Notes
to Condensed Consolidated Financial Statements
F-1
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MEDIAN
GROUP INC
CONDENSED
CONSOLIDATED BALANCE SHEETS
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AS
OF SEPTEMBER 30, 2017 AND DECEMBER 31, 2016
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September
30
2017
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December
31
2016
|
|
Notes
|
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(Unaudited)
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|
(Audited)
|
|
|
|
US$
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|
US$
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
24,286
|
|
797,230
|
Accounts receivables
|
|
|
32,307
|
|
-
|
Prepayments and deposits
|
|
|
153,180
|
|
113,981
|
Amounts due from related parties
|
8
|
|
1,075,359
|
|
2,229
|
Total current assets
|
|
|
1,285,132
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|
913,440
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|
|
|
|
|
|
Non-current assets:
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|
|
|
|
|
Intangible assets - goodwill
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|
541,307
|
|
-
|
Property and equipment
|
4
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|
42,433
|
|
-
|
|
|
|
583,740
|
|
-
|
|
|
|
|
|
|
Total assets
|
|
|
1,868,872
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|
913,440
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LIABILITIES AND
STOCKHOLDERS' DEFICITS
|
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Current liabilities:
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|
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Accounts payable
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63,397
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|
-
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Other payables and accruals
|
7
|
|
750,041
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|
651,880
|
Amounts due to related parties
|
8
|
|
973,665
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|
806,812
|
Total current liabilities
|
|
|
1,787,103
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|
1,458,692
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|
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Long-term debts:
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Shareholder loan
|
9
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|
2,000,000
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|
2,000,000
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Total non-current liabilities
|
|
|
2,000,000
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|
2,000,000
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|
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|
|
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Total liabilities
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|
3,787,103
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|
3,458,692
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|
|
|
|
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Commitments and contingencies
|
12
|
|
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|
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Stockholders
'
equity:
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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
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|
4,728,563
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|
4,095,230
|
Accumulated deficits
|
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(6,655,780)
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(6,519,665)
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Accumulated other comprehensive income
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|
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(108,748)
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(120,817)
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Total Median Group
Inc. stockholders' deficits
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(2,035,965)
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(2,545,252)
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Non-controlling interest
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117,734
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|
-
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Total stockholders’ deficits
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(1,918,231)
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(2,545,252)
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Total
liabilities and stockholders’ deficits
|
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|
1,868,872
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|
913,440
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The
accompanying notes are an integral part of these condensed consolidated financial statements
F-2
MEDIAN
GROUP INC
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CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
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FOR
THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
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(UNAUDITED)
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|
Three
Months Ended
September
30
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|
Nine
Months Ended
September
30
|
|
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|
2017
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|
2016
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|
2017
|
|
2016
|
|
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|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
|
|
|
|
|
|
|
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Net Revenue
|
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|
23,479
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|
7,350
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358,534
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40,726
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Cost of revenue
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(63,287)
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(6,615)
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(240,460)
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(31,464)
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Gross (loss)
profit
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(39,808)
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|
735
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118,074
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9,262
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Operating expenses:
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Administration
expenses
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(94,448)
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(158,691)
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(187,563)
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(357,074)
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Selling and distribution
expenses
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|
-
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-
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|
-
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|
-
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Total operating
expenses
|
|
|
(94,448)
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|
(158,691)
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|
(187,563)
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|
(357,074)
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|
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|
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|
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Operating loss
from operations
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|
(134,256)
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|
(157,956)
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(69,489)
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|
(347,812)
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|
|
|
|
|
|
|
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Other income
(expenses)
|
|
|
|
|
|
|
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Other
income
|
|
|
28,776
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|
223
|
|
79,615
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|
741
|
Finance
charges
|
|
|
(34)
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|
(35)
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|
(114)
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|
(192)
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Interest
expenses
|
|
|
(40,000)
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|
(40,000)
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|
(120,000)
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|
(120,000)
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|
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Loss before taxation
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|
(145,514)
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|
(197,768)
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|
(109,988)
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|
(467,263)
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Recovery of tax
|
|
|
-
|
|
-
|
|
19
|
|
-
|
Net
loss
|
|
|
(145,514)
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|
(197,768)
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|
(109,969)
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|
(467,263)
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Less:
net (loss) income attributable to non-controlling interests
|
|
|
(47,209)
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|
(44,825)
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26,146
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|
(115,584)
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Net
loss attributable to Median Group Inc.
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|
(98,305)
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|
(152,943)
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(136,115)
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|
(351,679)
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Net loss per
share attributable to Median Group Inc. Shareholders - Basic and diluted
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Continuing
operations
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|
(0.00)
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|
(0.00)
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|
(0.00)
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|
(0.00)
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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 *
|
|
|
11,593,899,627
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|
11,307,232,960
|
|
11,493,167,026
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|
11,307,232,960
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*
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Weighted
average number of shares used to compute basic and diluted loss per share for the three months and nine months ended September
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 NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
|
(UNAUDITED)
|
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Note
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|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(145,514)
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|
(197,768)
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|
(109,969)
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|
(467,263)
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|
|
|
|
|
|
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Other comprehensive
income, net of tax
|
|
|
|
|
|
|
|
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Foreign
currency translation gain
|
|
|
13,364
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|
56
|
|
15,239
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|
3,107
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Total comprehensive
loss
|
|
|
(132,150)
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|
(197,712)
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|
(94,730)
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|
(464,156)
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Less:
net (loss) income attributable to non-controlling interests
|
|
|
(47,209)
|
|
(44,825)
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|
26,146
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|
(115,584)
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Less:
other comprehensive income attributable to non-controlling interests - foreign currency translation income
|
|
|
2,004
|
|
33
|
|
3,170
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|
6,655
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Total
comprehensive loss attributable to Median Group Inc.
|
|
|
(86,945)
|
|
(152,920)
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|
(124,046)
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|
(355,227)
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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 NINE MONTHS ENDED SEPTEMBER 30, 2017
|
(UNAUDITED)
|
|
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|
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|
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|
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|
Number
of Shares
|
|
Common
Stock Amount
|
|
Accumulated
Other Comprehensive (Loss) Income
|
|
Accumulated
Deficits
|
|
Non-controlling
Interest
|
|
Total
Stockholders' (Deficits) Equity
|
|
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
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|
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
|
|
-
|
|
-
|
|
12,069
|
|
-
|
|
3,170
|
|
15,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the period
|
|
-
|
|
-
|
|
-
|
|
(136,115)
|
|
26,146
|
|
(109,969)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2017
|
|
11,593,899,627
|
|
4,728,563
|
|
(108,748)
|
|
(6,655,780)
|
|
117,734
|
|
(1,918,231)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
F-5
MEDIAN
GROUP INC
(Formerly
China Media Group Corporation)
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended
September
30
|
|
|
|
2017
|
|
2016
|
|
|
|
US$
|
|
US$
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net (loss)
|
|
|
(109,969)
|
|
(467,263)
|
Adjusted for non cash items:
|
|
|
|
|
|
Depreciation
|
|
|
2,960
|
|
3,651
|
|
|
|
(107,009)
|
|
(463,612)
|
Changes in asset and liabilities
|
|
|
|
|
|
(Increase)/decrease in assets
|
|
|
|
|
|
Accounts receivables
|
|
|
(30,558)
|
|
6,970
|
Prepayments and deposits
|
|
|
164,825
|
|
9,409
|
Amount due from a related
party
|
|
|
(901,731)
|
|
(81,296)
|
Increase/(decrease) in liabilities:
|
|
|
|
|
|
Accounts payable
|
|
|
61,251
|
|
20,689
|
Other payables and accruals
|
|
|
(228,913)
|
|
248,422
|
Net cash used in
operating activities
|
|
|
(1,042,135)
|
|
(259,418)
|
|
|
|
|
|
|
Cash flows used
in investing activities
|
|
|
|
|
|
Purchase of fixed assets
|
|
|
-
|
|
(193,628)
|
Net cash used in
investing activities
|
|
|
-
|
|
(193,628)
|
|
|
|
|
|
|
Cash flows from
financing activities :
|
|
|
|
|
|
Cash acquired
on acquisition of subsidiary
|
|
|
87,099
|
|
-
|
Amounts due to related
parties
|
|
|
166,853
|
|
376,851
|
Net cash from financing
activities
|
|
|
253,952
|
|
376,851
|
|
|
|
|
|
|
Effect of exchange rate in comprehensive income
|
|
|
15,239
|
|
3,107
|
Net decrease in cash and cash equivalents
|
|
|
(772,944)
|
|
(73,088)
|
Cash and cash equivalents - net, beginning
|
|
|
797,230
|
|
77,164
|
|
|
|
|
|
|
Cash and cash equivalents - net, ending
|
|
|
24,286
|
|
4,076
|
|
|
|
|
|
|
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
|
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 Abdul 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.
On
acquisition, GNS had $45,393 in fixed assets of, $1,749 in trade receivables, $87,099 in cash, $204,024 in prepayments and deposits
and $171,399 in amounts due from related party for a total assets of $509,664; GNS also had $2,129 in trade payables and $327,091
in advance revenue for a total liabilities of $329,220 and a net assets of $180,444.
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 September 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.
|
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.
|
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 September 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.
|
Property
and Equipment
|
|
Property
and equipment is stated at costs. Depreciation are computed using the straight-line method over the estimated economic
useful lives as follows:
|
Office equipment
and computers
|
5 years
|
Motor
vehicle
|
5 years
|
Expenditure
for maintenance and repairs is expensed as incurred. The gain or loss on the disposal of plant and equipment is the difference.
|
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)
|
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.
|
Network
design services income is recognized as revenue when the services has been substantially provided..
|
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.
|
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.
|
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 September 30, 2017.
|
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)
|
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 September 30, 2017, the comprehensive loss was $108,748.
|
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 September 30, 2017, the Company has incurred an accumulated deficits totaling $6,655,780 and its current liabilities
exceed its current assets by $501,971. In view of the matters described above, recoverability of a major portion of the recorded
asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn
is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a
going concern.
|
Management
has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide
the Company with the ability to continue as a going concern. The Company is actively pursuing additional funding and potential
merger or acquisition candidates and strategic partners, which would enhance stockholders' investment. Management believes
that the above actions will allow the Company to continue operations through the next fiscal year.
|
NOTE
4
|
PROPERTY
AND EQUIPMENT, NET
|
Property
and equipment is summarized as following:
|
|
|
September
30
2017
|
|
December
31
2016
|
|
|
US$
|
|
US$
|
Cost
|
|
|
|
|
Furniture, fixtures
and equipment
|
|
23,043
|
|
-
|
Motor vehicle
|
|
25,392
|
|
-
|
|
|
48,435
|
|
-
|
Accumulated depreciation
|
|
(6,002)
|
|
-
|
Balance at end of period
|
|
42,433
|
|
-
|
|
|
|
|
|
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 $0.0038 per share for a total share consideration
of 633,333 to satisfy the consideration for acquiring 51% equity interest in GNS Technology (M) Sdn. Bhd.
|
|
As
of September 30, 2017, the Company had a total of 11,593,899,627 shares of its common stock issued and outstanding.
|
|
|
|
The
Company adopted ASC 718 “Compensation - Stock Compensation” and requires companies to measure and recognize the
cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value.
|
2007
Stock Incentive Plan
|
On
February 19, 2007, the Company adopted the 2007 Stock Incentive Plan (the "2007 Plan") allowing for the awarding
of options to acquire shares of common stock. This plan provides for the grant of incentive stock options to key employees,
directors and consultants. Options issued under this plan will expire over a maximum term of ten years from the date of grant.
|
On
March 8, 2007, the Company registered 38,400,000 shares underlying stock options under the 2007 Stock Incentive Plan with
the SEC pursuant to a registration statement on Form S-8.
|
During
the years 2007 to 2013, the Company had issued a total of 6,522,309 shares to its staff and consultants for their service
provided.
|
During
the years from 2014 to September 30, 2017, the Company did not issue any share options under the 2007 Plan.
|
As
at September 30, 2017 and December 31, 2016, there were i) no outstanding stock options and ii) 31,877,691
shares available to be issued under the 2007 Plan.
In
October 2017, the 2007 Stock Incentive Plan expired together with all the then shares available for issue.
|
F-11
MEDIAN GROUP INC
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE
7
|
OTHER
PAYABLES AND ACCRUALS
|
Other
payables and accruals consist of the following:
|
|
|
September
30
2017
|
|
December
31
2016
|
|
|
US$
|
|
US$
|
|
|
|
|
|
Potential tax penalty liability
|
|
410,000
|
|
410,000
|
Other payables and accruals
|
|
340,041
|
|
241,880
|
|
|
750,041
|
|
651,880
|
|
|
|
|
|
NOTE
8
|
AMOUNTS
DUE FROM (TO) RELATED PARTIES
|
|
|
September
30
2017
|
|
December
31
2016
|
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Amounts due from
related parties:
|
|
|
|
|
|
- Trade
|
|
-
|
|
-
|
|
- Non-trade
|
|
1,075,359
|
|
2,229
|
|
|
|
1,075,359
|
|
2,229
|
|
|
|
|
|
|
|
Amounts due to related
parties:
|
|
|
|
|
|
- Trade
|
|
-
|
|
-
|
|
- Non-trade
|
|
(973,665)
|
|
(806,812)
|
|
|
|
(973,665)
|
|
(806,812)
|
|
|
|
|
|
|
|
The
non-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(3)).
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
|
|
|
|
September
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 nine months ended September 30, 2017 was $120,000 (2016:
$120,000).
|
|
|
|
|
|
|
|
|
|
NOTE
10
|
RELATED
PARTY TRANSACTIONS
|
1.
|
For
the nine months period ended September 30, 2017, the Company paid no remuneration (2016: NIL) to its
directors and its officers for their services provided to the Company.
|
2.
|
During
the period a Group subsidiary provided consulting services amount to USD23,479 to a company owned and
controlled by our directors.
|
3.
|
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
|
No
provision was made for income tax for the nine months ended September 30, 2017 and 2016,
since the Company and its subsidiaries had significant net operating loss. In the nine
months ended September 30, 2017 and 2016, the Company and its subsidiaries incurred net
losses for tax purposes of approximately $109,969 and $467,263, respectively. Total net
operating losses carry forward as at September 30, 2017 and 2016, (i) for Federal and
State purpose were $12,261,959 and $11,859,918, respectively and (ii) for its entities
outside of the United States $49,679 and $387,185. 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 September 30, 2017 and December 31, 2016 was approximately $5,061,841 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:-
|
|
1.
|
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).
|
|
2.
|
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