NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: NATURE OF OPERATIONS
NowNews Digital Media Technology Co., Ltd.
(Formerly Forever Zen Ltd.) (“NowNews” or “the Company”) was incorporated in Nevada on March 30, 2010.
On November 11, 2013, Pioneer Media Investments Co., Ltd. purchased 1,500,000 shares of the Company’s common stock for $135,000
in cash from two of the Company’s shareholders. Those 1,500,000 shares of common stock represented 62% of the
Company’s issued and outstanding common stock immediately following the sale. As a result of the transaction,
a change in control of the Company occurred and in connection therewith. Mr. Alan Chen was elected as the Company’s president
and sole director. Pioneer Media Investments Co., Ltd. is beneficially owned and controlled by Alan Chen.
Worldwide Media Investments Corp. (“Worldwide”)
was incorporated in Anguilla on June 4, 2013 under the Anguilla International Business Companies Act, 2000. Worldwide is a holding
company and has not carried out substantive business operations of its own. Mr. Alan Chen is the sole director and controlling
beneficiary shareholder of Worldwide.
NOWnews Network Co., Ltd, (“NOWnews
Network”) was incorporated in Taipei City, Taiwan on June 8, 2006. NOWnews Network is a media company with operations
in Taiwan. NOWnews Network operates a news website and generates revenue from fees paid by advertisers in connection with the display
of graphical and non-graphical advertisements. In addition, NOWnews Network provides editing services of news articles, pictures,
and videos, and sells the broadcasting rights of its news articles, pictures, and videos. Mr. Alan Chen is a director and former
Chairman of NOWnews Network.
In August 2013, NOWnews Network established
NOWnews International Marketing Co., Ltd (“NOWnews International”) as a 55% owned subsidiary. Mr. Shu-sen Chang, the
former Chairman and current director of NOWnews Network, and one other shareholder, own 10% and 35% of NOWnews International, respectively.
The primary business of NOWnews International is to sell advertisement spaces in its own newspapers.
On December 27, 2013, the Board of Directors
of NOWnews Network approved the termination of operations of NOWnews International. The results of NOWnews International have been
presented as discontinued operations in the consolidated statements of income and comprehensive income. NOWnews Network has reclassified
the assets and liabilities of the discontinued entity in the accompanied consolidated financial statements.
On June 4, 2013, Sky Media Investments,
Co., Ltd. (“Sky Media”), a company incorporated in Anguilla and a wholly-owned subsidiary of the Company, acquired
7,999,945 common shares (or 66.3%) of NOWnews Network from Mr. Alan Chen for $1,522,388 (or NT$45 million). Mr. Alan Chen owned
10,169,945 shares (or 84.3%) of common stock of NOWnews Network prior to the above transaction (the “Restructuring Transaction”).
On November 14, 2014, the Company entered
into and closed a share exchange agreement (the “Share Exchange Agreement”) with Worldwide, the shareholders of Worldwide,
and NOWnews Network. Pursuant to the Share Exchange Agreement, the Company issued an aggregate of 20,000,000 shares of common stock to
the shareholders of Worldwide in exchange for all the issued and outstanding capital stock of Worldwide. Immediately following
the closing of the Share Exchange, the Company had a total of 22,412,000 issued and outstanding shares of common stock, of which
6,262,400 shares were beneficially held by Alan Chen. As a result of the Share Exchange, Worldwide and Sky Media become the Company’s
wholly owned subsidiaries and NOWnews Network became the Company’s majority owned subsidiary in which Company indirectly
held 66% of the equity interest. Upon consummation of the Share Exchange, Company’s assumed the business of NOWnews Network
and ceased to be a shell company.
On August 5, 2015, NOWnews Network, Sky
Media, Mr. Alan Chen and Ms. Tu entered a Stock Purchase Agreement (the “Stock Purchase Agreement") with Gamania Digital
Entertainment Co. Ltd. (“Gamania Digital”) and Ta Ya Venture Capital Co. Ltd. (“Ta Ya”). Pursuant to the
Stock Purchase Agreement and addendums, NOWnews Network issued 1,650,000, 350,000, 1,000,000, 2,200,000, 1,114,100, and 600,000
shares to non-controlling shareholders on August 14, 2015, September 8, 2015, November 30, 2016, March 16, 2017, October 2, 2017,
and November 17, 2017, respectively (See Note 10). On February 22, 2017, Sky Media entered into a stock purchase agreement with
Jin Hao Kang Marketing Co., Ltd (“Jin Hao Kang”), pursuant to which Sky Media purchased 1,065,000 shares of NOWnews
Network held by Jin Hao Kang for a purchase price of NT $937,200 (approximately $30,930). The transaction was completed on March
31, 2017. On November 17, 2017, Sky Media also made capital contribution to NOWnews Network in cash of NT$10,000,000, equivalent
to $332,779. On March 30, 2018, NOWnews Network received NT$13,000,000, equivalent to $446,735 subscriptions in advance from Gamania
Digital. As of the date of this report, no capital has been issued. NOWnews Network remains the Company’s majority owned
subsidiary in which Company indirectly holds 50.36% of the equity interest (see Note 9) at March 31, 2018.
On August 19, 2015, the Company established
Dawnrain Media Co., Ltd. (“Dawnrain”) in the Republic of Seychelles (“Seychelles”) as a wholly owned subsidiary.
On August 27, 2015, Dawnrain incorporated New Taoyard Cultural Transmission Co., Ltd. (“New Taoyard”) in Seychelles.
On November 15, 2016, the Company established Asia Well Ltd.(“Asia Well”) in Seychelles as a wholly owned subsidiary.
Dawnrain, New Taoyard, and Asia Well are holding companies and have not carried out substantive business operations of their own.
On April 13, 2016, the Company entered
in a share exchange agreement (“NTY Ageement”) with the Company’s wholly owned subsidiary, Dawnrain Media Co.,
Ltd., a Seychelles limited liability company (“Dawnrain”), New Taoyard Advertising Co., Ltd., a Seychelles limited
liability company and Dawnrain’s wholly owned subsidiary (“NTY”), Beijing New Tong Ying Culture Media Co., Ltd.,
a limited liability formed in the People’s Republic of China (“BJNTY”), and BJNTY’s shareholders (the “BJNTY
Shareholders”). Pursuant to the NTY Agreement, the BJNTY Shareholders will acquire from the Company an aggregate of 1,600,000
shares of the Company’s common stock, par value $0.001 per share (Common Stock), in exchange of 80% of the capital interest
of BJNTY. In the event the Company fails to cause the Company’s common stock to be listed on NYSE by February 28, 2017, the
BJNTY Shareholders shall have the option to unwind the transaction contemplated in the NTY Agreement. As the date of this report,
the NTY Agreement has not been fulfilled by both parties and the BJNTY Shareholders has not informed the Company of their intention
to unwind the transaction contemplated in the NTY Agreement.
On October 4, 2016, the Company entered
into a share exchange agreement (the “MySongAgreement”) with MySong Industrial Co., Ltd. (“MySong”), a
limited liability company formed under the laws of Taiwan and both shareholders of MySong to acquire all the issued and outstanding
5,000 shares of common stock of MySong in exchange for 200,000 restricted shares of common stock (“Share Exchange”).
The closing of the transactions contemplated under the MySong Share Exchange is subject to the fulfillment of certain conditions,
or on such other date and time as all parties may mutually determine (the “Closing Date”). As the date of this report,
the Agreement has not been fulfilled by both parties.
On November 19, 2016, the Company entered
into a share exchange agreement (the “Lao Agreement”) with Lao Development Holding Limited (“Lao Development”),
a Seychelles company and each of the shareholders of Lao Development (the “Lao Shareholders”) to acquire all the issued
and outstanding shares of common stock of Lao Development in exchange for 2,137,500 restricted shares of Common Stock (“Lao
Share Exchange”). The closing of the transactions contemplated under the Lao Agreement is subject to the fulfillment of certain
conditions. The Lao Share Exchange is expected to close on November 19, 2017 or such other date and time as all parties may mutually
determine. As the date of this report, the Lao Agreement has not been fulfilled by both parties.
On August 1, 2017, New Taoyard entered
into a share purchase agreement (the “Lovelife Agreement) with Shanghai Lovelife Trading Co., Ltd. (the “Lovelife”),
a limited liability formed in the People’s Republic of China, and its sole shareholder and director. Pursuant to the Lovelife
Agreement, Lovelife shall transfer 100% of its equity interest to New Taoyard. As of the date of this report, Lovelife has a registered
capital of USD 160,000 but no capital has actually been paid into the Lovelife.
The Company’s fiscal year ends on
December 31st.
NOTE 2: GOING CONCERN
The Company’s
consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable
to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The
Company has incurred significant losses and has not demonstrated the ability to generate sufficient cash flows from operations
to satisfy its liabilities and sustain operations. The Company had accumulated deficits of $12,322,143 and $11,869,788, and stockholders’
deficits of $2,567,931 and $2,115,848 as of March 31, 2018 and December 31, 2017, respectively. The net losses attributable to
common stockholders of $452,355 and $272,141 for the three months ended March 31, 2018 and 2017, respectively. In addition, current
liabilities exceed current assets by $2,100,875 and $1,837,035 as of March 31, 2018 and December 31, 2017, respectively, representing
significant working capital deficits. These matters raise substantial doubt about the Company’s ability to continue as a
going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate
capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it
could be forced to cease operations. The accompanying consolidated financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
Management’s Plan to Continue
as a Going Concern
In order to continue
as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain
such resources for the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of the Company’s
services, (3) short-term and long-term borrowings from banks, and (4) short-term borrowings from stockholders or other related
party(ies) when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any
of its plans.
The ability of
the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the
preceding paragraph and eventually to secure other sources of financing and attain profitable operations.
NOTE 3: BASIS OF PRESENTATION AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation:
The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Since
the Company, Worldwide, and NOWnews Network were entities under common control prior to the restructuring transaction. All the
assets and liabilities of Worldwide and NOWnews Network were transferred to the Company at their respective carrying amounts on
the date of transaction. The Company and Worldwide have recast prior period financial statements to reflect the conveyance of NOWnews
Network to Sky Media as if the restructuring transaction had occurred as of January 1, 2014. All significant intercompany transactions
and account balances have been eliminated. The nature of and effects on earnings per share (EPS) of nonrecurring intra-entity transactions
involving long-term assets and liabilities is not required to be eliminated and EPS amounts have been recast to include the earnings
(or losses) of the transferred net assets.
The functional currency of NOWnews Network
and NOWnews International is the New Taiwan dollars, however the accompanying consolidated financial statements have been translated
and presented in United States Dollars ($). In the accompanying consolidated financial statements and notes, “$”,
“US$” and “U.S. dollars” mean United States dollars, and “NT$” and “NT dollars”
mean New Taiwan dollars.
Use of estimates and assumptions:
The preparation of the consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management
makes these estimates using the best information available at the time the estimates are made. However, actual results could differ
materially from those results. The most significant estimates reflected in the consolidated financial statements include depreciation,
useful lives of property and equipment, deferred income taxes, useful life of intangible assets and contingencies. Estimates and
assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the
period they are determined to be necessary.
Cash and cash equivalents:
The Company considers all cash on hand
and in banks, certificates of deposit and other highly-liquid investments with original maturities of three months or less, when
purchased, to be cash and cash equivalents. As of March 31, 2018, and December 31, 2017, the Company has uninsured deposits in
banks of $454,951 and $41,540, respectively.
Accounts receivable:
The Company maintains reserves for potential
credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts,
customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate
the adequacy of these reserves. As of March 31, 2018, and December 31, 2017, the Company assessed the allowance for doubtful accounts
of $10,537 and $10,345, respectively.
Property and equipment:
Property and equipment are recorded at
cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost
of improvements that extends the life of property and equipment are capitalized. These capitalized costs may include structural
improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.
Depreciation for financial reporting purposes
is provided using the straight-line method over the estimated useful lives of the assets or lease term as follows:
Electronic Equipment
|
3 to 5 years
|
Computer Equipment
|
5 years
|
Office Equipment and Furniture
|
5 years
|
Leasehold Improvement
|
Lesser of term of the lease or the estimated useful lives of the assets
|
Long-lived assets:
The Company applies the provisions of FASB
ASC Topic 360 (ASC 360), “Property, Plant, and Equipment” which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held
and used in accordance with ASC 360, at least on an annual basis. ASC 360 requires the impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by
those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which
the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined
in a similar manner, except that fair market values are reduced for the cost of disposal.
Intangible assets:
Intangible assets consist of software,
trademark, and copyrights (see Note 6). At least annually, the Company evaluates intangible assets for impairment whenever events
or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized
when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less
than its carrying amount. Estimating future cash flows related to an intangible asset involves significant estimates and assumptions.
If the Company’s assumptions are not correct, there could be an impairment loss or, in the case of a change in the estimated
useful life of the asset, a change in amortization expense. There was no impairment of intangible assets as of and for the three
months ended March 31, 2018 and the year ended December 31, 2017, respectively.
Leases:
Lease agreements are evaluated to determine
if they are capital leases meeting any of the following criteria at inception: (a) Transfer of ownership; (b) Bargain purchase
option; (c) The lease term is equal to 75 percent or more of the estimated economic life of the leased property; (d) The present
value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory
costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent
of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit
retained by the lessor and expected to be realized by the lessor.
If at its inception a lease meets any of
the four lease criteria above, the lease is classified by the lessee as a capital lease; and if none of the four criteria are met,
the lease is classified by the lessee as an operating lease.
Fair Value Measurements:
FASB ASC 820, “Fair Value Measurements”
defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a
framework for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its
financial instruments to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable
inputs to determine the exit price. It establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure
fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing
the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available.
Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based
on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s
own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best
information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability
of the inputs as follows:
|
·
|
Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities
that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree
of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available.
|
|
·
|
Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly
observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are
not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term
of the assets or liabilities.
|
|
·
|
Level 3 – Valuations based on inputs that are unobservable and not corroborated by market
data. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies,
or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability.
|
The carrying values of certain assets and liabilities of the
Company, such as cash and cash equivalents, accounts receivable, due from related parties, other current assets, accounts payable,
accrued expenses, due to shareholders, and other current liabilities approximate fair value due to their relatively short maturities.
Revenue recognition:
Product and service revenue is recognized when the following
fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or the service has been
performed, (iii) the Company’s price to the customer is fixed or determinable and (iv) collection of the resulting accounts
receivable is reasonably assured. Payments received before satisfaction of all of the relevant criteria for revenue
recognition are recorded as unearned revenue. The Company recognizes revenue for product sales upon transfer of title to the customer. The
Company recognizes revenue for services upon performance of the service. Customer purchase orders and/or contracts will
generally be used to determine the existence of an arrangement. Shipping documents and the completion of any customer
acceptance requirements, when applicable, will be used to verify product delivery or that services have been rendered. The
Company will assess whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether
the sales price is subject to refund or adjustment. The Company will record reductions to revenue for estimated product returns
and pricing adjustments in the same period that the related revenue is recorded. These estimates will be based on industry-based
historical data, historical sales returns, if any, analysis of credit memo data, and other factors known at the time.
Post-retirement and post-employment
benefits
:
NOWnews Network adopted the government mandated defined contribution
plan pursuant to the Labor Pension Act (the “Act”) in Taiwan. Such labor regulations require that the rate of contribution
made by an employer to the Labor Pension Fund per month shall not be less than 6% of the worker's monthly salaries. Pursuant to
the Act, NOWnews Network makes monthly contribution equal to 6% of employees’ salaries to the employees’ pension fund.
NOWnews Network has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits,
which were expensed as incurred, were $27,235 and $23,881 for the three months ended March 31, 2018 and 2017, respectively. Other
than the above, the Company does not provide any other post-retirement or post-employment benefits.
Stock-based Compensation:
The Company measures expense associated
with all employee stock-based compensation awards using a fair value method and recognizes such expense in the consolidated financial
statements on a straight-line basis over the requisite service period in accordance with ASC Topic 718 “Compensation-Stock
Compensation”. Total employee stock-based compensation expenses were $0 for the three months ended March 31, 2018 and 2017,
respectively.
The Company accounted for stock-based compensation to non-employees
in accordance with ASC Topic 505-50 “Equity-Based Payments to Non-Employees” which requires that the cost of services
received from non-employees is measured at fair value at the earlier of the performance commitment date or the date service is
completed and recognized over the period the service is provided. Total non-employee stock-based compensation expenses were $0
for the three months ended March 31, 2018 and 2017, respectively.
Foreign currency translation:
The Company uses the United States dollar
("U.S. dollars") for financial reporting purposes. The Company maintains the books and records in its functional currency,
being the primary currency of the economic environment in which its operations are conducted. For reporting purpose, the Company
translates the assets and liabilities to U.S. dollars using the applicable exchange rates prevailing at the balance sheet dates,
and the statements of income are translated at average exchange rates during the reporting periods. Gain or loss on foreign currency
transactions are reflected on the income statement. Gain or loss on financial statement translation from foreign currency are recorded
as a separate component in the equity section of the balance sheet and is included as part of accumulated other
comprehensive income. The functional currency of the Company and its subsidiaries in Taiwan is New Taiwan Dollars.
Statement of cash flows:
In accordance with FASB ASC Topic 230,
“Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies,
and translated to the reporting currency using an average foreign exchange rate for the reporting period. As a result, amounts
related to changes in assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in
the corresponding balances on the balance sheets.
Income taxes:
Income taxes are accounted for under the
asset and liability method. 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
and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will
not be realized. The deferred income tax assets were $0 as of March 31, 2018 and December 31, 2017.
The Company applied the provisions of ASC
740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated
with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until
the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit
period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to
the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations
for the given period. At March 31, 2018 and December 31, 2017, management considered that the Company had no uncertain tax positions,
and will continue to evaluate for uncertain positions in the future.
The Company is subject to the tax authority in Taiwan for years
since incorporated.
Earnings (Losses) per share (EPS):
Earnings (losses) per share is calculated
in accordance with ASC 260. Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted
earnings (losses) per share is based on the assumption that all dilutive convertible shares and stock instruments were converted
or exercised. Options and warrants are assumed to be exercised at the beginning of the period if the average stock price for the
period is greater than the exercise price of the warrants and options. For the three months ended March 31, 2018 and 2017, no options
or warrants were issued or outstanding.
Discontinued operations
Results of the Company’s discontinued
entity have been presented in discontinued operations in the financial statements. See Note 1 and Note 12 for additional information.
Reclassifications:
Certain classifications have been made
to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously
reported net loss or accumulated deficit.
Recent accounting pronouncements:
In February 2016, the FASB issued ASU No.
2016-02, “Leases.” The core principle of the ASU is that a lessee should recognize the assets and liabilities that
arise from its leases other than those that meet the definition of a short-term lease. The ASU requires extensive qualitative and
quantitative disclosures, including with respect to significant judgments made by management. Subsequently, the FASB issued ASU
No. 2017-13, in September 2017 and ASU No. 2018-01, in January 2018, which amends and clarifies ASU 2016-02. The ASU will be effective
for the Company beginning January 1, 2019, including interim periods in the fiscal year 2019. Early adoption is permitted. The
Company is in the process of determining the method of adoption and assessing the impact of this ASU on its consolidated results
of operations, cash flows, financial position and disclosures.
In March 2016, the FASB issued ASU 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) .
In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations
and Licensing . In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements
and Practical Expedients and ASU 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of
SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF
Meeting . In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts
with Customers. In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers
(Topic 606), Leases (Topic 840), and Leases (Topic 842). These amendments provide additional clarification and implementation guidance
on the previously issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in ASU 2016-08 clarify
how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the
control principle to certain types of arrangements. ASU 2016-10 clarifies the following two aspects of ASU 2014-09: identifying
performance obligations and licensing implementation guidance. ASU 2016-11 rescinds several SEC Staff Announcements that are codified
in Topic 605, including, among other items, guidance relating to accounting for consideration given by a vendor to a customer,
as well as accounting for shipping and handling fees and freight services. ASU 2016-12 provides clarification to Topic 606 on how
to assess collectability, present sales tax, treat noncash consideration, and account for completed and modified contracts at the
time of transition. ASU 2016-12 clarifies that an entity retrospectively applying the guidance in Topic 606 is not required to
disclose the effect of the accounting change in the period of adoption. Additionally, ASU 2016-20 clarifies certain narrow aspects
within Topic 606 including its scope, contract cost accounting, and disclosures. The new guidance requires enhanced disclosures,
including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement
and recognition. The effective date and transition requirements for these amendments are the same as the effective date and transition
requirements of ASU 2014-09, which is effective for fiscal years, and for interim periods within those years, beginning after December
15, 2017. The Company is currently evaluating the overall impact that ASU 2014-09 and its related amendments will have on the Company’s
financial statements.
On December 22, 2017, the SEC issued Staff
Accounting Bulletin (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Act. SAB 118 provides
a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting
under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which
the accounting under ASC 740 is complete. In March 2018, the FASB issued ASU 2018-05, Amendments to SEC Paragraphs Pursuant to
SEC Staff Accounting Bulletin No. 118 (SEC Update), Income Taxes (Topic 740). ASU 2018-05 provides guidance regarding the recording
of tax impacts where uncertainty exists, in the period of adoption of the 2017 U.S. Tax Cuts and Jobs Act (the “2017 Tax
Act”).To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it
is able to determine a reasonable estimate, it must record a provisional estimate to be included in the financial statements. If
a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740
on the basis of the provision of the tax laws that were in effect immediately before the enactment of the Tax Act. While the Company
is able to make reasonable estimates of the impact of the reduction in corporate rate and the deemed repatriation transition tax,
the final impact of the Tax Act may differ from these estimates, due to, among other things, changes in our interpretations and
assumptions, additional guidance that may be issued by the I.R.S., and actions we may take. The Company is continuing to gather
additional information to determine the final impact.
In February 2018, the FASB issued Accounting
Standards Update No. 2018-02 (ASU 2018-02), Income Statement - Reporting Comprehensive Income (Topic 220). The guidance in ASU
2018-02 allows an entity to elect to reclassify the stranded tax effects related to the Tax Cuts and Jobs Act (the Tax Act) of
2017 from accumulated other comprehensive income into retained earnings. ASU 2018-02 is effective for fiscal years beginning after
December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its
Consolidated Financial Statements.
NOTE 4: ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
|
|
March 31,
2018
|
|
|
December 31,
2017
|
|
Accounts receivable
|
|
$
|
592,887
|
|
|
$
|
697,707
|
|
Less: Allowance for doubtful accounts
|
|
|
(10,537
|
)
|
|
|
(10,345
|
)
|
Accounts receivable, net
|
|
$
|
582,350
|
|
|
$
|
687,362
|
|
NOTE 5: PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Capital Lease
|
|
$
|
181,643
|
|
|
$
|
178,334
|
|
Leasehold improvement
|
|
|
153,624
|
|
|
|
149,508
|
|
Computer equipment
|
|
|
57,413
|
|
|
|
56,367
|
|
Office equipment and furniture
|
|
|
41,509
|
|
|
|
23,883
|
|
Electronic equipment
|
|
|
17,941
|
|
|
|
13,855
|
|
|
|
|
452,130
|
|
|
|
421,947
|
|
Less: Accumulated depreciation
|
|
|
(169,855
|
)
|
|
|
(145,888
|
)
|
|
|
$
|
282,275
|
|
|
$
|
276,059
|
|
As of March 31, 2018, assets under capital
lease of $181,643 represented server equipment (see Note 11). Depreciation expense for the three months ended March 31, 2018
and 2017 was $21,128 and $15,327, respectively.
NOTE 6: INTANGIBLE ASSETS, NET
Intangible assets consist of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Copyrights
|
|
$
|
971,990
|
|
|
$
|
954,280
|
|
Software
|
|
|
38,267
|
|
|
|
37,570
|
|
Trademark
|
|
|
7,216
|
|
|
|
7,085
|
|
Patent
|
|
|
173
|
|
|
|
170
|
|
Others
|
|
|
16,364
|
|
|
|
16,066
|
|
|
|
|
1,034,010
|
|
|
|
1,015,171
|
|
Accumulated amortization
|
|
|
(1,013,828
|
)
|
|
|
(993,371
|
)
|
Intangible assets, net
|
|
$
|
20,182
|
|
|
$
|
21,800
|
|
Intangible assets amounted to $20,182 and
$21,800 as of March 31, 2018 and December 31, 2017, respectively, mainly consisted of copyrights and software acquired, and trademark.
Copyrights
Copyrights mainly include the copyrights
of multiple films and pictures acquired from June 2007 to October 2009, and during the year ended December 31, 2013, with the total
purchase amount of NT$28,284,903 (approximately $971,990). Copyrights are amortized based on their determined useful life, and
tested annually for impairment. The amortization period ranges from 5 to 10 years. Amortization expense related to copyrights was
$0 for the three months ended March 31, 2018 and 2017, respectively.
For the three months ended March 31, 2018
and 2017, total amortization expense amounted to $2,010 and $656, respectively.
Estimated amortization for the next five years and thereafter
is as follows:
As of March 31,
|
|
Amount
|
|
2019
|
|
$
|
7,804
|
|
2020
|
|
|
7,529
|
|
2021
|
|
|
4,849
|
|
|
|
$
|
20,182
|
|
NOTE 7: ACCRUED EXPENSES
Accrued expenses consist of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Accrued bonus
|
|
$
|
348,171
|
|
|
$
|
427,486
|
|
Accrued payroll
|
|
|
202,489
|
|
|
|
179,094
|
|
Accrued professional fees
|
|
|
170,570
|
|
|
|
164,309
|
|
Accrued employee benefits and pension expenses
|
|
|
75,416
|
|
|
|
108,884
|
|
Accrued sales taxes
|
|
|
5,643
|
|
|
|
12,677
|
|
Other
|
|
|
78,401
|
|
|
|
65,506
|
|
Total
|
|
$
|
880,690
|
|
|
$
|
957,956
|
|
NOTE 8: INCOME TAX
United States
The Company is incorporated in the United
States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company
has no taxable income for the period. The applicable income tax rate for the Company was 35% for the three months ended March 31,
2018 and 2017. No tax benefit has been realized since a 100 % valuation allowance has offset deferred tax asset resulting from
the net operating losses.
On December 22, 2017 H.R. 1, originally
known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant changes to the U.S. Internal
Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective
January 1, 2018. The 21% Federal Tax Rate will apply to earnings reported for the full 2018 fiscal year. In addition, the Company
must re-measure its net deferred tax assets and liabilities using the Federal Tax Rate that will apply when these amounts are
expected to reverse. As of March 31, 2018, the Company can determine a reasonable estimate for certain effects of tax reform and
is recording that estimate as a provisional amount. The provisional remeasurement of the deferred tax assets and allowance valuation
of deferred tax assets at March 31, 2018 resulted in a net effect of $0 discrete tax expenses (benefit) which lowered the effective
tax rate by 17% for the three months ended March 31, 2018. The provisional remeasurement amount is anticipated to change as data
becomes available allowing more accurate scheduling of the deferred tax assets and liabilities primarily related to net operating
loss carryover.
Anguilla
Worldwide Media Investments Corp. and Sky
Media are incorporated in Anguilla, which does not tax income.
Seychelles
Dawnrain Media Co., Ltd., New Taoyard Cultural
Transmission Co., Ltd., and Asia Well Ltd. are incorporated in Seychelles, which does not tax income.
Taiwan
NOWnews Network and NOWnews International
are incorporated in Taiwan. According to the amendments to the “Income Tax Act”enacted by the office of the President
of the R.O.C. on February 7, 2018, an increase in the statutory income tax rate from 17% to 20% and decrease in the undistributed
earning tax from 10% to 5% are effective from January 1, 2018. This increase in the statutory income tax rate does not affect the
amounts of the current or deferred taxes recognized as of March 31, 2018 and for the three months then ended. No income tax liabilities
existed as of March 31, 2018 and December 31, 2017 due to the Company's continuing operating losses.
Provision for income tax expense (benefit)
consists of the following:
|
|
For the Three Months ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Current
|
|
|
|
|
|
|
|
|
USA
|
|
$
|
-
|
|
|
$
|
-
|
|
Taiwan
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
USA
|
|
|
|
|
|
|
|
|
Deferred tax assets for NOL carryforwards
|
|
|
(35,733
|
)
|
|
|
(26,409
|
)
|
Valuation allowance
|
|
|
35,733
|
|
|
|
26,409
|
|
Net changes in deferred income tax expense (benefit) under non-current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Taiwan
|
|
|
|
|
|
|
|
|
Noncurrent portion
|
|
|
|
|
|
|
|
|
NOL carryforwards
|
|
|
(204,256
|
)
|
|
|
(52,836
|
)
|
Valuation allowance
|
|
|
204,256
|
|
|
|
52,836
|
|
Net changes in deferred income tax expense (benefit) under non-current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total provision for income tax expense (benefit)
|
|
$
|
-
|
|
|
$
|
-
|
|
The following is a reconciliation of the statutory tax rate
to the effective tax rate:
|
|
For the Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
U.S. statutory income tax rate
|
|
|
21.0
|
%
|
|
|
35.0
|
%
|
Foreign statutory income tax rate difference
|
|
|
(1.0
|
)%
|
|
|
(18.0
|
)%
|
Provisional remeasurement of deferred taxes (U.S.)
|
|
|
(17.0
|
)%
|
|
|
-
|
%
|
Changes in valuation allowance
|
|
|
(3.0
|
)%
|
|
|
(17.0
|
)%
|
Effective income tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Significant components of the Company’s deferred taxes
as of March 31, 2018 and December 31, 2017 were as follows:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
4,804,612
|
|
|
$
|
4,564,623
|
|
Less: Valuation allowance
|
|
|
(4,804,612
|
)
|
|
|
(4,564,623
|
)
|
Deferred tax assets, net
|
|
$
|
-
|
|
|
$
|
-
|
|
In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable
income and tax planning strategies in making this assessment. As of March 31, 2018, and December 31, 2017, the Company accrued
100% valuation allowance against its deferred tax assets based on the assessment of the probability of future realization.
NOTE 9: STOCKHOLDERS’ EQUITY
As of March 31, 2018, the Company was authorized
to issue a total of 50,000,000 shares of common stock, par value $0.001 per share.
On June 4, 2013, Worldwide issued 17,000,000
common shares to Mr. Alan Chen as founder’s shares for no consideration exchanged. As a result, a discount on capital of
$17,000,000 was recorded. On the same date, Mr. Chen conveyed 1,000,000 shares, 8,548,000 shares, 3,816,000 shares, and 3,636,000
shares to Legend Media Investments Co., Ltd., Pioneer Media Investments Co., Ltd., Intelligent Media Investments Co., Ltd., and
Core Winner Investment Limited, respectively (collectively, the “Recipients”). All of the recipients are entities under
Mr. Chen’s common control. During the year 2014, Mr. Chen transferred 2,847,725, 410,000, and 11,687,600 shares to Ms. Chiu-li
Tu, the Company’s employees, and other non-related parties, respectively. Mr. Chen and Ms. Tu are husband and wife. Prior
to November 14, 2014, Mr. Chen holds 2,054,675 shares of Worldwide.
On September 16, 2013, Worldwide entered
into a written Definitive Agreement with GIA Investments Corp. (“GIA”), (the “Definitive Agreement”). Pursuant
to the provisions of the Definitive Agreement, Worldwide would acquire NOWnews Network pursuant to a stock purchase agreement,
and Worldwide will fund the operations of NOWnews Network for a period of approximately 8 months. Additionally, Worldwide desires
to be acquired by an unidentified company (defined in the Definitive Agreement as “Company A”), pursuant to a stock
exchange agreement, and Company A will be a participant in the OTCQB. As specified in the Definitive Agreement, GIA intends to
acquire 15% of the issued and outstanding shares of Company A’s common stock for $3,000,000, and Worldwide intends that its
existing shareholders will acquire 84% of the issued and outstanding shares of Company A’s common stock.
Pursuant to the Definitive Agreement, during
September through December 2013, GIA funded an aggregate of $1,522,388 to Worldwide, which was recorded as “Subscriptions
received in advance” on Worldwide’s consolidated balance sheet as of December 31, 2013. On May 23, 2014, Worldwide
issued 3,000,000 common shares to GIA for the proceeds received.
During September through December 2013,
Sky Media, the wholly-owned subsidiary of Worldwide, acquired 7,999,945 common shares (or 66.3%) of NOWnews Network from Mr. Alan
Chen for $1,522,388 (or NT$45 million). Mr. Alan Chen owned 10,169,945 shares (or 84.3%) of common stock of NOWnews Network prior
to the above transaction. Since Worldwide and NOWnews Network were both entities under Mr. Chen’s common control prior to
the transaction, it was deemed a restructuring transaction (the “Restructuring Transaction”) and the $1,522,388 disbursed
from Sky Media to Mr. Chen was recorded as a return of capital.
Pursuant to the Share Exchange Agreement
entered on November 14, 2014 (see Note 1), the Company issued an aggregate of 20,000,000 shares of common stock to the shareholders
of Worldwide in exchange for all the issued and outstanding capital stock of Worldwide. Immediately following the closing of the
Share Exchange, the Company had a total of 22,412,000 issued and outstanding shares of common stock.
In February, 2015, Ms. Chiu-li Tu paid
off the bank loans obtained by NOWnews Network, amounted to approximately $809,343 as of December 31, 2014, on behalf of NOWnews
Network. Immediately after the repayment, Ms. Tu and NOWnews Network entered an agreement that such repayment will be a shareholder
contribution to NOWnews Network. This transaction was treated as a related party transaction. The Company has recorded additional
paid-in capital of approximately $817,104 as of December 31, 2015 for this shareholder contribution.
On July 31, 2015, NOWnews Network entered
an agreement with Alan Chen and Ms. Chiu-li Tu, pursuant to which, Alan Chen and Ms. Tu agreed to forgive to their debt due from
NOWnews Network in the amount of approximately $116,255 (or NT$3.7 million) and $367,808 (or NT$11.6 million), respectively, as
shareholder contribution to NOWnews Network. This transaction was treated as a related party transaction, and such shareholder
contribution has been recorded as additional paid-in capital.
On August 5, 2015, NOWnews Network, Sky Media, Mr. Alan Chen and Ms. Tu entered a Stock Purchase Agreement
(the “Stock Purchase Agreement”) with Gamania Digital Entertainment Co. Ltd. (“Gamania Digital”) and Ta
Ya Venture Capital Co. Ltd. (“Ta Ya”), in which there are two phases of stock transfers. In Phase I, NOWnews Network
is committed to sell to Gamania Digital and Ta Ya 1,250,000 and 400,000 shares of outstanding shares of NOWnews Network at NT$10
per share, respectively, through new issuance. The share transfer of Phase I shall be completed sixty (60) days upon signing the
agreement. In Phase II, Gamania Digital and Ta Ya are expected, but not obligated, to purchase the same amount of shares from NOWnews
Network, and Mr. Chen and Ms. Tu, as Phase I. On August 14, 2015, NOWnews Network has fulfilled its obligation of Phase I through
issuance of 1,250,000 and 400,000 shares at NT$10 per share to Gamania Digital and Ta Ya for approximately $388,803 (or NT$12.5
million) and $124,417 (or NT$4.0 million), respectively. On September 8, 2015, NOWnews Network issued additional 350,000 shares
at NT$10 per share to Gamania Digital for approximately $107,230 (or NT$3.5 million). On November 30, 2016, NOWnews Network issued
additional 1,000,000 shares at NT$10 per share to Gamania Digital for approximately $313,283 (or NT$10 million). On March 16, 2017,
NOWnews Network issued additional 2,200,000 shares at NT$10 per share to Gamania Digital for approximately $711,054 (or NT $22,000,000).
On March 31, 2017, Sky Media purchased 1,065,000 shares of NOWnews Network held by Jin Hao Kang Marketing Co., Ltd for a purchase
price of approximately US$30,930 (or NT$937,200). ). On October 2, 2017 and November 17, 2017, NOWnews Network issued additional
1,114,100 and 600,000 shares at NT$10 per share to Gamania Digital for approximately $366,722 (or NT$11,141,000) and $199,667 (or
NT$6,000,000), respectively. On November 17, 2017, Sky Media also made capital contribution to NOWnews Network in cash of NT$10,000,000,
equivalent to $332,779. On March 30, 2018, NOWnews Network received NT$13,000,000, equivalent to $446,735 subscriptions in advance
from Gamania Digital. As of the date of this report, no capital has been issued. NOWnews Network remains the Company’s majority
owned subsidiary in which Company indirectly holds 50.36% of the equity interest at March 31, 2018.
On October 4, 2016, the Company issued
660,000 shares of common stock to GIA Consultants Limited to fulfill the Financial Advisory Service Recognition Agreement (the
“Agreement”) signed on September 20, 2016.In resolution of the Company’s outstanding obligations pertaining to
the financial advisory services that have been rendered to the Company as of August 12, 2016, the Company and GIA Consultants Limited
(“GIA”) entered into a Financial Advisory Service Recognition Agreement (the “Agreement”) on September
20, 2016, pursuant to which the Company agrees to issue 660,000 shares of common stock, par value $0.001 per share, to GIA in recognition
of services that have been previously rendered to the Company as of August 12, 2016. The common stock price was $4.50 per share
as of closing on August 12, 2016, totaling a sum of $2,970,000.
Dawnrain and New Taoyard had 30,000,000
issued and outstanding shares with a par value of $1 per share. Asia Well had 2,250,000 issued and outstanding shares with a par
value of $1 per share. On May 16, 2017, the Company has completed the amendment of share registry to reduce the amount of the issued
and outstanding shares to 10 shares of Dawnrain, 10 shares of New Taoyard, and 100 shares of Asia Well. Accordingly, the capital
of $10, $10, and $100 has been paid to Dawnrain, New Taoyard, and Asia Well, respectively.
On June 22, 2017, the Company entered into
a subscription agreement (the “Agreement”) with Wei Su Technology Holdings Co., Ltd. (the “Wei Su”). Wei
Su was incorporated in September 2001 under the laws of Taiwan. Pursuant to the Agreement, Wei Su agreed to purchase 100,000 restricted
shares of common stock, par value $.001 of the Company (“Share Purchase”) for an aggregate price of $530,000 (the “Subscription
Price”). The Agreement contains a buy-back clause whereby Wei Su will have an option to have the Company buy back the shares
issued to Wei Su under the Agreement at a price of $5.8 per share one year after Wei Su pays the full Subscription Price. The closing
of the transactions contemplated under the Agreement is subject to the fulfillment of certain conditions, or on such other date
and time as all parties may mutually determine (the “Closing Date”). As of March 31, 2018,
the
Company has not issued 100,000 shares to Wei Su.
On March 17, 2017, the Company entered
into a consulting agreement (the “EMCC Agreement”) with EMCC International Consultancy Co., Ltd. (“EMCC”)
for the maintenance of the listing in the U.S. stock exchange market. At December 31, 2017, the Company recognized non-employee
stock based compensation cost of $795,000 (300, 000 shares of the Company’s common stock at $2.65 per share based on the
closing price at December 31, 2017 of the Company’s common stocks traded on the U.S. OTC Markets) in connection with the
terms in the EMCC Agreement. As of the date of this report, the Company is in process of issuance of common stock of the Company
to EMCC.
On
December 1, 2017, the Board of Directors and the majority beneficiary shareholders of the Company approved to award bonus to current
four directors and Mr. Alan Chen, the former Chairman, in an aggregate of 545,000 shares of the Company’s common stock
at
$2.65 per share based on the closing price on December 29, 2017 of the Company’s common stocks traded on the U.S. OTC Markets).
Accordingly, the Company recorded stock compensation costs of $1,444,250 at December 31, 2017. As of the date of this report, the
Company is in process of issuance of common stock of the Company to the four directors and Mr. Alan Chen.
NOTE 10: NON-CONTROLLING INTEREST
In August 2013, NOWnews Network established
NOWnews International as a 55% owned subsidiary. Mr. Shu-sen Chang, the former Chairman and current director of NOWnews Network,
and one other shareholder, owns 10% and 35% of NOWnews International, respectively.
During September through December 2013,
Sky Media acquired 66% of NOWnews Network from Mr. Alan Chen. Mr. Chen owned 84.3% of common stock of NOWnews Network prior to
the Restructuring Transaction.
On August 14 and September 8, 2015, NOWnews
Network issued additional 1,650,000 and 350,000 shares of common stock to non-controlling shareholders, respectively, pursuant
to the Stock Purchase Agreement (see Note 9).
On each of November 30, 2016, March 16,
2017, October 2, 2017, and November 17, 2017, NOWnews Network respectively issued additional 1,000,000, 2,200,000, 1,114,100, and
600,000 shares of common stock to non-controlling shareholders, pursuant to the Stock Purchase Agreement (see Note 9). As a result,
Sky Media owned 50.36% of NOWnews Network.
Non-controlling interest consisted of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Beginning balance
|
|
$
|
640,708
|
|
|
$
|
641,118
|
|
Capital contribution by non-controlling interest
|
|
|
446,735
|
|
|
|
835,124
|
|
Net loss attributed to non-controlling interest
|
|
|
(278,032
|
)
|
|
|
(842,645
|
)
|
Other comprehensive loss attributable to non-controlling interest
|
|
|
(830
|
)
|
|
|
7,111
|
|
Ending balance
|
|
$
|
808,581
|
|
|
$
|
640,708
|
|
NOTE 11: COMMITMENTS AND CONTINGENCIES
(1) Lease commitments
Capital Lease
From April, 2015, NOWnews Network entered
into various capital lease agreements with Nextlink Technology Co., Ltd. (“Nextlink”), pursuant to which NOWNews
Network agreed to lease multiple servers from Nextlink for the period ranges from sixteen months to two years. At the end of each
contract and upon fulfillment of the lease obligations, the title of these servers and ownership shall be transferred to NOWnews
Network. Because NOWnews Network takes ownership of the equipment at the completion of the lease contract, NOWnews Network determined
that the arrangement represents a capital lease for the equipment. The Company recorded $174,598 as a capital lease for the equipment
and began depreciating the equipment on a straight line basis over five years.
On June 21, 2017, NOWnews Network entered
into another capital lease agreement with High Performance Information Co., Ltd. (“HPI”), pursuant to which NOWNews
Network agreed to lease the Network Attached Storage (“NAS”) servers from HPI for three years with maturity date on
May 31, 2020. At the end of this contract and upon fulfillment of the lease obligations, the title of these servers and ownership
shall be transferred to NOWnews Network. Because NOWnews Network takes ownership of the equipment at the completion of the lease
contract, NOWnews Network determined that the arrangement represents a capital lease for the equipment. The Company recorded $7,045
as a capital lease for the equipment and began depreciating the equipment on a straight line basis over three years.
Depreciation expense of those equipment
under capital lease was $10,170 and $9,324 for the three months ended March 31, 2018 and 2017, respectively. Interest expense
resulted from capital leases amounted to $95 and $65 for the three months ended March 31, 2018 and 2017, respectively.
Operating Lease
Operating lease commitments consist of
leases for office space and copy machines under various operating lease agreements which expire in August, 2022. Operating lease
agreements generally contain renewal options that may be exercised at the Company’s discretion after the completion of the
terms.
The Company's obligations under capital
and operating leases are as follows:
As of March 31,
|
|
Capital
Leases
Amount
|
|
|
Operating
Leases
Amount
|
|
2019
|
|
$
|
2,318
|
|
|
$
|
303,844
|
|
2020
|
|
|
2,912
|
|
|
|
311,508
|
|
2021
|
|
|
-
|
|
|
|
324,412
|
|
2022
|
|
|
-
|
|
|
|
321,975
|
|
After 2023
|
|
|
-
|
|
|
|
127,790
|
|
Total minimum payments
|
|
$
|
5,230
|
|
|
$
|
1,389,529
|
|
The Company incurred rent expenses of $71,517
and $25,382 for the three months ended March 31, 2018 and 2017, respectively.
(2) Litigation
Defamation and General Matters
From time to time, the Company is subject
to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of copyrights and
other intellectual property rights and other claims alleging defamation, invasion of privacy, or similar claims arising in connection
with the news articles, pictures, and other contents published on the Company’s website.
(3) Shares to be issued
On August 5, 2015, NOWnews Network, Sky
Media, Mr. Alan Chen and Ms. Tu entered a Stock Purchase Agreement with Gamania Digital, and Ta Ya, in which NOWnews Network is
committed to sell to Gamania Digital, and Ta Ya of its outstanding shares through two Phases (see Note 9). As of December 31, 2017,
the sale of Phase I has been completed. As of the date of this report, NOWnews Network has issued in an aggregate of 4,914,100
common stock shares to Gamania Digital in exchange for approximately $1,621,960 (or NT$49,141,000) in the sale of Phase II, which
shall terminate on September 21, 2018 pursuant to the Stock Purchase Agreement and addendums.
NOTE 12: DISCONTINUED OPERATIONS
On December 27, 2013, NOWnews Network’s
Board of Directors approved the termination of operations of NOWnews Network’s 55% owned subsidiary, NOWnews International
(see Note 1). The results of the subsidiary have been presented as a discontinued operation in the statements of income and comprehensive
income. There was no revenue, cost of sales, operating expenses, or any income taxes incurred from the discontinued entity during
the three months ended March 31, 2018.
Net assets of discontinued operations as of March 31, 2018 were
as follows:
|
|
As of March
31, 2018
|
|
Cash & cash equivalents
|
|
$
|
14
|
|
Other Current assets
|
|
|
1
|
|
Current assets
|
|
$
|
15
|
|
Accounts payable
|
|
$
|
180
|
|
Accrued expenses
|
|
|
429
|
|
Due to related parties
|
|
|
104,029
|
|
Current liabilities
|
|
$
|
104,638
|
|
NOTE 13: RELATED PARTY TRANSACTIONS
The related parties of the company with
whom transactions are reported in these financial statements are as follows:
Name of entity or Individual
|
|
Relationship with the Company and its subsidiaries
|
Mega Media Investments Co., Ltd. (Taiwan Branch)
|
|
Entity controlled by Mr. Alan Chen
|
Gamania Digital Entertainment Co., Ltd.
|
|
Entity owned 45.61% of NOWnews Network.
|
GASH Co., Ltd.
|
|
Entity controlled by Gamania Digital.
|
Jollywiz Digital Technology Co., Ltd.
|
|
Entity controlled by Gamania Digital.
|
GASH Media Digital Marketing Co., Ltd
|
|
Entity controlled by GASH Co., Ltd.
|
Mr. Alan Chen
|
|
Director and controlling beneficiary shareholder of the Company. Current Director and former Chairman of NOWnews Network.
|
Transactions
|
|
For the Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Sales to GASH Co., Ltd.
|
|
$
|
8,621
|
|
|
$
|
9,670
|
|
Sales to Mega Media Investments Co., Ltd. (Taiwan Branch)
|
|
|
-
|
|
|
|
13,215
|
|
Sales to GASH Media Digital Marketing Co., Ltd.
|
|
|
-
|
|
|
|
4,451
|
|
Total
|
|
$
|
8,621
|
|
|
$
|
27,336
|
|
The primary services provided by NOWnews
Network to this related party were advertisement space on NOWnews Network’s website.
Due from related parties
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Trade receivable from GASH Co., Ltd.
|
|
$
|
7,136
|
|
|
$
|
19,698
|
|
Trade receivable from GASH Media Digital Marketing Co., Ltd.
|
|
|
-
|
|
|
|
6,353
|
|
Total
|
|
$
|
7,136
|
|
|
$
|
26,051
|
|
Due to related parties
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Due to Mr. Alan Chen
|
|
$
|
2,700,096
|
|
|
$
|
1,573,618
|
|
Due to Mega Media Investments Co., Ltd. (Taiwan Branch)
|
|
|
25,655
|
|
|
|
5,302
|
|
Due to Gamania Digital Entertainment Co., Ltd.
|
|
|
2,165
|
|
|
|
-
|
|
Due to Jollywiz Digital Technology Co., Ltd.
|
|
|
-
|
|
|
|
33,340
|
|
|
|
$
|
2,727,916
|
|
|
$
|
1,612,260
|
|
Due to related parties were unsecured, had no written agreement,
due on demand with no maturity date, and bearing no interest.
NOTE 14: SUBSEQUENT EVENT
Management has evaluated subsequent events through May 20, 2018, the date which the financial statements
were available to be issued. All subsequent events requiring recognition as of March 31, 2017 have been incorporated into these
consolidated financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic
855, “Subsequent Events.”