ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward
Looking Statements
This
section of the report includes a number of forward-looking statements that reflect our current views with respect to future events and
financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend,
project and similar expressions, or words which, by their nature, refer to future events. Actual results could differ materially from
those anticipated in these forward looking statements as a result of any number of factors, including those set forth in this Quarterly
Report, and in the Company’s most recent Annual Report on Form 10-K filed on January 29, 2021.
All
written and oral forward-looking statements made in connection with this Quarterly Report on Form 10-Q that are attributable to us or
persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround
such statements, you are cautioned not to place undue reliance on such forward-looking statements, which apply only as of the date of
this quarterly report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results
to differ materially from historical results or our predictions.
Overview
The
following discussion is an overview of the important factors that management focuses on in evaluating our businesses, financial condition
and operating performance and should be read in conjunction with the financial statements included in this Quarterly Report on Form 10-Q.
The
Company is subject to a number of risks similar to other companies in the medical device industry. These risks include but are not limited
to rapid technological change, uncertainty of market acceptance of our products, uncertainty of regulatory approval, competition from
substitute products and larger companies, the need to obtain additional financing, compliance with government regulation, protection
of proprietary technology, product liability, and the dependence on key individuals.
Our
Business
We
are engaged in the business of designing, developing, manufacturing and marketing of biomaterial internal fixation devices. We hold one
Class III medical device permit from the National Medical Products Administration of the PRC (“NMPA”) for our product - polymer
orthopaedic internal fixation screws, one Class II permit and one Class I permit. We hold four patents issued by the State Intellectual
Property Office of the P.R.C. (“SIPO”). Our polyamide materials, their uses and manufacturing processes are protected by
Patent No. ZL201511006236.7 and ZL971190739. Patent No. ZL201410647464.1 titled “Bone Fracture Plate Made of High Polymer Materials”
and patent No. ZL201511005531.0 titled “Composite fiber, manufacturing method and orthopaedic binding wire” were granted
to us in 2018 and 2020 respectively. Our polyamide materials are used in producing screws, binding wires, rods and related products.
These products are used in a variety of applications including orthopaedic trauma, sports related medical treatment, or cartilage injuries,
and reconstructive dental procedures. At this time, our company is the sole patent holder and market permit holder of PA technologies
in China, as well as the only company currently engaged in clinical trials, manufacturing and marketing for PA orthopaedic internal fixation
devices in the PRC. Our products are made of a very unique material called PA6-P(MMA-CO-NVP)-HA (“PA”). Our PA products,
such as screws, binding wires, rods, suture anchors and rib-pins consist of enhanced fibers and high molecular polymers which are designed
to facilitate quick healing of complex fractures in many areas of the human skeletal system.
Our
products offer a number of significant advantages over existing metal implants and the first generation of degradable implants (i.e.
PLLA) for patients, surgeons and other customers including:
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1.
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A
notably reduced need for a secondary surgery to remove implant due to post-operative complications, therefore avoiding unnecessary
risk and expense on all patient care;
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2.
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Enhancing
the performance of the materials by manufacturing them to be easily fitted to each patient, forming an exact fit;
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3.
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Improving
the biological activity of materials. Clinical trial results have shown that PA implants promote a progressive shift of load to the
new bone creating micro-motion and thereby avoiding bone atrophy due to ‘stress shielding’;
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4.
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Reducing
the chance of post-operative infection;
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5.
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Stimulate
bone tissues to facilitate effective biological integration, benefitting the regeneration of bone;
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6.
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Ease
of post-operative care i.e. no distortion during x-ray imaging;
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7.
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Simple
and cost-effective to manufacture.
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Our
products are designed to replace the traditional internal fixation device made of stainless steel and titanium and overcome the limitations
of previous generations of products such as PLA and PLLA. Our laboratory statistics show that our PA products have a higher mechanical
strength, last longer in degradation ratio and are more evenly absorbed form outer layer inwards as compared with similar materials such
as PLA and PLLA. Thus PA allows increased restoration time for bone healing and re-growth. The Company’s polymer orthopaedic internal
fixation screws received approval from the National Medical Products Administration of the PRC (“NMPA”) in April 2018. We
launched our sales campaign at the end of our fiscal year ended October 31, 2019 and achieved a milestone in the Company’s history
by generating revenue through the sales of our PA Screws.
NMPA
Application Process and Approval for Polymer Screws
The
Company first submitted its application for PA Screws to the NMPA (formerly the SFDA/CFDA) in 2008. The application has been withheld
by the NMPA pending additional clinical trial cases. This is due to the amended NMPA regulations, which unlike previous regulations require
the applicant to specify the position on the body where the clinical trial is carried out. Our amended NMPA application has specified
the ankle fracture as the body part of our clinical trial. This is because bones around this part carry most of the body weight.
Due
to the uniqueness of our material, there were no established NMPA Product Standards that we could follow during our application process
for our PA Screws. To establish our own Product Standards, the Company had been carrying out extra tests. The Company submitted its Product
Standards and supplementary reports to the NMPA in 2014. In December 2016, the Company received a notice from the NMPA requesting supplementary
report as part of the review process. The Company completed the supplementary report and submitted it to the NMPA in June 2017.
In
April 2018, the Company’s application for its PA Screws was approved by the NMPA in China (Medical Device Certification Number:
20183460133).
Process
of Human Trials
As
of July 31, 2021, for medical study and comparison purpose, the Company has completed a total of 83 successful clinical human trial cases,
including 71 cases on ankle fractures and 57 successful PA Binding Wire trial cases. We have been conducting human trials at the 6 state
level hospitals recognized by NMPA for clinical trials in different cities throughout China; including Nanchang, Changsha, Luoyang, Nanning
and Tianjin. The cities and provinces where our clinical trial hospitals are based will be the initial target regions on our marketing
plan. These regions are both densely populated and have experienced high or above medium economic growth. The clinical trials for the
Company’s PA Screws have been completed with 100 percent success rate. Having gained NMPA approval for PA Screws, the Company is
planning to start clinical trials on series of orthopaedic products the Company has developed using the same unique biomaterial.
Government
Regulation
Medical
implant devices/products manufactured or marketed by the Company in China are subject to extensive regulations by the NMPA. Pursuant
to the related laws and acts, as amended, and the regulations promulgated there under (the “NMPA Regulations”), the NMPA
regulates the clinical testing, manufacture, labeling, distribution and promotion of medical devices. The NMPA also has the authority
to request repair, replacement, or refund of the cost of any device manufactured or distributed by the Company.
Under
the NMPA Regulations, medical devices are classified into three classes (class I, II or III), the basis of the controls deemed necessary
by the NMPA to reasonably assure their safety and efficacy. Under the NMPA’s regulations, class I devices are subject to general
controls (for example, labeling and adherence to Good Manufacturing Practices (“GMP”) requirements) and class II devices
are subject to general and special controls. Generally, class III devices are those which must receive premarket approval by the NMPA
to ensure their safety and efficacy (for example, life-sustaining, life-supporting and certain implantable devices, or new devices which
have not been found substantially equivalent to legally marketed class I or class II devices). The Company is classified as a manufacturer
of class III medical devices. Current NMPA enforcement policy prohibits the marketing of approved medical devices for unapproved uses.
Before
a new device can be introduced into the market in China, the manufacturer generally must obtain NMPA marketing clearance through clinical
trials. Since the Company is classified as a manufacturer of Class III medical devices, the Company must carry out all clinical trials
in pre-selected NMPA approved hospitals.
Manufacturers
of medical devices for marketing in China are required to adhere to GMP requirements. Enforcement of GMP requirements has increased significantly
in the last several years and the NMPA has publicly stated that compliance will be more strictly scrutinized. From time to time the NMPA
has made changes to the GMP and other requirements that increase the cost of compliance. Changes in existing laws or requirements or
adoption of new laws or requirements could have a material adverse effect on the Company’s business, financial condition and results
of operations. There can be no assurance that the Company will not incur significant costs to comply with applicable laws and requirements
in the future or that applicable laws and requirements will not have a material adverse effect upon the Company’s business, financial
condition and results of operations.
Regulations
regarding the development, manufacturing and sale of the Company’s products are subject to change. The Company cannot predict the
impact, if any, that such changes might have on its business, financial condition and results of operations.
Results
of Operations
The
“Results of Operations” discussed in this section merely reflect the information and results of the Company for the period
from September 25, 2002 (Shenzhen Changhua’s date of inception) to July 31, 2021 and 2020.
Revenues
Our
revenue for the three and nine months ended July 31, 2021 and 2020 were $180, $961, $47,508 and $61,251 respectively.
Our
management team is continuously looking for fundraising possibilities for sales and marketing expansion, product improvement, machinery
upgrades, facility expansions and continuous research and development.
Estimate
current production lines in full capacity
Our
facility is located in Shenzhen, China, which is built to meet the GMP standards. Our facility covers about 865 square meters, which
includes the combined facilities of offices, laboratories, and workshops. There is one production line for the PA Screw and another production
line for the PA Binding Wire. The annual production capabilities of each production line are 100,000 pieces for PA Screw, and 240,000
packs for the PA Binding Wires. Both production lines, at their maximum production capacities are capable of generating approximately
$30,000,000 in annual revenue.
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Output Quantity (Max.)
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Price at ex-factory ($)
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Total Turnover ($)
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PA Screw
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100,000
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(piece)
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180
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18,000,000
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PA Binding Wire
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240,000
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(pack)
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50
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12,000,000
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Total:
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30,000,000
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China’s
Marketing Analysis:
We
have established long term relationships with many hospitals and national distributors in China. Ms. Hui Wang, the Company’s CEO,
has over 25 years’ sales experience in medical distribution. Professor Shangli Liu, our chief medical advisor, is one of the highest
ranked orthopedic doctors in China as well as being highly renowned in the rest of the world. He will assist the Company in nationwide
product promotion and joint projects with associated academic institutions and medical schools. During product development and clinical
trial stages, we developed close relationships with many major national hospitals. We expect these relationships to boost our revenue
generation.
China’s
market for PA devices depends on 3 major conditions:
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Patients
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Advanced technology level
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Performance and price of the materials
China
has gradually entered the Old Age Society. It is expected that there will be 245 million people over 60 years of age by 2020, and, according
to the survey of 50 years old, the incidence of osteoporosis is as high as 60%, accompanied by osteoporosis, fracture, bone necrosis,
disability and other diseases, resulting in continued high demand of orthopaedic implant medical devices. (Source: The UN; Shenwan Hongyuan
Securities research report).
The
Company has advantages and more opportunities over others competitors due to:
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No other similar patent registrations in China.
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We are the only company to receive market approval and permission to perform PA clinical trials by the NMPA to the best of our knowledge.
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We have a timing advantage over other Chinese companies; other companies would need to successfully complete preclinical testing for
the NMPA in order to obtain clinical trial permits.
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Under new regulations by the NMPA, it will take at least 5-10 years for clinical trials of new materials.
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Our patented material enables us to rapidly diversify our product line according to market trend and demand.
Number
of Hospitals at the end of November 2020 Statistic and Census report by the National Health Commission of the People’s Republic
of China.
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Statistic and Census report by the National Health Commission of the People’s Republic of China
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(March 2021)
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March 2021
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March 2020
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Increase / (Decrease)
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Total No. of Hospitals
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35,519
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34,349
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1,170
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Public Hospital
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11,840
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11,916
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(76
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)
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Private Hospital
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23,679
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22,433
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1,246
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Hospital Rating
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AAA
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3,044
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2,779
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265
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AA
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10,483
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9,805
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678
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A
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12,300
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11,266
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1,034
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Unrated
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9,692
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10,499
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(807
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)
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In
general, technological advancements and the marketing potential within Asia are the biggest factors in driving significant growth within
the global orthopedic devices market. Another major factor that positively influences this market is the growing number of aging baby
boomers with active lifestyles. This sector represents a large portion of the total population.
Cost
of Sales
Cost
of sales for the three and nine months ended July 31, 2021 and 2020 were $38, $820, $10,217 and $33,831 respectively. The main components
of cost of sales are expenses for attending exhibitions/trade shows and staff costs.
Gross
Profits
Gross
profits for the three and nine months ended July 31, 2021 and 2020 were $142, $141, $37,291 and $27,420 respectively.
Operating
Expenses
Operating
expenses for the three and nine months ended July 31, 2021 and 2020 were $111,914, $116,582, $350,855 and $363,840 respectively.
Research
and Development
Research
and development costs related to both present and future products are expensed as incurred. Total expenditure on research and development
charged to general and administrative expenses for the three and nine months ended July 31, 2021 and 2020 were $54,633, $42,773, $178,086
and $140,858. The main component of research and development costs is staff costs of the technical personnel on product improvements
to enhance industrial design.
We
expect research and development expenses to grow as we continue to invest in basic research, clinical trials, product development and
in our intellectual property. The Company will be working closely with medical institutions and research universities to expedite future
clinical trials of upcoming series of polymer fixation devices, including Intramedullary Nailing Fixation, Binding Wires, Micromodule
Screws & Plates, Maxillofacial & Craniofacial Plates, and Rib Pins.
Marketing
Strategy
The
Company has been conducting Pre-Market Research before its PA Screws application was approved by the NMPA in April 2018. The research
is intended to estimate the potential market success of the company’s products that can be expected. The research also beyond the
Company’s initial market - China, and covers international markets. Based on the results of our Pre-Market Research and the positive
feedbacks we have received from trade shows and industrial conferences, it is the Company’s intention to apply for additional international
regulatory approvals in due course.
The
Company will market its products through a hybrid sales force comprised of a managed network of independent regional distributors/sales
agents (80%) and direct sales representatives (20%) in China.
There
are two ways the Company will generate revenue, 1) through our nationwide and regional distributors and 2) through our direct sales channels.
Impact
of COVID-19 Outbreak
The
Company’s primary business is carried out through its subsidiary, Shenzhen Changhua Biomedical Engineering Co., Ltd. (“Shenzhen
Changhua”), based in Shenzhen, China, where the COVID-19 pandemic started in January 2020.
The
Company has identified the following areas that had been adversely affected by COVID-19:
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1.
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Operation:
Our facilities in China were not fully staffed due to COVID-19 lockdown, travel restrictions and quarantine requirements. This affected
our accounting and marketing departments mostly because a large number of staff could not come back to office as they were not allowed
to travel or have 14-day quarantine before they came back to work. Our operation gradually came back to normal with the easing of
COVID-19 restrictions in China during the third and fourth quarter of 2020.
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2.
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Manufacturing:
We had sufficient raw material stock for 2 months, however, our production was affected by staff shortage and facilities closure
during lockdown.
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3.
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Marketing:
We launched our sales campaign in late 2019 and we generated revenue the first time in the history of the Company at the end of 2019
fiscal year. Our sales and marketing plans were disrupted by COVID-19 pandemic because almost all the hospitals in China were dealing
with COVID-19 and non-essential operations were postponed or cancelled.
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The
Company has been working with its business partners and workforce through crisis planning, effective communication and co-operation to
minimize the negative impact of the COVID-19 pandemic.
Other
Income and Expenses
Total
other (expenses) income, for the three and nine months ended July 31, 2021 and 2020 were ($86,941), ($88,784), ($246,282) and ($142,246)
respectively. There was no significant changes in total other income and expenses for the three and nine months ended July 31, 2021 except
that during the nine months ended July 31, 2020, the Company received a Biomedical Incentive Award of US$125,237 from the government
of Shenzhen Longgang District where our facilities are located, in recognition of the Company’s achievement of obtaining a Class
III medical device permit from China’s NMPA. The remaining other expenses comprised mainly interest expenses with no significant
differences between the relevant periods of 2021 and 2020.
Finance
Costs
As
of July 31, 2021 and October 31, 2020, a stockholder and four related parties had loaned a total of $6,349,167 and $5,585,620 respectively
to the Company as unsecured loans repayable on demand and interest is charged at 7% per annum on the amount due. Total interest expenses
on advances from a stockholder and the related parties accrued for the three and nine months ended July 31, 2021 and 2020 were $76,885,
$79,615, $225,581 and $239,946 respectively.
As
of July 31, 2021 and October 31, 2020, the Company owed $347,889 and $308,031 respectively to the directors for advances made on an unsecured
basis, repayable on demand. Total imputed interest expenses on advances from the directors, calculated at 5% per annum, recorded as additional
paid-in capital amounted to $4,049, $3,409, $11,428 and $10,205 for the three and nine months ended July 31, 2021 and 2020 respectively.
Net
Loss
The
net loss attributable to common stockholders for the three and nine months ended July 31, 2021 and 2020 were $213,501, $280,767, $792,746
and $532,914 respectively. We started to generate revenue at the end of our fiscal year from inception to October 31, 2019 before our
sales campaign was disrupted by the COVID-19 pandemic, but we have to incur operating expenses for the upkeep of the Company and the
clinical trials.
Liquidity
and Capital Resources
We
had a working capital deficit of $8,336,260 and $7,533,045 as of July 31, 2021 and October 31, 2020 respectively. Our working capital
deficit increased as a result of the fact that we only started to market of our NMPA approved PA Screw in China at the end of 2019 fiscal
year, and the company has to put resources to market its products, complete the clinical trials of other products. Although we began
to generate revenues at the end of 2019 fiscal year, our marketing campaign was disrupted by the COVID-19 pandemic and the revenue income
was not sufficient. Our main source of financing during the year came in the form of PA Screws sales and loan from our related parties
and stockholders.
Cash
Flows
Net
Cash Used in Operating Activities
Net
cash used in operating activities was $743,038 and $105,512 in the nine months ended July 31, 2021 and 2020 respectively. This amount
was attributable primarily to the net loss after adjustment for non-cash items, such as depreciation, loss on disposal of property and
equipment, imputed interest on advances from directors, and stock-based compensation expenses. The change in operating assets and liabilities
include inventory, other receivables and prepaid expenses, trade payable and contract liabilities and other payables and accrued
expenses. In short, cash used in operating activities increased were a result of increased in operating loss, build-up of inventory,
increment in other receivables and prepared expenses assets, and reduction in trade payables and contract liabilities while slightly
offset by other payables and accrued expenses liabilities. Other items had no significant changes.
Net
Cash Used in Investing Activities
We
recorded net cash used of $51,449 and $29,692 in investing activities in the nine months ended July 31, 2021 and 2020 respectively. This
amount reflected purchases of property and equipment, primarily for research and development to our facilities.
Net
Cash Provided by Financing Activities
Net
cash provided by financing activities in the nine months ended July 31, 2021 and 2020 was $593,760 and $143,975 respectively, which represented
advances from a stockholder, directors and related parties, payment to operating lease with principal and interest. The significant increase
in the cash provided by financing activities was loan from related parties which was the current financing source of the Company.
Operating
Capital and Capital Expenditure Requirements
Our
ability to continue as a going concern and support the commercialization of current products is dependent upon our ability to market
our product while obtaining additional financing in the near term. We anticipate that such funding will be in the form of marketing of
our products and equity financing from sales of our common stock. However, there is no assurance that we will be able to raise sufficient
funding from the sale of our products and common stock to fund our business plan should we decide to proceed. We anticipate our sales
revenue will not meet our financial needs in 2021 and we need to rely on advances from our related parties and stockholders in order
to continue to fund our business operations.
We
believe that our existing cash, cash equivalents at July 31, 2021, will be insufficient to meet our cash needs. Our minimum cash requirement
for the next 12 months is projected to be $800,000. This amount may increase if we decide to start clinical trials on new products. The
management is actively pursuing additional funding and strategic partners, which will enable the Company to implement our business plan,
business strategy, to continue research and development, clinical trials or further development that may arise.
We
intend to spend more to support the commercialization of current products and on research and development activities, including new products
development, regulatory and compliance, clinical studies, and the enhancement and protection of our intellectual property portfolio.
OFF-BALANCE
SHEET ARRANGEMENTS
We
do not have any 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 our investors.
CRITICAL
ACCOUNTING POLICIES
The
preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including
but not limited to those related to income taxes and impairment of long-lived assets. We base our estimates on historical experience
and on various other assumptions and factors that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Based
on our ongoing review, we plan to adjust to our judgments and estimates where facts and circumstances dictate. Actual results could differ
from our estimates.
We
believe the following critical accounting policies are important to the portrayal of our financial condition and results and require
our management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect
of matters that are inherently uncertain.
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1.
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Property
and equipment
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Property
and equipment are stated at cost, less accumulated depreciation. Expenditures for additions, major renewals and betterments are capitalized
and expenditures for maintenance and repairs are charged to expense as incurred.
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Depreciation
is provided on a straight-line basis, less estimated residual value over the assets estimated useful lives. The estimated useful
lives of the assets are 5 years.
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2.
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Inventories
Raw
materials, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials,
direct labour and an applicable proportion of production overheads. Production overheads are allocated to inventories on the basis
of normal operating capacity. Costs are assigned to individual inventory items on weighted average costs basis. Net realisable value
is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling
costs.
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3.
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Long-lived
assets
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In
accordance with FASB Codification Topic 360 (ASC Topic 360), “Accounting for the impairment or disposal of Long-Lived Assets”,
long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the
recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived
assets. The Company reviews long-lived assets to determine that carrying values are not impaired.
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4.
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Fair
value of financial instruments
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FASB
Codification Topic 825(ASC Topic 825), “Disclosure About Fair Value of Financial Instruments,” requires certain disclosures
regarding the fair value of financial instruments. The carrying amounts of other receivables and prepaid expenses, other payables
and accrued expenses, due to a stockholder, directors and related parties approximate their fair values because of the short-term
nature of the instruments. The management of the Company is of the opinion that the Company is not exposed to significant interest
or credit risks arising from these financial statements.
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5.
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Government
grant
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Government
grants are recognized when there is reasonable assurance that the Company complies with any conditions attached to them and the grants
will be received.
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6.
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Revenue
recognition
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Revenue
from contract with customers is recognized when control of goods is transferred to a customer, at an amount that reflects the consideration
to which the Company expects to be entitled in exchange for those goods. Control is considered to be transferred when the customer
has the ability to direct the use of and obtain substantially all of the remaining benefits of that good, generally on delivery of
the goods.
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Revenues
are generated from manufacturing and supply of biomaterial internal fixation devices, which are sold through its network of distributors/agents
and direct sales channels. Our performance obligations are satisfied at a point in time. Our contracts have an anticipated duration
of less than a year.
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Actual
returns and claims in any future period are inherently uncertain and thus may differ from our estimates. If actual or expected future
returns and claims are significantly greater or lower than the reserves that we have established, we will record a reduction or increase
to net revenue in the period in which we make such a determination.
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7.
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Stock-based
compensation
The
fair value of services received, as measured at the fair value of stock granted at the grant date, is expensed in the statements
of operations and comprehensive loss with a corresponding increase in the common stock and additional paid-in capital where applicable.
Where
the shares are granted for services to be rendered over a period of time, the fair value of the stock granted is accounted for as
a prepayment with a corresponding increase in the common stock and additional paid-in capital where applicable. This prepaid stock-based
compensation is amortized as an expense on a straight-line basis over the period for which the services are rendered.
Where,
pursuant to an agreement, the stock of the Company is to be granted for services being rendered, the fair value of the stock-based
compensation is credited to the stock-based compensation reserve which will be transferred to common stock and additional paid-in-capital
upon the actual granting of the shares. The stock-based compensation would be amortized as an expense on a straight-line basis over
the period for which the services are rendered.
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8.
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Income
taxes
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The
Company accounts for income taxes under the FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized
as income in the period included the enactment date.
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9.
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Research
and Development
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Research
and development costs related to both present and future products are expensed as incurred.
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10.
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Foreign
currency translation
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The
financial statements of the Company’s subsidiary denominated in currencies other than US $ are translated into US $ using the
closing rate method. The balance sheet items are translated into US $ using the exchange rates at the respective balance sheet dates.
The capital and various reserves are translated at historical exchange rates prevailing at the time of the transactions while income
and expenses items are translated at the average exchange rate for the year. All exchange differences are recorded within equity.
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RECENT
ACCOUNTING PRONOUNCEMENTS
There
has been no newly effective accounting pronouncement that has significance, or potential significance, to our consolidated financial
statements.
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions
of any such pronouncements may be expected to cause a material impact on the financial condition or the results of operations. The Company
will carefully analyze these recently accounting pronouncements and take action to adopt them as required.