local and long distance telephone service, internet service, and new technologies (including VoIP, CATV, HDTV, and security) to the end users (residential, business, and institutional).

 

A large portion of the telecommunications industry is comprised of equipment manufacturers (switch, router, and network component companies) producing products that make and/or route connections from point-to-point via a central office location. Whether these products are used in networks supporting wired or wireless applications, the ultimate goal for equipment manufacturers is to produce an efficient, cost effective, and reliable product to support network service providers.

 

Solution providers is another level of the telecommunications industry which is large in size. In this segment, companies source, develop, and implement the network infrastructure that ‘service providers’ will use to supply communication connections to the end users. As a segue between component manufacturers and service providers, solutions providers greatly influence network structures, protocols, and the successful implementation of emerging technologies.

 

The other large segment of the telecommunications industry is service providers. This market is focused on providing communications, in one form or other, to the end users. For most people, this segment is viewed as the face of the industry, delivering the final product/service that the equipment manufacturers and solutions providers support. The most common applications for this segment are premises networks, LAN (local area networks), WAN (wide area networks), and wireless networks.

 

GNS’s offerings are that of connectivity at multiple levels of the telecommunications industry ranging from standard cable assemblies and loopbacks for the equipment manufacturing segment to optical drop cables to support service provider networks.

 

 

- 5 -

 

 

 

Moving Forward

 

Moving forward, we will continue to strive in executing our roadmap for growth which encompasses five key areas namely, strengthening our talents and resources, expanding our product range, widening our geographical reach, improving customers’ journey and experience and enhancing our internal process. The positive results from these areas would create a stable platform for the Group to spread its wings regionally and globally to unveil the vast potential of the digital services market segment. Talks and negotiations are ongoing with several mobile network enablers and operators in the South East Asian region. This would promulgate further the Group’s vision and commitment in becoming a regional mobile service operator with an assortment of deliverables that would satisfy the ravishing appetite of the customers. Being in a competitive industry where customers’ satisfaction is uncompromising, we are continuously ensuring that customers’ experience would be the fundamental element in all facets of our operation.

 

Technology is the staple food of today’s consumers, which is ever changing, we will be investing our resources into R&D, talent enhancement, product innovation, and technology adoption in our delivery processes. This will enable us to be more efficient in providing an unmatched customers’ experience, which will translate into a faster and higher subscribers’ acquisition. We will continue to jointly work closely with mobile enablers to penetrate new markets and opportunities this year and beyond.

 

Industry Overview and Competition

 

Telecommunication Market

 

Asia Pacific

At the end of 2015, 62% of the population in Asia Pacific (2.5 billion individuals) subscribed to mobile services. Growth rates in the region are set to remain above the global average, with Asia Pacific adding more than 600 million new subscribers by 2020. The focus of growth will shift to South and South-East Asia. ⁴

 

The region is seeing an accelerating technology migration to 4G, with the number of 4G connections increasing by 2.5 times over the course of 2015 and now totaling in excess of 600 million. A number of previously ‘laggard’ markets in Asia Pacific are now migrating to 4G, including the likes of Thailand, Malaysia and the Philippines. This is being driven by a number of factors including ongoing network investments by operators, falling device prices and growing consumer appetite for higher speed mobile.

 

Revenue growth in the region slowed sharply in 2015, reflecting slowing subscriber growth, a weak macroeconomic backdrop and ongoing competitive pressures in a number of markets. Growth rates should recover in the second half of the decade, due to the positive impact of the migration to 4G on data traffic growth. ¹

 

For the period ending January 2017, mobile connections as against the country’s population is led by Hong Kong with a penetration rate of 165% followed by Singapore (147%), Indonesia (142%), Malaysia (139%), Thailand (133%), Vietnam (131%) and Philippines (126%). On the other hand, mobile broadband penetration is highest in Singapore (146%) and followed by Thailand (131%), Hong Kong (125%), Malaysia (104%), Indonesia (65%), and Philippines (65%) with the global average 55%.³

 

On mobile social media penetration, Singapore is ahead with 70% with Hong Kong, Malaysia and Thailand closing in at 66%, 65% and 62% respectively. They are followed by Philippines (52%), Vietnam (43%), and Indonesia (35%) with the global average at 34%.

The active M-commerce countries are Thailand (41%), Singapore (40%), Malaysia (38%), Hong Kong (36%), Indonesia (33%), Vietnam (28%) and Philippines (26%).³

 

Malaysia

The information and communication subsector continued to record a strong growth of 8.7% during the first six months of 2016 (January - June 2015: 9.4%). The communication segment remained as the major contributor to growth, sustaining its pace at 10.1% (January - June 2015: 10.1%) following new and expansion of internet-based applications as well as enhanced data plans. This was supported by growing number of information and communications technology (ICT) devices as well as continuous initiatives to enhance network coverage and communication access. Growth of the subsector was partly driven by infrastructure expansion to cater for the rising demand for reliable and high-speed internet, including 4G Long Term Evolution (LTE) network and fiber optic.²

 

¹ The Mobile Economy Asia Pacific 2016 - GSMA

² Bank Negara Malaysia Annual Report 2016

³ Digital in 2017 : Southeast Asia – we are social & Hootsuite

⁴ Digital in 2017 : Global Overview – we are social & Hootsuite

 

 

- 6 –

 

 

 

Mobile Virtual Network Operator Market

 

The explosive growth of wireless is one of the most striking aspects of the telecom industry since the 1990s. Demand for low-cost and high-value cellular service has been driving the mobile industry towards price wars. As the industry continue to mature, Mobile Network Operators (MNO’s) recognize that future growth depends on the pursuit of new markets beyond the conventional method of direct acquisition of new subscribers. The growth driven by bundled service offerings with slashed rates is only a short-term remedy. A new strategic model through alliances with Mobile Virtual Network Operator (MVNO) offered a far sighted solution. The MVNO model is seen as both, a solution as well as an opportunity for MNOs to pursue new markets that present sustainable growth and retention.

 

MVNO’s typically do not own a network but lease the network of a service provider that does have a network. An MVNO business consists of managing two key relationships; Mobile Network Operator (MNO) and the end-users. MVNO provides mobile services without owning spectrum and relies on the MNO network infrastructure. Notably, this business arrangement allows smaller service providers to be focused on specific aspects of the mobile business by offering specialized services and enriching the industry service offerings through optimization usage of the network infrastructure.

 

MVNOs provide lower operational costs for mobile operators through billing, sales, customer service, marketing, increase revenue through new applications, value added services and attractive rates. As such, the opportunity for mobile operators to take advantage of MVNOs generally outweighs the competitive threat.

 

Type of MVNO’s

 

Discount Provides very low call rates to market segments for example, the foreign workers market
Lifestyle Focuses on specific niche market demographics for example on the high income executives with specific interests
Advertising-funded Earns advertising revenue in order to provide free voice, SMS and data to its subscribers
Ethnic Provides services to certain ethnic groups in the country. For e.g. XOX caters to the Chinese community in Malaysia, other MVNOs like Lycamobile, Lebara, iCard Mobile, Globalcell Mobile and Dialog Vizz who target ethnic communities by providing inexpensive calls to their home country
Data Focuses on selling data subscriptions to end-users. Amazon in US and Dell in Japan are Data MVNOs. Merchantrade in Malaysia is a Data MVNO.

 

 

Examples of other MVNO’s in Malaysia

 

Merchantrade A strong presence in the foreign workers’ in the Malaysia on Celcom network
XOX Focus to serve the Chinese community offering services riding on Maxis network
Redtone Serving the small and medium-sized enterprises market segment. A spin-off of Redtone International Bhd riding on Maxis
Tune Talk A lifestyle service offering as sister companies Tune Hotels and Tune Money. Operates on Celcom’s network
Smart Pinoy A service zooming into over 700,000 Filipino migrant workers in Malaysia, a joint venture between Celcom and Philippines Long Distance Telecom (PLDT)
Tron Offering a yearlong validity for Tron user community numerous incentives. Rides on DiGi network
MyEvolution Malaysia’s first Machine-to-Machine (M2M) MVNO service on DiGi network
Tesco Affinity program via Clubcard (Tesco loyalty card) on Maxis network
SpeakOut Targeting students, youth, business travelers, tourists, migrant workers and telco-blacklisted individuals
Buzz Me A prepaid mobile services operating on U Mobile targeting the urban young market
FRiENDi A joint venture between Virgin Mobile Middle East & Africa and Kumpulan Perangsang Selangor
Altel A MVNO under Puncak Semangat, within the Al-Bukhary group, in collaboration with CELCOM. No clear direction or target market.

 

 

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Fibre Internet in Malaysia

 

Fiber internet represents a faster broadband than practically any other type of broadband in Malaysia. “Faster” means that more data transfers per second than other types of broadband services. Essentially, fibre optic technology converts electrical signals that carry data into light, which are transferred via hair-thin glass cables. Fiber also supports simultaneous access to internet, voice and television connections.

 

Fibre-optics is a fairly recent development worldwide and particularly in Malaysia. It is available to limited areas because of the infrastructure required. In Malaysia, it is typically known as Fibre to the Home (FTTH), and it is replacing ADSL in urban centres, bringing with it a shift to 24-month package contracts typical of a UK or US internet provider.

 

Fiber internet services in Malaysia typically provide speeds ranging from 5 Mbps to 100 Mbps. Companies offering FTTH include Time dotCom, Telekom Malaysia’s UniFi and Maxis among others. The fibre options are typically much faster than the ADSL and Wireless Broadband options. However, fibre broadband in Malaysia is still not as fast as some fibre broadband options in the United States, like Google Fibre, which offers up to 1 Gbps.

 

In the first quarter of 2017 (1Q17), household broadband penetration rate is 81.8% (4Q16:81.5%) with 2.5 million fixed broadband subscriptions and 30.6 million (4Q16:28.5 million) mobile broadband subscriptions. ¹

 

¹ Malaysian Communications and Multimedia Commission – “Communications and Multimedia : Facts and Figures 1Q 2017

 

 

Plan of operations

 

OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS.

We hope to generate additional revenues in the next twelve months by engaging business operations through internal growth and through strategic acquisitions and cooperative advertising agreements, as described more fully under "Overview" above.

 

We have cash and cash equivalents of $84,594 as of June 30, 2017; a decrease of about 89.3% from the previous period end of December 31, 2016. In the opinion of management, the current funds will not satisfy our working capital requirements to operate at our current level of activity for the next twelve months. To effectuate our business plan, during the next twelve months, we must arrange for adequate funding to implement our plans of increasing our advertising offerings and promote our advertising services, through cooperation agreements and otherwise.

 

Financing and funding

 

Management intends to continue to raise additional financing through debt and equity financing or other means and interests that it deems necessary, with a view to implementing our business plan and building a revenue base. We plan to use the proceeds of such financings to provide working capital to our operations and increase our capital expenditure for marketing and working with our co-operative partners. There can be no assurances that sufficient financing will be available on terms acceptable to us or at all. Our forecast for the period for which financial resources will be needed to support our operations involves risks and uncertainties and actual results could fail as a result of a number of factors.

 

Specifically, we hope to accomplish the steps as set out in this report to implement our business plan in respect of developing and integrating the MVNO business. The success of our plans is subject to our ability to obtain adequate funding. Such additional capital may be raised through public or private equity financing, borrowings, or other sources, such as contributions from our officers and directors. If we are unable to obtain funds necessary to implement our business plan, we may revise or scale back our business plan.

 

We are not currently conducting any research and development activities, other than the continual development of our website. We do not anticipate conducting any other research and development activities in the near future. In the event that we expand our business scope, then we may need to hire additional employees or independent contractors as well as purchase or lease additional equipment and open new office locations.

 

 

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Results of operation.

 

FOR THE THREE MONTHS AND SIX MONTHS PERIOD ENDED JUNE 30, 2017 COMPARED TO THE THREE MONTHS AND SIX MONTHS PERIOD ENDED JUNE 30, 2016

 

REVENUES.

 

For the three months period ended June 30, 2017, the Group realized $329,189 in revenue, $173,766 in cost of revenue, achieving $155,423 in gross profit from its operations. For the three months ended June 30, 2016 the Group realized $12,479 in revenue, $11,231 in cost of revenue, achieving $1,248 in gross profit from its operations. The Company derived revenue of $254 from telecom services and $328,935 from network design services for the three months ended June 30, 2017 as compared to $12,479 in telecom services for the three months ended June 30, 2016.

 

For the six months period ended June 30, 2017, the Group realized $335,055 in revenue, $177,173 in cost of revenue, achieving $157,882 in gross profit from its operations. For the six months ended June 30, 2016 the Group realized $33,376 in revenue, $24,849 in cost of revenue, achieving $8,527 in gross profit from its operations. The Company derived revenue of $6,120 from telecom services and $328,935 from network design services for the six months ended June 30, 2017 as compared to $33,376 in telecom services for the six months ended June 30, 2016.

 

OPERATING EXPENSES.

 

For the three months period ended June 30, 2017, we had $155,423 in gross profit and our total operating expenses were $50,629, all of which were selling, general and administrative expenses. We also had $29,717 in other income, $37 in finance charges, $40,000 in interest expenses and $19 in recovery of taxation, so that the net income to our shareholders from our operations for the three months period ended June 30, 2017 was $94,493. This was in comparison in the three months period ended June 30 2016, we had $1,248 in gross profit and our total operating expenses were $57,335, all of which were selling, general and administrative expenses. We also had $53 in other income, $77 in finance charges, and $40,000 in interest expenses, so that the net loss to our shareholders from our operations for the three months period ended June 30, 2016 was $96,111.

 

For the six months period ended June 30, 2017, we had $157,882 in gross profit and our total operating expenses were $93,115, all of which were selling, general and administrative expenses. We also had $50,839 in other income, $80 in finance charges, $80,000 in interest expenses and $19 in recovery of taxation, so that the net income to our shareholders from our operations for the three months period ended June 30, 2017 was $35,545. This was in comparison in the six months period ended June 30 2016, we had $8,527 in gross profit and our total operating expenses were $198,383, all of which were selling, general and administrative expenses. We also had $518 in other income, $157 in finance charges, and $80,000 in interest expenses, so that the net loss to our shareholders from our operations for the three months period ended June 30, 2016 was $269.495.

 

Liquidity and Capital Resources

 

As at June 30, 2017, the Company had cash and cash equivalents totaling $84,594 and the other current assets consisted of $8,488 in accounts receivables, $150,653 in prepayments and deposits, $1,020,804 in due from related parties, $541,307 in goodwill and $45,393 in fixed assets. Therefore our total assets was $1,851,239 as of June 30, 2017. We also had current liabilities of $1,637,320 which were represented by $36,655 in accounts payables, $667,210 in other payables and accruals and $933,455 in amounts due to related parties. We also had $2,000,000 in long-term shareholders loan as of June 30, 2017, making our total liabilities $3,367,320.

 

At present the Company does not have sufficient cash resources to provide for all general corporate operations in the foreseeable future. The Company will be required to raise additional capital in order to continue and expand its operations in fiscal 2017.

 

 

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Going Concern

 

The Company's financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced significant losses from operations in recent periods. For the six months ended June 30, 2017 the Company incurred net income of $35,526 and has accumulated losses of $6,557,475 as at June 30, 2017. The Company's ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in developing markets and the competitive environment in which the Company operates. The Company is pursuing financing for its operations seeking additional investment in the Group. In addition, the Company is seeking to expand its revenue base in its consulting business, the developing the MVNO business in Malaysia and the newly acquired network design and maintenance services for fiber optics backbone and Fiber-to-the-Home broadband services. Failure to secure such financing, to raise additional equity capital and to expand its revenue based may result in the Company depleting its available funds and not being able to pay its obligations. These 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 possible inability of the Company to continue as a going concern.

 

Off Balance Sheet Arrangements

 

As of June 30, 2017, there were no off balance sheet arrangements. The Company has no off balance sheet obligations nor guarantees and has not historically used special purpose entities for any transactions.

 

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

 

Quantitative and Qualitative Disclosures about Market Risk:

 

The Company is exposed to various market risks, including changes in interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company also has not entered into financial instruments to manage and reduce the impact of changes in interest rates and foreign currency exchange rates, although we may enter into such transactions in the future.

 

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures:

 

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission. Our principal executive and financial officer have reviewed the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) within the end of the period covered by this Quarterly Report on Form 10-Q and have concluded that the disclosure controls and procedures were not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner as the Company did not have proper staffing of accounting personnel to prepare the accounts in timely manner. However, this deficiency has since been rectified as we have now staffed 6 accountants in our accounting department to ensure that our financial reporting will be prepared and presented timely. Except for the staffing of the accounting department noted above, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the last day they were evaluated by our principal executive and financial officers.

 

 

Changes in Internal Controls over Financial Reporting:

 

There have been no changes in the Company's internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

 

 

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PART II - OTHER INFORMATION

 

 

Item 1. Legal Proceedings

 

None.

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

On June 15, 2017 the Company issued 166,666,667 shares to the vendors as the consideration for the acquisition of 51% equity interest in GNS Technology (M) Sdn. Bhd.

 

 

Item 3. Defaults Upon Senior Securities

 

None.

 

 

Item 4. Submissions of Matters to a Vote of Security Holders

 

None.

 

 

Item 5. Other Information

 

None.

 

 

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Item 6. Exhibits

 

 

Exhibit No. Description of Exhibit

 

 

 

 

2.1

 

Sale and Purchase Agreement between GNS Technology Co. Ltd, Kim Chul Woo, GNS Technology (M) Sdn. Bhd. and Median Group Inc.(7)
   
3.1 Articles of Incorporation (1)
3.1.1 Certificate of Amendment to Articles of Incorporation (2)
3.1.2 Certificate of Amendment to Articles of Incorporation, as amended.(3)
3.1.3 Certificate of Amendment to Articles of Incorporation, as amended.(5)
3.1.4 Certificate of Amendment to Articles of Incorporation, as amended.(6)
3.2 Bylaws (1)
   
10.1 2007 Stock Incentive Plan (4)
   
31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1* Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2* Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

   
1. Incorporated by reference to our Registration Statement on Form SB-2 as filed with the SEC on April 15, 2003.
2. Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on February 3, 2005.
3. Incorporated by reference to our Registration Statement on Form SB-2 as filed with the SEC on September 26, 2005.
4. Incorporated by reference to our Registration Statement on Form S8 as filed with the SEC on March 8, 2007.
5. Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on April 7, 2014.
6. Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on October 12, 2015.
7. Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on June 5, 2017.

 

* Filed herewith.

 

 

 

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SIGNATURES

 

 

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 34, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

  Median Group Inc
  a Texas corporation
   
    /s/  Andrew Hwan Lee
  ---------------------------------------
  Andrew Hwan Lee
 

Chief Executive Officer

 

 

 

 

 

   
    /s/ Mohd Suhaimi bin Rozali
  ---------------------------------------
  Mohd Suhaimi bin Rozali
 

Chief Financial Officer

 

 

 

 

 

   

 

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:   /s/   Dato Haji Abdul Fattah Abdullah August 17, 2017
  -----------------------------------------------------  
  Dato Haji Abdul Fattah Abdullah  
Its: Director  

 

 

By:   /s/   Andrew Hwan Lee August 17, 2017
  -----------------------------------------------------  
  Andrew Hwan Lee  
Its: President, Chief Executive Officer, Director  

 

 

By:   /s/   Ahmad Shukri Abdul Ghani August 17, 2017
  -----------------------------------------------------  
  Ahmad Shukri Abdul Ghani  
Its: Director  

 

 

By:   /s/ Mohd. Suhaimi bin Rozali August 17, 2017
  -----------------------------------------------------  
  Mohd Suhaimi bin Rozali  
Its: Chief Financial Officer, Company Secretary, Treasurer  

 

 

 

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