UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31,
2011
[ ]
TRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from [ ] to [
]
Commission file number
000-50392
TRANSAKT LTD.
(Exact name
of registrant as specified in its charter)
Nevada
|
N/A
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification
No.)
|
|
|
|
|
|
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No.3, Lane 141, Sec. 3, Beishen Rd., Shenkeng
Township, Taipei County
222, Taiwan (R.O.C.)
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N/A
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(Address of principal executive offices)
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(Zip Code)
|
|
|
Registrant's telephone number, including area code:
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403-290-1744
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
|
Name of Each Exchange On Which Registered
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N/A
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N/A
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
(Title of class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act
Yes [ ] No [X]
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the last 90 days.
Yes [X] No
[ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registration statement was required to submit and post
such files).
Yes [X] No [
]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Yes [ ] No [
]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definition of large accelerated filer, accelerated
filer and smaller reporting company in Rule 12b-2 of the Exchange
Act.
Large accelerated filer [ ]
|
Accelerated
filer [ ]
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Non-accelerated filer [ ]
|
Smaller reporting company [X]
|
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
The aggregate market value of Common Stock held by
non-affiliates of the Registrant on March 28, 2012 was $6,836,865.17 based on a
$0.035 average bid and asked price of such common equity, as of the last
business day of the registrants most recently completed second fiscal quarter.
Indicate the number of shares outstanding of each of the
registrants classes of common stock as of the latest practicable date.
195,339,005 as of March 28, 2012
DOCUMENTS INCORPORATED BY REFERENCE
None.
2
TABLE OF CONTENTS
3
4
PART I
Item 1. Business
This annual report contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as may,
should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled Risk Factors, that may cause our or our industrys actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.
In this annual report, unless otherwise specified, all dollar
amounts are expressed in United States dollars and all references to common
shares refer to the common shares in our capital stock.
As used in this current report and unless otherwise indicated,
the terms "we", "us" and "our" mean Chang-On International, Inc., a Utah
corporation, and our subsidiaries, unless otherwise indicated.
General Overview
TransAKT Ltd. was incorporated in the Province of British
Columbia on December 10, 1996 as Green Point Resources Inc. On October 18, 2000,
we changed our name to Wildcard Wireless Solutions Inc. On June 30, 2001, we
filed Articles of Continuance in the Province of Alberta and became an Alberta
corporation. On that same day, we conducted an amalgamation with Wildcard
Communications Canada Inc., an Alberta corporation, our wholly-owned subsidiary,
wherein Wildcard Communications Canada was merged into Wildcard Wireless
Solutions Inc. On June 20, 2003, we changed our name to TransAKT Corp. We
changed our name from TransAKT Corp. to TransAKT Ltd. on July 12, 2006.
Effective December 2, 2011, following approval by our shareholders on November
17, 2011, we re-domesticated our Company from the Province of Alberta, Canada
and became a Nevada corporation.
We have operated principally as a research and development
company since our inception. Initial seed capital has been directed toward areas
of product research and development, patent filings and administration. We
initially focused on the research, design, development and manufacturing of
mobile payment terminals. However, the sale of these payment terminals reached
its end-of life due to changes in cellular phone regulations and limited
acceptance in the marketplace. In October 2004, we purchased the existing
business and certain assets of IP Mental Inc., a Taiwan-based Voice over
Internet Protocol (VoIP) hardware and software provider. On November 15, 2006,
we acquired Taiwan Halee International Co. Ltd. (HTT), a Taiwan-based leading
designer, manufacturer and distributor of telecommunications equipment,
including specialized VoIP-compatible phone systems. These acquisitions were
intended to enable us to remain competitive in the marketplace. Our current
business is the design, development and manufacturing of telecommunications
equipment, including VoIP compatible telephone systems and multi-line cordless
telephone systems.
5
On November 15, 2006, 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.
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.
On August 12, 2010, the Company filed the Registration
Statement (Form S-4) in connection with the continuation of the Company from
Alberta to Nevada. Based upon the number of common shares of TransAKT Ltd., a
Nevada corporation (TransAKT Nevada), to be issued to the shareholders of
TransAKT Ltd., an Alberta corporation (TransAKT Alberta), on a one-for-one
basis upon completion of the Continuation and based on 102,645,120 shares of
common stock of TransAKT Ltd., an Alberta corporation, issued and outstanding as
of August 12, 2010.
Our Current Business
Operations and Principal Activities
We began operations in 1997 and commercialized our first
product line of wireless point-of-sale (WPOS) terminals in April 2003. With
the use of cellular phones, these terminals allow merchants to accept payments
anywhere, anytime. However, our WPOS terminals were discontinued due to changes
in cellular phone regulations and limited acceptance in the marketplace. In
October 2004, through the acquisition of the business and certain assets of IP
Mental Inc., we entered the VoIP business. We currently offer a range of
telecommunications products including VoIP equipment and advanced multi-line
cordless phone systems.
We sustained operating losses of $337,463 and $197,404 during
the years ended December 31, 2011 and 2010, respectively, and incurred an
accumulated deficit of $2,573,759 and $2,236,296 as of December 31, 2011 and
December 31, 2010, respectively. In addition, we expect to incur an operating
loss in 2012.
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,
production and distribution of mobile wireless equipment, and other
telecommunications solutions for business and individual consumers, including
VoIP solutions in Taiwan. Our business includes the design, 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. We currently rely exclusively on third parties for the manufacture of
products that we design or distribute.
Principal Products and Markets
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 distributed or produced.
6
Our second product line consists of VoIP products and
solutions. These products allow communication over the World Wide Web at reduced
communication rates. Our products range from Universal Serial Bus (USB) plug
and play phones to stand alone phone adapters and phones. All of our in house
products are currently designed by our subsidiary, HTT, and marketed under the
HTT brand. Our product offerings vary from time to time and currently include,
among others, USB dongle adapters for use with DECT phones via Skype, our
SkyDECT cordless phone system that integrates use of VoIP, a traditional
telephone based on a landline, and our EZDECT specialized multiline cordless
phone systems.
The products of HTT, our subsidiary, are currently distributed
in Taiwan., We have had limited revenues in the last four (4) fiscal years as we
only began marketing our VoIP products in October 2004. The expansion of our
distribution network will depend on our ability to raise required financing
through private placements.
Manufacturing
It is not our intention to engage in the capital and management
intensive endeavor of manufacturing our own products. We instead outsource our
manufacturing and have spent considerable time identifying a stable of suitable
engineering and manufacturing firms with proven track records. Our products are
currently manufactured exclusively in Taiwan and China where intense competition
among manufacturers provides a readily available supply of cost-effective,
quality manufacturing options. In order to take advantage of the ample supply of
manufacturing choices available to us in Taiwan and China, we have not entered
into any formal or long-term agreements with any manufacturer for the
fabrication of our products. Instead, by selecting manufacturers on an as needed
basis, we are better able to take advantage of competitive pricing, ensure
quality control, and maintain appropriate inventory supply levels. We do not
rely on any particular manufacturer for any of our products. Currently, we
primarily commission for manufacture our own HTT brand products, although from
time to time we commission the production of 3
rd
party labeled
products under license from those parties.
Distribution of Third Party Products
In addition to the distribution of products under our HTT
brand, we are engaged in the distribution of name brand telecommunications
equipment in Taiwan, including Panasonic, Lenovo, Sanyo, and Siemens products,
among others. The products that we purchase for resale are warehoused at our
offices. Our own employees are responsible for the inventory, sale and
expedition of products. We maintain a cargo van used for smaller deliveries
while larger orders are delivered by local freight companies.
Generally, our distribution arrangements are on an ad-hoc
basis; we purchase products from suppliers as needed and distribute them to a
wide range of retailers in Taiwan. However, we have recently entered into
binding distribution agreements with Panasonic and Sanyo for the resale of their
telecommunications products in Taiwan.
On December 14, 2010, we entered into an agreement with Sanyo
Electronics ( Taiwan ) CO.,LTD granting us the right to manufacture and
distribute, under the Sanyo trademark, up to 3,000 Sanyo Caller-ID cordless
telephones. The royalty payable to Sanyo is $783 New Taiwanese Dollars or
approximately $26.81 U.S. Dollars per unit produced. The term of the agreement
continues until January, 4, 2013.
The following table provides a breakdown of our sales results
during the last fiscal year by product brand-name:
Product Brand
|
Percentage of Sales
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HTT
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6%
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Panasonic
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26%
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Siemens
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20%
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Lenovo
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13%
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Sanyo
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30%
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Other
|
5%
|
7
Seasonality
Our products can be used all year round and are not affected by
seasonal trends.
Sources and Availability of Raw Materials
All raw materials for our products are sourced from China,
Taiwan and the United Kingdom. The computer components used in our products can
be subject to high price volatility and to the risk of obsolescence. In order to
control component costs and the risk of their obsolescence, we contract with a
manufacturer at a set price for the building of our products over a number of
terminals. The manufacturer becomes responsible for making sure that enough
components are in stock and, if components become unavailable, to quickly
implement 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 our WPOS 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.
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 or at reduced
rates through outside VoIP networks.
Competition
Innovation in this market is primarily focused on combining
different technologies in new ways. Our management believes that our SKYDECT, a
single device capable of connecting to different technologies, is an example of
such innovation. Our research and development team is focused on creating
similarly innovative products.
We currently generate revenues, at least in part, through the
distribution of third party name brand products in Taiwan. Our management
believes that this provides us with an insiders view 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 are working in cooperation with SANYO on an informal basis to
develop a Wi-Fi phone and a GSM/Wi-Fi dual mode phone for production under the
Sanyo label. The decision of whether to proceed with the production of Wi-Fi
phones in partnership with Sanyo will depend on our mutual agreement with Sanyo
that a market exists for this product. We intend to conduct market analysis to
make this determination. 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 minimize our costs, 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 companies comprise our largest
current competitors:
8
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 2011, Vetch recorded sales of over US$1.7 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 Dungun, Guangdong province in southern China.
Currently, Vtechhas two (2) manufacturing sites in China, located at Housie town
and Liao Science Park, within hours of its headquarters in Hong Kong.
Vtech acquired the consumer phone business of Lucent
Technologies, as well as a license to sell AT&T branded products on wire
line 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 Vetch exclusive rights to sell
AT&T-branded wire line telephone products and accessories in Greater China,
and non-exclusive rights in Europe, Mexico, Central and South America.
Uniden
Unidens 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 over $547 million in fiscal 2011.
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, Vida 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.
9
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. BBK
currently sells only to the Chinese market and has annual sales of over $100
million.
Intellectual Property
We hold common law trademark rights and copyright in our
corporate name, TransAKT, our product name, SKYDECT, and related logos and
trademarks. However, we have not filed for the registration of our current
intellectual property rights in any jurisdiction. Similarly, we have not filed
for any patent protection of our products or technologies, and rely exclusively
on confidentiality agreement with our employees, customers and licensors to
protect any proprietary rights we may have in relation to our products.
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 WPOS
technologies have become obsolete and were written off on December 20, 2006.
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 WPOS
technologies have become obsolete and were written off on December 20, 2006.
Research and Development
In 2007, we spent USD$400,000 for the development of our
multiline cordless phone systems. No significant research and development
expenses were incurred in 2011 or 2010. Any future research and development
undertakings will be subject to the availability of sufficient capital.
Employees
We have thirty (30) 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.
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 Taiwan Halee International Co. Ltd. (HTT) (a
Taiwan corporation).
Legislation and Government Regulation
All radio communication devices sold in Taiwan are regulated by
the National Communications Commission (NCC). Each of our wireless devices
operating on 1.8GHz and 2.4GHz frequencies have been tested and certified for
compliance with all applicable NCC regulations by ETC (Electronics Testing
Center, Taiwan). 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. If we are successful in expanding the distribution of our products
into other jurisdictions, we will be required to comply with equivalent
regulation in those jurisdictions. However, because international operating
standards for wireless devices are increasingly harmonized, we do not anticipate
having to incur significant expense in order to render our products compliant
with foreign regulation.
10
Item 1A. Risk Factors
As a smaller reporting company, we are not required to
provide the information required by this Item.
Item 1B. Unresolved Staff Comments
As a smaller reporting company, we are not required to
provide the information required by this Item.
Item 2. Properties
Our principal executive offices are located at No.3, Lane 141,
Sec. 3, Beishen Rd., Shenkeng Township, Taipei County 222, Taiwan (R.O.C.)
Item 3. Legal Proceedings
We know of no material, existing or pending legal proceedings
against us, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial shareholder, is an
adverse party or has a material interest adverse to our company.
Item 4. (Removed and Reserved)
PART II
Item 5. Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of
Equity Securities
Previously, our stock traded on the TSX Venture Exchange
(TSX-V) which trading began on October 18, 2000. We voluntarily de-listed from
the TSX-V on September 17, 2004. Our common stock began quotation on the OTC
Bulletin Board on May 20, 2004 under the trading symbol TAKDF. On February
22, 2011 quotation of our common stock was moved to OTC Markets Groups
OTCQB under the trading symbol TAKD. Trading in stocks quoted on the OTCQB
is often thin and is characterized by wide fluctuations in trading prices due to
many factors that may have little to do with a company's operations or business
prospects. We cannot assure you that there will be a market for our common stock
in the future.
OTCQB securities are not listed or traded on the floor of an
organized national or regional stock exchange. Instead, OTCQB securities
transactions are conducted through a telephone and computer network connecting
dealers in stocks. OTCQB issuers are traditionally smaller companies that do not
meet the financial and other listing requirements of a regional or national
stock exchange.
The following table shows the high and low bid quotations for
our common stock for each fiscal quarter during our two most recently completed
fiscal years. These quotations are based on inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions.
11
OTC Markets Group Inc. OTCQB
(1)
|
Quarter Ended
|
High
|
Low
|
December 31, 2011
|
$0.08
|
$0.03
|
September 30, 2011
|
$0.07
|
$0.03
|
June 30, 2011
|
$0.07
|
$0.02
|
March 31, 2011
|
$0.04
|
$0.02
|
December 31, 2010
|
$00.0355
|
$0.0177
|
September 30, 2010
|
$0.00589
|
$0.007
|
June 30, 2010
|
$0.0098
|
$0.0051
|
March 31, 2010
|
$0.01
|
$0.005
|
December 31, 2009
|
$0.03
|
$0.007
|
September 30, 2009
|
$0.04
|
$0.015
|
June 30, 2009
|
$0.0496
|
$0.025
|
March 31, 2009
|
$0.024
|
$0.0098
|
December 31, 2008
|
$0.06
|
$0.02
|
(1) Over-the-counter market quotations
reflect inter-dealer prices without retail mark-up, mark-down or commission, and
may not represent actual transactions.
Our common shares are issued in registered form. Computershare
Trust Company Inc., 350 Indiana Street, Suite 750, Golden, CO, 80401 (Telephone:
(303) 262-0600) is the registrar and transfer agent for our common shares.
On March 28, 2012, the shareholders' list showed 68 registered
shareholders and 195,339,005 common shares outstanding.
Dividend Policy
We have not paid any cash dividends on our common stock and
have no present intention of paying any dividends on the shares of our common
stock. Our current policy is to retain earnings, if any, for use in our
operations and in the development of our business. Our future dividend policy
will be determined from time to time by our board of directors.
Equity Compensation Plan Information
We have not approved or adopted any equity compensation
plans.
Recent Sales of Unregistered Securities; Use of Proceeds
from Registered Securities
We did not sell any equity securities which were not registered
under the Securities Act during the year ended December 31, 2011 that were not
otherwise disclosed on our quarterly reports on Form 10-Q or our current reports
on Form 8-K filed during the year ended December 31, 2011.
12
Purchase of Equity Securities by the Issuer and Affiliated
Purchasers
We did not purchase any of our shares of common stock or other
securities during our fourth quarter of our fiscal year ended December 31,
2011.
Item 6. Selected Financial Data
As a smaller reporting company, we are not required to
provide the information required by this Item.
Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations.
Forward-Looking Statements
Some of the statements contained in this Form 10-K that are not
historical facts are "forward-looking statements" which can be identified by the
use of terminology such as "estimates," "projects," "plans," "believes,"
"expects," "anticipates," "intends," or the negative or other variations, or by
discussions of strategy that involve risks and uncertainties. We urge you to be
cautious of the forward-looking statements, that such statements, which are
contained in this Form 10-K, reflect our current beliefs with respect to future
events and involve known and unknown risks, uncertainties, and other factors
affecting our operations, market growth, services, products, and licenses. No
assurances can be given regarding the achievement of future results, as actual
results may differ materially as a result of the risks we face, and actual
events may differ from the assumptions underlying the statements that have been
made regarding anticipated events. Factors that may cause actual results, our
performance or achievements, or industry results, to differ materially from
those contemplated by such forward-looking statements include without
limitation:
|
1.
|
Our ability to attract and retain management, and to
integrate and maintain technical information and management information
systems;
|
|
|
|
|
2.
|
Our ability to generate customer demand for our
products;
|
|
|
|
|
3.
|
The intensity of competition; and
|
|
|
|
|
4.
|
General economic conditions.
|
All written and oral forward-looking statements made in
connection with this Form 10-K that are attributable to us or persons acting on
our behalf are expressly qualified in their entirety by these cautionary
statements. Given the uncertainties that surround such statements, you are
cautioned not to place undue reliance on such forward-looking statements. This
MD&A should also be read in conjunction with the Item 1.A. Risk Factors.
General Overview
TransAKT Ltd. was incorporated in the Province of British
Columbia on December 10, 1996 as Green Point Resources Inc. On October 18, 2000,
we changed our name to Wildcard Wireless Solutions Inc. On June 30, 2001, we
filed Articles of Continuance in the Province of Alberta and became an Alberta
corporation. On that same day, we conducted an amalgamation with Wildcard
Communications Canada Inc., an Alberta corporation, our wholly-owned subsidiary,
wherein Wildcard Communications Canada was merged into Wildcard Wireless
Solutions Inc. On June 20, 2003, we changed our name to TransAKT Corp. We
changed our name from TransAKT Corp. to TransAKT Ltd. on July 12, 2006.
We have operated principally as a research and development
company since our inception. Initial seed capital has been directed toward areas
of product research and development, patent filings and administration. We
initially focused on the research, design, development and manufacturing of
mobile payment terminals. However, the sale of these payment terminals reached its end-of life due to changes
in cellular phone regulations and limited acceptance in the marketplace. In
October 2004, we purchased the existing business and certain assets of IP Mental
Inc., a Taiwan-based Voice over Internet Protocol (VoIP) hardware and software
provider. On November 15, 2006, we acquired Taiwan Halee International Co. Ltd.
(HTT), a Taiwan-based leading designer, manufacturer and distributor of
telecommunications equipment, including specialized VoIP-compatible phone
systems. These acquisitions were intended to enable us to remain competitive in
the marketplace. Our current business is the design, development and
manufacturing of telecommunications equipment, including VoIP compatible
telephone systems and multi-line cordless telephone systems.
13
On November 15, 2006, 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.
On August 12, 2010, the Company filed the Registration
Statement (Form S-4) in connection with the continuation of the Company from
Alberta to Nevada. Based upon the number of common shares of TransAKT Ltd., a
Nevada corporation (TransAKT Nevada), to be issued to the shareholders of
TransAKT Ltd., an Alberta corporation (TransAKT Alberta), on a one-for-one
basis upon completion of the Continuation and based on 102,645,120 shares of
common stock of TransAKT Ltd., an Alberta corporation, issued and outstanding as
of August 12, 2010.
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):
During the years ended December 31, 2011 and 2010, 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.
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.
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.
14
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.
Revenue Recognition
Revenues are recognized when finished products are shipped to
customers and both title and the risks and rewards of ownership are transferred
and collectibility is reasonably assured. The Companys revenues are recorded
upon confirmed acceptance after inspection by the customers of the Company.
Going Concern
The Company has incurred a net loss of $337,403 and $197,404
during the years ended December 31, 2011 and 2010, respectively, and has an
accumulated deficit of $2,573,759 as of December 31, 2011.
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, 2011, 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 2012; (3) The Company
plans to continue actively seeing additional funding opportunities to improve
and expand upon our product lines.
Recent accounting pronouncements
In September 2011, the Financial Accounting Standards Board
("FASB") issued Accounting Standards Update ("ASU") 2011-08,
"Testing
Goodwill for Impairment."
This update amended the procedures surrounding
goodwill impairment testing to permit an entity to first assess qualitative
factors to determine whether it is more likely than not that the fair value of a
reporting unit is less than its carrying amount as a basis for determining
whether it is necessary to perform the two-step goodwill impairment test
described in Accounting Standards Codification ("ASC") 350,
"Intangibles Goodwill and Other."
ASU
2011-08 is effective for annual and interim goodwill impairment tests performed
for fiscal years beginning after December 15, 2011. The Company will adopt ASU
2011-08 during the first quarter of 2012. The adoption of this guidance will not
have a significant impact on the Company's consolidated financial
statements.
15
In June 2011, the FASB issued ASU 2011-05, "
Presentation of
Comprehensive Income
." This update amended the presentation options in ASC
220, "
Comprehensive Income
," to provide an entity the option to present
the total of comprehensive income, the components of net income, and the
components of other comprehensive income either in a single continuous statement
of comprehensive income or in two separate but consecutive statements.
Additionally, this update requires disclosure of reclassification adjustments
for items that are reclassified from other comprehensive income to net income on
the face of the financial statements. In December 2011, the FASB subsequently
issued ASU 2011-12,
"Comprehensive Income Deferral of the Effective Date
for Amendments to the Presentation of Reclassifications of Items Out of
Accumulated Other Comprehensive Income,"
which indefinitely deferred the
presentation requirements of reclassification adjustments within ASU 2011-05.
The Company will adopt ASU 2011-05 and ASU 2011-12 during the first quarter of
2012. The adoption of this guidance will not have a significant impact on the
presentation of the Company's consolidated financial statements.
In May 2011, the FASB issued ASU 2011-04,
"Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP
and IFRSs."
This update amended explanations of how to measure fair value to
result in common fair value measurement and disclosure requirements in U.S GAAP
and International Financial Reporting Standards. ASU 2011-04 is effective for
fiscal years, and interim periods within those years, beginning after December
15, 2011 with prospective application required. The Company will adopt ASU
2011-04 during the first quarter of 2012. The adoption of this guidance will not
have a significant impact on the Company's consolidated financial
statements.
Our Current Business
We began operations in 1997 and commercialized our first
product line of wireless point-of-sale 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 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. 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.
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 an insiders view 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/Wi-Fi dual mode
phone.
16
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 minimize our costs, 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.
Cash Requirements
We used cash in operations of $905,550 for the year ended
December 31, 2011. We continue to be dependent on the proceeds of equity and
non-equity financing to fund our operations. No assurances can be given that our
actual cash requirements will fall within our budget, that anticipated revenues
will be realized when needed, that lines of credit will be available to us if
required, or that additional capital will be available to us. We anticipate that
over the next twelve months, we will need a minimum of $3,000,000 to sustain
operations and market our products effectively.
Operating Results
In 2007, we expanded our product portfolio with the launch of
our EZ DECT multiline cordless telephone systems. These revolutionary products
allow small offices to create extensions to their telecommunications similar to
a PABX system, but without the need for wires. Full functionality including
3-way conference calls and multiple lines of up to 16 cordless phones provide
smaller offices with mobile, reliable communications.
In September 2007, we entered into a distribution agreement
with Senao Telecom, a subsidiary of Chung-Hua Telecom. Senao Telecom is a well
known publicly traded telecommunications company in Taiwan with projected total
revenues of over USD $500 million in 2007. Senao Telecom has more than two
hundred (200) retail outlets in Taiwan, and will be distributing HTT branded
products throughout its well established channels. We anticipate generating
$200,000 in annual revenues as a result of this agreement.
In the fourth quarter of 2007, we began planning the expansion
of our operations into China and in the second quarter of 2008 we received
regulatory approval to carry on business in China. However, the expansion of our
product distribution into China will be subject to our ability to raise
additional financing through the private placement of our common stock. Subject
to our ability to obtain additional financing, our management expects to see
continued revenue growth and profit recognition in fiscal 2012 through the
expansion of our operations into China.
Year Ended December 31, 2011 Compared to the Year Ended
December 31, 2010
Net Sales.
Sales for the year ended December 31, 2011 decreased by
$837,643 to $11,827,208 compared to $12,664,851 for the same period in 2010. The
decreased sales volume in telecommunications equipment, including specialized
VoIP compatible phone systems and multi-line cordless telephone systems, was
primarily due to the generally slow economic environment in 2011. We expect our
sales to improve in 2012.
Cost of Sales; Gross Profit
Cost of sales for the year ended December 31, 2011 totaled
$10,926,538 or approximately 92% of net sales compared to $11,890,316 or
approximately 94% of net sales for the year ended December 31, 2010,
representing a decrease of $963,778 or approximately 8%. The decrease was due
to decreased purchase costs from major vendors for the year ended December 31,
2011. Gross profit as a percentage of net sales was 8% in 2011, compared to 6%
in 2010. The higher gross profit in 2011 was primarily due to the substantial
decrease in costs.
17
Operating Expenses
Operating expenses for the year ended December 31, 2011 totaled
$1,159,357 or approximately 9.8% of net sales compared to $1,041,643 or
approximately 8.2% of net sales for the year ended December 31, 2010
representing an increase of $117,714 or approximately 11%. The increase in
operating expenses is mainly due to an increase in professional expense and
traveling expense, which is partially offset by a decrease in bad debt
expense.
Loss from Operations
Loss from operations for the year ended December 31, 2011
totaled $258,687 or approximately 2.2% of net sales compared to $267,108 or
approximately 2.1% of sales for the year ended December 31, 2010, representing a
decrease in loss of $8,421. The decrease in loss from operations was primarily
due to an increase in gross profit which is partially offset by increased
operating expenses in 2011.
Interest Expense
Interest expense for the year ended December 31, 2011 totaled
$67,959 compared to $89,836 for the year ended December 31, 2010, representing a
decrease of $21,877 or approximately 24%. The decrease was due to higher
accounts receivable turnover rate, decreased capital requirements resulting in
decreased borrowings.
Net Loss
Loss for the year ended December 31, 2011 totaled $337,463
compared to a loss of $197,404 for the year ended December 31, 2010,
representing an increased in losses of $140,059 or approximately 71%. The
increase in net loss was primarily due to increased operating expenses and
currency exchange loss recognized in 2011 which is partially offset by the
increase in gross profit.
Inflation
Our opinion is that inflation has not had, and is not expected
to have, a material effect on our operations.
Climate Change
Our opinion is that neither climate change, nor governmental
regulations related to climate change, have had, or are expected to have, any
material effect on our operations.
Liquidity
Our principal sources of liquidity are cash and cash
equivalents, and cash flow from operations. Our cash and cash equivalent
increased from $871,682 at December 31, 2011, to $1,131,339 at December 31,
2010.
Net cash flow provided by (used in) operating activities was
$(905,550) in 2011, and $273,348 in 2010, a decrease of $1,178,898. Net cash
flow provided by operating activities in fiscal 2011 was mainly due to our net
loss of $(337,463), an increase in accounts receivable of $163,980, a decrease
in inventory of $146,450, an increase in prepaid expenses and other assets of
$237,665, and a decrease in accounts payable and accrued expenses of $312,880.
Net cash flow provided by operating activities in fiscal 2010 was mainly due to
our net loss of $(197,404), a decrease in accounts receivable of $617,888, a
decrease in inventory of $193,408, a decrease in prepaid expenses and other
assets of $73,688, a decrease in accounts payable and accrued expenses of
$459,791, and an increase in other payable of $28,850.
18
Net cash flow provided by investing activities was $6,584 for
2011 as compared to net cash flow used in investing activities of $7,989 for
2010. . Net cash flow used in investing activities in 2010 was mainly due to a
decrease in restricted cash of $7,033 and purchase of fixed assets of $449. Net
cash flow used in investing activities in 2010 was mainly due to an increase in
restricted cash of $64,486 and proceeds from sales of investments of $56,497
Net cash flow provided by financing activities was $689,606 for
2011, as compared to net cash flow used in $130,892 for 2010. Net cash flow
provided by financing activities in 2011 was mainly due to proceeds from bank
loans of $1,865,807 and repayments of bank loans of $1,837,994, an decrease
in due from related party of $170,707, and proceeds from issuance of common
stock of $832,500. Net cash flow used in financing activities in 2010 was mainly
due to proceeds from bank loans of $1,702,710 and repayments of bank loans of
$2,020,402, and an increase in due from related party of $186,800.
Our working capital was $2,117,040 as of December 31, 2011
compared to $1,165,029 as of December 31, 2010.
In managements opinion, our working capital is currently
sufficient for our present requirements. Nevertheless, we will continue to
evaluate alternative sources of capital to meet our growth requirements,
including other asset or debt financing, issuing equity securities and entering
into other financing arrangements. There can be no assurance, however, that any
of the contemplated financing arrangements described herein will be available
and, if available, can be obtained on terms favorable to us.
Historically, operations and short-term financing have been
sufficient to meet our cash needs. We believe that we will be able to generate
revenues from sales and raise capital through private placement offerings of our
equity securities to provide the necessary cash flow to meet anticipated working
capital requirements. However, our actual working capital needs for the long and
short -term will depend upon numerous factors, including operating results,
competition, and the availability of credit facilities, none of which can be
predicted with certainty. Future expansion will be limited by the availability
of financing products and raising capital.
Capital Expenditure
Total capital expenditures is $449 and $0 for the years ended
December 31, 2011 and 2010, respectively.
Currency Exchange Fluctuations
The Company financial statements are presented in the U.S.
dollar ($), which is the Companys reporting currency, while its functional
currency is 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.
Research and Development, Patents and Licenses, etc.
No significant research and development expenses were incurred
in 2011 or 2010.
Off-Balance Sheet Arrangements
We do not currently have any off-balance sheet
arrangements.
19
Tabular Disclosure of Contractual Obligations
Operating Leases
The following table provides information, as of the latest
fiscal year, with respect to our known contractual obligations, including
amounts aggregated by contractual obligation.
Year
|
|
Amount (for leases)
|
|
2012
|
$
|
12,396
|
|
2013
|
|
4,000
|
|
Total
|
$
|
16,396
|
|
We lease various office facilities under operating leases that
terminate on various dates in 2012 and 2013. Rental expense for these leases
consisted of approximately $32,396 and $37,207 for the years ended December 31,
2011 and 2010, respectively.
Bank Loan Payable
The Company has loan payable amounting to $1,964,533 as of
December 31, 2011 from several commercial banks in Taiwan. The loans are
partially secured by certificate of deposits for $603,089 and accounts
receivable. The loans payable at December 31, 2011 comprised of the following:
|
|
|
|
|
|
Interest per
|
|
|
|
|
|
Nature
|
|
|
|
|
Annum
|
|
|
|
|
|
|
|
Due on
|
|
|
|
|
|
Amount
|
|
|
Secured note payable from a
bank
|
|
12/27/2012
|
|
|
3.22%
|
|
|
141,290
|
|
|
Secured note payable from a bank
|
|
5/29/2012
|
|
|
2.97%
|
|
|
453,473
|
|
|
Secured note payable from a
bank
|
|
5/1/2012
|
|
|
1.70%
|
|
|
773,125
|
|
|
Secured note payable from a bank
|
|
5/16/2012
|
|
|
2.22%
|
|
|
104,100
|
|
|
Secured note payable from a
bank
|
|
3/27/2012
|
|
|
2.57%
|
|
|
161,113
|
|
|
Secured note payable from a bank
|
|
1/30/2012
|
|
|
5.20%
|
|
|
331,432
|
|
|
|
|
Total
|
|
$
|
1,964,533
|
|
|
|
|
Current portion
|
|
$
|
1,964,533
|
|
|
|
|
Long-term portion
|
|
$
|
-
|
|
In light of the recurring net loss over the past three years
and current uncertain market and economic conditions, we are aggressively
managing our cost structure and cash position to ensure that we will meet our
debt obligations while preserving the ability to make investments that will
enable us to respond to customer requirements and achieve long-term profitable
growth. We currently believe that our cash and cash equivalent, working capital,
and cash generated from operations, will be sufficient to meet our
payment obligations, forecasted operating expense, and capital expenditures
through the next twelve months.
20
Contractual Obligations
As a smaller reporting company, we are not required to
provide tabular disclosure obligations.
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):
During the years ended December 31, 2011 and 2010, 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.
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.
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.
Revenue Recognition
Revenues are recognized when finished products are shipped to
customers and both title and the risks and rewards of ownership are transferred
and collectibility is reasonably assured. The Companys revenues are recorded
upon confirmed acceptance after inspection by the customers of the Company.
Going Concern
The Company has incurred a net loss of $337,403 and $197,404
during the years ended December 31, 2011 and 2010, respectively, and has an
accumulated deficit of $2,573,759 as of December 31, 2011.
21
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, 2011, 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.
Recent accounting pronouncements
In July 2011, the FASB issued accounting standard update
(ASU) 2011-20, Receivables Disclosures about the Credit Quality of
Financing Receivables and the Allowance for Credit Losses. ASU 2011-20 amends
Topic 310 to improve the disclosures that an entity provides about the credit
quality of its financing receivables and the related allowance for credit
losses. As a result of these amendments, an entity is required to disaggregate
by portfolio segment or class certain existing disclosures and provide new
disclosures about certain financing receivables and related allowance for credit
losses. These provisions are effective for interim and annual reporting periods
ending on or after December 15, 2011. The adoption of this standard did not have
a significant impact on our financial statements or disclosures.
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk
As a smaller reporting company, we are not required to
provide the information required by this Item.
Item 8. Financial Statements
and Supplementary Data
22
TRANSAKT LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2011 AND 2010 AND
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
CONTENTS
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, 2011 and
2010, and the related consolidated statements of operations and comprehensive
income, change in shareholders equity, , 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, 2011 and 2010, 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 $(2,573,759) at December 31, 2011 including net losses of $(337,463) and
$(197,405) during the years ended December 31, 2011 and 2010, respectively.
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
March 22, 2012
F-1
TRANSAKT LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
871,682
|
|
|
1,131,339
|
|
Restricted cash
|
|
603,089
|
|
|
632,094
|
|
Accounts receivable,
net
|
|
1,747,862
|
|
|
1,646,476
|
|
Inventory
|
|
1,151,933
|
|
|
1,341,133
|
|
Other receivable, net
|
|
9,212
|
|
|
9,546
|
|
Prepaid expenses
|
|
258,278
|
|
|
28,868
|
|
Deferred income taxes
|
|
4,512
|
|
|
-
|
|
Total
Current Assets
|
|
4,646,568
|
|
|
4,789,456
|
|
|
|
|
|
|
|
|
Property & Equipment, net
|
|
1,652
|
|
|
2,693
|
|
|
|
|
|
|
|
|
Deposits
|
|
24,681
|
|
|
27,750
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
4,672,901
|
|
$
|
4,819,899
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
$
|
502,160
|
|
$
|
837,738
|
|
Bank loans
|
|
1,964,533
|
|
|
2,007,994
|
|
Loan payable to related party
|
|
62,835
|
|
|
739,137
|
|
Unsecured convertible
notes payable,
|
|
|
|
|
|
|
net of unamortized
discounts of $3,041 at 12/31/10
|
|
-
|
|
|
26,959
|
|
Deferred tax liability
|
|
-
|
|
|
12,599
|
|
Total Current Liabilities
|
|
2,529,528
|
|
|
3,624,427
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
Common stock,
300,000,000 shares authorized for issuance,
$0.001 par value,
195,339,005 and 102,645,120 shares issued and
outstanding at December 31, 2011 and December 31, 2010, respectively
|
|
195,339
|
|
|
102,645
|
|
Preferred stock, 200,000,000 shares
authorized for issuance,
$0.001
par value, 0 share issued and outstanding
|
|
-
|
|
|
-
|
|
Additional paid-in capital
|
|
4,460,087
|
|
|
3,172,373
|
|
Other comprehensive
income
|
|
61,706
|
|
|
156,750
|
|
Accumulated deficit
|
|
(2,573,759
|
)
|
|
(2,236,296
|
)
|
Total Stockholders'
Equity
|
|
2,143,373
|
|
|
1,195,472
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders'
Equity
|
$
|
4,672,901
|
|
$
|
4,819,899
|
|
The accompanying notes are an integral part of the financial
statements
F-2
TRANSAKT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
|
|
Year Ended
|
|
|
|
|
|
|
December 31, 2011
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
Sales, net
|
$
|
11,827,208
|
|
$
|
12,664,851
|
|
Cost of sales
|
|
10,926,538
|
|
|
11,890,316
|
|
Gross profit
|
|
900,670
|
|
|
774,535
|
|
Selling, general and administrative expenses
|
|
1,159,357
|
|
|
1,041,643
|
|
Loss from operations
|
|
(258,687
|
)
|
|
(267,108
|
)
|
Other income (expense)
|
|
|
|
|
|
|
Interest income
|
|
3,317
|
|
|
2,225
|
|
Investment
income
|
|
-
|
|
|
3,247
|
|
Other income
|
|
6,222
|
|
|
-
|
|
Curreny
exchange gain (loss)
|
|
(18,774
|
)
|
|
168,714
|
|
Interest expense
|
|
(67,959
|
)
|
|
(89,836
|
)
|
Total
other income (expenses)
|
|
(77,194
|
)
|
|
84,350
|
|
Loss before income taxes
|
|
(335,881
|
)
|
|
(182,758
|
)
|
Provision for income taxes expense
|
|
8,763
|
|
|
14,646
|
|
Loss before extraordinary item
|
|
(344,644
|
)
|
|
(197,404
|
)
|
Extraordinary item
|
|
|
|
|
|
|
Gain from extinguishment of debt
|
|
|
|
|
|
|
(less of applicable income taxes of $0)
|
|
7,181
|
|
|
-
|
|
Net loss
|
$
|
(337,463
|
)
|
$
|
(197,404
|
)
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
Basic and diluted income (loss) per share
|
|
|
|
|
|
|
Loss before extraordinary item
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
Extraordinary item
|
$
|
0.00
|
|
$
|
-
|
|
Net loss
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding:
|
|
|
|
|
|
|
Basic and diluted
|
|
152,624,884
|
|
|
102,645,120
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss):
|
|
|
|
|
|
|
Net Loss
|
$
|
(337,463
|
)
|
$
|
(197,405
|
)
|
Foreign currency translation adjustment
|
|
(95,044
|
)
|
|
172,028
|
|
Comprehensive Income (Loss)
|
$
|
(432,507
|
)
|
$
|
(25,377
|
)
|
The accompanying notes are an integral part of the financial
statements
F-3
TRANSAKT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income (loss)
|
|
|
Deficit
|
|
|
Total
|
|
Balance at December 31, 2009
|
|
102,645,120
|
|
$
|
102,645
|
|
$
|
3,172,373
|
|
$
|
(15,278
|
)
|
$
|
(2,038,892
|
)
|
$
|
1,220,848
|
|
Foreign currency translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
172,028
|
|
|
-
|
|
|
172,028
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(197,404
|
)
|
|
(197,404
|
)
|
Balance at December 31, 2010
|
|
102,645,120
|
|
$
|
102,645
|
|
$
|
3,172,373
|
|
$
|
156,750
|
|
$
|
(2,236,296
|
)
|
$
|
1,195,472
|
|
Foreign currency translation
adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(95,044
|
)
|
|
-
|
|
|
(95,044
|
)
|
Beneficial conversion feature relating to
convertible debentures
|
|
-
|
|
|
-
|
|
|
(10,000
|
)
|
|
. -
|
|
|
-
|
|
|
(10,000
|
)
|
Common stock issued to settle
debt
|
|
2,000,000
|
|
|
2,000
|
|
|
28,000
|
|
|
-
|
|
|
-
|
|
|
30,000
|
|
Common stock issued for cash
|
|
55,500,000
|
|
|
55,500
|
|
|
777,000
|
|
|
-
|
|
|
-
|
|
|
832,500
|
|
Common stock issued to settle
debt
|
|
34,927,218
|
|
|
34,927
|
|
|
488,981
|
|
|
-
|
|
|
-
|
|
|
523,908
|
|
Common stock issued for service
|
|
266,667
|
|
|
267
|
|
|
3,733
|
|
|
-
|
|
|
-
|
|
|
4,000
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(337,463
|
)
|
|
(337,463
|
)
|
Balance at December 31, 2011
|
|
195,339,005
|
|
$
|
195,339
|
|
$
|
4,460,087
|
|
$
|
61,706
|
|
$
|
(2,573,759
|
)
|
$
|
2,143,373
|
|
The accompanying notes are an integral part of the financial
statements
F-4
TRANSAKT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net loss
|
$
|
(337,463
|
)
|
$
|
(197,404
|
)
|
Adjustments to reconcile net loss to net cash used in (provided by)
operating activities:
|
|
|
|
|
|
|
Gain on sale of short-term investment
|
|
-
|
|
|
(3,247
|
)
|
Gain on debt extinguishment
|
|
7,181
|
|
|
-
|
|
Deferred tax
|
|
(17,174
|
)
|
|
11,678
|
|
Depreciation expense
|
|
1,424
|
|
|
778
|
|
Amortization of debt discount attributable to
convertible debentures
|
|
10,000
|
|
|
7,500
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
Decrease (Increase) in accounts
receivable
|
|
(163,980
|
)
|
|
617,888
|
|
Decrease in
inventory
|
|
146,450
|
|
|
193,408
|
|
(Increase) in other receivable
|
|
-
|
|
|
(2,283
|
)
|
Decrease (Increase)
in prapaid expense
|
|
(237,665
|
)
|
|
26,776
|
|
Decrease in deposits
|
|
2,439
|
|
|
49,195
|
|
(Decrease) in
accounts payable and accrued expenses
|
|
(312,880
|
)
|
|
(459,791
|
)
|
Increase (Decrease) in other
payable
|
|
(3,882
|
)
|
|
28,850
|
|
Net
cash used in (provided by) operating activities
|
|
(905,550
|
)
|
|
273,348
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Decrease (Increase) in restricted
cash
|
|
7,033
|
|
|
(64,486
|
)
|
Purchase of fixed assets
|
|
(449
|
)
|
|
-
|
|
Proceeds from sale of investments
|
|
-
|
|
|
56,497
|
|
Net cash provided
by (used in) investing activities
|
|
6,584
|
|
|
(7,989
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
Proceeds from bank loans
|
|
1,865,807
|
|
|
1,702,710
|
|
Repayment of bank loans
|
|
(1,837,994
|
)
|
|
(2,020,402
|
)
|
Due to related party
|
|
40,881
|
|
|
186,800
|
|
Repayment of amount due to
related party
|
|
(211,588
|
)
|
|
-
|
|
Sale of common stock
|
|
832,500
|
|
|
-
|
|
Net
cash provided by (used in) financing activities
|
|
689,606
|
|
|
(130,892
|
)
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and
cash equivalents
|
|
(50,297
|
)
|
|
122,454
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
(259,657
|
)
|
|
256,921
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning
|
|
1,131,339
|
|
|
874,418
|
|
Ending
|
$
|
871,682
|
|
$
|
1,131,339
|
|
The accompanying notes are an integral part of the financial
statements
F-5
TRANSAKT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
(CONTINUED)
Supplemental disclosure of cash flows
|
|
|
|
|
|
|
Cash paid during
the year for:
|
|
|
|
|
|
|
Income tax
|
$
|
1,920
|
|
$
|
214
|
|
Interest expense
|
$
|
61,310
|
|
$
|
87,598
|
|
|
|
|
|
|
|
|
Non-cash
transactions:
|
|
|
|
|
|
|
Issuance of
common stock to settle convertible debentures
|
$
|
30,000
|
|
$
|
-
|
|
Conversion of related party notes payable into common stock
|
$
|
575,466
|
|
$
|
-
|
|
The accompanying notes are an integral part of the financial
statements
F-6
TRANSAKT LTD.
NOTES TO FINANCIAL
STATEMENTS
DECEMBER 31, 2011
NOTE 1 ORGANIZATION
TransAKT Ltd. (the Company) was
incorporated under the laws of the Province of Alberta on June 3, 1997. The
Company completed the acquisition of Green Point Resources Inc. on October 18,
2000 whereby it became a publicly traded company listed on the Canadian Venture
Exchange. In 2004 the Company voluntarily delisted from the TSX Venture Exchange
and retained a listing on the Over the Counter Bulletin Board in the United
States.
In October 2004 the Company purchased
certain assets of IP Mental Inc., a Taiwan based Voice over Internet Protocol
(VoIP) company. The company name was changed from TransAKT Corp. to TransAKT
Ltd. on September 29, 2006. The Company designs and develops Voice over Internet
Protocol (VoIP) solutions and mobile payment terminals for the consumer
electronics industry.
On November 15, 2006 TransAKT Ltd and
the shareholders of Taiwan Halee International Co. Ltd. (HTT), entered into a
Share Exchange Agreement in which TransAKT Ltd. acquired 100% of Taiwan Halee
International Co. Ltd.s outstanding common stock. HTT was incorporated under
the laws of Republic of China in 1985. HTT is engaged in designing,
manufacturing and distribution of Taiwan telecommunications equipment. The
acquisition has been accounted for as a reverse acquisition under the purchase
method of accounting. Accordingly, the merger of the two companies has been
recorded as a recapitalization of HTT, with HTT being treated as the continuing
entity.
On August 12, 2010, the Company filed
the Registration Statement (Form S-4) in connection with the continuation of the
Company from Alberta to Nevada. Based upon the number of common shares of
TransAKT Ltd., a Nevada corporation (TransAKT Nevada), to be issued to the
shareholders of TransAKT Ltd., an Alberta corporation (TransAKT Alberta), on a
one-for-one basis upon completion of the Continuation and based on 102,645,120
shares of common stock of TransAKT Ltd., an Alberta corporation, issued and
outstanding as of August 12, 2010.
The Articles of Conversion of TransAKT
Nevada provides that the authorized capital of the TransAKT will be 300,000,000
shares of common stock, par value $0.001 per share and 200,000,000 shares of
preferred stock, par value $0.001 per share.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements
include the accounts of TransAKT Ltd. and its wholly owned subsidiaries Taiwan
Halee International Co. Ltd. and TransAKT Taiwan Limited, collectively referred
to within as the Company. All material intercompany accounts, transactions and
profits have been eliminated in consolidation.
Use of Estimates
The preparation of financial
statements in conformity with generally accepted accounting principles in the
United States (GAAP) requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenues are recognized when finished
products are shipped to customers and both title and the risks and rewards of
ownership are transferred and collectability is reasonably assured. The
Companys revenues are recorded upon confirmed acceptance after inspection by
the customers of the Company.
F-7
TRANSAKT LTD.
NOTES TO FINANCIAL
STATEMENTS
DECEMBER 31, 2011
Exchange Gain (Loss):
During the years ended December 31,
2011 and 2010, the transactions of TransAKT Holdings Limited, Taiwan Halee
International Co. Ltd. and TransAKT Taiwan Limited were denominated in foreign
currency and were recorded in Taiwan Dollar (TWD) and Canadian Dollar (CAD) at
the rates of exchange in effect when the transactions occur. Exchange gains and
losses are recognized for the different foreign exchange rates applied when the
foreign currency assets and liabilities are settled.
Translation Adjustment
The Company financial statements are
presented in the U.S. dollar ($), 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.
Statement of Cash Flows
Cash flows from the Company's
operations are based upon the local currencies. As a result, amounts related to
assets and liabilities reported on the statement of cash flows will not
necessarily agree with changes in the corresponding balances on the balance
sheet.
F-8
TRANSAKT LTD.
NOTES TO FINANCIAL
STATEMENTS
DECEMBER 31, 2011
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk are accounts receivable and
other receivables arising from its normal business activities. The Company has a
diversified customer base. The Company controls credit risk related to accounts
receivable through credit approvals, credit limits and monitoring procedures.
The Company routinely assesses the financial strength of its customers and,
based upon factors surrounding the credit risk, establishes an allowance, if
required, for uncollectible accounts and, as a consequence, believes that its
accounts receivable credit risk exposure beyond such allowance is limited.
Cash and Cash Equivalents
Cash and cash equivalents include cash
in hand and cash in time deposits, certificates of deposit and all highly liquid
debt instruments with original maturities of three months or less.
Restricted Cash
The Company had restricted cash and
investments of $603,089 and $632,094 for years ended December 31, 2011 and 2010,
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 $182,315 and $188,098 as at December
31, 2011 and December 31, 2010, 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, 2011 and
2010, 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
|
F-9
TRANSAKT LTD.
NOTES TO FINANCIAL
STATEMENTS
DECEMBER 31, 2011
As of December 31, 2010, Property,
Plant & Equipment consist of the following:
Computer and office equipment
|
$
|
64,533
|
|
Accumulated depreciation
|
|
(62,881
|
)
|
|
|
|
|
|
$
|
1,652
|
|
Depreciation expenses were $1,424 and
$778 for the years ended December 31, 2011 and 2010, respectively.
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.
F-10
TRANSAKT LTD.
NOTES TO FINANCIAL
STATEMENTS
DECEMBER 31, 2011
Recent accounting pronouncements
In September 2011, the Financial
Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")
2011-08,
"Testing Goodwill for Impairment."
This update amended the
procedures surrounding goodwill impairment testing to permit an entity to first
assess qualitative factors to determine whether it is more likely than not that
the fair value of a reporting unit is less than its carrying amount as a basis
for determining whether it is necessary to perform the two-step goodwill
impairment test described in Accounting Standards Codification ("ASC") 350,
"Intangibles Goodwill and Other."
ASU 2011-08 is effective for annual
and interim goodwill impairment tests performed for fiscal years beginning after
December 15, 2011. The Company will adopt ASU 2011-08 during the first quarter
of 2012. The adoption of this guidance will not have a significant impact on the
Company's consolidated financial statements.
In June 2011, the FASB issued ASU
2011-05, "
Presentation of Comprehensive Income
." This update amended the
presentation options in ASC 220, "
Comprehensive Income
," to provide an
entity the option to present the total of comprehensive income, the components
of net income, and the components of other comprehensive income either in a
single continuous statement of comprehensive income or in two separate but
consecutive statements. Additionally, this update requires disclosure of
reclassification adjustments for items that are reclassified from other
comprehensive income to net income on the face of the financial statements. In
December 2011, the FASB subsequently issued ASU 2011-12,
"Comprehensive
Income Deferral of the Effective Date for Amendments to the Presentation of
Reclassifications of Items Out of Accumulated Other Comprehensive Income,"
which indefinitely deferred the presentation requirements of reclassification
adjustments within ASU 2011-05. The Company will adopt ASU 2011-05 and ASU
2011-12 during the first quarter of 2012. The adoption of this guidance will not
have a significant impact on the presentation of the Company's consolidated
financial statements.
In May 2011, the FASB issued ASU
2011-04,
"Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs."
This update amended explanations of
how to measure fair value to result in common fair value measurement and
disclosure requirements in U.S GAAP and International Financial Reporting
Standards. ASU 2011-04 is effective for fiscal years, and interim periods within
those years, beginning after December 15, 2011 with prospective application
required. The Company will adopt ASU 2011-04 during the first quarter of 2012.
The adoption of this guidance will not have a significant impact on the
Company's consolidated financial statements.
Going Concern
The Company has incurred a net loss of
$337,463 and $197,404 during the years ended December 31, 2011 and 2010,
respectively, and has an accumulated deficit of $2,573,759 as of December 31,
2011.
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.
F-11
TRANSAKT LTD.
NOTES TO FINANCIAL
STATEMENTS
DECEMBER 31, 2011
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, 2011, 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 2012; (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, 2011 and 2010 are summarized as follows:
|
|
2011
|
|
|
2010
|
|
Accounts payable
|
$
|
385,256
|
|
$
|
675,600
|
|
Accrued expenses
|
|
6,427
|
|
|
45,948
|
|
Sales tax payable
|
|
14,125
|
|
|
37,700
|
|
Income tax payable
|
|
23,311
|
|
|
-
|
|
Accrued payroll
|
|
73,041
|
|
|
78,490
|
|
Total
|
$
|
502,160
|
|
$
|
837,738
|
|
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, 2011 and 2010, there were $62,835 and $678,737
advances outstanding, respectively.
The Company also had loans payable to
five shareholders amounted to $60,400 as of December 31, 2010. These loan
payable were converted to common stock at June 21, 2011 at a deemed price of
$0.015 per share.
NOTE 5 - LOANS PAYABLE
The Company has loan payable amounting
to $1,964,533 as of December 31, 2011 from several commercial banks in Taiwan.
The loans are partially secured by certificate of deposits for $603,089 and
accounts receivable. The loans payable at December 31, 2011 comprised of the
following:
F-12
TRANSAKT LTD.
NOTES TO FINANCIAL
STATEMENTS
DECEMBER 31, 2011
|
|
|
|
|
|
Interest per
|
|
|
|
|
|
Nature
|
|
Due on
|
|
|
Annum
|
|
|
Amount
|
|
|
Secured note payable from a
bank
|
|
12/27/2012
|
|
|
3.22%
|
|
|
141,290
|
|
|
Secured note payable from a bank
|
|
5/29/2012
|
|
|
2.97%
|
|
|
453,473
|
|
|
Secured note payable from a
bank
|
|
5/1/2012
|
|
|
1.70%
|
|
|
773,125
|
|
|
Secured note payable from a bank
|
|
5/16/2012
|
|
|
2.22%
|
|
|
104,100
|
|
|
Secured note payable from a
bank
|
|
3/27/2012
|
|
|
2.57%
|
|
|
161,113
|
|
|
Secured note payable from a bank
|
|
1/30/2012
|
|
|
5.20%
|
|
|
331,432
|
|
|
|
|
Total
|
|
|
|
|
$
|
1,964,533
|
|
|
|
|
Current portion
|
|
|
|
|
$
|
1,964,533
|
|
|
|
|
Long-term portion
|
|
|
|
|
$
|
-
|
|
NOTE 6 INCOME TAXES
The Company is registered in the State
of Nevada and has operations in primarily two tax jurisdictions -Taiwan and the
United States. For the operations in the U.S., the Company has incurred net
accumulated operating losses for income tax purposes. The Company believes that
it is more likely than not that these net accumulated operating losses will not
be utilized in the future. Therefore, the Company has provided full valuation
allowance for the deferred tax assets arising from the losses in the U.S. as of
December 31, 2011 and 2010. Accordingly, the Company has no net deferred tax
assets on the U.S. operations.
United States of America
The Company has income tax net
operating losses (NOL) in 2011. Due to the change in ownership of more than
fifty percent, the amount of NOL which may be used in any one year will be
subject to a restriction under section 382 of the Internal Revenue Code. 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, 2011. The Company has provided 100% valuation allowance to the
deferred tax assets as of December 31, 2011.
Taiwan:
The statutory tax rate under Taiwan
tax law is 17%. The Company has several deferred tax asset items. The provision
for income taxes from continuing operations on income consists of the following
for the years ended December 31, 2011 and 2010:
|
|
2011
|
|
|
2010
|
|
Income tax expense current
|
$
|
13,275
|
|
$
|
2,047
|
|
Income tax expense deferred
|
|
(4,512
|
)
|
|
12,599
|
|
Total income tax expense
|
$
|
8,763
|
|
$
|
14,646
|
|
F-13
TRANSAKT LTD.
NOTES TO FINANCIAL
STATEMENTS
DECEMBER 31, 2011
The following is a reconciliation of
the statutory tax rate to the effective tax rate for the years ended December
31, 2011 and 2010:
|
|
2011
|
|
|
2010
|
|
U.S. Federal tax at statutory
rate
|
|
34%
|
|
|
34%
|
|
Valuation allowance
|
|
(34%
|
)
|
|
(34%
|
)
|
Foreign income tax- Taiwan
|
|
17%
|
|
|
17%
|
|
Net effect of non-taxable
income/non-deductible expenses
|
|
(5.78%
|
)
|
|
104.63%
|
|
Effective tax rate
|
|
11.22%
|
|
|
121.63%
|
|
|
|
|
|
|
|
|
Deferred taxes:
|
|
|
|
|
|
|
The tax effect of temporary
differences that give rise to the Companys deferred tax asset as of December
31, 2011 and 2010 are as follows:
U.S:
|
|
2011
|
|
|
2010
|
|
Deferred tax asset non-current:
|
|
|
|
|
|
|
Net operating loss carry
forward
|
$
|
112,341
|
|
$
|
-
|
|
Valuation allowance
|
|
(
112,341
|
)
|
|
( -)
|
|
Net deferred tax asset
|
$
|
-
|
|
$
|
-
|
|
Taiwan:
|
|
2011
|
|
|
2010
|
|
Deferred tax liability- current:
|
|
|
|
|
|
|
Foreign currency exchange
loss (gain)
|
$
|
-
|
|
$
|
( 12,599
|
)
|
Deferred tax asset - non-current:
|
|
|
|
|
|
|
Foreign currency exchange
loss (gain)
|
|
4,512
|
|
|
-
|
|
Valuation allowance
|
|
-
|
|
|
-
|
|
Net deferred tax asset
(liability)
|
$
|
4,512
|
|
$
|
(12,599
|
)
|
NOTE 7 - COMMITTMENTS
Operating Leases
The Company leases various office
facilities under operating leases that expire on various dates of years 2012 and
2013. Rental expense for these leases consisted of approximately $32,396 and
$37,207 for the years ended December 31, 2011 and 2010, respectively. The
Company has future minimum lease obligations of $12,396 and $4,000 for the
twelve-month periods ended December 31, 2012 and 2013.
NOTE 8 - 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.
F-14
TRANSAKT LTD.
NOTES TO FINANCIAL
STATEMENTS
DECEMBER 31, 2011
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 was
amortized to interest expense over the term of the note.
On February 22, 2011, the Company
entered into a Subscription Agreement- Debt Settlement with the holders of the
above convertible notes. Based on the agreement, the holders subscribed
2,000,000 shares of common stock and apply the indebtedness of the convertible
notes in payment of the subscription proceeds. Therefore, the embedded
beneficial conversion feature of notes is extinguished. In accordance with ASC
470-20, the amount of the reacquisition price to be allocated to the repurchased
beneficial conversion features shall be measured using the intrinsic value of
that conversion feature at the extinguishment date. The residual amount would be
allocated to the convertible security. The Company recognized and measured
$10,000 of the intrinsic value of the embedded beneficial conversion feature at
the extinguishment date to additional paid-in capital. The gain on
extinguishment of the convertible debt security in the amount of $7,181 is
recorded as extraordinary item, in accordance with ASC 470-50.
NOTE 9 COMMON STOCK
On June 21, 2011, the Company issued
55,500,000 shares of its common stock for $0.015 per share to individuals for
aggregate gross proceeds of $832,500.
On June 21, 2011, the Company
converted its outstanding related party notes payable totaling $523,908 into
34,927,218 shares of Common Stock. The deemed price of the shares issued was
$0.015.
On June 21, 2011, the Company issued
an aggregate of 266,667 shares of common stock, at a deemed price of $0.015 per
share, to pay $4,000 for services.
NOTE 10 SUBSEQUENT EVENTS
The Company evaluated all events or
transactions that occurred after December 31, 2011 up through the date the
Company issued these financial statements.
******
F-15
Item 9. Changes in and
Disagreements With Accountants on Accounting and Financial Disclosure
There were no disagreements related to accounting principles or
practices, financial statement disclosure, internal controls or auditing scope
or procedure during the two fiscal years and interim periods, including the
interim period up through the date the relationship ended.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and
Procedures
We maintain disclosure controls and procedures, as defined in
Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act
of 1934 (the "Exchange Act"), that are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC, and that such information
is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
As of the end of the period covered by this report, our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of our
disclosure controls and procedures. Based upon this evaluation, and the material
weaknesses outlined in our Management Report on Internal Control Over Financial
Reporting, our management concluded that our disclosure controls and procedures
were not effective.
Managements Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Under the supervision and
with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, we conducted an evaluation of the effectiveness of
our internal control over financial reporting as of December 31, 2011 using the
criteria established in
Internal ControlIntegrated Framework
issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
A material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of our annual or interim
financial statements will not be prevented or detected on a timely basis. In our
assessment of the effectiveness of internal control over financial reporting as
of December 31, 2011, we determined that there were control deficiencies that
constituted material weaknesses, as described below:
1.
|
We do not have an audit committee or a financial expert
on our Board of Directors While not being legally obligated to have an
audit committee, it is managements view that such a committee, including
a financial expert member, is an utmost important entity level control
over our financial statements. Currently, the Board of Directors acts in
the capacity of the audit committee, and does not include a member that is
considered to be independent of management to provide the necessary
oversight over managements activities.
|
|
|
2.
|
We did not implement appropriate information technology
controls As of December 31, 2011, we retain copies of all financial data
and material agreements; however, there is no formal procedure or evidence
of normal backup of our data or off-site storage of the data in the event
of theft, misplacement or loss due to unmitigated
factors.
|
Accordingly, we concluded that these control deficiencies
resulted in a reasonable possibility that a material misstatement of our annual
or interim financial statements will not be prevented or detected on a timely
basis by our internal controls.
16
As a result of the material weaknesses described above,
management has concluded that we did not maintain effective internal control
over financial reporting as of December 31, 2011 based on criteria established
in
Internal ControlIntegrated Framework
issued by COSO.
KCCW Accountancy Corp., an independent registered public
accounting firm, was not required to and has not issued a report concerning the
effectiveness of our internal control over financial reporting as of December
31, 2011.
Continuing Remediation Efforts to Address Deficiencies in
our Internal Control Over Financial Reporting
Once we are engaged in a business of merit and have sufficient
personnel available, then our Board of Directors, in particular and in
connection with the aforementioned deficiencies, will establish the following
remediation measures:
1.
|
Our Board of Directors will nominate an audit committee
and audit committee financial expert.
|
|
|
2.
|
We will implement formal procedures to ensure that
appropriate backup of off-site storage of our data is
implemented.
|
Changes in Internal Control
During the fiscal year ended December 31, 2011 there were no
changes in our internal control over financial reporting (as defined in Rule
13a-15(e) and Rule 15d-15(e) under the Exchange Act) that materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and
Corporate Governance
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
|
Age
|
Position
|
James Wu
|
58
|
Chairman, Chief Executive
Officer, President and Director
|
Taifen Day
|
52
|
Chief Financial Officer
|
Cheng Chun-Chih
|
65
|
Director (Chairman of Taiwan
Halee International Co. Ltd.)
|
Dr. Shiau Tzong- Huei
|
56
|
Director (Chief Technical Officer
of Taiwan Halee International Co. Ltd. and Chairman of TransAKT Taiwan
Corp.)
|
Tseng Ming-Huang
|
42
|
Director
|
J.T. Wang
|
45
|
Vice President of Asia Operations
|
17
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.
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.
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.
Tseng Ming-Huang-
Director
Mr. Tseng was a founder and currently serves as CEO of CeraMicro
Technology Corp. which was started in 2003. 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
Panasonic Taiwan Operations. Mr. Wang has profound knowledge of the
telecommunications industry not only in the associated technologies, but also
with sales distribution channels.
Employment Agreements
We have no formal employment agreements with any of our
employees, directors or officers.
Family Relationships
There are no family relationships between any of our directors,
executive officers and proposed directors or executive officers.
18
Involvement in Certain Legal Proceedings
None of our directors, executive officers, promoters or control
persons has been involved in any of the following events during the past five
years:
1. 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;
2. 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);
3. 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
|
|
|
|
|
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;
|
4. 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;
5. 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;
6. 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;
7. 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:
|
i.
|
Any Federal or State securities or commodities law or
regulation; or
|
|
|
|
|
ii.
|
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
|
|
|
|
|
iii.
|
Any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity; or
|
19
8. 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.
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 Securities and Exchange Commission 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, 2011, all filing requirements
applicable to our officers, directors and greater than 10% percent beneficial
owners were complied with.
Code of Ethics
We have adopted a code of ethics as part of a broader code of
conduct, which addresses ethical issues as well as broader corporate governance
issues. Our code of conduct has been approved by our Board of Directors and is
applicable to all our directors, officers, employees and consultants, including
but not limited to our principle executive officer, our principal financial
officer and principal accounting officer, and any persons performing similar
functions. No amendments have been made or waivers granted in respect of any
provision of our Code of Ethics during the most recently completed fiscal
year.
A copy of the code of ethics portion of our code of conduct is
attached to this annual report as Exhibit A.
In addition, we practice corporate governance in accordance
with rules and regulations in Canada.
Corporate governance relates to the activities of our our
directors who are elected by and accountable to the shareholders and takes into
account the role of management who are appointed by the Board and who are
charged with our on-going management. Our Board of Directors encourages sound
corporate governance practices designed to promote our well being and on-going
development, having always as its ultimate objective the best long-term
interests of us and the enhancement of value for all shareholders. The Board
also believes that sound corporate governance benefits our employees and the
communities in which we operate. The Board is of the view that our corporate
governance policies and practices, outlined in our Code of Ethics, are
appropriate and substantially consistent with the guidelines for improved
corporate governance in Canada as adopted by the Toronto Stock Exchange.
Board and Committee Meetings
Our board of directors held no formal meetings during the year
ended December 31, 2011. 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 Corporations Act and our Bylaws,
as valid and effective as if they had been passed at a meeting of the directors
duly called and held.
Nomination Process
As of December 31, 2011, 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 annual report.
20
Audit Committee
We have no formal audit committee, and thus, we have no audit
committee financial expert. Our Board is responsible for reviewing our financial
reporting procedures, internal controls, and the performance of our auditors.
Our Board is also responsible for reviewing all disclosure with respect to
financial matters prior to filing or release. Ms. Taifen Day is our Chief
Financial Officer and a Chartered Accountant in the Province of Alberta, Canada.
Ms. Day reports to our Board in her capacity as Chief Financial Officer.
Audit Committee Financial Expert
Our board of directors has determined that it does not have a
member of its audit committee that qualifies as an "audit committee financial
expert" as defined in Item 407(d)(5)(ii) of Regulation S-K.
Compensation Committee
We have no formal compensation committee. Our Board determines
the terms of the compensation packages provided to our senior executive
officers, including salary, bonus and awards under our stock option plan and any
other compensation plans that we may adopt in the future.
Corporate Governance Committee
We have no formal corporate governance committee. Our Board
meets with and discusses current disclosure issuances with our management
personnel and with our legal counsel, in order to not only report any matters
which should be the subject of either public disclosure or remedial action, but
also to assist in establishing reporting and disclosure procedures to ensure
that we are in compliance with our disclosure and compliance obligations under
applicable laws, rules and obligations.
Item 11. 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, 2011 and 2011; 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, 2011 and 2011,
|
who we will collectively refer to as the named executive
officers of our company, 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 $100,000 for the respective fiscal year:
21
SUMMARY COMPENSATION
TABLE
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensa-
tion
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensa-
tion
($)
|
Total
($)
|
James Wu
(1)
President, Chief
Executive
Officer,
and Director
|
2011
2011
|
90,000
90,000
|
N/A
N/A
|
N/A
N/A
|
N/A
N/A
|
N/A
N/A
|
N/A
N/A
|
N/A
N/A
|
N/A
N/A
|
J.T. Wang
VicePresident of
Asia Operations
|
2011
2011
|
40,000
40,000
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
(1)
|
Mr. Wu was appointed the President, Chief Executive
Officer, and a director of our company on October 25, 2004.
|
|
|
(2)
|
Mr. Wang was appointed as Vice President of Asia
Operations on April 1, 2007.
|
There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. Our
directors and executive officers may receive share options at the discretion of
our board of directors in the future. We do not have any 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 share options may be
granted at the discretion of our board of directors.
2011 Grants of Plan-Based Awards
There were no grants of plan based awards during the year ended
December 31, 2011.
Outstanding Equity Awards at Fiscal Year End
There were no outstanding equity awards at the year ended
December 31, 2011.
Option Exercises and Stock Vested
During our Fiscal year ended December 31, 2011 there were no
options exercised by our named 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.
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.
22
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.
Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of March 28, 2011, certain
information with respect to the beneficial ownership of our common shares by
each shareholder known by us to be the beneficial owner of more than 5% of our
common shares, as well as by each of our current directors and executive
officers as a group. Each person has sole voting and investment power with
respect to the shares of common stock, except as otherwise indicated. Beneficial
ownership consists of a direct interest in the shares of common stock, except as
otherwise indicated.
Name and Address of Beneficial Owner
|
Amount and Nature of
Beneficial Ownership
(Common Shares)
|
Percentage
of
Class
(1)
|
James Wu
President, Chief Executive
Officer, and Director
2 FL NO 28 Lane 231 Fu-Hsin N Rd
Taipei,
Taiwan"
|
5,000,000
|
2.56%
|
Cheng Chun-Chih
Director (Chairman of
Taiwan Halee
International Co. Ltd.)
NO 3 Lane 141 Sec
3 Pei-Shen Rd
Shen-Ken Hsiaung
Taipei Hsieng, Taiwan
|
5,000,000
|
2.56%
|
Tseng Ming-Huang
Director
503
5F Silvercord Tower 2,
30 Canton Rd
Tsimshatsui Kowloon, HKG
|
100,000
|
(2)
|
Dr. Shiau Tzong-Huei
Director (Chief
Technical Officer of Taiwan
Halee and Chairman of TransAKT
Taiwan
Corp.)
NO 3 Lane 141 Sec 3 Pei-Shen Rd
Shen-Ken Hsiaung
Taipei Hsieng, Taiwan"
|
1,000,000
|
(2)
|
Taifen Day
Chief Financial Officer
420 12 Ave N.W.
Calgary, Alberta T2M 0C9
Canada"
|
-
|
(2)
|
J.T. Wang
Vice President of Asia
Operations
|
1,000,000
|
(2)
|
Directors and Executive Officers
as a Group
(1)
|
12,100,000
Common
Shares
|
6.19%
|
23
Name and Address of Beneficial Owner
|
Amount and Nature of
Beneficial
Ownership
(Common Shares)
|
Percentage
of
Class
(1)
|
Ceramicro Technology Corp.
4f No 16-1 Sec
6 Min Chuan East Rd.
Neihu District, Taipei
Taiwan
|
35,000,000
|
17.92%
|
Lin Yu-Hsiung
c/o NO 3 Lane 141 Sec 3
Pei-Shen Rd
Shen-Ken Hsiaung
Taipei Hsieng, Taiwan
|
10,000,000
|
5.12%
|
Other holders of 5% or more
|
45,000,000 Common
Shares
|
23.04%
|
|
(1)
|
Under Rule 13d-3, a beneficial owner of a security
includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship, or otherwise has or shares: (i)
voting power, which includes the power to vote, or to direct the voting of
shares; and (ii) investment power, which includes the power to dispose or
direct the disposition of shares. Certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share
the power to vote or the power to dispose of the shares). In addition,
shares are deemed to be beneficially owned by a person if the person has
the right to acquire the shares (for example, upon exercise of an option)
within 60 days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of shares
outstanding is deemed to include the amount of shares beneficially owned
by such person (and only such person) by reason of these acquisition
rights. As a result, the percentage of outstanding shares of any person as
shown in this table does not necessarily reflect the persons actual
ownership or voting power with respect to the number of shares of common
stock actually outstanding on March 29, 2011. As of March 29, 2011 there
were 102,645,120 shares of our companys common stock issued and
outstanding.
|
|
|
|
|
(2)
|
Less than 1%
|
Changes in Control
We are unaware of any contract or other arrangement the
operation of which may at a subsequent date result in a change in control of our
company.
Item 13. Certain Relationships and Related Transactions, and
Director Independence
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, 2011 and
2010, there were $62,835 and $678,737 advances outstanding, respectively.
The Company also had loans payable to five shareholders
amounted to $60,400 as of December 31, 2010. These loan payable were converted
to common stock at June 21, 2011 at a deemed price of $0.015 per share.
Except as disclosed herein, no director, executive officer,
shareholder holding at least 5% of shares of our common stock, or any family
member thereof, had any material interest, direct or indirect, in any
transaction, or proposed transaction since the year ended December 31, 2011, 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 yearend for
the last three completed fiscal years.
24
Director Independence
We currently act with four (4) directors, consisting of James
Wu, Cheng Chun-Chih, Tseng Ming-Huang, and Dr. Shiau Tzong-Huei. We have not
made any determination as to whether any of our directors are independent
directors, as that term is used in Rule 4200(a)(15) of the Rules of National
Association of Securities Dealers.
Item 14. Principal Accounting Fees and Services
The aggregate fees billed for the most recently completed
fiscal year ended December 31, 2011 and for fiscal year ended December 31, 2010
for professional services rendered by the principal accountant for the audit of
our annual financial statements and review of the financial statements included
in our quarterly reports on Form 10-Q and services that are normally provided by
the accountant in connection with statutory and regulatory filings or
engagements for these fiscal periods were as follows:
|
Year Ended
|
|
December 31, 2011
|
December 31, 2010
|
Audit Fees
|
$63,500
|
$63,500
|
Audit Related Fees
|
$Nil
|
$Nil
|
Tax Fees
|
$Nil
|
$Nil
|
All Other Fees
|
$Nil
|
$Nil
|
Total
|
$63,500
|
$63,500
|
Our board of directors pre-approves all services provided by
our independent auditors. All of the above services and fees were reviewed and
approved by the board of directors either before or after the respective
services were rendered.
Our board of directors has considered the nature and amount of
fees billed by our independent auditors and believes that the provision of
services for activities unrelated to the audit is compatible with maintaining
our independent auditors independence.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)
|
Financial Statements
|
|
|
|
|
(1)
|
Financial statements for our company are listed in the
index under Item 8 of this document
|
|
|
|
|
(2)
|
All financial statement schedules are omitted because
they are not applicable, not material or the required information is shown
in the financial statements or notes thereto.
|
|
|
|
(b)
|
Exhibits
|
Exhibit
|
Description
|
Number
|
|
|
|
3.1
|
Articles of Amalgamation (incorporated by reference from
our Form 20-F filed on September 16, 2003).
|
|
|
3.2
|
By-laws, as amended (incorporated by reference from our
Form 20-F filed on September 16, 2003).
|
25
Exhibit
|
Description
|
Number
|
|
|
|
10.
|
Form of Loan
Agreement and Promissory Note (incorporated by reference from our Form
20-F filed on September 16, 2003).
|
|
|
10.1
|
Distribution
Agreement with Panasonic (Taiwan) (April, 2011) (incorporated by reference
from our Form 20-F/A filed on January 21, 2011).
|
|
|
10.2
|
Manufacture
and Distribution Agreement with Sanyo (April, 2011) (incorporated by reference
from our Form 20-F/A filed on January 21, 2011).
|
|
|
10.3
|
Form of Promissory
for Shareholder Loan. (April, 2011) (incorporated by reference from our
Form 20-F/A filed on January 21, 2011).
|
|
|
10.4
|
Form of Subscription
Agreement for Convertible Debenture (April, 2011) (incorporated by reference
from our Form 20-F/A filed on January 21, 2011).
|
|
|
14
|
Code of Ethics
(April, 2011) (incorporated by reference from our Form 20-F/A filed on
January 21, 2011).
|
|
|
(31)
|
Rule 13a-14(a)/15d-14(a)
Certifications
|
|
|
31.1*
|
Certificate
of Principal Executive Officer filed pursuant to Section 302 Certification
under Sarbanes- Oxley Act of 2002
|
|
|
31.2 *
|
Certification
of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
(32)
|
Section 1350
Certifications
|
|
|
32.1*
|
Certificate
of Principal Executive Officer filed pursuant to Section 906 Certification
under Sarbanes- Oxley Act of 2002
|
|
|
32.2 *
|
Certificate
of Principal Financial Officer filed pursuant to Section 906 Certification
under Sarbanes- Oxley Act of 2002
|
*
Filed herewith.
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereto duly authorized.
|
TransAKT Ltd.
|
|
(Registrant)
|
|
|
|
|
Dated: March 30, 2012
|
/s/
James Wu
|
|
James Wu
|
|
President, Chief Executive Officer, and
Director
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
Dated: March 30, 2012
|
/s/
Taifen Day
|
|
Taifen Day
|
|
Chief Financial Officer
|
|
(Principal Financial Officer and Principal
|
|
Accounting Officer)
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Dated: March 30, 2012
|
/s/
James Wu
|
|
James Wu
|
|
President, Chief Executive Officer, and
Director
|
|
(Principal Executive Officer)
|
|
|
Dated: March 30, 2012
|
/s/
Cheng Chun Chih
|
|
Cheng Chun-Chih
|
|
Director
|
|
|
Dated: March 30, 2012
|
/s/
Tseng Ming-Huang
|
|
Tseng Ming-Huang
|
|
Director
|
|
|
Dated: March 30, 2012
|
/s/
Dr. Shiau Tzong-Huei
|
|
Dr. Shiau Tzong-Huei
|
|
Director
|
27
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