UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 20-F /A
(Amendment No.1)
[ ]
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X ]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2009
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________to
______________________
Commission file number _______________________________
TransAKT Ltd.
(Exact name
of Registrant as specified in its charter)
___________________________________
(Translation of
Registrants name into English)
Alberta, Canada
(Jurisdiction of incorporation
or organization)
Suite 260, 1414 8
th
Street S.W., Calgary, Alberta, Canada, T2R
1J6
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section
12(b) of the Act.
Title of each class
|
Name of each exchange on which registered
|
|
|
None
|
Not applicable
|
Securities registered or to be registered pursuant to Section
12(g) of the Act.
Common Stock
(Title of Class)
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the
issuers capital or common stock as of the close period covered by the annual
report.
On December 31, 2009, there were a total of 102,645,120 common
shares issued and outstanding.
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
[ ] Yes
[X] No
If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934.
[ ] Yes [X] No
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 past 90 days.
[ X ] Yes [ ] No
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, 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 registrant was required to submit and post such files).
[ X ] Yes [ ] No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer [ ]
|
Accelerated filer [ ]
|
Non-accelerated filer [X ]
|
Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:
U.S. GAAP [X]
|
International Financial Reporting Standards
as issued by the International Accounting Standards Board
|
[ ]
|
Other [ ]
|
If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant
has elected to follow.
[ ] Item 17 [ ] Item 18
_________________________________
If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
[ ] Yes [ ] No
TABLE OF CONTENTS
PART I
Forward-looking statements are not guarantees of future
performance. They involve risks, uncertainties and assumptions. Our future
results and shareholder values may differ materially from those expressed in
these forward-looking statements. Readers are cautioned not to put undue
reliance on any forward-looking statements.
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISORS
Not applicable to Form 20-F filed as an Annual Report.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable to Form 20-F filed as an Annual Report.
ITEM 3. KEY INFORMATION
3.A. Selected Financial Data
The table below presents selected financial information. Our
financial statements are stated in United States dollars (USD) and are
prepared in accordance with United States Generally Accepted Accounting
Principles (GAAP). The following table presents selected financial information
under U.S. GAAP. The table should be read in conjunction with the financial
statements and notes thereto and our discussion and analysis included elsewhere
in this Annual Report. All dollar amounts in this report are expressed in USD
unless otherwise stated.
Selected Financial Data US GAAP
(USD$)
|
2009
|
2008
|
2007
|
2006
|
2005
|
Operating Revenues
|
10,623,736
|
9,546,132
|
9,687,678
|
8,385,075
|
9,167,708
|
Income (loss) from Operations
|
(186,069)
|
(206,483)
|
(1,463,176)
|
(152,291)
|
(7,282)
|
Net Income (loss)
|
(249,643)
|
(420,776)
|
(921,158)
|
(237,459)
|
(702)
|
Net Loss per share (basic and diluted)
|
0
|
0
|
(0)
|
(0.00)
|
(0.00)
|
Dividends per share
|
-
|
-
|
-
|
-
|
-
|
Weighted Ave Shares Outstanding
|
102,645,120
|
102,645,120
|
99,707,278
|
52,379,273
|
50,000,000
|
Working Capital
|
1,164,286
|
1,493,102
|
1,778,734
|
1,189,171
|
1,601,039
|
Long Terms Debt
|
-
|
-
|
-
|
-
|
-
|
Shareholders Equity
|
1,220,848
|
1,531,931
|
1,854,514
|
1,269,299
|
1,652,044
|
Capital Stock
|
3,260,018
|
3,260,018
|
3,260,018
|
1,832,174
|
1,826,400
|
Total Assets
|
4,980,879
|
6,161,158
|
6,331,827
|
5,539,691
|
3,796,596
|
This Annual Report contains financial statements that were
prepared in USD with conversions of certain amounts of Taiwan Dollars (TWD)
and Canadian Dollars (CAD) converted into USD based upon the exchange rate in
effect at the end of the calendar year to which the amount relates, or the
exchange rate on the date specified. These translations should not be construed
as representations that the TWD and CAD amounts actually represent such USD
amounts or that TWD and CAD could be converted into USD at the rate
indicated.
1
3.B. Capitalization and Indebtedness
Not applicable to Form 20-F filed as an Annual Report.
3.C. Reasons for the Offer and Use of Proceeds
Not applicable to Form 20-F filed as an Annual Report.
3.D. Risk Factors
INVESTMENT IN OUR COMMON SHARES IS HIGHLY SPECULATIVE. A PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS:
Risks Relating to Our Stock
We Have a History of Operating Losses Which May Affect Our Ability to Continue Operations.
We sustained operating losses for each of the fiscal years ended December 31, 2009 and 2008 of $249,643 and $420,776, respectively. . We also anticipate sustaining a loss from operations for the fiscal year ended December 31, 2010. If we are
unable to achieve profitability or to raise sufficient capital to carry out our business plan, we may not be able to continue operations.
We Have a Limited Operating History and Are Still Proving the Viability of Our Products and Business Model, and thus, We May Be Unable to Sustain Operations and You May Lose Your Entire Investment.
Since inception, we have been primarily focused on research and development. In April 2003, our products became commercially available and in 2006, we significantly changed our product line. We are still adding to our product line and are in the
process of proving the viability of our products and business model. If our business model proves unsuccessful or our products prove unviable, we may not be able to sustain operations and our ability to raise additional funding may be jeopardized.
Our Competition Has Greater Resources Than We Do and Can Respond More Quickly to Changes in Our Industry Which Could Adversely Affect our Ability to Compete.
Communications-based businesses are intensely competitive and involve a high degree of risk. Public acceptance of our products may never reach the magnitude required for us to achieve commercial profitability.
Many of our existing competitors, as well as a number of potential new competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than us. These
factors may allow them to respond more quickly than us to new or emerging technologies and changes in customer requirements. It may also allow them to devote greater resources than we can to the development, promotion and sale of their products and
services. Such competitors may also engage in more extensive research and development, undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to existing and potential employees,
strategic partners, advertisers and Internet publishers. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the quality and commercial
viability of their products or services.
Volatility of Global Economic Conditions May Affect Our Ability to Raise Capital and our Product Costs Which May Affect Our Ability to Continue Operations.
Our revenues, profitability, future growth, and the carrying value of our assets are substantially dependent on prevailing global economic conditions, generally, and on fluctuations in specific factors such as exchange rates, rates of inflation,
governmental stability and the occurrence of economically disruptive events, such as war or natural or industrial disaster. Our ability to borrow and to obtain additional capital on attractive terms is also substantially dependent upon these
factors. The negative impact of these factors on sales orders originating from an affected country would have an adverse effect on our borrowing capacity, revenues, profitability and cash flows from operations. For example, unfavorable changes in
exchange rates can increase the cost of our products and reduce revenues, resulting in reduced profitability. In the event that our profitability is reduced and we are unable to maintain our profit margins, our ability to raise or to
borrow capital may decrease. In addition, as has been recently experienced, general downturns in the technology sector worldwide have made fundraising difficult. Since the marketing of our products will require us to raise additional capital, such
downturns may have an adverse affect on our ability to continue operations and to effectively market our products.
2
We are Dependent on Key Personnel Who Have Extensive Knowledge of Our Products and Business and thus, the Loss of One or More of These Individuals May Adversely Affect Our Business.
We are heavily dependent upon the expertise of our management and certain other key officers and directors who have extensive knowledge of our products and our operations, and the loss of one or more of these individuals could have a material
adverse effect on our business. We do not maintain key-person insurance policies on any of our executive officers. Since we are a technology driven company, our future success also depends on our ability to continue to attract, retain, and motivate
highly skilled employees in the telecommunications technology sector, and in the technology sector, generally. Competition for employees in our industry is intense. We may be unable to retain key employees or to attract, assimilate, or retain other
highly qualified employees in the future. We currently have employment agreements with our key executive officers, engineers and other key employees. These contracts are for five (5) year terms and include non-competition clauses.
If We Are Unable to Respond To the Rapid Technological Change in Our Industry, Our Products Could Become Obsolete and We May Be Unable to Compete, Resulting In the Termination of Our Operations.
The communications technology industry is characterized by rapid and significant technological change. Many communication applications have a short life cycle. For example, our former payment system technologies product lines became obsolete and
reached their end-of-life. Furthermore, due to changes in governmental policy, the cellular phones that our products were designed to work with have become obsolete. Going forward, our main products will be in the areas of telecommunications
equipment, including VoIP hardware, HTT’s USB Dongle designed for use with Skype, HTT’s SkyDECT, HTT’s EZDECT advanced multi-line cordless telephone systems, etc. We also plan to distribute other name-brand telecommunications
equipment in Taiwan, China and other regions throughout Asia. Our future success will depend in large part on our ability to continue to respond to such changes. If we are unable to respond to such changes and/or new or improved competing technology
is developed, our technology may be rendered non-competitive. In the event that we are unable to respond to these changes, our ability to raise capital to carry out our business plan may be severely restricted. In addition, our profitability may
decrease as any existing inventory may need to be sold at a discount. In this event, our cash flow and liquidity would also be decreased.
Government Regulation Could Adversely Affect Our Ability to Sell Our Products.
Laws and regulations directly applicable to communications, commerce and advertising are becoming more prevalent. In addition, the growth and development of the communications industry may prompt calls for more stringent consumer protection laws,
both in Canada and abroad, that may impose additional burdens on companies. Recently, the United States government mandated wireless number portability for all new cell phones allowing consumers to keep their existing phone numbers when changing
carriers. The implementation of wireless number portability rendered several then popular cellular phone models obsolete. In the event that a phone model that our unit attaches to is rendered obsolete by regulations such as wireless number
portability, our sales and inventory values would be adversely affected. In addition, to the extent that regulatory bodies impose restrictions on VoIP, our ability to compete with major telecommunication companies would be effected. The result would
be decreased profitability, which may adversely affect our share price.
Government regulations could also potentially slow down our expansion plans. We may be required to obtain approval of our products from several regulatory agencies. Regulatory approval processes can be onerous and slow, and could adversely affect
our ability to meet our financial projections. Further, compliance with different national standards may require additional capital investments and testing. If we are unable to obtain such financing or to obtain any necessary approvals, our business
could be adversely impacted.
3
We Will Need Additional Funds In Order to Expand our product Design, Production and Distribution Capacities, and There Is No Assurance That Such Funds Will Be Available As, If and When Needed, Which May Adversely Affect Our
Operations.
We generated positive cash flow from operations of $1,007,964 for the fiscal year ended December 31, 2009, and negative cash flow from operations of $890,840 for the same period in 2008. Although our operating activities generated net
proceeds in fiscal 2009, we are dependent on the proceeds of equity and non-equity financing to finance the expansion of 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 (12) months, we will need a minimum of $1,000,000 in order to
execute the planned expansion of our distribution operations into China and Hong Kong. Similarly, any future research and development activities will be subject to our ability to raise additional financing.
Failure to obtain such additional funds on terms and conditions that we deem acceptable may materially and adversely affect our ability to effectively market and distribute our products, resulting in decreased revenues which may also result in a
decreased share price.
The Market Price of Our Common Shares Has Been and Will In All Likelihood Continue To Be Volatile, Which May Adversely Affect the Value of Your Investment.
The market price of our common shares has fluctuated over a wide range and it is likely that the price of our common stock will continue to fluctuate in the future. Announcements regarding acquisitions, the status of corporate collaborations,
regulatory approvals or other developments by us or our competitors could have a significant impact on the market price of our common shares.
Our shares currently trade on the Over-the-Counter Bulletin Board (“OTCC.BB”) with limited activity. If this market is not sustained or we are unable to satisfy any future trading criteria that may be imposed by the Financial Industry
Regulation Authority (“FINRA”) on our market makers or by the Securities and Exchange Commission (“SEC”) on us, there may not be any liquidity for our shares. What’s more, we have not generated any profit from the sale
of our products to date. These factors could have a negative impact on the liquidity of any investment made in our stock.
The Value and Transferability of Our Shares May Be Adversely Impacted By the Penny Stock Rules.
Holders of our common stock in the United States may experience substantial difficulty in selling their securities as a result of the “penny stock rules.” Our common stock is subject to the penny stock rules propagated by the Securities
SEC, which impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors. Accredited investors generally include institutions with assets in excess of
$5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. For transactions covered by the rule, the broker-dealer must make a special suitability
determination for the purchaser and transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities and also may affect the ability of purchasers of our stock to sell their shares in the
secondary market. It may also cause fewer broker-dealers to make a market in our stock.
The Large Number of Shares Eligible for Future Sale by Existing Shareholders May Adversely Affect the Market Price for Our Common Shares.
Future sales of substantial amounts of our common shares in the public market, or the perception that such sales could occur, could adversely affect the market price of our common shares. At December 31, 2009, we had 102,645,120 common shares
outstanding. On that date, we had no common shares reserved for issuance under our stock option plan; and no common shares reserved for issuance under the warrants issued pursuant to various private placements.
No prediction can be made as to the effect, if any, that sales of shares of our common stock or the availability of such shares for sale will have on the market prices of our common stock.
We Have Limited Sales of Products to Date and No Assurance Can Be Given That Our Products Will Be Widely Accepted In the Marketplace, Which May Adversely Affect Your Investment
.
Our future sales, and therefore, our cash flow, income, and ultimate success, are highly dependent on success in marketing our products and consumer acceptance of those products. If our products are not widely accepted or we are
unable to market our products effectively, we may face reduced share prices, decreased profitability, and decreased cash flow.
4
There Is A Limited Public Market for Our Common Shares At This Time In the United States Which May Affect Your Ability to Sell Our Stock.
Our shares currently trade on the OTCC.BB with limited trading. If this market is not sustained or we are unable to satisfy any future trading criteria that may be imposed on our market makers by the Financial Industry Regulations Authority
(“FINRA”) or by the SEC on us, there may not be any liquidity for our shares. We have generated only limited revenue from the sale of our products to date. These factors could have a negative impact on the liquidity of any investment
made in our stock.
You Should Not Expect to Receive Dividends.
We have never paid any cash dividends on shares of our capital stock, and we do not anticipate that we will pay any dividends in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion of our
business. Any future determination to pay cash dividends will be at the discretion of our board of directors, and will be dependent upon our consolidated financial condition, results of operations, capital requirements, and such other factors that
our board of directors may deem relevant at that time.
ITEM 4. INFORMATION ON THE COMPANY
History and Development of the Company
TransAKT Ltd. (“we”, “us”, “our”, or similar terms) 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.
The legislation under which we operate is the Alberta Company Act and our registered office is located at Suite 260, 1414 – 8
th
Street S.W., Calgary, Alberta, T2R 1J6 (403) 290-1744.
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 distribution of telecommunications equipment, including VoIP compatible telephone systems and multi-line cordless telephone systems. We currently rely exclusively on third parties for
the manufacture or supply of products that we design and distribute under our own HTT brand. We are also engaged in the distribution of name brand telecommunications equipment supplied by third party producers.
Over the past three (3) years we have made no major capital expenditures and we currently have no planned capital expenditures. In 2004, we purchased the assets of IP Mental Inc. in consideration for shares of our common stock that were fair valued
at USD$2,944,000. We also advanced additional consideration of USD$500,000 to IP Mental Inc. by way of a promissory note payable to us. Other capitalized costs in the transaction were $363,618, which included a finder’s fee in
stock of $294,400 and miscellaneous acquisition costs. On May 19, 2006, IP Mental Inc. settled its debt with us in the amount of $505,150 in exchange for the return of 9,300,000 of our common shares. Our outstanding shares were reduced
correspondingly. On November 15, 2006, we acquired 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.
5
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.
Business Overview
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 $249,643 and $420,776 during the years ended December 31, 2009 and 2008, respectively, and incurred an accumulated deficit of $2,038,892 and $1,789,249 as of December 31, 2009 and December 31, 2008,
respectively. In addition, we expect to incur an operating loss in 2010.
We have operated principally as a research and development company since our inception. Initial seed capital has been directed toward areas of product research and development, patent filings and administration. We have now completed development of
our initial products and have entered into the sales and distribution phase. Our current business is the design, development, production and distribution of mobile wireless equipment, and other telecommunications solutions for business and
individual consumers, including VoIP solutions in Taiwan. In 2010, our business will include 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.
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 multi-line cordless phone systems.
The products of HTT, our subsidiary, are currently distributed in Taiwan and we plan to continue to expand distribution of these products, first toChina, beginning in 2011, and later to other regions of Asia and North America. We have had limited revenues in the last four (4) fiscal years as we only
began marketing our VoIP products in October 2004. The expansion of our
distribution network will depend on our ability to raise required financing
through private placements.
6
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 April 1, 2010 we entered into an agreement with Panasonic
whereby we will endeavor to sell up to $320,000,000 New Taiwanese Dollars (TWD)
(approximately USD$10,939,463.65) of Panasonic products. If we are successful in
meeting the TWD $320,000,000 sales target, we will be entitled to a rebate of
0.4% of the value of goods sold. If we successfully sell in excess of
TWD$380,000,000 (USD$12,990,569.52), we will receive a rebate of 0.5% of the
value of goods sold. The sales target must be achieved by March 31, 2011.
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
|
HTT
|
30%
|
Panasonic
|
32%
|
Siemens
|
28%
|
Lenovo
|
8%
|
Other
|
2%
|
Seasonality
Our products can be used all year round and are not affected by
seasonal trends.
7
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.
Patents or Licenses
Patent rights, copyrights, trademarks, trade secrets and
similar intellectual property rights are important to our success. We rely on
patent, trademark and copyright law, trade secret protection and confidentiality
or license agreements with our employees, customers, partners and others to
protect both their and our proprietary rights.
Our patent application for our VoIP technology filed in United
States was cancelled and we are no longer pursuing any patents for this
technology. In addition, all our intellectual properties relating to the WPOS
technologies have become obsolete and were written off on December 20, 2006.
Competitive Position
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.
8
Our main focus is on telecommunications equipment, including
VoIP hardware and multi-line cordless telephone systems. We also plan to
distribute other name-brand telecommunications equipment in Taiwan, China and
other regions throughout Asia. These areas are marked by strong competition and
rapid change. The following summarizes our current competitors.
Vtech
Vtech
was founded in Hong Kong in October 1976 by two
(2) engineers.
Vtech
began its operations with 2,000 sq. ft. of office
space and a staff of forty (40) employees. Sales in
Vtech
s first year
were under US$1 million. Today,
Vtech
has worldwide operations and
approximately 20,000 employees. In fiscal year 2010, Vetch recorded sales of
over US$1.5 billion in fiscal 2010.
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,
Vtech
has 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 2010.
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.
9
In 2005, net revenues reached USD$9,167,708 and USD$8,385,075
was attained in 2006.
BBK Communication Equipment Ltd.
Founded in 1995 as one of three (3) subsidiaries (communication
equipment, A/V electronics, and educational electronics), BBK Communication
Equipment Ltd. (BBK) specializes in the research, development, production and
distribution of DECT phones, 2.4G digital cordless telephones, GSM WLL/FWP
phones, basic telephones, caller ID phones, and 46-49MHz cordless telephones.
BBK has business partners in Russia and Vietnam, and is expanding worldwide. BBK
currently sells only to the Chinese market and has annual sales of over $100
million.
Government Regulations
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.
Organizational Structure
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).
Property, Plants and Equipment
We have no material tangible fixed assets as we subcontract all
manufacturing to third parties.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
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 arrangement
with Senao Telecom, a subsidiary of Chung-Hua Telecom, whereby Senao Telecom
began purchasing our HTT brand cordless telephones on an as-need basis for sale
in Senao Telecoms retail outlets. 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. Based on current markets conditions and on our discussions with Senao, we anticipate that we will generate approximately $200,000 in annual revenues as a result of this arrangement. However, because we have not entered into a definitive agreement with Senao, no future revenues are guaranteed.
10
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 register TransAKT (Guangzhou) Ltd. and TransAKT (Hong Kong) Ltd., both wholly-owned
subsidiaries of TransAKT Ltd. With the registration of these subsidiaries, TransAKT has been approved by the Chinese government to do business in China and Hong Kong. The approval in question was granted by the China’s Investment Commission
(MOEA) which is responsible for the regulation of foreign enterprise under the Statute for Investment by Foreign Nationals. Subsequent government approvals will be required in respect of any products that we aim to distribute. 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 2011 through the expansion of our operations into China.
1. Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008
Changes in Net Sales or Revenues
Sales for the year ended December 31, 2009 increased by $1,077,604 to $10,623,736 compared to $9,546,132 for the same period in 2008. The increased sales volume in telecommunications equipment, including specialized VoIP compatible phone
systems and multi-line cordless telephone systems, was primarily due to the general economic recovery in 2009 from the economic downturn experienced in 2008. We expect our sales to improve in 2010.
Cost of Sales; Gross Profit
Cost of sales for the year ended December 31, 2009 totaled $9,780,380 or approximately 92% of net sales compared to $8,489,638 or approximately 88.9% of net sales for the year ended December 31, 2008, representing an increase crease of
$1,290,742 or approximately 15%. The increase was due to increased purchase costs from major vendors for the year ended December 31, 2009. Gross profit as a percentage of net sales was 8% in 2009, compared to 11.1% in 2008. The lower gross
profit in 2009 was primarily due to the substantial increase in costs.
Operating Expenses
Operating expenses for the year ended December 31, 2009 totaled $1,029,425 or approximately 9.6% of net sales compared to $1,262,977 or approximately 13% of net sales for the year ended December 31, 2008 representing a decrease of
$233,552 or approximately 18.4% . The decrease in operating expenses was due to decreases in commission, payroll, rent, and professional fees, which were partially offset by increases in bad debt and legal expenses.
Income (Loss) from Operations
Loss from operations for the year ended December 31, 2009 totaled $186,069 or approximately 1.7% of net sales compared to $206,483 or approximately 2.2% of sales for the year ended December 31, 2008, representing a reduction in loss of
$20,414 or approximately 10%. The reduction in loss from operations was primarily due to reduced operating expenses and increased sales recognized in 2009.
Interest Expense
Interest expense for the year ended December 31, 2009 totaled $96,474 compared to $122,573 for the year ended December 31, 2008, representing a decrease of $26,099 or approximately 21%. The decrease was due to higher accounts receivable
turnover rate, decreased capital requirements resulting in decreased borrowings.
11
Net Income (Loss)
Loss for the year ended December 31, 2009 totaled 249,643 compared to a loss of $420,776 for the year ended December 31, 2008, representing a decreased in losses of $171,133 or approximately 41%. The decrease in net loss was primarily due to
decreased operating expenses and currency exchange gains recognized in 2009.
2. Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007
Net Sales
Revenues for the year ended December 31, 2008 decreased by $141,546, or approximately 1.5%, to $9,546,132 compared to $9,687,678 for the same period in 2007. The changes in sales volume and amount were not significant.
Cost of Sales; Gross Profit
Cost of sales for the year ended December 31, 2008 totaled $8,489,638 or approximately 88.9% of net sales compared to $9,440,398 or approximately 97.4% for the year ended December 31, 2007, a decrease of $950,760 or approximately 10%.
The decrease was due to decreased purchase costs including purchase allowance from major vendors for the year ended December 31, 2008. Gross profit as a percentage of net sales was 11.1% in 2008, compared to 2.6% in 2007. The higher gross profit in
2008 was primarily due to the substantial decrease in purchase costs.
Operating Expenses
Operating expenses for the year ended December 31, 2008 totaled $1,262,977 or approximately 13% of net sales compared to $1,710,456 or approximately 18% for the year ended December 31, 2007, a decrease of $447,479 or approximately 26%.
The decrease in operating expenses was due to decreases in travel expense, commission, and professional fee, which is partially offset by increases in payroll and pension expenses.
Income (Loss) from Operations
Loss from operations for the year ended December 31, 2008 totaled $(206,483) or approximately (2.2)% of sales compared to $(1,463,176) or approximately (15.1)% of sales for the year ended December 31, 2007, a decrease of $1,256,693. The
decrease in loss from operations was primarily due to decreased purchase costs and operating expenses recognized in 2008.
Interest Expense
Interest expense for the year ended December 31, 2008 totaled $122,573 compared to $113,138 for the year ended December 31, 2007, an increase of $9,435 or approximately 8.3% . The increase was due to lower accounts receivable turnover
rate, increased capital requirements resulting in increased borrowings.
Net Income (Loss)
Loss for the year ended December 31, 2008 totaled $(420,776) compared to $(921,158) for the year ended December 31, 2007, an increase of $500,382. The decrease in net loss was primarily due to decreases in purchase costs and operating
expenses recognized in 2008 as described above.
3. Impact of Inflation
Inflation is not considered to be a material factor affecting our continuing operations, as the inflation rate of the country in which we are presenting our financial statements remains low.
12
4. Impact of Foreign Currency Fluctuations
Our revenue and cost of product sales are primarily earned and spent in Taiwan Dollars (“TWD”) and Canadian Dollars (“CAD”). Operating expenses are likewise primarily denominated in TWD and CAD. Consequently, significant
movements in exchange rates may have a significant impact on our financial results. In addition, sales and cost of products for our Taiwan office are based in United States dollars (“USD”) while operational expenses are in TWD and CAD,
and therefore, any significant movements in exchange rates between the USD and the TWD or CAD may also have a significant impact on our financial results.
5. Governmental Economic, Fiscal, Monetary of Political Policies
There are no known governmental economic, fiscal, monetary or political policies or factors that have materially affected, or could materially affect, directly or indirectly, our operations or investments by host country shareholders.
Liquidity and Capital Resources
1. Sources of Liquidity
Our primary source of liquidity as of December 31, 2009 is our cash on hand and accounts receivable. Net cash provided by operations for the year ended December 31, 2009 was $1,007,964. For the year ended December 31, 2008, operations provided
no net cash and used net cash of $890,840. The increase in net cash provided by operations was a result of the decrease in accounts receivable and inventory, which is partially offset by the increase in prepaid expense and deposits, and a
decrease in accounts payable. Our cash and cash equivalents were $ 874,418 and $205,658 as of December 31, 2009 and 2008, respectively. Our current assets were $4,904,858 on December 31, 2009. Our current assets totaled $6,122,329 on
December 31, 2008. The decrease in current assets during 2009 was primarily due to a decrease in inventory. Working capital was $1,164,286 as of December 31, 2009 compared to $1,493,102 as of December 31, 2008.
In management’s 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.
Our Cash Flows
Net sales
Net sales for the year ended December 31, 2009 were $10,623,736 compared to $9,546,132 for the year ended December 31, 2008 representing an increase of $1,077,604 or approximately 11%. The increase in sales was due to the overall
economic recovery in 2009 from the downturn experienced in fiscal 2008. We expect to achieve modest growth in sales during fiscal 2010.
Cost of Sales
Cost of sales for the year ended December 31, 2009 totaled $9,780,380 or approximately 92% of net sales compared to $8,489,638 or approximately 88.9% of net sales for the year ended December 31, 2008, representing an increase crease of
$1,290,742 or approximately 15%. The increase was due to increased purchase costs from major vendors for the year ended December 31, 2009.
Operating Expenses
Operating expenses for the year ended December 31, 2009 totaled $1,029,425 or approximately 9.6% of net sales compared to $1,262,977 or approximately 13% of net sales for the year ended December 31, 2008 representing a decrease of $233,552 or approximately 18.4% . The decrease in
operating expenses was due to decreases in commission, payroll, rent, and
professional fees, which were partially offset by increases in bad debt and
legal expenses.
13
Income (Loss) from Operations
Loss from operations for the year ended December 31, 2009
totaled $186,069 or approximately 1.7% of net sales compared to $206,483 or
approximately 2.2% of sales for the year ended December 31, 2008, representing a
reduction in loss of $20,414 or approximately 10%. The reduction in loss from
operations was primarily due to reduced operating expenses and increased sales
recognized in 2009.
Interest Expense
Interest expense for the year ended December 31, 2009 totaled
$96,474 compared to $122,573 for the year ended December 31, 2008, representing
a decrease of $26,099 or approximately 21%. The decrease was due to decreased
capital requirements resulting in decreased borrowing and increased repayment of
loans.
Net Income (Loss)
Loss for the year ended December 31, 2009 totaled 249,643
compared to a loss of $420,776 for the year ended December 31, 2008,
representing a decreased in losses of $171,133 or approximately 41%. The
decrease in net loss was primarily due to decreased operating expenses and
currency exchange gains recognized in 2009.
Lease Obligation
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)
|
|
|
$
|
21,483
|
|
Total
|
$
|
21,483
|
|
We lease various office facilities under operating leases that
terminate on various dates in 2010. Rental expense for these leases consisted of
approximately $39,596 and $83,677 for the years ended December 31, 2009 and
2008, respectively. We have future minimum lease obligations of $21,483 for the
twelve-month period ended December 31, 2010.
Bank Loan Payable
The Company has loan payable amounting to $2,083,361 as of
December 31, 2009 from several commercial banks in Taiwan. The loans are
partially secured by certificate of deposits for $498,540 and accounts
receivable. The loans payable at December 31, 2009 comprised of the
following:
|
|
|
|
Interest per
|
|
|
Nature
|
|
Due on
|
|
Annum
|
|
Amount
|
Secured note payable from a bank
|
|
1/12/2010
|
|
5.25%
|
|
27,000
|
Secured note payable from a bank
|
|
1/12/2010
|
|
5.25%
|
|
39,300
|
Secured note payable from a bank
|
|
2/3/2010
|
|
5.25%
|
|
40,300
|
Secured note payable from a bank
|
|
2/10/2010
|
|
5.25%
|
|
55,460
|
Secured note payable from a bank
|
|
2/23/2010
|
|
5.25%
|
|
117,700
|
Secured note payable from a bank
|
|
2/4/2010
|
|
5.25%
|
|
23,250
|
14
Secured note payable from a bank
|
|
4/8/2010
|
|
5.25%
|
|
37,800
|
Secured note payable from a bank
|
|
4/20/2010
|
|
5.25%
|
|
12,500
|
Secured note payable from a bank
|
|
4/20/2010
|
|
5.25%
|
|
37,500
|
Secured note payable from a bank
|
|
4/25/2010
|
|
5.25%
|
|
16,500
|
Secured note payable from a bank
|
|
4/25/2010
|
|
5.25%
|
|
31,286
|
Secured note payable from a bank
|
|
4/25/2010
|
|
5.25%
|
|
25,920
|
Secured note payable from a bank
|
|
5/5/2010
|
|
5.25%
|
|
38,700
|
Secured note payable from a bank
|
|
5/13/2010
|
|
5.25%
|
|
27,000
|
Secured note payable from a bank
|
|
5/8/2010
|
|
5.25%
|
|
39,000
|
Secured note payable from a bank
|
|
5/17/2010
|
|
5.25%
|
|
16,170
|
Secured note payable from a bank
|
|
5/25/2010
|
|
5.25%
|
|
55,460
|
Secured note payable from a bank
|
|
5/26/2010
|
|
5.10%
|
|
56,875
|
Secured note payable from a bank
|
|
12/28/2010
|
|
2.88%
|
|
151,500
|
Secured note payable from a bank
|
|
3/1/2010
|
|
5.35%
|
|
23,007
|
Secured note payable from a bank
|
|
3/6/2010
|
|
5.35%
|
|
27,914
|
Secured note payable from a bank
|
|
1/14/2010
|
|
5.00%
|
|
52,000
|
Secured note payable from a bank
|
|
1/22/2010
|
|
5.00%
|
|
25,750
|
Secured note payable from a bank
|
|
5/7/2010
|
|
5.00%
|
|
82,800
|
Secured note payable from a bank
|
|
3/8/2010
|
|
1.52%
|
|
692,717
|
Secured note payable from a bank
|
|
2/10/2010
|
|
2.40%
|
|
17,800
|
Secured note payable from a bank
|
|
4/26/2010
|
|
2.58%
|
|
45,797
|
Secured note payable from a bank
|
|
3/22/2010
|
|
2.42%
|
|
36,600
|
Secured note payable from a bank
|
|
3/30/2010
|
|
2.42%
|
|
27,000
|
Secured note payable from a bank
|
|
3/29/2010
|
|
2.42%
|
|
32,250
|
Secured note payable from a bank
|
|
3/30/2010
|
|
2.42%
|
|
36,000
|
Secured note payable from a bank
|
|
4/12/2010
|
|
2.43%
|
|
21,000
|
Secured note payable from a bank
|
|
4/12/2010
|
|
2.43%
|
|
31,800
|
Secured note payable from a bank
|
|
4/28/2010
|
|
2.43%
|
|
40,500
|
Secured note payable from a bank
|
|
5/4/2010
|
|
2.43%
|
|
31,125
|
Secured note payable from a bank
|
|
5/10/2010
|
|
2.43%
|
|
10,080
|
|
|
Total
|
|
|
$
|
2,083,361
|
|
|
Current portion
|
$
|
2,083,361
|
|
|
Long-term portion
|
$
|
-
|
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.
2. Financial Instruments
Net cash used in financing activities totaled $495,805 compared
with net cash provided by financing activities of $886,531 for the year ended
December 31, 2008. The decrease was mainly due to the net decrease in cash
proceeds received from bank loans and operating loans borrowed from related
parties. In 2007, we closed a private placement of 8,650,000 shares for total
proceeds of $1,037,653. No private placement was closed in 2008. On May 29,
2009, we received $30,000 in consideration of the issuance of a convertible
debenture, due May 29, 2011, in the form attached to this report as exhibit 4.4.
The debenture will accrue interest at 12% per annum due upon maturity. The
debenture is convertible at any time after the first anniversary after the
closing date, at the holders option, into shares of our common stock at a price
of $0.02 per share.
Net cash provided by investing activities totaled $173,333 for
the year ended December 31, 2009 compared to the $20,094 used in investing
activities for the year ended December 31, 2008. The increase in cash provided
by investing activities resulted primarily from an increase in the proceeds from
the sale of investments in fiscal 2009.
15
3. Material Commitments for Capital Expenditures
Subject to our ability to obtain additional financing, we
anticipate expanding our current operations in Taiwan into mainland China over
the next twelve (12) months. We estimate that expenditures related to this
project will be approximately USD$1,000,000. We intend to finance the project
through the private placement of our common shares.
Research and Development, Patents and Licenses,
etc.
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 2008 or 2009. Any future research and development
undertakings will be subject to the availability of sufficient capital.
Trend Information
VoIP has emerged as the next generation global communications
platform and has greatly impacted the telecommunications industry. Traditional
telecommunications companies are seeing their market share start to erode away
as barriers to entry in the industry are dropping due to VoIP. Ian Cox of
Juniper Research says VoIP will bring new revenue-generating opportunities to
the telephony market by combining voice services with other IP applications.
The use of VoIP for communications drastically reduces the cost of long
distance.
Many of the networks and much of the hardware available today
have problems with Network Address Translation (NAT). Our diverse VoIP
offerings include a proprietary network that operates in NAT environments as
well as behind firewalls, and also includes hardware that works with or without
a computer. We currently have four (4) different hardware offerings and are
continuing to expand on them.
As more and more companies enter the VoIP market, margins on
hardware are shrinking in exchange for capturing clients. As the larger
incumbent telecommunications companies enter the market and offer significant
discounts to retain their existing client base, we will be forced to offer the
same rates in order to stay competitive.
In addition to risks described elsewhere in this report, we are
subject to each of, and the cumulative effect of all the following
uncertainties. We have risk management practices in place designed to offset
these uncertainties to the greatest extent possible; however there are no
guarantees that these practices will be effective. These uncertainties include,
but are not necessarily limited to:
-
Competition in the industry;
-
Technological change, new products and standards and dependence on
proprietary technologies;
-
Third party claims for patent infringement;
-
Inability to protect our intellectual property against unauthorized or
infringing uses;
-
Inability to effectively manage future growth and expansion;
-
Dependence on key personnel, products and customers;
-
Variances in the industry growth rate;
-
Dependence on continuing demand for our products;
-
Finite financial resources and the potential need for future financing;
-
Dependence on third party manufacturers, suppliers and licensees;
-
Potential fluctuations in quarterly results;
-
Lengthy and variable sales cycles;
-
Acquisitions;
-
Reliance on international sales;
-
Product liability issues;
-
Changes in the regulatory environment;
-
Regulatory approval; and
-
Changes in currency exchange rates.
16
Off-Balance Sheet Arrangements
We do not currently have any off-balance sheet
arrangements.
Tabular Disclosure of Contractual Obligations
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)
|
|
2010
|
$
|
21,483
|
|
Total
|
$
|
21,483
|
|
We lease various office facilities under operating leases that
terminate on various dates in 2010. Rental expense for these leases consisted of
approximately $39,596 and $83,677 for the years ended December 31, 2009 and
2008, respectively. We have future minimum lease obligations of $21,483 for the
twelve-month period ended December 31, 2010.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
Name
|
Age
|
Position
|
James Wu
|
57
|
Chairman, Chief Executive Officer, President
and Director
|
Taifen Day
|
51
|
Chief Financial Officer
|
Cheng Chun-Chih
|
64
|
Director (Chairman of Taiwan Halee
International Co. Ltd.)
|
Dr. Shiau Tzong- Huei
|
55
|
Director (Chief Technical Officer of Taiwan
Halee International Co. Ltd. and Chairman of TransAKT Taiwan Corp.)
|
Tseng Ming-Huang
|
41
|
Director
|
J.T. Wang
|
44
|
Vice President of Asia Operations
|
None of the above directors or officers is related and no
arrangements or understandings with major shareholders, customers, suppliers, or
other persons resulted in their selections as a director or officer.
The following summaries include the name, business experience,
functions and areas of experience of each of our directors and executive
officers.
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.
17
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 WisconsinMadison, 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.
Compensation
The following table sets forth the amount of compensation paid,
and benefits in kind granted, to our directors and members of our
administrative, supervisory or management bodies and our subsidiaries for
services in all capacities to us and our subsidiaries by any such person(s),
including, but not limited to, total amounts set aside or accrued by us or our
subsidiaries to provide pension, retirement or similar benefits, within the last
full financial year.
Name and
Principal
Position
|
Annual Compensation
|
Long-Term Compensation
|
Salary
($)
|
Bonus
($)
|
Other Annual
Compensation
($)
|
Stock Awards
|
Securities
Under
Options/ SARs Granted
(#)
|
Restricted
Shares or
Restricted Share Units
($)
|
James Wu
President & Chief Executive Officer
|
90,000
|
|
|
|
|
J.T. Wang
Vice President of Asia Operations
|
40,000
|
|
|
|
|
Taifen Day
Chief Financial Officer
|
|
|
|
|
|
Lionel Ni
Director
|
|
|
|
|
|
Mark Fletcher
Director, Corporate Secretary*
|
|
|
|
|
|
Tseng Ming-Huang
Director
|
|
|
|
|
|
Leroy Wolbaum
Director
|
|
|
|
|
|
* Mr. Fletcher resigned as our Corporate Secretary and as a
Director on our Board of Directors on May 1, 2009.
18
Board Practices
The following table lists information for our last completed
financial year (2009) with respect to our directors and executive officers.
Name
|
Position
|
Director
(1)
or
Executive
Officer
Since
|
James Wu
|
Chairman, President and CEO
|
2004/10/25
|
Cheng Chun-Chih
|
Director
|
2006/12/14
|
Dr. Shiau Tzong-Huei
|
Director
|
2006/12/14
|
Mark Fletcher
(2)
|
Director and Corporate Secretary
|
2006/05/26
(2)
|
Taifen Day
|
Chief Financial Officer
|
2006/07/27
|
Tseng Ming-Huang
|
Director
|
2006/05/25
|
(1)
|
Each director is elected at our Annual General Meeting
and holds office until the next Annual General Meeting or until his or her
successor is duly elected or appointed, unless the office is earlier
vacated in accordance with our Articles or the
Company Act
(Alberta) or he or she becomes disqualified as a director.
|
|
|
(2)
|
Mr. Fletcher resigned as our Corporate Secretary and as a
Director on our Board of Directors on May 1, 2009.
|
None of our directors or executive officers has a service
contract with us.
Audit Committee
We have no formal audit committee. Our Board of Directors
(Board) oversees the retention, performance and compensation of our
independent auditors, and the establishment and oversight of our systems of
internal accounting and auditing control.
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 both our Canadian and United States 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.
19
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.
Share Ownership
The following table sets forth information, as of June 22,
2010, with respect to the beneficial ownership of our common stock, by each of
our executive officers and directors, and by our executive officers and
directors as a group. Information is also provided regarding beneficial
ownership of common stock if all outstanding options, warrants, rights and
conversion privileges (to which the applicable executive officers and directors
have the right to exercise in the next sixty (60) days) are exercised and
additional shares of common stock are issued.
Beneficial Owner
|
Common Shares
|
Options
|
Total
|
Percent of
|
|
|
|
|
Class
(2)
|
James Wu
(1)
|
5,000,000
|
-
|
5,000,000
|
4.9%
|
Cheng Chun-Chih
|
5,000,000
|
-
|
5,000,000
|
4.9%
|
Tseng Ming-Huang
|
50,000
|
-
|
50,000
|
-
|
Dr. Shiau Tzong-Huei
|
1,000,000
|
-
|
1,000,000
|
1.0%
|
Mark Fletcher
|
-
|
-
|
-
|
-
|
Taifen Day
|
-
|
-
|
-
|
-
|
All Officers and Directors as a group
|
11,050,000
|
-
|
11,050,000
|
10.8%
|
(1)
|
James Wu is our current President and CEO.
|
|
|
(2)
|
Based on 102,645,120 common shares outstanding as of June
22, 2010.
|
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS
Major Shareholders
The following table sets forth information, as of June 22,
2010, with respect to the beneficial ownership of our common shares by each
person known to be the beneficial owner of more than five percent (5%) of the
outstanding common shares, by each of our executive officers and directors,
including the names of our major shareholders, the number of their shares and
the percentage of outstanding shares of each class owned by each of them.
TITLE OF
|
BENEFICIAL
|
AMOUNT AND NATURE
|
PERCENT
|
CLASS
|
OWNER
|
OF BENEFICIAL OWNER
|
OF
|
|
|
|
CLASS
(1)
|
|
|
|
|
Common
|
James Wu
|
5,000,000
|
4.9%
|
Common
|
Cheng Chun Chih
|
5,000,000
|
4.9%
|
Common
|
Hsieh Chi-Hsien
|
7,650,000
|
7.5%
|
Common
|
Lin Yu-Hsiung
|
10,000,000
|
9.7%
|
Common
|
Pan Yu-Jung
|
6,000,000
|
5.9%
|
(1)
Based on 102,645,120 common shares outstanding
as of June 22, 2010.
20
During the past three (3) years, the only significant changes
in the percentage ownership of shares held by our major shareholders that we are
aware of were as follows:
Mr. Gordon Miller Pursuant to a private placement that closed
on June 24, 2004, Mr. Miller purchased 1,000,000 of our shares at USD$0.30 per
share.
In October 2004, we purchased the business and certain assets
of IP Mental Inc. in exchange for 12,800,000 of our common shares. On May 19,
2006, IP Mental Inc. settled its debt of USD$505,150 with us. In settlement, IP
Mental Inc. surrendered 12,800,000 shares it received as consideration for the
sale of its assets in exchange for 3,500,000 shares.
Our major shareholders do not have any different voting rights
than those held by any other shareholder.
We are not directly or indirectly owned or controlled by any
other corporation(s), by a foreign government or by any other natural or legal
person(s) severally or jointly, except as disclosed above. We are not aware of
any arrangements, the operation of which may at a subsequent date result in a
change in our control.
Related Party Transactions
During the last three (3) fiscal; years, we entered into the
following related party transactions.
As of December 31, 2009 and 2008, there were $435,225 and
$216,632 advances outstanding from related parties, respectively.
The advances are repayable to our officers and are interest
free, unsecured, current, and without fixed terms of repayment.
We also had loans of $60,400 in the aggregate payable to five
shareholders as of December 31, 2009 and 2008. The unsecured loans bear interest
at the rate of 12% per annum, and due on May and June 2010. Each of these loans
payable was made under promissory note in the form attached as exhibit 4.3 to
this report.
As at December 31, 2007, we had $178,289 due from an officer of
TransAKT Ltd. This amount was unsecured, interest free and due on demand.
Subsequently on March 2008, the officer paid $340,000 to clear his debt and
loaned the balance of $161,171 to us.
Interests of Experts and Counsel
None of our named experts or counsellors was or is employed on
a contingent basis, owns an amount of our shares or our subsidiaries which is
material to that person, or has a material, direct or indirect economic interest
us.
ITEM 8. FINANCIAL INFORMATION
The required financial statements are provided at the end of
this Annual Report starting on Page 26.
ITEM 9. THE OFFER AND LISTING
Offer and Listing Details
(a)
|
Set forth below are the annual high and low market prices
for our stock for the last five (5) most recent full financial years
ending December 31.
|
21
|
2005*
|
2006
|
2007
|
2008
|
2009
|
High
|
0.23
|
0.24
|
0.25
|
0.12
|
0.055
|
Low
|
0.031
|
0.04
|
0.042
|
0.01
|
0.007
|
* These numbers represent the annual high and low market prices
for our stock as quoted on the Over the Counter Bulletin Board (OTC.BB). Our
stock began quotation on the OTCC.BB on May 20, 2004. Previously, our stock
traded on the TSX Venture Exchange (TSX) which trading began on October 18,
2000. We voluntarily de-listed from the TSX on September 17, 2004.
(b)
|
Set forth below are the high and low market prices for
each full financial quarter for the two most recent full financial years
and any subsequent period.
|
For the Over-the-Counter Bulletin Board
(OTC.BB)
(1)
Year 2007
Quarter
|
March
|
June
|
Sept
|
Dec
|
High
|
0.25
|
0.23
|
0.158
|
0.095
|
Low
|
0.06
|
0.11
|
0.09
|
0.042
|
Year 2008
Quarter
|
March
|
June
|
Sept
|
Dec
|
High
|
0.07
|
0.07
|
0.12
|
.02
|
Low
|
0.04
|
0.02
|
0.01
|
.01
|
Year 2009
Quarter
|
March
|
June
|
Sept
|
Dec
|
High
|
0.02
|
0.055
|
0.03
|
0.028
|
Low
|
0.01
|
0.025
|
0.015
|
0.007
|
Year 2010
Quarter
|
March
|
High
|
0.01
|
Low
|
0.0051
|
(1)
Our stock began trading on the OTCC.BB on May
20, 2004.
(c)
|
Set forth below are the high and low market prices for
each month for the most recent six (6) months on the
OTC.BB.
|
Six Months
|
December
2009
|
January
2010
|
February
2010
|
March
2010
|
April
2010
|
May
2010
|
High
|
0.0198
|
0.01
|
0.007
|
0.0088
|
0.0078
|
0.71
|
Low
|
0.007
|
0.0055
|
0.0065
|
0.005
|
0.0051
|
0.78
|
Plan of Distribution
Not applicable to Form 20-F filed as an Annual Report.
Markets
Currently, our shares trade on the OTCC.BB under the symbol
TAKDF. There is a limited trading market for our shares and the market is not
liquid.
22
Selling Shareholders
Not applicable to Form 20-F filed as an Annual Report.
Dilution
Not applicable to Form 20-F filed as an Annual Report.
Expenses of the Issue
Not applicable to Form 20-F filed as an Annual Report.
ITEM 10. ADDITIONAL INFORMATION
Share Capital
Not applicable to Form 20-F filed as an Annual Report.
Memorandum and Articles of Association
Reference is hereby made to our Articles of Amalgamation (“Articles”) and to our Bylaws, each of which is incorporated herein by reference to, respectively, Exhibits 1.1 and 1.2 to our Registration Statement on Form 20-F, file number
000-50392 as filed on September 16, 2003.
On June 23, 2006, our Board and majority shareholders approved an amendment to our Articles to effect the consolidation of our common shares on a 2-for-1 basis.
All stock issuances have been retroactively updated to reflect the 2-for-1 reverse stock split.
Material Contracts
On April 27, 2007, we entered into a consulting agreement with Mr. Liu Fu Ming for a twelve (12) month period beginning on April 27, 2007. Persuant to this agreement, we issued 2,000,000 shares of common stock to Mr. Liu, as compensation for service
provided. These shares were recorded at the fair market value of $326,778, based on the price of stock on the agreement date. Since the compensation for services is settled through issuance of shares, we recorded $195,488 as an expense for
the period and the balance of $131,290 was recorded as prepaid consulting for the service not performed as part of equity.
Exchange Controls
There are no governmental laws, decrees, regulations or other legislation of Canada that may affect the import or export of capital for use.
Other than the withholding of any taxes due under the terms of specific treaties between countries on dividends paid to our shareholders, there are no restrictions on the remittance of dividends, interests or other payments.
Taxation
The discussions below summarize the material tax considerations relevant to an investment in common shares by individuals and corporations who, for income tax purposes, are resident in the U.S. for purposes of the Convention (as hereinafter defined)
and are not resident in Canada, who hold common shares as a capital asset (a “Holder”), and who do not hold the common shares in carrying on a business through a permanent establishment in Canada or in connection with a fixed base in
Canada (collectively, "Unconnected U.S. Shareholders" or "Holders"). The tax consequences of an investment in common shares by investors who are not Unconnected U.S. Shareholders may differ substantially from the
tax consequences discussed herein. The discussion of U.S. tax considerations is addressed only to Unconnected U.S. Shareholders whose "functional currency" within the meaning of Section 985 of the Internal Revenue Code of 1986, as amended (the
"Code"), is the U.S. dollar, and to U.S. citizens who are not residents in the U.S. for the purpose of the Convention, but who otherwise meet the definition of Unconnected U.S. Shareholders. Furthermore, the discussion of U.S. tax considerations do
not address the tax treatment of Unconnected U.S. Shareholders that own, or are deemed for U.S. federal income tax purposes to own, ten percent (10%) or more of the total combined voting power of all classes of our voting stock. The discussion of
Canadian tax considerations does not address the tax treatment of a trust, company, organization or other arrangement that is a resident of the U.S. and that is generally exempt from U.S. tax.
23
This discussion does not address all of the income tax consequences that may be applicable to any Holder subject to special treatment under the U.S. federal income tax law or to any particular Holder in light of such Holder's particular facts and
circumstances. Some Holders, including tax exempt entities, banks, insurance companies and persons who hold common shares as part of a hedging transaction, may be subject to special or different rules not discussed below. The discussion of U.S. tax
considerations is based on the provisions of the Code.
The discussion of Canadian tax considerations is based upon the provisions of the Income Tax Act (Canada) (the "Tax Act"), the Convention between Canada and the U.S. with Respect to Taxes on Income and Capital, as amended from time to time (the
"Convention"), and our understanding of published administrative practices of Canadian Customs and Revenue Agency and judicial decision, all of which are subject to change. The discussion does not take into account the tax laws of the various
provinces or territories of Canada or the tax laws of the various state and local jurisdictions in the U.S.
U.S. Federal Income Tax Considerations
Unconnected U.S. Shareholders generally will treat the gross amount of the distributions paid by us, including the amount of any Canadian tax withheld, as foreign source dividend income for U.S. federal income tax purposes to the extent of our
current or accumulated earnings and profits, as computed for U.S. federal income tax purposes. Distribution in excess of that amount will reduce an Unconnected U.S. Shareholder's tax basis in the common shares, but not below zero, and the remainder,
if any, will be treated as taxable capital gains. In general, in computing its U.S. federal income tax liability, an Unconnected U.S. Shareholder may elect for each taxable year whether to claim a deduction or, subject to the limitations described
below, a credit for Canadian taxes withheld from dividends paid on their common shares. If the Unconnected U.S. Shareholder elects to claim a credit for such Canadian taxes, the election will be binding for all foreign taxes paid or accrued by the
Shareholder for such taxable year. The Code applies various limitations on the amount of foreign tax credit that may be available to a U.S. taxpayer based upon the segregation of foreign source income into separate categories of income. The amount
of credit which may be claimed with respect to the category of income to which the dividend is allocated, and to which the foreign taxes are attributable generally may not exceed the same portion of the U.S. tax on worldwide taxable income, before
applying the foreign tax credit as the U.S. Holder's foreign source taxable income allocation to such category bears to such U.S. Holder's entire taxable income. The foreign tax credit is disallowed for dividends on stock unless a minimum holding
period is satisfied and additional limitations may restrict the ability of some individuals to claim the foreign tax credit. Accordingly, we urge investors to consult their own tax advisors with respect to the potential consequences to them of the
foreign tax credit limitations.
For U. S. federal income tax purposes, the amount of any distributions made on a common share to an Unconnected U.S. Shareholder in Canadian dollars will equal the U.S. dollar value of the Canadian dollars calculated by reference to the appropriate
exchange rate in effect on the date of receipt of the distribution, regardless of whether the Canadian dollars are actually converted into U.S. dollars upon receipt. Unconnected U.S. Shareholders are urged to consult their own tax advisors regarding
the treatment of foreign currency gain or loss, if any, on any Canadian dollars which are converted into U.S. dollars subsequent to receipt by the shareholder.
The sale of common shares generally will result in a gain or loss to the Holder in an amount equal to the difference between the amount realized and the Holder's adjusted cost basis in the shares. Provided that the Holder is not considered a
"dealer' in the shares sold, gain or loss on the sale of the common shares will generally be capital gain or loss.
24
Capital losses are deductible to the extent of capital gains. Individual taxpayers may deduct excess capital losses of up to US$3,000 a year, US$1,500 in the case of a married individual filing separately, from ordinary income. Non-corporate
taxpayers may carry-forward unused capital losses indefinitely. Unused capital losses of a corporation may be carried back three (3) years and carried forward five (5) years.
Canadian Tax Considerations
Dividends paid or credited, or that we deem to pay or credit, on the common shares to Unconnected U.S. Shareholders will be subject to Canadian withholding tax. Under the Convention, the maximum rate of withholding tax on dividends paid or credited
on the common shares is fifteen percent (15%) if the beneficial owner of such dividends is an Unconnected U.S. Shareholder. However, that rate is reduced to five percent (5%) under the Convention if the beneficial owner of such dividends is an
Unconnected U.S. Shareholder that is a corporation that owns at least ten percent (10%) of our voting stock.
An Unconnected U.S. Shareholder will not be subject to tax in Canada on any capital gain realized upon the disposition or deemed disposition of the common shares, provided that the common shares do not constitute "taxable Canadian property" of the
shareholder within the meaning of the Tax Act.
Canada does not currently impose any estate taxes or succession duties.
Dividends and Paying Agents
Not applicable to Form 20-F filed as an Annual Report.
Statements By Experts
Not applicable to Form 20-F filed as an Annual Report.
Documents on Display
All documents filed in connection with this Annual Report have been filed with the Securities and Exchange Commission (“SEC”) using the Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system. The SEC maintains a
Web site on the Internet at the address http://www.sec.gov that contains reports, proxy information statements and other information regarding registrants that file electronically with the SEC.
Subsidiary Information
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Currency Exchange Rate Sensitivity
The results of our operations are subject to currency translational risk and currency transactional risk. Regarding currency translational risk, the operating results and financial position of our subsidiaries are reported in TWD and then translated
into USD at the applicable exchange rate for preparation of our consolidated financial statements. The fluctuation of the TWD in relation to the USD will, therefore, have an impact upon profitability of our operations and may also affect the value
of our assets and the amount of shareholders’ equity.
In regards to transaction risk, our functional currency is TWD and are activities are predominantly executed in TWD. However, due to the fact that the majority of our financings are completed in USD, we are not subject to significant operational
exposures due to fluctuations in these currencies. Our common shares are listed on the OTC.BB and are bought and sold in USD (see tables in Item 9). We have not
entered into any agreements or purchased any instruments to hedge any possible
currency risks at this time.
25
Interest Rate Sensitivity
We currently have no significant short-term or long-term debt
requiring interest payments. This does not require us to consider entering into
any agreements or purchasing any instruments to hedge against possible interest
rate risks at this time. Our interest earning investments are short-term. Thus,
any reductions in future income or carrying values due to future interest rate
declines are believed to be immaterial.
Commodity Price Sensitivity
Not applicable.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES
Not applicable to Form 20-F filed as an Annual Report. In
respect of Items 12.D.3 and 12.D.4, no fees or charges are payable by any holder
of American depositary receipts in respect of our securities and no payments
have been made to us by any depositary.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
We have elected to report under Item 15T.
ITEM 15T. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure
that information required to be disclosed in our reports filed under Canadian
and U.S. securities regulations is recorded, processed, summarized and reported
within the time periods specified and is accumulated and communicated to our
management, including our Chief Executive Officer and our Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.
An evaluation was carried out under the supervision of, and
with the participation of, our management, including our Chief Executive Officer
and our Chief Financial Officer, of the effectiveness of our disclosure controls
and procedures (as such term is defined in the Exchange Act, as amended, Rules
13a-15(e) and 15d-15(e)) as of December 31, 2009. Based on that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of December 31, 2009.
26
Internal Controls over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (the “Exchange Act”).
Under the supervision and with the participation of our Company's Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of December 31, 2009,
based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that our internal control over financial
reporting was effective as of December 31, 2009.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the period covered by the annual report, being the fiscal year ended December 31, 2009, that has materially affected, or is reasonably likely to materially affect our
internal control over financial reporting.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
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.
ITEM 16B. 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.
ITEM 16C. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
Audit Fees
Our external auditors, KCCW Accountancy Corp., charged total
fees of $45,000 for the year ended December 31, 2009. All of the $45,000 above
was for audit fees and none of the amount was for audit-related fees or income
tax preparation fees. Our external auditors, KCCW Accountancy Corp., charged
total fees of $45,000 for the year ended December 31, 2008. All of the $45,000
above was for audit fees and none of the amount was for audit-related fees or
income tax preparation fees.
27
Audit-Related Fees
None.
Tax Fees
None.
All Other Fees
None.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES
Not Applicable.
ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND
AFFILIATED PURCHASER
Not Applicable.
PART III
ITEM 17. FINANCIAL STATEMENTS
The required financial statements are provided herein starting
on page 26.
ITEM 18. FINANCIAL STATEMENTS
See above.
ITEM 19. EXHIBITS
Exhibit
No.
|
Exhibit
|
1.1*
|
Articles of Amalgamation
|
1.2*
|
Bylaws
|
28
* Incorporated by reference to the Exhibits filed with our Form
20-F filed on September 16, 2003.
29
TRANSAKT LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31,
2009, AND 2008 AND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
i
CONTENTS
ii
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
TransAKT Ltd.
We have audited the accompanying consolidated balance sheets of
TransAKT Ltd. and its subsidiaries (the Company) as of December 31, 2008 and
2009, and the related consolidated statements of operations, shareholders
equity and comprehensive income, and cash flows for the years then ended. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in
all material respects, the consolidated financial positions of TransAKT Ltd. as
of December 31, 2008 and 2009, and the consolidated results of their operations
and their consolidated cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, the Company has accumulated deficit
of $(2,038,892) at December 31, 2009 including a net loss of $(249,643) during
the year ended December 31, 2009. Management's plans in regard to these matters
are also described in Note 2. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ KCCW Accountancy Corp.
Diamond Bar, California
June 6, 2010
F-1
Report of Independent Registered Public Accounting
Firm
Board of Directors and Shareholders
TransAKT Ltd and Subsidiaries
Calgary, Canada.
We have audited the accompanying
consolidated statements of operations of TransAKT Ltd and Subsidiaries for the
year ended December 31, 2007, and the related consolidated statements of
stockholders equity, and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in
accordance with 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 audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the consolidated results of operations of TransAKT Ltd and Subsidiaries for the
year ended December 31, 2007, and their cash flows for the year 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 $(1,368,473) at December 31, 2007 including a
net loss of $(921,158) during the year ended December 31, 2007. 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/ KABANI & COMPANY, INC.
CERTIFIED PUBLIC ACCOUNTANTS
Los Angeles, California
February 6, 2008
F-2
TRANSAKT LTD.
|
CONSOLIDATED BALANCE SHEETS
|
DECEMBER 31, 2009 and 2008
|
|
|
December 31,
|
|
|
December 31,
|
|
ASSETS
|
|
2009
|
|
|
2008
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
874,418
|
|
$
|
205,658
|
|
Restricted cash
|
|
498,540
|
|
|
563,756
|
|
Accounts receivable, net
|
|
2,049,995
|
|
|
2,245,101
|
|
Inventory
|
|
1,373,516
|
|
|
2,924,211
|
|
Other receivable, net
|
|
6,278
|
|
|
4,351
|
|
Prepaid expenses
|
|
51,196
|
|
|
26,683
|
|
Investments
|
|
50,915
|
|
|
152,569
|
|
Total Current
Assets
|
|
4,904,858
|
|
|
6,122,329
|
|
|
|
|
|
|
|
|
Property & Equipment, net
|
|
3,130
|
|
|
9,205
|
|
|
|
|
|
|
|
|
Deposits
|
|
72,891
|
|
|
29,624
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
4,980,879
|
|
$
|
6,161,158
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
$
|
1,161,586
|
|
$
|
1,556,676
|
|
Other payable
|
|
-
|
|
|
22,120
|
|
Bank loans
|
|
2,083,361
|
|
|
2,773,399
|
|
Loan payable to related party
|
|
495,625
|
|
|
277,032
|
|
Total Current
Liabilities
|
|
3,740,572
|
|
|
4,629,227
|
|
|
|
|
|
|
|
|
Non-current Liabilities
|
|
|
|
|
|
|
Unsecured convertible notes payable,
net of unamortized discounts of $10,541
|
|
19,459
|
|
|
-
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
Common stock, unlimited shares authorized for issuance,
no par value, 102,645,120 shares issued and outstanding
|
|
3,260,018
|
|
|
3,260,018
|
|
Additional paid-in capital
|
|
15,000
|
|
|
-
|
|
Other comprehensive income (loss)
|
|
(15,278
|
)
|
|
61,162
|
|
Accumulated deficit
|
|
(2,038,892
|
)
|
|
(1,789,249
|
)
|
Total Stockholders' Equity
|
|
1,220,848
|
|
|
1,531,931
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
$
|
4,980,879
|
|
$
|
6,161,158
|
|
The accompanying notes are an integral part of the financial
statements
F-3
TRANSAKT LTD.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, AND
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Sales of goods, net
|
$
|
10,623,736
|
|
$
|
9,546,132
|
|
$
|
9,687,678
|
|
Total
revenues
|
|
10,623,736
|
|
|
9,546,132
|
|
|
9,687,678
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
9,780,380
|
|
|
8,489,638
|
|
|
9,440,398
|
|
Selling, general and administrative
expenses
|
|
1,029,425
|
|
|
1,262,977
|
|
|
1,710,456
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(186,069
|
)
|
|
(206,483
|
)
|
|
(1,463,176
|
)
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
1,414
|
|
|
8,147
|
|
|
6,516
|
|
Investment income (loss)
|
|
7,119
|
|
|
(9,279
|
)
|
|
-
|
|
Currency exchange gain
(loss)
|
|
25,699
|
|
|
(84,180
|
)
|
|
-
|
|
Gain on settlement of debt
|
|
-
|
|
|
-
|
|
|
4,603
|
|
Other income
|
|
-
|
|
|
11,151
|
|
|
655,242
|
|
Interest expense
|
|
(96,474
|
)
|
|
(122,573
|
)
|
|
(113,138
|
)
|
Total other expense
|
|
(62,242
|
)
|
|
(196,734
|
)
|
|
553,224
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
|
(248,311
|
)
|
|
(403,217
|
)
|
|
(909,952
|
)
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
1,332
|
|
|
17,559
|
|
|
11,206
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(249,643
|
)
|
$
|
(420,776
|
)
|
$
|
(921,158
|
)
|
|
|
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
102,645,120
|
|
|
102,645,120
|
|
|
99,707,278
|
|
The accompanying notes are an integral part of the financial
statements
F-4
TRANSAKT LTD.
|
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
|
AND COMPREHENSIVE INCOME
|
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, AND
2007
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Prepaid
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Consulting
|
|
|
Income (loss)
|
|
|
Deficit
|
|
|
Total
|
|
Balance at December 31, 2006
|
|
90,912,620
|
|
$
|
1,832,174
|
|
$
|
-
|
|
$
|
(189,151
|
)
|
$
|
38,271
|
|
$
|
(411,994
|
)
|
$
|
1,269,299
|
|
Issuance of shares for cash
|
|
8,772,500
|
|
|
1,037,653
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,037,653
|
|
Issuance of shares for
services
|
|
2,000,000
|
|
|
362,098
|
|
|
-
|
|
|
(131,290
|
)
|
|
-
|
|
|
(35,320
|
)
|
|
195,488
|
|
Issuance of shares for compensation
|
|
500,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Issuance of shares for
debt settlement
|
|
460,000
|
|
|
28,093
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
28,093
|
|
Amortization of consulting fees
|
|
-
|
|
|
-
|
|
|
-
|
|
|
189,151
|
|
|
-
|
|
|
-
|
|
|
189,151
|
|
Foreign currency translation
adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
55,988
|
|
|
-
|
|
|
55,988
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(921,158
|
)
|
|
(921,158
|
)
|
Balance at December 31, 2007
|
|
102,645,120
|
|
$
|
3,260,018
|
|
$
|
-
|
|
$
|
(131,290
|
)
|
$
|
94,259
|
|
$
|
(1,368,473
|
)
|
$
|
1,854,514
|
|
Amortization of consulting fees
|
|
-
|
|
|
-
|
|
|
-
|
|
|
131,290
|
|
|
-
|
|
|
-
|
|
|
131,290
|
|
Foreign currency translation
adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(33,097
|
)
|
|
-
|
|
|
(33,097
|
)
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(420,776
|
)
|
|
(420,776
|
)
|
Balance at December 31, 2008
|
|
102,645,120
|
|
$
|
3,260,018
|
|
$
|
-
|
|
$
|
-
|
|
$
|
61,162
|
|
$
|
(1,789,249
|
)
|
$
|
1,531,931
|
|
Foreign currency translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(76,440
|
)
|
|
-
|
|
|
(76,440
|
)
|
Beneficial conversion
feature relating to convertible debentures
|
|
-
|
|
|
-
|
|
|
15,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
15,000
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(249,643
|
)
|
|
(249,643
|
)
|
Balance at December 31, 2009
|
|
102,645,120
|
|
$
|
3,260,018
|
|
$
|
15,000
|
|
$
|
-
|
|
$
|
(15,278
|
)
|
$
|
(2,038,892
|
)
|
$
|
1,220,848
|
|
The accompanying notes are an integral part of the financial
statements
F-5
TRANSAKT LTD.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR THE YEARS ENDED DECDEMBER 31, 2009, 2008, AND
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(249,643
|
)
|
$
|
(420,776
|
)
|
$
|
(921,158
|
)
|
Adjustments to reconcile net
income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
6,159
|
|
|
18,526
|
|
|
64,976
|
|
Gain on settlement of debt
|
|
-
|
|
|
-
|
|
|
(4,603
|
)
|
Loss on disposal of
fixed assets
|
|
-
|
|
|
16,724
|
|
|
-
|
|
Investment loss (income)
|
|
(7,119
|
)
|
|
9,279
|
|
|
-
|
|
Issuance of shares for
services
|
|
-
|
|
|
-
|
|
|
195,488
|
|
Amortization of consulting fees
|
|
-
|
|
|
121,592
|
|
|
189,151
|
|
Amortization of debt
discount attributable to convertible debentures
|
|
4,118
|
|
|
-
|
|
|
-
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease in accounts receivable
|
|
185,362
|
|
|
858,511
|
|
|
(242,458
|
)
|
(Increase)
Decrease in inventory
|
|
1,568,377
|
|
|
(1,052,753
|
)
|
|
189,174
|
|
(Increase) Decrease in other receivables
|
|
6,659
|
|
|
(4,529
|
)
|
|
68,420
|
|
(Increase)
Decrease in prepaid expense
|
|
(33,947
|
)
|
|
44,206
|
|
|
54,221
|
|
(Increase) in deposits
|
|
(42,252
|
)
|
|
(329
|
)
|
|
(18,921
|
)
|
(Decrease)
in accounts payable and accrued expenses
|
|
(429,750
|
)
|
|
(481,291
|
)
|
|
(684,790
|
)
|
Net cash provided by (used in) operating
activities
|
|
1,007,964
|
|
|
(890,840
|
)
|
|
(1,110,500
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of
property and equipment
|
|
-
|
|
|
91
|
|
|
-
|
|
Decrease in restricted cash
|
|
63,151
|
|
|
188,104
|
|
|
(536,360
|
)
|
Purchase of investments
|
|
-
|
|
|
(168,101
|
)
|
|
-
|
|
Proceeds from sale of investments
|
|
110,182
|
|
|
-
|
|
|
-
|
|
Net cash provided by (used in) investing
activities
|
|
173,333
|
|
|
20,094
|
|
|
(536,360
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
Proceeds from bank
loans
|
|
2,132,162
|
|
|
2,887,063
|
|
|
993,731
|
|
Repayment of bank loans
|
|
(2,820,683
|
)
|
|
(2,432,730
|
)
|
|
-
|
|
Proceeds from loan from
related party
|
|
165,011
|
|
|
432,198
|
|
|
(281,954
|
)
|
Issuance of shares for cash
|
|
-
|
|
|
-
|
|
|
1,037,653
|
|
Net proceeds from
issuance of convertible debentures
|
|
27,705
|
|
|
-
|
|
|
-
|
|
Net cash provided by (used in) financing activities
|
|
(495,805
|
)
|
|
886,531
|
|
|
1,749,430
|
|
Effect of exchange rate changes on cash and
cash equivalents
|
|
(16,732
|
)
|
|
(38,188
|
)
|
|
21,738
|
|
Net increase (decrease) in cash and cash equivalents
|
|
668,760
|
|
|
(22,403
|
)
|
|
124,308
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
205,658
|
|
|
228,061
|
|
|
103,753
|
|
Ending
|
$
|
874,418
|
|
$
|
205,658
|
|
$
|
228,061
|
|
Supplemental disclosure of cash flows: Cash paid during the
year for:
|
|
|
|
|
|
|
|
|
|
Income tax
|
$
|
197
|
|
$
|
30,524
|
|
$
|
3,201
|
|
Interest expense
|
$
|
109,663
|
|
$
|
115,391
|
|
$
|
93,858
|
|
The accompanying notes are an integral part of the financial
statements
F-6
TRANSAKT LTD.
|
NOTES TO FINANCIAL STATEMENTS
|
DECEMBER 31, 2009
|
NOTE 1 ORGANIZATION
TransAKT Ltd. (the Company) was
incorporated under the laws of the Province of Alberta on June 3, 1997. The
Company completed the acquisition of Green Point Resources Inc. on October 18,
2000 whereby it became a publicly traded company listed on the Canadian Venture
Exchange. In 2004 the Company voluntarily delisted from the TSX Venture Exchange
and retained a listing on the Over the Counter Bulletin Board in the United
States.
In October 2004 the Company purchased
certain assets of IP Mental Inc., a Taiwan based Voice over Internet Protocol
(VoIP) company. The company name was changed from TransAKT Corp. to TransAKT
Ltd. on September 29, 2006. The Company designs and develops Voice over Internet
Protocol (VoIP) solutions and mobile payment terminals for the consumer
electronics industry.
On November 15, 2006 TransAKT Ltd and
the shareholders of Taiwan Halee International Co. Ltd. (HTT), entered into a
Share Exchange Agreement in which TransAKT Ltd. acquired 100% of Taiwan Halee
International Co. Ltd.s outstanding common stock. HTT was incorporated under
the laws of Republic of China in 1985. HTT is engaged in designing,
manufacturing and distribution of Taiwan telecommunications equipment. The
acquisition has been accounted for as a reverse acquisition under the purchase
method of accounting. Accordingly, the merger of the two companies has been
recorded as a recapitalization of HTT, with HTT being treated as the continuing
entity. The historical financial statements presented are those of HTT. The
continuing company has retained December 31 as its fiscal year end.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of
Consolidation
The consolidated financial statements
include the accounts of TransAKT Holdings Limited and its wholly owned
subsidiaries Taiwan Halee International Co. Ltd. and TransAKT Taiwan Limited,
collectively referred to within as the Company. All material intercompany
accounts, transactions and profits have been eliminated in consolidation.
Financial Statement Presentation
Certain changes to the 2007 and 2008
financial statements have been made to conform to the 2009 financial statement
format.
Use of Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles in the United States
(GAAP) requires management to make certain estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-7
Revenue Recognition
The Companys revenue recognition
policies are in compliance with Staff Accounting Bulletin (SAB) 104. Revenues
are recognized when finished products are shipped to unaffiliated customers and
both title and the risks and rewards of ownership are transferred and
collectibility is reasonably assured.
The Companys revenues are recorded
upon confirmed acceptance after inspection by the customers of the Company.
Exchange Gain (Loss):
During the years ended December 31,
2009, 2008, and 2007, the transactions of TransAKT Holdings Limited, Taiwan
Halee International Co. Ltd. and TransAKT Taiwan Limited were denominated in
foreign currency and were recorded in Taiwan Dollar (TWD) and Canadian Dollar
(CAD) at the rates of exchange in effect when the transactions occur. Exchange
gains and losses are recognized for the different foreign exchange rates applied
when the foreign currency assets and liabilities are settled.
Translation Adjustment
The Company financial statements are
presented in the U.S. dollar ($), which is the Companys reporting currency,
while its functional currency is Taiwan dollar (TWD) and Canadian Dollar (CAD).
Transactions in foreign currencies are initially recorded at the functional
currency rate ruling at the date of transaction. Any differences between the
initially recorded amount and the settlement amount are recorded as a gain or
loss on foreign currency transaction in the consolidated statements of income.
Monetary assets and liabilities denominated in foreign currency are translated
at the functional currency rate of exchange ruling at the balance sheet date.
Any differences are taken to profit or loss as a gain or loss on foreign
currency translation in the statements of income.
In accordance with ASC 830, Foreign
Currency Matters, the Company translates the assets and liabilities into U.S.
dollar ($) using the rate of exchange prevailing at the balance sheet date and
the statements of operations and cash flows are translated at an average rate
during the reporting period. Adjustments resulting from the translation from TWD
and CAD into U.S. dollar are recorded in stockholders equity as part of
accumulated other comprehensive income.
Comprehensive Income
Comprehensive income includes
accumulated foreign currency translation gains and losses. The Company has
reported the components of comprehensive income on its statements of
stockholders equity.
Advertising
Advertising expenses consist primarily
of costs of promotion for corporate image and product marketing and costs of
direct advertising. The Company expenses all advertising costs as incurred.
Income Taxes
The Company accounts for income taxes
in accordance with ASC 740, Income Taxes, which requires that the Company
recognize deferred tax liabilities and assets based on the differences between
the financial statement carrying amounts and the tax basis of assets and
liabilities, using enacted tax rates in effect in the years the differences are
expected to reverse. Deferred income tax benefit (expense) results from the
change in net deferred tax assets or deferred tax liabilities. A valuation
allowance is recorded when, in the opinion of management, it is more likely than
not that some or all of any deferred tax assets will not be realized.
The Company adopted ASC 740-10-25,
Income Taxes- Overall-Recognition, on January 1, 2007, which provides criteria
for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must
recognize the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position are
measured based on the largest benefit that has a greater than 50% likelihood of
being realized upon ultimate resolution. The Company did not recognize any
additional liabilities for uncertain tax positions as a result of the
implementation of ASC 740-10-25.
F-8
Statement of Cash Flows
In accordance with generally accepted
accounting principles (GAAP), cash flows from the Companys operations is based
upon the local currencies. As a result, amounts related to assets and
liabilities reported on the statement of cash flows will not necessarily agree
with changes in the corresponding balances on the balance sheet.
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk are accounts receivable and
other receivables arising from its normal business activities. The Company has a
diversified customer base. The Company controls credit risk related to accounts
receivable through credit approvals, credit limits and monitoring procedures.
The Company routinely assesses the financial strength of its customers and,
based upon factors surrounding the credit risk, establishes an allowance, if
required, for un-collectible accounts and, as a consequence, believes that its
accounts receivable credit risk exposure beyond such allowance is limited.
Cash and Cash Equivalents
Cash and cash equivalents include cash
in hand and cash in time deposits, certificates of deposit and all highly liquid
debt instruments with original maturities of three months or less.
Restricted Cash
The Company had restricted cash and
investments of $498,540 and $563,756 for year ended December 31, 2009 and 2008,
respectively. The restricted cash primarily collateralizes the Companys bank
loans and issuances of standby and commercial letters of credit. The
restrictions expire when related obligations are fulfilled.
Allowance for Doubtful
Accounts
The Company maintains reserves for
potential credit losses on accounts receivable. Management reviews the
composition of accounts receivable and analyzes historical bad debts, customer
concentrations, customer credit worthiness, current economic trends and changes
in customer payment patterns to evaluate the adequacy of these reserves.
Allowance for doubtful debts amounted to $190,402 and $187,353 as at December
31, 2009 and December 31, 2008, respectively.
Inventory
Inventories are valued at the lower of
cost (determined on a weighted average basis) or market. The Management compares
the cost of inventories with the market value and allowance is made for writing
down their inventories to market value, if lower. As of December 31, 2009 and
2008, inventory consisted only of finished goods.
Property, Plant & Equipment
Property and equipment are stated at
cost. Expenditures for maintenance and repairs are charged to earnings as
incurred; additions, renewals and betterments are capitalized. When property and
equipment are retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the respective accounts, and any gain or loss is
included in operations. Depreciation of property and equipment is provided
using the straight-line method for substantially all assets with estimated lives
of:
F-9
Furniture and Fixtures
|
3-5 years
|
Equipment
|
3-5 years
|
Computer Hardware and Software
|
3-5 years
|
Automobile
|
3-5 years
|
As of December 31, 2009, Property,
Plant & Equipment consist of the following:
Computer and office equipment
|
$
|
59,769
|
|
Accumulated depreciation
|
|
(56,639
|
)
|
|
|
|
|
|
$
|
3,130
|
|
Depreciation expenses were $6,159,
$18,526, and $64,976 for the years ended December 31, 2009, 2008, and 2007,
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
Recent accounting
pronouncements
In October 2009, the FASB issued
Accounting Standards Update 2009-13, Multiple-Deliverable Revenue Arrangements
a consensus of the FASB Emerging Issues Task Force, to provide amendments to
the criteria in Subtopic 609-24 of the Codification for separating consideration
into multiple-deliverable revenue arrangements. ASU 2009-13 establishes a
selling price hierarchy for determining the selling price of each specific
deliverable which includes vendor-specific objective evidence (VSOE) if
available, third party evidence if VSOE is not available or estimated selling
price if neither VSOE nor third party evidence is available. ASU 2009-13 also
eliminates the residual method for allocating revenue between the elements of an
arrangement and requires that arrangement consideration be allocated at the
inception of the arrangement to all deliverables using the relative selling
price method, which allocates any discount in the arrangement proportionally to
each deliverable on the basis of each deliverables selling price. This Update
expands the disclosure requirements regarding a vendors multiple-deliverable
revenue arrangements. ASU 2009-13 is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010, with early adoption permitted. The Company is currently
evaluating the impact of ASU 2009-13 on its financial statements and does not
expect the adoption of this standard will have material impact on its financial
position, results of operations or cash flows.
In January 2010, the FASB issued ASU
No. 2010-06,
Improving Disclosures about Fair Value Measurements
, which,
among other things, amends
Accounting Standards Topic 820 Fair Value
Measurements and Disclosures (ASC 820)
to require entities to separately
present purchases, sales, issuances, and settlements in their reconciliation of
Level 3 fair value measurements (i.e., to present such items on a gross basis
rather than on a net basis), and which clarifies existing disclosure
requirements provided by ASC 820 regarding the level of disaggregation and the
inputs and valuation techniques used to measure fair value for measurements that
fall within either Level 2 or Level 3 of the fair value hierarchy. ASU No.
2010-06 is effective for interim and annual periods beginning after December 15,
2009, except for the disclosures about purchases, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measurements
which are effective for fiscal years beginning after December 15, 2010 and for
interim periods within those fiscal years. The Companys adoption of this
standard had no impact on its financial position, results of operations or cash
flows.
Going Concern
The Company has incurred a net loss of
$249,643, $420,776, and $921,158 during the years ended December 31, 2009, 2008,
and 2007, respectively, and has an accumulated deficit of $2,038,892,
$1,789,249, and $1,368,473 as of December 31, 2009, December 31, 2008, and
December 31, 2007, respectively.
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going
concern. This basis of accounting contemplates the recovery of the Companys
assets and the satisfaction of liabilities in the normal course of business.
This presentation presumes funds will be available to finance ongoing research
and development, operations and capital expenditures and permit the realization
of assets and the payment of liabilities in the normal course of operations for
the foreseeable future.
The ability of the Company to continue
research and development projects and realize the capitalized value of
proprietary technologies and related assets is dependent upon future commercial
success of the technologies and raising sufficient funds to continue research
and development as well as to effectively
market its products. Through December 31, 2009, the Company has not realized
commercial success of the technologies, nor have they raised sufficient funds to
continue research and development or to market its products.
F-11
There can be no assurances that there
will be adequate financing available to the Company and the consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
The Company has taken certain
restructuring steps to provide the necessary capital to continue its operations.
These steps included: (1) Tightly budgeting and controlling all expenses; (2)
Expanding the companys operations into China, expanding product lines and
recruiting a strong sales team to significantly increase sales revenue and
profit in 2010; (3) The Company plans to continue actively seeing additional
funding opportunities to improve and expand upon our product lines.
NOTE 3 ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The accounts payable and accrued
expenses as of December 31, 2009 and 2008 are summarized as follows:
|
|
2009
|
|
|
2008
|
|
Accounts payable
|
$
|
911,780
|
|
$
|
1,390,155
|
|
Accrued expenses
|
|
155,110
|
|
|
153,482
|
|
Sales tax payable
|
|
35,391
|
|
|
-
|
|
Accrued payroll
|
|
59,305
|
|
|
-
|
|
Income Taxes Payable
|
|
-
|
|
|
13,039
|
|
Total
|
$
|
1,161,586
|
|
$
|
1,556,676
|
|
NOTE 4 - RELATED PARTY TRANSACTIONS
The Companys officers and shareholders
have advanced funds to the Company for working capital purposes. The Company has
not entered into any agreement on the repayment terms for these advances. As of
December 31, 2009 and 2008, there were $435,225 and $216,632 advances
outstanding, respectively.
The Company also had loans payable to
five shareholders amounted to $60,400 as of December 31, 2009 and 2008. The
unsecured loans bear interest at the rate of 12% per annum, and due on May and
June 2010.
NOTE 5 - LOANS PAYABLE
The Company has loan payable amounting
to $2,083,361 as of December 31, 2009 from several commercial banks in Taiwan.
The loans are partially secured by certificate of deposits for $498,540 and
accounts receivable. The loans payable at December 31, 2009 comprised of the
following:
F-12
|
|
|
|
Interest per
|
|
|
Nature
|
|
Due on
|
|
Annum
|
|
Amount
|
Secured note payable from a bank
|
|
1/12/2010
|
|
5.25%
|
|
27,000
|
Secured note payable from a bank
|
|
1/12/2010
|
|
5.25%
|
|
39,300
|
Secured note payable from a bank
|
|
2/3/2010
|
|
5.25%
|
|
40,300
|
Secured note payable from a bank
|
|
2/10/2010
|
|
5.25%
|
|
55,460
|
Secured note payable from a bank
|
|
2/23/2010
|
|
5.25%
|
|
117,700
|
Secured note payable from a bank
|
|
2/4/2010
|
|
5.25%
|
|
23,250
|
Secured note payable from a bank
|
|
4/8/2010
|
|
5.25%
|
|
37,800
|
Secured note payable from a bank
|
|
4/20/2010
|
|
5.25%
|
|
12,500
|
Secured note payable from a bank
|
|
4/20/2010
|
|
5.25%
|
|
37,500
|
Secured note payable from a bank
|
|
4/25/2010
|
|
5.25%
|
|
16,500
|
Secured note payable from a bank
|
|
4/25/2010
|
|
5.25%
|
|
31,286
|
Secured note payable from a bank
|
|
4/25/2010
|
|
5.25%
|
|
25,920
|
Secured note payable from a bank
|
|
5/5/2010
|
|
5.25%
|
|
38,700
|
Secured note payable from a bank
|
|
5/13/2010
|
|
5.25%
|
|
27,000
|
Secured note payable from a bank
|
|
5/8/2010
|
|
5.25%
|
|
39,000
|
Secured note payable from a bank
|
|
5/17/2010
|
|
5.25%
|
|
16,170
|
Secured note payable from a bank
|
|
5/25/2010
|
|
5.25%
|
|
55,460
|
Secured note payable from a bank
|
|
5/26/2010
|
|
5.10%
|
|
56,875
|
Secured note payable from a bank
|
|
12/28/2010
|
|
2.88%
|
|
151,500
|
Secured note payable from a bank
|
|
3/1/2010
|
|
5.35%
|
|
23,007
|
Secured note payable from a bank
|
|
3/6/2010
|
|
5.35%
|
|
27,914
|
Secured note payable from a bank
|
|
1/14/2010
|
|
5.00%
|
|
52,000
|
Secured note payable from a bank
|
|
1/22/2010
|
|
5.00%
|
|
25,750
|
Secured note payable from a bank
|
|
5/7/2010
|
|
5.00%
|
|
82,800
|
Secured note payable from a bank
|
|
3/8/2010
|
|
1.52%
|
|
692,717
|
Secured note payable from a bank
|
|
2/10/2010
|
|
2.40%
|
|
17,800
|
Secured note payable from a bank
|
|
4/26/2010
|
|
2.58%
|
|
45,797
|
Secured note payable from a bank
|
|
3/22/2010
|
|
2.42%
|
|
36,600
|
Secured note payable from a bank
|
|
3/30/2010
|
|
2.42%
|
|
27,000
|
Secured note payable from a bank
|
|
3/29/2010
|
|
2.42%
|
|
32,250
|
Secured note payable from a bank
|
|
3/30/2010
|
|
2.42%
|
|
36,000
|
Secured note payable from a bank
|
|
4/12/2010
|
|
2.43%
|
|
21,000
|
Secured note payable from a bank
|
|
4/12/2010
|
|
2.43%
|
|
31,800
|
Secured note payable from a bank
|
|
4/28/2010
|
|
2.43%
|
|
40,500
|
Secured note payable from a bank
|
|
5/4/2010
|
|
2.43%
|
|
31,125
|
Secured note payable from a bank
|
|
5/10/2010
|
|
2.43%
|
|
10,080
|
|
|
Total
|
|
|
$
|
2,083,361
|
|
|
Current portion
|
$
|
2,083,361
|
|
|
Long-term portion
|
$
|
-
|
NOTE 6 STOCKHOLDERS EQUITY
On January 25, 2007, the Company issued
460,000 shares of common stock to Patrick Hillier and Manfred Schauer in
connection with the settlement of debt. These shares have been recorded at fair
value of $28,093, based on the price of the stock on the agreement date. The
Company recorded gain on settlement of debt amounting to $4,603.
On January 25, 2007, the Company issued
22,500 shares of common stock to Rick Martens as 10% commission for arranging
the private placement in September 2006 .These shares have been recorded as net
of cash received as part of private placement..
On January 25, 2007 the Company issued
500,000 shares to its former shareholders as compensation for loss of capital
due to termination of a distribution agreement for the Asia Pacific region. The
Company recorded those shares as deemed dividend amounting to $35,320.
On April 3, 2007, the Company had a
private placement and issued 8,650,000 shares of common stock. The Company
issued share at $0.12 per share for cash.
F-13
On April 3, 2007, the Company issued
100,000 shares of common stock to Allen Schwabe as 10% commission for arranging
the private placement to 10 individuals in British.Columbia in April 2007 .These
shares have been recorded as net of cash received as part of private
placement.
On April 27, 2007, the Company issued
2,000,000 shares of common stock to Liu Fu Ming, an outside consultant, as
compensation for service provided. These shares were recorded at the fair market
value of $326,778, based on the price of stock on the agreement date. The
consulting agreement is for the period of 12 months starting April 27, 2007.
Since the compensation for services is settled thru issuance of shares therefore
the Company recorded $195,488 as an expense for the period and the balance of
$131,290 was recorded as prepaid consulting for the service not performed as
part of equity.
Stock Based Compensation:
Stock Option Plan
In 2004 the Company filed a stock
option plan where management is authorized to issue 5,250,000 shares under the
plan.
Activity under the 2004 plan is as
follows:
|
|
|
|
|
Weighted
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Average
|
|
|
Intrinsic Value
|
|
2004 Equity Incentive Plan
|
|
Shares
|
|
|
Exercise Price
|
|
|
|
|
Outstanding at December 31, 2005
|
|
4,235,000
|
|
$
|
0.36
|
|
$
|
-
|
|
Granted in 2006
|
|
4,600,000
|
|
|
|
|
|
|
|
Exercised in 2006
|
|
(4,235,000
|
)
|
|
|
|
|
|
|
Canceled in 2006
|
|
(1,900,000
|
)
|
|
|
|
|
|
|
Outstanding at December 31, 2006
|
|
2,700,000
|
|
$
|
0.18
|
|
|
|
|
Exercisable at December 31, 2006
|
|
2,700,000
|
|
$
|
0.18
|
|
$
|
-
|
|
Expired in 2007
|
|
(2,700,000
|
)
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
-
|
|
|
|
|
|
|
|
Exercisable at December 31, 2007
|
|
-
|
|
|
|
|
|
|
|
All outstanding options under the 2004
plan have expired during the year 2007.
NOTE 7 INCOME TAXES
The Company was incorporated under the
laws of the Province of Alberta, Canada and has operations in primarily two tax
jurisdictions - Taiwan and Canada. For certain operations in Taiwan and Canada,
the Company has incurred net accumulated operating losses for income tax
purposes. The Company believes that it is more likely than not that these net
accumulated operating losses will not be utilized in the future. Therefore, the
Company has provided full valuation allowance for the deferred tax assets
arising from the losses at these locations as of December 31, 2009, 2008, and
2007. Accordingly, the Company has no net deferred tax assets.
Canada:
The statutory tax rate under Canada tax
law is 34%. The Company has significant income tax net operating losses (NOL)
carried forward from prior years. Due to the uncertainty of the realizability of
the related deferred tax assets, a reserve equal to the amount of deferred
income taxes has been established at December
31, 2009 and 2008. The Company has provided 100% valuation allowance to the
deferred tax assets as of December 31, 2009 and 2008.
F-14
Taiwan:
The statutory tax rate under Taiwan tax
law is 25%. The Company has several deferred tax asset items. Due to the
uncertainty of the realizability of the related deferred tax assets, a reserve
equal to the amount of deferred income taxes has been established at December
31, 2009 and 2008. The Company has provided 100% valuation allowance to the
deferred tax assets as of December 31, 2009 and 2008.
The provision for income taxes from
continuing operations on income consists of the following for the years ended
December 31, 2009, 2008, and 2007:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Income tax expense current
|
$
|
1,332
|
|
$
|
17,559
|
|
$
|
11,206
|
|
Income tax expense deferred
|
|
-
|
|
|
-
|
|
|
-
|
|
Total income tax expense
|
$
|
1,332
|
|
$
|
17,559
|
|
$
|
11,206
|
|
Deferred taxes:
The tax effect of temporary differences
that give rise to the Companys deferred tax asset as of December 31, 2009, and
2008 are as follows:
Canada:
|
|
2009
|
|
|
2008
|
|
Deferred tax asset non-current:
|
|
|
|
|
|
|
Net operating loss carry forward
|
$
|
2,301,024
|
|
$
|
2,241,872
|
|
Valuation allowance
|
|
(2,301,024
|
)
|
|
(2,241,872
|
)
|
Net deferred tax asset
|
$
|
-
|
|
$
|
-
|
|
Taiwan:
|
|
2009
|
|
|
2008
|
|
Deferred tax asset non-current:
|
|
|
|
|
|
|
Net operating loss carry forward
|
$
|
16,514
|
|
$
|
-
|
|
Foreign currency exchange loss (gain)
|
|
(7,555
|
)
|
|
14,280
|
|
Other temporary non-deductible difference
|
|
-
|
|
|
2,539
|
|
Valuation allowance
|
|
(8,
959
|
)
|
|
(16,819
|
)
|
Net deferred tax asset
|
$
|
-
|
|
$
|
-
|
|
NOTE 7 - COMMITTMENTS
Operating Leases
The Company leases various office
facilities under operating leases that expire on various dates of year 2010.
Rental expense for these leases consisted of approximately $39,596, $83,677, and
$64,174 for the years ended December 31, 2009, 2008, and 2007, respectively. The
Company has future minimum lease obligations of $21,483 for the twelve-month
period ended December 31, 2010.
NOTE 8 - OTHER COMPREHENSIVE INCOME
Balances of related after-tax
components comprising accumulated other comprehensive income (loss), included in
stockholders equity, at December 31, 2009, 2008, and 2007 are as follows:
|
|
|
Foreign Currency
|
|
|
|
|
Translation
|
|
|
|
|
Adjustment
|
|
Balance at December 31, 2006
|
|
$
|
38,271
|
|
Change for 2007
|
|
|
55,988
|
|
Balance at December 31, 2007
|
|
$
|
94,259
|
|
Change for 2008
|
|
|
(
33,097
|
)
|
Balance at December 31, 2008
|
|
|
61,162
|
|
Change for 2009
|
|
|
(76,440
|
)
|
Balance at December 31, 2009
|
|
$
|
(15,278
|
)
|
F-15
NOTE 9 - FAIR VALUE MEASUREMENTS
Generally accepted accounting
principles (GAAP) utilizes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels. The
fair value hierarchy gives the highest priority to observable quoted prices
(unadjusted) in active markets for identical assets and liabilities and the
lowest priority to unobservable inputs.
As of December 31, 2009 and 2008 the
Company had $50,915 and $152,569, respectively, in Level 1 investments in the
form of mutual funds.
NOTE 10 - PRIVATE PLACEMENT OF CONVERTIBLE NOTES
12% Unsecured Convertible Promissory
Notes dated May 29, 2009
On May 29, 2009, the Company issued
$30,000 convertible promissory notes due May 29, 2011 with interest at 12% per
annum due upon maturity. The note is convertible at any time after the first
anniversary after the closing date, at the holders option, into shares of the
Companys common stock at a price of $0.02 per share. At maturity, any accrued
and unpaid interest, is payable to the holder.
In accordance with ASC 470-20, the
Company recognized an embedded beneficial conversion feature present in the
note. The Company allocated a portion of the proceeds equal to the intrinsic
value of that feature to additional paid-in capital. The Company recognized and
measured an aggregate of $15,000 of the proceeds, which is equal to the
intrinsic value of the embedded beneficial conversion feature, to additional
paid-in capital and a discount against the note. The debt discount attributed to
the beneficial conversion feature is amortized over the notes maturity period
(two years) as interest expense.
The Company recorded the intrinsic
value of the embedded beneficial conversion feature ($15,000) to debt discount
which will be amortized to interest expense over the term of the note.
Amortization of $4,459 was recorded for the year ended December 31, 2009.
******
F-16
SIGNATURES
The registrant hereby certifies that it meets all the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.
TRANSAKT LTD.
Date: June 25, 2010
|
By: /s/ James Wu
|
Name:
|
James Wu
|
Title:
|
President and Chief Executive
Officer (principal executive officer)
|
Date: June 25, 2010
|
By: /s/ Taifen Day
|
Name:
|
Taifen Day
|
Title:
|
Chief Financial Officer
(principal financial officer and principal accounting officer)
|
30
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