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EX-32.1 - EXHIBIT 32.1 - NowNews Digital Media Technology Co. Ltd.v435414_ex32-1.htm
EX-21.1 - EXHIBIT 21.1 - NowNews Digital Media Technology Co. Ltd.v435414_ex21-1.htm
EX-31.2 - EXHIBIT 31.2 - NowNews Digital Media Technology Co. Ltd.v435414_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - NowNews Digital Media Technology Co. Ltd.v435414_ex31-1.htm
EX-32.2 - EXHIBIT 32.2 - NowNews Digital Media Technology Co. Ltd.v435414_ex32-2.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

(Mark One) FORM 10-K  

 

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2015

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________________ to ___________________

 

Commission file number: 333-171637

 

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO. LTD. 

(Exact name of registrant as specified in its charter)

 

Nevada   56-2012361
State or other jurisdiction of   (I.R.S. Employer
Incorporation or organization   Identification No.)

 

4F, No. 32, Ln. 407, Sec. 2, Tiding Road, Neihu District, Taipei City, Taiwan   114
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: +86-451-8233-5794

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Securities registered pursuant to section 12(g) of the Act: Common Stock, Par Value $0.001

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes x No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes x No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes ¨ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

 

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 ¨ (Do not check if a smaller reporting

company)

Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

¨ Yes x No

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the bid and asked price of such common equity, as of June 30, 2015 was approximately $65 million based on the closing price of $5.001 on June 30, 2015.

 

APPLICABLE ONLY TO REGISTRANTS 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 Section 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 REGISTRANTS)

 

The number of shares of common stock, par value $0.001 (the “Common Stock”), outstanding as of March 30, 2016 is 22,412,000.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

   

 

 

Table of Contents

 

    Page
     
  PART I  
     
Item 1. Business. 3
     
Item 1A. Risk Factors. 14
     
Item 1B. Unresolved Staff Comments. 14
     
Item 2. Properties. 14
     
Item 3. Legal Proceedings. 14
     
Item 4. Mine Safety Disclosures. 15
     
  PART II  
     
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 15
     
Item 6. Selected Financial Data. 16
     
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 17
     
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 24
     
Item 8. Financial Statements and Supplementary Data. F-1
     
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 25
     
Item 9A. Controls and Procedures. 25
     
Item 9B. Other Information. 26
     
  PART III  
     
Item 10. Directors, Executive Officers, and Corporate Governance. 26
     
Item 11. Executive Compensation. 28
     
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 30
     
Item 13. Certain Relationships and Related Transactions, and Director Independence. 31
     
Item 14. Principal Accountant Fees and Services. 32
     
Item 15. Exhibits, Financial Statement Schedules. 34

 

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Cautionary Statement Regarding Forward Looking Statements

 

The discussion contained in this Annual Report on Form 10-K (“Annual Report”) contains “forward-looking statements” within the meaning of Section 27A of the United States Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the United States Securities Exchange Act of 1934, as amended, or the Exchange Act. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases like “anticipate,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “target,” “expects,” “management believes,” “we believe,” “we intend,” “we may,” “we will,” “we should,” “we seek,” “we plan,” the negative of those terms, and similar words or phrases. We base these forward-looking statements on our expectations, assumptions, estimates and projections about our business and the industry in which we operate as of the date of this Annual Report. These forward-looking statements are subject to a number of risks and uncertainties that cannot be predicted, quantified or controlled and that could cause actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Statements in this Annual Report describe factors, among others, that could contribute to or cause these differences. Actual results may vary materially from those anticipated, estimated, projected or expected should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect. Because the factors discussed in this Annual Report could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement made by us or on our behalf, you should not place undue reliance on any such forward-looking statement. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. Except as required by law, we undertake no obligation to publicly revise our forward-looking statements to reflect events or circumstances that arise after the date of this Annual Report or the date of documents incorporated by reference herein that include forward-looking statements.

 

PART I

 

Item 1. Business.

 

Corporate History

 

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. and planned to enter into the business of internet media and news content. Prior to the Share Exchange described 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, (i) 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. Worldwide, through its wholly owned subsidiary, Sky Media Investments Co., Ltd. (“Sky Media”), owns 66% of all the issued and outstanding capital stock of NOWnews Network(the “Share Exchange”).. As a result of the Share Exchange, Worldwide and Sky Media become our wholly owned subsidiary and NOWnews Networkis now our majority owned subsidiary in which we indirectly holds 66% of the equity interest. Upon consummation of the Share Exchange, we ceased to be a shell company.

 

In connection with the Share Exchange Agreement, Alan Chen and his spouse, Chiu-Li Tu, executed a personal guarantee in favor of the Company whereby they jointly and severally guarantees to make a cash payment to the Company in the amount of the net loss from operations of the Company, if any, within 15 business days of the date of the issuance of the audited financial statements of the Company for each of the fiscal years ended December 31, 2014 and 2015.

 

On August 5, 2015, NOWnews Network , Sky Media, Mr. Alan Chen and his spouse, Chiu-Li 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. As a result of the Stock Purchase, NOWnews Network is now our majority owned subsidiary in which we indirectly holds 57% of the equity interest.

 

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Corporate Structure

 

The diagram below illustrates our corporate structure as of the date of this report.

 

 

Worldwide was incorporated in Anguilla on June 4, 2013 under the Anguilla International Business Companies Act, 2000.

 

Sky Media was incorporated under the laws of Anguilla on June 4, 2013.

 

NOWnews Network Co. Ltd. (“NOWnews Network”) was incorporated in Taipei City, Taiwan on June 8, 2006. NOWnews Network is our primary operating subsidiary as of December 31, 2015.

 

NOWnews Network owns 55% of the equity interest of Nownews International Marketing Co., Ltd, a Taiwan corporation (“Nownews International”), primarily engaged in sales of advertising spaces in newspapers. The operation of Nownews International was terminated in December 2013.

 

Recent Development

 

Change in Principal Executive Offices

 

In an effort to save costs, we decided to terminate our existing lease with Shin Kong Life Insurance Co., Ltd. for the office space at 4F No. 550, Riuguang Road, Neihu, District, Taipei City 114, Taiwan, for which we pay approximately $10,000 per month. On March 3, 2015, we signed an office lease with Yiqiu International Department Store Co., Ltd. from whom we lease a floor area of approximately 7,117.35 square feet for a term of two years with a monthly rent of approximately $7,045 (NT$231,000). The lease expires on April 14, 2017. Our principal executive offices have been moved to 4F, No. 32, Ln. 407, Sec. 2, Tiding Road, Neihu District, Taipei City 114, Taiwan. On March 15, 2015, we terminated the lease with Shin Kong without any penalty for early termination.

 

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Principal Services

 

We generate our revenues primarily from online advertising and marketing services and news content licensing.

 

Advertising and Marketing

 

Our advertising product offerings consist of banner, button, text-link and video advertisements that appear on pages within our website, and advertising campaign design and management services. Our primary advertising and sponsorship client base for advertising and sponsorships includes international and local companies. We offer brand advertising services in display formats on our website as well as performance-based online marketing solutions, such as promoted feeds on mobile or tablet. Display advertising comprises the text, images and other interactive ads that run across the web on computers and mobile devices, including content specially formatted to be displayed on smartphones, tablets and other mobile personal digital devices.

 

We also provide advertising campaign design and management services for a fee. Our services include design and implementation of marketing and advertising projects consisting of content advertising through publishing topic news and experience articles, pop-up or embedded advertisements on our website or applications, creation of visual/mobile/audio advertisement, etc. Through these services, we help our clients establish their corporate image and brand and market their products.

 

News Content Licensing

 

We have our own team comprising journalists and editors who produce approximately 350 - 500 news articles/reports on a daily basis, covering real-time diversified news including politics, finance, life, technology, sport, entertainment, travel and others. Besides, NOWnews Network also licenses its self-created news content to major portals and corporate partners with more extensive news network, such as Yahoo Hong Kong, Yahoo Taiwan, MSN Taiwan, Yam, Sina Taiwan, Taiwan Mobile, Chunghwa Telecom, Far EasTone Telecommunications Co. Ltd., Vibo Telecom, etc.

 

Historically, we provided editing services to customers including selecting, sorting, editing news for other website operators such as Yahoo Taiwan. We ceased this service in December 2013 because this service was not profitable. In addition, we used to provide film/video editing services and licensed copyrights to a related party, Chunghwa Wideband Best Network Co., Ltd., and stopped in later 2013.

 

E-Commerce

 

We started our E-commerce business in July 2012 when we partnered with some online shopping websites and received commissions for diverting our website traffic to these shopping websites. We launched our E-commerce platform, NOWshopping, in March 2013 and engaged in the online sales of electronic products including electronics and computers, appliances etc. However, we suspended this line of business in April 2014 due to continuous losses and terminated it at the end of 2015.

 

Seasonality

 

We have experienced seasonality in our online advertising business. Historically, the periods from May through August and from November to January have seen increase of more than 20% in advertising revenues due to the summer break and the winter holiday season. February has historically been the worst month for our advertising business as it is after the Lunar New Year holidays when advertising revenues are generally down nationwide. Past performance may not be indicative of future trends, as the mix of advertising industry sectors, which may have different seasonality factors, may shift from quarter to quarter. There is no seasonality in its licensing business.

 

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Major Customers

 

For the fiscal year ended December 31, 2015, our top three customers and their respective sale amount are as follows:

 

       Percentage of Total 
Name  Sales ($)   Revenue 
Google   221,062    9.00%
Zenithoptimedia Co., Ltd.   178,662    7.27%
GuoShi Partners Co.   172,501    7.02%

 

For the fiscal year ended December 31, 2014, our top three customers and their respective sale amount are as follows:

 

       Percentage of Total 
Name  Sales ($)   Revenue 
Yahoo Taiwan Inc.   159,104    5.43%
GuoShi Partners Co.   141,601    4.83%
Zenithoptimedia Co., Ltd.   133,900    4.57%

 

Employees

 

As of the date of this report, we have 80 employees, all of whom are full-time and are based in Taiwan. The breakdown of our employees based on departments is set forth below:

 

Department   Number of Employees
News   49
Sales and Marketing   20
Innovation and Development   3
Finance    3
Administration    5

 

There are no collective bargaining contracts covering any of our employees. We believe our relationship with our employees is satisfactory.

 

Regulation

 

Regulatory Authorities

 

We are subject to the supervision of the National Communications Commission of Republic of China (the “NCC”). The NCC was established in February 2006.

 

Permits, Licenses and Approvals

 

Pursuant to the Provisions on Broadcasting and Television Program Supply, to obtain the permit to engage in broadcasting and TV program supply business, we are required to meet two criteria: (i) minimum registered capital of NT$1,200,000 and (ii) minimum office area of approximately 377square feet. The operating permit should be obtained from Ministry of Culture before we apply for the business license for regular companies. As of the date of this report, NOWnews Network has obtained the approval for (i) production and distribution of radio and TV programs and (ii) radio and TV advertisement.

 

We believe we have all requisite permits, approvals and licenses to conduct our businesses.

 

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Rating of Internet Content

 

The Regulations for the Rating of Internet Content was abolished by the NCC in 2012. At present, the rating of internet content is governed by Article 46 of the Protection of Children and Youths Welfare and Rights Act (last amended on August 8, 2012), which requires that all internet platform providers adopt their own rules implementing “clear and practicable” protection measures in accordance with the internet content supervisory institutions engaged by the NCC and other relevant authorities to prevent youth and children from having access to harmful internet contents. An internet platform provider is required to restrict children and youths from having access to internet content upon the relevant authority’s notification that such internet contents may be harmful or that such internet platform provider failed to implement “clear and practicable” protection measures.

 

Personal Data Protection Act

 

On May 26, 2010, the President of the Republic of China announced the amendment of the Personal Information Protection Act, or PIPA, which replaced the former Computer-Processed Personal Data Protection Act, or CPPDPA, and became fully effective on October 1, 2012, except for its Articles 6 and 54 that await further determination by the Executive Yuan. Under the PIPA, every individuals or governmental or non-governmental agencies, including us, should be subject to certain requirements and restrictions for collecting, processing or using personal data. The definition of “personal data” is extended to cover a broad scope, including name, birthday, ID, special features, fingerprints, marriage status, family, education, occupation, medical records, medical history, generic information, sex life, health examination report, criminal records, contact information, financial status, social activities, and any other data which is sufficient to directly or indirectly identify a specific person. If we fail to comply with the PIPA, we may be subject to serious punishment for civil claims, criminal offenses and administrative liabilities: the ceiling of the aggregate compensation amount for damages payable in a single case will be up to NT$200 million or the actual value of loss arising from our violation provided the amount of actual value of such loss is higher than NT$200 million; the defendant may be subject to an imprisonment of up to five years; and the penalty for administrative liabilities will be up to NT$500,000 for each violation, and may be imposed consecutively if such violation continues.

 

Foreign Investment

 

Pursuant to the provisions of the Statute for Investment by Foreign Nationals, there are only a few industries where foreign investments are restricted. None of the businesses of NOWnews Network fall under the restricted industries. Therefore, there is no restriction on foreign ownership in NOWnews. However, Taiwan restricts investments by the PRC nationals. In accordance with the Rules on Investment Permit by Nationals from the People’s Republic of China, only certain industries are open to the PRC nationals. The following businesses of NOWnews Network are open to the PRC nationals: Online and catalog shopping, non-store retail, portal website operation, data processing, website management and related services.

 

News Regulation

 

As a news generator, we are subject to regulations on contents of news. We are prohibited from creating or distributing certain news including but not limited to the following:

 

News that damages people’s reputation

News that invades people’s privacy

News that involves information on national defense

News that might influence judicial proceedings

 

Depending on the circumstances, in the event of violation of any of the foregoing restrictions, we may be subject to fines or criminal liabilities. In addition, we need to comply with requirements on news regarding election, public polls, and pharmaceuticals, etc.

 

Regulation on Advertisement

 

Companies are prohibited from using false or misleading advertising language and advertising agencies cannot help its clients design or create untrue or misleading advertisements. Otherwise, the agencies may be subject to the same liabilities as their clients.

 

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Foreign Exchange

 

Foreign exchange regulation in Taiwan is primarily governed by the Ordinance of Foreign Exchange Administration, latest amended on April 29, 2009 (the “Foreign Exchange Ordinance”). Under the Foreign Exchange Ordinance, foreign exchange refers to foreign currency, bills and marketable securities. The authority managing the administration of foreign exchange is Ministry of Finance of Republic of China, while the authority managing the practical operation of foreign exchange business is Central Bank of Republic of China. The Foreign Exchange Ordinance also specifies the allocated power of Ministry of Finance and Central Bank, respectively. To the extent that any foreign exchange receipts, payments or transactions reach the threshold of NT$500,000 ($15,249) or equivalent in foreign currency, it must be reported to the Central Bank or its designated authorities. Upon incurrence of any of the following events, the State Council of Republic of China may determine and announce that for a period of time, to close the foreign exchange market, suspend or restrict all or partial foreign exchange payment, order a mandatory sale or deposit of all or partial foreign exchange into a designed bank, or dispose in any other manner as it deems necessary:

 

the disorder in domestic or international economy to the detriment of the stability of Taiwan’s economy; or Taiwan suffers serious trade deficit.

 

Tax

 

The current principal regulations governing tax in Taiwan include the following:

 

Income Tax Law, latest amended on December 2, 2015;

The Implementation Rules of Income Tax Law, latest amended on September 30, 2014;

Value-Added and Non-Value-Added Business Tax Law, latest amended on December 30, 2015; and

The Implementation Rules of Value-Added and Non-Value-Added Business Tax Law, latest amended on December 23, 2015.

 

Under the Income Tax Law, there are two kinds of income tax, comprehensive income tax for individuals and income tax for enterprises operating for profit, respectively.

 

Individuals who have income with a source within Taiwan must pay comprehensive income tax on their income sourced within Taiwan; while non-resident individuals having income with a source within Taiwan, except otherwise provided in the Income Tax Law, shall pay tax based on the amount attributable to the sources of their income.

 

The enterprise with head office located in Taiwan shall pay profit-seeking income tax on its global income both within and outside Taiwan; while the enterprises with head office outside Taiwan shall only pay profit-seeking income tax on its business income sourced from within Taiwan.

 

Rate of Income Tax

 

The individual comprehensive income tax exemption threshold is NT$60,000 ($1,830) per person per year. Any income beyond such exemption threshold is subject to a progressive tax rate ranging from 5% to 45%.

 

With respect to enterprises operating for profit, the exemption threshold is NT$120,000 ($3,660). Any income beyond such exemption threshold is subject to 17% tax rate on its taxable income.

 

Sale of goods or service, import of goods in Taiwan are subject to a Value-Added or Non-Value-Added Business Tax. The Rate of business tax, except as otherwise stipulated in the relevant tax law, ranges from 5% to 10% as determined by the State Council of Taiwan.

 

Enforceability of Judgments in Taiwan

 

All of our directors and executive officers named in this report are residents of Taiwan and substantially all of our assets and the assets of those persons are located in Taiwan. As a result, it may not be possible for investors to effect service of process upon us or those persons outside of Taiwan, or to enforce against them judgments obtained in courts outside of Taiwan. Any final judgment obtained against us in any court other than the courts of the Republic of China in connection with any legal suit or proceeding arising out of or relating to our securities will be enforced by the courts of the Republic of China without further review of the merits only if the court of the Republic of China in which enforcement is sought is satisfied that:

 

the court rendering the judgment has jurisdiction over the subject matter according to the laws of the Republic of China;

 

the judgment and the court procedure resulting in the judgment are not contrary to the public order or good morals of the Republic of China;

 

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if the judgment was rendered by default by the court rendering the judgment, we, or our officers and directors, were duly served within a reasonable period of time in accordance with the laws and regulations of the jurisdiction of the court or process was served on us with judicial assistance of the Republic of China; and

 

judgments at the courts of the Republic of China are recognized and enforceable in the court rendering the judgment on a reciprocal basis.

 

A party seeking to enforce a foreign judgment in the Republic of China would be required to obtain foreign exchange approval from the Central Bank of the Republic of China (Taiwan) for the payment out of Taiwan of any amounts recovered in connection with the judgment denominated in a currency other than NT dollars if a conversion from NT dollars to a foreign currency is involved.

 

Market Opportunities

 

Our current primary focus is on the Taiwan market. The success of our business is tied to the size and vitality of Taiwan’s economy. According to the World Bank, Taiwan’s gross domestic product in 2014 grew 3.58% year over year to $529.60 billion.

 

Taiwan has one of the most advanced telecommunications networks in Asia. With excellent telecommunications infrastructure in place and the innovative use of breakthrough information technologies, Taiwan continues to be well placed to drive both mobile and data communications services.

 

Competition

 

The market for Web sites offering online content and services targeting the global Chinese community is competitive and we expect competition to increase in the future. Many of the companies attempting to address this market offer portal, content and e-commerce services. The following table lists the Chinese-language Web sites that we believe are currently our primary competitors in Taiwan:

 

udn.com

appledaily.com.tw

Chinatimes.com

ltn.com.tw

ettoday.net

 

As internet usage in Mainland China, Hong Kong, Macau and Taiwan (collectively, the “Greater China”) increases and the Greater China market becomes more attractive to advertisers and for conducting fee-based services, large global competitors, such as Facebook, LinkedIn, Google, Twitter, Line, Kakao and WhatsApp, may increasingly focus their resources on the Greater China market. We cannot assure you that we will succeed in competing against the established and emerging competitors in the market. The increased competition could result in reduced traffic, loss of market share and revenues, and lower profit margins.

 

Our ability to compete successfully depends on many factors, including the quality of our content, the breadth, depth and ease of use of our services, our sales and marketing efforts and the performance of our technology.

 

Competitive Strength

 

We provide online content and services for the global Chinese community with a focus on Taiwan, including but not limited to informational features, social media and social networking services as well as other fee-based services. This industry can be characterized as highly competitive and rapidly changing due to the fast growing market demand. Barriers to entry are relatively low, and current and new competitors can launch new websites or services at a relatively low cost. Many companies offer various content and services targeting this community that compete with us. Many of our competitors have greater financial resources, a longer history of providing online services, a larger and more active user base, more established brand names and currently offer a greater breadth of products that may be more popular than our online offerings. However, we believe that we possess the following competitive strengths that enable us to compete effectively:

 

We have an outstanding editorial team which produces hundreds of news on a daily basis, covering real-time diversified news including politics, finance, life, technology, sport, entertainment, travel and others. Besides, we license our self-created news content to major portals and corporate partners with a stable and extensive news network. We believe this is very critical to attract readers and increase traffic volume of our website.

 

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We have been focusing on new media operations and interaction with its members and fans. We believe we are the first news media which opened official accounts on LINE and WeChat, two very popular mobile messengers in Asia and created NOWnews Network fan group on Facebook.

 

With the growing popularity of mobile devices, we are the first to develop applications on mobile devices offering users real-time news anywhere at any time. The current daily traffic on our website exceeds 14 million and is mobile website has a daily traffic volume of approximately 4 million.

 

We have won many awards and is highly recognized and rated among our peers. Recognition and awards include:

 

o 14th among the top 100 websites in Taiwan in the survey conducted by comScore

o 18th on the “Top 100 Hottest Websites in Taiwan” and first among the original news websites by Digital Times in 2014

o 22th on the “Top 100 Most Popular Fan Clubs in Taiwan” by Digital Times in 2013

o The Seventh and Eighth Quality Journalism Awards by the Ministry of the Interior of Taiwan

o The 13th Cross-Strait News Reporting Award – Citizen News

o The 2011 Excellent Alliance Partners by Yahoo Shopping Center

 

We are not only committed to the provision of quality news content, but also have ventured into the e-commerce business. We started trial operation of NOWshopping, an online shopping mall, in 2013. Despite that we have incurred continuous loss in the past and temporarily suspended our E-commerce business, we believe the existing membership base and high daily traffic volume on our website will put us in a very favorable position for online shopping business, particularly after we adjust our operating strategy for E-commerce business and re-launch it in the near future.

 

We have a very large member base, which includes approximately 1.6 million members, 320,000 shopping members, 300,000 Facebook fans and 800,000 LINE subscribers and 100,000 Wechat subscribers. We believe this member base will keep increasing and we will leverage this membership base to expand our business. PRC implements strict control over the media. However, we are the only Taiwan internet media to which the PRC residents have full access – this, we believe, provides us with access to a very large potential reader base and tremendous business opportunities. Currently, approximately 7% of our traffic is from the PRC. Through our platform, we can build a cross-strait service system where we can promote Taiwan’s services or products to readers in the PRC. However, PRC regulatory authorities may find the contents on our website/mobile applications objectionable and block users in China from accessing our website and/or mobile applications.

 

Technology Infrastructure

 

Our operating infrastructure is designed to serve and deliver hundreds of millions of page views a day to our users. This scalable infrastructure allows our users to access our products and services quickly and efficiently, regardless of their geographical location. Our infrastructure is also designed to provide high-speed access by forwarding queries to our Web hosting sites with greater resources or lower loads. Our Web pages are generated, served and cached by servers hosted at various co-location Web hosting sites in Taiwan and the United States.

 

Our servers run on our own web-based platforms. These servers are maintained at Amazon in the United States and our offices in Taiwan. We believe that our hosting partners provide significant operating advantages, including an enhanced ability to protect our systems from power loss, break-ins and other potential external causes of service interruption. They provide continuous customer service, multiple connections to the Internet and a continuous power supply to our systems. In addition, we conduct online monitoring of all our systems for accessibility, load, system resources, network- server intrusion and timeliness of content.

 

Sales and Marketing

 

We enhance our brand images and visibility through participating in various public events, exchanging resources with other companies, and establishing partnership with other media companies. In addition, we focus on keyword marketing and search engine optimizing to increase the search ranking of our news content.

 

Research and Development

 

Currently, we focus on (i) developing the Drupal platform to host our website and (ii) using Drupal to build daily news from personal blogs and company applications. Drupal is an open source content management platform powering millions of websites and applications. It’s built, used, and supported by an active and diverse community of people around the world and has thousands of add-on modules and designs available for us to build and improve our website.

 

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Intellectual Property

 

We rely on a combination of copyright, trademark, patent and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology. Monitoring unauthorized use of our products is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.

 

In addition, third parties may initiate litigation against us alleging infringement of their proprietary rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the infringed or similar technology on a timely basis, our business could be harmed. In addition, even if we are able to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations.

 

Patents

 

We have the following patents as of the date of this report:

 

Patent Name   Type   Jurisdiction   Valid Period   Certificate No.
Portable multimedia sharing device   Utility Model   Taiwan   May 11, 2011 – September 15, 2020   M403695
Multimedia device with embedded multimedia information   Utility Model   Taiwan   May 21, 2012 – September 26, 2021   M429933
Information browsing system   Utility Model   Taiwan   April 11, 2012 – September 29, 2021   M426832
Multimedia file with embedded information   Utility Model   The PRC   May 11, 2011 – September 15, 2020   2495374

 

Trademarks

 

As of the date of this report, we have registered an aggregate of 17 trademarks in various categories and are in the process of applying for an additional four trademarks in Taiwan and the PRC. Set forth below is a list of our trademarks:

 

        Valid Period    
Trademarks   Jurisdiction   From   To   Categories
                 
    Taiwan   2/16/2007   1/31/2018   35, 41
2/16/2007   11/30/2017   38, 42
2/16/2008   2/15/2018   16, 35,42

 

 11 

 

 

        Valid Period    
Trademarks   Jurisdiction   From   To   Categories
                 
    Taiwan   5/7/2007   2/15/2018   16, 35, 42
    5/7/2007   8/31/2018   9, 38, 41
                 
    Taiwan   4/3/2008   12/15/2018   9, 16, 35, 38, 41
                 
    Taiwan   5/6/2009   4/15/2020   35
    5/6/2009   2/15/2020   38
    5/6/2009   2/15/2025   9
                 
    Taiwan   6/30/2010   9/15/2021   9, 16, 35, 38, 41
             
PRC   8/2/2010   12/23/2023   9
  8/2/2010   4/13/2022   16
  8/2/2010   5/6/2024   35
    8/2/2010   6/2/2024   41
                 
    Taiwan   5/19/2010   1/31/2021   9, 16, 35, 38, 41
                 
    Taiwan   5/6/2009   4/15/2020   35
    5/6/2009   2/15/2020   9, 38, 41
                 
    Taiwan   2/1/2013   1/31/2023   35

 

 12 

 

 

        Valid Period    
Trademarks   Jurisdiction   From   To   Categories
                 
    Taiwan   8/18/2013   7/31/2023   16
    11/16/2013   11/15/2023   35, 41
                 
    Taiwan   11/2/2012   8/15/2023   35
                 
    PRC   4/7/2008   2/6/2022   16

 

 13 

 

 

Item 1A. Risk Factors.

 

Not applicable.

 

Item 1B. Unresolved Staff Comments.

 

Not applicable.

 

Item 2. Properties.

 

Our corporate headquarters are located at 4F, No. 32, Ln. 407, Sec. 2, Tiding Road, Neihu District, Taipei City 114, Taiwan, where we lease approximately 7,117.35 square feet of office space under a lease that expires April 14, 2017. Our monthly lease payment for this office space is approximately $7,045 (NT$231,000).

 

Our servers are primarily maintained in Taiwan. We believe the leased premise is sufficient to meet the immediate needs of our business.

 

Item 3. Legal Proceedings.

 

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.

 

Wang Matter

 

On April 4, 2010, Ms. Mei-hsin Wang filed a claim against NOWnews Network in the Taiwan Taipei District Court (the “Taipei District Court”) in connection to a news article NOWnews Network purchased from Eastern Television Co., Ltd. (“ETTV”). Ms. Wang claims that the news article published on NOWnews Network’s website contained a false statement that harms the reputation of Ms. Wang. Ms. Wang seeks approximately $60,994 (NT$2 million) in compensatory damages and newspaper apology from ETTV and NOWnews Network. On July 8, 2011, the Taipei District Court entered a judgment of first instance against ETTV and NOWnews Network in the amount of approximately $18,298 (NT$600,000).

 

On August 8, 2011, NOWnews Network appealed against the judgment of first instance to the Taiwan Superior Court (the “Superior Court”). On November 13, 2013, the Superior Court reversed the judgment of first instance and entered the judgment of second instance that NOWnews Network and ETTV shall pay the plaintiff approximately $9,149 (NT$300,000) and $9,149 (NT$300,000), respectively, and apologize on the newspapers specified.

 

In November, 2013, NOWnews Network filed a motion in the Supreme Court against the judgment of second instance. The Supreme Court denied the motion on December 19, 2013. NOWnews Network accrued contingent loss of approximately $9,149 (NT$300,000) for the year ended December 31, 2010. In addition, NOWnews Network accrued expenses related to the newspaper apology during the year ended December 31, 2013 in the amount of approximately $23,233 (NT$700,000). In February 2014, NOWnews Network paid approximately $9,149 (NT$300,000) to Ms. Mei-hsin Wang as damages and apologized on certain specified newspapers.

 

Election Matter

 

On March 7, 2013, NOWnews Network  received a letter from Taichung City Election Commission indicating the content of a news article published by NOWnews Network on January 17, 2013 appears to violate the Civil Servants Election And Recall Act of Taiwan On October 4, 2013, the Central Election Commission (the “CEC”) determined that NOWnews Network violated the Civil Servants Election And Recall Act and imposed a penalty of approximately $15,249 (NT$500,000) and $15,249 (NT$500,000) on NOWnews Network and Mr. Shu-sen Chang, NOWnews Network’ legal representative and Chairman, respectively.

 

On November 4, 2013, NOWnews Network filed an appeal in the Administrative Appeal Committee under the Executive Yuan of Taiwan government against the decision of CEC based on the Taiwan Administrative Appeal Act. The Administrative Appeal Committee denied NOWnews Network’ appeal on February 14, 2014. NOWnews Network accrued contingent loss of approximately $30,497 (NT$1,000,000) during the year ended December 31, 2013. In 2014, NOWnews Network paid a fine of approximately $30,497 (NT$1,000,000) and this action is closed.

 

 14 

 

 

Election Matter (Yamedia)

 

The news article published on January 17, 2013, as described in Election Matter was published simultaneously by one of NOWnews Network’ customers, Yamedia Inc. (“Yamedia”) based on the sales agreement between Yamedia and NOWnews Network. According to the agreement, if the news content provided by NOWnews Network violates any regulations or infringes on any copyrights, NOWnews Network shall be responsible for any losses Yamedia may occur.

 

On October 8, 2013, the CEC determined that Yamedia violated the Civil Servants Election and Recall Act and imposed a penalty of approximately $15,249 (NT$500,000) and $15,249 (NT$500,000) on Yamedia and the legal representative of Yamedia, respectively. Based on the above terms in the sales agreement, NOWnews Network shall compensate the losses of approximately $30,497 (NT$1,000,000) for such penalty. NOWnews Network accrued contingent loss of approximately $30,497 (NT$1,000,000) during the year ended December 31, 2013. In 2014, NOWnews Network paid a fine of approximately $30,497 (NT$1,000,000) and this action is closed.

 

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 $16,773 (NT$550,000) in compensatory damages from NOWnews Network, $53,370 in aggregate from (NT$1,750,000) 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 $12,199 (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 $12,199 (NT$400,000) of contingent loss in connection to this lawsuit settlement during the year ended December 31, 2014. During the year ended December 31, 2015, NOWnews Network  has made payment of $11,813 (NT$375,000) in connection with this legal matter.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market for Common Equity and Related Stockholder Matters

Our common stock is currently quoted on the OTCQB under the symbol “NDMT.” There has not been any significant trading to date in the Company’s common stock. The table below presents the high and low bid for our common stock for each quarter for the years ended December 31, 2014 and 2013. These prices reflect inter-dealer prices, without retail markup, markdown, or commission, and may not represent actual transactions.

 

   High   Low 
First Quarter of 2015 (for the period end March 28, 2016)  $6.80   $6.00 
           
Year ended December 31, 2015          
1st Quarter  $5.00   $5.00 
2nd Quarter  $5.00   $5.00 
3rd Quarter  $5.00   $5.00 
4th Quarter  $7.80   $6.50 
           
Year ended December 31, 2014          
1st Quarter  $1.50   $1.50 
2nd Quarter  $1.50   $1.50 
3rd Quarter  $6.10   $1.50 
4th Quarter  $6.30   $5.00 

 

 15 

 

 

As of March 25, 2016, we had 22,412,000 shares of common stock outstanding and held of record by 510 stockholders..

 

Securities Authorized for Issuance under Equity Compensation Plans.

 

None.

 

Stock Transfer Agent

 

Our stock transfer agent is Empire Stock Transfer, 1859 Whitney Mesa Dr., Henderson, NV 89014.

 

Dividends

 

The Company has never declared or paid any cash dividends on its common stock. The Company currently intends to retain future earnings, if any, to finance the expansion of its business. As a result, the Company does not anticipate paying any cash dividends in the foreseeable future.

 

Repurchase of Equity Securities

 

None.

 

Recent Sales of Unregistered Securities

 

None.

 

Item 6. Selected Financial Data.

 

Not applicable.

 

 16 

 

 

Item 7. 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%.

 

 17 

 

 

Results of Operations for the Years Ended December 31, 2015 and 2014

 

   For The Years Ended     
   December 31,   Change in 
   2015   2014   $   % 
                 
Net revenue  $2,458,785   $2,932,751   $(473,966)   (16)
Cost of revenue   (1,474,886)   (1,819,883)   344,997    (19)
Gross profit   983,899    1,112,868    (128,969)   (12)
                     
Selling expenses   (508,480)   (606,355)   97,875    (16)
General and administrative expenses   (1,002,819)   (1,384,823)   382,004    (28)
Total operating expense   (1,511,299)   (1,991,178)   479,879    (24)
                     
Operating loss   (527,400)   (878,310)   350,910    (40)
                     
Other income (expense)                    
Interest income   412    1,556    (1,144)   (74)
Interest expense   (4,377)   (25,103)   20,726    (83)
Other income, net   4,088    2,664    1,424    53 
Total other income (expense)   123    (20,883)   21,006    (101)
                     
Loss from continuing operations before income taxes   (527,277)   (899,193)   371,916    (41)
Income taxes   -    -    -    0 
Loss from continuing operations   (527,277)   (899,193)   371,916    (41)
Loss from discontinued operations, net of income taxes   (64,794)   (8,604)   (56,190)   653 
                     
Net loss   (592,071)   (907,797)   315,726    (35)
                     
Net loss attributable to noncontrolling interests:                    
Net loss from continuing operations   72,987    205,029    (132,042)   (64)
Net loss from discontinued operations   41,274    5,481    35,793    653 
Total net loss attributable to noncontrolling interest   114,261    210,510    (96,249)   (46)
                     
Net loss attributable to NowNews Digital Media Technology Co., Ltd.  $(477,810)  $(697,287)  $219,477    (31)

 

Net Revenue

 

Our net revenue for the year ended December 31, 2015 was $2.46 million, a decrease of $0.47 million or 16% from $2.93 million for the year ended December 31, 2014. The decrease was primarily due to the decrease in licensing and services revenue and E-commerce revenue and advertisement revenue.

 

Advertising

 

Our advertising avenue was $2.27 million for the year ended December 31, 2015, a decrease of $0.09 million, or 4%, from $2.36 million for the year ended December 31, 2014. We will continue focus on the internet advertising and marketing business.

 

Licensing and Services

 

Our revenue from content licensing was $0.19 million for the year ended December 31, 2015, a decrease of $0.11 million, or 37%, from $0.30 million for the year ended December 31, 2014. The decrease was primarily due to the termination of our low-profit news editing services to Yahoo Taiwan. Such services were supplementary to our licensing arrangements with them.

 

 18 

 

 

E-Commerce

 

E-commerce revenue was $2,117 for the year ended December 31, in 2014, representing a $0.25 million decrease, or 99%, in the year ended December 31, 2015, attributable to suspension of our E-Commerce business in April 2014 due to continuous losses. This business was terminated at the end of 2015.

 

Cost of Revenue

 

Cost of revenue mainly consists of advertisement costs, content licensing costs, E-commerce costs, copyright costs, website maintenance costs, and labor costs.

 

Cost of revenue was $1.47 million for the year ended December 31, 2015, a decrease of $0.35 million, or 19%, as compared to $1.82 million for the year ended December 31, 2014. The decrease was mainly due to the decrease of $0.23 million in cost of goods sold in E-commerce and $0.10 million in advertisement cost.

 

Gross Profit

 

Gross profit decreased approximately $0.13 million, or 12%, for the year ended December 31, 2015, as compared to the same period in 2014, due to the substantial decrease in net revenue. Gross profit margin was 40% for the year ended December 31, 2015 as compared to 38% for the same period in 2014.

 

Selling Expenses

 

Total selling expenses consist primarily of payroll, labor and health insurance, and advertisement expenses. The amount decreased by $0.10 million, or 16%, from $0.61 million for the year ended December 31, 2014, to $0.51 million for the year ended December 31, 2015. The decrease in selling expenses was primarily due to the decrease in labor costs resulting from the decrease 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 decreased by approximately $0.38 million, or 28%, from $1.38 million for the year ended December 31, 2014 to $1.00 million for the year ended December 31, 2015. The decrease in general and administration expenses was principally due to the decrease in payroll resulting from reduction in the number of employees.

 

Interest Expense

 

Interest expense for the year ended December 31, 2015 was $4,377 compared to $25,103 for the year ended December 31, 2014, a decrease of $20,726, or 83%. The decrease in interest expense was primarily due to reduced bank loans incurred for the year ended December 31, 2015 as compared with the year ended December 31, 2014 as we repaid our bank loans in full in February, 2015.

 

Net Loss

 

As a result of the above factors, we have net loss of approximately $0.59 million for the year ended December 31, 2015 as compared to net loss of approximately $0.91 million for the year ended December 31, 2014, representing a decrease of loss of approximately $0.32 million, or approximately 35%.

  

Liquidity and Capital Resources

 

Our 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. We have incurred significant losses and have not demonstrated the ability to generate sufficient cash flows from operations to satisfy its liabilities and sustain operations. We had accumulated deficits of $4,400,189 and $3,922,379, and stockholders’ deficits of $437,293 and $1,162,292 as of December 31, 2015 and 2014, respectively. The net losses attributable to common stockholders of $477,810 and $697,287 for the years ended December 31, 2015 and 2014, respectively. In addition, current liabilities exceed current assets by $497,578 and $1,418,978 as of December 31, 2015 and 2014, respectively, representing significant working capital deficits. These matters raise substantial doubt about our ability to continue as a going concern.  Our ability to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until it becomes profitable.  If we are 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 we are unable to continue as a going concern.

 

Management’s Plan to Continue as a Going Concern

 

In order to continue as a going concern, we will need, among other things, additional capital resources. Management’s plans to obtain such resources for us include (1) obtaining capital from the sale of its equity securities, (2) sales of our 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 we will be successful in accomplishing any of its plans.

 

Our ability to continue as a going concern is dependent upon our ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.

 

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.

 

As of December 31, 2015, we had working capital deficit of $497,578 as compared to working capital deficit of $1,418,978 as of December 31, 2014. We had cash and cash equivalents of $301,205 as of December 31, 2015, an increase of $231,129, or 330% from $70,076 as of December 31, 2014.   Our principal sources and uses of funds were as follows:

 

  

For the

Years Ended

December 31,

 
   2015   2014 
Net cash used in operating activities  $(272,891)  $(1,383,018)
Net cash used in investing activities   (33,154)   (166)
Net cash provided by financing activities   547,414    1,136,537 
Net cash used in discontinued operations   -    (2,263)
Effect of exchange rate change on cash and cash equivalents   (10,240)   (8,012)
Net increase (decrease) in cash and cash equivalents  $231,129   $(256,922)

 

 19 

 

 

Net cash used in operating activities of continuing operations was approximately $0.27 million for the year ended December 31, 2015, compared to net cash used in operating activities of approximately $1.38 million for the year ended December 31, 2014.  The decrease of $1.11 million of cash used in operating activities was primarily due to the decrease in net loss of $0.32 million and increase of cash provided from changes in accounts receivable, related-party trade receivable, and accounts payable of approximately $0.63 million.

 

Net cash used in investing activities of continuing operations was $0.03 million for the year ended December 31, 2015, compared to $166 for the same period last year. We used $23,649 in the addition of leasehold improvement during the year ended December 31, 2015.

 

Net cash provided by financing activities of continuing operations amounted to approximately $0.55 million for the year ended December 31, 2015, compared to approximately $1.14  million cash provided for the year ended December 31, 2014, representing a decrease of approximately $0.59  million.  The decrease in net cash provided from financing activities was mainly due to the decrease of $1.21 million of the proceeds received from related party loans, offset by the increase of $0.63 million of capital contribution provided by noncontrolling shareholders during the year ended December 31, 2015, compared to the same period in 2014.

 

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 December 31, 2015 and 2014, the Company has uninsured deposits in banks of $100,536 and $0.

 

 20 

 

 

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 December 31, 2015 and 2014, the Company assessed the allowance for doubtful accounts of $14,121 and $34,232, 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.

 

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 years ended December 31, 2015 and 2014, 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.

 

 21 

 

 

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 $56,506 and $82,900 for the years ended December 31, 2015 and 2014, 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 December 31, 2015 and 2014.

 

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 December 31, 2015 and 2014, 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 years ended December 31, 2015 and 2014, no options or warrants were issued or outstanding.

 

 22 

 

 

Discontinued operations

 

Results of the Company’s discontinued entity have been presented in discontinued operations in the financial statements. See Note 1 and Note 13 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.

 

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.

 

 23 

 

 

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.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

 24 

 

 

Item 8. Financial Statements and Supplementary Data.

 

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

  

    Page
     
Report of Independent Registered Public Accounting Firm   F-2
     
Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014   F-3
     
Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2015 and 2014   F-4
     
Consolidated Statement of Equity for the years ended December 31, 2015, and 2014   F-5
     
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014   F-6
     
Notes to Consolidated Financial Statements   F-7 - F-24

 

F-1

 

 

Audit • Tax • Consulting • Financial Advisory

Registered with Public Company Accounting Oversight Board (PCAOB)

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

NowNews Digital Media Technology Co. Ltd.

 

We have audited the accompanying consolidated balance sheets of NowNews Digital Media Technology Co. Ltd. and Subsidiaries (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of income and comprehensive income, equity and cash flows for the years then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of NowNews  Digital Media Technology Co. Ltd. and Subsidiaries as of December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 of the consolidated financial statements, the Company has incurred significant negative cash flows from operative activities, and continuing net losses and working capital deficits. The Company’s viability is dependent upon its ability to obtain future financing and the success of its future operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

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Diamond Bar, California

March 31, 2016

 

 

F-2

 

  

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

  

    December 31,     December 31,  
Assets   2015     2014  
             
Current Assets                
Cash and cash equivalents   $ 301,205     $ 70,076  
Accounts receivable, net     447,169       538,511  
Due from related parties     66,894       171,901  
Security deposits, current     -       33,089  
Other current assets     22,311       9,250  
Current assets of discontinued operations     3,976       69,216  
Total Current Assets     841,555       892,043  
                 
Furniture, fixture, and equipment, net     158,463       55,194  
Security deposits, non-current     14,090       -  
Intangible assets, net     14,066       29,040  
                 
Total Assets   $ 1,028,174     $ 976,277  
                 
Liabilities and Equity                
                 
Current Liabilities                
Long-term obligation under capital lease, current   $ 79,751     $ -  
Long-term debt, current     -       488,048  
Accounts payable     119,082       96,354  
Advance from customers     9,650       1,418  
Accrued expenses     484,371       560,705  
Due to related parties     545,397       1,072,495  
Other current liabilities     4,055       12,903  
Current liabilities of discontinued operations     96,827       79,098  
Total Current Liabilities     1,339,133       2,311,021  
                 
Long-term obligation under capital lease     15,712       -  
Long-term debt     -       321,295  
Total Liabilities     1,354,845       2,632,316  
                 
Commitments and contingencies (Note 12)                
                 
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                
December 31, 2015 and 2014, respectively     22,412       22,412  
Additional paid-in capital     3,915,928       2,793,855  
Accumulated deficit     (4,400,189 )     (3,922,379 )
Accumulated other comprehensive income (loss)     24,556       (56,180 )
Total Stockholders' deficit     (437,293 )     (1,162,292 )
Noncontrolling Interests     110,622       (493,747 )
Total Deficit     (326,671 )     (1,656,039 )
                 
Total Liabilities and Equity   $ 1,028,174     $ 976,277  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-3

 

 

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME 

 

 

 

    For The Years Ended  
    December 31,  
    2015     2014  
             
Net revenue   $ 2,458,785     $ 2,932,751  
Cost of revenue     (1,474,886 )     (1,819,883 )
Gross profit     983,899       1,112,868  
                 
Selling expenses     (508,480 )     (606,355 )
General and administrative expenses     (1,002,819 )     (1,384,823 )
Total operating expense     (1,511,299 )     (1,991,178 )
                 
Operating loss     (527,400 )     (878,310 )
                 
Other income (expense)                
Interest income     412       1,556  
Interest expense     (4,377 )     (25,103 )
Other income (expense), net     4,088       2,664  
Total other income (expense)     123       (20,883 )
                 
Loss from continuing operations before income taxes     (527,277 )     (899,193 )
Income taxes     -       -  
Loss from continuing operations     (527,277 )     (899,193 )
Loss from discontinued operations, net of income taxes     (64,794 )     (8,604 )
                 
Net loss     (592,071 )     (907,797 )
                 
Net loss attributable to noncontrolling interests:                
Net loss from continuing operations     72,987       205,029  
Net loss from discontinued operations     41,274       5,481  
Total net loss attributable to noncontrolling interest     114,261       210,510  
                 
Net loss attributable to NowNews Digital Media Technology Co. Ltd.   (477,810 )   (697,287 )
                 
Foreign currency translation (loss) gain     (178 )     68,686  
Comprehensive loss     (477,988 )     (628,601 )
Other comprehensive loss (income) attributable to noncontrolling interests     80,914       (23,633 )
Comprehensive loss attributable to NowNews Digital Media Technology Co. Ltd.   $ (397,074 )   $ (652,234 )
                 
Amount attributable to common stockholders:                
Net loss from continuing operations, net of income taxes   $ (454,290 )   $ (694,164 )
Net loss from discontinued operations, net of income taxes     (23,520 )     (3,123 )
Net loss attributable to common stockholders   $ (477,810 )   $ (697,287 )
                 
Net loss attributable to common stockholders - basic and diluted                
Loss from continuing operations   $ (0.02 )   $ (0.15 )
Loss from discontinued operations     -       -  
Net loss attributable to common stockholders   $ (0.02 )   $ (0.15 )
                 
Weighted average shares outstanding, basic and diluted     22,412,000       4,676,756  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-4

 

 

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO. LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

  

                            Accumulated              
          Additional     Subscriptions           Other           Total  
    Common Stock     Paid-in     Received     Accumulated     Comprehensive     Non-controlling     Stockholders'  
    Shares     Amount     Capital     In Advance     Deficit     Loss     interest     Equity  
Balance at December 31, 2013     2,412,000       2,412       1,291,467       1,522,388     $ (3,225,092 )   $ (101,233 )   $ (306,870 )   $ (816,928 )
Issuance of shares due to share exchange     20,000,000       20,000       1,502,388       (1,522,388 )     -       -       -       -  
Foreign currency translation     -       -       -       -       -       45,053       23,633       68,686  
Net loss for the period ended
December 31, 2014
    -       -       -       -       (697,287 )     -       (210,510 )     (907,797 )
Balance at December 31, 2014     22,412,000     22,412     2,793,855     -     (3,922,379 )   (56,180 )   (493,747 )   (1,656,039 )
Capital contribution by shareholders through debt conversion     -       -       739,844       -       -       -       561,323       1,301,167  
Capital contribution by noncontrolling interest     -       -       382,229       -       -       -       238,221       620,450  
Foreign currency translation     -       -       -       -       -       80,736       (80,914 )     (178 )
Net loss for the period ended
December 31, 2015
    -       -       -       -       (477,810 )     -       (114,261 )     (592,071 )
Balance at December 31, 2015     22,412,000     $ 22,412     $ 3,915,928     $ -     $ (4,400,189 )   $ 24,556     $ 110,622     $ (326,671 )

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-5

 

 

NOWNEWS  DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

 

 

 
    For the Years Ended  
    December 31,  
    2015     2014  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss   $ (592,071 )   $ (907,797 )
Loss from discontinued operations     64,794       8,604  
Depreciation     72,627       72,048  
Amortization     23,884       18,371  
Loss from disposal of equipment     3,040       3,201  
Loss from lawsuit settlement     -       16,502  
Bad debt expense     27,143       -  
Adjustments to reconcile net loss to net cash provided by operating activities:                
Decrease (increase) in accounts receivable     47,020       (58,067 )
Decrease (increase) in related-parties trade receivable     102,022       (24,611 )
Decrease (increase) in security deposits     18,385       (1,426 )
Increase in other current assets     (13,312 )     (950 )
Increase (decrease) in accounts payable     27,089       (370,900 )
Increase (decrease) in advance from customers     8,557       (76,621 )
Decrease in accrued expenses     (53,412 )     (69,464 )
(Decrease) increase in other current liabilities     (8,657 )     8,092  
Net cash used in continuing activities     (272,891 )     (1,383,018 )
Net cash used in discontinued operations     -       (33,453 )
Net cash used in operating activities     (272,891 )     (1,416,471 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Additions to fixed assets     (23,649 )     -  
Purchase of intangible assets     (9,505     (166 )
Net cash used in continuing activities     (33,154 )     (166 )
Net cash used in discontinued operations     -       -  
Net cash used in investing activities     (33,154 )     (166 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Repayments of current portion of long-term loan     -       (48,416 )
Net (repayment of) proceeds from loans from related parties     (20,471 )     1,184,953  
Payments of capital lease obligations     (62,149 )     -  
Capital contributions from noncontrolling interest     630,034       -  
Net cash provided by continuing activities     547,414       1,136,537  
Net cash provided by discontinued operations     -       31,190  
Net cash provided by financing activities     547,414       1,167,727  
                 
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS     (10,240 )     (8,012 )
                 
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS     231,129       (256,922 )
NET DECREASE IN CASH & CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS     -       (2,263 )
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS FROM CONTINUING OPERATIONS     231,129       (254,659 )
                 
CASH & CASH EQUIVALENTS, BEGINNING BALANCE     70,076       324,735  
CASH & CASH EQUIVALENTS, ENDING BALANCE   $ 301,205     $ 70,076  
                 
SUPPLEMENTAL DISCLOSURES:                
Income tax paid   $ -     $ -  
Interest paid   $ 4,377     $ 26,156  
NONCASH INVESTING AND FINANCING ACTIVITIES:                
Equipment acquired through capital lease   $ 160,757     $ -  
Debt conversion to additional paid-in capital   $ 1,301,167     $ -  

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-6

 

 

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

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-7

 

 

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 10). 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 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 $4,400,189 and $3,922,379, and stockholders’ deficits of $437,293 and $1,162,292 as of December 31, 2015 and 2014, respectively. The net losses attributable to common stockholders of $477,810 and $697,287 for the years ended December 31, 2015 and 2014, respectively. In addition, current liabilities exceed current assets by $497,578 and $1,418,978 as of December 31, 2015 and 2014, 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-8

 

 

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 December 31, 2015 and 2014, the Company has uninsured deposits in banks of $100,536 and $0.

 

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 December 31, 2015 and 2014, the Company assessed the allowance for doubtful accounts of $14,121 and $34,232, 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-9

 

 

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 years ended December 31, 2015 and 2014, 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 $56,506 and $82,900 for the years ended December 31, 2015 and 2014, respectively. Other than the above, the Company does not provide any other post-retirement or post-employment benefits.

 

F-10

 

 

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 December 31, 2015 and 2014.

 

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 December 31, 2015 and 2014, 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 years ended December 31, 2015 and 2014, no options or warrants were issued or outstanding.

 

F-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 13 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.

 

F-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.

 

F-13

 

 

NOTE 4: ACCOUNTS RECEIVABLE 

 

Accounts receivable consist of the following:

 

   December 31,
2015
   December 31,
2014
 
Accounts receivable  $461,290   $572,743 
Less: Allowance for doubtful accounts   (14,121)   (34,232)
Accounts receivable, net  $447,169   $538,511 

 

During the year ended December 31, 2015, the Company collected and charged off $47,254 that were previously recorded in allowance for doubtful account. The Company recorded bad debt expense of $27,143 for the year ended December 31, 2015.

 

NOTE 5: PROPERTY AND EQUIPMENT, NET

 

Property and equipment consist of the following:

 

    December 31,     December 31,  
    2015     2014  
Capital Lease   $ 155,631     $ -  
Computer equipment     45,514       71,230  
Leasehold improvement     20,198       107,622  
Electronic equipment     16,043       141,345  
Office equipment and furniture     4,788       353,692  
      242,174       673,889  
Less: Accumulated depreciation     (83,711 )     (618,695 )
    $ 158,463     $ 55,194  

 

 

 

 

F-14

 

 

As of December 31, 2015, assets under capital lease of $155,631 represented server equipment (see Note 12). Depreciation expense for the years ended December 31, 2015 and 2014 was $72,627 and $72,048, respectively.

 

NOTE 6: INTANGIBLE ASSETS, NET

 

Intangible assets consist of the following:

 

   December 31,   December 31, 
   2015   2014 
Copyrights  $862,608   $895,092 
Software   33,961    25,691 
Trademark   6,404    6,646 
Patent   154    159 
    903,127    927,588 
Accumulated amortization   (889,061)   (898,548)
Intangible assets, net  $14,066   $29,040 

 

Intangible assets amounted to $14,066 and $29,040 as of December 31, 2015 and 2014, 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 $862,608). 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 $15,111 and $9,697 for the years ended December 31, 2015 and 2014, respectively.

 

For the years ended December 31, 2015 and 2014, total amortization expense amounted to $23,884 and $18,371, respectively.

 

Estimated amortization for the next five years and thereafter is as follows:

 

As of December 31,   Amount  
2016   $ 5,998  
2017     2,482  
2018     2,206  
2019     1,844  
2020     1,536  
    $ 14,066  

  

F-15

 

 

NOTE 7: BANK LOANS

 

Long-term debt

 

Long-term debt consists of the following:

 

   December 31,   December 31, 
   2015   2014 
Loan from Taiwan Shin Kong Commercial Bank Co., Ltd., interest rate at 2.75% per annum, the term started April 9, 2013 with the maturity date October 9, 2014, secured by a property owned by a Director of the Company (former Chairman) and his wife (currently the Director of Supervisory Committee of the Company), as well as their personal guarantees (see Note 14).  $-   $440,452 
           
Loan from Taiwan Shin Kong Commercial Bank Co., Ltd., interest rate at 2.5% per annum, the term started February 8, 2012 with the maturity date February 8, 2019, secured by a property owned by a Director of the Company (former Chairman) and his wife (currently the Director of Supervisory Committee of the Company), as well as their personal guarantees (see Note 14).   -    368,891 
    -    809,343 
Current portion   -    (488,048)
Total  $-   $321,295 

 

Both loans as of December 31, 2014 had been repaid in full amount by Ms. Chiu-li Tu, the Director of Supervisory Committee of NOWnews Network, in February, 2015. See Note 10.

 

Interest expense resulted from bank loans for the years ended December 31, 2015 and 2014 amounted to $1,482 and $25,039, respectively.

 

NOTE 8: ACCRUED EXPENSES

 

Accrued expenses consist of the following:

 

    December 31,     December 31,  
    2015     2014  
Accrued bonus   $ 123,771     $ 78,041  
Accrued professional fees     111,253       108,705  
Accrued payroll     96,383       112,315  
Accrued employee benefits and pension expenses     75,795       110,305  
Accrued sales taxes     43,078       21,337  
Accrued office rent and management fees     -       48,899  
Accrued legal settlement     2,745       17,089  
Other     31,346       64,014  
Total   $ 484,371     $ 560,705  

 

 

NOTE 9: 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 years ended December 31, 2015 and 2014. No tax benefit has been realized since a 100 % valuation allowance has offset deferred tax asset resulting from the net operating losses.

 

F-16

 

 

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 $3,660 (NT$120,000). No income tax liabilities existed as of December 31, 2015 and 2014 due to the Company’s continuing operating losses.

 

Provision for income tax consists of the following:

 

    For the Years Ended  
    December 31,  
    2015     2014  
Current                
USA   $ -     $ -  
Taiwan     -       -  
                 
Deferred                
USA                
Deferred tax assets for NOL carryforwards     (104,129 )     (104,605 )
Valuation allowance     104,129       104,605  
Net changes in deferred income tax under non-current portion     -       -  
                 
Taiwan                
Noncurrent portion                
NOL carryforwards     (160,562 )     (133,908 )
Valuation allowance     160,562       133,908  
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 Years Ended December 31, 
   2015   2014 
         
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%

 

Significant components of the Company’s deferred taxes as of December 31, 2015 and 2014 were as follows:

 

    December 31,     December 31,  
    2015     2014  
Deferred tax assets:                
Net operating loss carryforwards   $ 1,924,332     $ 2,123,347  
Less: Valuation allowance     (1,924,332 )     (2,123,347 )
Deferred tax assets, net   $ -     $ -  

  

 

F-17

 

 

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 December 31, 2015 and 2014, the Company accrued 100% valuation allowance against its deferred tax assets based on the assessment of the probability of future realization.

 

NOTE 10: STOCKHOLDERS’ EQUITY

 

As of December 31, 2015, 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.

 

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.

 

F-18

 

 

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 (see Note 7). 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 December 31, 2015, 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 11: 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 10). As a result, Sky Media owned 57% of NOWnews Network.

 

Non-controlling interest consisted of the following:

 

   December 31,   December 31, 
   2015   2014 
Beginning balance  $(493,747)  $(306,870)
Capital contribution by shareholders through debt conversion   561,323    - 
Capital contribution by non-controlling interest   238,221    - 
Net loss attributed to non-controlling interest   (114,261)   (210,510)
Other comprehensive (loss) income attributable to non-controlling interest   (80,914)   23,633 
Ending balance  $110,622   $(493,747)

 

 

F-19

 

 

NOTE 12: 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 $155,631 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 year ended December 31, 2015 was $27,887. Interest expense resulted from capital leases for the year ended December 31, 2015 amounted to $2,895.

 

Operating Lease

 

Operating lease commitments consist of leases for office space and copy machines under various operating lease agreements which expire in June, 2018. 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 December 31,  Capital Leases
Amount
   Operating Leases
Amount
 
2016  $79,751   $87,225 
2017   15,712    23,564 
2018   -    714 
Total minimum payments  $95,463   $111,503 

 

The Company incurred rent expenses of $123,345 and $240,914 for the years ended December 31, 2015 and 2014, 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.

 

Wang Matter

 

On April 4, 2010, Ms. Mei-hsin Wang filed a claim against NOWnews Network in the Taiwan Taipei District Court (the “Taipei District Court”) in connection to a news article NOWnews Network purchased from Eastern Television Co., Ltd. (“ETTV”). Ms. Wang claims that the news article published on NOWnews Network’s website contained a false statement that harms the reputation of Ms. Wang. Ms. Wang seeks approximately $60,994 (NT$2 million) in compensatory damages and newspaper apology from ETTV and NOWnews Network. On July 8, 2011, the Taipei District Court entered a judgment of first instance against ETTV and NOWnews Network in the amount of approximately $18,298 (NT$600,000).

 

On August 8, 2011, NOWnews Network appealed against the judgment of first instance to the Taiwan Superior Court (the “Superior Court”). On November 13, 2013, the Superior Court reversed the judgment of first instance and entered the judgment of second instance that NOWnews Network and ETTV shall pay the plaintiff approximately $9,149 (NT$300,000) and $9,149 (NT$300,000), respectively, and apologize on the newspapers specified.

 

In November, 2013, NOWnews Network filed a motion in the Supreme Court against the judgment of second instance. The Supreme Court denied the motion on December 19, 2013. NOWnews Network accrued contingent loss of approximately $9,149 (NT$300,000) for the year ended December 31, 2010. In addition, NOWnews Network accrued expenses related to the newspaper apology during the year ended December 31, 2013 in the amount of approximately $23,233 (NT$700,000). In February 2014, NOWnews Network paid approximately $9,149 (NT$300,000) to Ms. Mei-hsin Wang as damages and apologized on certain specified newspapers.

 

Election Matter

 

On March 7, 2013, NOWnews Network  received a letter from Taichung City Election Commission indicating the content of a news article published by NOWnews Network on January 17, 2013 appears to violate the Civil Servants Election And Recall Act of Taiwan On October 4, 2013, the Central Election Commission (the “CEC”) determined that NOWnews Network violated the Civil Servants Election And Recall Act and imposed a penalty of approximately $15,249 (NT$500,000) and $15,249 (NT$500,000) on NOWnews Network and Mr. Shu-sen Chang, NOWnews Network’ legal representative and Chairman, respectively.

 

On November 4, 2013, NOWnews Network filed an appeal in the Administrative Appeal Committee under the Executive Yuan of Taiwan government against the decision of CEC based on the Taiwan Administrative Appeal Act. The Administrative Appeal Committee denied NOWnews Network’ appeal on February 14, 2014. NOWnews Network accrued contingent loss of approximately $30,497 (NT$1,000,000) during the year ended December 31, 2013. In 2014, NOWnews Network paid a fine of approximately $30,497 (NT$1,000,000) and this action is closed.

  

Election Matter (Yamedia)

 

The news article published on January 17, 2013, as described in Election Matter was published simultaneously by one of NOWnews Network’ customers, Yamedia Inc. (“Yamedia”) based on the sales agreement between Yamedia and NOWnews Network. According to the agreement, if the news content provided by NOWnews Network violates any regulations or infringes on any copyrights, NOWnews Network shall be responsible for any losses Yamedia may occur.

 

On October 8, 2013, the CEC determined that Yamedia violated the Civil Servants Election and Recall Act and imposed a penalty of approximately $15,249 (NT$500,000) and $15,249 (NT$500,000) on Yamedia and the legal representative of Yamedia, respectively. Based on the above terms in the sales agreement, NOWnews Network shall compensate the losses of approximately $30,497 (NT$1,000,000) for such penalty. NOWnews Network accrued contingent loss of approximately $30,497 (NT$1,000,000) during the year ended December 31, 2013. In 2014, NOWnews Network paid a fine of approximately $30,497 (NT$1,000,000) and this action is closed.

 

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 $16,773 (NT$550,000) in compensatory damages from NOWnews Network, $53,370 in aggregate from (NT$1,750,000) 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 $12,199 (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 $12,199 (NT$400,000) of contingent loss in connection to this lawsuit settlement during the year ended December 31, 2014. During the year ended December 31, 2015, NOWnews Network has made payment of $11,813 (NT$375,000) in connection with this legal matter.

 

F-20

 

 

(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 10). As of the date of this report, the sale of Phase I has been completed.

 

NOTE 13: 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. Operating results for the discontinued business are presented in the following tables:

 

   For The Years Ended 
   December 31, 2015 
Net revenue  $- 
Cost of goods sold   - 
Selling, general, and administrative expenses   (64,794)
Loss before income taxes   (64,794)
Income taxes   - 
Net loss  $(64,794)

 

Net assets of discontinued operations as of December 31, 2015 were as follows:

 

   As of December 31, 2015 
Cash & cash equivalents  $3,975 
Other current assets   1 
Current assets  $3,976 
Accounts payable  $160 
Accrued expenses   380 
Due to related parties   96,287 
Current liabilities  $96,827 

 

F-21

 

 

NOTE 14: 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
Chunghwa Wideband Best Network Co., Ltd.   Mr. Alan Chen is the Chairman and legal representative of this entity
Chunghwa United International Development Co., Ltd.   Mr. Alan Chen is the Chairman and legal representative of this entity.
Mega Media Investments Co., Ltd. (Taiwan Branch)   Entity controlled by Mr. Alan Chen
Jin Hao Kang Marketing Co., Ltd.   Ms. Chiu-li Tu is the Chairman, Director, and legal representative of this entity.
Youchu International Digital Technology Co., Ltd.   Mr. Alan Chen is the Chairman and legal representative of this entity.
Chunghwa United Co., Ltd.   Ms. Chiu-li Tu is the Chairman, Director, and legal representative of this entity.
Wowtoday Co., Ltd.   Entity owned by a family member of the shareholder who holds 35% of NOWnews International (see Note 1)
Hwalian International Business Co., Ltd.   Mr. Alan Chen is the Chairman and legal representative of this entity.
Jingu Telecom Co., Ltd.   Mr. Yih-Jong Shy is the Chairman 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
Mr. Alan Chen   Director and controlling beneficiary shareholder of the Company. Current Director and former Chairman of NOWnews Network.
Ms. Chiu-li Tu   Wife of Mr. Alan Chen.
     

    

Transactions

 

   For the Years Ended December 31, 
   2015   2014 
Sales to Jin Hao Kang Marketing Co., Ltd.  $81,004   $66,008 
Sales to Mega Media Investments Co., Ltd. (Taiwan Branch)   50,403    33,004 
Sales to GASH Co., Ltd.   7,403    - 
Sales to Gamania Digital Entertainment Co., Ltd.   4,725    - 
Sales to Gash point(HK) Co., Ltd.   316    - 
Sales to Jollywiz Digital Technology Co., Ltd.   14    - 
Sales to Chunghwa Wideband Best Network Co., Ltd.   -    20,123 
Sales to Chunghwa United International Development Co., Ltd.   -    2,906 
Total  $143,865   $122,041 

 

The primary services provided by NOWnews Network to those related parties were advertisement space on NOWnews Network’s website and broadcasting right of the films and news articles owned by NOWnews Network.

 

F-22

 

 

Due from related parties

 

   December 31,   December 31, 
   2015   2014 
Trade receivable from Jin Hao Kang Marketing Co., Ltd  $55,680   $77,532 
Trade receivable from GASH Co., Ltd.   6,092    - 
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    - 
Trade receivable from Chunghwa Wideband Best Network Co., Ltd.   -    42,855 
Trade receivable from Mega Media Investments Co., Ltd. (Taiwan Branch)   -    38,509 
Trade receivable from Youchu International Digital Technology Co., Ltd.   -    6,329 
Trade receivable from Chunghwa United International Development Co., Ltd.   -    2,926 
Trade receivable from Chunghwa United Co., Ltd.   -    2,089 
Trade receivable from Wowtoday Co., Ltd.   -    1,661 
Total  $66,894   $171,901 

  

F-23

 

 

Due to related parties

 

   December 31,   December 31, 
   2015   2014 
Due to Mr. Alan Chen  $545,397   $649,377 
Due to Ms. Chiu-li Tu   -    212,185 
Due to Hwalian International Business Co., Ltd.   -    178,339 
Due to Jingu Telecom Co., Ltd.   -    32,595 
   $545,397   $1,072,495 

 

Due to related parties were unsecured, had no written agreement, due on demand with no maturity date, and bearing no interest.

 

Guarantees

 

As of December 31, 2014, Mr. Chen and Ms. Tu provided personal guarantees on long-term loans obtained by NOWnews Network. In addition, the property collateralized for the long-term loans was owned by Mr. Chen and Ms. Tu (see Note 7).

 

NOTE 15: SUBSEQUENT EVENT

 

Management has evaluated subsequent events through March 31, 2016, the date which the financial statements were available to be issued. All subsequent events requiring recognition as of December 31, 2015 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-24

 

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.

 

Item 9A. 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, , the Company’s chief executive officer, and g, the Company’s 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 fiscal year ended December 31, 2015. 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.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. The Company’s management is also required to assess and report on the effectiveness of the Company’s internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of the Company’s financial reporting for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that in reasonable detail accurately and fairly reflect the Company’s transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of the Company’s financial statements and that receipts and expenditures of company assets are made in accordance with management authorization; and (iii) provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

The Company’s management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. This evaluation was conducted by Yih- Jong Shy, the Company’s chief executive officer, and Tsung-Chien Chiang, the Company’s chief financial officer. Based on our evaluation, we determined that, as of December 31, 2015, our internal control over financial reporting was effective.

 

This Annual Report does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. The management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission.

 

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 last fiscal quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 25 

 

 

Limitations on Controls

 

Management does not expect that the Company's disclosure controls and procedures or the Company's internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. The Company's disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and the Company's chief executive officer and chief financial officer have concluded that the Company's disclosure controls and procedures are effective at that reasonable assurance level.

 

Item 9B. Other Information.

 

None.

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

Below are the names and certain information regarding the Company’s executive officers and directors as of the date of this Annual Report.

 

Name   Age   Position  
Alan Chen   62   Chairman  
Shuo-Wei Shih   47   Chief Executive Officer  
Tsung-Chien Chiang   56   Chief Financial Officer  
En Ming Tseng   60   Director  
Yih-Jong Shy (1)   60   Director  
Shang-Hong Lin   42   Director  
Yuhao AixinjueLuo   47   Director  

 

(1)    Mr. Yih-Jong Shy resigned as the CEO as of March 25, 2016 and remained as a director of the Company.

 

Alan Chen. For the past decade, Mr. Chen has been the chairman of the Chunghwa United Holdings Group, a consortium of multimedia companies actively involved in cable television, “5TV”, “NowNews”, “Airnet” and other global media ventures. We believe his experience qualifies him to serve as our officer and director.

 

Tsung-Chien Chiang. Mr. Chiang was appointed our Chief Financial Officer on November 14, 2014. Since November 2011, Mr. Chiang has been working as the chief financial officer for Chunghwa United Group, a consortium of multimedia companies actively involved in internet and cable television and other global media ventures. He was the chief financial officer of Kimlan Food Co., Ltd., a food production company, from January 2010 through October 2010. Prior to that, Mr. Chiang served as senior financial manager at Airproduct & Chemical Co., Ltd., a company manufacturing specialty air products, for about eight years. Mr. Chiang received his bachelor’s degree in business from China Culture University in Taiwan in 1983.

 

Shuo-Wei Shih Before joining the Company, Mr. Shih has been a director of GIA Investment, a consulting firm in finance, operation and marketing in Taiwan since October 2014. From 2007 to 2012, Mr. Shih was the founder of Sunrise Global Solar Energy Ltd, which engages in the design, manufacture, and marketing of photovoltaic solar energy products for residential, commercial and utility-scale power plant clients worldwide. Mr. Shih was responsible for business development, financing as well as cooperation with Australian scientists. In 2012, under Mr. Shih’s supervision, Sunrise Global Solar Energy Ltd was acquired by Sino-American Silicon Products Inc.(TSEC:5483), a manufacturer of solar wafer listed in Taiwan. In 2012, he was selected by Council for Industrial and Commercial Development of Taiwan as a director responsible for resource integration and providing of financial advice. Mr. Shih started his professional career as an associate researcher with the Industrial Technology Research Institute in Taiwan. He was certified as an Industrial Technologist by National Association of Industrial Technology (USA) in 1997. Mr. Shih graduated from Southern Illinois University with a BS degree focusing on industrial technology in 1994 and received his MS degree from Indiana State University in 1996.

 

 26 

 

 

En Ming Tseng. Mr. Tseng was appointed a director on November 14, 2014. He has been serving as Chairman of St John’s University since December 2009 and Chairman of Digivast Co, Ltd., a mobile application company, since January 2012. Prior to that, he served on the board of directors of Heima Vista Co. Ltd., an internet application solutions company from August 2004 through July 2014. He also served on the board of directors of St John’s University from September 2010 through May 2013. From July 2011 to December 2013, Mr. Tseng was a managing consultant at Jucheng Group, a training and consulting company. Mr. Tseng holds a bachelor’s degree in shipping and transportation management from National Taiwan Ocean University, an MBA from Bloomsburg University of Pennsylvania and a PhD in industrial training from University of Northern Iowa. We believe Mr. Tseng bring to the Board extensive industry experience and in-depth knowledge of internet and mobile application business.

 

Yih-Jong Shy. Mr. Shy was appointed Chief Executive Officer and a director on November 14, 2014 and resigned as the CEO on March 25, 2016. He has been the chief executive officer of Chunghwa United Group since 2008. Prior to that, he spent eight years at Fareastone Telecommunication serving as an executive vice president, primarily in charge of network operation and new business development. In addition, he also acted as the president of KGEX Co., Ltd. and Fareastron Co., Ltd., both of which are subsidiaries of Fareastone Telecommunication from 2005 to 2007. Mr. Shy has extensive experience in divisional and corporate business strategy planning, development and operations with a very solid technology background. He graduated from Feng-Cha University in Taiwan with a bachelor’s degree in Computer Science in 1980 and received his EMBA degree from Michigan, University of Inc in 2001.

 

Shang-Hong Lin. Mr. Lin was appointed a director on November 14, 2014 and has been serving as the chief science officer of Chunghwa United Group since May 2014. Mr. Lin was an adviser of Chunghwa Wideband Best Network Co., Ltd. from May 2013 to April 2014. Prior to that, he served as sales director at Zinwell Homepage Co., Ltd. from October 2008 to April 2014 and Interactive Video Technology Co., Ltd. from October 2005 to October 2013. Mr. Lin graduated from Chinese Culture University with a master’s degree in Sociolinguistics.

 

Dr. Yuhao Aixinjueluo, Dr. Aixinjueluo is a banking veteran with solid expertise and extensive experience in the banking industry. In addition to holding numerous professional certifications such as Financial Risk Manager, Certified International Investment Analyst, Chartered Financial Analyst, and Certified Financial Planner, he retains important positions at many major international financial institutions. He was once the UN Messenger of Peace of the United Nations International Week of Science and Peace in 2007, the president of the Lao Economic Development Committee, the chairman of the supervisory at Lao Construction Bank, the chairman of the supervisory at Lao World Trade Center, and the chairman of the board of directors of Laos Loto Group.

 

Our directors will serve until the annual meeting of stockholders and until his respective successors have been elected and have qualified, or until his earlier resignation, removal or death.

 

We are not required to have any independent members of the Board of Directors. Our Board of Directors has determined that En Ming Tseng is independent under applicable SEC rules. As we do not have any board committees, the Board as a whole carries out the functions of audit, nominating and compensation committees.

 

Compensation Committee Interlocks and Insider Participation

 

None of our executive officers serves as a member of the Board of Directors or compensation committee of any other entity that has one or more of its executive officers serving as a member of our Board of Directors.

 

Material Changes to the Procedures by which Security Holders May Recommend Nominees to the Board of Directors

 

There have been no material changes to the procedures by which security holders may recommend nominees to the Board of Directors.

 

Code of Ethics

 

As of the date of this report, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We plan to adopt a code of ethics as we develop our business.

 

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Board Leadership Structure and Role in Risk Oversight

 

Since November 14, 2014, we have separated the roles of Chairman of the Board and Chief Executive Officer. Although the separation of roles has been appropriate for us during that time period, in the view of the board of directors, the advisability of the separation of these roles depends upon the specific circumstances and dynamics of our leadership.

 

As Chairman of the Board, Mr. Chen serves as the primary liaison between the CEO and the Board and provides strategic input and counseling to the CEO. With input from other members of the board of directors and management, he presides over meetings of the board of directors. Mr. Chen has developed an extensive knowledge of our company, its challenges and opportunities and has a productive working relationship with our senior management team.

 

The board of directors, as a unified body and through committee participation, organizes the execution of its monitoring and oversight roles and does not expect its Chairman to organize those functions. Our primary rationale for separating the positions of Board Chairman and the CEO is the recognition of the time commitments and activities required to function effectively as Chairman and as the CEO of a company with a relatively flat management structure. The separation of roles has also permitted the board of directors to recruit senior executives into the CEO position with skills and experience that meet the board of director’s planning for the position who may not have extensive public company board experience.

 

Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. Management is responsible for the day-to-day management of risks the company faces, while the board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.

 

The board of directors believes that establishing the right “tone at the top” and that full and open communication between executive management and the board of directors are essential for effective risk management and oversight. Our CEO communicates frequently with members of the board to discuss strategy and challenges facing the company.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

As of the date of this report, to our knowledge, the officers, directors and greater than ten percent shareholders plan to file their Form 3s as soon as possible.

 

Item 11. Executive Compensation.

 

The following table sets forth all compensation paid to our principal executive officers for the fiscal years ended December 31, 2015 and 2014. No other executive officer or former executive officer received more than $100,000 in compensation in the periods indicated except reported below.

 

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SUMMARY COMPENSATION TABLE

 

              Stock   Option   All other     
Name and     Salary   Bonus   awards   awards   compensation   Total 
principal position  Year  ($)   ($)   ($)   ($)   ($)   ($) 
Alan Chen  Year Ended   -    -    -    -    -    - 
Former Chief Executive  December 31, 2015                              
Officer, Chief Financial  Year Ended   -    -    -    -    -    - 
Officer and director (1)  December 31,2014                              
Hans Van Niekerk  Year Ended   -    -    -    -    -    - 
Former President, Chief  December 31, 2015                              
Executive Officer,  Year Ended   -    -    -    -    -    - 
Chief Financial Officer,  December 31, 2014                              
and Director (2)                                 
Churyl Kylo  Year Ended   -    -    -    -    -    - 
Former President, Chief  December 31, 2015                              
Executive Officer,  Year Ended   -    -    -    -    -    - 
Chief Financial Officer  December 31, 2014                              
and Director (3)                                 
Yih-Jong Shy  Year Ended        -    -    -    -      
Chief Executive Officer  December 31, 2015                              
and director (4)  Year Ended   750    -    -    -    -    750 
   December 31, 2014                              
Tsung-Chien Chiang  Year Ended        -    -    -    -      
Chief Financial Officer  December 31, 2015                              
   Year Ended                              
   December 31, 2014   750    -    -    -    -    750 

 

(1) On November 11, 2013, Mr. Chen was appointed director and officer of the Company. On November 14, 2014, Mr. Chen resigned as the Company’s officers but remained as Chairman of the Board.

(2) On November 11, 2013, Mr. Van Niekerk resigned as our officer and director.

(3) On July 25, 2013, Mr. Kylo resigned as our officer and director.

(4) On March 25, 2016, Mr. Yih-Jong Shy resigned as the Chief Executive Officer.

 

Employment Agreement

 

Yih-Jong Shy

 

Pursuant to the employment agreement that the Company and Mr. Shy entered into on November 14, 2014, Mr. Shy will be entitled to an annual salary of $6,000 for his services as Chief Executive Officer of the Company. The employment agreement has an initial term (the “Initial Term”) commencing as of November 14, 2014 and expiring on December 31, 2015, and continuing on a year-to-year basis thereafter unless terminated by either party on not less than thirty days’ notice prior to the expiration of the Initial Term or any one-year extension. In addition, Mr. Shy will be entitled to receive a stock option to purchase up to 15,000 shares of common stock of the Company if the Company reports a net income of $500,000 for the year ending December 31, 2015 (the “Performance Target”). All the shares underlying the options will vest immediately upon the Board of Director’s confirmation of the attaining of the Performance Target. On March 25, 2016, Mr. Yih-Jong Shy resigned as the Chief Executive Officer.

 

Shuo-Wei Shih

 

Pursuant to the employment agreement that the Company and Mr. Shih entered into on March 25, 2016, Mr. Shih will be entitled to an annual salary of $6,000 for his services as Chief Executive Officer of the Company. The employment agreement has an initial term (the “Initial Term”) commencing as of March 25, 2016 and expiring on December 31, 2016, and continuing on a year-to-year basis thereafter unless terminated by either party on not less than thirty days’ notice prior to the expiration of the Initial Term or any one-year extension. In addition, Mr. Shih will be entitled to receive a stock option to purchase up to 15,000 shares of common stock of the Company if the Company reports a net income of $500,000 for the year ending December 31, 2016 (the “Performance Target”). All the shares underlying the options will vest immediately upon the Board of Director’s confirmation of the attaining of the Performance Target.

 

Tsung-Chien Chiang

 

Pursuant to the employment agreement that the Company and Mr. Chiang entered into on November 14, 2014, Mr. Chiang will be entitled to an annual salary of $6,000 for his services as Chief Financial Officer of the Company. The employment agreement has an initial term (the “Initial Term”) commencing as of November 14, 2014 and expiring on December 31, 2015, and continuing on a year-to-year basis thereafter unless terminated by either party on not less than thirty days’ notice prior to the expiration of the Initial Term or any one-year extension. In addition, Mr. Chiang will be entitled to receive a stock option to purchase up to 15,000 shares of common stock of the Company if the Performance Target is met. All the shares underlying the options will vest immediately upon the Board of Director’s confirmation of the attaining of the Performance Target.

 

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Outstanding Equity Awards at Fiscal Year-End

 

None.

 

Director Compensation

 

No director of the Company received any compensation for services as director during its last fiscal year.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth certain information, as of the date of filing of this report, with respect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of the Company’s executive officers and directors; and (iii) the Company’s directors and executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.

 

   Amount of shares
of common stock
     
   Beneficially Owned   Percent Of 
Name of Beneficial Owner  (1)   Class (2) 
Alan Chen (4)   6,032,400(4)   26.92%
Yih-Jong Shy   100,000    * 
Tsung-Chien Chiang   50,000    * 
En Ming Tseng   106,000(5)   * 
Shang-Hong Lin   10,000    * 
Shuo-Wei Shih   -    - 
Yuhao Aixinjue Luo   -    - 
All Executive Officers and Directors as a Group          
(seven persons)   6,298,400    28.10%
GIA Investments Corp. (3)   3,000,000    13.4%

 

*Represents less than one percent.

 

(1)Under Rule 13d-3 of the Exchange Act of 1934, as amended (the “Exchange Act”), a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares: (i) voting power, which includes the power to vote or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.

(2)Calculated based on 22,412,000 shares of Common Stock outstanding as of March 28, 2016.

(3)Heer Hsiao holds the voting and dispositive power over the securities held by GIA Investments Corp.

(4)This number includes (i) 1,130,000 shares of Common Stock held by Pioneer; (ii) 395,100 shares of Common Stock held by Social Cloud Co., Ltd. (“Social”); (iii)350,000 shares of Common Stock held by Legend Media Investments (“Legend”); (iv) 419,575 shares of Common Stock held by Trophy Access Limited (“Trophy”); (v) 445,000 shares of Common Stock held by Core Winner Investment Limited (“Core”); (vi) 445,000 shares of Common Stock held by Intelligent Media Investments (“Intelligent”); and (vii) 2,847,725 shares of Common Stock held by his spouse. As such, Mr. Chen is deemed to have the voting and dispositive power over shares of Common Stock held by these entities and his spouse.

 

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(5)Includes (i) 6,000 shares of Common Stock held directly by Mr. Tseng and (ii)100,000 shares of Common Stock held by Prime Chance Limited of which his wife, Tsung-Mei Luo, is the sole director and member.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

Related Party Transactions

 

The table below sets forth our sales to the related parties during the years ended December 31, 2014 and 2015:

 

   For the Years Ended 
   December 31, 
  2015   2014 
Sales to Jin Hao Kang Marketing Co., Ltd.  $81,004   $66,008 
Sales to Mega Media Investments Co., Ltd. (Taiwan Branch)   50,403    33,004 
Sales to GASH Co., Ltd.   7,403    - 
Sales to Gamania Digital Entertainment Co., Ltd.   4,725    - 
Sales to Gash point(HK) Co., Ltd.   316    - 
Sales to Jollywiz Digital Technology Co., Ltd.   14    - 
Sales to Chunghwa Wideband Best Network Co., Ltd.   -    20,123 
Sales to Chunghwa United International Development Co., Ltd.   -    2,906 
Total  $143,865   $122,041 

 

The primary services provided by NOWnews to those related parties were advertisement space on NOWnews’s website and broadcasting right of the films and news articles owned by NOWnews.

 

Due from Related Parties

 

The table below sets forth due from related parties for the fiscal years ended December 31, 2014 and 2015:

 

   December 31,   December 31, 
   2015   2014 
Trade receivable from Jin Hao Kang Marketing Co., Ltd.  $55,680   $77,532 
Trade receivable from GASH Co., Ltd.   6,092    - 
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    - 
Trade receivable from Chunghwa Wideband Best Network Co., Ltd.   -    42,855 
Trade receivable from Mega Media Investments Co., Ltd. (Taiwan Branch)   -    38,509 
Trade receivable from Youchu International Digital Technology Co., Ltd.   -    6,329 
Trade receivable from Chunghwa United International Development Co., Ltd.   -    2,926 
Trade receivable from Chunghwa United Co., Ltd.   -    2,089 
Trade receivable from Wowtoday Co., Ltd.   -    1,661 
Total  $66,894   $171,901 

 

Due to Related Parties

 

The table below sets forth due to related parties for the fiscal years ended December 31, 2014 and 2015:

 

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   December 31,   December 31, 
   2015   2014 
Due to Mr. Alan Chen  $545,397   $649,377 
Due to Ms. Chiu-li Tu   -    212,185 
Due to Hwalian International Business Co., Ltd.   -    178,339 
Due to Jingu Telecom Co., Ltd   -    32,595 
   $545,397   $1,072,495 

 

Due to related parties were unsecured, had no written agreement, due on demand with no maturity date, and bearing no interest.

 

Guarantees

 

As of December 31, 2014, Mr. Chen and Ms. Tu provided personal guarantees on long-term loans obtained by NOWnews. In addition, the property collateralized for the long-term loans was owned by Mr. Chen and Ms. Tu.

 

The table below explains how the aforementioned parties are related to the Company.

 

Name of Entity or Individual   Relationship with the Company and its subsidiaries
Chunghwa Wideband Best Network Co., Ltd.   Mr. Alan Chen is the Chairman and legal representative of this entity
Chunghwa United International Development Co., Ltd.   Mr. Alan Chen is the Chairman and legal representative of this entity.
Mega Media Investments Co., Ltd. (Taiwan Branch)   Entity controlled by Mr. Alan Chen
Jin Hao Kang Marketing Co., Ltd.   Ms. Chiu-li Tu is the Chairman, Director, and legal representative of this entity.
Youchu International Digital Technology Co., Ltd.   Mr. Alan Chen is the Chairman and legal representative of this entity.
Chunghwa United Co., Ltd.   Ms. Chiu-li Tu is the Chairman, Director, and legal representative of this entity.
Wowtoday Co., Ltd.   Entity owned by a family member of the shareholder who holds 35% of Nownews International
Hwalian International Business Co., Ltd.   Mr. Alan Chen is the Chairman and legal representative of this entity.
Jingu Telecom Co., Ltd.   Mr. Yi-Jong Shy is the Chairman and legal representative of this entity.
GASH Co., Ltd.   Entity controlled by Gamania Digital
Gamania Digital Entertainment Co., Ltd.   Entity owned 23% of NOWnews
Gash point(HK) Co., Ltd.   Entity controlled by Gamania Digital
Jollywiz Digital Technology Co., Ltd.   Entity controlled by Gamania Digital
Mr. Alan Chen   Director and controlling shareholder of the Company, former Chairman of NOWnews.
Ms. Chiu-li Tu   Wife of Mr. Alan Chen.

 

We have not adopted written policies and procedures specifically for related person transactions. Our Board of Directors is responsible to approve all related party transactions.

 

Item 14. Principal Accounting Fees and Services.

 

The following is a summary of fees for professional services rendered by our registered independent public accounting firm for the years ended December 31, 2015 and 2014:

 

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   Year Ended December 31, 2015   Year Ended December 31, 2014 
Audit Fees  $60,000   $72,000 
Audit Related Fees   -    - 
Tax Fees   -    - 
All Other Fees   -    - 
Total Fees  $60,000   $72,000 

 

Pre-Approval Policies and Procedures

 

The Board of Directors pre-approves all audit and non-audit services performed by the Company’s auditor and the fees to be paid in connection with such services in order to assure that the provision of such services does not impair the auditor’s independence.

 

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PART IV

 

Item 15. Exhibits, Financial Statement Schedules.

 

Exhibit    
No.   Description
     
3.1   Articles of Incorporation of the Company (1)
     
3.2   Certificate of Amendment of the Company (2)
     
3.3   Bylaws of the Company (1)
     
10. 1   Share Exchange Agreement, dated November14, 2014, by and among the Company, Worldwide Media Investments Corp, NOWnews Network Co., Ltd., and the shareholders of Worldwide Media Investments Corp (4)
     
10.2   Personal Guarantee, dated November 14, 2014, by Alan Chen and Chiu-Li Tu (3)
     
10.3   NOWnews Office Lease Agreement dated March 3, 2015, by and between the Company and Yiqiu International Department Store Co., Ltd. (5)
     
10.4   Lease Termination Agreement, dated March 15, 2015, by and between the Company and Shin Kong Life Insurance Co., Ltd. (5)
     
21.1   List of Subsidiaries*
     
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.

 

(1) Incorporated by reference herein the exhibits to the Company’s Form S-1 filed on January 11, 2011.

 

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(2) Incorporated by reference the exhibit to the Company’s Form 10-K filed on November 12, 2014.

(3) Incorporated by reference the exhibit to the Company’s Form 8-K filed on November 14, 2014.

(4) Incorporated by reference the exhibit to the Company’s Form 8-K/A filed on January 9, 2015.

(5) Incorporated by reference the exhibits 10.6 and 10.7 to the Company’s Form 10-K filed on March 31, 2015.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  NOWNEWS DIGITAL MEDIA TECHNOLOGY CO. LTD.
   
Date: March 31, 2016 By: /s/ Shuo-Wei Shih
    Shuo-Wei Shih
    Chief Executive Officer
    (Principal Executive Officer)

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ Shuo-Wei Shih   Chief Executive Officer   March 31, 2016
Shuo-Wei Shih   (Principal Executive Officer)    
         
/s/ Tsung-Chien Chiang   Chief Financial Officer   March 31, 2016
Tsung-Chien Chiang   (Principal Financial and Accounting Officer)    
         
/s/ Alan Chen   Chairman of the Board of Directors   March 31, 2016
Alan Chen        
         
/s/ Shang-Hong Lin   Director   March 31, 2016
Shang-Hong Lin        
         
/s/ En Ming Tseng   Director   March 31, 2016
En Ming Tseng        
         
/s/ Yuhao Aixinjueluo   Director   March 31, 2016
Yuhao Aixinjueluo        
         
/s/ Yih-Jong Shy   Director   March 31, 2016
Yih-Jong Shy        

 

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