Item
7. Managements
Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our
audited consolidated financial statements and the related notes for the years
ended December 31, 2018 and 2017 that appear elsewhere in this annual report.
The following discussion contains forward-looking statements that reflect our
plans, estimates and beliefs. Our actual results could differ materially from
those discussed in the forward looking statements. Factors that could cause or
contribute to such differences include, but are not limited to those discussed
below and elsewhere in this annual report, particularly in the section entitled
"Risk Factors" beginning on page 7 of this annual report.
Our audited consolidated financial statements are stated in
United States Dollars and are prepared in accordance with United States
Generally Accepted Accounting Principles.
Operating Results
There was no sales revenue for the period of last twelve
months.
Results of Operation for the Years Ended December 31,
2018 Compared to the Year Ended December 31, 2017
Results of Operation
Our operating results for the years ended December 31, 2018 and
2017 are summarized as follows:
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Sales, net
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Cost of sales
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Gross Profit/(Loss)
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
$
|
(208,089
|
)
|
$
|
(207,796
|
)
|
|
|
|
|
|
|
|
Loss from
operations
|
$
|
(208,089
|
)
|
$
|
(207,796
|
)
|
|
|
|
|
|
|
|
Total Other income (expenses)
|
$
|
(221
|
)
|
$
|
(13,144
|
)
|
|
|
|
|
|
|
|
Provision for income taxes
expense (benefit)
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(208,310
|
)
|
$
|
(220,940
|
)
|
|
|
|
|
|
|
|
Net loss attributable to
non-controlling interest
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Net loss attributable to
TRANSAKT LTD.
|
$
|
(208,310
|
)
|
$
|
(220,940
|
)
|
Revenues & Cost of Sales
There was no sales revenue for the year ended December 31, 2018
and 2017.
Cost of sales was zero for the year ended December 31, 2018
since the zero sales in 2018.
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended
December 31, 2018 totaled $208,089 compared to operating expenses of $207,796
during the year ended December 31, 2017. Almost same as last year.
Loss from Operations
Loss from operations for the year ended December 31, 2018
totaled $208,089 compared to $207,796 from the same period in 2017. Almost same
as last year.
Other Income (expenses)
Other (expense) / income decrease approximately $(12,923) to
$(221) for the year ended December 31, 2018 from ($13,144) for the same period
in 2017. The decrease in net other expense was primarily due to the decrease in
interest expense on convertible note.
Net loss
As a result of the above factors, we have net loss attributable
to the Companys common stockholders of approximately $208,310 for the year
ended December 31, 2018 as compared to a loss of $220,940 for the year ended
December 31, 2017, representing a decrease of approximately $12,630.
Liquidity
Working Capital
|
|
At
|
|
|
At
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Current assets
|
$
|
239,088
|
|
$
|
445,630
|
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
37,287
|
|
$
|
35,656
|
|
|
|
|
|
|
|
|
Working capital
|
$
|
201,801
|
|
$
|
409,974
|
|
Cash Flows
|
|
Fiscal year ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Net cash used in operating
activities
|
$
|
208,679
|
|
$
|
198,122
|
|
Net cash used in investing activities
|
$
|
-
|
|
$
|
-
|
|
Net cash provided by
financing activities
|
$
|
-
|
|
$
|
-
|
|
Net cash flow used in operating activities was $208,679 in
2018, compared to $198,122 in 2017, an increase of $10,557. The increase in net
cash flow used in operating activities was mainly due to higher operation
cost.
There is no net cash flow used in investing activities for 2018
and 2017.
There is no net cash flow provided by financing activities for
2018 and 2017.
Our working capital was $201,801 as of December 31, 2018
compared to $409,974 as of December 31, 2017.
In managements opinion, our working capital is not currently
sufficient for our present requirements. However, we will continue to evaluate
alternative sources of capital to meet our growth requirements, including other
asset or debt financing, issuing equity securities and entering into other
financing arrangements. There can be no assurance, however, that any of the
contemplated financing arrangements described herein will be available and, if
available, can be obtained on terms favorable to us.
Historically, operations and short-term financing have been
sufficient to meet our cash needs. We believe that we will be raise capital
through private placement offerings of our equity securities to provide the
necessary cash flow to meet anticipated working capital requirements. However,
our actual working capital needs for the long and short -term will depend upon
numerous factors, including operating results, competition, and the availability
of credit facilities, none of which can be predicted with certainty. Future
expansion will be limited by the availability of financing products and raising
capital.
Capital Expenditure
Total capital expenditures were $0 for the years ended December
31, 2018 and 2017, respectively.
Currency Exchange Fluctuations
The Company financial statements are presented in the U.S.
dollar ($), which is the Companys reporting currency, while its functional
currency is Hong Kong Dollar (HKD). Transactions in foreign currencies are
initially recorded at the functional currency rate ruling at the date of
transaction. Any differences between the initially recorded amount and the
settlement amount are recorded as a gain or loss on foreign currency transaction
in the consolidated statements of income. Monetary assets and liabilities
denominated in foreign currency are translated at the functional currency rate
of exchange ruling at the balance sheet date. Any differences are taken to
profit or loss as a gain or loss on foreign currency translation in the
statements of income.
In accordance with ASC 830, Foreign Currency Matters, the
Company translates the assets and liabilities into U.S. dollar ($) using the
rate of exchange prevailing at the balance sheet date and the statements of
operations and cash flows are translated at an average rate during the reporting
period. Adjustments resulting from the translation from HKD into U.S. dollar are
recorded in stockholders equity as part of accumulated other comprehensive
income.
Cash Requirements
We used cash in operations of $208,679 for the year ended
December 31, 2018. We continue to be dependent on the proceeds of equity and
non-equity financing to fund our operations. No assurances can be given that our
actual cash requirements will fall within our budget that anticipated revenues
will be realized when needed, that lines of credit will be available to us if
required, or that additional capital will be available to us.
Research and Development
No research and development expenses were incurred in 2018 or
2017.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
stockholders.
Critical Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
TransAKT (BVI) Limited and its wholly owned subsidiaries, TransAKT Bio Agritech
Ltd., collectively referred to within as the Company. All material intercompany
accounts, transactions, and profits have been eliminated in consolidation.
Going Concern
We has incurred a net loss attributable to the Companys common
stockholders of $208,310 and $220,940 during the years ended December 31, 2018
and 2017, respectively, and has an accumulated deficit of $22,558,836 and
$22,350,526 as of December 31, 2018 and December 31, 2017, respectively.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. This basis
of accounting contemplates the recovery of the Companys assets and the
satisfaction of liabilities in the normal course of business. This presentation
presumes funds will be available to finance ongoing
research and development, operations and capital expenditures and permit the realization of assets and the payment of liabilities in the normal course of operations for the foreseeable future.
The ability of the Company to continue research and development projects and realize the capitalized value of proprietary technologies and related assets is dependent upon future commercial success of the technologies and raising sufficient funds to
continue research and development as well as to effectively market its products. Through December 31, 2018, the Company has not realized commercial success of the technologies, nor have they raised sufficient funds to continue research and
development or to market its products.
There can be no assurances that there will be adequate financing available to the Company and the consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
The Company has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included: (1) Tightly budgeting and controlling all expenses; (2) The Company plans to continue actively seeking additional
funding opportunities to improve and expand upon our product lines.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenues are recognized when finished products are shipped to customers and both title and the risks and rewards of ownership are transferred and collectability is reasonably assured. The Company’s revenues are recorded upon confirmed
acceptance after inspection by the customers of the Company.
Exchange Gain (Loss):
During the years ended December 31, 2018 and 2017, the transactions of TransAKT Bio Agritech Ltd. were denominated in foreign currency and were recorded in Hong Kong Dollar (HKD) at the rates of exchange in effect when the transactions occur.
Exchange gains and losses are recognized for the different foreign exchange rates applied when the foreign currency assets and liabilities are settled.
Translation Adjustment
The Company financial statements are presented in the U.S. dollar ($), which is the Company’s reporting currency, while its functional currency is Hong Kong Dollar (HKD). Transactions in foreign currencies are initially recorded at the
functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of income.
Monetary assets and liabilities denominated in foreign currency are translated at the functional currency rate of exchange ruling at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency
translation in the statements of income.
In accordance with ASC 830, Foreign Currency Matters, the Company translates the assets and liabilities into U.S. dollar ($) using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are
translated at an average rate during the reporting period. Adjustments resulting from the translation from HKD into U.S. dollar are recorded in stockholders’ equity as part of accumulated other comprehensive income.
Comprehensive Income
Comprehensive income includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income on its statements of stockholders’ equity.
Advertising
Advertising expenses consist primarily of costs of promotion for corporate image and product marketing and costs of direct advertising. The Company expenses all advertising costs as incurred.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis
of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation
allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.
Statement of Cash Flows
Cash flows from the Company's operations are based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the
balance sheet.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are accounts receivable and other receivables arising from its normal business activities. The Company has a diversified customer base. The Company controls
credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an
allowance, if required, for un-collectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.
Fair Value of Financial Instruments
In the first quarter of fiscal year 2008, the Company adopted Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”). ASC 820-10 defines fair value, establishes a framework for measuring
fair value, and enhances fair value measurement disclosure. ASC 820-10 delays, until the first quarter of fiscal year 2009, the effective date for ASC 820-10 for all non-financial assets and non-financial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of ASC 820-10 did not have a material impact on the Company’s financial position or operations.
Effective October 1, 2008, the Company adopted Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting Standards Codification subtopic 825-10, Financial Instruments
(“ASC 825-10”), which permits entities to choose to measure many financial instruments and certain other items at fair value. Neither of these statements had an impact on the Company’s unaudited condensed consolidated financial
position, results of operations or cash flows. The carrying value of cash and cash equivalents, accounts payable and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these
instruments.
Stock-based Compensation
The Company records stock-based compensation expense pursuant
to ASC 718-10, "
Share Based Payment Arrangement
, which requires
companies to measure compensation cost for stock-based employee compensation
plans at fair value at the grant date and recognize the expense over the
employee's requisite service period. The Companys expected volatility
assumption is based on the historical volatility of Companys stock or the
expected volatility of similar entities. The expected life assumption is
primarily based on historical exercise patterns and employee post-vesting
termination behavior. The risk-free interest rate for the expected term of the
option is based on the U.S. Treasury yield curve in effect at the time of grant.
Stock-based compensation expense is recognized based on awards
expected to vest, and there were no estimated forfeitures as the Company has a
short history of issuing options. ASC 718-10 requires forfeitures to be
estimated at the time of grant and revised in subsequent periods, if necessary,
if actual forfeitures differ from those estimates.
Net Loss Per Share
The Company has adopted Accounting Standards Codification
subtopic 260-10, Earnings Per Share (ASC 260-10) which specifies the
computation, presentation and disclosure requirements of earnings per share
information. Basic earnings per share have been calculated based upon the
weighted average number of common shares outstanding. Common equivalent shares
are excluded from the computation of the diluted loss per share if their effect
would be anti-dilutive.
Intangible assets
Intangible assets include a patent. With the adoption of FASB
ASC Topic 350, Intangibles, intangible assets with a definite life are
amortized on a straight-line basis. The patent is being amortized over its
estimated life of 10 years. Intangible assets with a definite life are tested
for impairment whenever events or circumstances indicate that a carrying amount
of an asset (asset group) may not be recoverable. An impairment loss would be
recognized when the carrying amount of an asset exceeds the estimated
undiscounted cash flows used in determining the fair value of the asset. The
amount of the impairment loss to be recorded is calculated by the excess of the
assets carrying value over its fair value. Fair value is generally determined
using a discounted cash flow analysis. Costs related to internally develop
intangible assets are expensed as incurred.
Recent accounting pronouncements
The FASB issued an Accounting Standards Update (ASU) that helps
organizations address certain stranded income tax effects in accumulated other
comprehensive income (AOCI) resulting from the Tax Cuts and Jobs Act.
ASU No. 2018-02, Income StatementReporting Comprehensive
Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income, provides financial statement preparers with an
option to reclassify stranded tax effects within AOCI to retained earnings in
each period in which the effect of the change in the U.S. federal corporate
income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is
recorded.
The ASU requires financial statement preparers to disclose:
|
A description of the accounting
policy for releasing income tax effects from AOCI;
|
|
Whether they elect to reclassify
the stranded income tax effects from the Tax Cuts and Jobs Act; and
|
|
Information about the other
income tax effects that are reclassified.
|
The amendments affect any organization that is required to
apply the provisions of Topic 220, Income StatementReporting Comprehensive
Income, and has items of other comprehensive income for which the related tax
effects are presented in other comprehensive income as required by GAAP.
The amendments are effective for all organizations for fiscal
years beginning after December 15, 2018, and interim periods within those fiscal
years. Early adoption is permitted. Organizations should apply the proposed
amendments either in the period of adoption or retrospectively to each
period (or periods) in which the effect of the change in the U.S. federal
corporate income tax rate in the Tax Cuts and Jobs Act is recognized.
The FASB has issued Accounting Standards Update (ASU) No.
2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC
Staff Accounting Bulletin No. 118. ASU 2018-05 amends certain SEC material in
Topic 740 for the income tax accounting implications of the recently issued Tax
Cuts and Jobs Act (Act).
ASU 2018-05 adds the following guidance, among other things, to
the FASB Accounting Standards Codification regarding the Act:
Question 1:If the accounting for certain income tax effects of the Act
is not completed by the time a company issues its financial statements that
include the reporting period in which the Act was enacted, what amounts should a
company include in its financial statements for those income tax effects for
which the accounting under Topic 740 is incomplete?
Answer 1:In a companys financial statements that include the reporting
period in which the Act was enacted, a company must first reflect the income tax
effects of the Act in which the accounting under Topic 740 is complete. These
completed amounts would not be provisional amounts. The company would then also
report provisional amounts for those specific income tax effects of the Act for
which the accounting under Topic 740 will be incomplete but a reasonable
estimate can be determined. For any specific income tax effects of the Act for
which a reasonable estimate cannot be determined, the company would not report
provisional amounts and would continue to apply Topic 740 based on the
provisions of the tax laws that were in effect immediately prior to the Act
being enacted. For those income tax effects for which a company was not able to
determine a reasonable estimate (such that no related provisional amount was
reported for the reporting period in which the Act was enacted), the company
would report provisional amounts in the first reporting period in which a
reasonable estimate can be determined.
Question 2: If an entity accounts for certain income tax effects of the
Act under a measurement period approach, what disclosures should be
provided?
Answer 2:The staff believes an entity should include financial
statement disclosures to provide information about the material financial
reporting impacts of the Act for which the accounting under Topic 740 is
incomplete, including:
a. Qualitative disclosures of the income tax effects
of the Act for which the accounting is incomplete;
b. Disclosures of items
reported as provisional amounts;
c. Disclosures of existing current or
deferred tax amounts for which the income tax effects of the Act have not been
completed;
d. The reason why the initial accounting is incomplete;
e. The
additional information that is needed to be obtained, prepared, or analyzed in
order to complete the accounting requirements under Topic 740;
f. The nature
and amount of any measurement period adjustments recognized during the reporting
period;
g. The effect of measurement period adjustments on the effective tax
rate; and
h. When the accounting for the income tax effects of the Act has
been completed.
ASU 2018-05 is effective upon inclusion in the FASB
Codification.
The FASB has issued Accounting Standards Update (ASU) No.
2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party
Guidance for Variable Interest Entities, that reduces the cost and complexity of
financial reporting associated with consolidation of variable interest entities
(VIEs). A VIE is an organization in which consolidation is not based on a
majority of voting rights.
The new guidance supersedes the private company alternative for
common control leasing arrangements issued in 2014 and expands it to all
qualifying common control arrangements.
Under the new standard, a private company could make an
accounting policy election to not apply VIE guidance to legal entities under
common control (including common control leasing arrangements) when certain
criteria are met. This accounting policy election must be applied by a private
company to all current and future legal entities under common control that meet the criteria for applying the alternative. A
private company will be required to continue to apply other consolidation
guidance, specifically the voting interest entity guidance.
Additionally, a private company electing the alternative is
required to provide detailed disclosures about its involvement with, and
exposure to, the legal entity under common control.
The ASU also amends the guidance for determining whether a
decision-making fee is a variable interest. The amendments require organizations
to consider indirect interests held through related parties under common control
on a proportional basis rather than as the equivalent of a direct interest in
its entirety (as currently required in GAAP). Therefore, these amendments likely
will result in more decision makers not consolidating VIEs.
For organizations other than private companies, the amendments
in this ASU are effective for fiscal years beginning after December 15, 2019,
and interim periods within those fiscal years. The amendments in this ASU are
effective for a private company for fiscal years beginning after December 15,
2020, and interim periods within fiscal years beginning after December 15, 2021.
Early adoption is permitted.
Tabular Disclosure of Contractual Obligations
Operating Leases
We were not party to any leases agreement during the year ended
December 31, 2018.
Contractual Obligations
As a smaller reporting company, we are not required to
provide tabular disclosure obligations.
Item
8. Financial
Statements and Supplementary Data
TRANSAKT LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2018 AND 2017 AND
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the board of directors of TransAKT Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
TransAKT Ltd. and its subsidiaries (the "Company") as of December 31, 2018 and
2017, the related consolidated statements of operations, changes in
shareholders equity, and cash flows, for each of the two years in the period
ended December 31, 2018, and the related notes (collectively referred to as the
"financial statements"). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of
December 31, 2018 and 2017, and the consolidated results of its operations and
its cash flows for each of the two years in the period ended December 31, 2018,
in conformity with accounting principles generally accepted in the United States
of America.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, the Company has suffered recurring
losses from operations and has a net capital deficiency that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the
Company's consolidated financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion.
Our audits included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/
Centurion ZD CPA & Co
.
Centurion ZD CPA
& Co.
(as successor to Centurion ZD CPA Limited)
We have served as the Company's auditor since 2016.
Hong
Kong, SAR
April 1, 2019
F-1
TRANSAKT LTD.
CONSOLIDATED BALANCE SHEETS
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and
cash equivalents
|
$
|
227,088
|
|
$
|
435,630
|
|
Prepayments
|
|
12,000
|
|
|
10,000
|
|
Total
Current Assets
|
|
239,088
|
|
|
445,630
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
239,088
|
|
$
|
445,630
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accrued
expenses
|
$
|
37,287
|
|
$
|
35,656
|
|
Convertible Promissory
Note
|
|
-
|
|
|
-
|
|
Total Current Liabilities
|
|
37,287
|
|
|
35,656
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
37,287
|
|
|
35,656
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
Preferred stock,
200,000,000 shares authorized for
issuance,
$0.001
par value, 0 share issued and outstanding
|
|
-
|
|
|
-
|
|
Common stock, 700,000,000 shares authorized for issuance,
$0.001 par value, 133,506,570 shares and
133,506,570
shares
issued and outstanding at December 31, 2018 and
2017, respectively
|
|
133,506
|
|
|
133,506
|
|
Additional paid-in
capital
|
|
24,265,011
|
|
|
24,265,011
|
|
Accumulated deficit
|
|
(22,558,836
|
)
|
|
(22,350,526
|
)
|
Other comprehensive
income
|
|
(437,880
|
)
|
|
(438,017
|
)
|
Stock
subscription receivable
|
|
(1,200,000
|
)
|
|
(1,200,000
|
)
|
Treasury stock,
common stock, at cost, 0 share at
December 31, 2018 and 2017, respectively
|
|
-
|
|
|
-
|
|
Total
Stockholders' Equity
|
|
201,801
|
|
|
409,974
|
|
|
|
|
|
|
|
|
Total
Equity
|
|
201,801
|
|
|
409,974
|
|
|
|
|
|
|
|
|
Total Liabilities and
Equity
|
$
|
239,088
|
|
$
|
445,630
|
|
The accompanying notes are an integral part of the financial
statements
F-2
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF
OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Sales, net
|
$
|
-
|
|
$
|
-
|
|
Cost of sales
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Gross profit
|
|
-
|
|
|
-
|
|
Selling, general and
administrative expenses
|
|
(208,089
|
)
|
|
(207,796
|
)
|
Loss from operations
|
|
(208,089
|
)
|
|
(207,796
|
)
|
Other income (expense)
|
|
|
|
|
|
|
Interest expense
|
|
-
|
|
|
(13,333
|
)
|
Currency exchange gain/ (loss)
|
|
(221
|
)
|
|
189
|
|
Total other income
|
|
(221
|
)
|
|
(13,144
|
)
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
(208,310
|
)
|
|
(220,940
|
)
|
Provision for income taxes
expense (benefit)
|
|
-
|
|
|
-
|
|
Net loss
|
|
(208,310
|
)
|
|
(220,940
|
)
|
Net loss attributable to
TRANSAKT LTD.
|
$
|
(208,310
|
)
|
$
|
(220,940
|
)
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
Basic and diluted income (loss) common
stockholders per share
|
$
|
(0.002
|
)
|
$
|
(0.002
|
)
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding:
|
|
|
|
|
|
|
Basic and diluted
|
|
133,506,570
|
|
|
116,811,045
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
(Loss)
|
|
|
|
|
|
|
Net profits (loss)
|
$
|
(208,310
|
)
|
$
|
(220,940
|
)
|
Foreign currency translation
adjustment
|
|
137
|
|
|
(4,849
|
)
|
Comprehensive income (loss)
|
|
(208,173
|
)
|
|
(225,789
|
)
|
Comprehensive income (loss)
attributable to TRANSAKT LTD.
|
$
|
(208,173
|
)
|
$
|
(225,789
|
)
|
The accompanying notes are an integral part of the financial
statements
F-3
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS
DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2018
|
|
Common Stock
|
|
|
|
|
|
Additional
|
|
|
Stock
|
|
|
Accumulated
|
|
|
Other
|
|
|
Treasury
|
|
|
Stock at Cost
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-in
|
|
|
Subscription
|
|
|
Deficit
|
|
|
Comprehensive
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Receivable
|
|
|
|
|
|
Income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
28,439,904
|
|
$
|
28,440
|
|
$
|
23,319,411
|
|
$
|
(1,200,000
|
)
|
$
|
(22,129,586
|
)
|
$
|
(433,168
|
)
|
|
-
|
|
$
|
-
|
|
$
|
(414,903
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue Common Stock
|
|
105,066,666
|
|
|
105,066
|
|
|
945,600
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,050,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(220,940
|
)
|
|
(4,849
|
)
|
|
-
|
|
|
-
|
|
|
(225,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
133,506,570
|
|
$
|
133,506
|
|
$
|
24,265,011
|
|
$
|
(1,200,000
|
)
|
$
|
(22,350,526
|
)
|
$
|
(438,017
|
)
|
|
-
|
|
$
|
-
|
|
$
|
409,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(208,310
|
)
|
|
137
|
|
|
|
|
|
|
|
|
(208,173
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
133,506,570
|
|
$
|
133,506
|
|
$
|
24,265,011
|
|
$
|
(1,200,000
|
)
|
$
|
(22,558,836
|
)
|
$
|
(437,880
|
)
|
|
-
|
|
$
|
-
|
|
$
|
201,801
|
|
The accompanying notes are an integral part of the financial
statements
F-4
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
|
|
2018
|
|
|
2017
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
Net profits
(loss) available to common stockholders
|
$
|
(208,310
|
)
|
$
|
(220,940
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
Interest expenses
|
|
-
|
|
|
13,333
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
Decrease (Increase) in prepayments
|
|
(2,000
|
)
|
|
-
|
|
Increase (Decrease) in
accounts payable and accrued expenses
|
|
1,631
|
|
|
9,485
|
|
Net cash used in
operating activities
|
|
(208,679
|
)
|
|
(198,122
|
)
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Restricted cash
|
|
-
|
|
|
-
|
|
Net cash used in
investing activities
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Net
repayment of amount due to shareholders
|
|
-
|
|
|
-
|
|
Proceeds from issuance of
Convertible Promissory Note
|
|
-
|
|
|
-
|
|
Net cash
provided by financing activities
|
|
-
|
|
|
-
|
|
Effect of exchange rate changes on cash and
cash equivalents
|
|
137
|
|
|
(4,849
|
)
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
(208,542
|
)
|
|
(202,971
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning
|
|
435,630
|
|
|
638,601
|
|
Ending
|
$
|
227,088
|
|
$
|
435,630
|
|
|
|
|
|
|
|
|
Non cash financing activities
|
|
|
|
|
|
|
Issuance of common stock to
settle convertible promissory note and its relevant accrued interest
|
|
-
|
|
|
1,050,666
|
|
|
|
|
|
|
|
|
Supplemental disclosure of
cash flows
|
|
|
|
|
|
|
Cash paid during the year
for:
|
|
|
|
|
|
|
Interest expense
|
$
|
-
|
|
$
|
-
|
|
The accompanying notes are an integral part of the financial
statements
F-5
TRANSAKT LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 1 ORGANIZATION
TransAKT Ltd. (the Company) was incorporated under the laws
of the Province of Alberta on June 3, 1997. The Company completed the
acquisition of Green Point Resources Inc. on October 18, 2000 whereby it became
a publicly traded company listed on the Canadian Venture Exchange. In 2004 the
Company voluntarily delisted from the TSX Venture Exchange and retained a
listing on the Over the Counter Bulletin Board in the United States.
In October 2004 the Company purchased certain assets of IP
Mental Inc., a Taiwan based Voice over Internet Protocol (VoIP) company. The
company name was changed from TransAKT Corp. to TransAKT Ltd. on September 29,
2006. The Company designs and develops Voice over Internet Protocol (VoIP)
solutions and mobile payment terminals for the consumer electronics
industry.
On November 15, 2006 TransAKT Ltd and the shareholders of
Taiwan Halee International Co. Ltd. (HTT), entered into a Share Exchange
Agreement in which TransAKT Ltd. acquired 100% of Taiwan Halee International Co.
Ltd.s outstanding common stock. HTT was incorporated under the laws of Republic
of China in 1985. HTT is engaged in designing, manufacturing and distribution of
Taiwan telecommunications equipment. The acquisition has been accounted for as a
reverse acquisition under the purchase method of accounting. Accordingly, the
merger of the two companies has been recorded as a recapitalization of HTT, with
HTT being treated as the continuing entity.
On August 12, 2010, the Company filed the Registration
Statement (Form S-4) in connection with the continuation of the Company from
Alberta to Nevada. Based upon the number of common shares of TransAKT Ltd., a
Nevada corporation (TransAKT Nevada), to be issued to the shareholders of
TransAKT Ltd., an Alberta corporation (TransAKT Alberta), on a one-for-one
basis upon completion of the Continuation and based on 102,645,120 shares of
common stock of TransAKT Ltd., an Alberta corporation, issued and outstanding as
of August 12, 2010.
The Articles of Conversion of TransAKT Nevada provides that the
authorized capital of the TransAKT will be 300,000,000 shares of common stock,
par value $0.001 per share and 200,000,000 shares of preferred stock, par value
$0.001 per share.
On July 26, 2012, the Company acquired 100% equity of Vegfab
Agricultural Technology Co. Ltd. (the Vegfab), a company incorporated under
the laws of the Republic of China (ROC, Taiwan). Vegfab is mainly engaged in
selling agricultural equipment used to grow vegetables using simulated sunlight
from LED lamps in hydroponic systems.
On January 4, 2013, the Company entered into a Share Purchase
and Sale Agreement with a shareholder pursuant to which the Company sold to him
100% of all issued and outstanding securities of its wholly owned subsidiary
Taiwan Halee International Corporation (HTT). In consideration of the sale of
HTT, the shareholder has transferred to the Company 45,000,000 previously issued
common voting shares of TransAKT with a deemed value of $0.04 per share or $1.8
million in the aggregate.
On October 30, 2013, Million Talented Ltd., a related party 50%
owned by the Companys president and director, contributed $516 (equals to HKD
4,000) to obtain 40% ownership of TransAKT Bio Agritech Ltd., formerly named as
TransAKT (H.K) Ltd., (TransAKT H.K.). TransAKT H.K. was incorporated in Hong
Kong on November 20, 2007. It had no operation until 2013. TransAKT H.K.'s
primary business is conducting research and development on new agricultural
technology relating to the Companys business.
6
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
TransAKT (BVI) Limited and its wholly owned subsidiaries, TransAKT Bio Agritech
Ltd., collectively referred to within as the Company. All material intercompany
accounts, transactions, and profits have been eliminated in consolidation.
Going Concern
The Company has incurred a net loss of $208,310 and $220,940
during the years ended December 31, 2018 and 2017, respectively, and has an
accumulated deficit of $22,558,836 and $22,350,526 as of December 31, 2018 and
December 31, 2017, respectively.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. This basis
of accounting contemplates the recovery of the Companys assets and the
satisfaction of liabilities in the normal course of business. This presentation
presumes funds will be available to finance ongoing research and development,
operations and capital expenditures and permit the realization of assets and the
payment of liabilities in the normal course of operations for the foreseeable
future.
The ability of the Company to continue research and development
projects and realize the capitalized value of proprietary technologies and
related assets is dependent upon future commercial success of the technologies
and raising sufficient funds to continue research and development as well as to
effectively market its products. Through December 31, 2018, the Company has not
realized commercial success of the technologies, nor have they raised sufficient
funds to continue research and development or to market its products.
There can be no assurances that there will be adequate
financing available to the Company and the consolidated financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
The Company has taken certain restructuring steps to provide
the necessary capital to continue its operations. These steps included: (1)
Tightly budgeting and controlling all expenses; (2) The Company plans to
continue actively seeking additional funding opportunities ; (3) The company is
seeking for other business opportunities to create sources of income.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States (GAAP) requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
7
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Revenue Recognition
Revenues are recognized when finished products are shipped to
customers and both title and the risks and rewards of ownership are transferred
and collectability is reasonably assured. The Companys revenues are recorded
upon confirmed acceptance after inspection by the customers of the Company.
Exchange Gain (Loss):
During the years ended December 31, 2018 and 2017, the
transactions of TransAKT Bio Agritech Ltd. were denominated in foreign currency
and were recorded in Hong Kong Dollar (HKD) at the rates of exchange in effect
when the transactions occur. Exchange gains and losses are recognized for the
different foreign exchange rates applied when the foreign currency assets and
liabilities are settled.
Translation Adjustment
The Company financial statements are presented in the U.S.
dollar ($), which is the Companys reporting currency, while its functional
currency is Hong Kong Dollar (HKD). Transactions in foreign currencies are
initially recorded at the functional currency rate ruling at the date of
transaction. Any differences between the initially recorded amount and the
settlement amount are recorded as a gain or loss on foreign currency transaction
in the consolidated statements of income. Monetary assets and liabilities
denominated in foreign currency are translated at the functional currency rate
of exchange ruling at the balance sheet date. Any differences are taken to
profit or loss as a gain or loss on foreign currency translation in the
statements of income.
In accordance with ASC 830, Foreign Currency Matters, the
Company translates the assets and liabilities into U.S. dollar ($) using the
rate of exchange prevailing at the balance sheet date and the statements of
operations and cash flows are translated at an average rate during the reporting
period. Adjustments resulting from the translation from HKD into U.S. dollar are
recorded in stockholders equity as part of accumulated other comprehensive
income.
Comprehensive Income
Comprehensive income includes accumulated foreign currency
translation gains and losses. The Company has reported the components of
comprehensive income on its statements of stockholders equity.
Advertising
Advertising expenses consist primarily of costs of promotion
for corporate image and product marketing and costs of direct advertising. The
Company expenses all advertising costs as incurred.
Income Taxes
The Company accounts for income taxes in accordance with ASC
740, Income Taxes, which requires that the Company recognize deferred tax
liabilities and assets based on the differences between the financial statement
carrying amounts and the tax basis of assets and liabilities, using enacted tax
rates in effect in the years the differences are expected to reverse. Deferred
income tax benefit (expense) results from the change in net deferred tax assets
or deferred tax liabilities. A valuation allowance is recorded when, in the
opinion of management, it is more likely than not that some or all of any
deferred tax assets will not be realized.
8
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Statement of Cash Flows
In accordance with generally accepted accounting principles
(GAAP), cash flows from the Company's operations are based upon the local
currencies. As a result, amounts related to assets and liabilities reported on
the statement of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheet.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk are accounts receivable and other receivables
arising from its normal business activities. The Company has a diversified
customer base. The Company controls credit risk related to accounts receivable
through credit approvals, credit limits and monitoring procedures. The Company
routinely assesses the financial strength of its customers and, based upon
factors surrounding the credit risk, establishes an allowance, if required, for
un-collectible accounts and, as a consequence, believes that its accounts
receivable credit risk exposure beyond such allowance is limited.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and cash in time
deposits, certificates of deposit and all highly liquid debt instruments with
original maturities of three months or less.
Fair Value of Financial Instruments
In the first quarter of fiscal year 2008, the Company adopted
Accounting Standards Codification subtopic 820-10, Fair Value Measurements and
Disclosures (ASC 820-10). ASC 820-10 defines fair value, establishes a
framework for measuring fair value, and enhances fair value measurement
disclosure. ASC 820-10 delays, until the first quarter of fiscal year 2009, the
effective date for ASC 820-10 for all non-financial assets and non-financial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). The adoption of
ASC 820-10 did not have a material impact on the Companys financial position or
operations.
Effective October 1, 2008, the Company adopted Accounting
Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures
(ASC 820-10) and Accounting Standards Codification subtopic 825-10, Financial
Instruments (ASC 825-10), which permits entities to choose to measure many
financial instruments and certain other items at fair value. Neither of these
statements had an impact on the Companys unaudited condensed consolidated
financial position, results of operations or cash flows. The carrying value of
cash and cash equivalents, accounts payable and short-term borrowings, as
reflected in the balance sheets, approximate fair value because of the
short-term maturity of these instruments.
9
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Stock-based Compensation
The Company records stock-based compensation expense pursuant
to ASC 718-10, "
Share Based Payment Arrangement
, which requires
companies to measure compensation cost for stock-based employee compensation
plans at fair value at the grant date and recognize the expense over the
employee's requisite service period. The Companys expected volatility
assumption is based on the historical volatility of Companys stock or the
expected volatility of similar entities. The expected life assumption is
primarily based on historical exercise patterns and employee post-vesting
termination behavior. The risk-free interest rate for the expected term of the
option is based on the U.S. Treasury yield curve in effect at the time of grant.
Stock-based compensation expense is recognized based on awards
expected to vest, and there were no estimated forfeitures as the Company has a
short history of issuing options. ASC 718-10 requires forfeitures to be
estimated at the time of grant and revised in subsequent periods, if necessary,
if actual forfeitures differ from those estimates.
Net Loss Per Share
The Company has adopted Accounting Standards Codification
subtopic 260-10, Earnings Per Share (ASC 260-10) which specifies the
computation, presentation and disclosure requirements of earnings per share
information. Basic earnings per share have been calculated based upon the
weighted average number of common shares outstanding. Common equivalent shares
are excluded from the computation of the diluted loss per share if their effect
would be anti-dilutive.
Intangible assets
Intangible assets include a patent. With the adoption of FASB
ASC Topic 350, Intangibles, intangible assets with a definite life are
amortized on a straight-line basis. The patent is being amortized over its
estimated life of 10 years. Intangible assets with a definite life are tested
for impairment whenever events or circumstances indicate that a carrying amount
of an asset (asset group) may not be recoverable. An impairment loss would be
recognized when the carrying amount of an asset exceeds the estimated
undiscounted cash flows used in determining the fair value of the asset. The
amount of the impairment loss to be recorded is calculated by the excess of the
assets carrying value over its fair value. Fair value is generally determined
using a discounted cash flow analysis. Costs related to internally develop
intangible assets are expensed as incurred.
Recent accounting pronouncements
The FASB issued an Accounting Standards Update (ASU) that helps
organizations address certain stranded income tax effects in accumulated other
comprehensive income (AOCI) resulting from the Tax Cuts and Jobs Act.
ASU No. 2018-02, Income StatementReporting Comprehensive
Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income, provides financial statement preparers with an
option to reclassify stranded tax effects within AOCI to retained earnings in
each period in which the effect of the change in the U.S. federal corporate
income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is
recorded.
The ASU requires financial statement preparers to disclose:
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A description of the accounting
policy for releasing income tax effects from AOCI;
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Whether they elect to reclassify
the stranded income tax effects from the Tax Cuts and Jobs Act; and
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Information about the other
income tax effects that are reclassified.
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The amendments affect any organization that is required to
apply the provisions of Topic 220, Income StatementReporting Comprehensive
Income, and has items of other comprehensive income for which the related tax
effects are presented in other comprehensive income as required by GAAP.
10
The amendments are effective for all organizations for fiscal
years beginning after December 15, 2018, and interim periods within those fiscal
years. Early adoption is permitted. Organizations should apply the proposed
amendments either in the period of adoption or retrospectively to each period
(or periods) in which the effect of the change in the U.S. federal corporate
income tax rate in the Tax Cuts and Jobs Act is recognized.
The FASB has issued Accounting Standards Update (ASU) No.
2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC
Staff Accounting Bulletin No. 118. ASU 2018-05 amends certain SEC material in
Topic 740 for the income tax accounting implications of the recently issued Tax
Cuts and Jobs Act (Act).
ASU 2018-05 adds the following guidance, among other things, to
the FASB Accounting Standards Codification regarding the Act:
Question
1:If the accounting for certain income tax effects of the Act is not completed
by the time a company issues its financial statements that include the reporting
period in which the Act was enacted, what amounts should a company include in
its financial statements for those income tax effects for which the accounting
under Topic 740 is incomplete?
Answer
1:In a companys financial statements that include the reporting period in which
the Act was enacted, a company must first reflect the income tax effects of the
Act in which the accounting under Topic 740 is complete. These completed amounts
would not be provisional amounts. The company would then also report provisional
amounts for those specific income tax effects of the Act for which the
accounting under Topic 740 will be incomplete but a reasonable estimate can be
determined. For any specific income tax effects of the Act for which a
reasonable estimate cannot be determined, the company would not report
provisional amounts and would continue to apply Topic 740 based on the
provisions of the tax laws that were in effect immediately prior to the Act
being enacted. For those income tax effects for which a company was not able to
determine a reasonable estimate (such that no related provisional amount was
reported for the reporting period in which the Act was enacted), the company
would report provisional amounts in the first reporting period in which a
reasonable estimate can be determined.
Question
2: If an entity accounts for certain income tax effects of the Act under a
measurement period approach, what disclosures should be provided?
Answer
2:The staff believes an entity should include financial statement disclosures to
provide information about the material financial reporting impacts of the Act
for which the accounting under Topic 740 is incomplete, including:
a.
Qualitative disclosures of the income tax effects of the Act for which the
accounting is incomplete;
b. Disclosures of items reported as provisional
amounts;
c. Disclosures of existing current or deferred tax amounts for which
the income tax effects of the Act have not been completed;
d. The reason why
the initial accounting is incomplete;
e. The additional information that is
needed to be obtained, prepared, or analyzed in order to complete the accounting
requirements under Topic 740;
f. The nature and amount of any measurement
period adjustments recognized during the reporting period;
g. The effect of
measurement period adjustments on the effective tax rate; and
h. When the
accounting for the income tax effects of the Act has been completed.
ASU
2018-05 is effective upon inclusion in the FASB Codification.
FASB Releases ASU No. 2018-09. The FASB has released Accounting
Standards Update (ASU) No. 2018-09, Codification Improvements. ASU 2018-09
affects a wide variety of Topics in the Codification including:
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Amendments to Subtopic 220-10,Income Statement Reporting
Comprehensive IncomeOverall.The guidance in paragraph 220-10-45-10B(b)
states that taxes not payable in cash are required to be reported as a
direct adjustment to paid-in capital. This requirement conflicts with
other guidance in Topic 740,Income Taxes, Subtopic 805-740,Business
CombinationsIncome Taxes, and Subtopic 852-740,Reorganizations Income
Taxes, which generally states that income taxes and adjustments to those
accounts upon a business combination or a bankruptcy that is eligible for
fresh-start reporting must be recognized in income. ASU No.
2018-09 clarifies the guidance in paragraph 220-10-45-10B
by removing the generic phrase taxes not payable in cash and adding
guidance that is specific to certain quasi-reorganizations.
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11
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Amendments to Subtopic 470-50,DebtModifications and
Extinguishments.The guidance in paragraph 470- 50-40-2 requires that the
difference between the reacquisition price of debt and the net carrying
amount of extinguished debt be recognized in income in the period of
extinguishment. The guidance in that paragraph was not amended by FASB
Statement No. 155, Accounting for Certain Hybrid Financial Instruments, or
FASB Statement No. 159,The Fair Value Option for Financial Assets and
Financial Liabilities; therefore, it does not specifically address
extinguishments of debt when the fair value option is elected. ASU No.
2018-09 clarifies that:
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1. When the fair value option has been elected on debt
that is extinguished, the net carrying amount of the extinguished debt
equals its fair value at the reacquisition date, and
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2. Related gains or losses in other comprehensive income
must be included in net income upon extinguishment of the debt.
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Amendments to Subtopic 480-10,Distinguishing Liabilities
from EquityOverall.The guidance in paragraph 480-10-25-15 prohibits the
combination of freestanding financial instruments within the scope of
Subtopic 480-10 with noncontrolling interest, unless the combination is
required by Topic 815,Derivatives and Hedging. The example in paragraphs
480-10-55-55 and 480-10-55-59 conflicts with that guidance by stating that
freestanding option contracts with the terms in Derivative 2 should be
accounted for on a combined basis with the noncontrolling interest. The
source of the example in paragraph 480-10-55-59 is from EITF Issue No.
00-4, Majority Owners Accounting for a Transaction in the Shares of a
Consolidated Subsidiary and a Derivative Indexed to the Noncontrolling
Interest in That Subsidiary. Issue 00-4 was nullified by FASB Statement
No. 150,Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity, but a conforming amendment to the example
in paragraph 480-10-55-59 was not made to align it with the guidance in
Statement 150. The amendment in this Update conforms the guidance in
paragraphs 480-10-55-55 and 480- 10-55-59 with the guidance in Statement
150.
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Amendments to Subtopic 718-740,CompensationStock
CompensationIncome Taxes.The guidance in paragraph 718-740-35-2, as
amended, is unclear on whether an entity should recognize excess tax
benefits (or tax deficiencies) for compensation expense that is taken on
the entitys tax return. The amendment to paragraph 718-740-35-2 in ASU
No. 2018-09 clarifies that an entity should recognize excess tax benefits
(that is, the difference in tax benefits between the deduction for tax
purposes and the compensation cost recognized for financial statement
reporting) in the period when the tax deduction for compensation expense
is taken on the entitys tax return. This includes deductions that are
taken on the entitys return in a different period from when the event
that gives rise to the tax deduction occurs and the uncertainty about
whether (1) the entity will receive a tax deduction and (2) the amount of
the tax deduction is resolved.
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Amendments to Subtopic 805-740,Business Combinations
Income Taxes.The amendments to paragraph 805-740-25-13 removes a list of
three methods for allocating the consolidated tax provision to an acquired
entity after acquisition that is inconsistent with guidance in Topic 740.
The three methods for tax allocation described in paragraph 805-740-25-13
do not follow the broad principles of being systematic, rational, and
consistent with Topic 740. The amendment removes the allocation methods in
paragraph 805-740-25-13 and conforms the guidance in Subtopic 805-740 with
the guidance in Topic 740.
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Amendments to Subtopic 815-10,Derivatives and Hedging
Overall.The amendment to paragraphs 815-10- 45-4 and 815-10-45-5 in ASU
No. 2018-09 clarifies the circumstances in which derivatives may be
offset. Under certain specific conditions, derivatives may be offset if
three of the four criteria in paragraph 210-20- 45-1 are met. One of the
criteriathe intent to set offis not required to offset derivative assets
and liabilities for certain amounts arising from derivative instruments
recognized at fair value and executed with the same counterparty under a
master netting agreement.
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12
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Amendments to Subtopic 820-10,Fair Value Measurement
Overall.The amendments to paragraph 820-10- 35-16D in ASU No. 2018-09
clarify the Boards decisions about the measurement of the fair value of a
liability or instrument classified in a reporting entitys shareholders
equity from the perspective of a market participant that holds an
identical item as an asset at the measurement date. A technical inquiry
questioned how transfer restrictions embedded in an asset should affect
the fair value of the corresponding liability or equity instrument from
the perspective of the issuer. The amendments correct the wording of
paragraph 820- 10-35-16D to clarify how an entity should account for those
restrictions. The amendments are not intended to substantively change the
application of GAAP. However, it is possible that the amendments may
result in a change to existing practice for some entities.
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The amendments to paragraphs 820-10-35-18D through 35-18F and
820-10-35- 18H through 35-18L revise the current guidance to allow portfolios of
financial instruments and nonfinancial instruments accounted for as derivatives
in accordance with Topic 815 to use the portfolio exception to valuation. The
amendments improve guidance by adding wording that explicitly states that a
group of financial assets, financial liabilities, nonfinancial items accounted
for as derivatives in accordance with Topic 815, or a combination of these items
that otherwise meet the criteria to do so are permitted to apply the portfolio
exception for measuring fair value of the group. This allows entities to measure
fair value on a net basis for those portfolios in which financial assets and
financial liabilities and nonfinancial instruments are managed and valued
together.
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Amendments to Subtopic 940-405,Financial ServicesBrokers
and DealersLiabilities.Paragraph 940-405- 55-1 contains incomplete
guidance about offsetting on the balance sheet. The current guidance
focuses only on explicit settlement dates as a determining criterion for
offsetting when, in fact, an entity should consider all the requirements
in Section 210-20-45,Balance SheetOffsettingOther Presentation Matters,
to determine whether a right of offset exists. There is similar guidance
in paragraph 942-210-45-3. Paragraphs 940-405-55- 1 and 942-210-45- 3
originated from two different AICPA Audit and Accounting Guides and
paraphrase the guidance in Subtopic 210-20, albeit each slightly
differently. The Board decided to amend both paragraphs so that the
industry Topic guidance refers to the complete guidance for offsetting.
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Amendments to Subtopic 962-325,Plan AccountingDefined
Contribution Pension PlansInvestments Other.The amendment to Subtopic
962-325 removes the stable value common collective trust fund from the
illustrative example in paragraph 962-325-55-17 to avoid the
interpretation that such an investment would never have a readily
determinable fair value and, therefore, would always use the net asset
value per share practical expedient. Rather, a plan should evaluate
whether a readily determinable fair value exists to determine whether
those investments may qualify for the practical expedient to measure at
net asset value in accordance with Topic 820.
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Transition and Effective Date
. The transition and
effective date guidance is based on the facts and circumstances of each
amendment. Some of the amendments in ASU No. 2018-09 do not require transition
guidance and will be effective upon issuance of ASU No. 2018-09. However, many
of the amendments do have transition guidance with effective dates for annual
periods beginning after December 15, 2018, for public business entities.
In addition, there are some conforming amendments in ASU No.
2018-09 that have been made to recently issued guidance that is not yet
effective that may require application of the transition and effective date
guidance in the original ASU. For example, there are conforming amendments to
Topic 820 and Subtopic 944-310, Financial ServicesInsuranceReceivables, that
are related to the amendments in Accounting Standards Update No. 2016-01,
Financial InstrumentsOverall (Subtopic 825-10): Recognition and Measurement of
Financial Assets and Financial Liabilities, which require application of the
transition and effective date guidance in that ASU.
The FASB has issued Accounting Standards Update (ASU) No.
2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party
Guidance for Variable Interest Entities, that reduces the cost and complexity of
financial reporting associated with consolidation of variable interest entities
(VIEs). A VIE is an organization in which consolidation is not based on a
majority of voting rights.
The new guidance supersedes the private company alternative for
common control leasing arrangements issued in 2014 and expands it to all
qualifying common control arrangements.
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Under the new standard, a private company could make an
accounting policy election to not apply VIE guidance to legal entities under
common control (including common control leasing arrangements) when certain
criteria are met. This accounting policy election must be applied by a private
company to all current and future legal entities under common control that meet
the criteria for applying the alternative. A private company will be required to
continue to apply other consolidation guidance, specifically the voting interest
entity guidance.
Additionally, a private company electing the alternative is
required to provide detailed disclosures about its involvement with, and
exposure to, the legal entity under common control.
The ASU also amends the guidance for determining whether a
decision-making fee is a variable interest. The amendments require organizations
to consider indirect interests held through related parties under common control
on a proportional basis rather than as the equivalent of a direct interest in
its entirety (as currently required in GAAP). Therefore, these amendments likely
will result in more decision makers not consolidating VIEs.
For organizations other than private companies, the amendments
in this ASU are effective for fiscal years beginning after December 15, 2019,
and interim periods within those fiscal years. The amendments in this ASU are
effective for a private company for fiscal years beginning after December 15,
2020, and interim periods within fiscal years beginning after December 15, 2021.
Early adoption is permitted.
NOTE 3 PREPAYMENTS
Prepayments consist of the following:
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December 31, 2018
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December 31, 2017
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Prepaid expenses
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12,000
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10,000
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$
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12,000
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$
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10,000
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NOTE 4 ACCRUED EXPENSES
Accrued expenses consist of the following:
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December 31, 2018
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December 31, 2017
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Accrued payroll
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$
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9,344
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$
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9,344
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Accrued employee benefits and pension
expenses
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288
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288
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Accrued professional fees
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27,655
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26,024
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$
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37,287
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$
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35,656
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NOTE 5 - RELATED PARTY TRANSACTIONS
On February 28, 2017, Mr. Ho Kangwing (the holder of
convertible promissory note) elected to convert the entire outstanding amount of
the Note into 105,066,666 common shares of the Company including the accumulated
interest. Therefore, the issued and outstanding common shares of the Company
were increased to 133,506,570 shares at that date.
There was no related party transaction for the year ended
December 31, 2018 and 2017.
NOTE 6 INCOME TAXES
The Company is registered in the State of Nevada and has
operations in primarily two tax jurisdictions -The United States and Hong Kong.
For the operations in the U.S., the Company has incurred net accumulated
operating losses for income tax purposes. The Company believes that it is more
likely than not that these net accumulated operating losses will not be utilized
in the future. Therefore, the Company has provided full valuation allowance for
the deferred tax assets arising from the losses in the U.S. as of
December 31, 2018 and 2017. Accordingly, the Company has no net deferred tax
assets on the U.S. operations.
14
United States of America
For the year ended December 31, 2018, the Company had net
operating loss carry-forwards of approximately $1,463,206 that may be available
to reduce future years taxable income through 2035, Future tax benefits which
may arise as a result of these losses have not been recognized in these
financial statements, as their realization is determined not likely to occur and
accordingly, the Company has recorded a valuation allowance for the deferred tax
asset relating to these tax loss carry-forwards.
The provision for Federal income tax consists of the following
years ended December 31:
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2018
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2017
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Federal income tax benefit
attributable to:
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Current Operations
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$
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84,265
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$
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97,017
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Less: Valuation allowance
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(84,265
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)
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( 97,017
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)
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Net provision for Federal income taxes
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$
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-
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$
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-
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Deferred taxes:
The tax effect of temporary differences that give rise to the
Companys deferred tax asset as of December 31, 2018 and 2017 are as
follows:
U.S:
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2018
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2017
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Deferred tax asset
non-current:
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Net operating loss carry forward
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$
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1,463,206
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$
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1,378,941
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Valuation allowance
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(1,463,206
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)
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(1,378,941
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)
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Net deferred tax asset
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$
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-
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$
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-
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The following is a reconciliation of the statutory tax rate to
the effective tax rate for the years ended December 31, 2018 and 2017:
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2018
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2017
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U.S. Federal tax at statutory
rate
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21%
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34%
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Valuation allowance
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(21%)
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(34%)
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Foreign income tax- HK
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16.5%
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16.5%
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Other (a)
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(16.5%)
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(16.5%)
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Effective tax rate
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0%
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0%
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Other represents expenses incurred by the Company that are not
deductible for HK income taxes and changes in valuation allowance for HK
entities for the years ended December 31, 2018 and 2017.
15
NOTE 7 COMMON STOCK
On June 21, 2011, the Company issued 55,500,000 shares of its
common stock for $0.015 per share to individuals for aggregate gross proceeds of
$832,500.
On June 21, 2011, the Company converted its outstanding related
party notes payable totaling $523,908 into 34,927,218 shares of Common Stock.
The deemed price of the shares issued was $0.015.
On June 21, 2011, the Company issued an aggregate of 266,667
shares of common stock, at a deemed price of $0.015 per share, to pay $4,000 for
services.
On May 17, 2012, the Company issued an aggregate of 39,854,567
shares of common stock at a price of $0.03 per share, pursuant to the closing of
a private placement, for aggregate gross proceeds of approximately $1,200,000.
On June 25, 2012, the Company amended its articles of
incorporation to increase the authorized number of shares of common stock from
300,000,000 to 700,000,000 shares of common stock, par value of $0.001 per
share.
On July 26, 2012, the Company issued 150,000,000 shares of
common stock as a part of consideration for acquisition of Vegfab Agricultural
Technology Co., Ltd. (Note 12).
In July, 2012, the Company issued 18,333,333 shares of common
stock to the Companys president, pursuant to the acquisition of Vegfab
Agricultural Technology Co., Ltd. The Company agreed to pay its president share
compensation of 10% of the value of the acquisition that he secured for the
company.
On January 4, 2013, the Company entered into a Share Purchase
and Sale Agreement with Mr. Pan Yen Chu pursuant to which the Company sold to
Mr. Pan 100% of all issued and outstanding securities of its wholly owned
subsidiary Taiwan Halee International Corporation (HTT). In consideration of
the sale of HTT, Mr. Pan has transferred to the Company 45,000,000 previously
issued common voting shares of TransAKT with a deemed value of $0.04 per share
or $1.8 million in the aggregate. The transfer of common shares was completed on
January 7, 2013. In connection with the sale HTT, the 45,000,000 common shares
of the Company received as consideration will be returned to treasury. The
45,000,000 shares constitute approximately 11.5% of the Companys currently
issued and outstanding common stock.
On September 16, 2013, the Company issued 140,678,401 shares of
common stock to fifty-seven individuals for aggregate proceeds of $9,300,785 at
deemed prices as follows:
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1.
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30,986 shares at US$0.03 per share;
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2.
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4,017,557 shares at US$0.04 per share;
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3.
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29,768,176 shares at US$0.045 per share;
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4.
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21,961,580 shares at US$0.05 per share;
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5.
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4,525,102 shares at US$0.06 per share; and
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6.
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80,375,000 shares at US$0.08 per
share.
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The Company paid $500,000 of commission to an individual for
the above private placements.
On November 26, 2013, the Company issued 69,242,000 shares of
common stock to nine individuals for aggregate proceeds of $5,389,360 at deemed
prices as follows:
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1.
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5,000,000 shares at US$0.05 per
share;
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16
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2.
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64,242,000 shares at US$0.08 per
share;
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On June 23, 2016, the company made a stock reverse split of 20
to 1. The issued and outstanding common stock was consolidated from 613,447,306
shares to 30,672,404 shares with fractional share round up to 1 share.
On October 4, 2016, the company cancelled the treasury stock of
common shares 2,232,500.
On February 28, 2017, Mr. Ho Kangwing (the holder of
convertible promissory note) elected to convert the entire outstanding amount of
the Note into 105,066,666 common shares of the Company including the accumulated
interest. Therefore, the issued and outstanding common shares of the Company
were increased to 133,506,570 shares at that date.
NOTE 8 SHARE-BASED COMPENSATION
On April 19, 2013, the Company granted to Mr. Christian
Nielsen, accounting manager stock options to purchase 1,000,000 of the Companys
common stock for services performed for the Company, at an exercise price of
$0.03 per share. The options have a five-year contractual term and are vested at
the date of grant.
In accordance with the guidance provided in ASC Topic 718,
Stock Compensation, the compensation costs associated with these options are
recognized, based on the grant-date fair values of these options, over the
requisite service period, or vesting period. Accordingly, the Company recognized
a compensation expense of $56,643 for the period ended December 31, 2013.
The Company estimated the fair value of these options using the
Black-Scholes-Merton option pricing model based on the following
weighted-average assumptions:
Date of grant
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19-Apr-13
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Fair value of common stock on date of grant
(A)
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$
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0.06
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Exercise price of the options
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$
|
0.03
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Expected life of the options (years)
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-
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Dividend yield
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0.00%
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Expected volatility
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223.57%
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Risk-free interest rate
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0.27%
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Expected forfeiture per year (%)
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0.00%
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Weighted-average fair value of the options (per unit)
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$
|
0.0566
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The fair value of the Company's common stock was obtained from the closing price
on the OTC Bulletin (A) Board as of the dates of grant.
Fair value hierarchy of the above assumptions can be
categorized as follows:
(1)
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Level 1 inputs include:
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Fair value of common stock on date of grant- Obtained
from the closing price of the Companys common stock quoted on the OTC
Bulletin Board as of the date of grant.
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(2)
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Level 2 inputs include:
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Expected volatility- Based on historical volatility of
the closing price of the Companys common stock quoted on the OTC Bulletin
Board.
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Risk-free rate- The risk-free rate of return reflects the
interest rate for United States Treasury Note with similar
time-to-maturity to that of the options.
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17
(3)
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Level 3 inputs include:
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Expected lives- The expected lives of options granted
were derived from the output of the option valuation model and represented
the period of time that options granted are expected to be
outstanding.
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Expected forfeitures per year- The expected forfeitures
are estimated at the dates of grant and will be revised in subsequent
periods pursuant to actual forfeitures, if significantly different from
the previous estimates.
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The estimates of fair value from the model are theoretical
values of stock options and changes in the assumptions used in the model could
result in materially different fair value estimates. The actual value of the
stock options will depend on the market value of the Companys common stock when
the stock options are exercised.
Options issued and outstanding as of December 31, 2018 and
their activities during the twelve months then ended are as follows:
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Weighted-Average
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Number of
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Weighted-Average
|
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Contractual Life
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Underlying
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Exercise Price Per
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Remaining in
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Shares
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Share
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Years
|
|
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|
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Outstanding as of January 1,
2018
|
|
-
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$
|
-
|
|
|
|
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|
|
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Granted- Before
reverse split
|
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1,000,000
|
|
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0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Granted- After
reverse split
|
|
50,000
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Expired
|
|
(50,000
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Forfeited
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of December
31, 2018
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of December
31, 2018
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest
|
|
-
|
|
|
-
|
|
|
-
|
|
As of December 31, 2018, the aggregate intrinsic value of
options outstanding was $0.
NOTE 9 EARNINGS PER SHARE
The Company calculates earnings per share in accordance with
ASC 260, Earnings Per Share, which requires a dual presentation of basic and
diluted earnings per share. Basic earnings per share are computed using the
weighted average number of shares outstanding during the fiscal year. The
following table sets forth the computation of basic and diluted net income per
common share:
18
The following table sets forth the computation of basic and
diluted net income per common share:
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
|
$
|
(208,310
|
)
|
$
|
(220,940
|
)
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares Basic EPS
|
|
133,506,570
|
|
|
116,811,045
|
|
|
|
|
|
|
|
|
Weighted average shares Diluted EPS
|
|
133,506,570
|
|
|
116,811,045
|
|
|
|
|
|
|
|
|
Net income (loss) per share Basic and
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS - basic and diluted
|
$
|
(0.002
|
)
|
$
|
(0.002
|
)
|
NOTE 10 SUBSEQUENT EVENTS
The Company evaluated all events or transactions that occurred
after December 31, 2018 up through the date the Company issued these financial
statements.
19