Item 7.
|
Managements Discussion and Analysis of
Financial Condition and Results of Operations.
|
The following discussion should be read in conjunction with our
audited consolidated financial statements and the related notes for the years
ended December 31, 2017 and 2016 that appear elsewhere in this annual report.
The following discussion contains forward-looking statements that reflect our
plans, estimates and beliefs. Our actual results could differ materially from
those discussed in the forward looking statements. Factors that could cause or
contribute to such differences include, but are not limited to those discussed
below and elsewhere in this annual report, particularly in the section entitled
"Risk Factors" beginning on page 10 of this annual report.
Our audited consolidated financial statements are stated in
United States Dollars and are prepared in accordance with United States
Generally Accepted Accounting Principles.
Operating Results
No business activities for the period of last twelve
months.
Results of Operation for the Years Ended December 31,
2017 Compared to the Year Ended December 31, 2016
Results of Operation
Our operating results for the years ended December 31, 2017 and
2016 are summarized as follows:
|
|
Year
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Sales, net
|
$
|
-
|
|
$
|
-
|
|
Cost of sales
|
$
|
-
|
|
$
|
-
|
|
Gross Profit(Loss)
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
$
|
(207,796
|
)
|
$
|
(258,313
|
)
|
Loss from operations
|
$
|
(207,796
|
)
|
$
|
(258,313
|
)
|
Total Other income (expenses)
|
$
|
(13,144
|
)
|
$
|
(41,187
|
)
|
Provision for income taxes expense (benefit)
|
$
|
Nil
|
|
$
|
Nil
|
|
Net loss
|
$
|
(220,940
|
)
|
$
|
(299,500
|
)
|
Net loss attributable to non-controlling
interest
|
$
|
-
|
|
$
|
-
|
|
Net loss attributable to
TRANSAKT LTD.
|
$
|
(220,940
|
)
|
$
|
(299,500
|
)
|
Revenues & Cost of Sales
There was no sales revenue for the year ended December 31, 2017
and 2016.
Cost of sales was zero for the year ended December 31, 2017
since the zero sales in 2017.
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended
December 31, 2017 totaled $207,796 compared to operating expenses of $258,313
during the year ended December 31, 2016 down by 20% The decrease in operating
expenses was primarily due to the tightening of budget during the year.
Loss from Operations
Loss from operations for the year ended December 31, 2017
totaled $207,796 compared to $258,313 from the same period in 2016 decreased by
$50,517. The decrease was primarily due to the tightening of budget during the
year.
Other Income (expenses)
Other (expense) / income decrease approximately $(28,043) to
$(13,144) for the year ended December 31, 2017 from ($41,187) for the same
period in 2016. The increase in net other expense was primarily due to the
decrease in interest expense on convertible note.
Net loss
As a result of the above factors, we have net loss attributable
to the Companys common stockholders of approximately $220,940 for the year
ended December 31, 2017 as compared to a loss of $299,500 for the year ended
December 31, 2016, representing a decrease of approximately $78,560.
Inflation
Our opinion is that inflation has not had, and is not expected
to have, a material effect on our operations.
Climate Change
Our opinion is that neither climate change, nor governmental
regulations related to climate change, have had, or are expected to have, any
material effect on our operations.
Liquidity
Working Capital
|
|
At
|
|
|
At
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Current assets
|
$
|
445,630
|
|
$
|
648,601
|
|
Current liabilities
|
$
|
35,656
|
|
$
|
1,063,504
|
|
Working capital
|
$
|
409,974
|
|
$
|
(414,903
|
)
|
Cash Flows
|
|
Fiscal year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Net cash used in operating
activities
|
$
|
198,122
|
|
$
|
277,938
|
|
Net cash used in investing activities
|
$
|
-
|
|
$
|
-
|
|
Net cash provided by
financing activities
|
$
|
-
|
|
$
|
809,000
|
|
Net cash flow used in operating activities was $198,122 in
2017, compared to $277,938 in 2016, a decrease of $79,816. The decrease in net
cash flow used in operating activities was mainly due to lower operation
cost.
There is no net cash flow used in investing activities for 2017
and 2016.
Net cash flow provided by financing activities was $0 for 2017,
compared to net cash flow provided by financing activities of $809,000 for 2016,
a decrease of $809,000.
Our working capital was $409,974 as of December 31, 2017
compared to $(414,903) as of December 31, 2016.
In managements opinion, our working capital is not currently
sufficient for our present requirements. However, we will continue to evaluate
alternative sources of capital to meet our growth requirements, including other
asset or debt financing, issuing equity securities and entering into other
financing arrangements. There can be no assurance, however, that any of the
contemplated financing arrangements described herein will be available and, if
available, can be obtained on terms favorable to us.
Historically, operations and short-term financing have been
sufficient to meet our cash needs. We believe that we will be raise capital
through private placement offerings of our equity securities to provide the
necessary cash flow to meet anticipated working capital requirements. However,
our actual working capital needs for the long and short -term will depend upon
numerous factors, including operating results, competition, and the availability
of credit facilities, none of which can be predicted with certainty. Future
expansion will be limited by the availability of financing products and raising
capital.
Capital Expenditure
Total capital expenditures were $0 for the years ended December
31, 2017 and 2016, respectively.
Currency Exchange Fluctuations
The Company financial statements are presented in the U.S.
dollar ($), which is the Companys reporting currency, while its functional
currency is Hong Kong Dollar (HKD). Transactions in foreign currencies are
initially recorded at the functional currency rate ruling at the date of
transaction. Any differences between the initially recorded amount and the
settlement amount are recorded as a gain or loss on foreign currency transaction
in the consolidated statements of income. Monetary assets and liabilities
denominated in foreign currency are translated at the functional currency rate
of exchange ruling at the balance sheet date. Any differences are taken to
profit or loss as a gain or loss on foreign currency translation in the
statements of income.
In accordance with ASC 830, Foreign Currency Matters, the
Company translates the assets and liabilities into U.S. dollar ($) using the
rate of exchange prevailing at the balance sheet date and the statements of
operations and cash flows are translated at an average rate during the reporting
period. Adjustments resulting from the translation from HKD into U.S. dollar are
recorded in stockholders equity as part of accumulated other comprehensive
income.
Cash Requirements
We used cash in operations of $198,122 for the year ended
December 31, 2017. We continue to be dependent on the proceeds of equity and
non-equity financing to fund our operations. No assurances can be given that our
actual cash requirements will fall within our budget that anticipated revenues
will be realized when needed, that lines of credit will be available to us if
required, or that additional capital will be available to us.
Research and Development
No significant research and development expenses were incurred
in 2017 or 2016.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
stockholders.
Critical Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
TransAKT (BVI) Limited and its wholly owned subsidiaries, TransAKT Bio Agritech
Ltd., collectively referred to within as the Company. All material intercompany
accounts, transactions, and profits have been eliminated in consolidation.
Going Concern
We has incurred a net loss attributable to the Companys common
stockholders of $220,940 and $299,500 during the years ended December 31, 2017
and 2016, respectively, and has an accumulated deficit of $22,350,526 and
$22,129,586 as of December 31, 2017 and December 31, 2016, respectively.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. This basis
of accounting contemplates the recovery of the Companys assets and the
satisfaction of liabilities in the normal course of business. This presentation
presumes funds will be available to finance ongoing research and development,
operations and capital expenditures and permit the realization of assets and the
payment of liabilities in the normal course of operations for the foreseeable
future.
The ability of the Company to continue research and development
projects and realize the capitalized value of proprietary technologies and
related assets is dependent upon future commercial success of the technologies
and raising sufficient funds to continue research and development as well as to
effectively market its products. Through December 31, 2017, the Company has not
realized commercial success of the technologies, nor have they raised sufficient
funds to continue research and development or to market its products.
There can be no assurances that there will be adequate
financing available to the Company and the consolidated financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
The Company has taken certain restructuring steps to provide
the necessary capital to continue its operations. These steps included: (1)
Tightly budgeting and controlling all expenses; (2) The Company plans to
continue actively seeking additional funding opportunities to improve and expand
upon our product lines.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States (GAAP) requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue Recognition
Revenues are recognized when finished products are shipped to
customers and both title and the risks and rewards of ownership are transferred
and collectability is reasonably assured. The Companys revenues are recorded
upon confirmed acceptance after inspection by the customers of the Company.
Exchange Gain (Loss):
During the years ended December 31, 2017 and 2016, 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.
Statement of Cash Flows
Cash flows from the Company's operations are based upon the
local currencies. As a result, amounts related to assets and liabilities
reported on the statement of cash flows will not necessarily agree with changes
in the corresponding balances on the balance sheet.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk are accounts receivable and other receivables
arising from its normal business activities. The Company has a diversified
customer base. The Company controls credit risk related to accounts receivable
through credit approvals, credit limits and monitoring procedures. The Company
routinely assesses the financial strength of its customers and, based upon
factors surrounding the credit risk, establishes an allowance, if required, for
un-collectible accounts and, as a consequence, believes that its accounts
receivable credit risk exposure beyond such allowance is limited.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and cash in time
deposits, certificates of deposit and all highly liquid debt instruments with
original maturities of three months or less.
Fair Value of Financial Instruments
In the first quarter of fiscal year 2008, the Company adopted
Accounting Standards Codification subtopic 820-10, Fair Value Measurements and
Disclosures (ASC 820-10). ASC 820-10 defines fair value, establishes a
framework for measuring fair value, and enhances fair value measurement
disclosure. ASC 820-10 delays, until the first quarter of fiscal year 2009, the
effective date for ASC 820-10 for all non-financial assets and non-financial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). The adoption of
ASC 820-10 did not have a material impact on the 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, 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
FASB Clarifies the Definition of a Business. The FASB has
issued Accounting Standards Update No. 2017-01, Business Combinations (Topic
805): Clarifying the Definition of a Business, clarifying the definition of a
business. The amendments affect all companies and other reporting organizations
that must determine whether they have acquired or sold a business.
The definition of a business affects many areas of accounting
including acquisitions, disposals, goodwill, and consolidation. The amendments
are intended to help companies and other organizations evaluate whether
transactions should be accounted for as acquisitions (or disposals) of assets or
businesses. The amendments provide a more robust framework to use in determining
when a set of assets and activities is a business. They also provide more
consistency in applying the guidance, reduce the costs of application, and make
the definition of a business more operable.
For public companies, the amendments are effective for annual
periods beginning after December 15, 2017, including interim periods within
those periods. For all other companies and organizations, the amendments are
effective for annual periods beginning after December 15, 2018, and interim
periods within annual periods beginning after December 15, 2019.
The FASB has issued Accounting Standards Update (ASU) No.
2017-07, Compensation Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement
Benefit Cost. The amendments apply to all employers, including not-for-profit
entities, that offer to their employees defined benefit pension plans, other
postretirement benefit plans, or other types of benefits accounted for under
Topic 715, Compensation Retirement Benefits.
The amendments require that an employer report the service cost
component in the same line item or items as other compensation costs arising
from services rendered by the pertinent employees during the period. The other
components of net benefit cost are required to be presented in the income
statement separately from the service cost component and outside a subtotal of
income from operations, if one is presented. If a separate line item or items
are used to present the other components of net benefit cost, that line item or
items must be appropriately described. If a separate line item or items are not
used, the line item or items used in the income statement to present the other
components of net benefit cost must be disclosed.
The amendments also allow only the service cost component to be
eligible for capitalization when applicable (e.g., as a cost of internally
manufactured inventory or a self-constructed asset).
The amendments are effective for public business entities for
annual periods beginning after December 15, 2017, including interim periods
within those annual periods. For other entities, the amendments are effective
for annual periods beginning after December 15, 2018, and interim periods within
annual periods beginning after December 15, 2019. Early adoption is permitted as
of the beginning of an annual period for which financial statements (interim or
annual) have not been issued or made available for issuance.
FASB Amends SEC Paragraphs related to Revenue Recognition and
Leases Standards for Public Business Entities. The FASB has issued Accounting
Standards Update (ASU) No. 2017-13.This ASU adds, amends, and supersedes SEC
paragraphs of the Accounting Standards Codification (ASC) related to the
adoption and transition provisions of ASU No. 2014-09, Revenue From Contracts
with Customers and ASU 2016-02, Leases,for public business entities. The ASU is
titled ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts
with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842):
Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20,
2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer
Comments.
ASU 2017-13 codifies portions of an SEC Staff Announcement made
at the July 20, 2017 Emerging Issues Task Force (EITF) meeting essentially
delaying the effective date of the revenue recognition and leases standards for
a subset of public entities . The SEC Observer made the following SEC Staff
Announcement, Transition Related to Accounting Standards Updates No. 2014-09
and 2016-02, at the July 20, 2017 EITF meeting:
The SEC staff would not object to a public business entity that
otherwise would not meet the definition of a public business entity except for a
requirement to include or the inclusion of its financial statements or financial
information in another entitys filing with the SEC adopting (1) ASC Topic 606,
Revenue from Contracts with Customers for annual reporting periods beginning
after December 15, 2018, and interim reporting periods within annual reporting
periods beginning after December 15, 2019, and (2) ASC Topic 842, Leases for
fiscal years beginning after December 15, 2019, and interim periods within
fiscal years beginning after December 15, 2020.
A public business entity that otherwise would not meet the
definition of a public business entity except for a requirement to include or
the inclusion of its financial statements or financial information in another
entitys filing with the SEC may still elect to adopt ASC Topic 606 and ASC
Topic 842 according to the public business entity effective dates.
This announcement is applicable only to public business
entities that otherwise would not meet the definition of a public business
entity except for a requirement to include or the inclusion of its financial
statements or financial information in another entitys filing with the SEC.
This announcement is not applicable to other public business entities.
FASB Amends Codification for New SEC Content. The FASB has
issued Accounting Standards Update (ASU) No. 2017-14, Income StatementReporting
Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue
from Contracts with Customers (Topic 606). ASU 2017-14 includes amendments to
certain SEC paragraphs within the FASB Accounting Standards Codification
(Codification). ASU 2017-14 amends the Codification to incorporate the following
previously issued guidance from the SEC.
SEC Staff Accounting Bulletin (SAB)
No. 116
The SEC issued SAB 116 to bring existing SEC staff guidance
into conformity with the FASBs adoption of and amendments to ASC Topic 606,
Revenue from Contracts with Customers. The SAB modified SAB Topic 13, Revenue
Recognition, SAB Topic 8, Retail Companies, and Section A,
Operating-Differential Subsidies, of SAB Topic 11, Miscellaneous Disclosure. ASU
2017-14 supersedes various SEC paragraphs and amends an SEC paragraph pursuant
to the issuance of SAB 116.
SEC Interpretive Release on Vaccines for Federal Government
Stockpiles (SEC Release No. 33-10403)
The SEC issued this release to update its 2005 Commission
Guidance Regarding Accounting for Sales of Vaccines and Bioterror
Countermeasures to the Federal Government for Placement into the Pediatric
Vaccine Stockpile or the Strategic National Stockpile. The release stated that
consistent with ASC Topic 606, manufacturers should recognize revenue for
vaccines that are placed into the Vaccines for Children Program and the
Strategic National Stockpile. The release states that until a registrant adopts
ASC Topic 606, it should continue referring to the guidance included in the 2005
Release. ASU 2017-14 supersedes various SEC paragraphs and adds an SEC paragraph
pursuant to this guidance.
Tabular Disclosure of Contractual Obligations
Operating Leases
We were not party to any leases agreement during the year ended
December 31, 2017.
Contractual Obligations
As a smaller reporting company, we are not required to
provide tabular disclosure obligations.
Item 8.
|
Financial Statements and Supplementary
Data
|
TRANSAKT LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2017 AND 2016 AND
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
CONTENTS
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
To the shareholders and the board of directors of TransAKT Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
TransAKT Ltd. and its subsidiaries (the "Company") as of December 31, 2017 and
2016, the related consolidated statements of operations, changes in
shareholders equity, and cash flows, for each of the two years in the period
ended December 31, 2017, and the related notes (collectively referred to as the
"financial statements"). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of
December 31, 2017 and 2016, and the consolidated results of its operations and
its cash flows for each of the two years in the period ended December 31, 2017,
in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, the Company has suffered recurring
losses from operations and has a net capital deficiency that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the
Company's consolidated financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion.
Our audits included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
F-1
/s/ Centurion ZD CPA Limited
We have served as the Company's auditor since 2016.
Hong Kong, SAR
April 9, 2018
F-2
TRANSAKT LTD.
CONSOLIDATED BALANCE SHEETS
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and
cash equivalents
|
$
|
435,630
|
|
$
|
638,601
|
|
Prepayments
|
|
10,000
|
|
|
10,000
|
|
Total
Current Assets
|
|
445,630
|
|
|
648,601
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
445,630
|
|
$
|
648,601
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accrued
expenses
|
$
|
35,656
|
|
$
|
63,504
|
|
Convertible Promissory Note
|
|
-
|
|
|
1,000,000
|
|
Total Current Liabilities
|
|
35,656
|
|
|
1,063,504
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
35,656
|
|
|
1,063,504
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
Preferred stock, 200,000,000
shares authorized for
issuance,
$0.001
par value, 0 share issued and outstanding
|
|
-
|
|
|
-
|
|
Common stock, 700,000,000
shares authorized for
issuance,
$0.001
par value, 133,506,570 shares and 28,439,904 shares issued
and
outstanding
at December 31, 2017 and 2016, respectively
|
|
133,506
|
|
|
28,440
|
|
Additional paid-in capital
|
|
24,265,011
|
|
|
23,319,411
|
|
Accumulated deficit
|
|
(22,350,526
|
)
|
|
(22,129,586
|
)
|
Other
comprehensive income
|
|
(438,017
|
)
|
|
(433,168
|
)
|
Stock
subscription receivable
|
|
(1,200,000
|
)
|
|
(1,200,000
|
)
|
Treasury stock, common
stock, at
cost,
0
share at December 31, 2017 and 2016, respectively
|
|
-
|
|
|
-
|
|
Total Stockholders' Equity
|
|
409,974
|
|
|
(414,903
|
)
|
|
|
|
|
|
|
|
Total Equity
|
|
409,974
|
|
|
(414,903
|
)
|
|
|
|
|
|
|
|
Total Liabilities and
Equity
|
$
|
445,630
|
|
$
|
648,601
|
|
The accompanying notes are an integral part of the financial
statements
F-3
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF
OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Sales, net
|
$
|
-
|
|
$
|
-
|
|
Cost of sales
|
|
-
|
|
|
-
|
|
Gross profit
|
|
-
|
|
|
-
|
|
Selling, general and administrative expenses
|
|
(207,796
|
)
|
|
(258,313
|
)
|
Loss from operations
|
|
(207,796
|
)
|
|
(258,313
|
)
|
Other income (expense)
|
|
|
|
|
|
|
Interest expense
|
|
(13,333
|
)
|
|
(37,333
|
)
|
Currency exchange gain/ (loss)
|
|
189
|
|
|
(3,854
|
)
|
Total other income
|
|
(13,144
|
)
|
|
(41,187
|
)
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
(220,940
|
)
|
|
(299,500
|
)
|
Provision for income taxes expense (benefit)
|
|
-
|
|
|
-
|
|
Net loss
|
|
(220,940
|
)
|
|
(299,500
|
)
|
Net loss attributable to TRANSAKT LTD.
|
$
|
(220,940
|
)
|
$
|
(299,500
|
)
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
Basic and diluted income
(loss) common stockholders per share
|
$
|
(0.002
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding:
|
|
|
|
|
|
|
Basic and diluted
|
|
116,811,045
|
|
|
22,670,938
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
(Loss)
|
|
|
|
|
|
|
Net profits (loss)
|
$
|
(220,940
|
)
|
$
|
(299,500
|
)
|
Foreign currency translation
adjustment
|
|
(4,849
|
)
|
|
4,289
|
|
Comprehensive income (loss)
|
|
(225,789
|
)
|
|
(295,211
|
)
|
Comprehensive income (loss)
attributable to TRANSAKT LTD.
|
$
|
(225,789
|
)
|
$
|
(295,211
|
)
|
The accompanying notes are an integral part of the financial
statements
F-4
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS
DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2017
|
|
Common Stock
|
|
|
Additional
|
|
|
Stock
|
|
|
Accumulated
|
|
|
Other
|
|
|
Treasury
|
|
|
Stock at Cost
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
Subscription
Receivable
|
|
|
Deficit
|
|
|
Comprehensive
Income (loss)
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
30,672,404
|
|
$
|
30,672
|
|
$
|
25,117,179
|
|
$
|
(1,200,000
|
)
|
$
|
(21,830,086
|
)
|
$
|
(437,457
|
)
|
|
(2,232,500
|
)
|
$
|
(1,800,000
|
)
|
$
|
(119,692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of treasury
shares
|
|
(2,232,500
|
)
|
|
(2,232
|
)
|
|
(1,797,768
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,232,500
|
|
|
1,800,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(299,500
|
)
|
|
4,289
|
|
|
-
|
|
|
-
|
|
|
(295,211
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
28,439,904
|
|
$
|
28,440
|
|
$
|
23,319,411
|
|
$
|
(1,200,000
|
)
|
$
|
(22,129,586
|
)
|
$
|
(433,168
|
)
|
|
-
|
|
$
|
-
|
|
$
|
(414,903
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue Common Stock
|
|
105,066,666
|
|
|
105,066
|
|
|
945,600
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,050,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(220,940
|
)
|
|
(4,849
|
)
|
|
-
|
|
|
-
|
|
|
(225,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
133,506,570
|
|
$
|
133,506
|
|
$
|
24,265,011
|
|
$
|
(1,200,000
|
)
|
$
|
(22,350,526
|
)
|
$
|
(438,017
|
)
|
|
-
|
|
$
|
-
|
|
$
|
409,974
|
|
The accompanying notes are an integral part of the financial
statements
F-5
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
|
2017
|
|
|
2016
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
Net profits
(loss) available to common stockholders
|
$
|
(220,940
|
)
|
$
|
(299,500
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
Interest expenses
|
|
13,333
|
|
|
-
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
Decrease (Increase) in prepayments
|
|
-
|
|
|
1,431
|
|
Increase (Decrease) in
accounts payable and accrued expenses
|
|
9,485
|
|
|
20,131
|
|
Net cash used in
operating activities
|
|
(198,122
|
)
|
|
(277,938
|
)
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Restricted cash
|
|
-
|
|
|
-
|
|
Net cash used in
investing activities
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Net
repayment of amount due to shareholders
|
|
-
|
|
|
(191,000
|
)
|
Proceeds from issuance of
Convertible Promissory Note
|
|
-
|
|
|
1,000,000
|
|
Net cash
provided by financing activities
|
|
-
|
|
|
809,000
|
|
Effect of exchange rate changes on cash and
cash equivalents
|
|
(4,849
|
)
|
|
4,289
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
(202,971
|
)
|
|
535,351
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning
|
|
638,601
|
|
|
103,250
|
|
Ending
|
$
|
435,630
|
|
$
|
638,601
|
|
|
|
|
|
|
|
|
Non cash financing activities
|
|
|
|
|
|
|
Issuance of common stock to
settle convertible promissory note and its relevant accrued interest
|
|
1,050,666
|
|
|
-
|
|
|
|
|
|
|
|
|
Supplemental disclosure of
cash flows
|
|
|
|
|
|
|
Cash paid during the year
for:
|
|
|
|
|
|
|
Interest
expense
|
$
|
-
|
|
$
|
37,333
|
|
The accompanying notes are an integral part of the financial
statements
F-6
TRANSAKT LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017
NOTE 1 ORGANIZATION
TransAKT Ltd. (the Company) was incorporated under the laws
of the Province of Alberta on June 3, 1997. The Company completed the
acquisition of Green Point Resources Inc. on October 18, 2000 whereby it became
a publicly traded company listed on the Canadian Venture Exchange. In 2004 the
Company voluntarily delisted from the TSX Venture Exchange and retained a
listing on the Over the Counter Bulletin Board in the United States.
In October 2004 the Company purchased certain assets of IP
Mental Inc., a Taiwan based Voice over Internet Protocol (VoIP) company. The
company name was changed from TransAKT Corp. to TransAKT Ltd. on September 29,
2006. The Company designs and develops Voice over Internet Protocol (VoIP)
solutions and mobile payment terminals for the consumer electronics
industry.
On November 15, 2006 TransAKT Ltd and the shareholders of
Taiwan Halee International Co. Ltd. (HTT), entered into a Share Exchange
Agreement in which TransAKT Ltd. acquired 100% of Taiwan Halee International Co.
Ltd.s outstanding common stock. HTT was incorporated under the laws of Republic
of China in 1985. HTT is engaged in designing, manufacturing and distribution of
Taiwan telecommunications equipment. The acquisition has been accounted for as a
reverse acquisition under the purchase method of accounting. Accordingly, the
merger of the two companies has been recorded as a recapitalization of HTT, with
HTT being treated as the continuing entity.
On August 12, 2010, the Company filed the Registration
Statement (Form S-4) in connection with the continuation of the Company from
Alberta to Nevada. Based upon the number of common shares of TransAKT Ltd., a
Nevada corporation (TransAKT Nevada), to be issued to the shareholders of
TransAKT Ltd., an Alberta corporation (TransAKT Alberta), on a one-for-one
basis upon completion of the Continuation and based on 102,645,120 shares of
common stock of TransAKT Ltd., an Alberta corporation, issued and outstanding as
of August 12, 2010.
The Articles of Conversion of TransAKT Nevada provides that the
authorized capital of the TransAKT will be 300,000,000 shares of common stock,
par value $0.001 per share and 200,000,000 shares of preferred stock, par value
$0.001 per share.
On July 26, 2012, the Company acquired 100% equity of Vegfab
Agricultural Technology Co. Ltd. (the Vegfab), a company incorporated under
the laws of the Republic of China (ROC, Taiwan). Vegfab is mainly engaged in
selling agricultural equipment used to grow vegetables using simulated sunlight
from LED lamps in hydroponic systems.
On January 4, 2013, the Company entered into a Share Purchase
and Sale Agreement with a shareholder pursuant to which the Company sold to him
100% of all issued and outstanding securities of its wholly owned subsidiary
Taiwan Halee International Corporation (HTT). In consideration of the sale of
HTT, the shareholder has transferred to the Company 45,000,000 previously issued
common voting shares of TransAKT with a deemed value of $0.04 per share or $1.8
million in the aggregate.
On October 30, 2013, Million Talented Ltd., a related party 50%
owned by the Companys president and director, contributed $516 (equals to HKD
4,000) to obtain 40% ownership of TransAKT Bio Agritech Ltd., formerly named as
TransAKT (H.K) Ltd., (TransAKT H.K.). TransAKT H.K. was incorporated in Hong
Kong on November 20, 2007. It had no operation until 2013. TransAKT H.K.'s
primary business is conducting research and development on new agricultural
technology relating to the Companys business.
7
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
TransAKT (BVI) Limited and its wholly owned subsidiaries, TransAKT Bio Agritech
Ltd., collectively referred to within as the Company. All material intercompany
accounts, transactions, and profits have been eliminated in consolidation.
Going Concern
The Company has incurred a net loss of $220,940 and $299,500
during the years ended December 31, 2017 and 2016, respectively, and has an
accumulated deficit of $22,350,526 and $22,129,586 as of December 31, 2017 and
December 31, 2016, respectively.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. This basis
of accounting contemplates the recovery of the Companys assets and the
satisfaction of liabilities in the normal course of business. This presentation
presumes funds will be available to finance ongoing research and development,
operations and capital expenditures and permit the realization of assets and the
payment of liabilities in the normal course of operations for the foreseeable
future.
The ability of the Company to continue research and development
projects and realize the capitalized value of proprietary technologies and
related assets is dependent upon future commercial success of the technologies
and raising sufficient funds to continue research and development as well as to
effectively market its products. Through December 31, 2017, the Company has not
realized commercial success of the technologies, nor have they raised sufficient
funds to continue research and development or to market its products.
There can be no assurances that there will be adequate
financing available to the Company and the consolidated financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
The Company has taken certain restructuring steps to provide
the necessary capital to continue its operations. These steps included: (1)
Tightly budgeting and controlling all expenses; (2) The Company plans to
continue actively seeking additional funding opportunities to improve and expand
upon our product lines.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States (GAAP) requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
8
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Revenue Recognition
Revenues are recognized when finished products are shipped to
customers and both title and the risks and rewards of ownership are transferred
and collectability is reasonably assured. The Companys revenues are recorded
upon confirmed acceptance after inspection by the customers of the Company.
Exchange Gain (Loss):
During the years ended December 31, 2017 and 2016, 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.
9
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Statement of Cash Flows
In accordance with generally accepted accounting principles
(GAAP), cash flows from the Company's operations are based upon the local
currencies. As a result, amounts related to assets and liabilities reported on
the statement of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheet.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk are accounts receivable and other receivables
arising from its normal business activities. The Company has a diversified
customer base. The Company controls credit risk related to accounts receivable
through credit approvals, credit limits and monitoring procedures. The Company
routinely assesses the financial strength of its customers and, based upon
factors surrounding the credit risk, establishes an allowance, if required, for
un-collectible accounts and, as a consequence, believes that its accounts
receivable credit risk exposure beyond such allowance is limited.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and cash in time
deposits, certificates of deposit and all highly liquid debt instruments with
original maturities of three months or less.
Fair Value of Financial Instruments
In the first quarter of fiscal year 2008, the Company adopted
Accounting Standards Codification subtopic 820-10, Fair Value Measurements and
Disclosures (ASC 820-10). ASC 820-10 defines fair value, establishes a
framework for measuring fair value, and enhances fair value measurement
disclosure. ASC 820-10 delays, until the first quarter of fiscal year 2009, the
effective date for ASC 820-10 for all non-financial assets and non-financial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). The adoption of
ASC 820-10 did not have a material impact on the Companys financial position or
operations.
Effective October 1, 2008, the Company adopted Accounting
Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures
(ASC 820-10) and Accounting Standards Codification subtopic 825-10, Financial
Instruments (ASC 825-10), which permits entities to choose to measure many
financial instruments and certain other items at fair value. Neither of these
statements had an impact on the Companys unaudited condensed consolidated
financial position, results of operations or cash flows. The carrying value of
cash and cash equivalents, accounts payable and short-term borrowings, as
reflected in the balance sheets, approximate fair value because of the
short-term maturity of these instruments.
10
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Stock-based Compensation
The Company records stock-based compensation expense pursuant
to ASC 718-10, "
Share Based Payment Arrangement
, which requires
companies to measure compensation cost for stock-based employee compensation
plans at fair value at the grant date and recognize the expense over the
employee's requisite service period. The Companys expected volatility
assumption is based on the historical volatility of Companys stock or the
expected volatility of similar entities. The expected life assumption is
primarily based on historical exercise patterns and employee post-vesting
termination behavior. The risk-free interest rate for the expected term of the
option is based on the U.S. Treasury yield curve in effect at the time of grant.
Stock-based compensation expense is recognized based on awards
expected to vest, and there were no estimated forfeitures as the Company has a
short history of issuing options. ASC 718-10 requires forfeitures to be
estimated at the time of grant and revised in subsequent periods, if necessary,
if actual forfeitures differ from those estimates.
Net Loss Per Share
The Company has adopted Accounting Standards Codification
subtopic 260-10, Earnings Per Share (ASC 260-10) which specifies the
computation, presentation and disclosure requirements of earnings per share
information. Basic earnings per share have been calculated based upon the
weighted average number of common shares outstanding. Common equivalent shares
are excluded from the computation of the diluted loss per share if their effect
would be anti-dilutive.
Intangible assets
Intangible assets include a patent. With the adoption of FASB
ASC Topic 350, Intangibles, intangible assets with a definite life are
amortized on a straight-line basis. The patent is being amortized over its
estimated life of 10 years. Intangible assets with a definite life are tested
for impairment whenever events or circumstances indicate that a carrying amount
of an asset (asset group) may not be recoverable. An impairment loss would be
recognized when the carrying amount of an asset exceeds the estimated
undiscounted cash flows used in determining the fair value of the asset. The
amount of the impairment loss to be recorded is calculated by the excess of the
assets carrying value over its fair value. Fair value is generally determined
using a discounted cash flow analysis. Costs related to internally develop
intangible assets are expensed as incurred.
Recent accounting pronouncements
FASB Clarifies the Definition of a Business. The FASB has
issued Accounting Standards Update No. 2017-01, Business Combinations (Topic
805): Clarifying the Definition of a Business, clarifying the definition of a
business. The amendments affect all companies and other reporting organizations
that must determine whether they have acquired or sold a business.
The definition of a business affects many areas of accounting
including acquisitions, disposals, goodwill, and consolidation. The amendments
are intended to help companies and other organizations evaluate whether
transactions should be accounted for as acquisitions (or disposals) of assets or
businesses. The amendments provide a more robust framework to use in determining
when a set of assets and activities is a business. They also provide more
consistency in applying the guidance, reduce the costs of application, and make
the definition of a business more operable.
For public companies, the amendments are effective for annual
periods beginning after December 15, 2017, including interim periods within
those periods. For all other companies and organizations, the amendments are
effective for annual periods beginning after December 15, 2018, and interim
periods within annual periods beginning after December 15, 2019.
11
The FASB has issued Accounting Standards Update (ASU) No.
2017-07, Compensation Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement
Benefit Cost. The amendments apply to all employers, including not-for-profit
entities, that offer to their employees defined benefit pension plans, other
postretirement benefit plans, or other types of benefits accounted for under
Topic 715, Compensation Retirement Benefits.
The amendments require that an employer report the service cost
component in the same line item or items as other compensation costs arising
from services rendered by the pertinent employees during the period. The other
components of net benefit cost are required to be presented in the income
statement separately from the service cost component and outside a subtotal of
income from operations, if one is presented. If a separate line item or items
are used to present the other components of net benefit cost, that line item or
items must be appropriately described. If a separate line item or items are not
used, the line item or items used in the income statement to present the other
components of net benefit cost must be disclosed.
The amendments also allow only the service cost component to be
eligible for capitalization when applicable (e.g., as a cost of internally
manufactured inventory or a self-constructed asset).
The amendments are effective for public business entities for
annual periods beginning after December 15, 2017, including interim periods
within those annual periods. For other entities, the amendments are effective
for annual periods beginning after December 15, 2018, and interim periods within
annual periods beginning after December 15, 2019. Early adoption is permitted as
of the beginning of an annual period for which financial statements (interim or
annual) have not been issued or made available for issuance.
FASB Amends SEC Paragraphs related to Revenue Recognition and
Leases Standards for Public Business Entities. The FASB has issued Accounting
Standards Update (ASU) No. 2017-13.This ASU adds, amends, and supersedes SEC
paragraphs of the Accounting Standards Codification (ASC) related to the
adoption and transition provisions of ASU No. 2014-09, Revenue From Contracts
with Customers and ASU 2016-02, Leases,for public business entities. The ASU is
titled ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts
with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842):
Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20,
2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer
Comments.
ASU 2017-13 codifies portions of an SEC Staff Announcement made
at the July 20, 2017 Emerging Issues Task Force (EITF) meeting essentially
delaying the effective date of the revenue recognition and leases standards for
a subset of public entities . The SEC Observer made the following SEC Staff
Announcement, Transition Related to Accounting Standards Updates No. 2014-09
and 2016-02, at the July 20, 2017 EITF meeting:
The SEC staff would not object to a public business entity that
otherwise would not meet the definition of a public business entity except for a
requirement to include or the inclusion of its financial statements or financial
information in another entitys filing with the SEC adopting (1) ASC Topic 606,
Revenue from Contracts with Customers for annual reporting periods beginning
after December 15, 2018, and interim reporting periods within annual reporting
periods beginning after December 15, 2019, and (2) ASC Topic 842, Leases for
fiscal years beginning after December 15, 2019, and interim periods within
fiscal years beginning after December 15, 2020.
A public business entity that otherwise would not meet the
definition of a public business entity except for a requirement to include or
the inclusion of its financial statements or financial information in another
entitys filing with the SEC may still elect to adopt ASC Topic 606 and ASC
Topic 842 according to the public business entity effective dates.
This announcement is applicable only to public business
entities that otherwise would not meet the definition of a public business
entity except for a requirement to include or the inclusion of its financial
statements or financial information in another entitys filing with the SEC.
This announcement is not applicable to other public business entities.
FASB Amends Codification for New SEC Content. The FASB has
issued Accounting Standards Update (ASU) No. 2017-14, Income StatementReporting
Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue
from Contracts with Customers (Topic 606). ASU 2017-14 includes amendments to
certain SEC paragraphs within the FASB Accounting Standards Codification
(Codification). ASU 2017-14 amends the Codification to incorporate the following
previously issued guidance from the SEC.
SEC Staff Accounting Bulletin (SAB)
No. 116
12
The SEC issued SAB 116 to bring existing SEC staff guidance
into conformity with the FASBs adoption of and amendments to ASC Topic 606,
Revenue from Contracts with Customers. The SAB modified SAB Topic 13, Revenue
Recognition, SAB Topic 8, Retail Companies, and Section A,
Operating-Differential Subsidies, of SAB Topic 11, Miscellaneous Disclosure. ASU
2017-14 supersedes various SEC paragraphs and amends an SEC paragraph pursuant
to the issuance of SAB 116.
SEC Interpretive Release on Vaccines for Federal Government
Stockpiles (SEC Release No. 33-10403)
The SEC issued this release to update its 2005 Commission
Guidance Regarding Accounting for Sales of Vaccines and Bioterror
Countermeasures to the Federal Government for Placement into the Pediatric
Vaccine Stockpile or the Strategic National Stockpile. The release stated that
consistent with ASC Topic 606, manufacturers should recognize revenue for
vaccines that are placed into the Vaccines for Children Program and the
Strategic National Stockpile. The release states that until a registrant adopts
ASC Topic 606, it should continue referring to the guidance included in the 2005
Release. ASU 2017-14 supersedes various SEC paragraphs and adds an SEC paragraph
pursuant to this guidance.
NOTE 3 CONVERTIBLE PROMISSORY NOTE
Convertible Promissory Note consists of the following:
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
Convertible Promissory
Note
|
|
-
|
|
|
1,000,000
|
|
|
$
|
-
|
|
$
|
1,000,000
|
|
On July 15, 2016, the Company entered into Securities Purchase
Agreement with the President, Chief Executive Officer and Director, Mr. Ho
Kang-Wing, Pursuant to the agreement the Company issued to Mr. Ho a Convertible
Promissory Note in consideration of $1,000,000 in cash. An interest rate is 8%
per annum. Maturity date is July 14, 2018. The fair value measurement of the
convertible promissory note was recorded in carrying amount because the
convertible promissory note was issued to the existing shareholder, the current
fair value calculation models did not reflect the fair value of the note in this
transaction and this note was subsequently converted to common stock on February
28, 2017.
NOTE 4 PREPAYMENTS
Prepayments consist of the following:
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
Prepaid expenses
|
|
10,000
|
|
|
10,000
|
|
|
$
|
10,000
|
|
$
|
10,000
|
|
NOTE 5 ACCRUED EXPENSES
Accrued expenses consist of the following:
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
Accrued payroll
|
$
|
9,344
|
|
$
|
-
|
|
Accrued employee benefits and pension
expenses
|
|
288
|
|
|
-
|
|
Accrued professional fees
|
|
26,024
|
|
|
26,171
|
|
Accrued interest expenses
|
|
-
|
|
|
37,333
|
|
|
$
|
35,656
|
|
$
|
63,504
|
|
13
NOTE 6 - RELATED PARTY TRANSACTIONS
Related party transaction
On February 28, 2017, Mr. Ho Kangwing (the holder of
convertible promissory note) elected to convert the entire outstanding amount of
the Note into 105,066,666 common shares of the Company including the accumulated
interest. Therefore, the issued and outstanding common shares of the Company
were increased to 133,506,570 shares at that date.
There was no related party transaction for the year ended
December 31, 2017.
NOTE 7 INCOME TAXES
The Company is registered in the State of Nevada and has
operations in primarily two tax jurisdictions -The United States and Hong Kong.
For the operations in the U.S., the Company has incurred net accumulated
operating losses for income tax purposes. The Company believes that it is more
likely than not that these net accumulated operating losses will not be utilized
in the future. Therefore, the Company has provided full valuation allowance for
the deferred tax assets arising from the losses in the U.S. as of December 31,
2017 and 2016. Accordingly, the Company has no net deferred tax assets on the
U.S. operations.
United States of America
For the year ended December 31, 2017, the Company had net
operating loss carry-forwards of approximately $1,378,941 that may be available
to reduce future years taxable income through 2035, Future tax benefits which
may arise as a result of these losses have not been recognized in these
financial statements, as their realization is determined not likely to occur and
accordingly, the Company has recorded a valuation allowance for the deferred tax
asset relating to these tax loss carry-forwards.
The provision for Federal income tax consists of the following
years ended December 31:
|
|
2017
|
|
|
2016
|
|
Federal income tax
benefit attributable to:
|
|
|
|
|
|
|
Current Operations
|
$
|
97,017
|
|
$
|
146,326
|
|
Less: Valuation allowance
|
|
(97,017
|
)
|
|
( 146,326
|
)
|
Net provision for Federal income taxes
|
$
|
-
|
|
$
|
-
|
|
Deferred taxes:
The tax effect of temporary differences that give rise to the
Companys deferred tax asset as of December 31, 2017 and 2016 are as
follows:
14
U.S:
|
|
2017
|
|
|
2016
|
|
Deferred tax asset
non-current:
|
|
|
|
|
|
|
Net operating loss carry forward
|
$
|
1,378,941
|
|
$
|
1,281,924
|
|
Valuation allowance
|
|
(1,378,941
|
)
|
|
(1,281,924
|
)
|
Net deferred tax asset
|
$
|
-
|
|
$
|
-
|
|
The following is a reconciliation of the statutory tax rate to
the effective tax rate for the years ended December 31, 2017 and 2016:
|
|
2017
|
|
|
2016
|
|
U.S. Federal tax at
statutory rate
|
|
34%
|
|
|
34%
|
|
Valuation allowance
|
|
(34%)
|
|
|
(34%)
|
|
Foreign income tax- HK
|
|
16.5%
|
|
|
16.5%
|
|
Other (a)
|
|
(16.5%)
|
|
|
(16.5%)
|
|
Effective tax rate
|
|
0%
|
|
|
0%
|
|
Other represents expenses incurred by the Company that are not
deductible for HK income taxes and changes in valuation allowance for HK
entities for the years ended December 31, 2017 and 2016.
NOTE 8- COMMON STOCK
On June 21, 2011, the Company issued 55,500,000 shares of its
common stock for $0.015 per share to individuals for aggregate gross proceeds of
$832,500.
On June 21, 2011, the Company converted its outstanding related
party notes payable totaling $523,908 into 34,927,218 shares of Common Stock.
The deemed price of the shares issued was $0.015.
On June 21, 2011, the Company issued an aggregate of 266,667
shares of common stock, at a deemed price of $0.015 per share, to pay $4,000 for
services.
On May 17, 2012, the Company issued an aggregate of 39,854,567
shares of common stock at a price of $0.03 per share, pursuant to the closing of
a private placement, for aggregate gross proceeds of approximately $1,200,000.
On June 25, 2012, the Company amended its articles of
incorporation to increase the authorized number of shares of common stock from
300,000,000 to 700,000,000 shares of common stock, par value of $0.001 per
share.
On July 26, 2012, the Company issued 150,000,000 shares of
common stock as a part of consideration for acquisition of Vegfab Agricultural
Technology Co., Ltd. (Note 12).
In July, 2012, the Company issued 18,333,333 shares of common
stock to the Companys president, pursuant to the acquisition of Vegfab
Agricultural Technology Co., Ltd. The Company agreed to pay its president share
compensation of 10% of the value of the acquisition that he secured for the
company.
On January 4, 2013, the Company entered into a Share Purchase
and Sale Agreement with Mr. Pan Yen Chu pursuant to which the Company sold to
Mr. Pan 100% of all issued and outstanding securities of its wholly owned
subsidiary Taiwan Halee International Corporation (HTT). In consideration of
the sale of HTT, Mr. Pan has transferred to the Company 45,000,000 previously
issued common voting shares of TransAKT with a deemed value of $0.04 per share or $1.8 million in the aggregate. The
transfer of common shares was completed on January 7, 2013. In connection with
the sale HTT, the 45,000,000 common shares of the Company received as
consideration will be returned to treasury. The 45,000,000 shares constitute
approximately 11.5% of the Companys currently issued and outstanding common
stock.
15
On September 16, 2013, the Company issued 140,678,401 shares of
common stock to fifty-seven individuals for aggregate proceeds of $9,300,785 at
deemed prices as follows:
|
1.
|
30,986 shares at US$0.03 per share;
|
|
|
|
|
2.
|
4,017,557 shares at US$0.04 per share;
|
|
|
|
|
3.
|
29,768,176 shares at US$0.045 per share;
|
|
|
|
|
4.
|
21,961,580 shares at US$0.05 per share;
|
|
|
|
|
5.
|
4,525,102 shares at US$0.06 per share; and
|
|
|
|
|
6.
|
80,375,000 shares at US$0.08 per
share.
|
The Company paid $500,000 of commission to an individual for
the above private placements.
On November 26, 2013, the Company issued 69,242,000 shares of
common stock to nine individuals for aggregate proceeds of $5,389,360 at deemed
prices as follows:
|
1.
|
5,000,000 shares at US$0.05 per share;
|
|
|
|
|
2.
|
64,242,000 shares at US$0.08 per
share;
|
On June 23, 2016, the company made a stock reverse split of 20
to 1. The issued and outstanding common stock was consolidated from 613,447,306
shares to 30,672,404 shares with fractional share round up to 1 share.
On October 4, 2016, the company cancelled the treasury stock of
common shares 2,232,500.
On February 28, 2017, Mr. Ho Kangwing (the holder of
convertible promissory note) elected to convert the entire outstanding amount of
the Note into 105,066,666 common shares of the Company including the accumulated
interest. Therefore, the issued and outstanding common shares of the Company
were increased to 133,506,570 shares at that date.
NOTE 9 SHARE-BASED COMPENSATION
On April 19, 2013, the Company granted to Mr. Christian
Nielsen, accounting manager stock options to purchase 1,000,000 of the Companys
common stock for services performed for the Company, at an exercise price of
$0.03 per share. The options have a five-year contractual term and are vested at
the date of grant.
In accordance with the guidance provided in ASC Topic 718,
Stock Compensation, the compensation costs associated with these options are
recognized, based on the grant-date fair values of these options, over the
requisite service period, or vesting period. Accordingly, the Company recognized
a compensation expense of $56,643 for the period ended December 31, 2013.
The Company estimated the fair value of these options using the
Black-Scholes-Merton option pricing model based on the following
weighted-average assumptions:
Date of grant
|
|
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)
|
|
0.3
|
|
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
|
|
16
The fair value of the Company's
common stock was obtained from the closing price on the OTC Bulletin (A) Board
as of the dates of grant.
Fair value hierarchy of the above assumptions can be
categorized as follows:
(1)
|
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:
|
|
|
|
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 December 31, 2017 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,
2017
|
|
-
|
|
$
|
-
|
|
|
|
|
Granted- Before reverse split
|
|
1,000,000
|
|
|
0.03
|
|
|
|
|
Granted- After
reverse split
|
|
50,000
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
-
|
|
|
|
|
|
-
|
|
Forfeited
|
|
-
|
|
|
-
|
|
|
|
|
Outstanding as of December
31, 2017
|
|
50,000
|
|
|
0.6
|
|
|
0.3
|
|
Exercisable as of December 31, 2017
|
|
50,000
|
|
|
0.6
|
|
|
0.3
|
|
Vested and expected to vest
|
|
50,000
|
|
|
0.6
|
|
|
0.3
|
|
17
As of December 31, 2017, the aggregate intrinsic value of
options outstanding was $0.
NOTE 10 EARNINGS PER SHARE
The Company calculates earnings per share in accordance with
ASC 260, Earnings Per Share, which requires a dual presentation of basic and
diluted earnings per share. Basic earnings per share are computed using the
weighted average number of shares outstanding during the fiscal year. The
following table sets forth the computation of basic and diluted net income per
common share:
The following table sets forth the computation of basic and
diluted net income per common share:
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
|
$
|
(220,940
|
)
|
$
|
(299,500
|
)
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares Basic EPS
|
|
116,811,045
|
|
|
22,670,938
|
|
|
|
|
|
|
|
|
Weighted average shares Diluted EPS
|
|
116,811,045
|
|
|
22,670,938
|
|
|
|
|
|
|
|
|
Net income (loss) per share
Basic and Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS - basic and diluted
|
$
|
(0.002
|
)
|
$
|
(0.01
|
)
|
NOTE 11 SUBSEQUENT EVENTS
The Company evaluated all events or transactions that occurred
after December 31, 2017 up through the date the Company issued these financial
statements.
18