UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________ to _____________
Commission file number: 333-171637
NOWNEWS DIGITAL MEDIA TECHNOLOGY CO. LTD.
(Exact name of Company as specified in its charter)
| Nevada | 36-4794119 | |
| (State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.) | |
| organization) |
| 4F, No. 32, Ln. 407, Sec. 2. Tiding Road, Neihu District, Taipei City, Taiwan | 114 | |
| (Address of principal executive offices) | (Zip Code) |
| +886 287978775 ext 500 | ||
| (Registrant’s telephone number, including area code) |
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed 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. Yes x 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). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ¨ | Accelerated filer | ¨ |
| Non-accelerated filer | ¨ | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨ Nox
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING 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 ¨
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
As of August 12, 2016, there were 22,412,000 shares of $0.001 par value common stock issued and outstanding.
FORM 10-Q
NOWNEWS DIGITAL MEDIA TECHNOLOGY CO. LTD.
INDEX
2
NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
F-1
NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| (UNAUDITED) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 124,792 | $ | 301,205 | ||||
| Accounts receivable, net | 438,517 | 447,169 | ||||||
| Due from related parties | 58,139 | 66,894 | ||||||
| Security deposits, current | 14,339 | - | ||||||
| Other current assets | 2,524 | 22,311 | ||||||
| Current assets of discontinued operations | 4,047 | 3,976 | ||||||
| Total Current Assets | 642,358 | 841,555 | ||||||
| Furniture, fixture, and equipment, net | 138,911 | 158,463 | ||||||
| Security deposits, non-current | - | 14,090 | ||||||
| Intangible assets, net | 9,474 | 14,066 | ||||||
| Total Assets | $ | 790,743 | $ | 1,028,174 | ||||
| Liabilities and Equity | ||||||||
| Current Liabilities | ||||||||
| Long-term obligation under capital lease, current | $ | 49,825 | $ | 79,751 | ||||
| Accounts payable | 122,179 | 119,082 | ||||||
| Advance from customers | 1,629 | 9,650 | ||||||
| Accrued expenses | 3,414,572 | 484,371 | ||||||
| Due to related parties | 696,932 | 545,397 | ||||||
| Other current liabilities | 9,752 | 4,055 | ||||||
| Current liabilities of discontinued operations | 98,540 | 96,827 | ||||||
| Total Current Liabilities | 4,393,429 | 1,339,133 | ||||||
| Long-term obligation under capital lease | 1,736 | 15,712 | ||||||
| Total Liabilities | 4,395,165 | 1,354,845 | ||||||
| Commitments and contingencies (Note 11) | ||||||||
| Equity | ||||||||
| Capital stock - $.001 par value | ||||||||
| Common Stock, $.001 par value, 50,000,000 shares authorized, 22,412,000 and 22,412,000 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively | 22,412 | 22,412 | ||||||
| Additional paid-in capital | 3,915,928 | 3,915,928 | ||||||
| Accumulated deficit | (7,604,428 | ) | (4,400,189 | ) | ||||
| Accumulated other comprehensive income | 28,034 | 24,556 | ||||||
| Total Stockholders' deficit | (3,638,054 | ) | (437,293 | ) | ||||
| Noncontrolling Interests | 33,632 | 110,622 | ||||||
| Total Deficit | (3,604,422 | ) | (326,671 | ) | ||||
| Total Liabilities and Equity | $ | 790,743 | $ | 1,028,174 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-2
NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
| For The Three Months Ended | For The Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net revenue | $ | 847,190 | $ | 522,222 | $ | 1,383,054 | $ | 1,038,211 | ||||||||
| Cost of revenue | (554,175 | ) | (332,815 | ) | (948,436 | ) | (688,029 | ) | ||||||||
| Gross profit | 293,015 | 189,407 | 434,618 | 350,182 | ||||||||||||
| Selling expenses | (155,153 | ) | (87,621 | ) | (298,307 | ) | (197,373 | ) | ||||||||
| General and administrative expenses | (260,662 | ) | (253,336 | ) | (448,351 | ) | (495,673 | ) | ||||||||
Financial advisory service fee – related party | (2,970,000 | ) | - | (2,970,000 | ) | - | ||||||||||
| Total operating expense | (3,385,815 | ) | (340,957 | ) | (3,716,658 | ) | (693,046 | ) | ||||||||
| Operating loss | (3,092,800 | ) | (151,550 | ) | (3,282,040 | ) | (342,864 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | 95 | 13 | 105 | 205 | ||||||||||||
| Interest expense | (371 | ) | (873 | ) | (857 | ) | (2,364 | ) | ||||||||
| Other income, net | 1,710 | 511 | 2,279 | 553 | ||||||||||||
| Total other income (expense) | 1,434 | (349 | ) | 1,527 | (1,606 | ) | ||||||||||
| Loss from continuing operations before income taxes | (3,091,366 | ) | (151,899 | ) | (3,280,513 | ) | (344,470 | ) | ||||||||
| Income taxes | - | - | - | - | ||||||||||||
| Loss from continuing operations | (3,091,366 | ) | (151,899 | ) | (3,280,513 | ) | (344,470 | ) | ||||||||
| Income (loss) from discontinued operations, net of income taxes | 1 | (54,589 | ) | 1 | (54,589 | ) | ||||||||||
| Net loss | (3,091,365 | ) | (206,488 | ) | (3,280,512 | ) | (399,059 | ) | ||||||||
| Net loss attributable to noncontrolling interests: | ||||||||||||||||
| Net loss from continuing operations | 10,270 | 53,134 | 76,274 | 106,884 | ||||||||||||
| Net (income) loss from discontinued operations | (1 | ) | 34,773 | (1 | ) | 34,773 | ||||||||||
| Total net loss attributable to noncontrolling interest | 10,269 | 87,907 | 76,273 | 141,657 | ||||||||||||
| Net loss attributable to NowNews Digital Media Technology Co. Ltd. | (3,081,096 | ) | (118,581 | ) | (3,204,239 | ) | (257,402 | ) | ||||||||
| Foreign currency translation gain (loss) | 1,058 | (7,675 | ) | 2,762 | (14,447 | ) | ||||||||||
| Comprehensive loss | (3,080,038 | ) | (126,256 | ) | (3,201,477 | ) | (271,849 | ) | ||||||||
| Other comprehensive (income) loss attributable to noncontrolling interests | (52 | ) | 2,866 | 716 | 5,265 | |||||||||||
| Comprehensive loss attributable to NowNews Digital Media Technology Co. Ltd. | $ | (3,080,090 | ) | $ | (123,390 | ) | $ | (3,200,761 | ) | $ | (266,584 | ) | ||||
| Amount attributable to common stockholders: | ||||||||||||||||
| Net loss from continuing operations, net of income taxes | $ | (3,081,096 | ) | $ | (98,765 | ) | $ | (3,204,239 | ) | $ | (237,586 | ) | ||||
| Net loss from discontinued operations, net of income taxes | - | (19,816 | ) | - | (19,816 | ) | ||||||||||
| Net loss attributable to common stockholders | $ | (3,081,096 | ) | $ | (118,581 | ) | $ | (3,204,239 | ) | $ | (257,402 | ) | ||||
| Net loss attributable to common stockholders - basic and diluted | ||||||||||||||||
| Loss from continuing operations | $ | (0.14 | ) | $ | (0.01 | ) | $ | (0.14 | ) | $ | (0.01 | ) | ||||
| Loss from discontinued operations | - | - | - | - | ||||||||||||
| Net loss attributable to common stockholders | $ | (0.14 | ) | $ | (0.01 | ) | $ | (0.14 | ) | $ | (0.01 | ) | ||||
| Weighted average shares outstanding, basic and diluted | 22,412,000 | 22,412,000 | 22,412,000 | 22,412,000 | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-3
NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2016 | 2015 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (3,280,512 | ) | $ | (399,059 | ) | ||
| (Income) loss from discontinued operations | (1 | ) | 54,589 | |||||
| Depreciation | 27,271 | 40,227 | ||||||
| Amortization | 4,768 | 6,793 | ||||||
| Loss from disposal of equipment | - | 3,095 | ||||||
| Bad debt expense | - | 5,627 | ||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Decrease in accounts receivable | 16,311 | 227,592 | ||||||
| Decrease in related-parties trade receivable | 9,788 | 139,963 | ||||||
| Decrease in security deposits | - | 18,718 | ||||||
| Decrease (increase) in other current assets | 19,839 | (10,517 | ) | |||||
| Increase in accounts payable | 974 | 21,341 | ||||||
| (Decrease) increase in advance from customers | (8,067 | ) | 719 | |||||
Increase in accrued financial advisory service fee – related party | 2,970,000 | - | ||||||
| Decrease in other accrued expenses | (46,058 | ) | (109,534 | ) | ||||
| Increase (decrease) in other current liabilities | 5,540 | (8,082 | ) | |||||
| Net cash used in continuing activities | (280,147 | ) | (8,528 | ) | ||||
| Net cash provided by discontinued operations | 1 | - | ||||||
| Net cash used in operating activities | (280,146 | ) | (8,528 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Additions to fixed assets | (5,254 | ) | (20,783 | ) | ||||
| Net cash used in continuing activities | (5,254 | ) | (20,783 | ) | ||||
| Net cash used in discontinued operations | - | - | ||||||
| Net cash used in investing activities | (5,254 | ) | (20,783 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Net proceeds from (repayment of) loans from related parties | 151,312 | (21,913 | ) | |||||
| Payments of capital lease obligations | (44,900 | ) | - | |||||
| Net cash provided by (used in) continuing activities | 106,412 | (21,913 | ) | |||||
| Net cash provided by discontinued operations | - | - | ||||||
| Net cash provided by (used in) financing activities | 106,412 | (21,913 | ) | |||||
| EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS | 2,576 | 1,137 | ||||||
| NET DECREASE IN CASH & CASH EQUIVALENTS | (176,412 | ) | (50,087 | ) | ||||
| NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS | 1 | - | ||||||
| NET DECREASE IN CASH & CASH EQUIVALENTS FROM CONTINUING OPERATIONS | (176,413 | ) | (50,087 | ) | ||||
| CASH & CASH EQUIVALENTS, BEGINNING BALANCE | 301,205 | 70,076 | ||||||
| CASH & CASH EQUIVALENTS, ENDING BALANCE | $ | 124,792 | $ | 19,989 | ||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Income tax paid | $ | - | $ | - | ||||
| Interest paid | $ | 857 | $ | 1,508 | ||||
| NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Equipment acquired through capital lease | $ | - | $ | 173,916 | ||||
| Debt conversion to additional paid-in capital | $ | - | $ | 817,104 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-4
NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1:NATURE OF OPERATIONS
NowNews Digital Media Technology Co., Ltd. (Formerly Forever Zen Ltd.) (“NowNews” or “the Company”) was incorporated in Nevada on March 30, 2010. On November 11, 2013, Pioneer Media Investments Co., Ltd. purchased 1,500,000 shares of the Company’s common stock for $135,000 in cash from two of the Company’s shareholders. Those 1,500,000 shares of common stock represented 62% of the Company’s issued and outstanding common stock immediately following the sale. As a result of the transaction, a change in control of the Company occurred and in connection therewith. Mr. Alan Chen was elected as the Company’s president and sole director. Pioneer Media Investments Co., Ltd. is beneficially owned and controlled by Alan Chen.
Worldwide Media Investments Corp. (“Worldwide”) was incorporated in Anguilla on June 4, 2013 under the Anguilla International Business Companies Act, 2000. Worldwide is a holding company and has not carried out substantive business operations of its own. Mr. Alan Chen is the sole director and controlling beneficiary shareholder of Worldwide.
NOWnews Network Co., Ltd, (“NOWnews Network”) was incorporated in Taipei City, Taiwan on June 8, 2006. NOWnews Network is a media company with operations in Taiwan. NOWnews Network operates a news website and generates revenue from fees paid by advertisers in connection with the display of graphical and non-graphical advertisements. In addition, NOWnews Network provides editing services of news articles, pictures, and videos, and sells the broadcasting rights of its news articles, pictures, and videos. Mr. Alan Chen is a director and former Chairman of NOWnews Network.
In August 2013, NOWnews Network established NOWnews International Marketing Co., Ltd (“NOWnews International”) as a 55% owned subsidiary. Mr. Shu-sen Chang, the former Chairman and current director of NOWnews Network, and one other shareholder, own 10% and 35% of NOWnews International, respectively. The primary business of NOWnews International is to sell advertisement spaces in its own newspapers.
On December 27, 2013, the Board of Directors of NOWnews Network approved the termination of operations of NOWnews International. The results of NOWnews International have been presented as discontinued operations in the consolidated statements of income and comprehensive income. NOWnews Network has reclassified the assets and liabilities of the discontinued entity in the accompanied consolidated financial statements.
During September through December 2013, Sky Media Investments, Co., Ltd. (“Sky Media”), a company incorporated in Anguilla and a wholly-owned subsidiary of the Company, acquired 7,999,945 common shares (or 66.3%) of NOWnews Network from Mr. Alan Chen for $1,522,388 (or NT$45 million). Mr. Alan Chen owned 10,169,945 shares (or 84.3%) of common stock of NOWnews Network prior to the above transaction (the “Restructuring Transaction”).
On November 14, 2014, the Company entered into and closed a share exchange agreement (the “Share Exchange Agreement”) with Worldwide, the shareholders of Worldwide, and NOWnews Network. Pursuant to the Share Exchange Agreement, the Company issued an aggregate of 20,000,000 shares of common stock to the shareholders of Worldwide in exchange for all the issued and outstanding capital stock of Worldwide. Immediately following the closing of the Share Exchange, the Company had a total of 22,412,000 issued and outstanding shares of common stock, of which 6,262,400 shares were beneficially held by Alan Chen. As a result of the Share Exchange, Worldwide and Sky Media become the Company’s wholly owned subsidiaries and NOWnews Network is now Company’s majority owned subsidiary in which Company indirectly holds 66% of the equity interest. Upon consummation of the Share Exchange, Company’s assumed the business of NOWnews Network and ceased to be a shell company.
F-5
On August 5, 2015, NOWnews Network, Sky Media, Mr. Alan Chen and Ms. Tu entered a Stock Purchase Agreement (the “Stock Purchase Agreement") with Gamania Digital Entertainment Co. Ltd. (“Gamania Digital”) and Ta Ya Venture Capital Co. Ltd. (“Ta Ya”). Pursuant to the Stock Purchase Agreement, NOWnews Network issued 1,650,000 and 350,000 shares to non-controlling shareholders on August 14, 2015 and September 8, 2015, respectively (see Note 9). As a result of the Stock Purchase, NOWnews Network remained the Company’s majority owned subsidiary in which Company indirectly holds 57% of the equity interest.
The Company’s fiscal year ends on December 31st.
NOTE 2: GOING CONCERN
The Company’s unaudited consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant losses and has not demonstrated the ability to generate sufficient cash flows from operations to satisfy its liabilities and sustain operations. The Company had accumulated deficits of $7,604,428 and $4,400,189, and stockholders’ deficits of $3,638,054 and $437,293 as of June 30, 2016 and December 31, 2015, respectively. The net losses attributable to common stockholders of $3,204,239 and $257,402 for the six months ended June 30, 2016 and 2015, respectively. In addition, current liabilities exceed current assets by $3,751,071 and $497,578 as of June 30, 2016 and December 31, 2015, respectively, representing significant working capital deficits. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management’s Plan to Continue as a Going Concern
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of the Company’s services, (3) short-term and long-term borrowings from banks, and (4) short-term borrowings from stockholders or other related party(ies) when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.
NOTE 3: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation:
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Since the Company, Worldwide, and NOWnews Network were entities under common control prior to the restructuring transaction, the Company and Worldwide have recast prior period financial statements to reflect the conveyance of NOWnews Network to Sky Media as if the restructuring transaction had occurred as of January 1, 2014. All significant intercompany transactions and account balances have been eliminated.
The functional currency of NOWnews Network and NOWnews International is the New Taiwan dollars, however the accompanying consolidated financial statements have been translated and presented in United States Dollars ($). In the accompanying consolidated financial statements and notes, “$”, “US$” and “U.S. dollars” mean United States dollars, and “NT$” and “NT dollars” mean New Taiwan dollars.
F-6
Use of estimates and assumptions:
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results. The most significant estimates reflected in the consolidated financial statements include depreciation, useful lives of property and equipment, deferred income taxes, useful life of intangible assets and contingencies. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.
Cash and cash equivalents:
The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with original maturities of three months or less, when purchased, to be cash and cash equivalents. As of June 30, 2016 and December 31, 2015, the Company has uninsured deposits in banks of $23,880 and $100,536.
Accounts receivable:
The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of June 30, 2016 and December 31, 2015, the Company assessed the allowance for doubtful accounts of $9,517 and $14,121, respectively.
Property and equipment:
Property and equipment are recorded at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extends the life of property and equipment are capitalized. These capitalized costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.
Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets or lease term as follows:
| Electronic Equipment | 3 years |
| Computer Equipment | 3 to 5 years |
| Office Equipment and Furniture | 3 to 5 years |
| Leasehold Improvement | Lesser of term of the lease or the estimated useful lives of the assets |
Long-lived assets:
The Company applies the provisions of FASB ASC Topic 360 (ASC 360), “Property, Plant, and Equipment” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 360, at least on an annual basis. ASC 360 requires the impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.
F-7
Intangible assets:
Intangible assets consist of software, trademark, and copyrights (see Note 6). At least annually, the Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Estimating future cash flows related to an intangible asset involves significant estimates and assumptions. If the Company’s assumptions are not correct, there could be an impairment loss or, in the case of a change in the estimated useful life of the asset, a change in amortization expense. There was no impairment of intangible assets as of and for the six months ended June 30, 2016 and the year ended December 31, 2015, respectively.
Leases:
Lease agreements are evaluated to determine if they are capital leases meeting any of the following criteria at inception: (a) Transfer of ownership; (b) Bargain purchase option; (c) The lease term is equal to 75 percent or more of the estimated economic life of the leased property; (d) The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor.
If at its inception a lease meets any of the four lease criteria above, the lease is classified by the lessee as a capital lease; and if none of the four criteria are met, the lease is classified by the lessee as an operating lease.
Revenue recognition:
Product and service revenue is recognized when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or the service has been performed, (iii) the Company’s price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured. Payments received before satisfaction of all of the relevant criteria for revenue recognition are recorded as unearned revenue. The Company recognizes revenue for product sales upon transfer of title to the customer. The Company recognizes revenue for services upon performance of the service. Customer purchase orders and/or contracts will generally be used to determine the existence of an arrangement. Shipping documents and the completion of any customer acceptance requirements, when applicable, will be used to verify product delivery or that services have been rendered. The Company will assess whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. The Company will record reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates will be based on industry-based historical data, historical sales returns, if any, analysis of credit memo data, and other factors known at the time.
Post-retirement and post-employment benefits:
NOWnews Network adopted the government mandated defined contribution plan pursuant to the Labor Pension Act (the “Act”) in Taiwan. Such labor regulations require that the rate of contribution made by an employer to the Labor Pension Fund per month shall not be less than 6% of the worker's monthly salaries. Pursuant to the Act, NOWnews Network makes monthly contribution equal to 6% of employees’ salaries to the employees’ pension fund. NOWnews Network has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $38,110 and $27,879 for the six months ended June 30, 2016 and 2015, respectively. The total amounts for such employee benefits, which were expensed as incurred, were $19,510 and $12,002 for the three months ended June 30, 2016 and 2015, respectively. Other than the above, the Company does not provide any other post-retirement or post-employment benefits.
F-8
Foreign currency translation:
The Company uses the United States dollar ("U.S. dollars") for financial reporting purposes. The Company maintains the books and records in its functional currency, being the primary currency of the economic environment in which its operations are conducted. For reporting purpose, the Company translates the assets and liabilities to U.S. dollars using the applicable exchange rates prevailing at the balance sheet dates, and the statements of income are translated at average exchange rates during the reporting periods. Gain or loss on foreign currency transactions are reflected on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component in the equity section of the balance sheet and is included as part of accumulated other comprehensive income. The functional currency of the Company and its subsidiaries in Taiwan is New Taiwan Dollars.
Statement of cash flows:
In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies, and translated to the reporting currency using an average foreign exchange rate for the reporting period. As a result, amounts related to changes in assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
Income taxes:
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. The deferred income tax assets were $0 as of both June 30, 2016 and December 31, 2015.
The Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At June 30, 2016 and December 31, 2015, management considered that the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.
The Company is subject to the tax authority in Taiwan for years since incorporated.
Earnings per share (EPS):
Earnings per share is calculated in accordance with ASC 260. Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock instruments were converted or exercised. Options and warrants are assumed to be exercised at the beginning of the period if the average stock price for the period is greater than the exercise price of the warrants and options. For the six months ended June 30, 2016 and 2015, no options or warrants were issued or outstanding.
Discontinued operations
Results of the Company’s discontinued entity have been presented in discontinued operations in the financial statements. See Note 1 and Note 12 for additional information.
F-9
Reclassifications:
Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.
Recent accounting pronouncements:
In February 25, 2016, FASB issued ASU-2016-02-Leases.The amendments in this Update create Topic 842, Leases, and supersede the leases requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The FASB is issuing this Update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease (as that term is defined in this Update), with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. All leases create an asset and a liability for the lessee in accordance with FASB Concepts Statement No. 6, Elements of Financial Statements, and, therefore, recognition of those lease assets and lease liabilities represents an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option. Reasonably certain is a high threshold that is consistent with and intended to be applied in the same way as the reasonably assured threshold in the previous leases guidance. In addition, also consistent with the previous leases guidance, a lessee (and a lessor) should exclude most variable lease payments in measuring lease assets and lease liabilities, other than those that depend on an index or a rate or are in substance fixed payments. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is still in progress of evaluating future impact of adopting this standard.
In November 20, 2015, FASB issued ASU-2015-17- Income Taxes. The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company is still in progress of evaluating future impact of adopting this standard.
F-10
In February 18, 2015, FASB issued ASU 2015-02—Consolidation (Topic 810). The amendments in this Update affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; (2) Eliminate the presumption that a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; (4) Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The amendments in this Update are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.
In August 2014, FASB issued ASU 2014-15 – Presentation of Financial Statements – Going Concern (Subtopic 205-40). The amendments in this Update states the disclosure of uncertainties about an entity’s ability to continue as a going concern. An entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). When management identifies conditions or events that raise substantial doubt, management should consider whether its plans will alleviate the substantial doubt. When substantial doubt is raised but is alleviated by management’s plans, the entity should disclose following information: (a) Principal conditions or events that raised substantial doubt (before consideration of management’s plans); (b) Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations; (c) Management’s plans that alleviated the substantial doubt.
When substantial doubt is raised but is not alleviated by management’s plans,, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued), and disclose the following information: (a) Principal conditions or events that raise substantial doubt; (b) Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations; (c) Management’s plans that are intended to mitigate the conditions or events that raise the substantial doubt.
The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is still in progress of evaluating future impact of adopting this standard.
NOTE 4: ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
| June 30, 2016 | December 31, 2015 | |||||||
| Accounts receivable | $ | 448,034 | $ | 461,290 | ||||
| Less: Allowance for doubtful accounts | (9,517 | ) | (14,121 | ) | ||||
| Accounts receivable, net | $ | 438,517 | $ | 447,169 | ||||
NOTE 5: PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following:
| June 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Capital Lease | $ | 157,691 | $ | 155,631 | ||||
| Computer equipment | 47,439 | 45,514 | ||||||
| Leasehold improvement | 20,556 | 20,198 | ||||||
| Electronic equipment | 19,931 | 16,043 | ||||||
| Office equipment and furniture | 6,177 | 4,788 | ||||||
| 251,794 | 242,174 | |||||||
| Less: Accumulated depreciation | (112,883 | ) | (83,711 | ) | ||||
| $ | 138,911 | $ | 158,463 | |||||
As of June 30, 2016, assets under capital lease of $157,691 represented server equipment (see Note 11). Depreciation expense for the three months ended June 30, 2016 and 2015 was $13,497 and $29,474, respectively. Depreciation expense for the six months ended June 30, 2016 and 2015 was $27,271 and $40,227, respectively.
F-11
NOTE 6: INTANGIBLE ASSETS, NET
Intangible assets consist of the following:
| June 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Copyrights | $ | 877,869 | $ | 862,608 | ||||
| Software | 34,561 | 33,961 | ||||||
| Trademark | 6,518 | 6,404 | ||||||
| Patent | 156 | 154 | ||||||
| 919,104 | 903,127 | |||||||
| Accumulated amortization | (909,630 | ) | (889,061 | ) | ||||
| Intangible assets, net | $ | 9,474 | $ | 14,066 | ||||
Intangible assets amounted to $9,474 and $14,066 as of June 30, 2016 and December 31, 2015, respectively, mainly consisted of copyrights and software acquired, and trademark.
Copyrights
Copyrights mainly include the copyrights of multiple films and pictures acquired from June 2007 to October 2009, and during the year ended December 31, 2013, with the total purchase amount of NT$28,284,903 (approximately $877,869). Copyrights are amortized based on their determined useful life, and tested annually for impairment. The amortization period ranges from 5 to 10 years. Amortization expense related to copyrights was $0 and $1,297 for the three months ended June 30, 2016 and 2015, respectively. Amortization expense related to copyrights was $0 and $2,564 for the six months ended June 30, 2016 and 2015, respectively.
For the three months ended June 30, 2016 and 2015, total amortization expense amounted to $2,409 and $3,427, respectively. For the six months ended June 30, 2016 and 2015, total amortization expense amounted to $4,768 and $6,793, respectively.
Estimated amortization for the next five years and thereafter is as follows:
| As of June 30, | Amount | |||
| 2017 | $ | 2,526 | ||
| 2018 | 2,440 | |||
| 2019 | 2,007 | |||
| 2020 | 1,873 | |||
| 2021 | 628 | |||
| $ | 9,474 | |||
NOTE 7: ACCRUED EXPENSES
Accrued expenses consist of the following:
| June 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
Accrued financial advisory service fee – related party | $ | 2,970,000 | $ | - | ||||
| Accrued payroll | 108,235 | 96,383 | ||||||
| Accrued bonus | 102,951 | 123,771 | ||||||
| Accrued professional fees | 96,760 | 111,253 | ||||||
| Accrued employee benefits and pension expenses | 66,992 | 75,795 | ||||||
| Accrued sales taxes | 57,273 | 43,078 | ||||||
| Accrued legal settlement | - | 2,745 | ||||||
| Other | 12,361 | 31,346 | ||||||
| Total | $ | 3,414,572 | $ | 484,371 | ||||
Please see note 13 for accrued financial advisory service fee – related party.
F-12
NOTE 8: INCOME TAX
United States
The Company is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company has no taxable income for the period. The applicable income tax rate for the Company was 35% for the six months ended June 30, 2016 and 2015. No tax benefit has been realized since a 100 % valuation allowance has offset deferred tax asset resulting from the net operating losses.
Anguilla
Worldwide Media Investments Corp. and Sky Media are incorporated in Anguilla, which does not tax income.
Taiwan
NOWnews Network and NOWnews International are incorporated in Taiwan. The Taiwan Income Tax Law imposes a unified enterprise income tax rate of 17% on all enterprises with taxable income greater than approximately $3,724 (NT$120,000). No income tax liabilities existed as of June 30, 2016 and December 31, 2015 due to the Company’s continuing operating losses.
Provision for income tax consists of the following:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Current | ||||||||||||||||
| USA | $ | - | $ | - | $ | - | $ | - | ||||||||
| Taiwan | - | - | - | - | ||||||||||||
| Deferred | ||||||||||||||||
| USA | ||||||||||||||||
| Deferred tax assets for NOL carryforwards | (1,073,274 | ) | (8,605 | ) | (1,085,926 | ) | (20,674 | ) | ||||||||
| Valuation allowance | 1,073,274 | 8,605 | 1,085,926 | 20,674 | ||||||||||||
| Net changes in deferred income tax under non-current portion | - | - | - | - | ||||||||||||
| Taiwan | ||||||||||||||||
| Noncurrent portion | ||||||||||||||||
| NOL carryforwards | (18,741 | ) | (21,775 | ) | (33,384 | ) | (46,088 | ) | ||||||||
| Valuation allowance | 18,741 | 21,775 | 33,384 | 46,088 | ||||||||||||
| Net changes in deferred income tax under non-current portion | - | - | - | - | ||||||||||||
| Total provision for income tax | $ | - | $ | - | $ | - | $ | - | ||||||||
The following is a reconciliation of the statutory tax rate to the effective tax rate:
| For the Six Months Ended June 30, | ||||||||
| 2016 | 2015 | |||||||
| U.S. statutory income tax rate | 35.0 | % | 35.0 | % | ||||
| Foreign statutory income tax rate difference | (18.0 | )% | (18.0) | % | ||||
| Changes in valuation allowance | (17.0 | )% | (17.0) | % | ||||
| Effective income tax rate | 0.0 | % | 0.0 | % | ||||
F-13
Significant components of the Company’s deferred taxes as of June 30, 2016 and December 31, 2015 were as follows:
| June 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforwards | $ | 3,043,642 | $ | 1,924,332 | ||||
| Less: Valuation allowance | (3,043,642 | ) | (1,924,332 | ) | ||||
| Deferred tax assets, net | $ | - | $ | - | ||||
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making this assessment. As of June 30, 2016 and December 31, 2015, the Company accrued 100% valuation allowance against its deferred tax assets based on the assessment of the probability of future realization.
NOTE 9: STOCKHOLDERS’ EQUITY
As of June 30, 2016, the Company was authorized to issue a total of 50,000,000 shares of common stock, par value $0.001 per share.
On June 4, 2013, Worldwide issued 17,000,000 common shares to Mr. Alan Chen as founder’s shares for no consideration exchanged. As a result, a discount on capital of $17,000,000 was recorded. On the same date, Mr. Chen conveyed 1,000,000 shares, 8,548,000 shares, 3,816,000 shares, and 3,636,000 shares to Legend Media Investments Co., Ltd., Pioneer Media Investments Co., Ltd., Intelligent Media Investments Co., Ltd., and Core Winner Investment Limited, respectively (collectively, the “Recipients”). All of the recipients are entities under Mr. Chen’s common control. During the year 2014, Mr. Chen transferred 2,847,725, 410,000, and 11,687,600 shares to Ms. Chiu-li Tu, the Company’s employees, and other non-related parties, respectively. Mr. Chen and Ms. Tu are husband and wife (see Note 14). Prior to November 14, 2014, Mr. Chen holds 2,054,675 shares of Worldwide.
On September 16, 2013, Worldwide entered into a written Definitive Agreement with GIA Investments Corp. (“GIA”), an unrelated party (the “Definitive Agreement”). Pursuant to the provisions of the Definitive Agreement, Worldwide would acquire NOWnews Network pursuant to a stock purchase agreement, and Worldwide will fund the operations of NOWnews Network for a period of approximately 8 months. Additionally, Worldwide desires to be acquired by an unidentified company (defined in the Definitive Agreement as “Company A”), pursuant to a stock exchange agreement, and Company A will be a participant in the OTCQB. As specified in the Definitive Agreement, GIA intends to acquire 15% of the issued and outstanding shares of Company A’s common stock for $3,000,000, and Worldwide intends that its existing shareholders will acquire 84% of the issued and outstanding shares of Company A’s common stock.
Pursuant to the Definitive Agreement, during September through December 2013, GIA funded an aggregate of $1,522,388 to Worldwide, which was recorded as “Subscriptions received in advance” on Worldwide’s consolidated balance sheet as of December 31, 2013. On May 23, 2014, Worldwide issued 3,000,000 common shares to GIA for the proceeds received.
During September through December 2013, Sky Media, the wholly-owned subsidiary of Worldwide, acquired 7,999,945 common shares (or 66.3%) of NOWnews Network from Mr. Alan Chen for $1,522,388 (or NT$45 million). Mr. Alan Chen owned 10,169,945 shares (or 84.3%) of common stock of NOWnews Network prior to the above transaction. Since Worldwide and NOWnews Network were both entities under Mr. Chen’s common control prior to the transaction, it was deemed a restructuring transaction (the “Restructuring Transaction”) and the $1,522,388 disbursed from Sky Media to Mr. Chen was recorded as a return of capital.
F-14
Pursuant to the Share Exchange Agreement entered on November 14, 2014 (see Note 1), the Company issued an aggregate of 20,000,000 shares of common stock to the shareholders of Worldwide in exchange for all the issued and outstanding capital stock of Worldwide. Immediately following the closing of the Share Exchange, the Company had a total of 22,412,000 issued and outstanding shares of common stock.
In February, 2015, Ms. Chiu-li Tu paid off the bank loans obtained by NOWnews Network, amounted to approximately $809,343 as of December 31, 2014, on behalf of NOWnews Network. Immediately after the repayment, Ms. Tu and NOWnews Network entered an agreement that such repayment will be a shareholder contribution to NOWnews Network. This transaction was treated as a related party transaction. The Company has recorded additional paid-in capital of approximately $817,104 as of December 31, 2015 for this shareholder contribution.
On July 31, 2015, NOWnews Network entered an agreement with Alan Chen and Ms. Chiu-li Tu, pursuant to which, Alan Chen and Ms. Tu agreed to forgive to their debt due from NOWnews Network in the amount of approximately $116,255 (or NT$3.7 million) and $367,808 (or NT$11.6 million), respectively, as shareholder contribution to NOWnews Network. This transaction was treated as a related party transaction, and such shareholder contribution has been recorded as additional paid-in capital.
On August 5, 2015, NOWnews Network, Sky Media, Mr. Alan Chen and Ms. Tu entered a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Gamania Digital Entertainment Co. Ltd. (“Gamania Digital”) and Ta Ya Venture Capital Co. Ltd. (“Ta Ya”), in which there are two phases of stock transfers. In Phase I, NOWnews Network is committed to sell to Gamania Digital and Ta Ya 1,250,000 and 400,000 shares of outstanding shares of NOWnews Network, respectively, through new issuance. In addition, Mr. Chen and Ms. Tu are committed to sell to Gamania Digital and Ta Ya 1,250,000 and 400,000 shares of NOWnews Network owned by them, respectively. The share transfer of Phase I shall be completed sixty (60) days upon signing the agreement. In Phase II, Gamania Digital and Ta Ya are expected, but not obligated, to purchase the same amount of shares from NOWnews Network, and Mr. Chen and Ms. Tu, as Phase I. As of March 31, 2016, NOWnews Network has fulfilled its obligation of Phase I through issuance of 1,250,000 and 400,000 shares to Gamania Digital and Ta Ya for approximately $388,803 (or NT$12.5 million) and $124,417 (or NT$4.0 million), respectively, on August 14, 2015. On September 8, 2015, NOWnews Network issued additional 350,000 shares to Gamania Digital for approximately $107,230 (or NT$3.5 million). As a result of the Stock Purchase, NOWnews Network remained the Company’s majority owned subsidiary in which Company indirectly holds 57% of the equity interest.
NOTE 10: NON-CONTROLLING INTEREST
In August 2013, NOWnews Network established NOWnews International as a 55% owned subsidiary. Mr. Shu-sen Chang, the former Chairman and current director of NOWnews Network, and one other shareholder, owns 10% and 35% of NOWnews International, respectively.
During September through December 2013, Sky Media acquired 66% of NOWnews Network from Mr. Alan Chen. Mr. Chen owned 84.3% of common stock of NOWnews Network prior to the Restructuring Transaction.
On August 14 and September 8, 2015, NOWnews Network issued additional 1,650,000 and 350,000 shares of common stock to non-controlling shareholders, respectively, pursuant to the Stock Purchase Agreement (see Note 9). As a result, Sky Media owned 57% of NOWnews Network.
Non-controlling interest consisted of the following:
| June 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Beginning balance | $ | 110,622 | $ | (493,747 | ) | |||
| Capital contribution by shareholders through debt conversion | - | 561,323 | ||||||
| Capital contribution by non-controlling interest | - | 238,221 | ||||||
| Net loss attributed to non-controlling interest | (76,274 | ) | (114,261 | ) | ||||
| Other comprehensive loss attributable to non-controlling interest | (716 | ) | (80,914 | ) | ||||
| Ending balance | $ | 33,632 | $ | 110,622 | ||||
F-15
NOTE 11: COMMITMENTS AND CONTINGENCIES
(1) Lease commitments
Capital Lease
From April, 2015, NOWnews Network entered into various capital lease agreements with Nextlink Technology Co., Ltd. (“Nextlink”), pursuant to which NOWNews Network agreed to lease multiple servers from Nextlink for the period ranges from sixteen months to two years. At the end of each contract and upon fulfillment of the lease obligations, the title of these servers and ownership shall be transferred to NOWnews Network. Because NOWnews Network takes ownership of the equipment at the completion of the lease contract, NOWnews Network determined that the arrangement represents a capital lease for the equipment. The Company recorded $157,691 as a capital lease for the equipment and began depreciating the equipment on a straight line basis over five years. Depreciation expense of those equipment under capital lease for the six months ended June 30, 2016 was $17,614. Interest expense resulted from capital leases for the six months ended June 30, 2016 amounted to $857.
Operating Lease
Operating lease commitments consist of leases for office space and copy machines under various operating lease agreements which expire in June, 2021. Operating lease agreements generally contain renewal options that may be exercised at the Company’s discretion after the completion of the terms.
The Company's obligations under capital and operating leases are as follows:
| As of June 30, | Capital Leases Amount | Operating Leases Amount | ||||||
| 2017 | $ | 49,825 | $ | 66,533 | ||||
| 2018 | 1,736 | 2,012 | ||||||
| 2019 | - | 2,012 | ||||||
| 2020 | - | 2,012 | ||||||
| 2021 | - | 2,012 | ||||||
| Total minimum payments | $ | 51,561 | $ | 74,581 | ||||
The Company incurred rent expenses of $20,993 and $31,154 for the three months ended June 30, 2016 and 2015, respectively. The Company incurred rent expenses of $41,708 and $77,052 for the six months ended June 30, 2016 and 2015, respectively.
(2) Litigation
Defamation and General Matters
From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of copyrights and other intellectual property rights and other claims alleging defamation, invasion of privacy, or similar claims arising in connection with the news articles, pictures, and other contents published on the Company’s website.
Lai Matter
On July 11, 2014, Ms. Xiu-qing Lai filed a claim against NOWnews Network and five other companies (the “Five Companies”) who are unrelated to the Company, in the Taiwan Tainan District Court (the “Tainan District Court”) in connection to a news article edited by NOWnews Network and published on July 19, 2012 on the website of NOWnews Network and five other websites owned by the Five Companies, respectively. Ms. Lai claims that the news article contained a false statement that harms the reputation of Ms. Lai. Ms. Lai seeks approximately $17,070 (NT$550,000) in compensatory damages from NOWnews Network, $54,314 (NT$1,750,000) in aggregate from the Five Companies, and newspaper apologies from NOWnews Network and the Five Companies. Based on the agreements entered by NOWnews Network and the Five Companies, if any news content provided by NOWnews Network violates any regulations or infringes on any copyrights, NOWnews Network shall be responsible for any losses that may occur.
F-16
On January 6, 2015, the plaintiff agreed to settle this legal matter with NOWnews Network outside of court. NOWnews Network agreed to pay the plaintiff $12,415 (NT$400,000) in compensatory damages, and the plaintiff agreed to revoke the claim against NOWnews Network and the Five Companies. NOWnews Network has accrued $12,415 (NT$400,000) of contingent loss in connection to this lawsuit settlement during the year ended December 31, 2014. As of June 30, 2016, NOWnews Network has made payment of approximately $12,415 (NT$400,000) and this action is closed.
(3) Shares to be issued
On August 5, 2015, NOWnews Network, Sky Media, Mr. Alan Chen and Ms. Tu entered a Stock Purchase Agreement with Gamania Digital, and Ta Ya, in which NOWnews Network is committed to sell to Gamania Digital, and Ta Ya of its outstanding shares through two Phases (see Note 9). As of the date of this report, the sale of Phase I has been completed.
NOTE 12: DISCONTINUED OPERATIONS
On December 27, 2013, NOWnews Network’s Board of Directors approved the termination of operations of NOWnews Network’s 55% owned subsidiary, NOWnews International (see Note 1). The results of the subsidiary have been presented as a discontinued operation in the statements of income and comprehensive income. There was no revenue, cost of sales, operating expenses, or any income taxes incurred from the discontinued entity during the six months ended June 30, 2016.
Net income of discontinued operations during the six months ended June 30, 2016 was as follows:
| For The Six Months Ended | ||||
| June 30, 2016 | ||||
| Net revenue | $ | - | ||
| Cost of goods sold | - | |||
| Selling, general, and administrative expenses | - | |||
| Other income | 1 | |||
| Income before income taxes | 1 | |||
| Income taxes | - | |||
| Net income | $ | 1 | ||
Net assets of discontinued operations as of June 30, 2016 were as follows:
Net assets:
| As of June 30, 2016 | ||||
| Cash & cash equivalents | $ | 4,047 | ||
| Current assets | $ | 4,047 | ||
| Accounts payable | $ | 163 | ||
| Accrued expenses | 387 | |||
| Due to related parties | 97,990 | |||
| Current liabilities | $ | 98,540 | ||
F-17
NOTE 13: RELATED PARTY TRANSACTIONS
The related parties of the company with whom transactions are reported in these financial statements are as follows:
| Name of entity or Individual | Relationship with the Company and its subsidiaries | |
| Global Investments Alliance Fundation | Entity owned by the GIA Investments Corp., who holds 13.4% of the Company. | |
| GIA Consultants Limited | Entity controlled by Heer Hsiao, president and controlling beneficiary shareholder of GIA Investments Corp. | |
| Jin Hao Kang Marketing Co., Ltd. | Ms. Chiu-li Tu is the Chairman, Director, and legal representative of this entity. | |
| GASH Co., Ltd. | Entity controlled by Gamania Digital. | |
| Gamania Digital Entertainment Co., Ltd. | Entity owned 23% of NOWnews Network. | |
| Gash point(HK) Co., Ltd. | Entity controlled by Gamania Digital. | |
| Jollywiz Digital Technology Co., Ltd. | Entity controlled by Gamania Digital. | |
| Digicentre Co., Ltd. | Entity controlled by Gamania Digital. | |
| WeBackers Co., Ltd. | Entity controlled by Gamania Digital. | |
| GASH Media Digital Marketing Co., Ltd | Entity controlled by GASH Co., Ltd. | |
| Chunghwa Wideband Best Network Co., Ltd. | Mr. Alan Chen is the Chairman and legal representative of this entity. | |
| Mr. Alan Chen | Director and controlling beneficiary shareholder of the Company. Current Director and former Chairman of NOWnews Network. |
Transactions
| For the Six Months Ended June 30, | ||||||||
| 2016 | 2015 | |||||||
| Sales to GASH Media Digital Marketing Co., Ltd. | $ | 19,056 | $ | - | ||||
| Sales to Jin Hao Kang Marketing Co., Ltd. | 14,556 | - | ||||||
| Sales to GASH Co., Ltd. | 3,668 | - | ||||||
| Sales to Digicentre Co., Ltd. | 3,057 | - | ||||||
| Sales to WeBackers Co., Ltd. | 1,528 | - | ||||||
| Total | $ | 41,865 | $ | - | ||||
The primary services provided by NOWnews Network to these related parties was advertisement space on NOWnews Network’s website.
F-18
Due from related parties
| June 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Trade receivable from Jin Hao Kang Marketing Co., Ltd | $ | 56,665 | $ | 55,680 | ||||
| Trade receivable from GASH Co., Ltd. | 1,319 | 6,092 | ||||||
| Trade receivable from Digicentre Co., Ltd. | 155 | - | ||||||
| Trade receivable from Gamania Digital Entertainment Co., Ltd. | - | 4,803 | ||||||
| Trade receivable from Gash point(HK) Co., Ltd. | - | 306 | ||||||
| Trade receivable from Jollywiz Digital Technology Co., Ltd. | - | 13 | ||||||
| Total | $ | 58,139 | $ | 66,894 | ||||
Due to related parties
| June 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Due to Mr. Alan Chen | $ | 682,231 | $ | 545,397 | ||||
| Due to GASH Media Digital Marketing Co., Ltd. | 10,045 | - | ||||||
| Due to Chunghwa Wideband Best Network Co., Ltd. | 3,104 | - | ||||||
| Due to Global Investments Alliance Fundation | 1,552 | - | ||||||
| $ | 696,932 | $ | 545,397 | |||||
Due to related parties were unsecured, had no written agreement, due on demand with no maturity date, and bearing no interest.
Accrued financial advisory service fee to related party
| June 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Accrued financial advisory service fee to GIA Consultants Limited | $ | 2,970,000 | $ | - | ||||
| $ | 2,970,000 | $ | - | |||||
In resolution of the Company’s outstanding obligations pertaining to Services that have been rendered to the Company as of June 30, 2016, the Company and GIA Consultants Limited (“GIA Consultants”) will enter into a Financial Advisory Service Recognition Agreement (the “Agreement”) by the end of August 2016, pursuant to which the Company will issue 660,000 shares of common stock, par value $0.001 per share, to GIA Consultants. The common stock price was $4.50 per share as of closing on August 12, 2016, the closing price as of the last business day prior to the date of this filling, totaling an aggregate sum of $2,970,000.00. Such payment obligations for Services provided by GIA Consultants have never been agreed upon between the Company and GIA Consultants until near the date of this filing. As of the date of this filing, the aforementioned shares have not been issued. Please see Note 7 for accrued financial advisory service fee – related party.
NOTE 14: SUBSEQUENT EVENT
Management has evaluated subsequent events through August 15, 2016, the date which the financial statements were available to be issued. All subsequent events requiring recognition as of June 30, 2016 have been incorporated into these consolidated financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”
F-19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Management Discussion and Analysis (“MD&A”) contains “forward-looking statements”, which represent our projections, estimates, expectations or beliefs concerning among other things, financial items that relate to management’s future plans or objectives or to our future economic and financial performance. In some cases, you can identify these statements by terminology such as “may”, “should”, “plans”, “believe”, “will”, “anticipate”, “estimate”, “expect” “project”, or “intend”, including their opposites or similar phrases or expressions. You should be aware that these statements are projections or estimates as to future events and are subject to a number of factors that may tend to influence the accuracy of the statements. These forward-looking statements should not be regarded as a representation by the Company or any other person that the events or plans of the Company will be achieved. You should not unduly rely on these forward-looking statements, which speak only as of the date of this MD&A. Except as may be required under applicable securities laws, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this MD&A or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe under “Risk Factors” in our reports filed with the Securities and Exchange Commission. Actual results may differ materially from any forward looking statement.
Overview
We were incorporated as Forever Zen Ltd. on March 20, 2010 under the laws of the State of Nevada. On December 13, 2013, we changed our name to NowNews Digital Media Technology Co Ltd. with the plan to enter into the business of internet media and news content. Prior to the Share Exchange as defined below, we were a development stage company and had not yet realized any revenues from our planned operations.
On November 14, 2014, we entered into and closed a share exchange agreement (the “Share Exchange Agreement”), with Worldwide Media Investments Corp., an Anguilla corporation (“Worldwide”), the shareholders of Worldwide, and NOWnews Network Co., Ltd., a Taiwan corporation (“NOWnews Network”). Pursuant to the Share Exchange Agreement, the Company issued an aggregate of 20,000,000 shares of common stock to the shareholders of Worldwide in exchange for all the issued and outstanding capital stock of Worldwide (the “Share Exchange”). Worldwide, through its wholly owned subsidiary, Sky Media Investments Co., Ltd. (“Sky Media”), owned 66% of all the issued and outstanding capital stock of NOWnews Network immediately following the Share Exchange.
As a result of the consummation of the Share Exchange on November 14, 2014, NOWnews Network became, indirectly through Worldwide and Sky Media, a majority-owned subsidiary of the Company. We are now, through NOWnews Network, engaged in creating, collecting and distributing news and information through our website http://www.nownews.com/ and our applications on mobile phones or tablets.
We currently generate revenue primarily from online advertising and marketing services and news content licensing. We historically had revenues from online product sales in the E-commerce business and editing services for customers. Since our editing service was not profitable, we ceased this service in December 2013. In addition, we also suspended our E-commerce business in April 2014 and eventually terminated the E-commerce business at the end of 2015 due to the continuous loss from this business.
On August 14 and September 8, 2015, NOWnews Network issued 1,650,000 and 350,000 shares of common stock to new shareholders, respectively. As a result, our ownership in NOWnews Network dropped from 66% to 57%.
Results of Operations for the Three Months Ended June 30, 2016 as Compared to the Three Months Ended June 30, 2015:
| For The Three Months Ended | ||||||||||||||||
| June 30, | Change in | |||||||||||||||
| 2016 | 2015 | $ | % | |||||||||||||
| Net revenue | $ | 847,190 | $ | 522,222 | $ | 324,968 | 62 | |||||||||
| Cost of revenue | (554,175 | ) | (332,815 | ) | (221,360 | ) | 67 | |||||||||
| Gross profit | 293,015 | 189,407 | 103,608 | 55 | ||||||||||||
| Selling expenses | (155,153 | ) | (87,621 | ) | (67,532 | ) | 77 | |||||||||
| General and administrative expenses | (260,662 | ) | (253,336 | ) | (7,326 | ) | 3 | |||||||||
Financial advisory service fee – related party | (2,970,000 | ) | - | (2,970,000 | ) | 100 | ||||||||||
| Total operating expense | (3,385,815 | ) | (340,957 | ) | (3,044,858 | ) | 893 | |||||||||
| Operating loss | (3,092,800 | ) | (151,550 | ) | (2,941,250 | ) | 1,941 | |||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | 95 | 13 | 82 | 631 | ||||||||||||
| Interest expense | (371 | ) | (873 | ) | 502 | (58 | ) | |||||||||
| Other income, net | 1,710 | 511 | 1,199 | 235 | ||||||||||||
| Total other income (expense) | 1,434 | (349 | ) | 1,783 | (511 | ) | ||||||||||
| Loss from continuing operations before income taxes | (3,091,366 | ) | (151,899 | ) | (2,939,467 | ) | 1,935 | |||||||||
| Income taxes | - | - | - | - | ||||||||||||
| Loss from continuing operations | (3,091,366 | ) | (151,899 | ) | (2,939,467 | ) | 1,935 | |||||||||
| Income (loss) from discontinued operations, net of income taxes | 1 | (54,589 | ) | 54,590 | (100 | ) | ||||||||||
| Net loss | (3,091,365 | ) | (206,488 | ) | (2,884,877 | ) | 1,397 | |||||||||
| Net loss attributable to noncontrolling interests: | ||||||||||||||||
| Net loss from continuing operations | 10,270 | 53,134 | (42,864 | ) | (81 | ) | ||||||||||
| Net (income) loss from discontinued operations | (1 | ) | 34,773 | (34,774 | ) | (100 | ) | |||||||||
| Total net loss attributable to noncontrolling interest | 10,269 | 87,907 | (77,638 | ) | (88 | ) | ||||||||||
| Net loss attributable to NowNews Digital Media Technology Co., Ltd. | (3,081,096 | ) | (118,581 | ) | (2,962,515 | ) | 2,498 | |||||||||
3
Net Revenue
Our net revenue for the three months ended June 30, 2016 was $0.85 million, an increase of $0.33 million or 62% from $0.52 million for the three months ended June 30, 2015. The increase was primarily due to the increase in advertisement revenue and licensing revenue.
Advertising
Our advertising avenue was $0.78 million for the three months ended June 30, 2016, an increase of $0.31 million, or 66%, from $0.47 million for the three months ended June 30, 2015. We will continue focus on the internet advertising and marketing business.
Licensing and Services
Our revenue from content licensing and services was $0.06 million for the three months ended June 30, 2016, an increase of $0.01 million, or 20%, from $0.05 million for the three months ended June 30, 2015. The increase was primarily due to new customers acquired during the three months ended June 30, 2016.
4
Cost of Revenue
Cost of revenue mainly consists of advertisement costs, content licensing costs, copyright costs, website maintenance costs, and labor costs.
Cost of revenue was $0.55 million for the three months ended June 30, 2016, compared to $0.33 million for the three months ended June 30, 2015, an increase of $0.22 million, or 67%. The increase was mainly due to the increase of $0.19 million in advertisement cost, and $0.03 million in labor cost.
Gross Profit
Gross profit for the three months ended June 30, 2016 increased approximately $0.10 million, or 55%, as compared to the same period in 2015, due to the substantial increase in revenue. Gross profit margin was 34.59% for the three months ended June 30, 2016 as compared to 36.27% for the same period in 2015.
Selling Expenses
Total selling expenses consist primarily of payroll, labor and health insurance, and advertisement expenses. The amount increased by $0.07 million, or 77%, from $0.09 million for the three months ended June 30, 2015, to $0.16 million for the three months ended June 30, 2016. The increase in selling expenses was primarily due to the increase in labor costs resulting from the increase in the number of salespersons.
General and Administrative Expenses
General and administrative expenses primarily consist of payroll, welfare, labor and health insurance, post-retirement benefits, office rent and management fees, depreciation & amortization expenses, professional services, litigation settlement payments and expenses for other general corporate activities. General and administrative expenses increased by approximately $0.01 million, or 3%, from $0.25 million for the three months ended June 30, 2015 to $0.26 million for the three months ended June 30, 2016. The increase in general and administration expenses was principally due to the increase in labor costs.
Financial advisory service fee – related party
Financial advisory service fee increased $2.97 million due to service provided by GIA Consulting Limited. In resolution of the Company’s outstanding obligations pertaining to Services that have been rendered to the Company as of June 30, 2016, the Company and GIA Consultants Limited (“GIA Consultants”) will enter into a Financial Advisory Service Recognition Agreement (the “Agreement”) by the end of August 2016, pursuant to which the Company will issue 660,000 shares of common stock, par value $0.001 per share, to GIA Consultants. The common stock price was $4.50 per share as of closing on August 12, 2016, the closing price as of the last business day prior to the date of this filing, totaling an aggregate sum of $2,970,000.00. Such payment obligations for Services provided by GIA Consultants have never been agreed upon between the Company and GIA Consultants until near the date of this filing.
5
Net Loss
As a result of the above factors, we have net loss of approximately $3.09 million for the three months ended June 30, 2016 as compared to net loss of approximately $0.21 million for the three months ended June 30, 2015, representing an increase of loss of approximately $2.88 million, or approximately 1,397%.
Results of Operations for the Six Months Ended June 30, 2016 and 2015
| For The Six Months Ended | ||||||||||||||||
| June 30, | Change in | |||||||||||||||
| 2016 | 2015 | $ | % | |||||||||||||
| Net revenue | $ | 1,383,054 | $ | 1,038,211 | $ | 344,843 | 33 | |||||||||
| Cost of revenue | (948,436 | ) | (688,029 | ) | (260,407 | ) | 38 | |||||||||
| Gross profit | 434,618 | 350,182 | 84,436 | 24 | ||||||||||||
| Selling expenses | (298,307 | ) | (197,373 | ) | (100,934 | ) | 51 | |||||||||
| General and administrative expenses | (448,351 | ) | (495,673 | ) | 47,322 | (10 | ) | |||||||||
Financial advisory service fee | (2,970,000 | ) | - | (2,970,000 | ) | 100 | ||||||||||
| Total operating expense | (3,716,658 | ) | (693,046 | ) | (3,023,612 | ) | 436 | |||||||||
| Operating loss | (3,282,040 | ) | (342,864 | ) | (2,939,176 | ) | 857 | |||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | 105 | 205 | (100 | ) | (49 | ) | ||||||||||
| Interest expense | (857 | ) | (2,364 | ) | 1,507 | (64 | ) | |||||||||
| Other income, net | 2,279 | 553 | 1,726 | 312 | ||||||||||||
| Total other income (expense) | 1,527 | (1,606 | ) | 3,133 | (195 | ) | ||||||||||
| Loss from continuing operations before income taxes | (3,280,513 | ) | (344,470 | ) | (2,936,043 | ) | 852 | |||||||||
| Income taxes | - | - | - | - | ||||||||||||
| Loss from continuing operations | (3,280,513 | ) | (344,470 | ) | (2,936,043 | ) | 852 | |||||||||
| Income (loss) from discontinued operations, net of income taxes | 1 | (54,589 | ) | 54,590 | (100 | ) | ||||||||||
| Net loss | (3,280,512 | ) | (399,059 | ) | (2,881,453 | ) | 722 | |||||||||
| Net loss attributable to noncontrolling interests: | ||||||||||||||||
| Net loss from continuing operations | 76,274 | 106,884 | (30,610 | ) | (29 | ) | ||||||||||
| Net (income) loss from discontinued operations | (1 | ) | 34,773 | (34,774 | ) | (100 | ) | |||||||||
| Total net loss attributable to noncontrolling interest | 76,273 | 141,657 | (65,384 | ) | (46 | ) | ||||||||||
| Net loss attributable to NowNews Digital Media Technology Co., Ltd. | (3,204,239 | ) | (257,402 | ) | (2,946,837 | ) | 1,145 | |||||||||
6
Net Revenue
Our net revenue for the six months ended June 30, 2016 was $1.38 million, an increase of $0.34 million or 33% from $1.04 million for the six months ended June 30, 2015. The increase was primarily due to the increase in advertisement revenue.
Advertising
Our advertising avenue was $1.26 million for the six months ended June 30, 2016, an increase of $0.32 million, or 34%, from $0.94 million for the six months ended June 30, 2015. The increase was because we focus on the more profitable internet advertising and marketing.
Cost of Revenue
Cost of revenue mainly consists of advertisement costs, content licensing costs, copyright costs, website maintenance costs, and labor costs.
Cost of revenue was $0.95 million for the six months ended June 30, 2016, compared to $0.69 million for the six months ended June 30, 2015, an increase of $0.26 million, or 38%. The increase was mainly due to the increase of $0.21 million in advertisement cost.
Gross Profit
Gross profit increased approximately $0.08 million, or 24%, for the six months ended June 30, 2016, as compared to the same period in 2015, due to the substantial increase in revenue. Gross profit margin was 31.42% for the six months ended June 30, 2016 as compared to 33.73% for the same period in 2015.
Selling Expenses
Total selling expenses consist primarily of payroll, labor and health insurance, and advertisement expenses. The amount increased by $0.10 million, or 51%, from $0.20 million for the six months ended June 30, 2015, to $0.30 million for the six months ended June 30, 2016. The increase in selling expenses was primarily due to the increase in labor costs resulting from the increase in the number of salespersons.
7
General and Administrative Expenses
General and administrative expenses primarily consist of payroll, welfare, labor and health insurance, post-retirement benefits, office rent and management fees, depreciation & amortization expenses, professional services, litigation settlement payments, and expenses for other general corporate activities. General and administrative expenses decreased by approximately $0.05 million, or 10%, from $0.50 million for the six months ended June 30, 2015 to $0.45 million for the six months ended June 30, 2016. The decrease in general and administration expenses was principally due to the decrease in the consulting fee for system maintenance and development.
Financial advisory service fee – related party
Financial advisory service fee increased $2.97 million due to service provided by GIA Consulting Limited. In resolution of the Company’s outstanding obligations pertaining to Services that have been rendered to the Company as of June 30, 2016,the Company and GIA Consultants Limited (“GIA Consultants”) will enter into a Financial Advisory Service Recognition Agreement (the “Agreement”) by the end of August 2016, pursuant to which the Company will issue 660,000 shares of common stock, par value $0.001 per share, to GIA Consultants. The common stock price was $4.50 per share as of closing on August 12, 2016, the closing price as of the last business day prior to the date of this filling, totaling an aggregate sum of $2,970,000.00. Such payment obligations for Services provided by GIA Consultants have never been agreed upon between the Company and GIA Consultants until near the date of this filing.
Net Loss
As a result of the above factors, we have net loss of approximately $3.28 million for the six months ended June 30, 2016 as compared to net loss of approximately $0.40 million for the six months ended June 30, 2015, representing an increase of loss of approximately $2.88 million, or approximately 722%.
Liquidity and Capital Resources
Our unaudited consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant losses and has not demonstrated the ability to generate sufficient cash flows from operations to satisfy its liabilities and sustain operations. The Company had accumulated deficits of $7,604,428 and $4,400,189, and stockholders’ deficits of $3,638,054 and $437,293 as of June 30, 2016 and December 31, 2015, respectively. The net losses attributable to common stockholders of $3,204,239 and $257,402 for the six months ended June 30, 2016 and 2015, respectively. In addition, current liabilities exceed current assets by $3,751,071 and $497,578 as of June 30, 2016 and December 31, 2015, respectively, representing significant working capital deficits. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management’s Plan to Continue as a Going Concern
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of the Company’s services, (3) short-term and long-term borrowings from banks, and (4) short-term borrowings from stockholders or other related party(ies) when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.
During the six month period ended June 30, 2016, we had a net decrease in cash of $176,412 as compared to a net decrease of $50,087 for the six months ended June 30, 2015. Our principal sources and uses of funds were as follows:
| For the Six Months Ended June 30, | ||||||||
| 2016 | 2015 | |||||||
| Net cash used in operating activities | $ | (280,147 | ) | $ | (8,528 | ) | ||
| Net cash used in investing activities | (5,254 | ) | (20,783 | ) | ||||
| Net cash provided by (used in) financing activities | 106,412 | (21,913 | ) | |||||
| Net cash provided by discontinued operations | 1 | - | ||||||
| Effect of exchange rate change on cash and cash equivalents | 2,576 | 1,137 | ||||||
| Net decrease in cash and cash equivalents | $ | (176,412 | ) | $ | (50,087 | ) | ||
Net cash used in operating activities of continuing operations was $280,147 for the six months ended June 30, 2016, compared to net cash used in operating activities of $8,528 for the six months ended June 30, 2015. The increase of $271,619 of cash used in operating activities was primarily due to the increase in net loss, lower decreases in accounts receivable and related-parties trade receivable, partially offset by the increase in accrued financial advisory service fee to related party of $2,970,000.
Net cash used in investing activities of continuing operations was $5,254 for the six months ended June 30, 2016, compared to $20,783 for the same period last year. We used $5,254 in the addition of electronic equipment, computer equipment, and office equipment and furniture during the six month period ended June 30, 2016.
Net cash provided by financing activities of continuing operations amounted to approximately $0.11 million for the six months ended June 30, 2016, compared to approximately $0.02 million cash used in for the six months ended June 30, 2015, representing an increase of approximately $0.13 million. The increase in net cash provided from financing activities was mainly due to the increase in net proceeds from loans from related parties for the six months ended June 30, 2016.
8
We believe that our current levels of cash, cash flows from operations, and bank/related party borrowings, will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, we may need additional cash resources in the future if we experience changed business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If we ever determine that our cash requirements exceed our amounts of cash and cash equivalents on hand, we may seek to issue debt or equity securities or obtain a credit facility. Any future issuance of equity securities could cause dilution for our shareholders. Any incurrence of indebtedness could increase our debt service obligations and cause us to be subject to restrictive operating and financial covenants. It is possible that, when we need additional cash resources, financing will only be available to us in amounts or on terms that would not be acceptable to us, if at all.
Critical Accounting Policies
Basis of presentation:
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Since the Company, Worldwide, and NOWnews Network were entities under common control prior to the restructuring transaction, the Company and Worldwide have recast prior period financial statements to reflect the conveyance of NOWnews Network to Sky Media as if the restructuring transaction had occurred as of January 1, 2014. All significant intercompany transactions and account balances have been eliminated.
The functional currency of NOWnews Network and NOWnews International is the New Taiwan dollars, however the accompanying consolidated financial statements have been translated and presented in United States Dollars ($). In the accompanying consolidated financial statements and notes, “$”, “US$” and “U.S. dollars” mean United States dollars, and “NT$” and “NT dollars” mean New Taiwan dollars.
Use of estimates and assumptions:
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results. The most significant estimates reflected in the consolidated financial statements include depreciation, useful lives of property and equipment, deferred income taxes, useful life of intangible assets and contingencies. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.
Cash and cash equivalents:
The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with original maturities of three months or less, when purchased, to be cash and cash equivalents. As of June 30, 2016 and December 31, 2015, the Company has uninsured deposits in banks of $23,880 and $100,536.
Accounts receivable:
The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of June 30, 2016 and December 31, 2015, the Company assessed the allowance for doubtful accounts of $9,517 and $14,121, respectively.
9
Property and equipment:
Property and equipment are recorded at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extends the life of property and equipment are capitalized. These capitalized costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.
Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets or lease term as follows:
| Electronic Equipment | 3 years |
| Computer Equipment | 3 to 5 years |
| Office Equipment and Furniture | 3 to 5 years |
| Leasehold Improvement | Lesser of term of the lease or the estimated useful lives of the assets |
Long-lived assets:
The Company applies the provisions of FASB ASC Topic 360 (ASC 360), “Property, Plant, and Equipment” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 360, at least on an annual basis. ASC 360 requires the impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.
Intangible assets:
Intangible assets consist of software, trademark, and copyrights (see Note 6). At least annually, the Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Estimating future cash flows related to an intangible asset involves significant estimates and assumptions. If the Company’s assumptions are not correct, there could be an impairment loss or, in the case of a change in the estimated useful life of the asset, a change in amortization expense. There was no impairment of intangible assets as of and for the six months ended June 30, 2016 and the year ended December 31, 2015, respectively.
Leases:
Lease agreements are evaluated to determine if they are capital leases meeting any of the following criteria at inception: (a) Transfer of ownership; (b) Bargain purchase option; (c) The lease term is equal to 75 percent or more of the estimated economic life of the leased property; (d) The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor.
If at its inception a lease meets any of the four lease criteria above, the lease is classified by the lessee as a capital lease; and if none of the four criteria are met, the lease is classified by the lessee as an operating lease.
Revenue recognition:
Product and service revenue is recognized when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or the service has been performed, (iii) the Company’s price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured. Payments received before satisfaction of all of the relevant criteria for revenue recognition are recorded as unearned revenue. The Company recognizes revenue for product sales upon transfer of title to the customer. The Company recognizes revenue for services upon performance of the service. Customer purchase orders and/or contracts will generally be used to determine the existence of an arrangement. Shipping documents and the completion of any customer acceptance requirements, when applicable, will be used to verify product delivery or that services have been rendered. The Company will assess whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. The Company will record reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates will be based on industry-based historical data, historical sales returns, if any, analysis of credit memo data, and other factors known at the time.
10
Post-retirement and post-employment benefits:
NOWnews Network adopted the government mandated defined contribution plan pursuant to the Labor Pension Act (the “Act”) in Taiwan. Such labor regulations require that the rate of contribution made by an employer to the Labor Pension Fund per month shall not be less than 6% of the worker's monthly salaries. Pursuant to the Act, NOWnews Network makes monthly contribution equal to 6% of employees’ salaries to the employees’ pension fund. NOWnews Network has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $38,110 and $27,879 for the six months ended June 30, 2016 and 2015, respectively. The total amounts for such employee benefits, which were expensed as incurred, were $19,510 and $12,002 for the three months ended June 30, 2016 and 2015, respectively. Other than the above, the Company does not provide any other post-retirement or post-employment benefits.
Foreign currency translation:
The Company uses the United States dollar ("U.S. dollars") for financial reporting purposes. The Company maintains the books and records in its functional currency, being the primary currency of the economic environment in which its operations are conducted. For reporting purpose, the Company translates the assets and liabilities to U.S. dollars using the applicable exchange rates prevailing at the balance sheet dates, and the statements of income are translated at average exchange rates during the reporting periods. Gain or loss on foreign currency transactions are reflected on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component in the equity section of the balance sheet and is included as part of accumulated other comprehensive income. The functional currency of the Company and its subsidiaries in Taiwan is New Taiwan Dollars.
Statement of cash flows:
In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies, and translated to the reporting currency using an average foreign exchange rate for the reporting period. As a result, amounts related to changes in assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
Income taxes:
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. The deferred income tax assets were $0 as of both June 30, 2016 and December 31, 2015.
The Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At June 30, 2016 and December 31, 2015, management considered that the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.
The Company is subject to the tax authority in Taiwan for years since incorporated.
Earnings per share (EPS):
Earnings per share is calculated in accordance with ASC 260. Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock instruments were converted or exercised. Options and warrants are assumed to be exercised at the beginning of the period if the average stock price for the period is greater than the exercise price of the warrants and options. For the six months ended June 30, 2016 and 2015, no options or warrants were issued or outstanding.
11
Discontinued operations
Results of the Company’s discontinued entity have been presented in discontinued operations in the financial statements. See Note 1 and Note 12 for additional information.
Reclassifications:
Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.
Recent accounting pronouncements:
In February 25, 2016, FASB issued ASU-2016-02-Leases.The amendments in this Update create Topic 842, Leases, and supersede the leases requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The FASB is issuing this Update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease (as that term is defined in this Update), with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. All leases create an asset and a liability for the lessee in accordance with FASB Concepts Statement No. 6, Elements of Financial Statements, and, therefore, recognition of those lease assets and lease liabilities represents an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option. Reasonably certain is a high threshold that is consistent with and intended to be applied in the same way as the reasonably assured threshold in the previous leases guidance. In addition, also consistent with the previous leases guidance, a lessee (and a lessor) should exclude most variable lease payments in measuring lease assets and lease liabilities, other than those that depend on an index or a rate or are in substance fixed payments. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is still in progress of evaluating future impact of adopting this standard.
In November 20, 2015, FASB issued ASU-2015-17- Income Taxes. The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company is still in progress of evaluating future impact of adopting this standard.
12
In February 18, 2015, FASB issued ASU 2015-02—Consolidation (Topic 810). The amendments in this Update affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; (2) Eliminate the presumption that a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; (4) Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The amendments in this Update are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.
In August 2014, FASB issued ASU 2014-15 – Presentation of Financial Statements – Going Concern (Subtopic 205-40). The amendments in this Update states the disclosure of uncertainties about an entity’s ability to continue as a going concern. An entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). When management identifies conditions or events that raise substantial doubt, management should consider whether its plans will alleviate the substantial doubt. When substantial doubt is raised but is alleviated by management’s plans, the entity should disclose following information: (a) Principal conditions or events that raised substantial doubt (before consideration of management’s plans); (b) Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations; (c) Management’s plans that alleviated the substantial doubt.
When substantial doubt is raised but is not alleviated by management’s plans,, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued), and disclose the following information: (a) Principal conditions or events that raise substantial doubt; (b) Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations; (c) Management’s plans that are intended to mitigate the conditions or events that raise the substantial doubt.
The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is still in progress of evaluating future impact of adopting this standard.
13
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in the reports filed under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to the Company's management, including the Company's chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company’s management, including the Company’s chief executive officer, and chief financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the quarter ended June 30, 2016. Based upon that evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective.
Changes in Internal Controls over Financial Reporting
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
14
From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of copyrights and other intellectual property rights and other claims alleging defamation, invasion of privacy, or similar claims arising in connection with the news articles, pictures, and other contents published on the Company’s website.
Lai Matter
On July 11, 2014, Ms. Xiu-qing Lai filed a claim against NOWnews Network and five other companies (the “Five Companies”) who are unrelated to the Company, in the Taiwan Tainan District Court (the “Tainan District Court”) in connection to a news article edited by NOWnews Network and published on July 19, 2012 on the website of NOWnews Network and five other websites owned by the Five Companies, respectively. Ms. Lai claims that the news article contained a false statement that harms the reputation of Ms. Lai. Ms. Lai seeks approximately $17,070 (NT$550,000) in compensatory damages from NOWnews Network, $54,314 (NT$1,750,000) in aggregate from the Five Companies, and newspaper apologies from NOWnews Network and the Five Companies. Based on the agreements entered by NOWnews Network and the Five Companies, if any news content provided by NOWnews Network violates any regulations or infringes on any copyrights, NOWnews Network shall be responsible for any losses that may occur.
On January 6, 2015, the plaintiff agreed to settle this legal matter with NOWnews Network outside of court. NOWnews Network agreed to pay the plaintiff $12,415 (NT$400,000) in compensatory damages, and the plaintiff agreed to revoke the claim against NOWnews Network and the Five Companies. NOWnews Network has accrued $12,415 (NT$400,000) of contingent loss in connection to this lawsuit settlement during the year ended December 31, 2014. As of June 30, 2016, NOWnews Network has made payment of approximately $12,415 (NT$400,000) and this action is closed.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Not applicable.
15
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.
| Exhibit No. | Description | |
| 31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | |
| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | |
| 32.1 | Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** | |
| 32.2 | Certification of the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** | |
| 101.INS | XBRL Instance Document* | |
| 101.SCH | XBRL Taxonomy Extension Schema Document* | |
| 101.CAL | XBRL Taxonomy Calculation Linkbase Document* | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document* | |
| 101.LAB | XBRL Taxonomy Label Linkbase Document* | |
| 101.PRE | XBRL Taxonomy Presentation Linkbase Document* |
*Filed herewith.
**Furnished herewith.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| NOWNEWS DIGITAL MEDIA TECHNOLOGY CO. LTD. | ||
| Date: August 15, 2016 | By: | /s/ Shuo-Wei Shih |
| Shuo-Wei Shih | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: August 15, 2016 | By: | /s/ Tsung-Chien Chiang |
| Tsung-Chien Chiang | ||
| Chief Financial Officer | ||
| (Principal Accounting and Financial Officer) | ||
17
