Item 1. Financial Statement
Our unaudited interim financial statements for the three
periods ended March 31, 2016 form part of this quarterly report. They are stated
in United States Dollars (US$) and are prepared in accordance with United States
generally accepted accounting principles. These interim unaudited financial
statements should be read in conjunction with the companys audited financial
statements and the Form 10-K for the year ended December 31, 2015.
TRANSAKT LTD. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
CONTENTS
2
TRANSAKT LTD.
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and
cash equivalents
|
$
|
39,375
|
|
$
|
$103,250
|
|
Restricted cash
|
|
-
|
|
|
-
|
|
Accounts
receivable, net
|
|
-
|
|
|
|
|
Trade, net
|
|
-
|
|
|
-
|
|
Related parties
|
|
-
|
|
|
-
|
|
Other receivable, net
|
|
-
|
|
|
-
|
|
Inventory
|
|
-
|
|
|
-
|
|
Advance to suppliers
|
|
-
|
|
|
-
|
|
Due from
related parties
|
|
-
|
|
|
-
|
|
Prepayments
|
|
-
|
|
|
11,431
|
|
Total Current Assets
|
$
|
39,375
|
|
$
|
114,681
|
|
Property & equipment, net
|
|
-
|
|
|
-
|
|
Deposits
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
39,375
|
|
$
|
114,681
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts
payable
|
$
|
-
|
|
$
|
-
|
|
Accrued expenses
|
|
46,453
|
|
|
43,373
|
|
Amount
due to a director
|
|
191,000
|
|
|
191,000
|
|
Loan payable to related
party
|
|
-
|
|
|
-
|
|
Other
payable
|
|
-
|
|
|
-
|
|
Customer deposit
|
|
-
|
|
|
-
|
|
Total Current Liabilities
|
$
|
237,453
|
|
$
|
234,373
|
|
|
|
|
|
|
|
|
Total liabilities
|
$
|
237,453
|
|
$
|
234,373
|
|
|
|
|
|
|
|
|
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, 613,447,306 shares
issued
and
outstanding at March 31, 2016 and December 31 2015, respectively
|
|
613,447
|
|
|
613,447
|
|
Additional paid-in
capital
|
|
24,534,404
|
|
|
24,534,404
|
|
Accumulated deficit
|
|
(21,908,294
|
)
|
|
(21,830,086
|
)
|
Other comprehensive
income
|
|
(437,635
|
)
|
|
(437,457
|
)
|
Stock
subscription receivable
|
|
(1,200,000
|
)
|
|
(1,200,000
|
)
|
Treasury stock, common
stock, at cost, 45,000,000 shares at
|
|
|
|
|
|
|
March 31,
2016 and December 31 2015, respectively
|
|
(1,800,000
|
)
|
|
(1,800,000
|
)
|
Total Stockholders'
Equity
|
$
|
(198,078
|
)
|
$
|
(119,692
|
)
|
Non-controlling interest
|
|
-
|
|
|
-
|
|
Total Equity
|
$
|
(198,078
|
)
|
$
|
(119,692
|
)
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
$
|
39,375
|
|
$
|
114,681
|
|
The accompanying notes are an integral part of the financial
statements
F-1
TRANSAKT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015
(UNAUDITED)
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
|
|
|
|
|
|
|
Sales, net
|
$
|
-
|
|
$
|
71,658
|
|
Cost of sales
|
|
-
|
|
|
86,536
|
|
|
|
|
|
|
|
|
Gross profit
|
|
-
|
|
|
(14,878
|
)
|
Selling, general and
administrative expenses
|
|
78,195
|
|
|
129,143
|
|
Impairment loss on fixed assets
|
|
-
|
|
|
-
|
|
Impairment loss on goodwill
|
|
-
|
|
|
-
|
|
Loss from operations
|
|
(78,195
|
)
|
|
(144,021
|
)
|
Other income (expense)
|
|
|
|
|
|
|
Interest income
|
|
-
|
|
|
48
|
|
Interest
expense
|
|
-
|
|
|
(38
|
)
|
Loss from investments
|
|
-
|
|
|
-
|
|
Loss from
disposal of subsidiary
|
|
-
|
|
|
-
|
|
Currency exchange gain
(loss)
|
|
(13
|
)
|
|
1,205
|
|
Gain on
disposal of fixed assets
|
|
-
|
|
|
-
|
|
Other income
|
|
-
|
|
|
1,539
|
|
Total
other income (expenses)
|
|
(13
|
)
|
|
2,754
|
|
Loss before income taxes
|
|
(78,208
|
)
|
|
(141,267
|
)
|
Provision for income taxes
expense (benefit)
|
|
-
|
|
|
-
|
|
Net loss
|
|
(78,208
|
)
|
|
(141,267
|
)
|
Net gain (loss) attributable
to non-controlling interest
|
|
-
|
|
|
(1,512
|
)
|
Net loss attributable to TRANSAKT LTD.
|
$
|
(78,208
|
)
|
$
|
(139,755
|
)
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
Basic and diluted income
(loss) common stockholders per share Net loss
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Weighted average number of
shares outstanding:
|
|
|
|
|
|
|
Basic and diluted
|
|
613,447,306
|
|
|
568,447,306
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
Net loss
|
$
|
(78,208
|
)
|
$
|
(141,267
|
)
|
Foreign currency translation adjustment
|
|
(178
|
)
|
|
(39,666
|
)
|
Comprehensive income (loss)
|
|
(78,386
|
)
|
|
(180,933
|
)
|
Comprehensive income (loss) attributable to
the non-controlling interest
|
|
-
|
|
|
1,512
|
|
Comprehensive income (loss)
attributable to TRANSAKT LTD.
|
$
|
(78,386
|
)
|
$
|
(179,421
|
)
|
The accompanying notes are an integral part of the financial
statements
F-2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015 (UNAUDITED)
|
|
Three Months
|
|
|
Three Months
|
|
`
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
Net loss available to
common stockholders
|
$
|
(78,208
|
)
|
$
|
(139,755
|
)
|
Adjustments to reconcile net
loss to net cash used in operating activities:
|
|
|
|
|
|
|
Minority interest
|
|
-
|
|
|
(1,512
|
)
|
Gain on
disposal of assets
|
|
-
|
|
|
-
|
|
Impairment loss on fixed
assets
|
|
-
|
|
|
-
|
|
Depreciation expense
|
|
-
|
|
|
-
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (Increase) in accounts
receivable
|
|
-
|
|
|
(3,948
|
)
|
Decrease (Increase) in
other receivable
|
|
-
|
|
|
25,741
|
|
Decrease (Increase) in
inventory
|
|
-
|
|
|
(494,506
|
)
|
Decrease (Increase) in advance to
suppliers
|
|
-
|
|
|
(1,405
|
)
|
Decrease (Increase) in
prepayments
|
|
11,431
|
|
|
(158,587
|
)
|
Decrease (Increase) in
deposits
|
|
-
|
|
|
(8,349
|
)
|
Increase (Decrease) in accounts payable
and accrued expenses
|
|
3,080
|
|
|
(65,464
|
)
|
Increase (Decrease) in customer deposits
|
|
-
|
|
|
238,618
|
|
Net cash
used in operating activities
|
|
(63,697
|
)
|
|
(609,167
|
)
|
Cash flows from investing
activities
|
|
|
|
|
|
|
Restricted cash
|
|
-
|
|
|
-
|
|
Acquisition of property and equipment
|
|
-
|
|
|
-
|
|
Payment for factory
construction
|
|
-
|
|
|
-
|
|
Net cash
used in investing activities
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
Principal payments under
capital lease obligations
|
|
-
|
|
|
-
|
|
Net
proceeds of short-term loans from shareholders
|
|
-
|
|
|
174,210
|
|
Due to related party
|
|
-
|
|
|
-
|
|
Net cash
provided by financing activities
|
|
-
|
|
|
174,210
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
(178
|
)
|
|
462,437
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
(63,875
|
)
|
|
27,480
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning
|
|
103,250
|
|
|
208,922
|
|
Ending
|
|
|
|
|
|
|
|
$
|
39,375
|
|
$
|
236,402
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows
|
|
|
|
|
|
|
Cash paid
during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
-
|
|
|
-
|
|
Interest
expense
|
$
|
-
|
|
$
|
38
|
|
The accompanying notes are an integral part of the financial
statements
F-3
TRANSAKT LTD.
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States (GAAP) for interim financial reporting and in
accordance with instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited condensed consolidated financial
statements contained in this report reflect all adjustments that are normal and
recurring in nature and considered necessary for a fair presentation of the
financial position and the results of operations for the interim periods
presented. The year-end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by GAAP. The
results of operations for the interim period are not necessarily indicative of
the results expected for the full year. These unaudited, condensed consolidated
financial statements, footnote disclosures and other information should be read
in conjunction with the financial statements and the notes thereto included in
the Companys Annual Report on Form 10-K for the year ended December 31,
2015.
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 Harlee International Co. Ltd. (HTT), entered into a Share Exchange
Agreement in which TransAKT Ltd. acquired 100% of Taiwan Harlee 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.
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 Harlee 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.
F-4
On October 30, 2013, Million Talented Ltd., a third party,
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. On May 6, 2015, the company acquired the remaining 40% of the TransAKT
Bio Agritech Ltd. From Million Talent Ltd. As such, the Company wholly owned its
subsidiary of TransAKT Bio Agritech Ltd. And it becomes our primary business
unit.
On June 30, 2015, our wholly owned subsidiary, TransAKT Taiwan
Ltd., entered into a Share Transfer Agreement among Vegfab Agricultural
Technology Co. Ltd. and a third party pursuant to which the third party acquired
100% of Vegfab Agricultural Technology Co. Ltd. in consideration of $100,000.
Vegfab Agricultural Technology Co. Ltd. was the sole material asset of TransAKT
Taiwan Ltd. and its parent company (and subsidiary of the Company), TransAKT
Holdings Ltd., a Turks and Caicos company. Subsequent to the sale of Vegfab
Agricultural Technology Co. Ltd., pursuant to a Share Purchase Agreement dated
June 30, 2015 with the Companys former President, Chief Executive Officer and
Director, the Company sold TransAKT Holdings Ltd. (and its subsidiary, TransAKT
Taiwan Ltd.) to the former (non-affiliated) officer and director in
consideration of $100,000. All intercompany debts between TransAKT Holdings Ltd.
and the formerly affiliated companies were cancelled as a result of the
transaction.
Principles of Consolidation
The consolidated financial statements include the accounts of
TransAKT (BVI) Ltd. and its wholly owned subsidiary 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 attributable to common
stockholders of $78,208 and $139,755 during the three months ended March 31,
2016 and 2015, respectively, and had an accumulated deficit of $21,908,294 and
$21,830,086 as of March 31, 2016 and December 31, 2015, 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 March 31, 2016, 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) expanding the companys
operations into China, expanding product lines and recruiting a strong sales
team to significantly increase sales revenue and profit in 2016; (3) cooperating
with local partners in Guangdong province, China to research and develop new
products; and(4)continuing to actively seeking additional funding opportunities
to improve and expand upon our product lines.
F-5
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 Companys revenues are recorded
upon confirmed acceptance after inspection by the customers of the Company.
Exchange Gain (Loss):
During the three months ended March 31, 2016 and 2015, 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.
F-6
Statement of Cash Flows
In accordance with generally accepted accounting principles
(GAAP), cash flows from the Companys 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
uncollectible 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.
Allowance for Doubtful Accounts
The Company maintains reserves for potential credit losses on
accounts receivable. Management reviews the composition of accounts receivable
and analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Allowance for doubtful debts amounted
to $0 and $0 as of March 31, 2016 and December 31, 2015.
Inventory
Inventories are valued at the lower of cost (determined on a
weighted average basis) or market. The Management compares the cost of
inventories with the market value and allowance is made for writing down their
inventories to market value, if lower. There is no inventory as of March 31,
2016 and December 31, 2015.
Property, Plant & Equipment
Property and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to earnings as incurred; additions, renewals
and betterments are capitalized. When property and equipment are retired or
otherwise disposed of, the related cost and accumulated depreciation are removed
from the respective accounts, and any gain or loss is included in operations.
Depreciation of property and equipment is provided using the straight-line
method for substantially all assets with estimated lives of:
|
Furniture and Fixtures
|
3 - 5 years
|
|
Machine and equipment
|
3 - 10 years
|
|
Computer Hardware and Software
|
3 - 5 years
|
|
Automobile
|
3 - 5 years
|
|
Leasehold improvement
|
30 years
|
The cost and related accumulated depreciation of assets sold or
otherwise retired are eliminated from the accounts and any gain or loss is
included in the statements of operations. The cost of maintenance and repairs is
charged to expenses as incurred, whereas significant renewals and betterments
are capitalized.
Long-term assets of the Company are reviewed annually as to
whether their carrying value has become impaired, pursuant to the guidelines
established in FASB ASC Topic 360, Property, Plant, and Equipment (formerly
SFAS No. 144). The Company also re-evaluates the periods of amortization to
determine whether subsequent events and circumstances warrant revised estimates
of useful lives.
F-7
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.
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 (formerly SFAS No. 142), 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 has issued Accounting Standards Update (ASU) No.
2015-01 about Simplifying Income Statement Presentation by Eliminating the
Concept of Extraordinary Items. The objective is to reduce the cost and
complexity of income statement presentation by eliminating the concept of
extraordinary items while maintaining or improving the usefulness of the information provided to the users of
financial statements. The extraordinary items must met two criterias: unusual
nature and infrequency of occurrence. If an event or transaction meets the
criteria for extraordinary classification, an entity is required to segregate
the extraordinary item from the results of ordinary operations and show the item
separately in the income statement, net of tax, after income from continuing
operations. The entity also is required to disclose applicable income taxes and
either. This amendment will be effective for annual periods, and interim periods
within those annual periods, beginning after December 15, 2015. The Board
decided to permit early adoption provided that the guidance is applied from the
beginning of the fiscal year of adoption.
F-8
In February 18, 2015, FASB issued ASU 2015-02Consolidation
(Topic 810). The amendments in this Update affect reporting entities that are
required to evaluate whether they should consolidate certain legal entities. All
legal entities are subject to re-evaluation under the revised consolidation
model. Specifically, the amendments: (1) Modify the evaluation of whether
limited partnerships and similar legal entities are variable interest entities
(VIEs) or voting interest entities; (2) Eliminate the presumption that a general
partner should consolidate a limited partnership; (3) Affect the consolidation
analysis of reporting entities that are involved with VIEs, particularly those
that have fee arrangements and related party relationships; (4) Provide a scope
exception from consolidation guidance for reporting entities with interests in
legal entities that are required to comply with or operate in accordance with
requirements that are similar to those in Rule 2a-7 of the Investment Company
Act of 1940 for registered money market funds. The amendments in this Update are
effective for public business entities for fiscal years, and for interim periods
within those fiscal years, beginning after December 15, 2015. The adoption of
this standard is not expected to have a material impact on the Companys
consolidated financial position and results of operations.
The FASB has issued ASU No. 2015-03 about Simplifying the
Presentation of Debt Issuance Costs. The objective is to require that debt
issuance costs related to a recognized debt liability be presented in the
balance sheet as a direct deduction from the carrying amount of that debt
liability, consistent with debt discounts. The recognition and measurement
guidance for debt issuance costs are not affected by the amendments in this
Update. For public business entities, the amendments in this Update are
effective for financial statements issued for fiscal years beginning after
December 15, 2015, and interim periods within those fiscal years. For all other
entities, the amendments in this Update are effective for financial statements
issued for fiscal years beginning after December 15, 2015, and interim periods
within fiscal years beginning after December 15, 2016. Early adoption of the
amendments in this Update is permitted for financial statements that have not
been previously issued.
The FASB has issued ASU No. 2015-05 about Intangibles-Goodwill
and Other-Internal-Use Software. The objective is to provide a guidance about
whether a cloud computing arrangement includes a software license. If a cloud
computing arrangement includes a software license, then the customer should
account for the software license element of the arrangement consistent with the
acquisition of other software licenses. If a cloud computing arrangement does
not include a software license, the customer should account for the arrangement
as a service contract. The amendment will not change GAAP for a customers
accounting for service contracts. In addition, the guidance in this Update
supersedes paragraph 350-40-25-16. Consequently, all software licenses within
the scope of Subtopic 350-40 will be accounted for consistent with other
licenses of intangible assets. For public business entities, the Board decided
that the amendments will be effective for annual periods, including interim
periods within those annual periods, beginning after December 15, 2015. For all
other entities, the amendment will be effective for annual periods beginning
after December 15, 2015, and interim periods in annual periods beginning after
December 15, 2016. Early adoption is permitted for all entities.
The FASB has issued ASU No. 2015-06 about Topic 260, Earnings
Per Share, which contains guidance that addresses master limited partnerships
that originated from Emerging Issues Task Force (EITF) Issue No. 07-4. This
amendment in this Update specify that for purposes of calculating historical
earnings per unit under the two-class method, the earnings (losses) of a
transferred business before the date of a dropdown transaction should be
allocated entirely to the general partner. In that circumstance, the previously
reported earnings per unit of the limited partners (which is typically the
earnings per unit measure presented in the financial statements) would not
change as a result of the dropdown transaction. Qualitative disclosures about how
the rights to the earnings (losses) differ before and after the dropdown
transaction occurs for purposes of computing earnings per unit under the
two-class method also are required. The amendments in this Update are effective
for fiscal years beginning after December 15, 2015, and interim periods within
those fiscal years. Earlier application is permitted.
F-9
The FASB has issued ASU No. 2015-07 about Topic 820, Fair Value
Measurement, which permits a reporting entity, as a practical expedient, to
measure the fair value of certain investments using the net asset value per
share of the investment. The amendments in this Update remove the requirement to
categorize within the fair value hierarchy all investments for which fair value
is measured using the net asset value per share practical expedient. The
amendments also remove the requirement to make certain disclosures for all
investments that are eligible to be measured at fair value using the net asset
value per share practical expedient. Rather, those disclosures are limited to
investments for which the entity has elected to measure the fair value using
that practical expedient. The amendments in this Update apply to reporting
entities that elect to measure the fair value of an investment within the
related scope by using the net asset value per share (or its equivalent)
practical expedient.
The FASB has issued No. 2015-15Subtopic 835-30, Interest -
Imputation of Interest: Presentation and Subsequent Measurement of Debt
Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC
Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting. This
amendment adds SEC paragraphs pursuant to the SEC Staff Announcement at thereon
June 18, 2015, Emerging Issues Task Force meeting about the presentation and
subsequent measurement of debt issuance costs associated with line-of-credit
arrangements.
The FASB has issued No. 2015-16Topic 805, Business
Combinations: Simplifying the Accounting for Measurement-Period Adjustments,
which aims to identify, evaluate, and improve areas of generally accepted
accounting principles (GAAP) for which cost and complexity can be reduced while
maintaining or improving the usefulness of the information provided to users of
financial statements. The amendments in this Update require that an acquirer
recognize adjustments to provisional amounts that are identified during the
measurement period in the reporting period in which the adjustment amounts are
determined. The amendments in this Update require that the acquirer record, in
the same periods financial statements, the effect on earnings of changes in
depreciation, amortization, or other income effects, if any, as a result of the
change to the provisional amounts, calculated as if the accounting had been
completed at the acquisition date. The amendments in this Update require an
entity to present separately on the face of the income statement or disclose in
the notes the portion of the amount recorded in current-period earnings by line
item that would have been recorded in previous reporting periods if the
adjustment to the provisional amounts had been recognized as of the acquisition
date. For public business entities, the amendments in this Update are effective
for fiscal years beginning after December 15, 2015, including interim periods
within those fiscal years. For all other entities, the amendments in this Update
are effective for fiscal years beginning after December 15, 2016, and interim
periods within fiscal years beginning after December 15, 2017.
The FASB has issued No. 2015-17Topic 740, Income Taxes:
Balance Sheet Classification of Deferred Taxes, which aims to identify,
evaluate, and improve areas of generally accepted accounting principles (GAAP)
for which cost and complexity can be reduced while maintaining or improving the
usefulness of the information provided to users of financial statements. The
amendments in this Update require that deferred tax liabilities and assets be
classified as noncurrent in a classified statement of financial position. The
amendments in this Update apply to all entities that present a classified
statement of financial position. The current requirement that deferred tax
liabilities and assets of a tax-paying component of an entity be offset and
presented as a single amount is not affected by the amendments in this Update.
The amendments in this Update will align the presentation of deferred income tax
assets and liabilities with International Financial Reporting Standards (IFRS).
For public business entities, the amendments in this Update are effective for
financial statements issued for annual periods beginning after December 15,
2016, and interim periods within those annual periods. For all other entities,
the amendments in this Update are effective for financial statements issued for
annual periods beginning after December 15, 2017, and interim periods within
annual periods beginning after December 15, 2018. Earlier application is
permitted for all entities as of the beginning of an interim or annual reporting
period.
F-10
Other accounting standards that have been issued or proposed by
the FASB or other standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the Companys
consolidated financial statements upon adoption.
NOTE 2 - RELATED PARTY TRANSACTIONS
Related party sales
There were no transactions between the Company and any related
party for the three months ended March 31, 2016 and 2015, respectively.
Due to related parties
An officer and shareholder advanced funds to the Company in the
aggregate amount of $191,000 for working capital purposes. The Company has not
entered into any agreement regarding the repayment of the advance, which is
unsecured, non-interest bearing, and due on demand. As of March 31, 2016 there
was $191,000 payable in respect of the advance.
NOTE 3 SHARE-BASED COMPENSATION
On April 19, 2013, the Company granted to Mr. Christian
Nielsen, our former 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
|
|
19-Apr-13
|
|
|
Fair value of common
stock on date of grant (A)
|
$
|
0.06
|
|
|
Exercise price of the options
|
$
|
0.03
|
|
|
Expected life of the options
(years)
|
|
2.50
|
|
|
Dividend yield
|
|
0.00%
|
|
|
Expected volatility
|
|
223.57%
|
|
|
Risk-free interest rate
|
|
0.27%
|
|
|
Expected forfeiture per year
(%)
|
|
0.00%
|
|
|
Weighted-average fair value of the options
(per unit)
|
$
|
0.0566
|
|
(A)
|
The fair value of the Company's common stock was obtained
from the closing price on the OTC Bulletin Board as of the dates of
grant.
|
Fair value hierarchy of the above assumptions can be
categorized as follows:
(1)
|
Level 1 inputs include:
|
|
|
|
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.
|
|
|
(2)
|
Level 2 inputs include:
|
F-11
|
Expected volatility- Based on historical volatility of
the closing price of the Companys common stock quoted on the OTC Bulletin
Board.
|
|
|
|
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.
|
|
|
(3)
|
Level 3 inputs include:
|
|
|
|
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.
|
|
|
|
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.
|
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 March 31, 2016 and their
activities during the twelve months then ended are as follows:
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
Number of
|
|
|
Weighted-Average
|
|
|
Contractual Life
|
|
|
|
Underlying
|
|
|
Exercise Price
Per
|
|
|
Remaining in
|
|
|
|
Shares
|
|
|
Share
|
|
|
Years
|
|
Outstanding as of January 1,
2016
|
|
-
|
|
$
|
-
|
|
|
|
|
Granted
|
|
1,000,000
|
|
|
0.03
|
|
|
|
|
Expired
|
|
-
|
|
|
-
|
|
|
|
|
Forfeited
|
|
-
|
|
|
-
|
|
|
|
|
Outstanding as of March 31,
2016
|
|
1,000,000
|
|
|
0.03
|
|
|
2.00
|
|
Exercisable as of March 31, 2016
|
|
1,000,000
|
|
|
0.03
|
|
|
2.00
|
|
Vested and expected to vest
|
|
1,000,000
|
|
|
0.03
|
|
|
2.00
|
|
As of March 31, 2016, the aggregate intrinsic value of options
outstanding was $7,198.
NOTE 4 NON-CONTROLLING INTEREST
On October 30, 2013, Million Talent Ltd. a related party 50%
owned by the Companys president and director, contributed $516 (HK$4,000) to
obtain 40% ownership of TransAKT BIO Agritech Ltd. Formerly named as TransAKT
(H.K.) Ltd. (TransAKT H.K.) TranAKT H.K. was incorporated in Hong Kong on
November 20, 2007. It had no operations until 2013. On May 6, 2015, the Company
acquired the remaining 40% equity interest in TransAKT H.K from Million Talent
Ltd. As such, the Company wholly owned its subsidiary of TransAKT BIO Agritech
Ltd. The Non-controlling interest consisted of the following:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Beginning Balance
|
$
|
-
|
|
$
|
(12,930
|
)
|
Formation of subsidiary
|
|
-
|
|
|
-
|
|
Net loss attributed to
non-controlling interest
|
|
-
|
|
|
-
|
|
Other comprehensive income attributable to
non-controlling interest
|
|
-
|
|
|
-
|
|
Gain on written-off on
non-controlling interest
|
|
-
|
|
|
12,930
|
|
|
$
|
-
|
|
$
|
-
|
|
F-12
NOTE 5
SUBSEQUENT EVENTS
The Company evaluated all events or transactions that occurred
after March 31, 2016 up through the date the Company issued these financial
statements, and found no material subsequent events are required to be
disclosed.
******
F-13
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
This quarterly report contains forward-looking statements.
These statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
may, should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled Risk Factors, that may cause our or our industrys actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.
In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars and all references to
common shares refer to the common shares in our capital stock.
As used in this current report and unless otherwise indicated,
the terms "we", "us" and "our" mean TransAKT Ltd., a Nevada corporation, and our
wholly owned subsidiary, TransAKT Bio Agritech Ltd. in Hong Kong (S.A.R).
General Overview
TransAKT Ltd. was incorporated in the Province of British
Columbia on December 10, 1996 as Green Point Resources Inc. On October 18, 2000,
we changed our name to Wildcard Wireless Solutions Inc. On June 30, 2001, we
filed Articles of Continuance in the Province of Alberta and became an Alberta
corporation. On that same day, we conducted an amalgamation with Wildcard
Communications Canada Inc., an Alberta corporation, our wholly-owned subsidiary,
wherein Wildcard Communications Canada was merged into Wildcard Wireless
Solutions Inc. On June 20, 2003, we changed our name to TransAKT Corp. We
changed our name from TransAKT Corp. to TransAKT Ltd. on July 12, 2006.
Effective December 2, 2010, following approval by our shareholders on November
17, 2010, we re-domesticated our company from the Province of Alberta, Canada
and became a Nevada corporation.
We have operated principally as a research and development
company since our inception. Initial seed capital has been directed toward areas
of product research and development, patent filings and administration. We
initially focused on the research, design, development and manufacturing of
mobile payment terminals. However, the sale of these payment terminals reached
its end-of life due to changes in cellular phone regulations and limited
acceptance in the marketplace.
In October 2004, we purchased the existing business and certain
assets of IP Mental Inc., a Taiwan-based Voice over Internet Protocol (VoIP)
hardware and software provider. On November 15, 2006, we acquired Taiwan Harlee
International Co. Ltd. (HTT), a Taiwan-based leading designer, manufacturer
and distributor of telecommunications equipment, including specialized
VoIP-compatible phone systems. These acquisitions were intended to enable us to
remain competitive in the marketplace. Our current business is the design,
development and manufacturing of telecommunications equipment, including VoIP
compatible telephone systems and multi-line cordless telephone systems.
3
On November 15, 2006, we acquired HTT, for the sum of
$5,000,000. The purchase price was paid by the delivery to the shareholders of
HTT of: (i) $200,000 in cash; (ii) $300,000 in a promissory note from us due in
cash six months after closing; (iii) 50,000,000 of our common voting shares,
with a deemed value of $0.09 per share; and (iv) 5,000,000 of our common voting
shares issued to Mr. James Wu as performance-based compensation. Other than the
acquisitions of IP Mental Inc. and HTT, we have generally only had capital
expenditures on computer equipment, tools and dies, patents, and trademarks.
We have mainly financed our operations through the use of debt
and the issuance of equity in private placements. In October 2006, we repaid a
loan we took against inventory produced to fund our first commercial run of our
payment terminals. We settled the loan for $90,000 using funds raised from the
private placement of our shares. In the short-term and until our sales are
sufficient to fund operations, we will continue to finance our operations
through debt or equity financing.
On August 12, 2010, we filed a Form S-4 Registration Statement
in connection with the continuation of our company from Alberta to Nevada. We
registered 102,645,120 shares of common stock of TransAKT Ltd. (Nevada) which
were issued to the shareholders of TransAKT Ltd. (Alberta) on a one-for-one
basis to the number of shares held by them.
Effective June 25, 2012, the Nevada Secretary of State accepted
for filing of a certificate of amendment, wherein, we amended our articles of
incorporation to increase the authorized number of shares of our common stock
from 300,000,000 to 700,000,000 shares of common stock, par value of $0.001 per
share. Our preferred stock remains unchanged.
On May 3, 2012, we entered into an Asset Purchase and Sale
Agreement with Vegfab Agricultural Technology Co. Ltd. (Vegfab), a Taiwanese
corporation, pursuant to which we intended to acquire the material assets of
Vegfab. Vegfab is in the business of manufacturing innovative indoor
agricultural equipment used to grow a large variety of vegetables and fruit
using simulated sunlight from LED lamps in a proprietary hydroponic system.
Vegfabs product line includes systems for commercial production and a home
growing system which allows families to grow safe and clean fruit and vegetables
in their own homes. Prior to completion of the transaction we and Vegfab elected
instead to proceed by way of a share purchase and, effective July 16, 2012, we
acquired all outstanding securities of Vegfab. In consideration of the Vegfab
securities, we had paid $1,000,000 in cash and issued 150,000,000 shares of our
common stock to the shareholders of Vegfab which constituted approximately 37.2%
of our common stock at the time of closing. As a result of the transaction
Vegfab became our wholly owned subsidiary and primary business unit. Vegfab has
since become engaged in the operation of a plant factory in Taiwan for the
production of pesticide-free vegetables.
Previously, we entered into a performance compensation
agreement dated June 15, 2006 with James Wu, our president and chief executive
officer, pursuant to which our company was required to pay Mr. Wu share
compensation of 10% of the value of any venture acquisition that Mr. Wu secured
for our company. As a result, in July 2012, we issued to Mr. Wu 18,333,333
shares of our companys common stock with respect to the acquisition of Vegfab.
On January 4, 2013, we entered into a share purchase and sale
agreement with Mr. Pan Yen Chu pursuant to which we sold to Mr. Pan 100% of all
issued and outstanding securities in our wholly owned subsidiary HTT. In
consideration of the sale of HTT, Mr. Pan has transferred to our company
45,000,000 previously issued common voting shares of our company 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 our company received as consideration will be
returned to treasury. The 45,000,000 shares constitute approximately 11.5% of
our companys currently issued and outstanding common stock.
On October 30, 2013, Million Talent Ltd., a third party,
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. On May 6, 2015, the Company acquired the
remaining 40% of the equity interest from Million Talent Ltd. As such, the
Company wholly owned its subsidiary of TransAKT BIO Agritech Ltd.
4
On June 30, 2015, our wholly owned subsidiary, TransAKT Taiwan
Ltd., entered into a Share Transfer Agreement among Vegfab Agricultural
Technology Co. Ltd. and a third party pursuant to which the third party acquired
100% of of Vegfab Agricultural Technology Co. Ltd. in consideration of $100,000.
Vegfab Agricultural Technology Co. Ltd. was the sole material asset of TransAKT
Taiwan Ltd. and its parent company (and subsidiary of the Company), TransAKT
Holdings Ltd., a Turks and Caicos company. Subsequent to the sale of Vegfab
Agricultural Technology Co. Ltd., pursuant to a Share Purchase Agreement dated
June 30, 2015 with the Companys former President, Chief Executive Officer and
Director, the Company sold TransAKT Holdings Ltd. (and its subsidiary, TransAKT
Taiwan Ltd.) to the former (non-affiliated) officer and director in
consideration of $100,000. All intercompany debts between TransAKT Holdings Ltd.
and the formerly affiliated companies were cancelled as a result of the
transaction.
Our Current Business
We began operations in 1997 and commercialized our first
product line of wireless point-of-sale (WPOS) terminals in April 2003. With
the use of cellular phones, these terminals allow merchants to accept payments
anywhere, anytime. However, our WPOS terminals were discontinued due to changes
in cellular phone regulations and limited acceptance in the marketplace. In
October 2004, through the acquisition of the business and certain assets of IP
Mental Inc., we entered the VoIP business. On November 15, 2006, we acquired
Taiwan Harlee International Co. Ltd. (HTT), a Taiwan-based leading designer,
manufacturer and distributor of telecommunications equipment, including
specialized VoIP-compatible phone systems. These acquisitions were intended to
enable us to remain competitive in the VoIP marketplace by engaging in the
design, development, manufacturing and sale of telecommunications equipment,
including VoIP compatible telephone systems and multiline cordless telephone
systems.
Effective July 16, 2012, we acquired all outstanding securities
of Vegfab Agricultural Technology Co. Ltd. (Vegfab), a Taiwanese corporation,
With the acquisition of Vegfab we entered the business of manufacturing
agricultural equipment used to grow a large variety of vegetables and fruit
using simulated sunlight from LED lamps in a proprietary hydroponic system.
Vegfabs product line includes systems for commercial production and a home
growing system which allows families to grow safe and clean fruit and vegetables
in their own homes. Vegfab has since become engaged in the operation of a plant
factory in Taiwan for the production of pesticide-free vegetables.
Concurrently with our acquisition of Vegfab, our management
began planning our exit from the VoIP telecommunications business owing to
diminishing growth opportunities for our Company in that industry. Subsequently,
on January 4, 2013, we entered into a share purchase and sale agreement with Mr.
Pan Yen Chu pursuant to which we sold to Mr. Pan 100% of all issued and
outstanding securities in our wholly owned subsidiary HTT in consideration for
the cancellation and return to treasury of 45,000,000 previously issued common
voting shares of our company 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. The 45,000,000 shares constitute approximately 11.5% of our companys
currently issued and outstanding common stock.
As a result of our sale of HTT and Vegfab Agricultural
Technology Co. Ltd. TransAKT BIO Aritech Ltd. has become our primary business
unit.
Subsequent to our sale of Vegfab, we continue to be engaged in
the sale and distribution of indoor agricultural equipment, including lighting,
irrigation and hydroponic growing systems. We purchase inventory from third
party manufacturers and re-sell equipment to various indoor agricultural
operators located in Asia. Our primary markets are Taiwain, Hong Kong, Mainland
China, and Singapore.
5
We incurred a net loss attributable to common stockholders of
$78,208 and $139,755 during the three months ended March 31, 2016 and 2015,
respectively, and had an accumulated deficit of $21,908,294 and $21,830,086 as
of March 31, 2016 and December 31, 2015, respectively. In addition, we expect to
incur an operating loss in the 2016 fiscal year.
About Our Products
We supply indoor agricultural equipment to commercial producers
of fruits and vegetables. Our products are focused on fully enclosed greenhouses
which rely on artificially controlled ambient conditions as temperature,
humidity, nutrition and lighting. Products include complete growing systems
consisting of proprietary simulated sunlight LED boards, growing racks in
various configurations for commercial and residential applications, environment
control and plant nutrition control components, portable work tables and
ladders, fruit and vegetable seeds and nutrition products, and safe, clean,
ready to eat vegetables.
Cash Requirements
We used cash in operations of $63,697 for the three months
ended March 31, 2016. 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. We anticipate that
over the next twelve months, beginning April 1, 2016, we will need a
approximately $2,000,000 to sustain our operations, market our products
effectively, and execute our business plan.
Our plan of operations for fiscal 2016 includes the following
budgeted expenditures:
12 Month Capital Requirements Forecast
|
USD
2
|
|
Beginning January 1,
2016
|
Capital required for expansion plans
1
|
$1,500,000
|
Salaries
|
$140,000
|
Accounting and Legal Expenses
|
$75,000
|
Public company reporting costs
|
$17,500
|
Selling, general and administrative expense
|
$100,000
|
Contingency
|
$100,000
|
Total
|
$1,932,500
|
|
1.
|
Capital for plan to acquire a plant factory in China and
further R&D expenses.
|
|
2.
|
Based on 2015 average exchange rate of
$0.128617
|
As at the date of this report we have not entered into any
agreement or identified sources of financing to raise working capital required
to execute our business plan. If we are unable to raise sufficient financing, we
intend to scale back our business in order to accommodate available financing or
revenue streams derived from our current operations.
Results of Operations for the Three Months Ended March
31, 2016 and 2015
6
Our operating results for the three months ended March 31, 2016
and 2015 are summarized as follows:
|
Three Months ended
|
Three Months ended
|
|
March 31, 2016
|
March 31, 2015
|
|
($)
|
($)
|
Operating revenues
|
-
|
71,658
|
Operating costs and expenses
|
78,195
|
215,679
|
Loss from operations
|
78,195
|
144,021
|
Other expenses
|
(13)
|
(2,754)
|
Provision for income taxes expense (benefit)
|
-
|
-
|
Net loss
|
78,208
|
141,267
|
Net loss attributable to noncontrolling interest
|
-
|
(1,512)
|
Net loss attributable to TRANSAKT LTD.
|
78,208
|
139,755
|
|
|
|
Net loss per share (basic and diluted)
|
0.00
|
0.00
|
Net Revenues and Cost of Sales
Net revenues decreased by approximately $71,658 or
approximately 100% from $71,658 for the three months ended March 31, 2015 to $0
for the three months ended March 31, 2016. The decrease in net revenues was
primarily due to our disposal of Vegfab on June 30, 2015. Cost of sales for the
three months ended March 31, 2016 was $0.
Operating Expenses
Operating expenses were $78,195 for the three months ended
March 31, 2016, compared to $129,143 for the three months ended March 31, 2015,
representing a decrease of $50,948. The decrease in operating expenses was
primarily due to our disposal of Vegfab on June 30, 2015.
Loss from Operations
Loss from operations were $78,195for the three months ended
March 31, 2016, compared to $144,021 for the three months ended March 31, 2015,
representing a decrease of $65,826 The decrease in loss from operations was
primarily due to our disposal of Vegfab on June 30, 2015.
Other Expenses
Other income (expenses) decreased by approximately $2,767 to
($13) for the three months ended March 31, 2016 from $2,754 for the same period
in 2015.
Net Income (Loss) attributable to TRANSAKT LTD.
As a result of the above factors, we have net loss attributable
to the Companys common stockholders of $78,208 for the three months ended March
31, 2016 compared to $139,755 for the three months ended March 31, 2015,
representing a decrease of $61,547or approximately 44%.
Liquidity and Capital Resources
Our financial position as of March 31, 2016 and December 31,
2015 and the changes for the periods then ended are as follows:
7
Working Capital
|
|
As of
|
|
|
As of
|
|
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Current Assets
|
$
|
39,375
|
|
$
|
114,681
|
|
Current Liabilities
|
$
|
237,453
|
|
$
|
234,373
|
|
Working Capital
|
$
|
(198,078
|
)
|
$
|
(119,692
|
)
|
Our working capital deficit increased from $119,692at December
31, 2015 to $198,078 at March 31, 2016, primarily as a result of decreases in
cash and cash equivalents, accounts receivable, prepayments, and increases in
accrued expenses,
Cash Flows
|
|
Three months
|
|
|
Three months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
Net cash used in operating
activities
|
$
|
63,697
|
|
$
|
609,167
|
|
Net cash used in investing activities
|
$
|
-
|
|
$
|
-
|
|
Net cash provided by
financing activities
|
$
|
-
|
|
$
|
174,210
|
|
|
|
|
|
|
|
|
Net increase (decrease) in
Cash and Cash Equivalents during the period
|
$
|
(63,875
|
)
|
$
|
27,480
|
|
Cash and Cash Equivalents, beginning of
period
|
$
|
103,250
|
|
$
|
208,922
|
|
Cash and Cash Equivalents,
end of period
|
$
|
39,375
|
|
$
|
236,402
|
|
Operating Activities
Net cash flow used in operating activities during the three
months ended March 31, 2016 was $63,697, representing a decrease of $545,470
compared to net cash flow used in operating activities of $609,167 during the
three months ended March 31, 2015. The decrease in the cash used in operating
activities was primarily due to the decreases in inventory, prepayments and
customers deposit.
Investing Activities
Net cash flow used in investing activities during the three
months ended March 31, 2016 was $0, representing no change from the same period
in 2015.
Financing Activities
Net cash flow provided by financing activities during the three
months ended March 31, 2016 was $0,which represented a 100% decrease from the
$174,210 innet cash provided by financing activities during the three months
ended March 31, 2015. The decrease in the cash provided by financing activities
was primarily due to the absence of related party loans during the three months
ended March 31, 2016.
Critical Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
TransAKT BIO Agritech Ltd., collectively referred to within as we. us,
our, or the Company. All material intercompany accounts, transactions, and
profits have been eliminated in consolidation.
8
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States (GAAP) requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue Recognition
Revenues are recognized when finished products are shipped to
customers and both title and the risks and rewards of ownership are transferred
and collectability is reasonably assured. The Companys revenues are recorded
upon confirmed acceptance after inspection by the customers of the Company.
Exchange Gain (Loss):
During the three months ended March 31, 2016 and 2015, the
transactions of TransAKT Bio Agritech Ltd. were denominated in foreign currency
and were recorded in Hong Kong Dollar (HKD) at the rates of exchange in effect
when the transactions occur. Exchange gains and losses are recognized for the di
fferent foreign exchange rates applied when the foreign currency assets and
liabilities are settled.
Translation Adjustment
The Company financial statements are presented in the U.S.
dollar ($), 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.
9
Statement of Cash Flows
In accordance with generally accepted accounting principles
(GAAP), cash flows from the Companys 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
uncollectible 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.
Allowance for Doubtful Accounts
The Company maintains reserves for potential credit losses on
accounts receivable. Management reviews the composition of accounts receivable
and analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Allowance for doubtful debts amounted
to $0 and $0 as of March 31, 2016 and December 31, 2015.
Inventory
Inventories are valued at the lower of cost (determined on a
weighted average basis) or market. The Management compares the cost of
inventories with the market value and allowance is made for writing down their
inventories to market value, if lower. As of March 31, 2016 and December 31,
2015,there is no inventory for our company.
Property, Plant & Equipment
Property and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to earnings as incurred; additions, renewals
and betterments are capitalized. When property and equipment are retired or
otherwise disposed of, the related cost and accumulated depreciation are removed
from the respective accounts, and any gain or loss is included in operations.
Depreciation of property and equipment is provided using the straight-line
method for substantially all assets with estimated lives of:
Furniture and Fixtures
|
3 - 5 years
|
Machine and equipment
|
3 - 10 years
|
Computer Hardware and Software
|
3 - 5 years
|
Automobile
|
3 - 5 years
|
Leasehold improvement
|
30 years
|
The cost and related accumulated depreciation of assets sold or
otherwise retired are eliminated from the accounts and any gain or loss is
included in the statements of operations. The cost of maintenance and repairs is
charged to expenses as incurred, whereas significant renewals and betterments
are capitalized.
Long-term assets of the Company are reviewed annually as to
whether their carrying value has become impaired, pursuant to the guidelines
established in FASB ASC Topic 360, Property, Plant, and Equipment (formerly
SFAS No. 144). The Company also re-evaluates the periods of amortization to
determine whether subsequent events and circumstances warrant revised estimates
of useful lives.
10
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.
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 (formerly SFAS No. 142), 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.
Reclassifications
The reclassifications have no impact on the Companys 2013
Consolidated Statements of Operations and Comprehensive Income and Consolidated
Statements of Cash Flows.
11
Recent Accounting Pronouncements
The FASB has issued Accounting Standards Update (ASU) No.
2015-01 about Simplifying Income Statement Presentation by Eliminating the
Concept of Extraordinary Items. The objective is to reduce the cost and
complexity of income statement presentation by eliminating the concept of
extraordinary items while maintaining or improving the usefulness of the
information provided to the users of financial statements. The extraordinary
items must met two criterias: unusual nature and infrequency of occurrence. If
an event or transaction meets the criteria for extraordinary classification, an
entity is required to segregate the extraordinary item from the results of
ordinary operations and show the item separately in the income statement, net of
tax, after income from continuing operations. The entity also is required to
disclose applicable income taxes and either. This amendment will be effective
for annual periods, and interim periods within those annual periods, beginning
after December 15, 2015. The Board decided to permit early adoption provided
that the guidance is applied from the beginning of the fiscal year of adoption.
In February 18, 2015, FASB issued ASU 2015-02Consolidation
(Topic 810). The amendments in this Update affect reporting entities that are
required to evaluate whether they should consolidate certain legal entities. All
legal entities are subject to re-evaluation under the revised consolidation
model. Specifically, the amendments: (1) Modify the evaluation of whether
limited partnerships and similar legal entities are variable interest entities
(VIEs) or voting interest entities; (2) Eliminate the presumption that a general
partner should consolidate a limited partnership; (3) Affect the consolidation
analysis of reporting entities that are involved with VIEs, particularly those
that have fee arrangements and related party relationships; (4) Provide a scope
exception from consolidation guidance for reporting entities with interests in
legal entities that are required to comply with or operate in accordance with
requirements that are similar to those in Rule 2a-7 of the Investment Company
Act of 1940 for registered money market funds. The amendments in this Update are
effective for public business entities for fiscal years, and for interim periods
within those fiscal years, beginning after December 15, 2015. The adoption of
this standard is not expected to have a material impact on the Companys
consolidated financial position and results of operations.
The FASB has issued ASU No. 2015-03 about Simplifying the
Presentation of Debt Issuance Costs. The objective is to require that debt
issuance costs related to a recognized debt liability be presented in the
balance sheet as a direct deduction from the carrying amount of that debt
liability, consistent with debt discounts. The recognition and measurement
guidance for debt issuance costs are not affected by the amendments in this
Update. For public business entities, the amendments in this Update are
effective for financial statements issued for fiscal years beginning after
December 15, 2015, and interim periods within those fiscal years. For all other
entities, the amendments in this Update are effective for financial statements
issued for fiscal years beginning after December 15, 2015, and interim periods
within fiscal years beginning after December 15, 2016. Early adoption of the
amendments in this Update is permitted for financial statements that have not
been previously issued.
The FASB has issued ASU No. 2015-05 about Intangibles-Goodwill
and Other-Internal-Use Software. The objective is to provide a guidance about
whether a cloud computing arrangement includes a software license. If a cloud
computing arrangement includes a software license, then the customer should
account for the software license element of the arrangement consistent with the
acquisition of other software licenses. If a cloud computing arrangement does
not include a software license, the customer should account for the arrangement
as a service contract. The amendment will not change GAAP for a customers
accounting for service contracts. In addition, the guidance in this Update
supersedes paragraph 350-40-25-16. Consequently, all software licenses within
the scope of Subtopic 350-40 will be accounted for consistent with other
licenses of intangible assets. For public business entities, the Board decided
that the amendments will be effective for annual periods, including interim
periods within those annual periods, beginning after December 15, 2015. For all
other entities, the amendment will be effective for annual periods beginning
after December 15, 2015, and interim periods in annual periods beginning after
December 15, 2016. Early adoption is permitted for all entities.
The FASB has issued ASU No. 2015-06 about Topic 260, Earnings
Per Share, which contains guidance that addresses master limited partnerships
that originated from Emerging Issues Task Force (EITF) Issue No. 07-4. This amendment in this Update specify that for purposes of
calculating historical earnings per unit under the two-class method, the
earnings (losses) of a transferred business before the date of a dropdown
transaction should be allocated entirely to the general partner. In that
circumstance, the previously reported earnings per unit of the limited partners
(which is typically the earnings per unit measure presented in the financial
statements) would not change as a result of the dropdown transaction.
Qualitative disclosures about how the rights to the earnings (losses) differ
before and after the dropdown transaction occurs for purposes of computing
earnings per unit under the two-class method also are required. The amendments
in this Update are effective for fiscal years beginning after December 15, 2015,
and interim periods within those fiscal years. Earlier application is permitted.
12
The FASB has issued ASU No. 2015-07 about Topic 820, Fair Value
Measurement, which permits a reporting entity, as a practical expedient, to
measure the fair value of certain investments using the net asset value per
share of the investment. The amendments in this Update remove the requirement to
categorize within the fair value hierarchy all investments for which fair value
is measured using the net asset value per share practical expedient. The
amendments also remove the requirement to make certain disclosures for all
investments that are eligible to be measured at fair value using the net asset
value per share practical expedient. Rather, those disclosures are limited to
investments for which the entity has elected to measure the fair value using
that practical expedient. The amendments in this Update apply to reporting
entities that elect to measure the fair value of an investment within the
related scope by using the net asset value per share (or its equivalent)
practical expedient.
The FASB has issued No. 2015-15Subtopic 835-30, Interest -
Imputation of Interest: Presentation and Subsequent Measurement of Debt
Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC
Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting. This
amendment adds SEC paragraphs pursuant to the SEC Staff Announcement at thereon
June 18, 2015, Emerging Issues Task Force meeting about the presentation and
subsequent measurement of debt issuance costs associated with line-of-credit
arrangements.
The FASB has issued No. 2015-16Topic 805, Business
Combinations: Simplifying the Accounting for Measurement-Period Adjustments,
which aims to identify, evaluate, and improve areas of generally accepted
accounting principles (GAAP) for which cost and complexity can be reduced while
maintaining or improving the usefulness of the information provided to users of
financial statements. The amendments in this Update require that an acquirer
recognize adjustments to provisional amounts that are identified during the
measurement period in the reporting period in which the adjustment amounts are
determined. The amendments in this Update require that the acquirer record, in
the same periods financial statements, the effect on earnings of changes in
depreciation, amortization, or other income effects, if any, as a result of the
change to the provisional amounts, calculated as if the accounting had been
completed at the acquisition date. The amendments in this Update require an
entity to present separately on the face of the income statement or disclose in
the notes the portion of the amount recorded in current-period earnings by line
item that would have been recorded in previous reporting periods if the
adjustment to the provisional amounts had been recognized as of the acquisition
date. For public business entities, the amendments in this Update are effective
for fiscal years beginning after December 15, 2015, including interim periods
within those fiscal years. For all other entities, the amendments in this Update
are effective for fiscal years beginning after December 15, 2016, and interim
periods within fiscal years beginning after December 15, 2017.
The FASB has issued No. 2015-17Topic 740, Income Taxes:
Balance Sheet Classification of Deferred Taxes, which aims to identify,
evaluate, and improve areas of generally accepted accounting principles (GAAP)
for which cost and complexity can be reduced while maintaining or improving the
usefulness of the information provided to users of financial statements. The
amendments in this Update require that deferred tax liabilities and assets be
classified as noncurrent in a classified statement of financial position. The
amendments in this Update apply to all entities that present a classified
statement of financial position. The current requirement that deferred tax
liabilities and assets of a tax-paying component of an entity be offset and
presented as a single amount is not affected by the amendments in this Update.
The amendments in this Update will align the presentation of deferred income tax
assets and liabilities with International Financial Reporting Standards (IFRS).
For public business entities, the amendments in this Update are effective for financial statements issued
for annual periods beginning after December 15, 2016, and interim periods within
those annual periods. For all other entities, the amendments in this Update are
effective for financial statements issued for annual periods beginning after
December 15, 2017, and interim periods within annual periods beginning after
December 15, 2018. Earlier application is permitted for all entities as of the
beginning of an interim or annual reporting period.
13
Other accounting standards that have been issued or proposed by
the FASB or other standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the Companys
consolidated financial statements upon adoption.
Subsequent Events
We have evaluated all events or transactions that occurred
after March 31, 2016 up through the date the Company issued these financial
statements, and found no material subsequent events are required to be
disclosed.
Off-Balance Sheet Arrangements
We have no significant 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.
Inflation
Our opinion is that inflation has not had, and is not expected
to have, a material effect on our operations.
Going Concern
Our company has incurred a net loss attributable to common
stockholders of $78,208 and $139,755 during the three months ended March 31,
2016 and 2015, respectively, and had an accumulated deficit of $21,908,294 and
$21,830,086 as of March 31, 2016 and December 31, 2015, respectively.
The accompanying consolidated financial statements have been
prepared assuming that our company will continue as a going concern. This basis
of accounting contemplates the recovery of our 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 our 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 March 31, 2016, our 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 our 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.
Our 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) Expanding our companys
operations into China, expanding product lines and recruiting a strong sales
team to significantly increase sales revenue in 2016; . (3) Cooperate with local
partners in the Guangdong province to research and develop new products; (4) Our
company plans to continue actively seeking additional funding
opportunities to improve and expand upon our product lines.
14
At this time, we cannot provide investors with any assurance
that we will be able to raise sufficient funding from the sale of our common
stock or through a loan from our directors, shareholders, or investors to meet
our obligations over the next twelve months. We do not have any further
arrangements in place for any future debt or equity financing.