PROXY STATEMENT/PROSPECTUS
TRANSAKT LTD.
No.3, Lane 141, Sec. 3, Beishen Rd.,
Shenkeng Township
Taipei County 222, Taiwan(R.O.C.)
TO THE SHAREHOLDERS OF TRANSAKT LTD.
We have called a special and annual meeting of our shareholders
to be held at the offices of the company’s legal counsel located at Suite
1210, 777 Hornby Street, Vancouver, British Columbia, Canada, V6Z 1S4, on November
17, 2010 at 10:00 a.m. (Vancouver time). At the meeting, our shareholders of
record on the record date, determined by our board of directors to be the close
of business on October 15, 2010, will be asked:
(1)
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To consider, and, if thought fit, to approve a special
resolution by shareholders holding at least two-thirds of the shares of
our common stock entitled to be voted at the meeting, to carry out a
continuance of our company, TransAKT Alberta, from the jurisdiction of the
Province of Alberta, to the State of Nevada;
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(2)
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To transact any other business that may properly be
brought before the meeting or any adjournment or postponement
thereof;
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(3)
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To elect James Wu, Cheng Chun-Chih, Dr. Shiau Tzong-Huei
and Tseng Ming-Huang to serve as our directors; and
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(4)
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To approve our financial statements for the year ended
December 31, 2010.
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Further information about the continuation and the meeting is
contained in the accompanying proxy statement-prospectus. We encourage you to
read the proxy statement-prospectus in its entirety.
SEE RISK FACTORS BEGINNING ON PAGE 18 OF THIS PROXY
STATEMENT/PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD
CONSIDER AS A SHAREHOLDER OF OUR COMPANY IN REGARDS TO THE CONTINUATION AND THE
MEETING.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
THE INFORMATION IN THIS PROXY STATEMENT-PROSPECTUS IS NOT
COMPLETE AND MAY BE CHANGED. THIS PROXY STATEMENT-PROSPECTUS IS NOT AN OFFER TO
SELL SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
TAKE NOTICE THAT PURSUANT TO THE
BUSINESS
CORPORATIONS ACT
(ALBERTA) (THE "ABCA"), YOU MAY PRIOR TO THE MEETING
AT WHICH THE SPECIAL RESOLUTION FOR CONTINUATION OF OUR COMPANY FROM THE
PROVINCE OF ALBERTA TO THE STATE OF NEVADA PURSUANT TO SECTION 189 OF THE ABCA
IS TO BE PASSED, GIVE TO OUR COMPANY A NOTICE OF DISSENT BY REGISTERED MAIL
ADDRESSED TO OUR COMPANY AT OUR OFFICE LOCATED AT No.3, Lane 141, Sec. 3,
Beishen Rd., Shenkeng Township Taipei County 222, Taiwan (R.O.C.), ATTENTION:
PRESIDENT, WITH RESPECT TO THE SAID SPECIAL RESOLUTION FOR CONTINUATION. AS A
RESULT OF GIVING A NOTICE OF DISSENT, YOU MAY, ON RECEIVING FROM OUR COMPANY A
NOTICE OF INTENTION TO ACT UNDER SECTION 191 OF THE ABCA, REQUIRE OUR COMPANY TO
PURCHASE ALL YOUR SHARES IN RESPECT OF WHICH THE NOTICE OF DISSENT WAS GIVEN. IF
WE DO NOT PROCEED WITH THE PROPOSED CONTINUATION, WE WILL NOT BE OBLIGED TO
PURCHASE ANY SHARES IN RESPECT OF WHICH A NOTICE OF DISSENT HAS BEEN GIVEN.
DISSENTING SHAREHOLDERS SHOULD NOTE THAT THE EXERCISE OF DISSENT RIGHTS CAN BE A
COMPLEX, TIME-SENSITIVE AND EXPENSIVE PROCEDURE AND MAY RESULT IN OUR COMPANY
ABANDONING THE CONTINUANCE. DISSENTING SHAREHOLDERS SHOULD CONSULT THEIR LEGAL
ADVISORS WITH RESPECT TO THE LEGAL RIGHTS AVAILABLE TO THEM IN RELATION TO THE
PROPOSED CONTINUATION.
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Dated September 22, 2010.
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TRANSAKT LTD.
No.3, Lane 141, Sec. 3, Beishen Rd.,
Shenkeng Township
Taipei County 222, Taiwan(R.O.C.)
NOTICE OF SPECIAL AND ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 17, 2010 AT 10:00 A.M.
TO THE SHAREHOLDERS OF TRANSAKT LTD.:
NOTICE IS HEREBY GIVEN that a special and annual meeting of the
shareholders of our company will be held at the offices of the company’s
legal counsel located at Suite 1210, 777 Hornby Street, Vancouver, British Columbia,
Canada, V6Z 1S4, on November 17, 2010 at 10:00 a.m. (Vancouver time). At the
meeting, our shareholders of record on the record date, determined by our board
of directors to be the close of business on October 15, 2010, will be asked:
At the meeting, our shareholders of record on the record date
will be asked to vote on the following matters:
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(1)
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To consider and approve the following special
resolutions, if approved by two-thirds (2/3s) or more of the holders of
the issued shares present and entitled to vote on the issue at the meeting
of the company (the Continuation Special Resolutions), authorizes
TransAKT to complete the Continuation of TransAKT out of Alberta and the
Continuation of TransAKT into Nevada (the Continuation):
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BE IT RESOLVED THAT:
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(a)
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the Plan of Conversion providing for the Continuation of
the Company out of the Province of Alberta and into the State of Nevada
under the Nevada Revised Statutes is hereby approved;
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(b)
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the Company be and hereby is authorized to file articles
of conversion and other related documents with the Corporate Registrar of
Alberta and the Nevada Secretary of State as required to give effect to
the proposed transfer of the Company out of Alberta and to Nevada for
approval of the proposed continuation of the Company into Nevada
continuing the Nevada as if it had been incorporated under the Nevada
Revised Statutes;
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(c)
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the Company approve and, upon the Continuation, adopt the
articles of conversion in the form approved by the directors of the
Company, the articles of conversion to come into effect when the Secretary
of State of Nevada issues a stamped copy of the articles of conversion
continuing the Company as if it had been incorporated under the Nevada
Revised Statutes;
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(d)
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the Company approve and, upon the Continuation, adopt the
bylaws (the Nevada Bylaws) in the form approved by the directors of the
Company, the Nevada Bylaws to come into effect when the Secretary of State
of Nevada issues a stamped copy of the articles of conversion continuing
the Company as if it had been incorporated under the Nevada Revised
Statutes;
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(e)
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the directors of the Company be hereby authorized, in
their discretion, to abandon or amend the application for Continuation of
the Company under the Nevada Revised Statutes without further approval of
the shareholders; and
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(f)
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the directors and officers of the Company, or any one of
them, be hereby authorized and directed to perform all such acts, deeds
and things and execute, under the seal of the Company or otherwise, all
such documents, agreements and other writings as may be required to give
effect to the true intent of these special resolutions.
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(2)
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To transact any other business that may properly be
brought before the meeting or any adjournment or postponement
thereof;
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(3)
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To elect James Wu, Cheng Chun-Chih, Dr. Shiau Tzong-Huei
and Tseng Ming-Huang to serve as our directors;
and
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(4)
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Approval of our financial statements for the year ended
December 31, 2010.
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Our board of directors recommends that you vote for the above
proposals and nominees:
The accompanying proxy statement/prospectus forms a part of
this notice and describes the terms and conditions of the continuance.
Our board of directors has fixed the record date of October 15,
2010 to determine the shareholders of our company who are entitled to receive
notice of and to vote at, the meeting or any adjournment or postponement of
the meeting. At the meeting, each holder of record of shares of our common stock,
with no par value, on the record date will be entitled to one vote per share
of common stock held on each matter properly brought before the meeting.
Your attention is directed to the accompanying proxy
statement/prospectus which summarizes the items to be voted upon. Shareholders
who do not expect to attend the meeting in person and who are entitled to vote
are requested to date, sign and return the enclosed proxy as promptly as
possible in the enclosed envelope.
THE VOTE OF EACH SHAREHOLDER IS IMPORTANT. YOU CAN VOTE YOUR
SHARES BY ATTENDING THE MEETING OR BY COMPLETING AND RETURNING THE PROXY CARD
SENT TO YOU. PLEASE SUBMIT A PROXY AS SOON AS POSSIBLE SO THAT YOUR SHARES CAN
BE VOTED AT THE MEETING IN ACCORDANCE WITH YOUR INSTRUCTIONS. FOR SPECIFIC
INSTRUCTIONS ON VOTING, PLEASE REFER TO THE INSTRUCTIONS ON THE PROXY CARD OR
THE INFORMATION FORWARDED BY YOUR BROKER, BANK OR OTHER HOLDER OF RECORD. EVEN
IF YOU HAVE VOTED YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A
BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE IN PERSON AT THE MEETING, YOU
MUST OBTAIN FROM SUCH BROKER, BANK OR OTHER NOMINEE A PROXY ISSUED IN YOUR NAME.
TAKE NOTICE THAT PURSUANT TO THE
BUSINESS
CORPORATIONS ACT
(ALBERTA) (THE "ABCA"), YOU MAY PRIOR TO THE MEETING
AT WHICH THE SPECIAL RESOLUTION FOR CONTINUATION OF OUR COMPANY FROM THE
PROVINCE OF ALBERTA TO THE STATE OF NEVADA PURSUANT TO SECTION 189 OF THE ABCA
IS TO BE PASSED, GIVE TO OUR COMPANY A NOTICE OF DISSENT BY REGISTERED MAIL
ADDRESSED TO OUR COMPANY AT OUR OFFICE LOCATED AT SUITE 260, 1414 8TH STREET
S.W., CALGARY, ALBERTA CANADA T2R 1J61, ATTENTION: PRESIDENT, WITH RESPECT TO
THE SAID SPECIAL RESOLUTION FOR CONTINUATION. AS A RESULT OF GIVING A NOTICE OF
DISSENT, YOU MAY, ON RECEIVING FROM OUR COMPANY A NOTICE OF INTENTION TO ACT
UNDER SECTION 191 OF THE ABCA, REQUIRE OUR COMPANY TO PURCHASE ALL YOUR SHARES
IN RESPECT OF WHICH THE NOTICE OF DISSENT WAS GIVEN. IF WE DO NOT PROCEED WITH
THE PROPOSED CONTINUATION, WE WILL NOT BE OBLIGED TO PURCHASE ANY SHARES IN
RESPECT OF WHICH A NOTICE OF DISSENT HAS BEEN GIVEN. DISSENTING SHAREHOLDERS
SHOULD NOTE THAT THE EXERCISE OF DISSENT RIGHTS CAN BE A COMPLEX, TIME-SENSITIVE
AND EXPENSIVE PROCEDURE AND MAY RESULT IN OUR COMPANY ABANDONING THE
CONTINUANCE. DISSENTING SHAREHOLDERS SHOULD CONSULT THEIR LEGAL ADVISORS WITH
RESPECT TO THE LEGAL RIGHTS AVAILABLE TO THEM IN RELATION TO THE PROPOSED
CONTINUATION.
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BY ORDER OF THE BOARD OF DIRECTORS
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By:
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s/ James
Wu
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James Wu
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President, Chief Executive Officer and Director
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Taipei, Taiwan
Dated: September 22, 2010
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TABLE OF CONTENTS
7
QUESTIONS AND ANSWERS
When and where will the special and annual meeting be
held?
The special and annual meeting of the shareholders of our
company will be held at the offices of the company’s legal counsel located
at Suite 1210, 777 Hornby Street, Vancouver, British Columbia, Canada, V6Z 1S4,
on November 17, 2010 at 10:00 a.m. (Vancouver time).
What is the transaction I am being asked to vote on at the
special and annual meeting?
You are being asked to vote on a proposal, which we refer to as
the continuation proposal, to approve the continuation and plan of conversion
for the purpose of reorganizing our company to change its place of incorporation
from Alberta to Nevada. The board of directors recommends that you vote
FOR
this proposal.
Why are we proposing this continuation?
The continuation is being proposed in order to reorganize the
company as a Nevada corporation. We believe that the Continuation to Nevada will
more accurately reflect our operations, which have always been based in the
United States. We have virtually no business connection to Canada. By
comparison, the OTC Bulletin Board, where our shares of common stock are quoted
for trading, is located in the U.S. As we are an S.E.C. issuer, as well a
reporting issuer in the Provinces of Alberta and British Columbia, we currently
have to prepare our financial statements to meet the accounting standards of
both countries. This dual-reporting of financial statements represents a
significant added expense for our company. If we meet certain securities
regulatory requirements, specifically National Instrument 71-102, it is our
intention to become a "foreign reporting issuer" and satisfy the Canadian
continuous disclosure requirements by preparing our financial statements solely
in accordance with U.S. standards. The Continuation of our company into the
State of Nevada will aid us in meeting the regulatory requirements of N.I.
71-102.
Additionally, the Continuation will eliminate cross-border
financing issues and concerns of United States institutional lenders, thereby
providing our company greater access to needed financing to meet our growing
business requirements.
Please read The Continuation Reasons for the Change in
Domicile beginning on page 22.
Will the continuation dilute my ownership interest?
No. The continuation will not dilute your ownership interest.
Immediately after the continuation is consummated you will own the same
percentage of TranskAKT Nevada common stock as you own of TranskAKT Alberta
common stock immediately prior to the completion of the continuation.
When do we expect to complete the continuation?
We intend to complete the continuation promptly after the
stockholders of our company approve the articles of conversion and the plan of
conversion at the special and annual meeting, although the board of directors
may delay completion of the continuation for some period of time after
stockholder approval pending receipt of third party consents or for other
business reasons.
Why was Nevada selected as the place of incorporation of our
company?
The State of Nevada has adopted comprehensive, modern and
flexible corporate laws which are updated and revised periodically to meet
changing business needs.
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Will the continuation affect current operations? What about
the future?
The continuation will have no immediate major impact on how we
conduct day-to-day operations. The location of future operations will generally
depend on the needs of our business, independent of our place of incorporation.
However, we are hopeful that the change in domicile from Alberta to Nevada will
more appropriately reflect our shift in strategic focus to include the United
States as a principal market will, as previously discussed: (i) improve our
access to capital markets, increase funding and strategic flexibility and reduce
the cost of capital, (ii) improve our access to U.S. government and private
sector contracts, and (iii) better focus management efforts on each U.S. and
international operation and better attract and retain key employees.
What vote is required to approve the continuation
proposal?
In order for us to effect the continuation, we need the
affirmative vote of at least two-thirds, or 66.7%, of the shares present in
person or represented by proxy at the meeting and entitled to vote thereat.
Therefore, if you abstain or otherwise do not vote on the continuation proposal,
it will have the effect of a vote against the proposal. Please read Voting
and Proxy Information Vote Required for Approval on page 25.
Will I be able to trade my shares during the time it takes
to complete the continuation?
Yes.
What will happen to my existing shares of common stock of
TransAKT Alberta upon the completion of the continuation? Do I have to exchange
my stock certificates?
Yes. Promptly after the effective time of the continuation, we
shall mail to each record holder of certificates that immediately prior to the
effective time of the continuation represented shares of our common stock, a
letter of transmittal and instructions for use in surrendering those
certificates. Upon the surrender of each certificate formerly representing our
common stock, together with a properly completed letter of transmittal, we shall
issue in exchange a share certificate of our company, the Nevada company, and
the stock certificate representing shares in the Alberta company shall be
cancelled. Until so surrendered and exchanged, each certificate of our common
stock shall represent solely the right to receive shares in the new company.
Who is entitled to vote at the special and annual
meeting?
All holders of record of our common stock as of the close of
business on October 15, 2010, the record date, are entitled to vote, or to grant
proxies to vote, at the special and annual meeting. On the record date, there
were 102,645,120 shares of our common stock issued and outstanding. Each share
of our common stock is entitled to cast one vote.
Who is soliciting these proxies?
Your vote and proxy is being solicited by our board of
directors for use at the special and annual meeting. We will bear the entire
cost of solicitation of proxies, including preparation, assembly and mailing of
this proxy statement/prospectus, the proxy and any additional information
furnished to our companys shareholders. Copies of solicitation materials will
be furnished to banks, brokerage houses, depositories, fiduciaries and
custodians holding shares of our common stock in their names that are
beneficially owned by others to forward to such beneficial owners. We may
reimburse persons representing beneficial owners for their costs of forwarding
the solicitation material to the beneficial owners of our common stock. Original
solicitation of proxies by mail may be supplemented by telephone, facsimile,
electronic mail or personal solicitation by our directors, officers or other
regular employees. No additional compensation will be paid to directors,
officers or other regular employees for such services. We do not presently
intend to employ any other party to assist in the solicitation process.
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How do I vote if my shares are registered in my
name?
By completing, signing and returning your proxy card in the
enclosed postage-prepaid envelope, you will authorize the persons named on the
proxy card to vote your shares according to your instructions. Please vote as
soon as possible even if you currently plan to attend the meeting in person, so
that your shares may be represented and voted at the special and annual meeting.
How do I vote if my broker holds my shares in street
name?
You should follow the voting instructions provided by your
securities broker.
If my broker holds my shares in street name, will my
broker vote my shares for me on the continuation proposal?
If you do not provide your broker with instructions on how to
vote your street name shares, your broker will not be permitted to vote them
for or against the continuation. You should complete and return the enclosed
form of proxy or be sure to provide your broker with instructions on how to vote
your shares.
What do I do if I want to change my vote?
Any stockholder giving a proxy has the power to revoke the
proxy at any time before the proxy is voted. In addition to revocation in any
other manner permitted by law, a proxy may be revoked by an instrument in
writing executed by the stockholder or by his attorney authorized in writing,
or, if the stockholder is a corporation, under its corporate seal or by an
officer or attorney thereof duly authorized, and deposited at the offices of our
transfer agent, Olympia Trust Company, 2300, 125 - 9th Avenue SE, Calgary,
Alberta T2G 0P6, at any time up to and including the last business day preceding
the day of the Meeting, or any adjournment thereof, or with the chairman of the
special and annual meeting on the day of the special and annual meeting.
Attendance at the special and annual meeting will not in and of itself
constitute revocation of a proxy.
What do I do if I receive multiple proxy cards?
If you receive multiple proxy cards, this indicates that your
shares are held in more than one account, such as two brokerage accounts, and
are registered in different names. You should vote each of the proxy cards to
ensure that all of your shares are voted.
How will my shares be voted if I do not indicate how I wish
to vote?
If you sign the proxy card but do not indicate how you wish to
vote on the continuation proposal, the persons named on the proxy card will vote
FOR the approval of the continuation.
What will constitute a quorum at the special and annual
meeting?
The presence, in person or by proxy, of the holders of five
(5%) percent of our shares entitled to vote at the special and annual
meeting.
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SUMMARY
THIS SUMMARY PROVIDES AN OVERVIEW OF THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT/PROSPECTUS AND DOES NOT CONTAIN ALL OF THE INFORMATION
YOU SHOULD CONSIDER. YOU SHOULD READ THE MORE DETAILED INFORMATION SET FORTH IN
THIS DOCUMENT AND THE DOCUMENTS TO WHICH WE REFER YOU. WE HAVE INCLUDED PAGE
REFERENCES TO DIRECT YOU TO MORE COMPLETE DESCRIPTIONS OF THE TOPICS PRESENTED
IN THIS SUMMARY. IN THIS DOCUMENT THE SYMBOL CDN$ REFERS TO CANADIAN DOLLARS
AND THE SYMBOL $ REFERS TO UNITED STATES DOLLARS. IN THIS DOCUMENT REFERENCES
TO THE COMPANY, OUR COMPANY, TRANSAKT, WE AND OUR REFER TO TRANSAKT
LTD.
Note Regarding Forward-Looking Statements
This proxy statement-prospectus includes or is based upon
estimates, projections or other forward-looking statements. Such
forward-looking statements include any projections or estimates made by us and
our management in connection with our business operations. Such forward-looking
statements are based on the beliefs of our company. When used in this proxy
statement-prospectus, the words anticipate, believe, estimate, expect,
intend and similar expressions, as they relate to us, are intended to identify
forward-looking statements. While these forward-looking statements and any
assumptions upon which they are based are made in good faith and reflect our
current information and judgment regarding the direction of our business, actual
results will almost always vary, sometimes materially, from any estimates,
predictions, projections, assumptions or other future performance suggested
herein.
Such estimates, projections or other forward-looking
statements involve various risks and uncertainties as outlined in this proxy
statement-prospectus commencing on page 18 under Risk Factors. We caution
the reader that important factors in some cases have affected and in the future
could materially affect actual results and cause actual results to differ
materially from the results expressed in any such estimates, projections or
other forward-looking statements.
TransAKT Ltd.
We are a publicly traded telecommunications equipment
manufacturer and distributor headquartered in Calgary, Alberta, Canada with
operations in Taipei, Taiwan.
We are currently traded on the Over the Counter Bulletin Board
Exchange (OTCBB) under the symbol TAKDF.
We were incorporated in the Province of British Columbia on
December 10, 1996 as Green Point Resources Inc. On October 18, 2000, we changed
our name to Wildcard Wireless Solutions Inc. On June 30, 2001, we filed Articles
of Continuance in the Province of Alberta and became an Alberta corporation. On
that same day, we conducted an amalgamation with Wildcard Communications Canada
Inc., an Alberta corporation, our wholly-owned subsidiary, wherein Wildcard
Communications Canada was merged into Wildcard Wireless Solutions Inc. On June
20, 2003, we changed our name to TransAKT Corp. We changed our name from
TransAKT Corp. to TransAKT Ltd. on July 12, 2006.
Our executive office is located at Suite 260, 1414 8
th
Street S.W., Calgary, Alberta, T2R 1J6 (403) 290-1744.
The Special and annual meeting
Matters to be voted on
Our stockholders will be asked to approve the Plan of
Conversion and the Continuation by way of special resolution. The complete text
of the proposed Continuation special resolutions to be considered at our special
and annual meeting is attached to this proxy statement/prospectus as Appendix A
(the Continuation Special Resolutions). The Continuation will have the effect
of changing our domicile from the Province of Alberta to the State of Nevada.
The Plan of Conversion is referred to in the Continuation Special
Resolutions and is attached hereto as Appendix B. The forms of the Articles of
Conversion and Bylaws to be adopted by the TransAKT Nevada are attached hereto
respectively as Appendix C and Appendix D.
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Vote needed to approve the Continuation
Approval of the Continuation requires the affirmative vote of
at least two-thirds, or 66.7%, of the shares present in person or represented by
proxy at the meeting and entitled to vote thereat. The directors and executive
officers of TransAKT together directly own approximately 10.8% of the total
number of outstanding shares of TransAKT common stock. These stockholders have
indicated that they intend to vote all their shares for the approval of the
Continuation.
The Continuation
We are currently incorporated under the corporate laws of
Alberta, Canada. We are proposing to change our jurisdiction of incorporation
from Alberta, Canada to Nevada under the Nevada Revised Statutes (the NRS)
through a process known as a continuation under the Alberta
Business
Corporations Act
(the ABCA), and known as a conversion under Nevada
corporate law (the Continuation or the Continuance). A conversion or a
continuation is a process by which a corporation which is not incorporated under
the laws of Nevada may change its jurisdiction of incorporation to Nevada. Under
the NRS, if the laws of its home jurisdiction allow for it, a company may be
continued as a Nevada corporation by filing Articles of Conversion with the
Secretary of State of Nevada. We refer to this process in this proxy
statement/prospectus as the Continuation. In order to give effect to the
Continuation, our board of directors has adopted a plan of conversion under
Chapter 92A of the Nevada Revised Statutes (the Plan of Conversion) and has
recommended that shareholders approve and adopt this Plan of Conversion. After
the completion of the Continuation, we will be a Nevada corporation governed by
the NRS. We will continue to conduct the business in which we are currently
engaged. The Continuation will not result in any material effect on our
operations. The business and operations of our company following the
Continuation will be identical in most respects to our current business, except
that we will no longer be subject to the corporate laws of Alberta but will be
subject to the NRS. The Nevada corporation will be liable for all the debts and
obligations of the Alberta corporation, and the officers and directors of the
corporation will be the officers and directors of our company. The differences
between the laws will not materially affect our business but will affect your
rights as a stockholder. The differences between the applicable laws of the two
jurisdictions are discussed in greater detail under Comparative Rights of
Stockholders on page 27 of this proxy statement/prospectus.
To effect the Continuance of a corporation out of the Province
of Alberta a corporation must first make application to the Alberta Corporate
Registrar, who must be satisfied that the proposed continuance into another
jurisdiction will not adversely affect creditors or shareholders of the
corporation.
Reference in this proxy statement/prospectus to TransAKT or
TransAKT Alberta are to TransAKT Ltd., an Alberta corporation, as we are
currently incorporated. References to TransAKT Nevada are to TransAKT Ltd., a
Nevada corporation, as we would be continued/converted under the NRS if the
Continuation is approved by our shareholders.
Our board of directors recommends that you vote FOR the
Continuation.
Reasons for the Continuation
We believe that the Continuation to Nevada will more accurately
reflect our operations, which have always been based in the United States. We
have virtually no business connection to Canada. By comparison, the OTCBB where
our shares of common stock are quoted for trading is located in the U.S. As we
are an S.E.C. issuer, as well as being a reporting issuer in the Provinces of
Alberta and British Columbia, we currently have to prepare our financial
statements to meet the accounting standards of both countries. This
dual-reporting of financial statements represents a significant added expense
for our company. If we meet certain securities regulatory requirements,
specifically National Instrument 71-102, it is our intention to become a
"foreign reporting issuer" and satisfy the Canadian continuous disclosure requirements by preparing our financial
statements solely in accordance with U.S. standards. The Continuation of our
company into the State of Nevada will aid us in meeting the regulatory
requirements of N.I. 71-102.
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Additionally, the Continuation will eliminate cross-border
financing issues and concerns of United States institutional lenders, thereby
providing our company greater access to needed financing to meet our growing
business requirements.
For a discussion of the risk factors associated with the
Continuation, please read the discussion under Risk Factors beginning on
page 18.
Factors You Should Consider
The Continuation will not have any effect on your relative
equity or voting interests in our business. You will continue to hold exactly
the same number and type of shares as you currently hold. The Continuation will,
however, result in changes to your rights and obligations under applicable
corporate and/or company laws. In addition, the Continuance may have tax
consequences for you.
Risk Factors Related to the Proposals
Factors such as possible adverse tax consequences following the
Continuance may affect your interest in owning shares of our common stock. In
evaluating the merits of the proposals, you should carefully consider the risk
factors included in this proxy statement-prospectus beginning on page
18.
How the Continuance Will Affect Your Rights as a Shareholder
You will continue to hold the same shares you now hold
following the Continuation of our company to Nevada. However, the rights of
stockholders under Nevada law differ in certain substantive ways from the rights
of stockholders under the Alberta
Business Corporations Act
(the ABCA).
Examples of some of the changes in stockholder rights which will result from
Continuation are:
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Under Nevada law, unless otherwise provided in the charter, stockholders
may act without a meeting by written consent of the majority of the voting
power of the outstanding common stock entitled to vote on the matter, and
notice need not be given to stockholders. Under the ABCA, stockholders may
only act by way of a resolution passed at a duly called meeting unless all
stockholders otherwise entitled to vote consent in writing.
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Under Nevada law, a charter amendment requires approval by vote of the
holders of a majority of the outstanding stock. Under the ABCA, an amendment
to a corporations charter requires approval by two- thirds majority of the
stockholders present and entitled to vote at a meeting of stockholders.
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Dissenters rights are available to stockholders under more circumstances
under the ABCA than under Nevada law.
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A directors liability may not be limited under the ABCA as it may under
Nevada law.
Price Volatility
We cannot predict what effect the Continuation will have on our
market price prevailing from time to time or the liquidity of our shares.
Accounting Treatment of the Continuance
For United States and Canadian accounting purposes, the
Continuation of our company from an Alberta corporation to a Nevada corporation
represents a non-substantive exchange to be accounted for in a manner consistent
with a transaction between entities under common control. All assets,
liabilities, revenues and expenses will be reflected in the accounts of TransAKT Nevada based on existing carrying
values at the date of the exchange. The historical comparative figures of
TransAKT will be those of TransAKT as an Alberta company.
13
Material tax consequences for stockholders
The following is a brief summary of the material tax
consequences the Continuation will have for stockholders. Stockholders should
consult their own tax advisers with respect to their particular circumstances. A
more detailed summary of the factors affecting the tax consequences for
stockholders is set out under Material United States Federal Tax Consequences
and Material Canadian Income Tax Consequences on pages 38 and
35, respectively, of this proxy statement/prospectus.
United States federal tax consequences
The continuance should qualify as a tax-deferred reorganization
for U.S. federal income tax purposes under Section 368(a) of the Internal
Revenue Code. Accordingly, U.S. holders (as defined below) generally should not
recognize gain or loss on the continuance of our company from Canada to the
United States. However, under some circumstances Section 367(b) of the Internal
Revenue Code may impose an inclusion of earnings and profits of the company as
a deemed dividend or otherwise require a recognition of gain for certain U.S.
shareholders. For a more complete discussion of the United States federal income
tax consequences of the continuance, and a disclosure of the assumptions upon
which this summary is based, please see Material United States Federal Tax
Consequences on page 35.
THE TAX SUMMARIES IN THIS PROXY STATEMENT/PROSPECTUS PROVIDE
GENERAL INFORMATION ONLY. THEY ARE NOT MEANT TO PROVIDE ANY OF THE SHAREHOLDERS
OF OUR COMPANY WITH LEGAL OR TAX ADVICE, AND SHOULD NOT BE INTERPRETED IN THAT
MANNER. SHAREHOLDERS OF OUR COMPANY ARE STRONGLY ADVISED TO CONSULT WITH THEIR
OWN TAX AND LEGAL ADVISORS REGARDING THE UNITED STATES AND CANADIAN INCOME TAX
CONSEQUENCES OF THE CONTINUANCE IN THEIR PARTICULAR CIRCUMSTANCES.
Canadian tax consequences
On completion of the continuance, our company will become
resident in the United States. Our company will be deemed to have disposed of
all property owned by it immediately before the continuance at a price equal to
the fair market value of the property. The deemed disposition may cause net
taxable capital gains and income to arise for which our company will incur
Canadian tax liability. Upon the continuance, our company will also be subject
to a corporate emigration tax of 5% on the amount by which the fair market value
of all of our company's property exceeds the aggregate of its liabilities and
the amount of paid-up capital on all of its issued and outstanding shares.
Despite the foregoing, as at the date of this proxy
statement/prospectus, our company's management believes that no Canadian federal
taxes should be payable by our company as a result of the continuance
.
However, there can be no assurance that the Canada Revenue Agency ("CRA")
will accept the valuations or the positions that our company has adopted in
calculating the amount of Canadian tax that will be payable upon the
continuance, including our company's calculation of the amount of historical tax
losses that are available to offset any taxes that would otherwise be payable
upon the continuance.
The continuance of our company to Nevada will not cause the
shareholders of our company to be considered to have disposed of their shares.
Accordingly, the shareholders will not realize any capital gains or capital
losses as a result of the continuance.
Following the continuance, individual taxpayers resident in
Canada will no longer be eligible for the dividend tax credit on any dividends
they receive from our company.
United States-resident shareholders of our company will not
generally be subject to Canadian tax by reason only of the continuance.
14
For a more complete discussion of the Canadian federal income
tax consequences of the continuance, and a disclosure of the assumptions upon
which this summary is based, please see Material Canadian Income Tax
Consequences on page 35.
Reporting Obligations under Securities Laws
Currently, we are a reporting issuer in the Provinces of
Alberta and British Columbia and are required to prepare our annual and interim
consolidated financial statements in accordance with Canadian generally accepted
accounting principles (Canadian GAAP).
We are also a foreign private issuer in the United States and
are required to file an Annual Report on Form 20-F (a Form 20-F Annual Report)
each year with the SEC. Our consolidated financial statements included on our
Form 20-F Annual Report are prepared in accordance with United States Generally
Accepted Accounting Principles (US GAAP).
Upon completion of the Continuation, we will be required to
continue preparing our consolidated financial statements in accordance with
United States Generally Accepted Accounting Principles (US GAAP) in the United
States. We expect to file our audited annual financial statements with the SEC
on Annual Reports on Form 10-K and our unaudited interim financial statements
with the SEC on Quarterly Reports on Form 10-Q.
Additionally, if we meet certain securities regulatory
requirements, specifically National Instrument 71-102, it is our intention to
become a "foreign reporting issuer" pursuant to the definition adopted by
Canadian securities legislation and satisfy the Canadian continuous disclosure
requirements by preparing our financial statements solely in accordance with
U.S. standards. The Continuation of our company into the State of Nevada will
aid us in meeting the regulatory requirements of National Instrument 71-102.
Regulatory approvals
We will have to comply with Nevada and Alberta regulatory
requirements in order to complete the Continuation to Nevada. Our board of
directors has approved the Plan of Conversion under Chapter 92A of the Nevada
Revised Statutes pursuant to which we will be converted into a corporation under
the Nevada Revised Statutes. Our board of directors recommends the adoption of
the Plan of Conversion by the shareholders of our company for the reasons set
forth herein.
In Alberta, we will have to:
-
receive approval of the Plan of Conversion from a majority of the shares
entitled to be voted;
-
file articles of conversion with the Alberta Corporate Registrar setting
out, among other things, the Plan of Conversion and related documents;
-
pay a filing fee the Alberta Corporate Registrar.
Under Nevada law, we will have to:
-
receive approval of the Plan of Conversion from a majority of the shares
entitled to be voted;
-
file articles of conversion with the Nevada Secretary of State setting
out, among other things, the Plan of Conversion;
-
pay a filing fee to the Nevada Secretary of State.
Upon completion of the Continuance, our charter documents will
be comprised of the Articles of Conversion and the Bylaws, in the forms attached
hereto as Appendix C and Appendix D, respectively.
15
Decrease to Authorized Capital
The Articles of Conversion of TransAKT Nevada, attached hereto
as Appendix C, will provide that the authorized capital of the TransAKT Nevada
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.
Our articles of incorporation presently provide that our
authorized capital is an unlimited number of shares of common stock, with no par
value and an unlimited number of shares of preferred stock, with no par
value.
Dissenters Rights
Our shareholders have dissent rights under Section 191 of the
Alberta
Business Corporation Act
in regards to the continuance. A
shareholder who exercises their dissent rights can require us to purchase their
shares for cash at fair market value. To exercise dissent rights, our
shareholders must be shareholders of record as of the record date, give written
notice to us that they are exercising their dissent rights before the vote on
the resolution from which they dissent and not vote their shares in favor of the
proposals. A shareholder who does not satisfy these requirements is not entitled
to receive payment for their shares.
Please refer to Dissenters Rights on page 27 for a
more comprehensive discussion regarding your dissent rights under the ABCA. The
full text of Section 191 of the Alberta
Business Corporation Act
is
included as Appendix E to this proxy statement-prospectus.
DISSENT RIGHTS ARE SUBJECT TO A NUMBER OF TECHNICAL LEGAL
REQUIREMENTS. SHAREHOLDERS WHO DO NOT COMPLY STRICTLY WITH THOSE LEGAL
REQUIREMENTS COULD LOSE THEIR RIGHTS. SHAREHOLDERS WHO WISH TO EXERCISE THEIR
DISSENT RIGHTS SHOULD SEEK QUALIFIED INDEPENDENT LEGAL ADVICE.
Our recommendations to stockholders
Taking into consideration all of the factors and reasons for
the conversion set forth above and elsewhere in this proxy statement/prospectus,
the Board of Directors has approved the Plan of Conversion, the Continuation and
recommends that stockholders of our company vote FOR approval of Plan of
Conversion and the Continuance.
16
SUMMARY FINANCIAL INFORMATION
The following summary financial information includes balance
sheet and statement of operations data from our unaudited financial statements
for the period ended June 30, 2010 and from our audited financial statements
for the year ended December 31, 2009. Our financial statements are stated in
United States dollars (USD) and are prepared in accordance with
United States Generally Accepted Accounting Principles (GAAP).The
information contained in this table should be read in conjunction with our Managements
Discussion and Analysis of Financial Condition and Results of Operations
beginning on page 54 as well as the financial statements and accompanying notes
included herein.
|
For the six
months
ended
June 30, 2010
($)
|
For the six
months
ended
June 30, 2009
($)
|
For the year
ended
December 31,
2009
($)
|
For the year
ended
December 31,
2008
($)
|
Operating Revenues
|
6,222,107
|
5,657,303
|
10,623,736
|
9,546,132
|
Income (loss) from Operations
|
(44,843)
|
(143,452)
|
186,069
|
(206,483)
|
Net Income (loss)
|
29,563
|
(210,944)
|
(249,643)
|
(420,776)
|
Net Loss per share (basic and diluted)
|
(0.00)
|
(0.00)
|
(0.00)
|
(0.00)
|
Dividends per share
|
-
|
-
|
-
|
-
|
Weighted Ave Shares Outstanding
|
102,645,120
|
102,645,120
|
102,645,120
|
102,645,120
|
|
As at
June 30,
2010
($)
|
As at
December
31, 2009
($)
|
As at
December
31, 2008
($)
|
Working Capital
|
1,329,104
|
1,164,286
|
1,493,102
|
Long Terms Debt
|
-
|
-
|
-
|
Shareholders Equity
|
1,338,150
|
1,220,848
|
1,531,931
|
Capital Stock
|
3,260,018
|
3,260,018
|
3,260,018
|
Total Assets
|
6,857,405
|
4,980,879
|
6,161,158
|
This proxy statement-prospectus contains financial statements
that were prepared in USD with conversions of certain amounts of Taiwan dollars
(TWD) converted into USD based upon the exchange rate in effect at the end of
the calendar year to which the amount relates, or the exchange rate on the date
specified. These translations should not be construed as representations that
the TWD amounts actually represent such USD amounts or that TWD could be
converted into USD at the rate indicated.
17
RISK FACTORS
The common shares of our company are considered speculative.
Prospective investors should carefully consider the risk factors set out
below.
Risks Relating to the Continuance
Upon the consummation of the continuance, our company
will become a Nevada corporation and because the rights of shareholders under
Nevada law differ from those under Alberta law, you may have fewer protections
as a shareholder.
Following the consummation of the continuance, our companys
affairs will be governed by our Articles of Conversion and be subject at all
times to the Nevada Revised Statutes. The rights of shareholders to take action
against our directors, actions by minority shareholders and the fiduciary
responsibility of directors are governed by the Nevada Revised Statutes and
common law principles derived from cases in Nevada. The rights of shareholders
and the fiduciary responsibilities of directors under Nevada law differ somewhat
from those under Alberta law.
Upon the consummation of the continuance, our company may
be subject to Canadian income tax liabilities which may adversely affect our
companys working capital.
Upon the continuance, our company will be deemed to have
disposed of all of its property at its fair market value, which may cause net
taxable capital gains and income for which our company may incur Canadian tax
liability.
The anticipated benefits of our reorganization may not be
realized.
We will incur additional direct costs and expenses related to
the continuation, including attorneys fees, accountants fees, financial
printing expenses and filing fees. While we believe that the continuation will
result in operational, administrative and other benefits that significantly
outweigh the related costs and expenses, we cannot assure you that those
benefits will be realized.
Risks Relating to Our Company
We Have a History of Operating Losses Which May Affect
Our Ability to Continue Operations.
We sustained operating losses for each of the fiscal years
ended December 31, 2009 and 2008 of respectively ($249,643) and ($420,776). We
also anticipate sustaining a loss from operations for the fiscal year ended
December 31, 2010. If we are unable to achieve profitability or to raise
sufficient capital to carry out our business plan, we may not be able to
continue operations.
We Have a Limited Operating History and Are Still Proving
the Viability of Our Products and Business Model, and thus, We May Be Unable to
Sustain Operations and You May Lose Your Entire Investment.
Since inception, we have been primarily focused on research and
development. In April 2003, our products became commercial and in 2006, our
product line was changed significantly. We are still adding to our product line
and in the process of proving the viability of our products and business model.
If we are unable to prove our business model or the viability of our products,
we may not be able to sustain operations and our ability to raise additional
funding may be jeopardized.
18
Our Competition Has Greater Resources Than We Do and Can
Respond More Quickly To Changes in the Industry Which Could Adversely Affect Our
Ability to Compete.
Communications-based businesses are intensely competitive and
involve a high degree of risk. Public acceptance of business transacted by us
may never reach the magnitude required to be commercially profitable.
Many of our existing competitors, as well as a number of
potential new competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than us. These factors may allow them to
respond more quickly than us to new or emerging technologies and changes in
customer requirements. It may also allow them to devote greater resources than
we can to the development, promotion and sale of their products and services.
Such competitors may also engage in more extensive research and development,
undertake more far-reaching marketing campaigns, adopt more aggressive pricing
policies and make more attractive offers to existing and potential employees,
strategic partners, advertisers and Internet publishers. In addition, current
and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products or services.
Volatility of World Economic Factors May Affect Our
Ability to Raise Capital and Product Costs Which May Affect Our Ability to
Continue Operations.
Our revenues, profitability and future growth and the carrying
value of assets are substantially dependent on prevailing world economic
conditions and fluctuations in influencing factors such as exchange rates, rates
of inflation, governmental stability and natural disasters. Our ability to
borrow and to obtain additional capital on attractive terms is also
substantially dependent upon these factors. The negative impact of these factors
on sales orders originating from an affected country would have an adverse
effect on our borrowing capacity, revenues, profitability and cash flows from
operations. For example, unfavorable changes in exchange rates can increase the
cost of our products and reduce revenues resulting in reduced profitability. In
the event that our profitability is reduced and we are unable to maintain our
profit margins, it may be difficult to raise capital and reduce our borrowing
ability. In addition, as has been recently experienced, general downturns in the
technology sector worldwide have made fundraising difficult. Since the marketing
of our products will require us to raise capital, this may have an adverse
affect on our ability to continue operations and to effectively market our
products.
We are Dependent on Key Personnel Who Have Extensive
Knowledge With Respect to Our Product and Business and thus, the Loss of One or
More of These Individuals May Adversely Affect Our Business.
We are heavily dependent upon the expertise of our management
and the loss of one or more of these individuals could have a material adverse
effect. We do not maintain key-person insurance policies on any of our executive
officers. Since we are a technology based company, our future success also
depends on our ability to continue to attract, retain and motivate highly
skilled employees in the payments and communications industry. Competition for
employees in our industry is intense. We may be unable to retain key employees
or attract, assimilate or retain other highly qualified employees in the future.
We currently have employment agreements with our key executive officers,
engineers and other key employees. These contracts are for five (5) year terms
and include non-competition clauses.
If We Are Unable to Respond To the Rapid Technological
Change in Our Industry, Our Products Could Become Obsolete and We May Be Unable
to Compete, Resulting In the Termination of Our Operations.
The communications industry is characterized by rapid and
significant technological change. Many communication applications have a short
life cycle. For example, our payment system technologies product lines became
obsolete and reached their end-of-life. Furthermore, due to changes in
governmental policy, the cellular phones that our products were designed to work
with have become obsolete. Going forward, our main products will be in the areas
of telecommunications equipment, including VoIP hardware, HTTs USB Dongle
designed for use with Skype, HTTs SkyDECT, HTTs EZDECT advanced multi-line
cordless telephone systems, etc. We also plan to distribute other name-brand
telecommunications equipment in Taiwan, China and other regions throughout Asia.
Our future success will depend in large part on our ability to continue to
respond to such changes. If we are unable to respond to such changes and/or new or improved competing technology is
developed, our technology may be rendered non-competitive. In the event that we
are unable to respond to these changes, our ability to raise capital to carry
out our business plan may be severely restricted. In addition, our profitability
may decrease as any existing inventory may need to be sold at a discount. In
this event, our cash flow and liquidity would also be decreased.
19
Government Regulation Could Adversely Affect Our Ability
to Sell Our Products.
Laws and regulations directly applicable to communications,
commerce and advertising are becoming more prevalent. In addition, the growth
and development of the communications industry may prompt calls for more
stringent consumer protection laws, both in Canada and abroad, that may impose
additional burdens on companies. Recently, the United States government mandated
wireless number portability for all new cell phones allowing consumers to keep
their existing phone numbers when changing carriers. The implementation of
wireless number portability rendered several phones obsolete. In the event that
a phone model that our unit attaches to is rendered obsolete by regulations such
as wireless number portability, our sales and inventory values would be
adversely affected. In addition, to the extent that regulatory bodies put
restrictions on VoIP, our ability to compete with major telecommunication
companies would be effected. The result would be decreased profitability which
may adversely affect our share price.
Government regulations could potentially slow down our
expansion plans. We may be required to have our products approved by several
regulatory agencies. This process can be onerous and slow, and could adversely
affect our ability to meet our financial projections. Compliance with different
standards may require additional capital investments and testing. If we are
unable to obtain such financing, our business could be adversely impacted.
We Will Need Additional Funds In Order to Implement Our
Intended Projects and There Is No Assurance That Such Funds Will Be Available
As, If and When Needed Which May Adversely Affect Our Operations.
Cash flow from operations for the fiscal years ended December
31, 2009 and 2008 were $1,007,964 and ($890,840), respectively. We have been
dependent upon the proceeds of equity and non-equity financing to fund
operations. No assurances can be given that our actual cash requirements will
not exceed our budget or that anticipated revenues will be realized when needed,
lines of credit will be available if necessary or that additional capital will
be available. We anticipate that over the next twelve (12) months, we will need
a minimum of $3,000,000 to sustain operations and market our products
effectively.
Failure to obtain such additional funds on terms and conditions
that we deem acceptable may materially and adversely affect our ability to
effectively market and distribute our products resulting in decreased revenues
which may also result in a decreased share price.
Prices for Raw Materials Required for our Products are
Volatile. If There is a Significant Increase in Prices of Raw Materials our
Ability to Generate Revenue and Achieve Profitability may Suffer.
All raw materials for our products are sourced from China,
Taiwan and the United Kingdom. Due to the fact that our products use computer
components, the price of these components can be highly volatile and are subject
to the risk of obsolescence. In order to control costs and the risk of
obsolescence, we contract with a manufacturer at a set price for the building of
our product over a number of terminals. Despite these efforts, there can be no
assurance that we will be able to keep prices of raw materials at a cost
effective level for our operations. If there is a significant increase in raw
materials our ability to generate revenue and achieve profitability may suffer.
Risks Relating to Our Stock
The Market Price of Our Common Shares Has Been and Will
In All Likelihood Continue To Be Volatile Which May Adversely Affect the Value
of Your Investment.
The market price of our common shares has fluctuated over a
wide range and it is likely that the price of our common stock will continue to
fluctuate in the future. Announcements regarding acquisitions, the status of
corporate collaborations, regulatory approvals or other developments by
us or our competitors could have a significant impact on the market price of our
common shares.
20
Our shares currently trade on the Over-the-Counter Bulletin
Board (OTCCBB) with limited trading. If this market is not sustained or we are
unable to satisfy any future trading criteria that may be imposed by the
Financial Industry Regulatory Authority (FINRA), there may not be any
liquidity for our shares. We have generated only limited revenue from the sale
of our products to date. These factors could have a negative impact on the
liquidity of any investment made in our stock.
The Value and Transferability of Our Shares May Be
Adversely Impacted By the Penny Stock Rules.
In addition, holders of our common stock in the United States
may experience substantial difficulty in selling their securities as a result of
the penny stock rules. Our common stock is covered by the penny stock rules, a
Securities and Exchange Commission (SEC) rule that imposes additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors, generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. For transactions covered by the rule, the broker-dealer must
make a special suitability determination for the purchaser and transaction prior
to the sale. Consequently, the rule may affect the ability of broker-dealers to
sell our securities and also may affect the ability of purchasers of our stock
to sell their shares in the secondary market. It may also cause fewer
broker-dealers to make a market in our stock.
The Large Number of Shares Eligible for Future Sale by
Existing Shareholders May Adversely Affect the Market Price for Our Common
Shares.
Future sales of substantial amounts of our common shares in the
public market, or the perception that such sales could occur, could adversely
affect the market price of our common shares. At September 10, 2010, we had
102,645,120 common shares outstanding. On that date, we had no common shares
reserved for issuance under our stock option plan; and no common shares reserved
for issuance under the warrants issued pursuant to various private placements.
No prediction can be made as to the effect, if any, that sales
of shares of our common stock or the availability of such shares for sale will
have on the market prices of our common stock.
We Have Limited Sales of Products to Date and No
Assurance Can Be Given That Our Products Will Be Widely Accepted In the
Marketplace Which May Adversely Affect Your Investment
.
Our future sales, and therefore, cash flow and income, and our
success, are highly dependent on success in marketing our products and consumer
acceptance of those products. If our products are not widely accepted or we are
unable to market our products effectively, we may face reduced share prices,
decreased profitability, and decreased cash flow.
There Is A Limited Public Market for Our Common Shares At
This Time In the United States Which May Affect Your Ability to Sell Our
Stock.
Our shares currently trade on the OTCCBB with limited trading.
If this market is not sustained or we are unable to satisfy any future trading
criteria that may be imposed by FINRA, there may not be any liquidity for our
shares. We have generated only limited revenue from the sale of our products to
date. These factors could have a negative impact on the liquidity of any
investment made in our stock.
You Should Not Expect to Receive Dividends.
We have never paid any cash dividends on shares of our capital
stock, and we do not anticipate that we will pay any dividends in the
foreseeable future. Our current business plan is to retain any future earnings
to finance the expansion of our business. Any future determination to pay cash
dividends will be at the discretion of our board of directors, and will be
dependent upon our consolidated financial condition, results of operations,
capital requirements and other factors as our board of directors may deem
relevant at that time.
21
THE CONTINUATION
Background to the Continuation proposal
The Board of Directors of our company has determined that it is
advisable for our company to continue from Alberta, Canada to Nevada (the
Continuation). Management has determined that a Continuation will be the most
effective means of achieving the desired change of domicile. The Alberta
Business Corporations Act
(the ABCA) allows a corporation that is
incorporated under Alberta law to convert into a foreign entity pursuant to a
continuation approved by the stockholders of the Alberta corporation.
Under the proposed Continuation, if the stockholders approve
the Continuation, then the Plan of Conversion, Articles of Conversion and
related documents will be filed with the Alberta Corporate Registrar. The Plan
of Conversion and the Articles of Conversion will also be filed with the Nevada
Secretary of State. Upon the filing and subsequent receipt of a stamped copy of
the Articles of Conversion from the Nevada Secretary of State, our company will
be continued as a Nevada corporation and will be governed by the laws of Nevada.
The assets and liabilities of the Nevada corporation immediately after the
Continuation will be identical to the assets and liabilities of the Alberta
company immediately prior to the Continuation. The current officers and
directors of the Alberta company will be the officers and directors of the
Nevada corporation. The change of domicile will not result in any material
change to the business of our company and will not have any effect on the
relative equity or voting interests of our stockholders. Each previously
outstanding share of our companys common stock will become one share of the
Nevada corporation. The change in domicile will, however, result in changes in
the rights and obligations of current TransAKT stockholders under applicable
corporate laws. For an explanation of these differences see Comparative Rights
of Stockholders on page 27 of this proxy statement/prospectus. In
addition, the Continuation may have material tax consequences to stockholders
which may or may not be adverse to any particular stockholders depending on the
stockholders particular circumstances. For a more detailed explanation of the
tax consequences, see Material United States Federal Tax Consequences and
Material Canadian Income Tax Consequences on pages 38 and
35, respectively, of this proxy statement/prospectus.
Pursuant to Section 189 of the ABCA, our board of directors has
adopted the Plan of Conversion, which will be voted upon by the shareholders of
our company, the effect of which will be to change the domicile of our company
from Alberta to Nevada. Such resolution shall be submitted to our stockholders
at the special and annual meeting. Due notice of the time, place and purpose of
the meeting shall be mailed to each holder of stock, whether voting or
non-voting, at the address of the stockholder as it appears on the records of
the corporation, in accordance with Section 134 of the ABCA. At the meeting, the
Plan of Conversion shall be considered and a vote taken for its adoption or
rejection. If at least two-thirds, or 66.7%, of the shares present in person or
represented by proxy at the meeting and entitled to vote thereat vote for the
adoption of the Plan of Conversion, we will then file articles of conversion
with the Alberta Corporate Registrar and the Secretary of State of Nevada. The
current officers and directors of the Alberta company will be the officers and
directors of the Nevada company. Upon the filing of the Articles of Conversion
and the Plan of Conversion with the Alberta Corporate Registrar and the Nevada
Secretary of State in accordance with Section 189 of the ABCA and NRS 92A.205
and payment of all fees prescribed thereto, together with the compliance with
all other requirements, the Continuation shall become effective, the
Continuation shall become effective in accordance with Section 189 of the ABCA
and NRS 92A.240. Upon receipt of the stamped Articles of Conversion and payment
of all applicable fees, the Nevada Secretary of State shall issue a stamped and
filed copy of the Articles of Conversion and the Alberta Corporate Registrar
shall issue a Certificate of Discontinuance, and the Continuance shall be
effective on the date shown in the Articles of Conversion.
Reasons for the change in domicile
We believe that the Continuation to Nevada will more accurately
reflect our operations, which have always been based in the United States. We
have virtually no business connection to Canada. By comparison, the OTCBB where
our shares of common stock are quoted for trading is located in
the U.S. As we are an S.E.C. issuer, as well as being a reporting issuer in the
Provinces of Alberta and British Columbia, we currently have to prepare our
financial statements to meet the accounting standards of both countries. This
dual-reporting of financial statements represents a significant added expense
for our company. If we meet certain securities regulatory requirements,
specifically National Instrument 71-102, it is our intention to become a
"foreign reporting issuer" and satisfy the Canadian continuous disclosure
requirements by preparing our financial statements solely in accordance with
U.S. standards. The Continuation of our company into the State of Nevada will
aid us in meeting the regulatory requirements of N.I. 71-102.
22
Additionally, the Continuation will eliminate cross-border
financing issues and concerns of United States institutional lenders, thereby
providing our company greater access to needed financing to meet our growing
business requirements.
Charter Documents following the Continuance
Upon completion of the Continuance, our charter documents will
be comprised of the Articles of Conversion and the Bylaws, in the forms attached
hereto as Appendix C and D, respectively.
Decrease to Authorized Capital in Connection with
Continuance
The Articles of Conversion of TransAKT Nevada, attached hereto
as Appendix C, will provide that the authorized capital of the TransAKT Nevada
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.
Our articles of incorporation presently provide that our
authorized capital is an unlimited number of shares of common stock, with no par
value and an unlimited number of shares of preferred stock, with no par
value.
Financial Statement Reporting
Currently, we are a reporting issuer in the Provinces of
Alberta and British Columbia and are required to prepare our annual and interim
consolidated financial statements in accordance with Canadian generally accepted
accounting principles (Canadian GAAP).
We are also a foreign private issuer in the United States and
are required to file an Annual Report on Form 20-F (a Form 20-F Annual Report)
each year with the SEC. Our consolidated financial statements included on our
Form 20-F Annual Report are prepared in accordance with United States Generally
Accepted Accounting Principles (US GAAP).
Upon completion of the Continuation, we will be required to
prepare our consolidated financial statements in accordance with US GAAP in the
United States. We expect to file our audited annual financial statements with
the SEC on Annual Reports on Form 10-K and our unaudited interim financial
statements with the SEC on Quarterly Reports on Form 10-Q.
Additionally, if we meet certain securities regulatory
requirements, specifically National Instrument 71-102, it is our intention to
become a "foreign reporting issuer" and satisfy the Canadian continuous
disclosure requirements by preparing our financial statements solely in
accordance with U.S. standards. The Continuation of our company into the State
of Nevada will aid us in meeting the regulatory requirements of N.I. 71-102.
Effective time of the Continuation
The Continuation will become effective upon:
1.
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adoption of the Plan of Conversion and approval of the
Continuation Special Resolutions by the
stockholders of our company at the special and annual meeting or any
adjournment thereof;
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23
2.
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the delivery of articles of conversion, the plan of
conversion and related documents to the Alberta Corporate Registrar in
accordance with Section 189 of the ABCA;
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3.
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the delivery of articles of conversion and the plan of
conversion to the Nevada Secretary of State in accordance with NRS
92A.205; and
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4.
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the issuance of the stamped Articles of Conversion by the
Secretary of State of Nevada.
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We anticipate that the articles of conversion and plan of
conversion will be filed promptly after the special and annual meeting of our
stockholders.
Conditions to the consummation of the
Continuation
Our board of directors has adopted and approved the
Continuation. Therefore, the only condition required for our company to adopt
the Continuation and become continued into Nevada is that the stockholders must
duly approve the Continuation pursuant to the proposed Continuation Special
Resolutions. The only material consent, approval or authorization of or filing
with any governmental entity required to consummate the Continuation are the
approval of the stockholders of our company in accordance with the ABCA, the
filing of the articles of conversion, plan of conversion and related documents
with the Alberta Corporate Registrar and the Secretary of State of Nevada.
Exchange of share certificates
No exchange of certificates that, prior to the Continuation,
represented shares of our common stock is required with respect to the
Continuation and the transactions contemplated by it. Promptly after the
effective time of the Continuation, we shall mail to each record holder of
certificates that immediately prior to the effective time of the Continuation
represented shares of our common stock, a letter of transmittal and instructions
for use in surrendering those certificates. Upon the surrender of each
certificate formerly representing our common stock, together with a properly
completed letter of transmittal, we shall issue in exchange a share certificate
of our company, the Nevada company, and the stock certificate representing
shares in the Alberta company shall be cancelled. Until so surrendered and
exchanged, each certificate of our common stock shall represent solely the right
to receive shares in the new company.
Warrants and stock options
As of the effective time of the Continuation, all warrants and
options to purchase shares of our common stock granted or issued prior to the
effective time of the Continuation will remain warrants and options to purchase
shares in our company as continued in Nevada.
Shares Being Registered
At the date of this proxy statement-prospectus, there were
102,645,120 shares of our common stock issued and outstanding. This proxy
statement-prospectus relates to the 102,645,120 common shares of our company
that, upon approval of the special resolution at the meeting and the completion
of the necessary procedures under the ABCA and the NRS, will be registered as
common shares of our continued company.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
CONTINUATION DESCRIBED IN THIS PROXY/PROSPECTUS AND RECOMMENDS THAT STOCKHOLDERS
APPROVE THE PLAN OF CONVERSION AND THE CONTINUATION.
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In reaching its decision, the Board of Directors reviewed the
fairness to our company and our stockholders of the proposed Continuation and
considered, without assigning relative weights to, the following factors:
-
the majority of our shareholders are resident outside of Canada;
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the belief that there will be minimal Canadian tax consequences of the
proposed Continuation;
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the belief that we will only be required to prepare our consolidated
financial statements in accordance with United States Generally Accepted
Accounting Principles (US GAAP) in the United States;
-
the belief that the proposed Continuation will gain our company access to
a larger capital market; and
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the fact that the stockholders have an opportunity to vote on the proposed
Continuation.
Without relying on any single factor listed above more than any
other factor, but rather based upon their consideration of all such factors
taken as a whole, our board of directors have concluded that the Continuation
proposal is fair to our company and our stockholders. ACCORDINGLY, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED
CONTINUATION SPECIAL RESOLUTIONS CONTAINED IN THIS PROXY/PROSPECTUS.
VOTING AND PROXY INFORMATION
Special and annual meeting
A special and annual meeting of our stockholders will be held
at the offices of our legal counsel located at Suite 1210, 777 Hornby Street,
Vancouver, British Columbia, Canada, V6Z 1S4, on November 17, 2010 at 10:00
a.m. (Vancouver time) (or at any adjournments or postponements thereof) to consider
and vote on a proposal to effect the proposed Continuation, which will have
the effect of transferring the jurisdiction of incorporation of our company
from the Province of Alberta to the State of Nevada, and to vote on any other
matters that may properly come before such meeting.
You are entitled to vote only if you were a holder of record
of shares of our common stock as of the record date of October 15, 2010. Your
shares can be voted at the meeting only if you are present in person or represented
by a valid proxy. Each holder on the record date is entitled to one vote for
each share of common stock held on all matters to be voted upon at the meeting.
On the record date, there were 102,645,120 shares of common stock issued and
outstanding.
The presence, in person or by proxy, of at least five (5%)
percent of the shares of our common stock entitled to vote at the meeting
constitute a quorum. The vote of any stockholder who is represented at the
special and annual meeting by proxy will be cast as specified in the proxy. If
no vote is specified in a duly executed and delivered proxy, such vote will be
cast for the proposal. Any stockholder of record who is present at the special
and annual meeting in person will be entitled to vote at the meeting regardless
of whether the stockholder has previously granted a proxy for the special and
annual meeting.
THE BOARD OF DIRECTORS OF OUR COMPANY HAS APPROVED THE
CONTINUANCE AND RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF ITS APPROVAL.
Proxy solicitation
We will bear the entire cost of solicitation of proxies,
including preparation, assembly and mailing of this proxy statement/prospectus,
the proxy and any additional information furnished to our companys
shareholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, depositories, fiduciaries and custodians holding shares of our
common stock in their names that are beneficially owned by others to forward to
such beneficial owners. We may reimburse persons representing beneficial owners
for their costs of forwarding the solicitation material to the beneficial owners
of our common stock. Original solicitation of proxies by mail may be
supplemented by telephone, facsimile, electronic mail or personal solicitation
by our directors, officers or other regular employees. No additional compensation will be paid to
directors, officers or other regular employees for such services. We do not
presently intend to employ any other party to assist in the solicitation
process.
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Record date
Only those stockholders of record at the close of business on
October 15, 2010, as shown in our records, will be entitled to vote or to grant
proxies to vote at the special and annual meeting.
Vote required for approval
Approval of our proposed Continuation Special Resolutions requires
the affirmative vote of at least two-thirds, or 66.7%, of the shares present
in person or represented by proxy at the meeting and entitled to vote thereat.
Abstentions and broker “non-votes” will have the effect of votes
against the Continuation. As of September 22, 2010, there were 102,645,120 shares
of common stock issued and outstanding. The directors and executive officers
of our company directly own, in the aggregate, 11,050,000 shares (approximately
10.8%) of the total number of shares of our common stock outstanding at the
record date. These persons have indicated that they will vote all of their shares
for the approval of the Continuation Special Resolutions.
Proxy Instruction
Each of our stockholders as of October 15, 2010, will receive
a proxy card. A stockholder may grant a proxy to vote for or against, or to
abstain from voting on, the Continuation Special Resolutions by marking his/her
proxy card appropriately and executing it in the space provided.
Holders of our common stock whose names appear on the stock
records of our company should return their proxy card to our transfer agent,
Olympia Trust Company, 2300, 125 - 9th Avenue SE, Calgary, Alberta T2G 0P6 at
any time up to and including the last business day that precedes the day of the
special and annual meeting or, if the special and annual meeting is adjourned,
the last business day that precedes any reconvening thereof, or to the chairman
of the special and annual meeting on the day of the special and annual meeting
or any reconvening thereof, or in any other manner provided by law, in the
envelope provided with the proxy card. Stockholders who hold their common stock
in the name of a bank, broker or other nominee should follow the instructions
provided by their bank, broker or nominee on voting their shares.
If a shareholder of our company fails to submit a proxy or vote
at the meeting, the shareholders votes will not be counted as present for the
purposes of determining a quorum and will have the same effect as a vote against
the matters to be voted upon at the meeting. If a shareholder of our company
submits a properly signed proxy card and affirmatively elects to abstain from
voting, the proxy will be counted as present for the purpose of determining a
quorum but will not be voted at the meeting. Consequently, an abstention will
have the same effect as a vote against the proposals to be voted upon at the
meeting. If a shareholders shares are held by a broker, custodian bank or other
nominee, the shareholder must contact such persons to vote the shares on the
shareholders behalf. Such persons cannot vote a shareholders shares without
receiving instructions from the shareholder.
TO BE EFFECTIVE, A PROXY CARD MUST BE RECEIVED PRIOR TO THE
SPECIAL AND ANNUAL MEETING. ANY PROPERLY EXECUTED PROXY WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATION INDICATED ON THE PROXY CARD. A PROPERLY
EXECUTED AND RETURNED PROXY CARD IN WHICH NO SPECIFICATION IS MADE WILL BE VOTED
FOR THE CONTINUATION SPECIAL RESOLUTIONS.
There will be no other matters presented at the special and
annual meeting.
If any other matters are properly presented at the meeting for
consideration, the persons named in the proxy card and acting under its
authority will have discretion to vote on such matters in accordance with their
best judgment.
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Proxy revocation
Any stockholder giving a proxy has the power to revoke the
proxy at any time before the proxy is voted. In addition to revocation in any
other manner permitted by law, a proxy may be revoked by an instrument in
writing executed by the stockholder or by his attorney authorized in writing,
or, if the stockholder is a corporation, under its corporate seal or by an
officer or attorney thereof duly authorized, and deposited at the offices of our
transfer agent, Olympia Trust Company, 2300, 125 - 9th Avenue SE, Calgary,
Alberta T2G 0P6, at any time up to and including the last business day preceding
the day of the Meeting, or any adjournment thereof, or with the chairman of the
special and annual meeting on the day of the special and annual meeting.
Attendance at the special and annual meeting will not in and of itself
constitute revocation of a proxy.
DISSENTERS RIGHTS
Pursuant to Section 191 of the ABCA, registered shareholders
have the right to dissent to the Continuation and receive the fair market value
of their respective shares from our company. Shareholders who wish to exercise
their right of dissent should seek their own legal advice as failure to comply
strictly with the provisions of Section 191 of the ABCA may prejudice their
right of dissent. In order to dissent, a written objection to the special
resolution must be received by our company at our registered office at least 48
hours, not including Saturday, Sunday or holidays, prior to the special and
annual meeting.
A vote against the Continuation Resolution, an abstention or
the execution of the proxy to vote against the Continuation Resolution does not
constitute such written objection.
The above summary is not a comprehensive statement of the
procedures to be followed by dissenting shareholders who seek payment of the
fair value for their Common shares. Section 191 of the ABCA requires adherence
to the procedures established therein and failure to do so may result in the
loss of all rights thereunder. The full text of Section 191 of the ABCA is set
out in Appendix E to this proxy statement/prospectus. If management determines
that an unacceptable number of shareholders have dissented from the
Continuation, the Continuation will not be proceeded with.
DISSENT RIGHTS ARE SUBJECT TO A NUMBER OF TECHNICAL LEGAL
REQUIREMENTS. SHAREHOLDERS WHO DO NOT COMPLY STRICTLY WITH THOSE LEGAL
REQUIREMENTS COULD LOSE THEIR RIGHTS. SHAREHOLDERS WHO WISH TO EXERCISE THEIR
DISSENT RIGHTS SHOULD SEEK QUALIFIED INDEPENDENT LEGAL ADVICE.
COMPARATIVE RIGHTS OF STOCKHOLDERS
After the Continuation, the stockholders of the former Alberta
corporation will become the holders of shares in the capital of a Nevada company
organized under the Nevada Revised Statutes (NRS). Differences between the
Nevada Revised Statutes and the ABCA, will result in various changes in the
rights of stockholders of our company. The following is a summary description of
the more significant differences. This summary description is qualified by
reference to the NRS and the ABCA.
Subject
Matter
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Nevada
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Alberta
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Inspection of Books and Records
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Under Nevada law, any person who has been a
stockholder of record of a corporation for at least six months immediately
preceding his demand, or any person holding, or thereunto authorized in
writing by the holders of, at least five percent of all of its outstanding
shares, upon at least five days written demand is entitled to inspect in
person or by agent or attorney, during usual business hours, a
corporations records and make copies therefrom.
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Where a corporation has previously distributed
its shares to the public, shareholders and creditors of a corporation may,
on payment of a reasonable fee, require a corporation to furnish a list
setting out the names and addresses of the stockholders of a corporation
and the number of shares held by each stockholder. In order to obtain such
a list, an affidavit must also be provided confirming that the list will
only be used in connection with an effort to influence voting
of the stockholders, an offer to acquire
securities of the corporation or any other matter relating to the affairs
of the corporation.
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27
Subject Matter
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Nevada
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Alberta
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Qualification of Directors
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A director must be a natural person who is at
least 18 years of age. A company must have at least one director. Unless
otherwise provided in the articles of incorporation of the company,
directors need not be stockholders.
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A director must be a natural person who is at
least 18 years of age. Directors must not have the status of bankrupt, and
must not have been found to be of unsound mind by a court in Canada or
elsewhere. All ABCA corporations must have at least one director, and
distributing corporations must have at least three directors, at least
two of which must not be officers or employees of the corporation or its
affiliates. We are a distributing corporation because we have filed a
prospectus in Alberta. At least one- quarter (1/4) of the companys
directors must be resident in Canada. There are no other actions which
must be taken by us in order to remain in compliance with the ABCA
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Amendments to the Articles
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In order to amend the articles of incorporation
of a company, the board of directors must adopt a resolution setting forth
the proposed amendment and call a meeting of the stockholders to vote on
the amendment or direct that the proposed amendment be considered at the
next annual meeting of the stockholders entitled to vote on the amendment.
If it appears upon the canvassing of the votes that stockholders holding
shares entitling them to exercise at least a majority of the voting power,
or such greater proportion of the voting power as may be required in the
case of a vote by classes, or as may be required by the provisions of the
articles of incorporation, have voted in favour of the amendment. The
certificate setting forth the amendment and the vote by which the
amendment was adopted must be signed by an officer of the company and
filed with the secretary of state. If any proposed amendment would
adversely alter or change any preference or any other right given to any
class of outstanding shares, then the amendment must be approved by the
vote, in addition to the affirmative vote otherwise required, of the
holders of shares representing a majority of the voting power of each
class adversely affected by the amendment.
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In order to amend its articles, the
shareholders of an ABCA corporation must pass a special resolution
approving the amendment. A special resolution must be approved by two
thirds of the votes cast on the resolution. The holders of a class or
series of shares are entitled to vote separately as a class on any
proposed amendment which would increase or decrease any maximum number of
authorized shares of that class, or increase any maximum number of
authorized shares of a class having rights or privileges equal or superior
to those of such class or series; effect an exchange, reclassification or
cancellation of all or part of the shares of that class; add, change or
remove the rights, privileges, restrictions or conditions attached to the
shares of that class; increased the rights or privileges of any class of
shares having rights or privileges equal or superior to the shares of that
class; create a new class of shares equal or superior to the shares of
that class; make any class of shares having rights or privileges inferior
to the shares of that class equal or superior to the shares of that class;
effect an exchange or create a right of exchange of all or part of the
shares of another class into the shares of that class; or constrain the
issue, transfer or ownership of the shares of that class, or change or
remove any such constraint. The right of holders of a class of shares
which would be affected in such a manner to vote separately as a class will apply
whether or not that class of shares is otherwise entitled to vote.
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28
Subject Matter
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Nevada
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Alberta
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If
authorized by the shareholders in the special resolution amending the
articles, the directors may revoke the resolution before it is acted on
without further approval of the shareholders. If the directors do not
revoke the resolution, the articles of amendment must be filed with the
Corporate Registrar under the ABCA, and the Corporate Registrar will then
issue a certificate of amendment.
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Election and Removal of Directors
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Directors are elected at the annual meeting of
the stockholders by a plurality of the votes cast at the election and any
director, or the entire Board, may be removed with or without cause, but
only by the vote of not less than two thirds of the issued and outstanding
stock entitled to vote at a meeting called for that purpose. The directors
may fill vacancies on the board unless the bylaws provide otherwise.
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Shareholders of a corporation shall, by
ordinary resolution at each annual meeting at which an election of
directors is required, elect directors to hold office. The shareholders of
a corporation may be ordinary resolution at a special and annual meeting
remove any director or directors from office and may fill such vacancy at
the meeting in which the director was removed. If not so filled, a quorum
of directors may fill a vacancy among the directors.
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Inspection of Stockholders List
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Under Nevada law, any stockholder of record of
a corporation who has held his shares for more than six months and
stockholders holding at least 5% of all of its outstanding shares, is
entitled to inspect, during normal business hours, the companys stock
ledger and make extracts therefrom. It also provides that a Nevada company
may condition such inspection right upon delivery of a written affidavit
stating that inspection is not desired for any purpose not related to the
stockholders interest in the company.
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Under the ABCA, where a corporation has
previously distributed its shares to the public, shareholders and
creditors of a corporation may, on payment of a reasonable fee require a
corporation to furnish a list setting out the names and addresses of the
stockholders of a corporation and the number of shares held by each
stockholder. In order to obtain such a list, an affidavit must also be
provided confirming that the list will only be used in connection with an
effort to influence voting of the stockholders, an offer to acquire
securities of the corporation or any other matter relating to the affairs
of the corporation.
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Transactions with Officers and Directors
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Under Nevada law, contracts or transactions in
which a director or officer is financially interested are not
automatically void or voidable if (i) the fact of the common directorship,
office or financial interest is known to the board of directors or
committee, and the board or committee authorizes, approves or ratifies the
contract or transactions in good faith by a vote sufficient for the
purpose, without counting the vote or votes of the common or interested
director or directors, or (ii) the contract or transaction, in good faith,
is ratified or approved by the holders of a majority of the
voting power, (iii) the fact of common directorship, office or financial
interest known to the director or officer at the time of the transactions
is brought before the board of directors for actions, or (iv) the contract
or transaction is fair to the corporation at the time it is authorized or
approved. Common or interested directors may be counted to determine
presence of a quorum and if the votes of the common or interested
directors are not counted at the meeting, then a majority of directors may
authorize, approve or ratify a contract or transaction.
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Under the ABCA, a material contract or
transaction between a corporation and one or more of its directors or
officers, or between a corporation and another entity in which a director
or officer of the corporation is a director or officer or has a material
interest in, is not invalid if the director or officer has disclosed the
nature and extent of his interest and the contract or transaction was
approved by the directors. Even if such disclosure is not made, a director
or officer, acting honestly and in good faith, will not be accountable to
the corporation for any profit realized in such a transaction, and the
contract or transaction will not be invalid only by reason of such
interest, if the contract or transaction is approved by a special
resolution at a meeting of shareholders, disclosure of the interest
sufficient to indicate its nature was made before shareholder approval,
and the contract or transaction is reasonable and fair to the corporation
at the time it was approved.
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29
Subject Matter
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Nevada
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Alberta
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Limitation on Liability of Directors;
Indemnification of Officers and Directors
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Nevada law provides for discretionary
indemnification made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The determination must
be made either: (i) by the stockholders; (ii) by the board of directors by
majority vote of a quorum consisting of directors who were not parties to
the actions, suit or proceeding; (iii) if a majority vote of a quorum
consisting of directors who were not parties to the actions, suit or
proceeding so orders, by independent legal counsel in a written opinion;
or (iv) if a quorum consisting of directors who were not parties to the
actions, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion. The articles of incorporation, the bylaws or
an agreement made by the corporation may provide that the expenses of
officers and directors incurred in defending a civil or criminal action,
suit or proceeding must be paid by the corporation as they are incurred
and in advance of the final disposition of the actions, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director
or officer to repay the amount if it is ultimately determined by a court
of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions do not affect any right to advancement of
expenses to which corporate personnel other than directors or officers may
be entitled under any contract or otherwise by law. The indemnification
and advancement of expenses authorized in or ordered by a court pursuant
to Nevada law does not exclude any other rights to which a person seeking indemnification or advancement
of expenses may be entitled under the articles of incorporation or any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, for either an action in his official capacity or an action in
another capacity while holding office, except that indemnification, unless
ordered by a court or for the advancement of expenses, may not be made to
or on behalf of any director or officer if his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was
material to the cause of action. In addition, indemnification continues
for a person who has ceased to be a director, officer, employee or agent
and inures to the benefit of the heirs, executors and administrators of
such a person.
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The ABCA provides that a corporation may
indemnify a director or officer or a former director or officer of the
corporation against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, reasonably incurred by the
individual in respect of a proceeding to which such person was a party by
reason of being or having been a director or officer, if the person: (i)
acted honestly and in good faith with a view to the best interests of the
corporation; and (ii) in the case of a criminal or administrative
proceeding enforced by a monetary penalty, the individual had reasonable
grounds for believing that the individuals conduct was lawful.
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30
Subject Matter
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Nevada
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Alberta
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Voting Rights with respect to extraordinary
corporate transactions
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Approval of mergers and consolidations and
sales, leases or exchanges of all or substantially all of the property or
assets of a corporation, whether or not in the ordinary course of
business, requires the affirmative vote or consent of the holders of a
majority of the outstanding shares entitled to vote, except that, unless
required by the articles of incorporation, no vote of stockholders of the
corporation surviving a merger is necessary if: (i) the merger does not
amend the articles of incorporation of the corporation; (ii) each
outstanding share immediately prior to the merger is to be an identical
share after the merger, and (iii) either no common stock of the
corporation and no securities or obligations convertible into common stock
are to be issued in the merger, or the common stock to be issued in the
merger, plus that initially issuable on conversion of other securities
issued in the merger does not exceed 20% of the common stock of the
corporation outstanding immediately before the merger.
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Approvals of amalgamations (except
amalgamations between a corporation and wholly owned subsidiaries),
consolidations, and sales, leases or exchanges of substantially all the
property of a corporation, other than in the ordinary course of business
of the corporation requires approval by the stockholders by a two-thirds
majority vote at a duly called meeting.
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Stockholders consent without a meeting
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Unless otherwise provided in the articles of
incorporation or the bylaws, any actions required or permitted to be taken
at a meeting of the stockholders may be taken without a meeting if, before
or after taking the actions, a written consent is signed by the
stockholders holding at least a majority of the voting power, except that
if a different proportion of voting power is required for such an action at a meeting, then that
proportion of written consent is required. In no instance where actions
are authorized by written consent, need a meeting of the stockholders be
called or notice given.
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Any action required or permitted to be taken at
a meeting of the stockholders may be taken by a written resolution signed
by all the stockholders entitled to vote on such resolution.
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31
Subject Matter
|
Nevada
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Alberta
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Stockholder Voting Requirements
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Unless the articles of incorporation or bylaws
provide for different proportions, a majority of the voting power, which
includes the voting power that is present in person or by proxy,
regardless of whether the proxy has authority to vote on all matters,
constitutes a quorum for the transactions of business. In all matters
other than the election of directors, the affirmative vote of the majority
of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the
stockholders. Directors must be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. Where a separate vote by a
class or series or classes or series is required, a majority of the voting
power of the class or series that is present or represented by proxy,
regardless of whether the proxy has authority to vote on all matters,
constitutes a quorum for the transaction of business. An act by the
stockholders of each class or series is approved if a majority of the
voting power of a quorum of the class or series votes for the actions.
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Unless the bylaws otherwise provide, a quorum
of stockholders is present for a meeting if the holders of a majority of
the shares entitled to vote at the meeting are present in person or
represented by proxy. Except where the ABCA requires approval by a special
resolution, being approval by a two-thirds majority of the shares present
in person or represented by proxy and entitled to vote on the resolution,
a simple majority or the shares present in person or represented by proxy
and entitled to vote on a resolution is required to approve any resolution
properly brought before the stockholders. Where the articles of a
corporation provide for cumulative voting, stockholders voting at an
election of directors have the right to a number of votes equal to the
votes attached to the shares held by such stockholder multiplied by the
number of directors to be elected and stockholders may cast all such votes
in favor of one candidate for director or may distribute the votes among
the candidates in any manner. The holders of a class or series of shares
are entitled to vote separately on proposals to amend the articles of a
corporation where such amendment affects the rights of such class or
series in a manner different than other shares of the corporation. A vote
to approve any such amendment is passed if approved by a two- thirds
majority of the voting power of the class or series represented in person
or by proxy at a meeting called to approve such amendment.
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Dividends
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A corporation is prohibited from making a
distribution to its stockholders if, after giving effect to the
distribution, the corporation would not be able to pay its debts as they
become due in the usual course of business or the corporations total
assets would be less than its total liabilities (plus any amounts
necessary to satisfy any preferential rights).
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A corporation is prohibited from declaring or
paying a dividend if there are reasonable grounds for believing that the
corporation, is or would after the payment be, unable to pay its
liabilities as they become due or the realizable value of the
corporations assets would be less than the total of its liabilities and
stated capital of all classes.
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Anti-Takeover Provisions
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Nevadas Acquisition of Controlling Interest
Statute applies to Nevada corporations that have at least 200 shareholders, with at least 100 shareholders of
record being Nevada residents, and that do business directly or indirectly
in Nevada. Where applicable, the statute prohibits an acquiror from voting
shares of a target companys stock after exceeding certain threshold
ownership percentages, until the acquiror provides certain information to
the company and a majority of the disinterested shareholders vote to
restore the voting rights of the acquirors shares at a meeting called at
the request and expense of the acquiror.
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There is no provision under the ABCA similar to
the Nevada Acquisition of Controlling Interest Statute.
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32
Subject Matter
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Nevada
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Alberta
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If the voting rights of such
shares are restored, shareholders voting against such restoration may
demand payment for the fair value of their shares (which is generally
equal to the highest price paid in the transaction subjecting the
stockholder to the statute). The Nevada statute also restricts a business
combination with interested shareholders, unless certain conditions are
met, with respect to corporations which have at least 200 shareholders of
record. A combination includes (a) any merger with an interested
stockholder, or any other corporation which is or after the merger would
be, an affiliate or associate of the interested stockholder, (b) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of
assets, to an interested stockholder, having (i) an aggregate market
value equal to 5% or more of the aggregate market value of the
corporations assets; (ii) an aggregate market value equal to 5% or more
of the aggregate market value of all outstanding shares of the
corporation; or (iii) representing 10% or more of the earning power or net
income of the corporation, (c) any issuance or transfer of shares of the
corporation or its subsidiaries, to the interested stockholder, having
an aggregate market value equal to 5% or more of the aggregate market
value of all the outstanding shares of the corporation, (d) the adoption
of any plan or proposal for the liquidation or dissolution of the
corporation proposed by the interested stockholder, (e) certain
transactions which would result in increasing the proportionate percentage
of shares of the corporation owned by the interested stockholder, or (f)
the receipt of benefits, except proportionately as a stockholder, of any
loans, advances or other financial benefits by an interested stockholder.
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Subject Matter
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Nevada
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Alberta
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An interested stockholder is a
person who, together with affiliates and associates, beneficially owns (or
within the prior three years, did beneficially own) 10% or more of the
corporations voting stock. A corporation to which this statute applies
may not engage in a combination within three years after the interested
stockholder acquired its shares, unless the combination or the interested
stockholders acquisition of shares was approved by the board of directors
before the interested stockholder acquired the shares. If this approval
was not obtained, then after the three year period expires, the
combination may be consummated if all applicable statutory requirements
are met and either (a) (i) the board of directors of the corporation
approves, prior to such person becoming an interested stockholder, the
combination or the purchase of shares by the interested stockholder or
(ii) the combination is approved by the affirmative vote of holders of a
majority of voting power not beneficially owned by the interested
stockholder at a meeting called no earlier than three years after the
date the interested stockholder became such or (b) (i) the aggregate
amount of cash and the market value of consideration other than cash to be
received by holders of common shares and holders of any other class or
series of shares meets certain minimum requirements set forth in the
statutes and (ii) prior to the consummation of the combination, except
in limited circumstances, the interested stockholder will not have
become the beneficial owner of additional voting shares of the
corporation.
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Appraisal Rights; Dissenters Rights
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Under Nevada law, unless otherwise provided in
the articles of incorporation or the bylaws of the issuing corporation in
effect on the tenth day following an acquisition of a controlling interest
by an acquiring person, if control shares are accorded full voting rights
and the acquiring person has acquired control shares with a majority or
more of all the voting power, any stockholder, other than the acquiring
person, whose shares are not voted in favour of authorizing voting rights
for the control shares may dissent in and obtain payment of the fair value
of his shares. Also, Nevada law does not provide for dissenters rights in the
case of a sale of assets.
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Under the ABCA, the holders of shares of any
class of a corporation have the right to dissent when a company amends its
articles to change any provisions restricting or constraining the issue,
transfer or ownership of shares of that class. Stockholders also have
dissenters rights when a company proposes to amend its articles to add,
change or remove any restrictions on the business or businesses that the
corporation may carry on, amalgamate (other than a vertical short-form
amalgamation with a wholly-owned subsidiary), continue to another
jurisdiction or sell, lease or exchange all or substantially all of its property. A shareholder who properly
exercises his or her rights of dissent is entitled to be paid the fair
market value of his or her shares in respect of which he or she dissents.
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34
MATERIAL CANADIAN INCOME TAX CONSEQUENCES
General
In the opinion of Clark Wilson, Canadian tax counsel to our
company, the following section is a summary of the material Canadian federal
income tax consequences of the continuance to our company, to Canadian-resident
shareholders of our company, and to United States-resident shareholders of our
company. The following summary is based on the facts set out in this proxy
statement/prospectus, and on additional information provided to counsel by
management of our company.
Although portions of the summary of tax consequences to United
States-resident shareholders may apply to shareholders residing in other
jurisdictions, this summary does not specifically address tax consequences to
such shareholders and accordingly such shareholders are urged to contact their
own tax advisors to determine the tax consequences to them. This summary does
not include the consequences of any provincial, municipal, or other local tax
laws or regulations, any tax laws of any jurisdictions outside of Canada, or any
other tax laws other than the federal income tax laws of Canada.
The summary of Canadian tax consequences in the following
section, as well as the abbreviated summary of Canadian tax consequences set
forth in the "SUMMARY" section of this proxy statement-prospectus, are based on
the current wording of the Income Tax Act of Canada, the regulations made under
that act, the Canada-United States Income Tax Convention, 1980, as amended, and
counsel's understanding of administrative materials published by the CRA. This
summary takes into account all proposed amendments to the Income Tax Act that
have been announced by the Minister of Finance before the date of mailing of
this proxy statement - prospectus. However, there is no assurance that such
proposed amendments will be enacted in their current form, or at all. Apart from
such proposed amendments, these summaries do not take into account or anticipate
any changes in law, whether by legislative, governmental, or judicial action. No
advance income tax ruling has been obtained from the CRA to confirm the tax
consequences of any of the transactions described in this proxy statement -
prospectus.
The summary of consequences to shareholders of our company
applies only to shareholders who, for the purposes of the Income Tax Act, hold
their shares of our company's common stock as capital property, deal at arm's
length with our company, and are not affiliated with our company. The summary
does not apply to a shareholder in relation to whom our company is or will be a
foreign affiliate within the meaning of the Income Tax Act, or who holds more
than 10 per cent of our company's common stock.
A shareholder will generally be considered to be holding shares
as capital property unless the shareholder holds the shares in the course of
carrying on a business, acquired the shares in a transaction that is an
adventure in the nature of trade, or holds the shares as "mark-to-market"
property for the purposes of the Income Tax Act. Shareholders to whom the shares
might not constitute capital property may elect, in certain circumstances, to
have such property treated as capital property by making the election permitted
by s. 39(4) of the Income Tax Act. Shareholders should consult their own tax
advisors if they have questions as to whether they in fact hold their shares of
our company's common stock as capital property. Shareholders who do not hold
their shares as capital property should consult their own tax advisors regarding
the consequences of the continuance to them.
THE TAX SUMMARIES IN THIS PROXY STATEMENT/PROSPECTUS PROVIDE
GENERAL INFORMATION ONLY. THEY ARE NOT MEANT TO PROVIDE ANY OF THE SHAREHOLDERS
OF OUR COMPANY WITH LEGAL OR TAX ADVICE, AND SHOULD NOT BE INTERPRETED IN THAT
MANNER.
35
THEY DO NOT COVER ALL OF THE TAX CONSEQUENCES THAT MIGHT BE
RELEVANT TO ALL OF THE SHAREHOLDERS OF OUR COMPANY, AND WILL NOT APPLY IN THE
SAME WAY TO ALL THE SHAREHOLDERS OF OUR COMPANY. SHAREHOLDERS OF OUR COMPANY ARE
STRONGLY ADVISED TO CONSULT WITH THEIR OWN TAX AND LEGAL ADVISORS REGARDING THE
UNITED STATES AND CANADIAN INCOME TAX CONSEQUENCES OF THE CONTINUANCE IN THEIR
PARTICULAR CIRCUMSTANCES.
Our Company
On the continuance, our company will be deemed under the
provisions of the Canada-United States Income Tax Convention to be resident in
the United States, and to no longer be resident in Canada. Under the Income Tax
Act, the change in our company's residence from Canada to the United States will
cause our company's tax year to end immediately before the continuance, and a
new tax year to begin at the time of the continuance. Furthermore, our company
will be deemed to have disposed of all of its property immediately before the
continuance for proceeds of disposition equal to the fair market value of the
property at that time. This deemed disposition may cause our company to incur
Canadian tax liability on the basis of the resulting deemed capital gains and
income.
Furthermore, our company will be subject to a separate
corporate emigration tax imposed by the Income Tax Act on corporations departing
from Canada. The emigration tax will be imposed on the amount by which the fair
market value of all of our company's property immediately before the continuance
exceeds the aggregate of its liabilities at that time and the amount of paid-up
capital on all of the issued and outstanding shares of our company's common
stock. Tax will be imposed at a rate of 5% on our company's net assets
determined under the foregoing formula, unless one of the main reasons for our
company changing its residence to the United States was to reduce the amount of
this corporate emigration tax or the amount of Canadian withholding tax paid by
our company, in which case the rate will be 25%.
Our company's management has reviewed our company's assets,
liabilities, paid-up capital, and tax loss carryforwards, and has advised
counsel that no Canadian federal taxes should be payable by our company as a
result of the continuance. This conclusion is based in part on determinations of
factual matters including the fair market value of our company's property, and
counsel expresses no opinion on such matters of factual determination.
Furthermore, facts underlying our company's assumptions and conclusions may also
change prior to the effective time of the continuance. Our company has not
applied to the CRA for a ruling as to the amount of federal taxes payable by our
company as a result of the continuance and does not intend to apply for such a
ruling given the factual nature of the determinations involved. In addition, our
company has not applied to the CRA for a determination of our company's past
losses, and does not intend to apply for such a determination prior to the
continuance. There can be no assurance that the CRA will accept the valuations
or the positions that our company has adopted in calculating the amount of
Canadian tax that will be payable upon the continuance, including our company's
calculation of the amount of historical tax losses that are available to offset
any taxes that would otherwise be payable upon the continuance. Accordingly,
there is no assurance that the CRA will conclude after the effective time of the
continuance that no Canadian federal taxes are due as a result of the
continuance or that the amount of Canadian federal taxes found to be due will
not be significant.
Due to our company's change in residence upon the continuance,
our company will no longer be subject to taxation in Canada on our worldwide
income. However, if our company carries on a business through a permanent
establishment located in Canada, as that expression is defined in the tax
convention, it will be subject to Canadian tax on business profits attributable
to the permanent establishment.
For the purposes of calculating any Canadian tax liability of
our company after the continuance, our company will be unable to deduct historic
losses incurred prior to becoming a Nevada corporation. The continuance will
therefore eliminate our company's past Canadian tax losses as a source of future
deductions.
Shareholders Resident in Canada
The following portion of the summary of Canadian federal tax
consequences applies to shareholders of our company who are resident in Canada
for the purposes of the Income Tax Act.
36
Shareholders of our company who continue to hold shares of our
company's common stock after the continuance will not be considered to have
disposed of those shares by reason only of the continuance. Accordingly, the
continuance will not cause these shareholders to realize a capital gain or loss
on their shares of our company's common stock, and will have no effect on the
adjusted cost base of their shares of our company's common stock. Following the
continuance, any dividends received by an individual shareholder on the shares
of our company's common stock will not be eligible for the gross-up and dividend
tax credit treatment generally applicable to dividends on shares of taxable
Canadian corporations. Any dividends received by a corporate shareholder on the
shares of our company's common stock will be included in calculating that
shareholder's income and will generally not be deductible. (As noted above, this
summary may not apply to a corporate shareholder of whom our company is or will
be a foreign affiliate). To the extent that United States withholding taxes are
imposed on dividends paid by our company to Canadian-resident shareholders,
Canadian resident shareholders will generally be entitled to claim a foreign tax
credit against their Canadian income tax.
The cessation of Canadian residence that occurs upon the
continuance will cause our shares of our company's common stock to cease at that
time to be a qualified investment for certain deferred income plans under the
Income Tax Act, namely trust governed by deferred profit sharing plans,
registered retirement savings plans, registered retirement income funds, and
registered education savings plans.
The tax consequences to such a deferred income plan of holding
shares of our company's common stock as non-qualified investments are complex,
and persons holding shares of our company's common stock in such a plan are
urged to consult with their own tax advisors regarding the potential
consequences. Generally speaking, any such deferred income plan that continues
to hold shares of our company's common stock after the shares cease to be
qualified investment will be subject to a 1% per month penalty tax calculated on
the cost of the shares. Registered retirement savings plans and registered
retirement income funds that continue to hold shares of our company's common
stock as non-qualified investments will be subject to tax on income earned from
and capital gains realized on the disposition of those shares. Registered
education savings plans that continue to hold shares of our company's common
stock as non-qualified investments are liable to be deregistered, thereby losing
their tax-free status altogether.
Canadian residents are required under the Income Tax Act to
report their foreign property holdings if the aggregate cost amount of their
foreign holdings exceeds CDN$100,000. Following the continuance, the shares of
our company's common stock will constitute foreign property for the purposes of
this rule and their cost amount will count towards the calculation of the
CDN$100,000 threshold.
Although the matter is not free from doubt, it is reasonable to
conclude based on administrative positions published by the CRA that the amount
paid to a shareholder who dissents to the continuance should be treated as
proceeds of disposition of that shareholder's shares of our company's common
stock. Accordingly, the dissenting shareholder would recognize a capital gain or
loss to the extent that the amount received as proceeds for the disposition of
that shareholder's shares exceeds or is less than the shareholder's adjusted
cost base of the shares.
Shareholders Resident in the United States
The following portion of the summary of Canadian federal tax
consequences applies to shareholders of our company who are resident in the
United States and not in Canada for the purposes of the Income Tax Act, and who
do not use or hold their shares of our company's common stock in the course of
carrying on a business in Canada.
Shareholders of our company who continue to hold shares of our
company's common stock after the continuance will not be considered for Canadian
tax purposes to have disposed of their shares of our company's common stock by
reason only of the continuance. Accordingly, the continuance will not cause
these shareholders to realize a capital gain or loss on their shares of our
company's common stock, and will have no effect on the adjusted cost base of
their shares of our company's common stock.
After the continuance, United States-resident shareholders of
our company will not be subject to Canadian withholding tax on dividends
received from our company.
37
After the continuance, the shares of our company's common stock
will not be taxable Canadian property to United-States resident shareholders,
and therefore will not cause such shareholders to be subject to taxation in
Canada on any subsequent disposition of the shares, provided that more than 50%
of the fair market value of the shares is not derived directly or indirectly
from one or any combination of real property situated in Canada, Canadian
resource properties, and timber resource properties.
Although the matter is not free from doubt, it is reasonable to
conclude based on administrative positions published by the CRA that the amount
paid to a shareholder who dissents to the continuance should be treated as
proceeds of disposition of that shareholder's shares of our company's common
stock. Based on this conclusion, no Canadian tax need ordinarily be withheld or
remitted on a payment made to a dissenting shareholder resident in the United
States.
MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
As described below, the consummation of the continuance is
contingent upon receipt by our company of a legal opinion from our company's
U.S. legal counsel. The following is a summary of the anticipated material U.S.
federal income tax consequences to U.S. holders, as described below, arising
from and relating to the continuance of our company.
This summary is for general information purposes only and does
not purport to be a complete analysis or listing of all potential U.S. federal
income tax consequences that may apply to a U.S. holder as a result of the
continuance. In addition, this summary does not take into account the individual
facts and circumstances of any particular U.S. holder that may affect the U.S.
federal income tax consequences of the continuance to such U.S. holder.
Accordingly, this summary is not intended to be, and should not be construed as,
legal or U.S. federal income tax advice with respect to any U.S. holder. U.S.
holders should consult their own financial advisor, legal counsel, or accountant
regarding the U.S. federal, state, local, and foreign tax consequences of the
continuance.
Scope of this Disclosure
Authorities
This summary is based on the Internal Revenue Code of 1986, as
amended, which we will refer to as the Code, Treasury Regulations, published
Internal Revenue Service ("IRS") rulings, published administrative positions of
the IRS, and U.S. court decisions that are applicable as of the date of this
proxy statement/prospectus. Any of the authorities on which this summary is
based could be changed in a material and adverse manner at any time, and any
such change could be applied on a retroactive basis. This summary does not
discuss the potential effects, whether adverse or beneficial, of any proposed
legislation that, if enacted, could be applied on a retroactive basis.
U.S. Holders
For purposes of this summary, a U.S. holder is a beneficial
owner of shares of our company that, for U.S. federal income tax purposes, is
(a) a citizen or resident of the U.S., (b) a corporation, or other entity
classified as a corporation for U.S. federal income tax purposes, that is
created or organized in or under the laws of the U.S. or any state thereof,
including the District of Columbia, (c) an estate if the income of such estate
is subject to U.S. federal income tax regardless of its source, or (d) a trust
if (i) such trust has validly elected to be treated as a U.S. person for U.S.
federal income tax purposes or (ii) a U.S. court is able to exercise primary
supervision over the administration of such trust and one or more U.S. persons
have the authority to control all substantial decisions of such trust.
Notwithstanding the foregoing, the term U.S. holder in this summary does not
include IDC.
Non-U.S. Holders
A non-U.S. holder is a beneficial owner of shares of our
company other than a U.S. holder. Subject to the discussion below under
"Information Reporting; Backup Withholding Tax," a non-U.S. holder generally
should not be subject to U.S. federal income tax on gain, if any, recognized
pursuant to the continuance, unless (a) such gain is effectively connected with
a U.S. trade or business of the non-U.S. holder (or, if the Convention Between
the United States of America and Canada with Respect to Taxes on Income and on
Capital, signed September 26, 1980, as amended, applies, such gain is attributable to a U.S. permanent
establishment of the non-U.S. holder) or, (b) in the case of gain recognized by
an individual non-U.S. holder, such individual is present in the U.S. for 183
days or more in the taxable year of the continuance and certain other conditions
are satisfied.
38
Non-U.S. holders should consult their own financial advisor,
legal counsel, or accountant regarding the U.S. federal, state, local, and
foreign tax consequences (including the potential application and operation of
any tax treaties) of the continuance.
U.S. Holders Subject to Special U.S. Federal Income Tax
Rules Not Addressed
Except as otherwise specifically stated, this summary does not
address the U.S. federal income tax consequences of the continuance to U.S.
holders that are subject to special provisions under the Code, including the
following U.S. holders: (a) U.S. holders that are tax-exempt organizations,
qualified retirement plans, individual retirement accounts, or other
tax-deferred accounts; (b) U.S. holders that are financial institutions,
insurance companies, real estate investment trusts, or regulated investment
companies or that are broker-dealers or dealers in securities; (c) U.S. holders
that have a "functional currency" other than the U.S. dollar; (d) U.S. holders
subject to the alternative minimum tax provisions of the Code; (e) U.S. holders
that own shares of our company as part of a straddle, hedging transaction,
conversion transaction, constructive sale, or other arrangement involving more
than one position; (f) U.S. holders that acquired shares of our company through
the exercise of employee stock options or otherwise as compensation for
services; (g) partners of partnerships that hold shares of our company or owners
of other entities classified as partnerships or "pass-through" entities for U.S.
federal income tax purposes that hold shares of our company; (h) U.S. holders
that own or have previously owned, directly or indirectly (applying the
ownership attribution rules of Section 958 of the Code), 10% or more of the
total combined voting power of all classes of the shares of our company entitled
to vote; and (i) U.S. holders that hold shares of our company other than as a
capital asset within the meaning of Section 1221 of the Code. U.S. holders that
are subject to special provisions under the Code, including U.S. holders
described immediately above, should consult their own financial advisor, legal
counsel or accountant regarding the U.S. federal, U.S. state and local, and
foreign tax consequences of the continuance.
Tax Consequences in Other Jurisdictions Not
Addressed
This summary does not address the U.S. state or local tax
consequences, or the tax consequences in jurisdictions other than the U.S., of
the continuance to U.S. holders. Each U.S. holder should consult its own
financial advisor, legal counsel, or accountant regarding the U.S. federal,
state, local, and foreign tax consequences of the continuance.
Transactions Not Addressed
This summary does not address the U.S. federal income tax
consequences to U.S. holders of transactions entered into prior to, concurrently
with, or subsequent to the continuance (regardless of whether any such
transaction is undertaken in connection with the continuance), including, but
not limited to, the following transactions: (a) any exercise of any stock
option, warrant, or other right or obligation to acquire shares of our company;
(b) any conversion of any note, debenture, or other debt instrument of our
company into shares of our company; or (c) any conversion of one class of shares
of our company into a different class of shares of our company.
U.S. Federal Income Tax Consequences of the
Continuance
The Continuance as a Tax-Deferred Reorganization
Qualification of the Continuance as a Tax-Deferred
Reorganization
It is a condition to the obligation of our company to complete
the continuance that our company receive a legal opinion from our U.S. legal
counsel to the effect that the continuance should qualify as a tax-deferred
reorganization under Section 368(a) of the Code, which we will refer to as a
reorganization. Such legal opinion will be based on certain factual assumptions
regarding, and the truth and accuracy of certain factual representations made
by, our company and will be subject to certain limitations. If one or more of
such assumptions or representations proves to be untrue or inaccurate, the
positions taken in such legal opinion and this summary may not apply, and the
actual U.S. federal income tax consequences of the continuance to U.S.
holders may be materially different than the U.S. federal income tax
consequences discussed in this summary.
39
It is anticipated that the continuance may qualify as a
reorganization under either or both of Section 368(a)(1)(F) of the Code (which
we will refer to as a Type F reorganization) or Section 368(a)(1)(D) of the Code
(which we will refer to as a Type D reorganization). The continuance will fail
to qualify as a Type F reorganization if holders of 1% or more of the shares of
our company exercise the right to dissent from the continuance. The continuance
may fail to qualify as a Type D reorganization if the continued company in
Nevada fails to acquire "substantially all" of the assets of our company in the
continuance. For ruling purposes, the IRS defines "substantially all" as 70% of
the gross assets and 90% of the net assets of our company. In determining if the
continued company in Nevada acquires the requisite amount of assets of our
company, payments of cash by us to any holders of shares of our company that
exercise the right to dissent from the continuance will not be considered as
assets acquired by the continued Company in Nevada. Accordingly, if holders of a
significant number of the shares of our company exercise the right to dissent
from the continuance, the continuance may fail to qualify as a Type D
reorganization.
The requirements that must be satisfied in order for the
continuance to qualify as either a Type F reorganization or a Type D
reorganization are complex, and each U.S. holder should consult its own
financial advisor, legal counsel, or accountant regarding these
requirements.
Assuming that the continuance qualifies as a reorganization,
the following U.S. federal income tax consequences should result to U.S.
holders: (a) no gain or loss should be recognized by a U.S. holder that holds
shares of our continued company, (b) the aggregate basis of shares of our
continued company received by a U.S. holder in the continuance should be equal
to the aggregate basis of our company shares exchanged therefor by such U.S.
holder, and (c) the holding period of shares of our continued company received
by a U.S. holder in the continuance should include the holding period of our
company shares exchanged therefor by such U.S. holder.
Application of Section 367(b) May Result in the Recognition
of a Deemed Dividend or Gain
Section 367(b) of the Internal Revenue Code and the related
Treasury Regulations may require the recognition of a deemed dividend or gain on
the shares of certain U.S. holders for various inbound reorganizations. The
continuance of our company to Nevada should be considered an inbound
reorganization subject to the rules of Section 367(b).
Under Section 367(b) and the related Treasury Regulations, a
U.S. holder that owns ten percent (10%) or more of a foreign corporation and any
foreign corporation with respect to which a U.S. holder is a ten percent (10%)
U.S. shareholder, must include into income as a deemed dividend all earnings and
profits of the corporation attributable to their stock in an inbound continuance
or reorganization.
Therefore, if our company had earnings and profits prior to the
continuance, a U.S. holder that owns ten percent (10%) or more of our shares and
any foreign corporation with a ten percent (10%) U.S. shareholder would have to
recognize income as a deemed dividend on the earnings and profits attributable
to their stock. We believe our company does not have any earnings and profits as
described in the Internal Revenue Code and therefore the imputation of a deemed
dividend should not be applicable for a U.S. holder that owns ten percent (10%)
or more of our shares and any foreign corporation with a ten percent (10%) U.S.
shareholder.
Under Section 367(b) and the related Treasury Regulations, a
U.S. holder that owns less than ten percent (10%) of a foreign corporation that
is involved in an inbound reorganization subject to Section 367(b) will be
required to recognize gain on their shares, if any, on the transaction. The U.S
holder is not entitled to recognize a loss on their shares should their cost
basis exceed the value of their shares upon the inbound reorganization. A U.S.
holder that owns less than ten percent (10%) may elect to include a deemed
dividend amount of all earnings and profits attributable to their shares or
report no deemed dividend should the corporation have no earnings and profits,
rather than recognize gain on their shares. If a less than ten percent (10%)
wishes to make an election to report the all earnings and profits amount or the
fact there are no earnings and profits, rather than recognize gain on their
shares, they must request a Section 367(b) statement related to the earnings and
profits of the company to be attached to the U.S. holders U.S. tax return.
40
Finally, certain U.S. holders that own less than ten percent
(10%) of our company stock and whose shares have a value of less than Fifty
Thousand Dollars ($50,000) on the date of the continuance are exempt from all
deemed dividend income and gain recognition as a result of Section 367(b).
Dissenting U.S. Holders
A U.S. holder that exercises the right to dissent from the
continuance should recognize gain or loss in an amount equal to the difference,
if any, between (i) the amount of cash received by such U.S. holder in exchange
for the shares of our company (other than amounts, if any, that are or are
deemed to be interest for U.S. federal income tax purposes, which amounts will
be taxed as ordinary income) and (ii) the tax basis of such U.S. holder in the
shares of our company.
Such gain or loss should be capital gain or loss, which will be
long-term capital gain or loss if the shares of our company are held for more
than one year. Preferential tax rates apply to long-term capital gains of a U.S.
holder that is an individual, estate, or trust. There are currently no
preferential tax rates for long-term capital gains of a U.S. holder that is a
corporation. Deductions for capital losses and net capital losses are subject to
complex limitations. For a U.S. holder that is an individual, estate, or trust,
capital losses may be used to offset capital gains and up to U.S.$3,000 of
ordinary income. An unused capital loss of a U.S. holder that is an individual,
estate, or trust generally may be carried forward to subsequent taxable years,
until such net capital loss is exhausted. For a U.S. holder that is a
corporation, capital losses may be used to offset capital gains, and an unused
capital loss generally may be carried back three years and carried forward five
years from the year in which such net capital loss is recognized.
Information Reporting: Backup Withholding Tax
Taxable payments made pursuant to the continuance generally
will be subject to information reporting and backup withholding tax, at the rate
of 28%, if a U.S. holder (a) fails to furnish such U.S. holder's correct U.S.
taxpayer identification number (generally on Form W-9), (b) furnishes an
incorrect U.S. taxpayer identification number, (c) is notified by the IRS that
such U.S. holder has previously failed to properly report items subject to
backup withholding tax, or (d) fails to certify, under penalty of perjury, that
such U.S. holder has furnished its correct U.S. taxpayer identification number
and that the IRS has not notified such U.S. holder that it is subject to backup
withholding tax. However, U.S. holders that are corporations generally are
excluded from these information reporting and backup withholding tax rules. Any
amounts withheld under the U.S. backup withholding tax rules will be allowed as
a credit against a U.S. holder's U.S. federal income tax liability, if any, or
will be refunded, if such U.S. holder furnishes required information to the IRS.
Each U.S. holder should consult its own financial advisor, legal counsel, or
accountant regarding the information reporting and backup withholding tax
rules.
No IRS Ruling
No ruling from the IRS has been requested, or will be obtained,
regarding the U.S. federal income tax consequences of the continuance to U.S.
holders. Neither this summary nor the legal opinion provided by U.S. legal
counsel are binding on the IRS, and the IRS is not precluded from taking a
position that is different from, and contrary to, the positions taken in this
summary or such legal opinion. In addition, because the authorities on which
this summary and such legal opinion are based are subject to various
interpretations, the IRS and the U.S. courts could disagree with one or more of
the positions taken in this summary or such legal opinion.
ACCOUNTING TREATMENT
For United States and Canadian accounting purposes, the
Continuation of our company from an Alberta corporation to a Nevada corporation
represents a non-substantive exchange to be accounted for in a manner consistent
with a transaction between entities under common control. All assets,
liabilities, revenues and expenses will be reflected in the accounts of TransAKT
Nevada based on existing carrying values at the date of the exchange. The
historical comparative figures of TransAKT will be those of TransAKT as an
Alberta company.
41
APPLICATION OF SECURITIES LAWS
Currently, we are a reporting issuer in the Provinces of
Alberta and British Columbia and are required to prepare our annual and interim
consolidated financial statements in accordance with Canadian generally accepted
accounting principles (Canadian GAAP).
We are also a foreign private issuer in the United States and
are required to file an Annual Report on Form 20-F (a Form 20-F Annual Report)
each year with the SEC. Our consolidated financial statements included on our
Form 20-F Annual Report are prepared in accordance with United States Generally
Accepted Accounting Principles (US GAAP).
Upon completion of the Continuation, we will be required to
prepare our consolidated financial statements in accordance with United States
Generally Accepted Accounting Principles (US GAAP) in the United States. We
expect to file our audited annual financial statements with the SEC on Annual
Reports on Form 10-K and our unaudited interim financial statements with the SEC
on Quarterly Reports on Form 10-Q.
Additionally, if we meet certain securities regulatory
requirements, specifically National Instrument 71-102, it is our intention to
become a "foreign reporting issuer" and satisfy the Canadian continuous
disclosure requirements by preparing our financial statements solely in
accordance with U.S. standards. The Continuation of our company into the State
of Nevada will aid us in meeting the regulatory requirements of National
Instrument 71-102.
INTEREST OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO
BE ACTED UPON
Except as disclosed elsewhere in this Registration Statement,
since January 1, 2010, being the commencement of our last completed financial
year, none of the following persons has any substantial interest, direct or
indirect, by security holdings or otherwise in any matter to be acted upon:
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1.
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any director or officer of our corporation;
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2.
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any proposed nominee for election as a director of our
corporation; and
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3.
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any associate or affiliate of any of the foregoing
persons.
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The shareholdings of our directors and officers are listed
below in the section entitled "Principal Shareholders and Security Ownership of
Management". To our knowledge, no director has advised that he intends to oppose
the increase to our authorized share capital, as more particularly described
herein.
SECURITY OWNERSHIP
The following table sets out the percentage of outstanding common
shares owned by our company’s directors and executive officers that are
entitled to vote on each matter properly brought before the meeting. As stated
in the table, our directors and executive officers as a group own 10.8%, or
11,050,000 shares, of our common stock out of the 102,645,120 shares of our
common stock issued and outstanding as of September 10, 2010. In order to consummate
the Continuation, the Alberta
Business Corporation Act
requires that
two-thirds, or 66.7%, of the shares entitled to vote at the meeting as of the
record date of October 15, 2010 are voted in support of the special resolution
to approve the continuance. Our directors and executive officers intend to vote
their shares in favor of the continuance.
42
Name and Address of Beneficial Owner
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Amount and Nature of
Beneficial
Ownership
|
Percentage
of
Class
(1)
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James Wu
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5,000,000
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4.9%
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Taifen Day
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Nil
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Nil
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Cheng Chun-Chih
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5,000,000
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4.9%
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Dr. Shiau Tzong-Huei
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1,000,000
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1.0%
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Tseng Ming-Huang
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50,000
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Nil
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Directors and Executive Officers as a
Group
(1)
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11,050,000 common shares
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10.8%
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Hsieh Chi-Hsien
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7,650,000
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7.5%
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Lin Yu-Hsiung
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10,000,000
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9.7%
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Pan Yu-Jung
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6,000,000
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5.9%
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(1) Beneficial ownership is determined in accordance with the
rules of the SEC and generally includes voting or investment power with respect
to securities. Shares of common stock subject to options currently exercisable,
or exercisable within 60 days of September 10, 2010 are deemed outstanding for
computing the percentage of the person holding such option or warrant but are
not deemed outstanding for computing the percentage of any other person. As
of September 10, 2010, we had no options or warrants outstanding.
(2) Percentage based on 102,645,120 shares of common stock outstanding
on September 10, 2010.
EXECUTIVE COMPENSATION
The particulars of the compensation paid to the following
persons:
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(a)
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our principal executive officer;
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(b)
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each of our two most highly compensated executive
officers who were serving as executive officers at the end of the years
ended December 31, 2009 and 2008; and
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(c)
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up to two additional individuals for whom disclosure
would have been provided under (b) but for the fact that the individual
was not serving as our executive officer at the end of the years ended
December 31, 2009 and 2008,
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43
who we will collectively refer to as the Named Executive
Officers, are set out in the following summary compensation table, except that
no disclosure is provided for any named executive officer, other than our
principal executive officers, whose total compensation did not exceed $100,000
for the respective fiscal year:
Name and Principal Position
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Year
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Annual Compensation
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Salary
($)
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Bonus
($)
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Other Annual
Compensation
($)
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James Wu
President & Chief Executive
Officer
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2008 and
2009
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90,000
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J.T. Wang
Vice President of Asia
Operations
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2008 and
2009
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40,000
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Taifen Day
Chief Financial Officer
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2008 and
2009
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-
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-
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-
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2009 Grants of Plan-Based Awards
We did not have any equity and non-equity awards granted
pursuant to plans to the named executives as of December 31, 2009.
Outstanding Equity Awards at Fiscal Year End
We did not have any outstanding equity awards granted to the
named executives in as of December 31, 2009.
Option Exercises and Stock Vested
During the fiscal year ended December 31, 2009 there were no
options exercised by our Named Executive Officers.
Compensation of Directors
We do not have any agreements for compensating our directors
for their services in their capacity as directors, although such directors are
expected in the future to receive stock options to purchase shares of our common
stock as awarded by our board of directors. We did not pay any compensation to
our non-employee directors during the fiscal year ended December 31, 2009.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. We have no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the board of directors or
a committee thereof.
Indebtedness of Directors, Senior Officers, Executive
Officers and Other Management
None of our directors or executive officers or any associate or
affiliate of our company during the last two fiscal years, is or has been
indebted to our company by way of guarantee, support agreement, letter of credit
or other similar agreement or understanding currently outstanding.
44
ELECTION OF DIRECTORS
The persons named as proxy holders in the enclosed proxy have
been selected by the Board of Directors to serve as proxy and will vote the
Shares represented by valid proxies at the Meeting and any adjournments thereof.
It is indicated that, unless otherwise specified in the proxy, they intend to
vote for the election as director each of the persons named as a nominee listed
below under "Nominees for Director" unless authority to vote in the election of
directors is withheld on each proxy. Each nominee is currently a member of the
Board of Directors. Each duly elected director will hold office until the 2011
Annual Meeting of Shareholders or until their successor shall have been elected
and qualified. Although the Board of Directors does not contemplate that a
nominee will be unable to serve, if such situation arises prior to the Meeting,
the persons named in the enclosed proxy will vote for the election of such other
person as may be nominated by the Board of Directors.
Our bylaws provide for our board of directors to consist of at
least three directors. Each director is elected by a plurality of votes at each
annual meeting. Currently, the Board of Directors consists of four
directors.
The nominees for election at the special and annual meeting to
fill the positions on our board of directors are James Wu, Cheng Chun-Chih, Dr.
Shiau Tzong-Huei and Tseng Ming-Huang.
Our board of directors unanimously recommends a vote "FOR" the
nominees: James Wu, Cheng Chun-Chih, Dr. Shiau Tzong-Huei and Tseng
Ming-Huang.
For further information, please refer to the heading below
"Nominees for Director".
Nominees for Director
The Board of Directors unanimously recommends a vote
FOR
the election of the nominees listed below.
For each of the Company's directors, the following table sets
forth their names, ages, principal occupations, other directorships of public
companies held by them and length of continuous service as a director:
Name
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Age
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Position
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James Wu
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57
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Chairman, Chief Executive Officer, President
and Director
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Cheng Chun-Chih
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64
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Director (Chairman of Taiwan Halee
International Co. Ltd.)
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Dr. Shiau Tzong-Huei
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55
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Director (Chief Technical Officer of Taiwan
Halee International Co. Ltd. and Chairman of TransAKT Taiwan Corp.)
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Tseng Ming-Huang
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41
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Director
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Business Experience
The following is a brief account of the education and business
experience during at least the past five years of each director, indicating the
director's principal occupation during that period, and the name and principal
business of the organization in which such occupation and employment were
carried out.
45
James Wu -
Chairman, Chief Executive Officer,
President and Director
Mr. James Wu served as President of IP Mental Inc.
from 1997 to 2006. During his tenure at IP Mental Inc., Mr. Wu oversaw the
development of a line of VoIP hardware and was part of the development team of
the proprietary U&Me VoIP network. Mr. Wu has over twenty (20) years of
experience in the information technology and telecommunication business. He has
also served as the founder of Cellstar South Africa and Anstek Electronics South
Africa, where he successfully grew these businesses. He was also an agent for
Asus, COMPEL and Motorola Computer and Cellular Handsets in South Africa. Mr. Wu
has been our President since 2004.
Cheng Chun-Chih-
Director (Chairman of Taiwan
Halee International Co. Ltd.)
Mr. Cheng is the Chairman of Taiwan Halee International Co.
Ltd., which was acquired by us for US$5MM on November 15, 2006, and has served
in this position since 1997. Prior to joining HTT Mr. Cheng was a consultant to
the Economy Department of Taiwan on small and medium industry.
Dr. Shiau Tzong-Huei-
Director (Chief
Technical Officer of Taiwan Halee and Chairman of TransAKT Taiwan Corp.)
Dr. Shiau holds a Ph.D in Computer Sciences from the University
of Wisconsin Madison, an MSc in Mathematics from the John Hopkins University and
a BSc in Mathematics from the National Taiwan University. Dr. Shiau has been a
director of Taiwan Halee since 2003, is a specialist in digital cordless
switching and has directed the engineering team at the Hsinchu Science Park
(HSP) for more than fifteen (15) years. Established in December 1980, HSP
leads the high-tech industry as the most respected science park created by the
Taiwanese government. Dr. Shiau is the founder and current Chief Technical
Officer of Computer & Communications Associates, INC. (now UWIN
Technologies), a research and development oriented company. The products
developed by his team include advanced cordless PBX , cordless Skype phones,
cordless VoIP phones, and wireless home automations.
Tseng Ming-Huang-
Director
Mr. Tseng was a founder and currently serves as CEO of CeraMicro
Technology Corp. which was started in 2003. CeraMicro
is a leading RF
solution provider of the wireless communications industry, focused on the design
and manufacturing of system-level packaging applications (SiP, System-in-Package)
and IEEE 802.15.4 standard "ZigBee" wireless network chip modules. From 2001
to 2003, he served as the general manager of international strategy investment
for the Wise Group Inc.
Director Independence and Board Meetings
We currently act with four (4) directors, consisting of James
Wu, Cheng Chun-Chih, Dr. Shiau Tzong-Huei and Tseng Ming-Huang. We have
determined that Mr. Tseng Ming-Huang is an independent directors as defined in
FINRAAQ Marketplace Rule 4200(a)(15).
Our board of directors held no formal meetings during the year
ended December 31, 2009. All proceedings of the board of directors were
conducted by resolutions consented to in writing by all the directors and filed
with the minutes of the proceedings of the directors. Such resolutions consented
to in writing by the directors entitled to vote on that resolution at a meeting
of the directors are, according to the Alberta
Business Corporations Act,
as valid and effective as if they had been passed at a meeting of the
directors duly called and held. Our audit committee was struck on March 6, 2009
and as such did not hold any meetings in 2009.
Audit Committee
Currently our audit committee consists of Mr. James Wu and Mr.
Cheng Chun-Chih, none of whom are independent.
46
During fiscal 2009 aside from quarterly review teleconferences,
there were no meetings held by this committee. The business of the audit
committee was conducted though these teleconferences and by resolutions
consented to in writing by all the members and filed with the minutes of the
proceedings of the audit committee.
Our board of directors has determined that it does not have an
audit committee member that qualifies as an audit committee financial expert
as defined in Item 407(d)(5)(ii) of Regulation S-K. We believe that the audit
committee members are capable of analyzing and evaluating our financial
statements and understanding internal controls and procedures for financial
reporting. In addition, we believe that retaining an independent director who
would qualify as an audit committee financial expert would be overly costly
and burdensome and is not warranted in our circumstances given the early stages
of our development and the fact that we have not generated revenues to date.
Nomination Process
As of December 31, 2009, we did not effect any material changes
to the procedures by which our shareholders may recommend nominees to our board
of directors. Our board of directors does not have a policy with regards to the
consideration of any director candidates recommended by our shareholders. Our
board of directors has determined that it is in the best position to evaluate
our companys requirements as well as the qualifications of each candidate when
the board considers a nominee for a position on our board of directors. If
shareholders wish to recommend candidates directly to our board, they may do so
by sending communications to the president of our company at the address on the
cover of this proxy/registration statement.
Committees of the Board
We currently do not have nominating or compensation committees
or committees performing similar functions nor do we have a written nominating
or compensation committee charter. Our board of directors does not believe that
it is necessary to have such committees because it believes the functions of
such committees can be adequately performed by our board of directors.
Family Relationships
There are no family relationships between any director or
executive officer.
Involvement in Certain Legal Proceedings
Our directors and executive officers, promoters or control
persons have not been involved in any of the following events during the past
ten years:
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a.
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A petition under the Federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or property of
such person, or any partnership in which he was a general partner at or
within two years before the time of such filing, or any corporation or
business association of which he was an executive officer at or within two
years before the time of such filing;
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b.
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Such person was convicted in a criminal proceeding or is
a named subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
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c.
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Such person was the subject of any order, judgment, or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:
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i.
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Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director
or employee of any investment company, bank, savings and
loan association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity;
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47
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ii.
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Engaging in any type of business practice; or
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iii.
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Engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection with any violation
of Federal or State securities laws or Federal commodities
laws;
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d.
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Such person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any Federal or
State authority barring, suspending or otherwise limiting for more than 60
days the right of such person to engage in any activity described in
paragraph (f)(3)(i) of this section, or to be associated with persons
engaged in any such activity;
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e.
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Such person was found by a court of competent
jurisdiction in a civil action or by the Commission to have violated any
Federal or State securities law, and the judgment in such civil action or
finding by the Commission has not been subsequently reversed, suspended,
or vacated;
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f.
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Such person was found by a court of competent
jurisdiction in a civil action or by the Commodity Futures Trading
Commission to have violated any Federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated;
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g.
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Such person was the subject of, or a party to, any
Federal or State judicial or administrative order, judgment, decree, or
finding, not subsequently reversed, suspended or vacated, relating to an
alleged violation of:
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i.
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Any Federal or State securities or commodities law or
regulation; or
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ii.
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Any law or regulation respecting financial institutions
or insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease-and-desist order, or removal or
prohibition order; or
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iii.
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Any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity; or
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h.
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Such person was the subject of, or a party to, any
sanction or order, not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the
Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or
any equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a
member.
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Compliance with Section 16(a) of the Securities Exchange Act
of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
our executive officers and directors and persons who own more than 10% of our
common stock to file with the SEC initial statements of beneficial ownership,
reports of changes in ownership and annual reports concerning their ownership of
our common stock and other equity securities, on Forms 3, 4 and 5 respectively.
Executive officers, directors and greater than 10% shareholders are required by
the SEC regulations to furnish us with copies of all Section 16(a) reports that
they file.
Based solely on our review of the copies of such forms received
by us, or written representations from certain reporting persons, we believe
that during fiscal year ended December 31, 2009, all filing requirements
applicable to our officers, directors and greater than 10% percent beneficial
owners were complied with.
48
Director Independence
Currently, our Board of Directors consists of four (4)
directors, consisting James Wu, Cheng Chun-Chih, Dr. Shiau Tzong-Huei and Tseng
Ming-Huang. We have determined that only Tseng Ming-Huang qualifies as
"independent" as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under
the Securities Exchange Act of 1934, as amended.
Transactions with Related Persons, Promoters and Certain
Control Persons
Except as described below, no director, executive officer,
principal shareholder holding at least five percent of our common shares, or any
family member thereof, had any material interest, direct or indirect, in any
transaction, or proposed transaction, since the beginning of our year ended
December 31, 2009, or in any currently proposed transaction, in which the amount
involved in the transaction exceeded or exceeds the lesser of $120,000 or one
percent of the average of our total assets at the year end for the last two
completed fiscal years.
The Companys officers and shareholders have advanced funds
to the Company for working capital purpose. The Company has not entered into
any agreement on the repayment terms for these advances. As of June 30, 2010
and December 31, 2009, there were $561,214 and $435,225 advances outstanding,
respectively.
The Company also had loans payable to five shareholders amounted
to $60,400 as of June 30, 2010 and December 31, 2009. The unsecured loans bear
interest at the rate of 12% per annum, and due on May and June 2010.
Employees
We have twenty nine (29) employees in Taiwan in various capacities
and also use independent consultants for all corporate activities. We currently
have three (3) independent consultants in addition to our executive Board members
that carry out day-to-day operations. One consultant takes care of our sales
efforts, the other takes care of overseeing day-to-day operations and the third
takes care of investor relations activities. We have no significant employees
performing executive functions other than the officers described above.
DESCRIPTION OF BUSINESS
History and Development of the Company
We were incorporated in the Province of British Columbia on
December 10, 1996 as Green Point Resources Inc. On October 18, 2000, we changed
our name to Wildcard Wireless Solutions Inc. On June 30, 2001, we filed Articles
of Continuance in the Province of Alberta and became an Alberta corporation. On
that same day, we conducted an amalgamation with Wildcard Communications Canada
Inc., an Alberta corporation, our wholly-owned subsidiary, wherein Wildcard
Communications Canada was merged into Wildcard Wireless Solutions Inc. On June
20, 2003, we changed our name to TransAKT Corp. We changed our name from
TransAKT Corp. to TransAKT Ltd. on July 12, 2006. Our registered office is
located at No.3, Lane 141, Sec. 3, Beishen Rd., Shenkeng Township Taipei County
222, Taiwan (R.O.C.).
We initially operated principally as a research and development
company. Initial seed capital was directed toward areas of product research and
development, patent filings and administration. We focused on the research,
design, development and manufacturing of mobile payment terminals. However, the
sale of these payment terminals reached its end-of life due to changes in
cellular phone regulations and limited acceptance in the marketplace.
In October 2004, we purchased the existing business and certain
assets of IP Mental Inc., a Taiwan-based Voice over Internet Protocol (VoIP)
hardware and software provider. VOIP is a system of allowing telephone like
communication over an existing internet network as opposed to traditional
telephone lines. In connection with our acquisition of the assets of IP Mental
Inc., we issued shares of our common stock that were valued at USD$2,944,000 and
advanced them USD$500,000 by way of a promissory note. Other capitalized costs
in the transaction were $363,618 which included a finders fee in stock of
$294,400 and miscellaneous acquisition costs.
49
On May 19, 2006, IP Mental Inc. settled its debt with us in the
amount of $505,150 in exchange for the return of 9,300,000 of our common shares.
Our outstanding shares were reduced correspondingly.
On November 15, 2006, we acquired Taiwan Halee International
Co. Ltd. (HTT), a Taiwan-based leading designer, manufacturer and distributor
of telecommunications equipment, including specialized VoIP-compatible phone
systems. We acquired HTT, for the sum of USD$5,000,000. The purchase price was
paid by the delivery to the shareholders of HTT of: (i) USD$200,000 in cash;
(ii) USD$300,000 in a promissory note from us due in cash six (6) months after
closing; (iii) 50,000,000 of our common voting shares, with a deemed value of
USD$0.09 per share; and (iv) 5,000,000 of our common voting shares issued to Mr.
James Wu as performance-based compensation.
Other than the acquisitions of IP Mental Inc. and HTT, we have
generally only had capital expenditures on computer equipment, tools and dies,
patents, and trademarks. These acquisitions were intended to enable us to remain
competitive in the marketplace. Our current business is the design, development
and manufacturing of telecommunications equipment, including VoIP compatible
telephone systems and multi-line cordless telephone systems.
We have mainly financed our operations through the use of debt
and the issuance of equity in private placements. In October 2006, we repaid a
loan we took against inventory produced to fund our first commercial run of our
payment terminals. We settled the loan for USD$90,000 using funds raised from
the private placement of our shares. In the short-term and until our sales are
sufficient to fund operations, we will continue to finance our operations
through debt or equity financing.
Since 2006 we have continued our business of distribution of
brand name electronics in Taiwan without material changes. We anticipate that
once we complete our continuation into Nevada, we will attempt to raise
additional funds and expand our operations into mainland China.
Business Overview
Operations and Principal Activities
We began operations in 1997 and commercialized our first
product line of mobile point-of-sale (POS) terminals in April 2003. With the
use of cellular phones, these terminals allow merchants to accept payments
anywhere, anytime. In October 2004, through the acquisition of the business and
certain assets of IP Mental Inc., we entered the VoIP business. We currently
offer a range of telecommunications products including VoIP equipment and
advanced multi-line cordless phone systems.
We sustained operating losses for each of the fiscal years
ended December 31, 2009 and 2008 of ($249,643) and ($420,776), respectively. In
addition, we expect to incur an operating loss in 2010.
We have operated principally as a research and development
company since our inception. Initial seed capital has been directed toward areas
of product research and development, patent filings and administration. We have
now completed development of our initial products and have entered into the
sales and distribution phase. Our current business is the design, development
and manufacturing of mobile wireless solutions and telecommunications equipment
and solutions for enterprise and consumer markets including VoIP solutions in
Taiwan and the Far East. We anticipate that in 2010, our business will include
the design, manufacturing, and distribution of telecommunications equipment,
including specialized VoIP compatible phone systems and multi-line cordless
telephone systems, and the distribution of name brand telecommunications
equipment including Panasonic, Sanyo, Siemens, etc. in Taiwan and the Far
East.
Principal Products and Services
Our mobile point-of-sale (MPOS) products are no longer
available. HTTs products are currently distributed in Taiwan and we plan to
expand distribution to China, other regions of Asia and North America. We have
had limited revenues in the last four (4) fiscal years as we only began
marketing our VoIP products in October 2004.
50
Our first product was the TransAKT. The TransAKT is a
wireless point-of-sale (WPOS) device that clips onto the back of certain
Motorola cellular phones providing the user with a mechanism for swiping cards
with magnetic stripes (e.g., credit cards, debit cards, etc.) for conducting
wireless commercial transactions. Once attached, the phones are used to send
transaction information over the cellular network to the processing center for
credit approval. This application provides mobile merchants, business
professionals and consumers with voice, data and transactional capability all in
one handheld device. TransAKT was never adapted for use with other types of
cellular phones and is no longer offered.
We currently offer a product line consisting of VoIP products
and solutions. These products allow communication over the Internet at reduced
communication rates. Our products range from Universal Serial Bus (USB) plug
and play phones to stand alone phone adapters and phones. We currently offer a
range of telecommunication and VoIP products developed by HTT, including a USB
dongle adapter for use with a DECT phone with Skype, HTTs SkyDECT cordless
phone system that integrates use of VoIP, a traditional telephone based on a
landline and EZDECT specialized multi-line cordless phone systems.
Principal Markets
It is not our intention to engage in the capital and management
intensive industry of manufacturing our products. We intend to outsource our
manufacturing, warehousing and distribution. Following this approach, we do not
expect that we will experience volatility in our gross margins because all
outsourcing will be undertaken on a fixed contract basis. We have spent
considerable time identifying suitable international engineering and
manufacturing firms.
We are not generally restricted to manufacturers for our
products. To date, we have been able to select from a number of potential
contractors and manufacturers and have been able to contract with well-organized
firms that have a proven track record. Our MPOS products are no longer in
production and our VoIP products are being manufactured in Taiwan and China.
We distribute HTTs own branded products, in addition to brand
name telecommunication equipment from brands including Panasonic, Sanyo, Sharp
and Siemens in Taiwan to more than 650 wholesale and retail outlets. HTT has
distribution and agency agreements with major name brand manufacturers Sanyos
communication lines, and Siemens CPE products in Taiwan.
Sources and Availability of Raw Materials
All raw materials for our products are sourced from China,
Taiwan, Japan, German and the United States. Due to the fact that our products
use computer components, the price of these components can be highly volatile
and are subject to the risk of obsolescence. In order to control costs and the
risk of obsolescence, we contract with a manufacturer at a set price for the
building of our product over a number of terminals. The manufacturer becomes
responsible for making sure enough inventory is in stock, and if not available,
quickly implements minor product changes to allow for components to be replaced.
This process is conducted for all manufacturing of our products.
Marketing Channels
We are no longer marketing the MPOS products. For VoIP, we plan
to align ourselves with Internet Service Providers (ISPs), computer retailers,
telephone companies, and computer manufacturers to capitalize on the existing
distribution infrastructure. These large established partners normally will fund
and support extensive domestic and international marketing programs for our
products. We plan to develop new businesses and joint ventures and to enter into
distribution agreements to diversify our products, clients and geographic
revenue base. We have recruited a senior sales executive from a major consumer
electronics corporation to help us develop the Asian market for our
products.
Our VoIP marketing is being conducted through the association
with distribution partners in several countries on a global basis. We attend
trade shows to market to the distributors and once signed we provide them with
marketing and technical support in order to enhance their sales.
51
The marketing of the VoIP products is targeted at consumers and
small businesses that are calling internationally on a regular basis. With our
products, consumers can have the benefit of either calling free inside our
network or at reduced rates outside the network.
Patents or Licenses
Patent rights, copyrights, trademarks, trade secrets and
similar intellectual property are important to our success. We rely on patent,
trademark and copyright law, trade secret protection and confidentiality or
license agreements with our employees, customers, partners and others to protect
their proprietary rights. Our patent application for our VoIP technology filed
in United States was cancelled and we are no longer pursuing any patents for
this technology. In addition, all our intellectual properties relating to the
MPOS technologies have become obsolete and were written off on December 20,
2006.
Competitive Position
Competition in the cordless phone market is currently
decreasing. Innovation in this market is focusing on combining different
technologies in new ways. Our research and development team is focusing on
creating more technologically advanced products.
We currently generate revenues, at least in part, through the
distribution of name brand products in Taiwan. Our management believes that this
provides us with a valuable perspective of some of the latest developments and
trends in technology and design. It also may provide us with relationships that
can be utilized for globalizing some of our new products. For example, we have
formed a partnership with SANYO to develop a Wi-Fi phone and a GSM/WiFi dual
mode phone.
We do not rely on a single revenue base or third parties for
revenue generation. We also have kept our marketing, allowances or rebates to a
minimum. Our management believes that these factors will allow us to effectively
compete in the industry and keep costs minimal, thereby allowing us to focus on
intellectual property development.
The VoIP industry is relatively young and several of the more
well-known players have much greater resources than we do. They have used their
resources to get their name out to the public and become leaders in the
industry. Some of the more well-known companies are Vonage, Packet 8, and Net 2
Phone. Our current share of the global VoIP market is negligible.
Our main focus is on telecommunications equipment, including
VoIP hardware and multi-line cordless telephone systems. We also plan to
distribute other name-brand telecommunications equipment in Taiwan, China and
other regions throughout Asia. These areas are marked by strong competition and
rapid change. The following summarizes our current competitors.
VTech
VTech was founded in Hong Kong in October 1976 by two (2)
engineers. VTech began its operations with 2,000 sq. ft. of office space and a
staff of forty (40) employees. Sales in VTechs first year were under US$1
million. Today, VTech has worldwide operations and approximately 20,000
employees. In fiscal year 2006, VTech recorded annual sales of US$1 billion.
In 1984, VTech introduced its first self-designed satellite
receiver. By 1991, VTech had designed a new generation of high frequency
cordless telephones employing microwave technology - the 900MHz cordless
phone.
Subsequently, VTech introduced several new generations of
900MHz cordless phones and has established itself as a leading provider of
high-frequency cordless phones in the US.
In 1988, to assist in business expansion, VTech moved its
production facilities to Dongguan, Guangdong province in southern China.
Currently, VTech has two (2) manufacturing sites in China, located at Houjie
town and Liaobu Science Park, within hours of its headquarters in Hong Kong.
52
VTech acquired the consumer phone business of Lucent
Technologies, as well as a license to sell AT&T branded products on wireline
telephones and accessories in the US and Canada in April 2000. These
transactions allowed VTech to expand its product range to be sold under both the
"VTech" and the "AT&T" brand names.
In August of 2002, VTech launched the industry's first 5.8GHz
cordless phone in the US. Furthermore, VTech amended the AT&T brand license
agreement in which the revised terms granted VTech exclusive rights to sell
AT&T-branded wireline telephone products and accessories in Greater China,
and non-exclusive rights in Europe, Mexico, Central and South America.
Uniden
Uniden's principal activities are to develop, manufacture and
sell telecommunication equipments and related products. Its operations are
carried out through the following divisions: telephone-related equipment;
wireless communication and applied equipment; digital home appliances and
others. The telephone-related equipments division deals in cordless phones and
mobile phones. The wireless communication and applied equipment division deals
in handheld walkie-talkies radios, radar detectors and scanners. The other
activities include marine electronics, CB radios and business phones
manufacturing. Uniden develops its products in Japan and China and has
manufacturing facilities in Asia. Its North American subsidiary manufactures and
markets wireless consumer products for sale in North, Central, and South
America. Uniden had sales of $729 million in 2006.
Advance Wireless Technology Corp.
Advance Wireless Technology Corp. (Advance Wireless) was
established in 2000 as a design house engaged in the development of wireless
communication and networking products. Its founders were predominantly from a
Taiwan-based communication company, Vidar SMS (Sun Moon Star) Group, which
develops and markets pagers and cellular phones.
Over the years, Advance Wireless has expanded its core wireless
technologies to include Bluetooth products, GSM phone modules, wireless PBXs,
home gateways and VoIP products such as phones and gateways. Advance Wireless
plans to focus on DECT-based products and IP PBXs in the next two (2) years.
DECT cordless phones supporting voice and data transmission
have been Advance Wireless main product line. To generate sales, Advance
Wireless sells its finished products and licenses its wireless technologies.
In 2005, net revenues reached USD$9,167,708 and USD$8,385,075
was attained in 2006.
BBK Communication Equipment Ltd.
Founded in 1995 as one of three (3) subsidiaries (communication
equipment, A/V electronics, and educational electronics), BBK Communication
Equipment Ltd. (BBK) specializes in the research, development, production and
distribution of DECT phones, 2.4G digital cordless telephones, GSM WLL/FWP
phones, basic telephones, caller ID phones, and 46-49MHz cordless telephones.
BBK has business partners in Russia and Vietnam, and is expanding worldwide.
Government Regulations
We are not aware of any current material effects of government
regulations on our business. However, the VoIP industry is in its infancy and is
not currently heavily regulated, and thus, in the future, governments may put in
place regulations that affect our ability to compete in foreign markets with
local communications providers. In addition, regulations may also come into
effect in our domestic market that limits our ability to compete with incumbent
telephone companies.
53
Subsidiaries
We have one (1) wholly owned subsidiary, TransAKT Holdings
Limited (a Turks and Caicos company). TransAKT Holdings Limited owns all of the
issued and outstanding shares of TransAKT Taiwan Corp, our Taiwan based
operating company. Other than holding the shares of TransAKT Taiwan Corp.,
TransAKT Holdings Limited is non-active. TransAKT Taiwan Corp. owns all of the
issued and outstanding shares of HTT (a Taiwan corporation).
Property, Plants and Equipment
We have no material tangible fixed assets as we subcontract all
manufacturing to third parties.
Employees
We have twenty nine (29) employees in Taiwan in various
capacities and also use independent consultants for all corporate activities. We
currently have three (3) independent consultants in addition to our executive
Board members that carry out day-to-day operations. One consultant takes care of
our sales efforts, the other takes care of overseeing day-to-day operations and
the third takes care of investor relations activities.
DESCRIPTION OF PROPERTIES
Our principal office is located at No.3, Lane 141, Sec. 3,
Beishen Rd., Shenkeng Township Taipei County 222, Taiwan (R.O.C.). We rent
approximately 1,400 square feet at a cost of $650 per month. We do not own any
real property.
LEGAL PROCEEDINGS
We are not aware of any legal proceedings in which any director
or officer or any owner of record or beneficial owner of more than 5% of any
class of voting securities of our company, any affiliate of any such director or
officer or security holder, or any of our subsidiaries, is a party adverse to
our company or has a material interest adverse to our company.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our
audited financial statements and the related notes thereto for the years ended
December 31, 2009 and 2008 and our unaudited financial statements and related
notes thereto for the six months ended June 30, 2010 and 2009 that appear elsewhere
in this proxy statement/prospectus. 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 the registration statement
and prospectus, particularly in the section entitled Risk Factors
beginning on page 18 of this proxy/statement-prospectus.
This proxy statement-prospectus contains financial statements
that were prepared in United States dollars (USD) with conversions of certain
amounts from Taiwan dollars (TWD). The TWD were converted into USD based upon
the exchange rate in effect at the end of the calendar year to which the amount
relates, or the exchange rate on the date specified. These translations should
not be construed as representations that the TWD amounts actually represent such
USD amounts or that TWD could be converted into USD at the rate indicated.
Results of Operations for the Years Ended December 31,
2009 and 2008
Our operating results for the years ended December 31, 2009 and
2008 are summarized as follows:
54
|
For the year ended
December 31, 2009
($)
|
For the year ended
December 31, 2008
($)
|
Operating Revenues
|
10,623,736
|
9,546,132
|
Operating Costs and expenses
|
10,809,805
|
9,752,615
|
Income (loss) from
Operations
|
(186,069)
|
(206,483)
|
Other Income (Expenses)
|
(62,242)
|
(196,734)
|
Provision for Income Taxes
|
1,332
|
17,559
|
Net Income (loss)
|
(249,643)
|
(420,776)
|
|
|
|
Net Loss per share (basic and diluted)
|
(0.00)
|
(0.00)
|
Revenues and Cost of Sales
Revenues for the year ended December 31, 2009 were $10,623,736
compared to $9,546,132 for the year ended December 31, 2008 representing an
increase of $1,077,604 or approximately 11%. The increase in sales was due to
the overall economic recovery in 2009 from the downturn experienced in fiscal
2008. We expect to achieve modest growth in sales during fiscal 2010.
Cost of sales for the year ended December 31, 2009 totaled
$9,780,380 or approximately 92% of net sales compared to $8,489,638 or
approximately 88.9% of net sales for the year ended December 31, 2008,
representing an increase crease of $1,290,742 or approximately 15%. The increase
was due to increased purchase costs from major vendors for the year ended
December 31, 2009.
Our revenue and cost of product sales are primarily earned and
spent in Taiwan dollars (TWD). Operating expenses are likewise primarily
denominated in TWD. Consequently, significant movements in exchange rates may
have a significant impact on our financial results. In addition, sales and cost
of products for our Taiwan office are based in United States dollars (USD)
while operational expenses are in TWD, and therefore, any significant movements
in exchange rates between the USD and the TWD may also have a significant impact
on our financial results.
Operating Expenses
Operating expenses for the year ended December 31, 2009 totaled
$1,029,425 or approximately 9.6% of net sales compared to $1,262,977 or
approximately 13% of net sales for the year ended December 31, 2008 representing
a decrease of $233,552 or approximately 18.4% . The decrease in operating
expenses was due to decreases in commission, payroll, rent, and professional
fees, which were partially offset by increases in bad debt and legal
expenses.
Income (Loss) from Operations
Loss from operations for the year ended December 31, 2009
totaled $186,069 or approximately 1.7% of net sales compared to $206,483 or
approximately 2.2% of sales for the year ended December 31, 2008, representing a
reduction in loss of $20,414 or approximately 10%. The reduction in loss from
operations was primarily due to reduced operating expenses and increased sales
recognized in 2009.
Net Income (Loss)
Loss for the year ended December 31, 2009 totaled 249,643
compared to a loss of $420,776 for the year ended December 31, 2008,
representing a decreased in losses of $171,133 or approximately 41%. The
decrease in net loss was primarily due to decreased operating expenses and
currency exchange gains recognized in 2009.
55
Liquidity and Capital Resources
Our financial position as at December 31, 2009 and December 31,
2008 and the changes for the years then ended are as follows:
Working Capital
|
|
As at
|
|
|
As at
|
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
Current Assets
|
$
|
4,904,858
|
|
$
|
6,122,329
|
|
Current Liabilities
|
$
|
3,740,572
|
|
$
|
4,629,227
|
|
Working Capital (Deficiency)
|
$
|
1,164,286
|
|
$
|
1,493,102
|
|
Our working capital surplus decreased from $1,493,102 at
December 31, 2008 to $1,164,286 at December 31, 2009 primarily as a result of
decreased inventory and an increase in loans payable to related party, which is
partially offset by an increase in cash and cash equivalent, and the decreases
in bank loan and accounts payable..
Cash Flows
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
Net cash provided by (used in) Operating
Activities
|
$
|
1,007,964
|
|
$
|
(890,840
|
)
|
Net cash provided by (used in) Investing Activities
|
$
|
173,333
|
|
$
|
20,094
|
|
Net cash provided in Financing Activities
|
$
|
(495,805
|
)
|
$
|
886,531
|
|
Effect of exchange rate changes on cash and cash
equivalents
|
$
|
(16,732
|
)
|
$
|
(38,188
|
)
|
Increase (Decrease) in Cash and Cash
Equivalents during the Year
|
$
|
668,760
|
|
$
|
(22,403
|
)
|
Cash, Beginning of Year
|
$
|
205,658
|
|
$
|
228,061
|
|
Cash, End of Year
|
$
|
874,418
|
|
$
|
205,658
|
|
Results of Operations for the Three Months Ended June 30,
2010 and 2009
Our operating results for the three months ended June 30, 2010
and 2009 are summarized as follows:
|
Three
Months ended
June 30, 2010
($)
|
Three
Months ended
June 30, 2009
($)
|
Operating
Revenues
|
2,960,219
|
2,685,500
|
Operating Costs and expenses
|
2,967,104
|
2,831,255
|
Income
(loss) from Operations
|
(6,885)
|
(145,755)
|
Other Income (Expenses)
|
47,273
|
(6,412)
|
Provision
for Income Taxes
|
-
|
16
|
Net Income (loss)
|
47,273
|
(152,183)
|
|
|
|
Net Loss per share (basic and diluted)
|
(0.00)
|
(0.00)
|
Revenues and Cost of Sales
Revenues for the three months ended June 30, 2010 increased by
$274,719 to $2,960,219 compared to $2,685,500 for the same period in 2009. The
increase was due to the overall economic recovery in 2010.. Cost of sales for
the three months ended June 30, 2010 totaled $2,737,218 or approximately 92.47%
of net sales compared to $2,596,143 or approximately 96.67% for the three months
ended June 30, 2009. The increase was due to decreased purchase costs from major
vendors for the three month ended June 30, 2010, compared to the same period
in 2009.
56
Operating Expenses
Operating expenses for the three months ended June 30, 2010 totaled
$229,886 or approximately 7.77% of net sales compared to $235,112 or approximately
8.75% for the three months ended June 30, 2009, a decrease of $5,226. The decrease
in operating expenses was primarily due to a decrease in professional fees,
which is partially offset by an increase in rent expenses.
Income (Loss) from Operations
Income (Loss) from operations for the three months ended June
30, 2010 totaled $(6,885) or approximately (0.23)% of sales compared to $(145,755)
or approximately (5.43)% of sales for the three months ended June 30, 2009,
a decrease of $ 138,870. The decrease in loss from operations was primarily
due to increased gross margin.
Other Income (expenses)
Other income (expenses) increased approximately $ 60,570 to $54,158
for the three months ended June 30, 2010 from $(6,412) for the same period in
2009. The increase in other income (expenses) was primarily due to the increase
in currency exchange gain and the decrease in interest expense.
Net Income (Loss)
Income (loss) for the three months ended June 30, 2010 totaled
$47,273 compared to $(152,183) for the three months ended June 30, 2009, an
increase of $199,456. The increase in net income was primarily due to the reasons
described above.
Results of Operations for the Six Months Ended June 30,
2010 and 2009
Our operating results for the six months ended June 30, 2010
and 2009 are summarized as follows:
|
Six
Months ended
June 30, 2010
($)
|
Six
Months ended
June 30, 2009
($)
|
Operating Revenues
|
6,222,107
|
5,657,303
|
Operating
Costs and expenses
|
6,266,950
|
5,800,755
|
Income (loss) from Operations
|
(44,843)
|
(143,452)
|
Other
Income (Expenses)
|
74,406
|
(66,210)
|
Provision for Income Taxes
|
-
|
1,282
|
Net
Income (loss)
|
29,563
|
(210,944)
|
|
|
|
Net
Loss per share (basic and diluted)
|
(0.00)
|
(0.00)
|
Revenues and Cost of Sales
Revenues for the six months ended June 30, 2010 increased by
$564,804 to $6,222,107 compared to $5,657,303 for the same period in 2009. The
increase was due to the overall economic recovery in 2010.. Cost of sales for
the Six months ended June 30, 2010 totaled $5,814,814 or approximately 93.45%
of net sales compared to $5,367,877 or approximately 94.88% for the six months
ended June 30, 2009. The increase was due to decreased purchase costs from major
vendors for the six month ended June 30, 2010, compared to the same period in
2009.
57
Operating Expenses
Operating expenses for the six months ended June 30, 2010 totaled
$452,136 or approximately 7.27% of net sales compared to $432,878 or approximately
7.65% for the six months ended June 30, 2009, an increase of $19,258. The increase
in operating expenses was primarily due to increases in rent and professional
fees, which is partially offset by decreases in payroll and traveling expenses.
Income (Loss) from Operations
Income (Loss) from operations for the six months ended June 30,
2010 totaled $(44,843) or approximately (0.72)% of sales compared to $(143,452)
or approximately (2.54)% of sales for the six months ended June 30, 2009, a
decrease of $ 98,609. The decrease in loss from operations was primarily due
to increased gross margin, which is partially offset by the increase in operating
expenses.
Other Income (expenses)
Other income (expenses) increased approximately $ 140,616 to
$74,406 for the six months ended June 30, 2010 from $(66,210) for the same period
in 2009. The increase in other income (expenses) was primarily due to the increase
in currency exchange gain.
Net Income (Loss)
Income for the six months ended June 30, 2010 totaled $29,563
compared to $(210,944) for the six months ended June 30, 2009, an increase of
$240,507. The increase in net income was primarily due to the reasons described
above.
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, 2009, the Company has not
realized commercial success of the technologies, nor have they raised sufficient
funds to continue research and development or to market its products.
There can be no assurances that there will be adequate
financing available to the Company and the consolidated financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
The Company has taken certain restructuring steps to provide
the necessary capital to continue its operations. These steps included: (1)
Tightly budgeting and controlling all expenses; (2) Expanding the companys
operations into China, expanding product lines and recruiting a strong sales
team to significantly increase sales revenue and profit in 2011; (3) The Company
plans to continue actively seeing additional funding opportunities to improve
and expand upon our product lines.
Liquidity and Capital Resources
Our financial position as at June 30, 2010 and December 31, 2009
and the changes for the years then ended are as follows:
58
Working Capital
|
|
As at
|
|
|
As at
|
|
|
|
June 30, 2010
|
|
|
December 31, 2009
|
|
Current Assets
|
$
|
6,825,150
|
|
$
|
4,904,858
|
|
Current Liabilities
|
$
|
5,496,046
|
|
$
|
3,740,572
|
|
Working Capital (Deficiency)
|
$
|
1,329,104
|
|
$
|
1,164,286
|
|
Our working capital surplus increased from $1,164,286 at December
31, 2009 to $1,329,104 at June 30, 2010 primarily as a result of increases in
cash and cash equivalent, restricted cash, inventory and accounts receivable,
which is partially offset by increase in accounts payable and accrued expenses,
bank loans, and loan payable to related party.
Cash Flows
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
Net cash provided by (used in) Operating Activities
|
$
|
2,059
|
|
$
|
710,994
|
|
Net cash provided by (used in) Investing Activities
|
$
|
(476,797
|
)
|
$
|
229,581
|
|
Net cash provided by (used in) Financing Activities
|
$
|
579,095
|
|
$
|
(358,734
|
)
|
Increase (Decrease) in Cash and Cash Equivalents during the
Period
|
$
|
159,107
|
|
$
|
591,817
|
|
Cash, Beginning of Period
|
$
|
874,418
|
|
$
|
205,658
|
|
Cash, End of Period
|
$
|
1,033,525
|
|
$
|
797,475
|
|
Critical Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
TransAKT Holdings Limited and its wholly owned subsidiaries Taiwan Halee
International Co. Ltd. and TransAKT Taiwan Limited, collectively referred to
within as the Company. All material intercompany accounts, transactions and
profits have been eliminated in consolidation.
Exchange Gain (Loss):
The transactions of TransAKT Holdings Limited, Taiwan Halee International
Co. Ltd. and TransAKT Taiwan Limited were denominated in foreign currency and
were recorded in Taiwan Dollar (TWD) and Canadian Dollar (CAD) 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 accompanying consolidated financial statements have been
translated and presented in United States Dollars ($), while the Companys
functional currency is the Taiwan and Canadian dollar.
The accounts of TransAKT Holdings Limited, Taiwan Halee International
Co. Ltd. and TransAKT Taiwan Limited were maintained, and its financial statements
were expressed, in CAD and TWD. In accordance with ASC 830, Foreign Currency
Matters, the Company translates the assets and liabilities into U.S. dollar
($) 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 TWD and
CAD into U.S. dollar are recorded in stockholders equity as part of accumulated
other comprehensive income.
59
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
The Companys revenue recognition policies are in compliance
with Staff Accounting Bulletin (SAB) 104. Revenues are recognized when finished
products are shipped to unaffiliated customers and both title and the risks and
rewards of ownership are transferred and collectibility is reasonably
assured.
The Companys revenues are recorded upon confirmed acceptance
after inspection by the customers of the Company.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
Our common shares are quoted on the Over-the-Counter Bulletin
Board, or OTC-BB, under the trading symbol TAKDF. Our shares have been quoted
on the OTC-BB since May 20, 2004.
The following table reflects the high and low bid information
for our common stock obtained from Yahoo Finance and reflects inter-dealer
prices, without retail mark-up, markdown or commission, and may not necessarily
represent actual transactions.
OTC Bulletin
Board
(1)
|
Quarter Ended
|
High
|
Low
|
June 30, 2010
|
$0.0098
|
$0.0051
|
March 31, 2010
|
$0.01
|
$0.0051
|
December 30, 2009
|
$0.028
|
$0.007
|
September 30, 2009
|
$0.05
|
$0.02
|
June 30, 2009
|
$0.06
|
$0.02
|
March 31, 2009
|
$0.02
|
$0.01
|
December 31, 2008
|
$0.02
|
$0.01
|
September 30, 2008
|
$0.12
|
$0.01
|
June 30, 2008
|
$0.11
|
$0.02
|
March 31, 2008
|
$0.07
|
$0.04
|
December 31, 2007
|
$0.09
|
$0.04
|
September 30, 2007
|
$0.15
|
$0.09
|
June 30, 2007
|
$0.23
|
$0.11
|
March 31, 2007
|
$0.25
|
$0.06
|
December 31, 2006
|
$0.13
|
$0.06
|
(1) Over-the-counter market quotations reflect inter-dealer
prices without retail mark-up, mark-down or commission, and may not represent
actual transactions.
60
Olympia Trust Company is the registrar and transfer agent for
our common shares. Their address is 2300, 125 - 9th Avenue SE, Calgary, Alberta
T2G 0P6. Telephone: (403) 261-0900; Facsimile: (403) 265-1455.
Holders of our Common Stock
As of September 10, 2010, there were 52 holders of record of
our common stock. As of such date, 102,645,120 common shares of our company
were issued and outstanding.
Dividends
No cash dividends have been paid by our company on our common
stock. We anticipate that our companys future earnings will be retained to
finance the continuing development of our business. The payment of any future
dividends will be at the discretion of our companys board of directors and will
depend upon, among other things, future earnings, any contractual restrictions,
the success of business activity, regulatory and corporate law requirements and
the general financial condition of our company.
Recent Sales of Unregistered Securities
During the last three completed fiscal years we issued the
following unregistered securities:
-
On November 15, 2006, we issued 50,000,000 of our common voting shares to
shareholders of HTT as part of the acquisition of HTT. These shares were
issued without a prospectus in reliance upon exemptions from registration
found in 4(2) of the Securities Act of 1933, as amended and NI 45-106 under
Canadian Securities laws
.
-
Also on November 15, 2006 we issued 5,000,000 of our common voting shares
to Mr. James Wu, a principal of HTT, as performance-based compensation. These
shares were issued without a prospectus in reliance upon exemptions from
registration found in Section 4(2) of the Securities Act of 1933, as
amended
.
Equity Compensation Plan Information
We currently do not have any stock option or equity
compensation plans or arrangements.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
All directors of our company hold office until the next annual
meeting of the security holders or until their successors have been elected and
qualified. The officers of our company are appointed by our board of directors
and hold office until their death, resignation or removal from office. Our
directors and executive officers, their ages, positions held, and duration as
such, are as follows:
Name
|
Position Held
with the
Company
|
Age
|
Date First Elected or Appointed
|
James Wu
|
Chairman, Chief Executive
Officer,
President and
Director
|
56
|
2004/10/25
|
Taifen Day
|
Chief Financial Officer
|
50
|
2006/07/27
|
61
Name
|
Position Held
with the
Company
|
Age
|
Date First Elected or Appointed
|
Cheng Chun-Chih
|
Director (Chairman of
Taiwan Halee
International
Co. Ltd.)
|
63
|
2006/12/14
|
Dr. Shiau Tzong-Huei
|
Director (Chief Technical
Officer of
Taiwan Halee
International Co. Ltd. and
Chairman of TransAKT
Taiwan Corp.)
|
55
|
2006/12/14
|
Tseng Ming-Huang
J.T. Wang
|
Director
Vice President of Asia
Operations
|
41
44
|
2006/05/25
2007/04/01
|
Business Experience
The following is a brief account of the education and business
experience during at least the past five years of each director, executive
officer and key employee of our company, indicating the persons principal
occupation during that period, and the name and principal business of the
organization in which such occupation and employment were carried out.
James Wu -
Chairman, Chief Executive Officer,
President and Director
Mr. James Wu served as President of IP Mental Inc. from 1997 to
2006. During his tenure at IP Mental Inc., Mr. Wu oversaw the development of a
line of VoIP hardware and was part of the development team of the proprietary
U&Me VoIP network. Mr. Wu has over twenty (20) years of experience in the
information technology and telecommunication business. He has also served as the
founder of Cellstar South Africa and Anstek Electronics South Africa, where he
successfully grew these businesses. He was also an agent for Asus, COMPEL and
Motorola Computer and Cellular Handsets in South Africa. Mr. Wu has been the
President of our company since 2004.
Taifen Day
Chief Financial Officer
Ms. Day holds a BA from Tunghai University of Taiwan and an MBA
from the University of St. Thomas of Texas. She became a Certified Public
Accountant in the State of Texas in 1987. After working in Texas for one (1)
year, Ms. Day returned to Taiwan where she worked for two (2) years as an
in-house Accounting Manager, and then eight (8) years as an auditor (five (5) as
a partner) with a public accounting firm. She became a Certified Public
Accountant in Taiwan in 1992. Ms. Day then moved to Alberta, receiving her
Chartered Accountant designation in 2001, where she currently works performing
public company accounting through her consulting company, Taifen Betsy Day
Professional Corporation.
Cheng Chun-Chih-
Director (Chairman of Taiwan
Halee International Co. Ltd.)
Mr. Cheng is the Chairman of Taiwan Halee International Co.
Ltd., which was acquired by us for US$5MM on November 15, 2006, and has served
in this position since 1997. Prior to joining HTT Mr. Cheng was a consultant to
the Economy Department of Taiwan on small and medium industry.
62
Dr. Shiau Tzong-Huei-
Director (Chief
Technical Officer of Taiwan Halee and Chairman of TransAKT Taiwan Corp.)
Dr. Shiau holds a Ph.D in Computer Sciences from the University
of Wisconsin Madison, an MSc in Mathematics from the John Hopkins University and
a BSc in Mathematics from the National Taiwan University. Dr. Shiau has been a
director of Taiwan Halee since 2003, is a specialist in digital cordless
switching and has directed the engineering team at the Hsinchu Science Park
(HSP) for more than fifteen (15) years. Established in December 1980, HSP
leads the high-tech industry as the most respected science park created by the
Taiwanese government. Dr. Shiau is the founder and current Chief Technical
Officer of Computer & Communications Associates, INC. (now UWIN
Technologies), a research and development oriented company. The products
developed by his team include advanced cordless PBX , cordless Skype phones,
cordless VoIP phones, and wireless home automations.
Tseng Ming-Huang-
Director
Mr. Tseng was a founder and currently serves as CEO of CeraMicro
Technology Corp. which was started in 2003. CeraMicro
is a leading RF
solution provider of the wireless communications industry, focused on the design
and manufacturing of system-level packaging applications (SiP, System-in-Package)
and IEEE 802.15.4 standard "ZigBee" wireless network chip modules. From 2001
to 2003, he served as the general manager of international strategy investment
for the Wise Group Inc.
J.T. Wang
Vice President of Asia
Operations
Mr. Wang joined us on April 1, 2007. During the past seventeen
(17) years, Mr. Wang served as a senior regional manager of Panasonics Taiwan
operations. Mr. Wang has profound knowledge of the telecommunications industry
not only in the associated technologies, but also with sales distribution
channels.
Family Relationships
There are no family relationships among our directors or
executive officers.
Significant Employees
We have no significant employees other than the officers of our
company.
Involvement in Certain Legal Proceedings
Our directors and executive officers, promoters or control
persons have not been involved in any of the following events during the past
ten years:
|
a.
|
A petition under the Federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or property of
such person, or any partnership in which he was a general partner at or
within two years before the time of such filing, or any corporation or
business association of which he was an executive officer at or within two
years before the time of such filing;
|
|
|
|
|
|
b.
|
Such person was convicted in a criminal proceeding or is
a named subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
|
|
|
|
|
|
c.
|
Such person was the subject of any order, judgment, or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:
|
|
|
|
|
|
|
i.
|
Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by
the Commodity Futures Trading Commission, or an associated
person of any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan association or
insurance company, or engaging in or continuing any conduct or practice in
connection with such activity;
|
63
|
|
ii.
|
Engaging in any type of business practice; or
|
|
|
|
|
|
|
iii.
|
Engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection with any violation
of Federal or State securities laws or Federal commodities laws;
|
|
|
|
|
|
d.
|
Such person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any Federal or
State authority barring, suspending or otherwise limiting for more than 60
days the right of such person to engage in any activity described in
paragraph (f)(3)(i) of this section, or to be associated with persons
engaged in any such activity;
|
|
|
|
|
|
e.
|
Such person was found by a court of competent
jurisdiction in a civil action or by the Commission to have violated any
Federal or State securities law, and the judgment in such civil action or
finding by the Commission has not been subsequently reversed, suspended,
or vacated;
|
|
|
|
|
|
f.
|
Such person was found by a court of competent
jurisdiction in a civil action or by the Commodity Futures Trading
Commission to have violated any Federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated;
|
|
|
|
|
|
g.
|
Such person was the subject of, or a party to, any
Federal or State judicial or administrative order, judgment, decree, or
finding, not subsequently reversed, suspended or vacated, relating to an
alleged violation of:
|
|
|
|
|
|
|
iv.
|
Any Federal or State securities or commodities law or
regulation; or
|
|
|
|
|
|
|
v.
|
Any law or regulation respecting financial institutions
or insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease-and-desist order, or removal or
prohibition order; or
|
|
|
|
|
|
|
vi.
|
Any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity; or
|
|
|
|
|
|
h.
|
Such person was the subject of, or a party to, any
sanction or order, not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the
Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or
any equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a
member.
|
Corporate Governance
Director Independence and Board Meetings
We currently act with four (4) directors, consisting of James
Wu, Cheng Chun-Chih, Dr. Shiau Tzong-Huei and Tseng Ming-Huang. We have
determined that Mr. Tseng Ming-Huang is an independent directors as defined in
FINRAAQ Marketplace Rule 4200(a)(15).
Our board of directors held no formal meetings during the year
ended December 31, 2009. All proceedings of the board of directors were
conducted by resolutions consented to in writing by all the directors and filed
with the minutes of the proceedings of the directors. Such resolutions consented
to in writing by the directors entitled to vote on that resolution at a meeting
of the directors are, according to the Alberta
Business Corporations Act,
as valid and effective as if they had been passed at a meeting of the
directors duly called and held. Our audit committee was struck on March 6, 2009
and as such did not hold any meetings in 2009.
64
Audit Committee
Currently our audit committee consists of Mr. James Wu and Mr.
Cheng Chun-Chih, none of whom are independent.
During fiscal 2009 aside from quarterly review teleconferences,
there were no meetings held by this committee. The business of the audit
committee was conducted though these teleconferences and by resolutions
consented to in writing by all the members and filed with the minutes of the
proceedings of the audit committee.
Our board of directors has determined that it does not have an
audit committee member that qualifies as an audit committee financial expert
as defined in Item 407(d)(5)(ii) of Regulation S-K. We believe that the audit
committee members are capable of analyzing and evaluating our financial
statements and understanding internal controls and procedures for financial
reporting. In addition, we believe that retaining an independent director who
would qualify as an audit committee financial expert would be overly costly
and burdensome and is not warranted in our circumstances given the early stages
of our development and the fact that we have not generated revenues to date.
Nomination Process
As of December 31, 2009, we did not effect any material changes
to the procedures by which our shareholders may recommend nominees to our board
of directors. Our board of directors does not have a policy with regards to the
consideration of any director candidates recommended by our shareholders. Our
board of directors has determined that it is in the best position to evaluate
our companys requirements as well as the qualifications of each candidate when
the board considers a nominee for a position on our board of directors. If
shareholders wish to recommend candidates directly to our board, they may do so
by sending communications to the president of our company at the address on the
cover of this proxy/registration statement.
Committees of the Board
We currently do not have nominating or compensation committees
or committees performing similar functions nor do we have a written nominating
or compensation committee charter. Our board of directors does not believe that
it is necessary to have such committees because it believes the functions of
such committees can be adequately performed by our board of directors.
National Instrument 52-110
We are a reporting issuer in the Provinces of British Columbia
and Alberta. National Instrument 52-110 of the Canadian Securities
Administrators requires our company, as a venture issuer, to disclose annually
in our proxy statement certain information concerning the constitution of our
audit committee and our relationship with our independent auditor. As defined in
National Instrument 52-110, Mr. James Wu and Mr. Cheng Chun-Chih are not
independent.
Mr. James Wu and Mr. Cheng Chun-Chih are financially
literate, as defined in National Instrument 52-110, as they have the industry
experience necessary to understand and analyze financial statements of our
company, as well as the understanding of internal controls and procedures
necessary for financial reporting. For a description of the education and
experience of Mr. James Wu and Mr. Cheng Chun-Chih that is relevant to the
performance of their responsibilities as an audit committee member, please see
the disclosure under the heading Directors and Executive Officers Business
Experience.
The audit committee is responsible for review of both interim
and annual financial statements for our company. For the purposes of performing
their duties, the members of the audit committee have the right at all times, to
inspect all the books and financial records of our company and any
subsidiaries and to discuss with management and the external auditors of our
company any accounts, records and matters relating to the financial statements
of our company. The audit committee meets periodically with management and
annually with the external auditors.
65
Since the commencement of our companys most recently completed
financial year, our company has not relied on the exemptions contained in
sections 2.4 or 8 of National Instrument 52-110. Section 2.4 (De Minimis
Non-audit Services) provides an exemption from the requirement that the audit
committee must pre-approve all non-audit services to be provided by the auditor,
where the total amount of fees related to the non-audit services are not
expected to exceed 5% of the total fees payable to the auditor in the fiscal
year in which the non-audit services were provided. Section 8 (Exemptions)
permits a company to apply to a securities regulatory authority for an exemption
from the requirements of National Instrument 52-110 in whole or in part.
The audit committee has adopted specific policies and
procedures for the engagement of non-audit services as set out in the Audit
Committee Charter of our company.
We are relying on the exemption provided by section 6.1 of
National Instrument 52-110 which provides that as we are a venture issuer, we
are not required to comply with Part 3 (Composition of the Audit Committee) and
Part 5 (Reporting Obligations) of National Instrument 52-110.
National Instrument 58-101
We are a reporting issuer in the Provinces of British Columbia
and Alberta. National Instrument 58-101 of the Canadian Securities
Administrators requires our company, as a venture issuer, to disclose annually
in our proxy statement certain information concerning corporate governance
disclosure.
Board of Directors
The board of directors is comprised of the following four
individuals: James Wu, President; Cheng Chun-Chih, Chairman of Taiwan Halee
International Co. Ltd. ("HTT"), Dr. Shiau Tzong-Huei, Chairman TransAKT Taiwan
Corp. and CTO of HTT; Tseng Ming-Huang
We do not have any directors that are presently directors of
other issuers that are reporting issuers (or the equivalent).
Independent Directors.
National Instrument 52-110 ("
NI 52-110
") of the Canadian
Securities Administrators provides that a member is "independent" if the member
has no direct or indirect material relationship with the issuer - a "material
relationship" being one which could, in the view of the issuer's board of
directors, reasonably interfere with the exercise of a member's independent
judgment. NI 52-110 also specifically prescribes certain relationships that are
considered to be material.
Based on the foregoing, the board of directors of the
Corporation has determined that the following directors are independent within
the meaning of NI 52-110: Tseng Ming-Huang
Non-Independent Directors.
The board of directors of the Corporation has determined that
the following directors are not independent based on the guidelines set forth in
NI 52-110:
James Wu
|
President of the Corporation
|
Cheng Chun-Chih
|
Chairman of HTT, a wholly owned subsidiary of
the Corporation
|
66
Dr. Shiau Tzong-Huei
|
Chairman TransAKT Taiwan Corp. , a wholly owned
subsidiary of
the Corporation, and CTO of HTT
|
Orientation and Continuing Education
The Corporation does not currently have any formal orientation
and education programs for new directors of the Corporation. Each director has
the responsibility to ensure that he maintains the skill and knowledge to meet
his obligations as a director. Board members are encouraged to communicate with
management of the Corporation, auditors and technical consultants to keep
themselves current with industry trends and developments and changes in
legislation, to attend related industry seminars and conventions and to visit
the Corporation's operations. Directors have full access to the Corporation's
records.
Ethical Business Conduct
The Board of Directors has adopted a written Code of Business
Conduct (the "
Code
"). A copy of this Code was attached to the Information
Circular for our October 26, 2007 shareholders meeting, and it is available on
SEDAR at www.sedar.com. Upon request, TransAKT will promptly provide a copy of
such document free of charge to Shareholders. The Code applies to the
Corporations' directors, officers, employees and consultants, each of whom is
expected to ensure that his or her behaviour accords with the letter and spirit
of the Code. The Board of Directors takes reasonable steps to monitor compliance
with the Code by encouraging all directors, officers, employees and consultants
to report violations of this Code.
Nomination of Directors
Responsibility for identifying new candidates to join the Board
of Directors and recommending nominees for election as directors belongs to the
Board of Directors as a whole at this time. The Board of Directors is required
to consider candidate independence, financial acumen, skills and available time
to devote to the duties of the Board of Directors in making their
recommendations for nomination. The Board of Directors reviews the composition
and size of the Board of Directors and tenure of directors in advance of annual
meetings when directors are elected by the Corporation's Shareholders, as well
as when individual directors indicate that their term may end or that their
status may change. In order to ensure an objective nomination process, the
independent directors take the lead in the director nomination process.
Compensation
The Board of Directors as a whole reviews the compensation for
the directors and senior management annually. The Board of Directors makes an
effort to provide compensation relative to industry standards. Directors who are
also members of management abstain from voting on matters related to senior
management compensation.
Other Board Committees
Other than the Audit Committee there are no other committees of
the Board of Directors.
Assessments
The Board of Directors takes steps to satisfy itself that the
Board, its committees and individual directors are performing effectively by
providing each director with the opportunity to attend all meetings either in
person or by teleconference at the cost of the Corporation.
67
EXECUTIVE COMPENSATION
The particulars of the compensation paid to the following
persons:
|
(a)
|
our principal executive officer;
|
|
|
|
|
(b)
|
each of our two most highly compensated executive
officers who were serving as executive officers at the end of the years
ended December 31, 2009 and 2008; and
|
|
|
|
|
(c)
|
up to two additional individuals for whom disclosure
would have been provided under (b) but for the fact that the individual
was not serving as our executive officer at the end of the years ended
December 31, 2009 and 2008,
|
who we will collectively refer to as the Named Executive
Officers, are set out in the following summary compensation table, except that
no disclosure is provided for any named executive officer, other than our
principal executive officers, whose total compensation did not exceed $100,000
for the respective fiscal year:
Name and Principal Position
|
Year
|
Annual Compensation
|
Salary
($)
|
Bonus
($)
|
Other Annual
Compensation
($)
|
James Wu
President & Chief Executive
Officer
|
2008 and
2009
|
90,000
|
|
|
J.T. Wang
Vice President of Asia
Operations
|
2008 and
2009
|
40,000
|
|
|
Taifen Day
Chief Financial Officer
|
2008 and
2009
|
-
|
-
|
-
|
2009 Grants of Plan-Based Awards
We did not have any equity and non-equity awards granted
pursuant to plans to the named executives as of December 31, 2009.
Outstanding Equity Awards at Fiscal Year End
We did not have any outstanding equity awards granted to the
named executives in as of December 31, 2009.
Option Exercises and Stock Vested
During the fiscal year ended December 31, 2009 there were no
options exercised by our Named Executive Officers.
Compensation of Directors
We do not have any agreements for compensating our directors
for their services in their capacity as directors, although such directors are
expected in the future to receive stock options to purchase shares of our common
stock as awarded by our board of directors. We did not pay any compensation to
our non-employee directors during the fiscal year ended December 31, 2009.
68
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. We have no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the board of directors or
a committee thereof.
Indebtedness of Directors, Senior Officers, Executive
Officers and Other Management
None of our directors or executive officers or any associate or
affiliate of our company during the last two fiscal years is or has been
indebted to our company by way of guarantee, support agreement, letter of credit
or other similar agreement or understanding currently outstanding.
RELATED PARTY TRANSACTIONS
Except as described below, no director, executive officer,
principal shareholder holding at least five percent of our common shares, or any
family member thereof, had any material interest, direct or indirect, in any
transaction, or proposed transaction, since the beginning of our year ended
December 31, 2009, or in any currently proposed transaction, in which the amount
involved in the transaction exceeded or exceeds the lesser of $120,000 or one
percent of the average of our total assets at the year end for the last two
completed fiscal years.
The Companys officers and shareholders have advanced funds to
the Company for working capital purpose. The Company has not entered into any
agreement on the repayment terms for these advances. As of June 30, 2010 and
December 31, 2009, there were $561,214 and $435,225 advances outstanding,
respectively.
The Company also had loans payable to five shareholders
amounted to $60,400 as of June 30, 2010 and December 31, 2009. The unsecured
loans bear interest at the rate of 12% per annum, and due on May and June
2010.
SECURITY OWNERSHIP
The following table sets out the percentage of outstanding common
shares owned by our companys directors and executive officers that are
entitled to vote on each matter properly brought before the meeting. As stated
in the table, our directors and executive officers as a group own 10.8%, or
11,050,000 shares, of our common stock out of the 102,645,120 shares of our
common stock issued and outstanding as of September 10, 2010. In order to consummate
the Continuation, the Alberta
Business Corporation Act
requires that
two-thirds, or 66.7%, of the shares entitled to vote at the meeting as of the
record date of October 15, 2010 are voted in support of the special resolution
to approve the continuance. Our directors and executive officers intend to vote
their shares in favor of the continuance.
Name and Address of Beneficial Owner
|
Amount and Nature of
Beneficial
Ownership
|
Percentage
of
Class
(1)
|
James Wu
|
5,000,000
|
4.9%
|
Taifen Day
|
Nil
|
Nil
|
Cheng Chun-Chih
|
5,000,000
|
4.9%
|
Dr. Shiau Tzong-Huei
|
1,000,000
|
1.0%
|
Tseng Ming-Huang
|
50,000
|
Nil
|
69
Name and Address of Beneficial Owner
|
Amount and Nature of
Beneficial
Ownership
|
Percentage
of
Class
(1)
|
Directors and Executive Officers as a
Group
(1)
|
11,050,000 common shares
|
10.8%
|
Hsieh Chi-Hsien
|
7,650,000
|
7.5%
|
Lin Yu-Hsiung
|
10,000,000
|
9.7%
|
Pan Yu-Jung
|
6,000,000
|
5.9%
|
(1)
|
Beneficial ownership is determined
in accordance with the rules of the SEC and generally includes voting
or investment power with respect to securities. Shares of common stock
subject to options currently exercisable, or exercisable within 60 days
of September 10, 2010 are deemed outstanding for computing the percentage
of the person holding such option or warrant but are not deemed outstanding
for computing the percentage of any other person. As of September 10,
2010, we had no options or warrants outstanding.
|
|
|
(2)
|
Percentage based on 102,645,120
shares of common stock outstanding on September 10, 2010.
|
Changes in Control
We are unaware of any contract, or other arrangement or
provision of our Articles or by-laws, the operation of which may at a subsequent
date result in a change of control of our company.
DESCRIPTION OF CAPITAL STOCK
General
Our authorized capital stock consists of an unlimited number of
shares of common stock, with no par value and an unlimited number of shares of
preferred stock, with no par value. Upon completion of the Continuance, our
authorized capital stock will consist of 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.
Common Stock
As of September 10, 2010, there were 102,645,120 shares of our
common stock issued and outstanding that were held by 52 holders of record.
Holders of our common stock are entitled to one vote for each
share on all matters submitted to a stockholder vote. Holders of common stock do
not have cumulative voting rights. Therefore, holders of a majority of the
shares of common stock voting for the election of directors can elect all of the
directors. Holders of our common stock representing a majority of the voting
power of our capital stock issued, outstanding and entitled to vote, represented
in person or by proxy, are necessary to constitute a quorum at any meeting of
our stockholders. A vote by the holders of a majority of our outstanding shares
is required to effectuate certain fundamental corporate changes such as
liquidation, merger or an amendment to our articles of incorporation.
Holders of common stock are entitled to share in all dividends
that the board of directors, in its discretion, declares from legally available
funds. In the event of a liquidation, dissolution or winding up, each
outstanding share entitles its holder to participate pro rata in all assets that
remain after payment of liabilities and after providing for each class of stock,
if any, having preference over the common stock. Holders of our common stock
have no pre-emptive rights, no conversion rights and there are no redemption
provisions applicable to our common stock.
70
Preferred Stock
As of September 10, 2010, there were no shares of preferred stock
issued and outstanding. Our board of directors is authorized to issue preferred
stock and to fix the consideration and preferences of the preferred stock.
STOCKHOLDER PROPOSALS
Stockholders of our company may submit proposals to be considered
for stockholder action at the special and annual meeting of our stockholders
if they do so in accordance with applicable regulations of the SEC and the laws
of the Province of Alberta. In order to be considered for inclusion in the proxy
statement for the meeting, the Secretary must receive proposals no later than
October 20, 2010. Stockholder proposals should be addressed to the Secretary,
at our principal office is located at No.3, Lane 141, Sec. 3, Beishen Rd., Shenkeng
Township Taipei County 222, Taiwan (R.O.C.).
EXPERTS
No expert or counsel named in this proxy statement-prospectus
as having prepared or certified any part of this proxy statement-prospectus or
having given an opinion upon the validity of the securities being registered or
upon other legal matters in connection with the registration of our common stock
was employed on a contingency basis or had, or is to receive, in connection with
the registration, a substantial interest, directly or indirectly, in our company
or any of our subsidiaries. Nor was any such person connected with our company
or any of our subsidiaries as a promoter, managing or principal underwriter,
voting trustee, director, officer or employee.
The financial statements of our company as of December 31, 2009
and 2008 included in this proxy statement-prospectus have been audited by KCCW
Accountancy Corp., an independent registered public accounting firm, as stated
in their report appearing herein, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the issuance of common stock offered hereby
will be passed upon for our company by Macdonald Tuskey Corporate &
Securities Lawyers, of Vancouver, British Columbia, Canada. Material income tax
consequences of the Continuance will be passed upon for our company in Canada by
Clark Wilson, LLP, and in the United States by Williams Kastner.
AVAILABLE INFORMATION
We intend to file annual, quarterly and special reports and
other information with the SEC. You may read and copy any document filed by us,
including this proxy statement/prospectus and its exhibits and schedules, at the
SEC's public reference room, 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-732-0330 for further information about its public
reference room. These SEC filings are also available to the public at the SEC's
website at "www.sec.gov".
71
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Engagement of KCCW Accountancy Corp.
We engaged KCCW Accountancy Corp. (KCCW) as our principal
independent accountant effective April 29, 2009. Kabani & Company, Inc.,
Certified Public Accountants, (Kabani) resigned as our principal independent
accountant at the request of our company, effective April 29, 2009. The decision
to change principal independent accountants has been approved by our board of
directors.
Kabanis report dated February 6, 2008 on the balance sheets of
our company as at December 31, 2007 and the statements of operations,
stockholders' deficiency and cash flows for the year ended December 31, 2007 did
not contain any adverse opinion or disclaimer of opinion, nor was it modified as
to uncertainty, audit scope, or accounting principles.
In connection with the audits of the two fiscal years ended
December 31, 2007 and 2006 and the subsequent interim period through to April
29, 2009, there were no disagreements with Kabani on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements if not resolved to the satisfaction of Kabani
would have caused them to make reference thereto in their reports on our audited
financial statements. Since April 29, 2009 we have also not had any
disagreements with KCCW on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which
disagreements if not resolved to the satisfaction of KCCW would have caused them
to make reference thereto in their reports on our audited financial
statements.
72
FINANCIAL STATEMENTS
TRANSAKT LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2009 AND 2008
TABLE OF CONTENTS
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD
ENDED
JUNE 30, 2010
TABLE OF CONTENTS
73
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
TransAKT Ltd.
We have audited the accompanying consolidated balance sheets of
TransAKT Ltd. and its subsidiaries (the Company) as of December 31, 2008 and
2009, and the related consolidated statements of operations, shareholders
equity and comprehensive income, and cash flows for the years then ended. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in
all material respects, the consolidated financial positions of TransAKT Ltd. as
of December 31, 2008 and 2009, and the consolidated results of their operations
and their consolidated cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, the Company has accumulated deficit
of $(2,038,892) at December 31, 2009 including a net loss of $(249,643) during
the year ended December 31, 2009. 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.
/s/ KCCW Accountancy Corp.
Diamond Bar, California
June 6, 2010
F-1
TRANSAKT LTD.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2009 and 2008
|
|
December 31,
|
|
|
December 31,
|
|
ASSETS
|
|
2009
|
|
|
2008
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
874,418
|
|
$
|
205,658
|
|
Restricted cash
|
|
498,540
|
|
|
563,756
|
|
Accounts receivable, net
|
|
2,049,995
|
|
|
2,245,101
|
|
Inventory
|
|
1,373,516
|
|
|
2,924,211
|
|
Other receivable, net
|
|
6,278
|
|
|
4,351
|
|
Prepaid expenses
|
|
51,196
|
|
|
26,683
|
|
Investments
|
|
50,915
|
|
|
152,569
|
|
Total Current Assets
|
|
4,904,858
|
|
|
6,122,329
|
|
|
|
|
|
|
|
|
Property & Equipment, net
|
|
3,130
|
|
|
9,205
|
|
|
|
|
|
|
|
|
Deposits
|
|
72,891
|
|
|
29,624
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
4,980,879
|
|
$
|
6,161,158
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
$
|
1,161,586
|
|
$
|
1,556,676
|
|
Other payable
|
|
-
|
|
|
22,120
|
|
Bank loans
|
|
2,083,361
|
|
|
2,773,399
|
|
Loan payable to related party
|
|
495,625
|
|
|
277,032
|
|
Total Current Liabilities
|
|
3,740,572
|
|
|
4,629,227
|
|
|
|
|
|
|
|
|
Non-current Liabilities
|
|
|
|
|
|
|
Unsecured convertible notes payable,
net of unamortized discounts of $10,541
|
|
19,459
|
|
|
-
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
Common stock, unlimited shares authorized
for issuance,
no par value, 102,645,120 shares issued and outstanding
|
|
3,260,018
|
|
|
3,260,018
|
|
Additional paid-in capital
|
|
15,000
|
|
|
-
|
|
Other comprehensive income (loss)
|
|
(15,278
|
)
|
|
61,162
|
|
Accumulated deficit
|
|
(2,038,892
|
)
|
|
(1,789,249
|
)
|
Total Stockholders' Equity
|
|
1,220,848
|
|
|
1,531,931
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders'
Equity
|
$
|
4,980,879
|
|
$
|
6,161,158
|
|
The accompanying notes are an integral part of the financial
statements
F-2
TRANSAKT LTD.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
|
|
2009
|
|
|
2008
|
|
Revenues:
|
|
|
|
|
|
|
Sales of goods, net
|
$
|
10,623,736
|
|
$
|
9,546,132
|
|
Total revenues
|
|
10,623,736
|
|
|
9,546,132
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
Cost of sales
|
|
9,780,380
|
|
|
8,489,638
|
|
Selling, general and administrative expenses
|
|
1,029,425
|
|
|
1,262,977
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(186,069
|
)
|
|
(206,483
|
)
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
Interest income
|
|
1,414
|
|
|
8,147
|
|
Investment income (loss)
|
|
7,119
|
|
|
(9,279
|
)
|
Currency exchange gain (loss)
|
|
25,699
|
|
|
(84,180
|
)
|
Other income
|
|
-
|
|
|
11,151
|
|
Interest expense
|
|
(96,474
|
)
|
|
(122,573
|
)
|
Total other expense
|
|
(62,242
|
)
|
|
(196,734
|
)
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
(248,311
|
)
|
|
(403,217
|
)
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
1,332
|
|
|
17,559
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(249,643
|
)
|
$
|
(420,776
|
)
|
|
|
|
|
|
|
|
Loss per share:
Basic and diluted loss per share
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding:
Basic and diluted
|
|
102,645,120
|
|
|
102,645,120
|
|
The accompanying notes are an integral part of the financial
statements
F-3
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED
DECEMBER 31, 2009 AND 2008
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Prepaid
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Consulting
|
|
|
Income (loss)
|
|
|
Deficit
|
|
|
Total
|
|
Balance at December 31, 2007
|
|
102,645,120
|
|
$
|
3,260,018
|
|
$
|
-
|
|
$
|
(131,290
|
)
|
$
|
94,259
|
|
$
|
(1,368,473
|
)
|
$
|
1,854,514
|
|
Amortization of consulting fees
|
|
-
|
|
|
-
|
|
|
-
|
|
|
131,290
|
|
|
-
|
|
|
-
|
|
|
131,290
|
|
Foreign currency
translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(33,097
|
)
|
|
-
|
|
|
(33,097
|
)
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(420,776
|
)
|
|
(420,776
|
)
|
Balance at December 31, 2008
|
|
102,645,120
|
|
$
|
3,260,018
|
|
$
|
-
|
|
$
|
-
|
|
$
|
61,162
|
|
$
|
(1,789,249
|
)
|
$
|
1,531,931
|
|
Foreign currency translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(76,440
|
)
|
|
-
|
|
|
(76,440
|
)
|
Beneficial conversion feature
relating to convertible debentures
|
|
-
|
|
|
-
|
|
|
15,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
15,000
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(249,643
|
)
|
|
(249,643
|
)
|
Balance at December 31, 2009
|
|
102,645,120
|
|
$
|
3,260,018
|
|
$
|
15,000
|
|
$
|
-
|
|
$
|
(15,278
|
)
|
$
|
(2,038,892
|
)
|
$
|
1,220,848
|
|
The accompanying notes are an integral part of the financial
statements
F-4
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECDEMBER 31, 2009 AND 2008
|
|
2009
|
|
|
2008
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net loss
|
$
|
(249,643
|
)
|
$
|
(420,776
|
)
|
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
Depreciation
|
|
6,159
|
|
|
18,526
|
|
Loss on disposal of fixed assets
|
|
-
|
|
|
16,724
|
|
Investment loss (income)
|
|
(7,119
|
)
|
|
9,279
|
|
Amortization of consulting fees
|
|
-
|
|
|
121,592
|
|
Amortization of debt discount attributable to convertible debentures
|
|
4,118
|
|
|
-
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
Decrease in
accounts receivable
|
|
185,362
|
|
|
858,511
|
|
(Increase) Decrease in inventory
|
|
1,568,377
|
|
|
(1,052,753
|
)
|
(Increase)
Decrease in other receivables
|
|
6,659
|
|
|
(4,529
|
)
|
(Increase) Decrease in prepaid expense
|
|
(33,947
|
)
|
|
44,206
|
|
(Increase)
in deposits
|
|
(42,252
|
)
|
|
(329
|
)
|
(Decrease) in accounts payable and accrued expenses
|
|
(429,750
|
)
|
|
(481,291
|
)
|
Net cash
provided by (used in) operating activities
|
|
1,007,964
|
|
|
(890,840
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
Proceeds from sales of property and equipment
|
|
-
|
|
|
91
|
|
Decrease in restricted cash
|
|
63,151
|
|
|
188,104
|
|
Purchase of investments
|
|
-
|
|
|
(168,101
|
)
|
Proceeds from sale of investments
|
|
110,182
|
|
|
-
|
|
Net cash
provided by investing activities
|
|
173,333
|
|
|
20,094
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Proceeds from bank loans
|
|
2,132,162
|
|
|
2,887,063
|
|
Repayment of bank loans
|
|
(2,820,683
|
)
|
|
(2,432,730
|
)
|
Proceeds from loan from related party
|
|
165,011
|
|
|
432,198
|
|
Net proceeds from issuance of convertible debentures
|
|
27,705
|
|
|
-
|
|
Net cash
provided by (used in) financing activities
|
|
(495,805
|
)
|
|
886,531
|
|
Effect of exchange rate changes on cash and
cash equivalents
|
|
(16,732
|
)
|
|
(38,188
|
)
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
668,760
|
|
|
(22,403
|
)
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning
|
|
205,658
|
|
|
228,061
|
|
Ending
|
$
|
874,418
|
|
$
|
205,658
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
Income tax
|
$
|
197
|
|
$
|
30,524
|
|
Interest expense
|
$
|
109,663
|
|
$
|
115,391
|
|
The accompanying notes are an integral part of the financial
statements
F-5
TRANSAKT LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
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. The historical financial statements presented are those of HTT. The
continuing company has retained December 31 as its fiscal year end.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements
include the accounts of TransAKT Holdings Limited and its wholly owned
subsidiaries Taiwan Halee International Co. Ltd. and TransAKT Taiwan Limited,
collectively referred to within as the Company. All material intercompany
accounts, transactions and profits have been eliminated in consolidation.
Financial Statement Presentation
Certain changes to the 2008 financial
statements have been made to conform to the 2009 financial statement format.
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
The Companys revenue recognition
policies are in compliance with Staff Accounting Bulletin (SAB) 104. Revenues
are recognized when finished products are shipped to unaffiliated customers and
both title and the risks and rewards of ownership are transferred and
collectibility is reasonably assured.
The Companys revenues are recorded
upon confirmed acceptance after inspection by the customers of the Company.
F-6
Exchange Gain (Loss):
During the years ended December 31,
2009 and 2008, the transactions of TransAKT Holdings Limited, Taiwan Halee
International Co. Ltd. and TransAKT Taiwan Limited were denominated in foreign
currency and were recorded in Taiwan Dollar (TWD) and Canadian Dollar (CAD) 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 ($), which is the Companys reporting currency,
while its functional currency is Taiwan dollar (TWD) and Canadian Dollar (CAD).
Transactions in foreign currencies are initially recorded at the functional
currency rate ruling at the date of transaction. Any differences between the
initially recorded amount and the settlement amount are recorded as a gain or
loss on foreign currency transaction in the consolidated statements of income.
Monetary assets and liabilities denominated in foreign currency are translated
at the functional currency rate of exchange ruling at the balance sheet date.
Any differences are taken to profit or loss as a gain or loss on foreign
currency translation in the statements of income.
In accordance with ASC 830, Foreign
Currency Matters, the Company translates the assets and liabilities into U.S.
dollar ($) 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 TWD
and CAD 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.
The Company adopted ASC 740-10-25,
Income Taxes- Overall-Recognition, on January 1, 2007, which provides criteria
for the recognition, measurement, presentation and disclosure of uncertain tax
position. The Company must recognize the tax benefit from an uncertain tax
position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical
merits of the position. The tax benefits recognized in the financial statements
from such a position are measured based on the largest benefit that has a
greater than 50% likelihood of being realized upon ultimate resolution. The
Company did not recognize any additional liabilities for uncertain tax positions
as a result of the implementation of ASC 740-10-25.
Statement of Cash Flows
In accordance with generally accepted
accounting principles (GAAP), cash flows from the Companys operations is 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.
F-7
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.
Restricted Cash
The Company had restricted cash and
investments of $498,540 and $563,756 for year ended December 31, 2009 and 2008,
respectively. The restricted cash primarily collateralizes the Companys bank
loans and issuances of standby and commercial letters of credit. The
restrictions expire when related obligations are fulfilled.
Allowance for Doubtful
Accounts
The Company maintains reserves for
potential credit losses on accounts receivable. Management reviews the
composition of accounts receivable and analyzes historical bad debts, customer
concentrations, customer credit worthiness, current economic trends and changes
in customer payment patterns to evaluate the adequacy of these reserves.
Allowance for doubtful debts amounted to $190,402 and $187,353 as at December
31, 2009 and December 31, 2008, respectively.
Inventory
Inventories are valued at the lower of
cost (determined on a weighted average basis) or market. The Management compares
the cost of inventories with the market value and allowance is made for writing
down their inventories to market value, if lower. As of December 31, 2009 and
2008, inventory consisted only of finished goods.
Property, Plant & Equipment
Property and equipment are stated at
cost. Expenditures for maintenance and repairs are charged to earnings as
incurred; additions, renewals and betterments are capitalized. When property and
equipment are retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the respective accounts, and any gain or loss is
included in operations. Depreciation of property and equipment is provided using
the straight-line method for substantially all assets with estimated lives
of:
|
Furniture and Fixtures
|
3 -5 years
|
|
Equipment
|
3- 5 years
|
|
Computer Hardware and Software
|
3- 5 years
|
|
Automobile
|
3-5 years
|
As of December 31, 2009, Property,
Plant & Equipment consist of the following:
Computer and office equipment
|
$
|
59,769
|
|
Accumulated depreciation
|
|
(56,639
|
)
|
|
|
|
|
|
$
|
3,130
|
|
Depreciation expenses were $6,159 and
$18,526 for the years ended December 31, 2009 and 2008, respectively.
F-8
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.
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.
Impairment of Long-Lived
Assets
The Company has adopted Accounting
Standards Codification subtopic 360-10, Property, Plant and Equipment (ASC
360-10). ASC 360-10 requires that long-lived assets and certain identifiable
intangibles held and used by the Company be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Company evaluates its long lived assets for
impairment annually or more often if events and circumstances warrant. Events
relating to recoverability may include significant unfavorable changes in
business conditions, recurring losses, or a forecasted inability to achieve
break-even operating results over an extended period. The Company evaluates the
recoverability of long-lived assets based upon forecasted undiscounted cash
flows. Should impairment in value be indicated, the carrying value of intangible
assets will be adjusted, based on estimates of future discounted cash flows
resulting from the use and ultimate disposition of the asset. ASC 360-10 also
requires assets to be disposed of be reported at the lower of the carrying
amount or the fair value less costs to sell.
Recent accounting
pronouncements
In October 2009, the FASB issued
Accounting Standards Update 2009-13, Multiple-Deliverable Revenue Arrangements
a consensus of the FASB Emerging Issues Task Force, to provide amendments to
the criteria in Subtopic 609-24 of the Codification for separating consideration
into multiple-deliverable revenue arrangements. ASU 2009-13 establishes a
selling price hierarchy for determining the selling price of each specific
deliverable which includes vendor-specific objective evidence (VSOE) if
available, third party evidence if VSOE is not available or estimated selling
price if neither VSOE nor third party evidence is available. ASU 2009-13 also
eliminates the residual method for allocating revenue between the elements of an
arrangement and requires that arrangement consideration be allocated at the
inception of the arrangement to all deliverables using the relative selling
price method, which allocates any discount in the arrangement proportionally to
each deliverable on the basis of each deliverables selling price. This Update
expands the disclosure requirements regarding a vendors multiple-deliverable
revenue arrangements. ASU 2009-13 is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010, with early adoption permitted. The Company is currently
evaluating the impact of ASU 2009-13 on its financial statements and does not
expect the adoption of this standard will have material impact on its financial
position, results of operations or cash flows.
F-9
In January 2010, the FASB issued ASU
No. 2010-06,
Improving Disclosures about Fair Value Measurements
, which,
among other things, amends
Accounting Standards Topic 820 Fair Value
Measurements and Disclosures (ASC 820)
to require entities to separately
present purchases, sales, issuances, and settlements in their reconciliation of
Level 3 fair value measurements (i.e., to present such items on a gross basis
rather than on a net basis), and which clarifies existing disclosure
requirements provided by ASC 820 regarding the level of disaggregation and the
inputs and valuation techniques used to measure fair value for measurements that
fall within either Level 2 or Level 3 of the fair value hierarchy. ASU No.
2010-06 is effective for interim and annual periods beginning after December 15,
2009, except for the disclosures about purchases, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measurements
which are effective for fiscal years beginning after December 15, 2010 and for
interim periods within those fiscal years. The Companys adoption of this
standard had no impact on its financial position, results of operations or cash
flows.
Going Concern
The Company has incurred a net loss of
$249,643 and $420,776 during the years ended December 31, 2009 and 2008,
respectively, and has an accumulated deficit of $2,038,892 and $1,789,249 as of
December 31, 2009 and December 31, 2008, 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, 2009, the Company has not realized commercial success of the technologies,
nor have they raised sufficient funds to continue research and development or to
market its products.
There can be no assurances that there
will be adequate financing available to the Company and the consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
The Company has taken certain
restructuring steps to provide the necessary capital to continue its operations.
These steps included: (1) Tightly budgeting and controlling all expenses; (2)
Expanding the companys operations into China, expanding product lines and
recruiting a strong sales team to significantly increase sales revenue and
profit in 2010; (3) The Company plans to continue actively seeing additional
funding opportunities to improve and expand upon our product lines.
NOTE 3 ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The accounts payable and accrued
expenses as of December 31, 2009 and 2008 are summarized as follows:
|
|
|
2009
|
|
|
2008
|
|
|
Accounts payable
|
$
|
911,780
|
|
$
|
1,390,155
|
|
|
Accrued expenses
|
|
155,110
|
|
|
153,482
|
|
|
Sales tax payable
|
|
35,391
|
|
|
-
|
|
|
Accrued payroll
|
|
59,305
|
|
|
-
|
|
|
Income Taxes Payable
|
|
-
|
|
|
13,039
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
1,161,586
|
|
$
|
1,556,676
|
|
F-10
NOTE 4 - RELATED PARTY TRANSACTIONS
The Companys officers and shareholders
have advanced funds to the Company for working capital purposes. The Company has
not entered into any agreement on the repayment terms for these advances. As of
December 31, 2009 and 2008, there were $435,225 and $216,632 advances
outstanding, respectively.
The Company also had loans payable to
five shareholders amounted to $60,400 as of December 31, 2009 and 2008. The
unsecured loans bear interest at the rate of 12% per annum, and due on May and
June 2010.
NOTE 5 - LOANS PAYABLE
The Company has loan payable amounting
to $2,083,361 as of December 31, 2009 from several commercial banks in Taiwan.
The loans are partially secured by certificate of deposits for $498,540 and
accounts receivable. The loans payable at December 31, 2009 comprised of the
following:
|
|
|
|
|
|
Interest per
|
|
|
|
|
|
Nature
|
|
Due on
|
|
|
Annum
|
|
|
Amount
|
|
|
Secured note payable from a bank
|
|
1/12/2010
|
|
|
5.25%
|
|
|
27,000
|
|
|
Secured note payable from a bank
|
|
1/12/2010
|
|
|
5.25%
|
|
|
39,300
|
|
|
Secured note payable from a bank
|
|
2/3/2010
|
|
|
5.25%
|
|
|
40,300
|
|
|
Secured note payable from a bank
|
|
2/10/2010
|
|
|
5.25%
|
|
|
55,460
|
|
|
Secured note payable from a bank
|
|
2/23/2010
|
|
|
5.25%
|
|
|
117,700
|
|
|
Secured note payable from a bank
|
|
2/4/2010
|
|
|
5.25%
|
|
|
23,250
|
|
|
Secured note payable from a bank
|
|
4/8/2010
|
|
|
5.25%
|
|
|
37,800
|
|
|
Secured note payable from a bank
|
|
4/20/2010
|
|
|
5.25%
|
|
|
12,500
|
|
|
Secured note payable from a bank
|
|
4/20/2010
|
|
|
5.25%
|
|
|
37,500
|
|
|
Secured note payable from a bank
|
|
4/25/2010
|
|
|
5.25%
|
|
|
16,500
|
|
|
Secured note payable from a bank
|
|
4/25/2010
|
|
|
5.25%
|
|
|
31,286
|
|
|
Secured note payable from a bank
|
|
4/25/2010
|
|
|
5.25%
|
|
|
25,920
|
|
|
Secured note payable from a bank
|
|
5/5/2010
|
|
|
5.25%
|
|
|
38,700
|
|
|
Secured note payable from a bank
|
|
5/13/2010
|
|
|
5.25%
|
|
|
27,000
|
|
|
Secured note payable from a bank
|
|
5/8/2010
|
|
|
5.25%
|
|
|
39,000
|
|
|
Secured note payable from a bank
|
|
5/17/2010
|
|
|
5.25%
|
|
|
16,170
|
|
|
Secured note payable from a bank
|
|
5/25/2010
|
|
|
5.25%
|
|
|
55,460
|
|
|
Secured note payable from a bank
|
|
5/26/2010
|
|
|
5.10%
|
|
|
56,875
|
|
|
Secured note payable from a bank
|
|
12/28/2010
|
|
|
2.88%
|
|
|
151,500
|
|
|
Secured note payable from a bank
|
|
3/1/2010
|
|
|
5.35%
|
|
|
23,007
|
|
|
Secured note payable from a bank
|
|
3/6/2010
|
|
|
5.35%
|
|
|
27,914
|
|
|
Secured note payable from a bank
|
|
1/14/2010
|
|
|
5.00%
|
|
|
52,000
|
|
|
Secured note payable from a bank
|
|
1/22/2010
|
|
|
5.00%
|
|
|
25,750
|
|
|
Secured note payable from a bank
|
|
5/7/2010
|
|
|
5.00%
|
|
|
82,800
|
|
|
Secured note payable from a bank
|
|
3/8/2010
|
|
|
1.52%
|
|
|
692,717
|
|
|
Secured note payable from a bank
|
|
2/10/2010
|
|
|
2.40%
|
|
|
17,800
|
|
|
Secured note payable from a bank
|
|
4/26/2010
|
|
|
2.58%
|
|
|
45,797
|
|
|
Secured note payable from a bank
|
|
3/22/2010
|
|
|
2.42%
|
|
|
36,600
|
|
|
Secured note payable from a bank
|
|
3/30/2010
|
|
|
2.42%
|
|
|
27,000
|
|
|
Secured note payable from a bank
|
|
3/29/2010
|
|
|
2.42%
|
|
|
32,250
|
|
|
Secured note payable from a bank
|
|
3/30/2010
|
|
|
2.42%
|
|
|
36,000
|
|
|
Secured note payable from a bank
|
|
4/12/2010
|
|
|
2.43%
|
|
|
21,000
|
|
|
Secured note payable from a bank
|
|
4/12/2010
|
|
|
2.43%
|
|
|
31,800
|
|
|
Secured note payable from a bank
|
|
4/28/2010
|
|
|
2.43%
|
|
|
40,500
|
|
|
Secured note payable from a bank
|
|
5/4/2010
|
|
|
2.43%
|
|
|
31,125
|
|
|
Secured note payable from a bank
|
|
5/10/2010
|
|
|
2.43%
|
|
|
10,080
|
|
|
Total
|
$
|
2,083,361
|
|
|
Current portion
|
$
|
2,083,361
|
|
|
Long-term portion
|
$
|
-
|
|
F-11
NOTE 6 INCOME TAXES
The Company was incorporated under the
laws of the Province of Alberta, Canada and has operations in primarily two tax
jurisdictions - Taiwan and Canada. For certain operations in Taiwan and Canada,
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 at these locations as of December 31, 2009 and 2008.
Accordingly, the Company has no net deferred tax assets.
Canada:
The statutory tax rate under Canada tax
law is 34%. The Company has significant income tax net operating losses (NOL)
carried forward from prior years. Due to the uncertainty of the realizability of
the related deferred tax assets, a reserve equal to the amount of deferred
income taxes has been established at December 31, 2009 and 2008. The Company has
provided 100% valuation allowance to the deferred tax assets as of December 31,
2009 and 2008.
Taiwan:
The statutory tax rate under Taiwan tax
law is 25%. The Company has several deferred tax asset items. Due to the
uncertainty of the realizability of the related deferred tax assets, a reserve
equal to the amount of deferred income taxes has been established at December
31, 2009 and 2008. The Company has provided 100% valuation allowance to the
deferred tax assets as of December 31, 2009 and 2008.
The provision for income taxes from
continuing operations on income consists of the following for the years ended
December 31, 2009 and 2008:
|
|
|
2009
|
|
|
2008
|
|
|
Income tax expense current
|
$
|
1,332
|
|
$
|
17,559
|
|
|
Income tax expense deferred
|
|
-
|
|
|
-
|
|
|
Total income tax expense
|
$
|
1,332
|
|
$
|
17,559
|
|
F-12
Deferred taxes:
The tax effect of temporary differences
that give rise to the Companys deferred tax asset as of December 31, 2009 and
2008 are as follows:
|
Canada:
|
|
2009
|
|
|
2008
|
|
|
Deferred tax asset non-current:
|
|
|
|
|
|
|
|
Net operating loss carry forward
|
$
|
2,301,024
|
|
$
|
2,241,872
|
|
|
Valuation allowance
|
|
(
2,301,024
|
)
|
|
(2,241,872
|
)
|
|
Net deferred tax asset
|
$
|
-
|
|
$
|
-
|
|
|
Taiwan:
|
|
2009
|
|
|
2008
|
|
|
Deferred tax asset non-current:
|
|
|
|
|
|
|
|
Net operating loss carry forward
|
$
|
16,514
|
|
$
|
-
|
|
|
Foreign currency exchange loss (gain)
|
|
( 7,555
|
)
|
|
14,280
|
|
|
Other temporary non-deductible difference
|
|
-
|
|
|
2,539
|
|
|
Valuation allowance
|
|
(8,
959
|
)
|
|
(16,819
|
)
|
|
Net deferred tax asset
|
$
|
-
|
|
$
|
-
|
|
NOTE 7 - COMMITTMENTS
Operating Leases
The Company leases various office
facilities under operating leases that expire on various dates of year 2010.
Rental expense for these leases consisted of approximately $39,596 and $83,677
for the years ended December 31, 2009 and 2008, respectively. The Company has
future minimum lease obligations of $21,483 for the twelve-month period ended
December 31, 2010.
NOTE 8 - OTHER COMPREHENSIVE INCOME
Balances of related after-tax
components comprising accumulated other comprehensive income (loss), included in
stockholders equity, at December 31, 2009 and 2008 are as follows:
|
|
|
Foreign Currency
|
|
|
|
|
Translation
|
|
|
|
|
Adjustment
|
|
Balance at December 31, 2007
|
|
$
|
94,259
|
|
Change for 2008
|
|
|
(
33,097
|
)
|
Balance at December 31, 2008
|
|
|
61,162
|
|
Change for 2009
|
|
|
(76,440
|
)
|
Balance at December 31, 2009
|
|
$
|
(15,278
|
)
|
NOTE 9 - FAIR VALUE MEASUREMENTS
Generally accepted accounting
principles (GAAP) utilizes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels. The
fair value hierarchy gives the highest priority to observable quoted prices
(unadjusted) in active markets for identical assets and liabilities and the
lowest priority to unobservable inputs.
As of December 31, 2009 and 2008 the
Company had $50,915 and $152,569, respectively, in Level 1 investments in the
form of mutual funds.
F-13
NOTE 10 - PRIVATE PLACEMENT OF CONVERTIBLE NOTES
12% Unsecured Convertible Promissory Notes dated May 29,
2009
On May 29, 2009, the Company issued $30,000 convertible
promissory notes due May 29, 2011 with interest at 12% per annum due upon
maturity. The note is convertible at any time after the first anniversary after
the closing date, at the holders option, into shares of the Companys common
stock at a price of $0.02 per share. At maturity, any accrued and unpaid
interest, is payable to the holder.
In accordance with ASC 470-20, the Company recognized an
embedded beneficial conversion feature present in the note. The Company
allocated a portion of the proceeds equal to the intrinsic value of that feature
to additional paid-in capital. The Company recognized and measured an aggregate
of $15,000 of the proceeds, which is equal to the intrinsic value of the
embedded beneficial conversion feature, to additional paid-in capital and a
discount against the note. The debt discount attributed to the beneficial
conversion feature is amortized over the notes maturity period (two years) as
interest expense.
The Company recorded the intrinsic value of the embedded
beneficial conversion feature ($15,000) to debt discount which will be amortized
to interest expense over the term of the note. Amortization of $4,459 was
recorded for the year ended December 31, 2009.
******
F-14
TRANSAKT LTD.
CONSOLIDATED
BALANCE SHEETS
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
ASSETS
|
|
(Unaudited)
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,033,525
|
|
$
|
874,418
|
|
Restricted cash
|
|
1,043,132
|
|
|
498,540
|
|
Accounts receivable, net
|
|
2,837,774
|
|
|
2,049,995
|
|
Inventory
|
|
1,810,512
|
|
|
1,373,516
|
|
Other receivable, net
|
|
8,969
|
|
|
6,278
|
|
Prepaid expenses
|
|
63,076
|
|
|
51,196
|
|
Investments
|
|
28,162
|
|
|
50,915
|
|
Total Current
Assets
|
|
6,825,150
|
|
|
4,904,858
|
|
|
|
|
|
|
|
|
Property & Equipment, net
|
|
2,331
|
|
|
3,130
|
|
|
|
|
|
|
|
|
Deposits
|
|
29,924
|
|
|
72,891
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
6,857,405
|
|
$
|
4,980,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
$
|
2,180,136
|
|
$
|
1,161,586
|
|
Bank loans
|
|
2,694,296
|
|
|
2,083,361
|
|
Loan payable to related party
|
|
621,614
|
|
|
495,625
|
|
Total Current
Liabilities
|
|
5,496,046
|
|
|
3,740,572
|
|
|
|
|
|
|
|
|
Non-current Liabilities
|
|
|
|
|
|
|
Unsecured convertible notes payable, net of
unamortized discounts of $6,791 and $10,541
|
|
23,209
|
|
|
19,459
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
Common stock, unlimited shares authorized for issuance,
no par value, 102,645,120 shares issued and
outstanding
|
|
3,260,018
|
|
|
3,260,018
|
|
Additional paid-in capital
|
|
15,000
|
|
|
15,000
|
|
Other comprehensive income (loss)
|
|
72,461
|
|
|
(15,278
|
)
|
Accumulated deficit
|
|
(2,009,329
|
)
|
|
(2,038,892
|
)
|
Total Stockholders' Equity
|
|
1,338,150
|
|
|
1,220,848
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
$
|
6,857,405
|
|
$
|
4,980,879
|
|
The Accompanying Notes Are an Integral
Part of the Financial Statements.
F-15
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Six Months Ended
|
|
|
Three Months Ended
|
|
|
|
June 30,2010
|
|
|
June 30,2009
|
|
|
June 30,2010
|
|
|
June 30,2009
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of goods, net
|
$
|
6,222,107
|
|
$
|
5,657,303
|
|
$
|
2,960,219
|
|
$
|
2,685,500
|
|
Total revenues
|
|
6,222,107
|
|
|
5,657,303
|
|
|
2,960,219
|
|
|
2,685,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
5,814,814
|
|
|
5,367,877
|
|
|
2,737,218
|
|
|
2,596,143
|
|
Selling, general and administrative expenses
|
|
452,136
|
|
|
432,878
|
|
|
229,886
|
|
|
235,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations
|
|
(44,843
|
)
|
|
(143,452
|
)
|
|
(6,885
|
)
|
|
(145,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
1,044
|
|
|
173
|
|
|
714
|
|
|
173
|
|
Investment income
|
|
487
|
|
|
151
|
|
|
487
|
|
|
151
|
|
Currency exchange gain (loss)
|
|
106,330
|
|
|
(28,147
|
)
|
|
61,911
|
|
|
16,132
|
|
Interest expense
|
|
(33,455
|
)
|
|
(38,387
|
)
|
|
(8,954
|
)
|
|
(22,868
|
)
|
Total other income (expense)
|
|
74,406
|
|
|
(66,210
|
)
|
|
54,158
|
|
|
(6,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
29,563
|
|
|
(209,662
|
)
|
|
47,273
|
|
|
(152,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
-
|
|
|
1,282
|
|
|
-
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
29,563
|
|
$
|
(210,944
|
)
|
$
|
47,273
|
|
$
|
(152,183
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share:
Basic and diluted income (loss) per share
|
$
|
0.00
|
|
$
|
(0.00
|
)
|
$
|
0.00
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding:
Basic and diluted
|
|
102,645,120
|
|
|
102,645,120
|
|
|
102,645,120
|
|
|
102,645,120
|
|
The Accompanying Notes Are an Integral
Part of the Financial Statements.
F-16
TRANSAKT LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six Months Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net income (loss)
|
$
|
29,563
|
|
$
|
(210,944
|
)
|
Adjustments to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
Gain on sales of short-term Investment
|
|
(487
|
)
|
|
(151
|
)
|
Depreciation
expense
|
|
964
|
|
|
918
|
|
Amortization of debt discount attributable to convertible debentures
|
|
3,696
|
|
|
68
|
|
Changes in assets
and liabilities:
|
|
|
|
|
|
|
(Increase) in accounts receivable
|
|
(648,961
|
)
|
|
(597,425
|
)
|
(Increase) Decrease in inventory
|
|
(346,136
|
)
|
|
1,050,747
|
|
(Increase) Decrease in other receivables
|
|
(2,259
|
)
|
|
4,261
|
|
(Increase) in prepaid expense
|
|
(8,610
|
)
|
|
(23,894
|
)
|
Decrease in deposits
|
|
45,062
|
|
|
2,567
|
|
Increase in accounts payable and accrued expenses
|
|
929,227
|
|
|
484,847
|
|
Net cash provided by operating activities
|
|
2,059
|
|
|
710,994
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
(Increase)
Decrease in restricted cash
|
|
(502,484
|
)
|
|
123,485
|
|
Proceeds from sale of investments
|
|
25,687
|
|
|
106,096
|
|
Net cash provided by (used in) investing activities
|
|
(476,797
|
)
|
|
229,581
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Proceeds from bank loans
|
|
2,473,715
|
|
|
2,059,353
|
|
Repayment of bank
loans
|
|
(1,999,370
|
)
|
|
(2,529,361
|
)
|
Due from related party
|
|
104,750
|
|
|
82,447
|
|
Net proceeds from
issuance of convertible debentures
|
|
-
|
|
|
28,827
|
|
Net cash provided by (used in) financing
activities
|
|
579,095
|
|
|
(358,734
|
)
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and
cash equivalents
|
|
54,750
|
|
|
9,976
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
159,107
|
|
|
591,817
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning
|
|
874,418
|
|
|
205,658
|
|
Ending
|
$
|
1,033,525
|
|
$
|
797,475
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows
|
|
|
|
|
|
|
Cash paid during
the year for:
|
|
|
|
|
|
|
Income tax
|
$
|
-
|
|
$
|
-
|
|
Interest expense
|
$
|
39,148
|
|
$
|
59,868
|
|
F-17
TRANSAKT LTD.
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States (GAAP) for interim financial reporting and in
accordance with instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited condensed consolidated financial
statements contained in this report reflect all adjustments that are normal and
recurring in nature and considered necessary for a fair presentation of the
financial position and the results of operations for the interim periods
presented. The year-end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by GAAP. The
results of operations for the interim period are not necessarily indicative of
the results expected for the full year. These unaudited, condensed consolidated
financial statements, footnote disclosures and other information should be read
in conjunction with the financial statements and the notes thereto included in
the Companys Annual Report on Form 20-F for the year ended December 31,
2009.
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.
Principles of
Consolidation
The consolidated financial statements include the accounts of
TransAKT Holdings Limited and its wholly owned subsidiaries Taiwan Halee
International Co. Ltd. and TransAKT Taiwan Limited, collectively referred to
within as the Company. All material intercompany accounts, transactions and
profits have been eliminated in consolidation.
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.
F-18
Statement of Cash Flows
In accordance with generally accepted accounting principles
(GAAP), cash flows from the Companys operations is 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.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and cash in time
deposits, certificates of deposit and all highly liquid debt instruments with
original maturities of three months or less.
Allowance for Doubtful Accounts
The Company maintains reserves for potential credit losses on
accounts receivable. Management reviews the composition of accounts receivable
and analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Allowance for doubtful debts amounted
to $201,835 and $190,402 as at June 30, 2010 and December 31, 2009,
respectively.
Inventory
Inventories are valued at the lower of cost (determined on a
weighted average basis) or market. The Management compares the cost of
inventories with the market value and allowance is made for writing down their
inventories to market value, if lower. As of June 30, 2010 and December 31,
2009, inventory consisted only of finished goods.
Recent Accounting Pronouncements
In February 2010 the FASB issued Update No. 2010-09 Subsequent
Events (Topic 855) (2010-09). 2010-09 clarifies the interaction of Accounting
Standards Codification 855 Subsequent Events (Topic 855) with guidance
issued by the SEC as well as the intended breadth of the reissuance disclosure
provision related to subsequent events found in paragraph 855-10-50-4 in Topic
855. This update is effective for annual or interim periods ending after June
15, 2010. Management is currently evaluating whether these changes will have any
material impact on its financial position, results of operations or cash
flows.
In February 2010 the FASB issued Update No. 2010-08 Technical
Corrections to Various Topics (2010-08). 2010-08 represents technical
corrections to SEC paragraphs within various sections of the Codification.
Management is currently evaluating whether these changes will have any material
impact on its financial position, results of operations or cash flows.
In January 2010 the FASB issued Update No. 2010-06 Fair Value
Measurements and DisclosuresImproving Disclosures about Fair Value
Measurements (2010-06). 2010-06 requires new disclosures regarding
significant transfers between Level 1 and Level 2 fair value measurements, and
disclosures regarding purchases, sales, issuances and settlements, on a gross
basis, for Level 3 fair value measurements. 2010-06 also calls for further
disaggregation of all assets and liabilities based on line items shown in the
statement of financial position. This amendment is effective for fiscal years
beginning after December 15, 2010 and interim periods within those fiscal years.
The Company is currently evaluating whether adoption of this standard will have
a material impact on its financial position, results of operations or cash
flows.
In January 2010 the FASB issued Update No. 2010-05
CompensationStock CompensationEscrowed Share Arrangements and Presumption of
Compensation (2010-05). 2010-05 re-asserts that the Staff of the SEC has
stated the presumption that for certain shareholders escrowed shares represent a
compensatory arrangement. 2010-05 further clarifies the criteria required to be
met to establish a position different from the SEC Staffs position. The Company
does not believe this pronouncement will have any material impact on its
financial position, results of operations or cash flows.
In January 2010 the FASB issued Update No. 2010-04 Accounting
for Various TopicsTechnical Corrections to SEC Paragraphs (2010-04). 2010-04
represents technical corrections to SEC paragraphs within various sections of
the Codification. Management is currently evaluating whether these changes will
have any material impact on its financial position, results of operations or
cash flows.
F-19
In January 2010 the FASB issued Update No. 2010-02 Accounting
and Reporting for Decreases in Ownership of a Subsidiarya Scope Clarification
(2010-02) an update of ASC 810 Consolidation. 2010-02 clarifies the scope of
ASC 810 with respect to decreases in ownership in a subsidiary to those of a
subsidiary or group of assets that are a business or nonprofit, a subsidiary
that is transferred to an equity method investee or joint venture, and an
exchange of a group of assets that constitutes a business or nonprofit activity
to a non-controlling interest including an equity method investee or a joint
venture. Management does not expect adoption of this standard to have any
material impact on its financial position, results of operations or operating
cash flows. Management does not intend to decrease its ownership in any of its
wholly-owned subsidiaries.
In January 2010 the FASB issued Update No. 2010-01 Accounting
for Distributions to Shareholders with Components of Stock and Casha consensus
of the FASB Emerging Issues Task Force (2010-03) an update of ASC 505
Equity. 2010-03 clarifies the treatment of stock distributions as dividends to
shareholders and their affect on the computation of earnings per shares.
Management does not expect adoption of this standard to have any material impact
on its financial position, results of operations or operating cash flows.
Going Concern
The Company has incurred a net loss of $210,944 during the
six-month periods ended June 30, 2009, and has an accumulated deficit of
$2,009,329 as of June 30, 2010.
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 June 30, 2010, the Company has not
realized commercial success of the technologies, nor have they raised sufficient
funds to continue research and development or to market its products.
There can be no assurances that there will be adequate
financing available to the Company and the consolidated financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
The Company has taken certain restructuring steps to provide
the necessary capital to continue its operations. These steps included: (1)
Tightly budgeting and controlling all expenses; (2) Expanding the companys
operations into China, expanding product lines and recruiting a strong sales
team to significantly increase sales revenue and profit in next year; (3) The
Company plans to continue actively seeing additional funding opportunities to
improve and expand upon our product lines.
NOTE 2 - RELATED PARTY TRANSACTIONS
Loan Payable to Related Parties
The Companys officers and shareholders have advanced funds to
the Company for working capital purpose. The Company has not entered into any
agreement on the repayment terms for these advances. As of June 30, 2010 and
December 31, 2009, there were $561,214 and $435,225 advances outstanding,
respectively.
The Company also had loans payable to five shareholders
amounted to $60,400 as of June 30, 2010 and December 31, 2009. The unsecured
loans bear interest at the rate of 12% per annum, and due on May and June
2010.
F-20
NOTE 3 - LOANS PAYABLE
The Company has loan payable amounting to $2,694,296 as of June
30, 2010 from several commercial banks in Taiwan. The loans are partially
secured by certificate of deposits for $1,043,132 and accounts receivable. The
loans payable at June 30, 2010 comprised of the following:
|
|
|
|
|
Interest per
|
|
|
|
|
Nature
|
|
Due on
|
|
|
Annum
|
|
|
Amount
|
|
Secured note payable from a bank
|
|
8/10/2010
|
|
|
5.10%
|
|
|
70,740
|
|
Secured note payable from a bank
|
|
8/8/2010
|
|
|
5.10%
|
|
|
32,050
|
|
Secured note payable from a bank
|
|
9/4/2010
|
|
|
5.10%
|
|
|
45,050
|
|
Secured note payable from a bank
|
|
9/15/2010
|
|
|
5.10%
|
|
|
41,400
|
|
Secured note payable from a bank
|
|
8/31/2010
|
|
|
5.10%
|
|
|
199,683
|
|
Secured note payable from a bank
|
|
9/15/2010
|
|
|
5.10%
|
|
|
224,932
|
|
Secured note payable from a bank
|
|
12/28/2010
|
|
|
2.88%
|
|
|
160,650
|
|
Secured note payable from a bank
|
|
8/22/2010
|
|
|
6.10%
|
|
|
28,620
|
|
Secured note payable from a bank
|
|
9/5/2010
|
|
|
6.10%
|
|
|
24,300
|
|
Secured note payable from a bank
|
|
9/9/2010
|
|
|
6.10%
|
|
|
31,860
|
|
Secured note payable from a bank
|
|
8/28/2010
|
|
|
6.10%
|
|
|
12,182
|
|
Secured note payable from a bank
|
|
9/24/2010
|
|
|
6.20%
|
|
|
21,135
|
|
Secured note payable from a bank
|
|
8/25/2010
|
|
|
5.00%
|
|
|
54,960
|
|
Secured note payable from a bank
|
|
9/6/2010
|
|
|
5.00%
|
|
|
25,920
|
|
Secured note payable from a bank
|
|
9/3/2010
|
|
|
5.00%
|
|
|
38,400
|
|
Secured note payable from a bank
|
|
9/16/2010
|
|
|
5.00%
|
|
|
16,500
|
|
Secured note payable from a bank
|
|
9/17/2010
|
|
|
5.00%
|
|
|
12,290
|
|
Secured note payable from a bank
|
|
10/1/2010
|
|
|
5.00%
|
|
|
25,920
|
|
Secured note payable from a bank
|
|
10/15/2010
|
|
|
5.00%
|
|
|
129,250
|
|
Secured note payable from a bank
|
|
10/29/2010
|
|
|
5.00%
|
|
|
37,800
|
|
Secured note payable from a bank
|
|
10/29/2010
|
|
|
5.00%
|
|
|
10,450
|
|
Secured note payable from a bank
|
|
11/5/2010
|
|
|
5.00%
|
|
|
104,940
|
|
Secured note payable from a bank
|
|
11/12/2010
|
|
|
5.00%
|
|
|
39,000
|
|
Secured note payable from a bank
|
|
11/12/2010
|
|
|
5.00%
|
|
|
26,892
|
|
Secured note payable from a bank
|
|
11/11/2010
|
|
|
5.00%
|
|
|
40,100
|
|
Secured note payable from a bank
|
|
7/5/2010
|
|
|
1.5275%
|
|
|
310,278
|
|
Secured note payable from a bank
|
|
8/5/2010
|
|
|
1.5370%
|
|
|
173,569
|
|
Secured note payable from a bank
|
|
10/5/2010
|
|
|
1.5243%
|
|
|
273,108
|
|
Secured note payable from a bank
|
|
11/5/2010
|
|
|
1.5243%
|
|
|
24,934
|
|
Secured note payable from a bank
|
|
7/21/2010
|
|
|
2.3580%
|
|
|
48,000
|
|
Secured note payable from a bank
|
|
8/2/2010
|
|
|
2.3563%
|
|
|
9,670
|
|
Secured note payable from a bank
|
|
9/27/2010
|
|
|
2.3762%
|
|
|
17,390
|
|
Secured note payable from a bank
|
|
11/1/2010
|
|
|
2.4101%
|
|
|
40,300
|
|
Secured note payable from a bank
|
|
11/15/2010
|
|
|
2.4725%
|
|
|
38,700
|
|
Secured note payable from a bank
|
|
11/18/2010
|
|
|
3.0136%
|
|
|
65,150
|
|
Secured note payable from a bank
|
|
11/18/2010
|
|
|
2.9040%
|
|
|
49,779
|
|
Secured note payable from a bank
|
|
9/27/2010
|
|
|
2.4419%
|
|
|
35,400
|
|
Secured note payable from a bank
|
|
8/31/2010
|
|
|
2.2833%
|
|
|
125,994
|
|
Secured note payable from a bank
|
|
12/13/2010
|
|
|
2.7801%
|
|
|
27,000
|
|
|
|
Total
|
|
|
|
|
$
|
2,694,296
|
|
|
|
Current portion
|
|
|
|
|
|
2,694,296
|
|
|
|
Long-term portion
|
|
|
|
|
$
|
-
|
|
F-21
NOTE 4 - OTHER COMPREHENSIVE INCOME
Balances of related after-tax components comprising accumulated
other comprehensive income (loss), included in stockholders equity, at June 30,
2010 and December 31, 2009 are as follows:
|
|
|
Foreign Currency
|
|
|
|
|
Translation
|
|
|
|
|
Adjustment
|
|
Balance at December 31, 2008
|
|
$
|
61,162
|
|
Change for 2009
|
|
|
(
76,440
|
)
|
Balance at December 31, 2009
|
|
|
( 15,278
|
)
|
Change for six months ended June 30, 2010
|
|
|
87,739
|
|
Balance at June 30, 2010
|
|
$
|
72,461
|
|
NOTE 5 - FAIR VALUE MEASUREMENTS
Generally accepted accounting principles (GAAP) utilizes a fair
value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels. The fair value hierarchy gives the
highest priority to observable quoted prices (unadjusted) in active markets for
identical assets and liabilities and the lowest priority to unobservable inputs.
As of June 30, 2010 and December 31, 2009, the Company had
$28,162 and $50,915, respectively, in Level 1 investments in the form of mutual
funds.
NOTE 6 - PRIVATE PLACEMENT OF CONVERTIBLE NOTES
12% Unsecured Convertible Promissory Notes dated May 29,
2009
On May 29, 2009, the Company issued $30,000 convertible
promissory notes due May 29, 2011 with interest at 12% per annum due upon
maturity. The note is convertible at any time after the first anniversary after
the closing date, at the holders option, into shares of the Companys common
stock at a price of $0.02 per share. At maturity, any accrued and unpaid
interest, is payable to the holder.
In accordance with ASC 470-20, the Company recognized an
embedded beneficial conversion feature present in the note. The Company
allocated a portion of the proceeds equal to the intrinsic value of that feature
to additional paid-in capital. The Company recognized and measured an aggregate
of $15,000 of the proceeds, which is equal to the intrinsic value of the
embedded beneficial conversion feature, to additional paid-in capital and a
discount against the note. The debt discount attributed to the beneficial
conversion feature is amortized over the notes maturity period (two years) as
interest expense.
The Company recorded the intrinsic value of the embedded
beneficial conversion feature ($15,000) to debt discount which will be amortized
to interest expense over the term of the note. Amortization of $3,750 and $62
were recorded for the six month periods ended June 30, 2010 and 2009,
respectively.
NOTE 7 SUBSEQUENT EVENT
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), expected to be issued to the existing
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. .
F-22
The Articles of Conversion of TransAKT Nevada will provide 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.
******
F-23
APPENDIX A - Form of Continuation Special Resolutions and
Change in Authorized Capital
The following special resolutions, if approved by a special
majority of the holders of the issued shares present and entitled to vote on the
issue at the meeting of the company, authorize TransAkt to complete the
Continuation of TransAkt out of Alberta and the Continuation of TransAkt into
Nevada (the "Continuation").
TRANSAKT LTD.
(the "Company")
Special Resolutions of the Stockholders of the Company
entitled to vote
in person or by proxy at a Special Meeting of the
Stockholders of the Company
WHEREAS the Company proposes to transfer out of Alberta under
the jurisdiction of the Alberta Business Corporations Act, Part 14, Section 189,
and continue into Nevada (the "Continuation") under the jurisdiction of the
Nevada Revised Statues Chapter 78;
RESOLVED, as Special Resolutions, that:
-
the Plan of Conversion providing for the Continuation of the Company out
of Alberta and into Nevada under the Nevada Revised Statutes is hereby
approved;
-
the Company approve and, upon the Continuation, adopt the Articles of
Conversion (the "Articles of Conversion") in the form approved by the
directors of the Company, the Articles of Conversion to come into effect upon
filing of such Articles of Conversion with the Nevada Secretary of State;
-
the Company approve and, upon the Continuation, adopt the bylaws (the
"Nevada Bylaws") in the form approved by the directors of the Company, the
Nevada Bylaws to come into effect upon filing of the Articles of Conversion
and the Bylaws with the Nevada Secretary of State;
-
the Company be and hereby is authorized to file the Articles of Conversion
with the Nevada Secretary of State as required by the Nevada Revised Statutes
to give effect to the proposed transfer of the Company out of Alberta; and be
and is further authorized to make such applications to, and filings with, the
Alberta Registrar of Companies as required by the Alberta Business
Corporations Act for approval of the proposed Continuation of the Company into
Nevada;
-
simultaneously with the effectiveness of the Continuation, the Company's
Alberta Notice of Articles, Articles and Bylaws be cancelled and thereby
substituted by the Articles of Conversion and Nevada Bylaws;
-
the directors of the Company be hereby authorized, in their discretion, to
abandon or amend the application for Continuation of the Company without
further approval of the stockholders; and
-
the directors and officers of the Company, or any one of them, be hereby
authorized and directed to perform all such acts, deeds and things and
execute, under the seal of the Company or otherwise, all such documents,
agreements and other writings as may be required to give effect to the true
intent of these special resolutions.
The following special resolutions, if approved a special
majority of the holders of the issued shares present and entitled to vote on the
issue at the meeting of the company, authorize TransAkt to change its authorized
share capital from unlimited shares of common stock without par value to
300,000,000 shares of common stock with a par value of $0.001 per share and
200,000,000 preferred shares with a par value of $0.001 for which the directors
of our company to fix and determine the designations, rights, preferences or
other variations of such class or series within each class of preferred shares
of the company and to issue the preferred shares for such consideration as may
be fixed by the Board of Directors (the "Change in Authorized Share
Capital").
77
TRANSAKT LTD.
(the "Company")
Special Resolutions of the Stockholders of the Company
entitled to vote
in person or by proxy at a Special Meeting of the
Stockholders of the Company
WHEREAS the Company proposes to change its authorized share
capital from unlimited shares of common stock without par value to 300,000,000
shares of common stock with a par value of $0.001 per share and 200,000,000
preferred shares with a par value of $0.001 for which the directors of our
company to fix and determine the designations, rights, preferences or other
variations of such class or series within each class of preferred shares of the
company and to issue the preferred shares for such consideration as may be fixed
by the Board of Directors;
RESOLVED, as Special Resolutions, that:
-
the change in the Company's authorized share capital from unlimited shares
of common stock without par value to 300,000,000 shares of common stock with a
par value of $0.001 per share and 200,000,000 preferred shares with a par
value of $0.001 for which the directors of our company to fix and determine
the designations, rights, preferences or other variations of such class or
series within each class of preferred shares of the company and to issue the
preferred shares for such consideration as may be fixed by the Board of
Directors be and are hereby approved;
-
the directors of the Company be hereby authorized, in their discretion, to
abandon the Change in Authorized Share Capital without further approval of the
stockholders; and
-
the directors and officers of the Company, or any one of them, be hereby
authorized and directed to perform all such acts, deeds and things and
execute, under the seal of the Company or otherwise, all such documents,
agreements and other writings as may be required to give effect to the true
intent of these special resolutions.
78
APPENDIX B - Plan of Conversion
PLAN OF CONVERSION
OF
TRANSAKT LTD.
(An Alberta Corporation)
INTO
TRANSAKT LTD.
(A Nevada Corporation)
TransAkt Ltd., an Alberta corporation (the "Constituent
Entity"), hereby adopts the following Plan of Conversion:
1. The name of the Constituent Entity is: TransAkt Ltd.
2. The name of the resulting entity (the "Resulting Entity")
is: TransAkt Ltd.
3. The jurisdiction of the law that governs the Constituent
Entity is the Province of Alberta (Canada). The jurisdiction of the law that
will govern the Resulting Entity is the State of Nevada.
4. As soon as is practicable following approval of this Plan of
Conversion by the stockholders of the Constituent Entity and all requisite
corporate and regulatory action in respect of the Resulting Entity has been
taken, the Constituent Entity will cause the conversion of the Constituent
Entity into the Resulting Entity (the "Conversion") to be consummated by the
filing of the Articles of Conversion in the office of the Nevada Secretary of
State in such form as is required by, and signed in accordance with, the
applicable provisions of Chapter 92A of the Nevada Revised Statutes and, if
required, the execution and filing of the Articles of Conversion with the
Registrar of Companies of Alberta. The date of filing the Articles of Conversion
with the Nevada Secretary of State will be the effective date of the Conversion
(the "Conversion Date").
5. As of the Conversion Date:
(a) The Constituent Entity shall be
converted into the Resulting Entity which shall possess all rights, privileges,
powers and franchises of a public nature and a private nature and shall be
subject to all restrictions, disabilities and duties of the Constituent Entity.
(b) The title to all real estate vested
by deed or otherwise under the laws of any jurisdiction, and the title to all
other property, real and personal, owned by the Constituent Entity, and all
debts due to the Constituent Entity on whatever account, as well as all other
things in action or belonging to the Constituent Entity, shall in accordance
with the Alberta Business Corporations Act and the Nevada Revised Statutes be
vested in the Resulting Entity without reservation or impairment.
(c) The Resulting Entity shall have all
of the debts, liabilities and duties of the Constituent Entity, but all rights
of creditors accruing and all liens placed upon any property of the Constituent
Entity up to the Conversion Date shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Entity shall attach to the Resulting
Entity and may be enforced against it to the same extent as if it had incurred
or contracted such debts, liabilities and duties.
79
(d) Any proceeding pending against the
Constituent Entity may be continued as if the Conversion had not occurred or the
Resulting Entity may be substituted in the proceeding in place of the
Constituent Entity.
(e) Any surplus appearing on the books
of the Constituent Entity shall be entered as surplus on the books of the
Resulting Entity and all such surplus shall thereafter be dealt by the Resulting
Entity in any lawful manner.
(f) Once the Conversion is completed,
the holders of shares of common stock of the Constituent Entity instead will own
one common share with a par value of $0.001 per share of the Resulting Entity
for each share of common stock held immediately prior to the Conversion.
(g) The Conversion, if approved, will
effect a change in the legal jurisdiction of incorporation of the Constituent
Entity as of the effective date thereof, but the Constituent Entity will not, as
a result of the change in legal jurisdiction, change its business or operations
after the effective date of the Conversion as the Resulting Entity.
(h) James Wu, Cheng Chun-Chih, Dr.
Shaiu Tzong-Huei and Tse Ming-Huang will be elected to the board of directors of
the Resulting Entity effective as of the Conversion Date. As of the Conversion
Date, the election, duties, resignation and removal of the Constituent Entity
directors and officers shall be governed by the Nevada Revised Statues, the
Articles of Conversion and the Bylaws of the Resulting Entity.
6. The full text of the Articles of Conversion and Bylaws of
the Resulting Entity are attached hereto as Schedule A and Schedule B,
respectively, and each is incorporated herein by this reference.
7. The Constituent Entity intends that this Plan of Conversion
will constitute the complete Plan of Conversion referred to in Section 92A.105
of the Nevada Revised Statutes.
80
APPENDIX C - Form of Articles of Continuance
81
82
APPENDIX D - Form of By Laws of TransAKT Ltd., a Nevada
corporation
BYLAWS
OF
TRANSAKT LTD.
A Nevada Corporation
Stockholders
Section 1
Annual Meeting
. Annual meetings of the stockholders of
TRANSAKT LTD. (the Corporation), shall be held on the day and at the time as
may be set by the Board of Directors of the Corporation (the Board of
Directors) from time to time, at which annual meeting the stockholders shall
elect by vote a Board of Directors and transact such other business as may
properly be brought before the meeting.
Section 2
Special Meetings
. Special meetings of the stockholders
for any purpose or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation, may be called by the President or the Secretary by
resolution of the Board of Directors or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose of the proposed meeting.
Section 3
Place of Meetings
. All annual meetings of the
stockholders shall be held at the registered office of the Corporation or at
such other place within or outside the State of Nevada as the Board of Directors
shall determine. Special meetings of the stockholders may be held at such time
and place within or outside the State of Nevada as shall be stated in the notice
of the meeting, or in a duly executed waiver of notice thereof.
Section 4
Quorum; Adjourned Meetings
. The holders of at least one
third (33.3%) of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Articles of Incorporation. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 5
Voting
. Each stockholder of record of the Corporation
holding stock which is entitled to vote at a meeting shall be entitled at each
meeting of stockholders to one vote for each share of stock standing in their
name on the books of the Corporation. Upon the demand of any stockholder, the
vote for members of the Board of Directors and the vote upon any question before
the meeting shall be by ballot.
83
When a quorum is present or represented at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall be sufficient to elect members of the Board
of Directors or to decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes or of the
Articles of Incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Section 6
Proxies.
At any meeting of the stockholders, any
stockholder may be represented and vote by a proxy or proxies appointed by an
instrument in writing. In the event that any such instrument in writing shall
designate two or more persons to act as proxies, a majority of such persons
present at the meeting, or, if only one shall be present, then that one shall
have and may exercise all of the powers conferred by such written instrument
upon all of the persons so designated unless the instrument shall otherwise
provide. No proxy or power of attorney to vote shall be used to vote at a
meeting of the stockholders unless it shall have been filed with the secretary
of the meeting. All questions regarding the qualification of voters, the
validity of proxies and the acceptance or rejection of votes shall be decided by
the inspectors of election who shall be appointed by the Board of Directors, or
if not so appointed, then by the presiding officer of the meeting.
Section 7
Action - Without Meeting
. Any action which may be taken
by the vote of the stockholders at a meeting may be taken without a meeting if
authorized by the written consent of stockholders holding at least a majority of
the voting power, unless the provisions of the statutes or of the Articles of
Incorporation require a greater proportion of voting power to authorize such
action in which case such greater proportion of written consents shall be
required.
Directors
Section 1
Management of Corporation
. The business of the
Corporation shall be managed by its Board of Directors which may exercise all
such powers of the Corporation and do all such lawful acts and things as are not
by statute or by the Articles of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
Section 2
Number, Tenure, and Qualifications
. The number of
directors which shall constitute the whole board shall be at least one. The
number of directors may from time to time be increased or decreased by
resolution of the Board of Directors to not less than one nor more than fifteen.
The Board of Directors shall be elected at the annual meeting of the
stockholders and except as provided in Section 2 of this Article, each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 3
Vacancies
. Vacancies in the Board of Directors including
those caused by an increase in the number of directors, may be filled by a
majority of the remaining Board of Directors, though not less than a quorum, or
by a sole remaining director, and each director so elected shall hold office
until his successor is elected at an annual or a special meeting of the
stockholders. The holders of two-thirds of the outstanding shares of stock
entitled to vote may at any time peremptorily terminate the term of office of
all or any of the members of the Board of Directors by vote at a meeting called
for such purpose or by a written statement filed with the secretary or, in his absence, with any other officer. Such
removal shall be effective immediately, even if successors are not elected
simultaneously.
84
A vacancy or vacancies in the Board of Directors shall be
deemed to exist in case of the death, resignation or removal of any directors,
or if the authorized number of directors be increased, or if the stockholders
fail at any annual or special meeting of stockholders at which any director or
directors are elected to elect the full authorized number of directors to be
voted for at that meeting.
If the Board of Directors accepts the resignation of a director
tendered to take effect at a future time, the Board of Directors or the
stockholders shall have power to elect a successor to take office when the
resignation is to become effective.
No reduction of the authorized number of directors shall have
the effect of removing any director prior to the expiration of his term of
office.
Section 4
Annual and Regular Meetings
. Regular meetings of the
Board of Directors shall be held at any place within or outside the State which
has been designated from time to time by resolution of the Board of Directors or
by written consent of all members of the Board of Directors. In the absence of
such designation, regular meetings shall be held at the registered office of the
Corporation. Special meetings of the Board of Directors may be held either at a
place so designated or at the registered office.
Regular meetings of the Board of Directors may be held without
call or notice at such time and at such place as shall from time to time be
fixed and determined by the Board of Directors.
Section 5
First Meeting
. The first meeting of each newly elected
Board of Directors shall be held immediately following the adjournment of the
meeting of stockholders and at the place thereof. No notice of such meeting
shall be necessary to the Board of Directors in order to legally to constitute
the meeting, provided a quorum be present. In the event such meeting is not so
held, the meeting may be held at such time and place as shall be specified in a
notice given as hereinafter provided for special meetings of the Board of
Directors.
Section 6
Special Meetings
. Special meetings of the Board of
Directors may be called by the Chairman or the President or by any Vice
President or by any two directors.
Written notice of the time and place of special meetings shall
be delivered personally to each director, or sent to each director by mail,
facsimile transmission, electronic mail or by other form of written
communication, charges prepaid, addressed to him at his address as it is shown
upon the records or if such address is not readily ascertainable, at the place
in which the meetings of the Board of Directors are regularly held. In case such
notice is mailed, it shall be deposited in the United States mail at least five
(5) days prior to the time of the holding of the meeting. In case such notice is
hand delivered, faxed or emailed as above provided, it shall be so delivered at
least twenty-four (24) hours prior to the time of the holding of the meeting.
Such mailing, faxing, emailing or delivery as above provided shall be due, legal
and personal notice to such director.
Section 7
Business of Meetings
. The transactions of any meeting of
the Board of Directors, however called and noticed or wherever held, shall be as
valid as though held at a meeting duly held after regular call and notice, if a
quorum be present, and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, or a consent to holding such
meeting, or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
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Section 8
Quorum, Adjourned Meetings
. A majority of the authorized
number of directors shall be necessary to constitute a quorum for the
transaction of business, except to adjourn as hereinafter provided. Every act or
decision made by a majority of the directors present at a meeting duly held at
which a quorum is present shall be regarded as the act of the Board of
Directors, unless a greater number be required by law or by the Articles of
Incorporation. Any action of a majority, although not at a regularly called
meeting, and the record thereof, if assented to in writing by all of the other
members of the Board of Directors shall be as valid and effective in all
respects as if passed by the Board of Directors in regular meeting.
A quorum of the Board of Directors may adjourn any meeting of
the Board of Directors to meet again at a stated day and hour-provided, however,
that in the absence of a quorum, a majority of the directors present at any
meeting of the Board of Directors, either regular or special, may adjourn from
time to time until the time fixed for the next regular meeting of the Board of
Directors.
Notice of the time and place of holding an adjourned meeting
need not be given to the absent directors if the time and place be fixed at the
meeting adjourned.
Section 9
Committees
. The Board of Directors may, by resolution
adopted by a majority of the Board of Directors, designate one or more
committees of the Board of Directors, each committee to consist of at least one
or more of the members of the Board of Directors which, to the extent provided
in the resolution, shall have and may exercise the power of the Board of
Directors in the management of the business and affairs of the Corporation and
may have power to authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by the Board of Directors. The
members of any such committee present at any meeting and not disqualified from
voting may, whether or not they constitute a quorum, unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any
absent or disqualified member. At meetings of such committees, a majority of the
members or alternate members shall constitute a quorum for the transaction of
business, and the act of a majority of the members or alternate members at any
meeting at which there is a quorum shall be the act of the committee.
The committees shall keep regular minutes of their proceedings
and report the same to the Board of Directors.
Section 10
Action Without Meeting
. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if a written consent thereto is signed by all
members of the Board of Directors or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors or committee.
Section 11
Special Compensation
. The directors may be paid their
expenses of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like reimbursement and
compensation for attending committee meetings.
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Notices
Section 1
Notice of Meetings
. Notices of meetings of stockholders
shall be in writing and signed by the President or a Vice President or the
Secretary or an Assistant Secretary or by such other person or persons as the
Board of Directors shall designate. Such notice shall state the purpose or
purposes for which the meeting of stockholders is called and the time and the
place, which may be within or without this State, where it is to be held. A copy
of such notice shall be delivered personally to, sent by facsimile transmission
or electronic mail or shall be mailed, postage prepaid, to each stockholder of
record entitled to vote at such meeting not less than ten (10) nor more than
sixty (60) days before such meeting. If mailed, it shall be directed to a
stockholder at his address as it appears upon the records of the Corporation and
upon such mailing of any such notice, the service thereof shall be complete and
the time of the notice shall begin to run from the date upon which such notice
is deposited in the mail for transmission to such stockholder. Personal delivery
of any such notice to any officer of a Corporation or association or to any
member of a partnership shall constitute delivery of such notice to such
Corporation, association or partnership. In the event of the transfer of stock
after delivery of such notice of and prior to the holding of the meeting it
shall not be necessary to deliver or mail notice of the meeting to the
transferee.
Section 2
Effect of Irregularly Called Meetings
. Whenever all
parties entitled to vote at any meeting, whether of the Board of Directors or
stockholders, consent, either by a writing on the records of the meeting or
filed with the Secretary, or by presence at such meeting and oral consent
entered on the minutes, or by taking part in the deliberations at such meeting
without objection, the doings of such meeting shall be as valid as if they had
been approved at a meeting regularly called and noticed, and at such meeting any
business may be transacted which is not excepted from the written consent or to
the consideration of which no objection for want of notice is made at the time,
and if any meeting be irregular for want of notice or of such consent, provided
a quorum was present at such meeting, the proceedings of said meeting may be
ratified and approved and rendered likewise valid and the irregularity or defect
therein waived by a writing signed by all parties having the right to vote at
such meeting, and such consent or approval of stockholders may be by proxy or
attorney, but all such proxies and powers of attorney must be in writing.
Section 3
Waiver of Notice.
Whenever any notice is required to be
given under the provisions of the statutes, of the Articles of Incorporation or
of these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
Officers
Section 1
Election
. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary and a
Treasurer, none of whom need be directors of the Corporation. Any person may
hold two or more offices. The Board of Directors may appoint a Chairman of the
Board of Directors, Vice Chairman of the Board of Directors, one or more Vice
Presidents, Assistant Treasurers and Assistant Secretaries.
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Section 2
Chairman of the Board
. The Chairman of the Board of
Directors shall preside at meetings of the stockholders and the Board of
Directors, and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 3
Vice Chairman of the Board
. The Vice Chairman of the
Board of Directors shall, in the absence or disability of the Chairman of the
Board of Directors, perform the duties and exercise the powers of the Chairman
of the Board of Directors and shall perform such other duties as the Board of
Directors may from time to time prescribe.
Section 4
President.
The President shall be the Chief Executive
Officer of the Corporation and shall have active management of the business of
the Corporation.
Section 5
Vice President
. The Vice President shall act under the
direction of the President and in the absence or disability of the President
shall perform the duties and exercise the powers of the President. The Vice
President shall perform such other duties and have such other powers as the
President or the Board of Directors may from time to time prescribe. The Board
of Directors may designate one or more Executive Vice Presidents or may
otherwise specify the order of seniority of the Vice Presidents. The duties and
powers of the President shall descend to the Vice Presidents in such specified
order of seniority.
Section 6
Secretary
. The Secretary shall act under the direction
of the President. Subject to the direction of the President, the Secretary shall
attend all meetings of the Board of Directors and all meetings of the
stockholders and record the proceedings. The Secretary shall perform like duties
for the standing committees when required. The Secretary shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the President or the Board of Directors.
Section 7
Assistant Secretaries
. The Assistant Secretaries shall
act under the direction of the President. In order of their seniority, unless
otherwise determined by the President or the Board of Directors, they shall, in
the absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary. They shall perform such other duties and have such
other powers as the President or the Board of Directors may from time to time
prescribe.
Section 8
Treasurer.
The Treasurer shall act under the direction
of the President. Subject to the direction of the President, the Treasurer shall
have custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the President or the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the President and
the Board of Directors, at its regular meetings, or when the Board of Directors
so requires, an account of all transactions as Treasurer and of the financial
condition of the Corporation.
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If required by the Board of Directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of the Treasurers office and for the restoration to the Corporation, in
case of Treasurers death, resignation, retirement or removal from office, of
all books, papers, vouchers, money and other property of whatever kind in the
Treasurers possession or under the Treasurers control belonging to the
Corporation.
Section 9
Assistant Treasurers
. The Assistant Treasurers in the
order of their seniority, unless otherwise determined by the President or the
Board of Directors, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer. They shall perform
such other duties and have such other powers as the President or the Board of
Directors may from time to time prescribe.
Section 10
Compensation
. The salaries and compensation of all
officers of the Corporation shall be fixed by the Board of Directors.
Section 11
Removal; Resignation
. The officers of the Corporation
shall hold office at the pleasure of the Board of Directors. Any officer elected
or appointed by the Board of Directors may be removed at any time by the Board
of Directors. Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise shall be filled by the Board of Directors.
Capital Stock
Section 1
Certificates
. Every stockholder shall be entitled to
have a certificate signed by the President or Secretary of the Corporation,
certifying the number of shares owned by such stockholder in the Corporation
unless the Corporations transfer agent allows for the electronic recording of
shares. If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of the various classes
of stock or series thereof and the qualifications, limitations or restrictions
of such rights, shall be set forth in full or summarized on the face or back of
the certificate, which the Corporation shall issue to represent such stock.
If a certificate is signed (1) by a transfer agent other than
the Corporation or its employees or (2) by a registrar other than the
Corporation or its employees, the signatures of the officers of the Corporation
may be facsimiles. In case any officer who has signed or whose facsimile
signature has been placed upon a certificate shall cease to be such officer
before such certificate is issued, such certificate may be issued with the same
effect as though the person had not ceased to be such officer. The seal of the
Corporation, or a facsimile thereof, may, but need not be, affixed to
certificates of stock.
Section 2
Surrendered, Lost or Destroyed Certificates
. The Board
of Directors may direct a certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost or destroyed upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost or destroyed.
89
Section 3
Replacement Certificates
. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation, if it is
satisfied that all provisions of the laws and regulations applicable to the
Corporation regarding transfer and ownership of shares have been complied with,
to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 4
Record Date
. The Board of Directors may fix in advance a
date not exceeding sixty (60) days nor less than ten (10) days preceding the
date of any meeting of stockholders, or the date for the payment of any
distribution, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, or a
date in connection with obtaining the consent of stockholders for any purpose,
as a record date for the determination of the stockholders entitled to notice of
and to vote at any such meeting, and any adjournment thereof, or entitled to
receive payment of any such distribution, or to give such consent, and in such
case, such stockholders, and only such stockholders as shall be stockholders of
record on the date so fixed, shall be entitled to notice of and to vote at such
meeting, or any adjournment thereof, or to receive payment of such distribution,
or to receive such allotment of rights, or to exercise such rights, or to give
such consent, as the case may be, notwithstanding any transfer of any stock on
the books of the Corporation after any such record date fixed as aforesaid.
Section 5
Registered Owner
. The Corporation shall be entitled to
recognize the person registered on its books as the owner of shares to be the
exclusive owner for all purposes including voting and distribution, and the
Corporation shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Nevada.
General Provisions
Section 1
Registered Office
. The registered office of this
Corporation shall be in the State of Nevada.
The Corporation may also have offices at such other places both
within and outside the State of Nevada as the Board of Directors may from time
to time determine or the business of the Corporation may require.
Section 2
Distributions
. Distributions upon capital stock of the
Corporation, subject to the provisions of the Articles of Incorporation, if any,
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Distributions may be paid in cash, in property or in shares of
capital stock, subject to the provisions of the Articles of Incorporation.
90
Section 3
Reserves.
Before payment of any distribution, there may
be set aside out of any funds of the Corporation available for distributions
such sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing distributions or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors shall think
conducive to the interest of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
Section 4
Checks; Notes.
All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 5
Fiscal Year
. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 6
Corporate Seal.
The Corporation may or may not have a
corporate seal, as may from time to time be determined by resolution of the
Board of Directors. If a corporate seal is adopted, it shall have inscribed
thereon the name of the Corporation and the words "Corporate Seal" and "Nevada".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or in any manner reproduced.
Indemnification
Section 1
Indemnification of Officers and Directors, Employees and
Other Persons
. Every person who was or is a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or a
person of whom he is the legal representative is or was a director or officer of
the Corporation or is or was serving at the request of the Corporation or for
its benefit as a director or officer of another Corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
the General Corporation Law of the State of Nevada from time to time against all
expenses, liability and loss (including attorneys' fees, judgments, fines and
amounts paid or to be paid in settlement) reasonably incurred or suffered by him
in connection therewith. The expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
Corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
Corporation. Such right of indemnification shall be a contract right which may
be enforced in any manner desired by such person. Such right of indemnification
shall not be exclusive of any other right which such directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under this Article.
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Section 2
Insurance
. The Board of Directors may cause the
Corporation to purchase and maintain insurance on behalf of any person who is or
was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another Corporation, or
as its representative in a partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the Corporation would
have the power to indemnify such person.
Section 3
Further Bylaws.
The Board of Directors may from time to
time adopt further Bylaws with respect to indemnification and may amend these
and such Bylaws to provide at all times the fullest indemnification permitted by
the General Corporation Law of the State of Nevada.
Amendments
Section 1
Amendments by Board of Directors.
The Board of
Directors, by a majority vote of the Board of Directors at any meeting may amend
these Bylaws, including Bylaws adopted by the stockholders, but the stockholders
may from time to time specify particular provisions of the Bylaws, which shall
not be amended by the Board of Directors.
Transactions with Stockholders
Section 1
Acquisition of Controlling Interest.
The Corporation
elects not to be governed by NRS 78.378 through 78.3793, inclusive, of the
Nevada Private Corporations Act.
Section 2
Combinations with Interested Stockholders.
The
Corporation elects not to be governed by NRS 78.411 through 78.444, inclusive,
inclusive, of the Nevada Private Corporations Act.
APPROVED AND ADOPTED this _____day of ______________, 2010.
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JAMES WU
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President and Director
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|
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CERTIFICATE
I hereby certify that I am the President, Secretary and
Treasurer of TRANSAKT LTD., and that the foregoing Bylaws, constitute the code
of Bylaws TRANSAKT LTD., as duly adopted by the Board of Directors of the
Corporation on ______________________, 2010.
DATED this _____day of ______________, 2010.
|
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James Wu
|
|
President, Secretary and Treasurer
|
|
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APPENDIX E - Section 191 of the Business Corporations Act
(Alberta)
Shareholder
s right to dissent
191
(1)
Subject to sections 192 and 242, a holder
of shares of any class of a corporation may dissent if the corporation resolves
to
(a) amend its articles under section
173 or 174 to add, change or remove any provisions restricting or constraining
the issue or transfer of shares of that class,
(b) amend its articles under section
173 to add, change or remove any restrictions on the business or businesses that
the corporation may carry on,
(b.1) amend its articles under section
173 to add or remove an express statement establishing the unlimited liability
of shareholders as set out in section 15.2(1),
(c) amalgamate with another
corporation, otherwise than under section 184 or 187, (d) be continued under the
laws of another jurisdiction under section 189, or (e) sell, lease or exchange
all or substantially all its property under section 190.
(2)
A holder of shares of any class or series of shares
entitled to vote under section 176, other than section 176(1)(a), may dissent if
the corporation resolves to amend its articles in a manner described in that
section.
(3)
In addition to any other right the shareholder may
have, but subject to subsection (20), a shareholder entitled to dissent under
this section and who complies with this section is entitled to be paid by the
corporation the fair value of the shares held by the shareholder in respect of
which the shareholder dissents, determined as of the close of business on the
last business day before the day on which the resolution from which the
shareholder dissents was adopted.
(4)
A dissenting shareholder may only claim under this
section with respect to all the shares of a class held by the shareholder or on
behalf of any one beneficial owner and registered in the name of the dissenting
shareholder.
(5)
A dissenting shareholder shall send to the
corporation a written objection to a resolution referred to in subsection (1) or
(2)
(a) at or before any meeting of
shareholders at which the resolution is to be voted on, or
(b) if the corporation did not send
notice to the shareholder of the purpose of the meeting or of the shareholders
right to dissent, within a reasonable time after the shareholder learns that the
resolution was adopted and of the shareholders right to dissent.
(6)
An application may be made to the Court by
originating notice after the adoption of a resolution referred to in subsection
(1) or (2),
(a) by the corporation, or
(b) by a shareholder if the shareholder
has sent an objection to the corporation under subsection (5),
to fix the fair value in accordance with subsection (3) of the
shares of a shareholder who dissents under this section, or to fix the time at
which a shareholder of an unlimited liability corporation who dissents under
this section ceases to become liable for any new liability, act or default of
the unlimited liability corporation.
(7)
If an application is made under subsection (6), the
corporation shall, unless the Court otherwise orders, send to each dissenting
shareholder a written offer to pay the shareholder an amount considered by the
directors to be the fair value of the shares.
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(8)
Unless the Court otherwise orders, an offer referred
to in subsection (7) shall be sent to each dissenting shareholder
(a) at least 10 days before the date on
which the application is returnable, if the corporation is the applicant, or
(b) within 10 days after the
corporation is served with a copy of the originating notice, if a shareholder is
the applicant.
(9)
Every offer made under subsection (7) shall
(a) be made on the same terms, and
(b) contain or be accompanied with a
statement showing how the fair value was determined.
(10)
A dissenting shareholder may make an agreement with
the corporation for the purchase of the shareholders shares by the corporation,
in the amount of the corporations offer under subsection (7) or otherwise, at
any time before the Court pronounces an order fixing the fair value of the
shares.
(11)
A dissenting shareholder
(a) is not required to give security
for costs in respect of an application under subsection (6), and
(b) except in special circumstances
must not be required to pay the costs of the application or appraisal.
(12)
In connection with an application under subsection
(6), the Court may give directions for
(a) joining as parties all dissenting
shareholders whose shares have not been purchased by the corporation and for the
representation of dissenting shareholders who, in the opinion of the Court, are
in need of representation,
(b) the trial of issues and
interlocutory matters, including pleadings and examinations for discovery,
(c) the payment to the shareholder of
all or part of the sum offered by the corporation for the shares,
(d) the deposit of the share
certificates with the Court or with the corporation or its transfer agent,
(e) the appointment and payment of
independent appraisers, and the procedures to be followed by them,
(f) the service of documents, and
(g) the burden of proof on the
parties.
(13)
On an application under subsection (6), the Court
shall make an order
(a) fixing the fair value of the shares
in accordance with subsection (3) of all dissenting shareholders who are parties
to the application,
(b) giving judgment in that amount
against the corporation and in favour of each of those dissenting
shareholders,
(c) fixing the time within which the
corporation must pay that amount to a shareholder, and
(d) fixing the time at which a
dissenting shareholder of an unlimited liability corporation ceases to become
liable for any new liability, act or default of the unlimited liability
corporation.
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(14)
On
(a) the action approved by the
resolution from which the shareholder dissents becoming effective,
(b) the making of an agreement under
subsection (10) between the corporation and the dissenting shareholder as to the
payment to be made by the corporation for the shareholders shares, whether by
the acceptance of the corporations offer under subsection (7) or otherwise,
or
(c) the pronouncement of an order under
subsection (13),
whichever first occurs, the shareholder ceases to have any
rights as a shareholder other than the right to be paid the fair value of the
shareholders shares in the amount agreed to between the corporation and the
shareholder or in the amount of the judgment, as the case may be.
(15)
Subsection (14)(a) does not apply to a shareholder
referred to in subsection (5)(b).
(16)
Until one of the events mentioned
in subsection (14) occurs,
(a) the shareholder may withdraw the shareholders
dissent, or
(b) the corporation may rescind the resolution, and in either event
proceedings under this section shall be discontinued.
(17)
The Court may in its discretion allow a reasonable
rate of interest on the amount payable to each dissenting shareholder, from the
date on which the shareholder ceases to have any rights as a shareholder by
reason of subsection (14) until the date of payment.
(18)
If subsection (20) applies, the corporation shall,
within 10 days after
(a) the pronouncement of an order under
subsection (13), or
(b) the making of an agreement between
the shareholder and the corporation as to the payment to be made for the
shareholders shares,
notify each dissenting shareholder that it is unable lawfully
to pay dissenting shareholders for their shares.
(19)
Notwithstanding that a judgment has been given in
favour of a dissenting shareholder under subsection (13)(b), if subsection (20)
applies, the dissenting shareholder, by written notice delivered to the
corporation within 30 days after receiving the notice under subsection (18), may
withdraw the shareholders notice of objection, in which case the corporation is
deemed to consent to the withdrawal and the shareholder is reinstated to the
shareholders full rights as a shareholder, failing which the shareholder
retains a status as a claimant against the corporation, to be paid as soon as
the corporation is lawfully able to do so or, in a liquidation, to be ranked
subordinate to the rights of creditors of the corporation but in priority to its
shareholders.
(20)
A corporation shall not make a payment to a
dissenting shareholder under this section if there are reasonable grounds for
believing that
(a) the corporation is or would after
the payment be unable to pay its liabilities as they become due, or
(b) the realizable value of the
corporations assets would by reason of the payment be less than the aggregate
of its liabilities.
RSA 2000 cB-9 s191;2005 c40 s7
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