UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q 

 

(Mark One)

 

x

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

 

For the quarterly period ended September 30, 2017

 

¨

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from ______________ to _____________

 

Commission file number:  333-171637

 

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO. LTD.

(Exact name of Company as specified in its charter)

 

Nevada		36-4794119
(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification No.)
organization)

 

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

 

	+886 287978775 ext 500
	(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x   No ¨

 

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
Emerging growth company	¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨   No x

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes ☐     No ☐

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

 

As of November 17, 2017, there were 23,072,000 shares of $0.001 par value common stock issued and outstanding.

 

  

FORM 10-Q

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO. LTD.

INDEX

 

		Page
PART I.	Financial Information
	Item 1.  Financial Statements (Unaudited).	F-2
	Item 2.  Management’s Discussion and Analysis of Financial Condition and results of Operation.	3
	Item 3.  Quantitative and Qualitative Disclosures About Market Risk.	12
	Item 4.  Controls and Procedures.	12
PART II.	Other Information	13
	Item 1.  Legal Proceedings.	13
	Item 1A. Risk Factors.	13
	Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.	13
	Item 3.  Defaults Upon Senior Securities.	13
	Item 4.  Mine Safety Disclosures.	13
	Item 5.  Other Information.	13
	Item 6.  Exhibits.	14

 

 

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 

(UNAUDITED)

 

		Page
Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016		F-2
Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2017 and 2016		F-3
Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016		F-4
Notes to Consolidated Financial Statements		F-5 - F-22

 

  

PART I –FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

  

		September 30,				December 31,
		2017				2016
		(UNAUDITED)
Assets
Current Assets
Cash and cash equivalents		$	352,812			$	244,691
Accounts receivable, net			660,759				585,968
Due from related parties			10,386				59,898
Security deposits, current			-				16,617
Other current assets			59,892				6,779
Current assets of discontinued operations			14				4,025
Total Current Assets			1,083,863				917,978
Furniture, fixture, and equipment, net			153,964				111,207
Security deposits, non-current			65,943				-
Intangible assets, net			6,710				8,166
Total Assets		$	1,310,480			$	1,037,351
Liabilities and Equity
Current Liabilities
Long-term obligation under capital lease, current		$	2,682			$	15,030
Accounts payable			316,629				221,210
Accrued expenses			822,196				528,310
Due to related parties			905,080				909,958
Other current liabilities			7,759				3,906
Current liabilities of discontinued operations			100,394				97,992
Total Current Liabilities			2,154,740				1,776,406
Long-term obligation under capital lease			3,925				-
Total Liabilities			2,158,665				1,776,406
Commitments and contingencies (Note 11)
Equity
Capital stock - $.001 par value
Common Stock, $.001 par value, 50,000,000 shares authorized, 23,072,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively			23,072				23,072
Additional paid-in capital			6,817,493				6,503,039
Subscriptions received in advance			530,000				-
Accumulated deficit			(8,975,389	)			(7,932,295	)
Accumulated other comprehensive income			409,827				26,011
Total Stockholders' deficit			(1,194,997	)			(1,380,173	)
Noncontrolling Interests			346,812				641,118
Total Deficit			(848,185	)			(739,055	)
Total Liabilities and Equity		$	1,310,480			$	1,037,351

 

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

 

  

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

 

		For The Three Months Ended								For The Nine Months Ended
		September 30,								September 30,
		2017				2016				2017				2016
Net revenue		$	959,833			$	843,153			$	2,626,493			$	2,226,207
Cost of revenue			(856,134	)			(599,410	)			(2,366,681	)			(1,547,846	)
Gross profit			103,699				243,743				259,812				678,361
Selling expenses			(281,415	)			(165,826	)			(755,729	)			(464,133	)
General and administrative expenses			(453,720	)			(268,712	)			(1,215,550	)			(717,063	)
Financial advisory service fee – related party			-				-				-				(2,970,000	)
Total operating expense			(735,135	)			(434,538	)			(1,971,279	)			(4,151,196	)
Operating loss			(631,436	)			(190,795	)			(1,711,467	)			(3,472,835	)
Other income (expense)
Interest income			186				1				399				106
Interest expense			(68	)			(253	)			(159	)			(1,110	)
Other income (expense), net			853				399				(428	)			2,678
Total other income (expense)			971				147				(188	)			1,674
Loss from continuing operations before income taxes			(630,465	)			(190,648	)			(1,711,655	)			(3,471,161	)
Income taxes			-				-				-				-
Loss from continuing operations			(630,465	)			(190,648	)			(1,711,655	)			(3,471,161	)
Income from discontinued operations, net of income taxes			-				-				1				1
Net loss			(630,465	)			(190,648	)			(1,711,654	)			(3,471,160	)
Net loss attributable to noncontrolling interests:
Net loss from continuing operations			245,070				43,174				668,561				119,448
Net income from discontinued operations			-				-				(1	)			(1	)
Total net loss attributable to noncontrolling interest			245,070				43,174				668,560				119,447
Net loss attributable to NowNews Digital Media Technology Co. Ltd.			(385,395	)			(147,474	)			(1,043,094	)			(3,351,713	)
Foreign currency translation gain			193,290				2,565				381,020				5,327
Comprehensive loss			(192,105	)			(144,909	)			(662,074	)			(3,346,386	)
Other comprehensive loss attributable to noncontrolling interests			72				1,251				2,796				1,967
Comprehensive loss attributable to NowNews Digital Media Technology Co. Ltd.		$	(192,033	)		$	(143,658	)		$	(659,278	)		$	(3,344,419	)
Amount attributable to common stockholders:
Net loss from continuing operations, net of income taxes		$	(385,395	)		$	(147,474	)		$	(1,043,094	)		$	(3,351,713	)
Net loss from discontinued operations, net of income taxes			-				-				-				-
Net loss attributable to common stockholders		$	(385,395	)		$	(147,474	)		$	(1,043,094	)		$	(3,351,713	)
Net loss attributable to common stockholders - basic and diluted
Loss from continuing operations		$	(0.02	)		$	(0.01	)		$	(0.05	)		$	(0.15	)
Loss from discontinued operations			-				-				-				-
Net loss attributable to common stockholders		$	(0.02	)		$	(0.01	)		$	(0.05	)		$	(0.15	)
Weighted average shares outstanding, basic and diluted			23,072,000				22,412,000				23,072,000				22,412,000

 

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

 

  

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		For the Nine Months Ended
		September 30,
		2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(1,711,654	)		$	(3,471,160	)
Income from discontinued operations			(1	)			(1	)
Depreciation			43,358				41,137
Amortization			2,001				5,447
Adjustments to reconcile net loss to net cash provided by operating activities:
Increase in accounts receivable			(34,605	)			(57,052	)
Decrease in related-parties trade receivable			53,302				15,975
Increase in security deposits			(47,924	)			(772	)
(Increase) decrease in other current assets			(52,388	)			19,865
Increase in accounts payable			79,874				78,930
Decrease in advance from customers			-				(7,662	)
Increase in accrued financial advisory service fee – related party			-				2,970,000
Increase (decrease) in other accrued expenses			264,959				(46,627	)
Increase (decrease) in other current liabilities			3,567				(196	)
Net cash used in continuing activities			(1,399,511	)			(452,116	)
Net cash provided by discontinued operations			1				1
Net cash used in operating activities			(1,399,510	)			(452,115	)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets			(78,329	)			(5,310	)
Acquisition of subsidiary equity interest			(31,077	)			-
Net cash used in continuing activities			(109,406	)			(5,310	)
Net cash used in discontinued operations			-				-
Net cash used in investing activities			(109,406	)			(5,310	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayment of) proceeds from loans from related parties			(6,829	)			279,773
Proceeds from stock subscriptions received in advance			530,000				-
Payments of capital lease obligations			(9,396	)			(66,674	)
Capital contributions from noncontrolling interest			1,086,721				-
Net cash provided by continuing activities			1,600,496				213,099
Net cash used in discontinued operations			(4,262	)			-
Net cash provided by financing activities			1,596,234				213,099
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS			16,542				6,054
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS			103,860				(238,272	)
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS			(4,261	)			1
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS FROM CONTINUING OPERATIONS			108,121				(238,273	)
CASH & CASH EQUIVALENTS, BEGINNING BALANCE			244,691				301,205
CASH & CASH EQUIVALENTS, ENDING BALANCE		$	352,812			$	62,932
SUPPLEMENTAL DISCLOSURES:
Income tax paid		$	-			$	-
Interest paid		$	159			$	1,110

 

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

 

  

NOWNEWS DIGITAL MEDIA TECHNOLOGY CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1: NATURE OF OPERATIONS

 

NowNews Digital Media Technology Co., Ltd. (Formerly Forever Zen Ltd.) (“NowNews” or “the Company”) was incorporated in Nevada on March 30, 2010. On November 11, 2013, Pioneer Media Investments Co., Ltd. purchased 1,500,000 shares of the Company’s common stock for $135,000 in cash from two of the Company’s shareholders.  Those 1,500,000 shares of common stock represented 62% of the Company’s issued and outstanding common stock immediately following the sale.  As a result of the transaction, a change in control of the Company occurred and in connection therewith. Mr. Alan Chen was elected as the Company’s president and sole director. Pioneer Media Investments Co., Ltd. is beneficially owned and controlled by Alan Chen.

 

Worldwide Media Investments Corp. (“Worldwide”) was incorporated in Anguilla on June 4, 2013 under the Anguilla International Business Companies Act, 2000. Worldwide is a holding company and has not carried out substantive business operations of its own. Mr. Alan Chen is the sole director and controlling beneficiary shareholder of Worldwide.

 

NOWnews Network Co., Ltd, (“NOWnews Network”) was incorporated in Taipei City, Taiwan on June 8, 2006. NOWnews Network is a media company with operations in Taiwan. NOWnews Network operates a news website and generates revenue from fees paid by advertisers in connection with the display of graphical and non-graphical advertisements. In addition, NOWnews Network provides editing services of news articles, pictures, and videos, and sells the broadcasting rights of its news articles, pictures, and videos. Mr. Alan Chen is a director and former Chairman of NOWnews Network.

 

In August 2013, NOWnews Network established NOWnews International Marketing Co., Ltd (“NOWnews International”) as a 55% owned subsidiary. Mr. Shu-sen Chang, the former Chairman and current director of NOWnews Network, and one other shareholder, own 10% and 35% of NOWnews International, respectively. The primary business of NOWnews International is to sell advertisement spaces in its own newspapers.

 

On December 27, 2013, the Board of Directors of NOWnews Network approved the termination of operations of NOWnews International. The results of NOWnews International have been presented as discontinued operations in the consolidated statements of income and comprehensive income. NOWnews Network has reclassified the assets and liabilities of the discontinued entity in the accompanied consolidated financial statements.

 

On June 4, 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 became the Company’s majority owned subsidiary in which Company indirectly held 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.

 

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 and addendums, NOWnews Network issued 1,650,000, 350,000, 1,000,000, and 2,200,000 shares to non-controlling shareholders on August 14, 2015, September 8, 2015, November 30, 2016, and March 16, 2017, respectively. On February 22, 2017, Sky Media entered into a stock purchase agreement with Jin Hao Kang Marketing Co., Ltd (“Jin Hao Kang”), pursuant to which Sky Media purchased 1,065,000 shares of NOWnews Network held by Jin Hao Kang for a purchase price of NT $937,200 (approximately US$30,930). The transaction was completed on March 31, 2017. As a result of this purchase of stock, NOWnews Network remained the Company’s majority owned subsidiary in which Company indirectly holds 52.49% of the equity interest (see Note 9) at September 30, 2017.

 

  

On August 19, 2015, the Company established Dawnrain Media Co., Ltd. (“Dawnrain”) in the Republic of Seychelles (“Seychelles”) as a wholly owned subsidiary. On August 27, 2015, Dawnrain incorporated New Taoyard Cultural Transmission Co., Ltd. (“New Taoyard”) in Seychelles. On November 15, 2016, the Company established Asia Well Ltd.(“Asia Well”) in Seychelles as a wholly owned subsidiary. Dawnrain, New Taoyard, and Asia Well are holding companies and have not carried out substantive business operations of their own.

 

On April 13, 2016, the Company entered in a share exchange agreement (“NTY Ageement”) with the Company’s wholly owned subsidiary, Dawnrain Media Co., Ltd., a Seychelles limited liability company (“Dawnrain”), New Taoyard Advertising Co., Ltd., a Seychelles limited liability company and Dawnrain’s wholly owned subsidiary (“NTY”), Beijing New Tong Ying Culture Media Co., Ltd., a limited liability formed in the People’s Republic of China (“BJNTY”), and BJNTY’s shareholders (the “BJNTY Shareholders”). Pursuant to the NTY Agreement, the BJNTY Shareholders will acquire from the Company an aggregate of 1,600,000 shares of the Company’s common stock, par value $0.001 per share (Common Stock), in exchange of 80% of the capital interest of BJNTY. In the event the Company fails to cause the Company’s common stock to be listed on NYSE by February 28, 2017, the BJNTY Shareholders shall have the option to unwind the transaction contemplated in the NTY Agreement. As the date of this report, the NTY Agreement has not been fulfilled by both parties and the BJNTY Shareholders has not informed the Company of their intention to unwind the transaction contemplated in the NTY Agreement.

 

On October 4, 2016, the Company entered into a share exchange agreement (the “MySongAgreement”) with MySong Industrial Co., Ltd. (“MySong”), a limited liability company formed under the laws of Taiwan and both shareholders of MySong to acquire all the issued and outstanding 5,000 shares of common stock of MySong in exchange for 200,000 restricted shares of common stock (“Share Exchange”). The closing of the transactions contemplated under the MySong Share Exchange is subject to the fulfillment of certain conditions, or on such other date and time as all parties may mutually determine (the “Closing Date”). As the date of this report, the Agreement has not been fulfilled by both parties.

 

On November 19, 2016, the Company entered into a share exchange agreement (the “Lao Agreement”) with Lao Development Holding Limited (“Lao Development”), a Seychelles company and each of the shareholders of Lao Development (the “Lao Shareholders”) to acquire all the issued and outstanding shares of common stock of Lao Development in exchange for 2,137,500 restricted shares of Common Stock (“Lao Share Exchange”). The closing of the transactions contemplated under the Lao Agreement is subject to the fulfillment of certain conditions. The Lao Share Exchange is expected to close on November 19, 2017 or such other date and time as all parties may mutually determine. As the date of this report, the Lao Agreement has not been fulfilled by both parties.

 

On August 1, 2017, New Taoyard entered into a share purchase agreement (the “Lovelife Agreement) with Shanghai Lovelife Trading Co., Ltd. (the “Lovelife”), a limited liability formed in the People’s Republic of China, and its sole shareholder and director. Pursuant to the Lovelife Agreement, New Taoyard shall acquire 100% of the registered capital interest of Lovelife in an aggregate amount of USD160,000. As of the date of this report, no capital has been paid into the Lovelife.

 

The Company’s fiscal year ends on December 31st.

 

  

NOTE 2: GOING CONCERN

 

The Company’s unaudited consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant losses and has not demonstrated the ability to generate sufficient cash flows from operations to satisfy its liabilities and sustain operations. The Company had accumulated deficits of $8,975,389 and $7,932,295, and stockholders’ deficits of $1,194,997 and $1,380,173 as of September 30, 2017 and December 31, 2016, respectively. The net losses attributable to common stockholders of $1,043,094 and $3,351,713 for the nine months ended September 30, 2017 and 2016, respectively. In addition, current liabilities exceed current assets by $1,070,877 and $858,428 as of September 30, 2017 and December 31, 2016, 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.

 

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 September 30, 2017 and December 31, 2016, the Company has uninsured deposits in banks of $139,235 and $122,508, respectively.

 

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 September 30, 2017 and December 31, 2016, the Company assessed the allowance for doubtful accounts of $10,110 and $9,464, 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 to 5 years
Computer Equipment	5 years
Office Equipment and Furniture	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 nine months ended September 30, 2017 and the year ended December 31, 2016, 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 $89,256 and $58,655 for the nine months ended September 30, 2017 and 2016, respectively. The total amounts for such employee benefits, which were expensed as incurred, were $34,246 and $20,545 for the three months ended September 30, 2017 and 2016, 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 September 30, 2017 and December 31, 2016.

 

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 September 30, 2017 and December 31, 2016, 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 nine months ended September 30, 2017 and 2016, no options or warrants were issued or outstanding.

 

Discontinued operations

 

Results of the Company’s discontinued entity have been presented in discontinued operations in the financial statements. See Note 1 and Note 12 for additional information.

 

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 January 2017, the FASB issued Accounting Standard Update 2017-03, Accounting Changes & Error Corrections and Investments – Equity Method and Joint Ventures: Amendments to SEC Paragraphs pursuant to Staff Announcements (“ASU 2017-03”), which amends various FASB Codification Topics. Public business entities are required to adopt this ASU for fiscal years beginning after December 15, 2019, with other entities adopting it for fiscal years beginning after December 15, 2020. Early adoption is permitted as of annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. The Company does not expect the adoption of this ASU to have a material effect on its consolidated financial statements.

 

  

In December 2016, the FASB issued Accounting Standard Update 2016-20 , Technical Corrections & Improvements to Topic 606: Revenue from Contracts with Customers (“ASU 2016-20”), which makes minor corrections or improvements to the Codification related to ASU 2014-09 Revenue from Contracts with Customers (the new Revenue Recognition Standard). The effective date for ASU 2016-20 is the same as the effective date for ASU 2014-09 Revenue from Contracts with Customers which date was deferred by ASU 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. Public business entities are required to adopt this ASU for fiscal years beginning after December 15, 2017, with other entities adopting it for fiscal years beginning after December 15, 2018, with interim reporting periods beginning after December 15, 2019. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company has begun the process of evaluating the potential impact of adoption of this ASU and does not expect the adoption of this ASU or the adoption of the related new Revenue Recognition standard to have a material effect on its consolidated financial statements.

 

On November 17, 2016, the FASB issued Accounting Standard Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, to address the diversity in the classification and presentation of changes in restricted cash on the statement of cash flows under Topic 230. The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. The Company is still in progress of evaluating future impact of adopting this standard.

 

On October 26, 2016, the FASB issued Accounting Standards Update No. 2016-17—Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control to amend the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. Under the amendments, a single decision maker is not required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety. Instead, a single decision maker is required to include those interests on a proportionate basis consistent with indirect interests held through other related parties. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

On October 24, 2016, Accounting Standards Update No. 2016-16—Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory to prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. In addition, interpretations of this guidance have developed in practice for transfers of certain intangible and tangible assets. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP. To more faithfully represent the economics of intra-entity asset transfers, the amendments in this Update require that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this Update do not change GAAP for the pre-tax effects of an intra-entity asset transfer under Topic 810, Consolidation, or for an intra-entity transfer of inventory. The Company is still in progress of evaluating future impact of adopting this standard.

 

On August 26, 2016, the FASB issued Accounting Standard Update 2016-15, Statement of Cash Flows (Topic 230), a consensus of the FASB’s Emerging Issues Task Force. The Update is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.  The amendments in this Update provide guidance on the following eight specific cash flow issues: Issue 1 - Debt prepayment or debt extinguishment costs.  Issue 2 - Settlement of zero-coupon debt instruments. . Issue 3 - Contingent consideration payments made after a business combination.  Issue 4 - Proceeds from the settlement of insurance claims.  Issue 5 - Proceeds from the settlement of corporate-owned life insurance (COLI) policies, including bank-owned life insurance (BOLI) policies.  Issue 6 - Distributions received from equity method investments. Issue 7 - Beneficial interests in securitization transactions. . Issue 8 - Separately identifiable cash flows and application of the predominance principle.  The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in this Update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is still in progress of evaluating future impact of adopting this standard.

 

  

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. In September 2017, the FASB issued ASU 2017-13, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842). The main objective of this pronouncement is to clarify the effective date of the adoption of ASC Topic 606 and ASC Topic 842 and the definition of public business entity as stipulated in ASU 2014-09 and ASU 2016-02. ASU 2014-09 provides that a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. ASU 2016-12 requires that “a public business entity and certain other specified entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. All other entities are required to adopt ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020”. ASU 2017-13 clarifies that the SEC would not object to certain public business entities electing to use the non-public business entities effective dates for applying ASC 606 and ASC 842. ASU 2017-13, however, limits such election to certain public business entities that “otherwise would not meet the definition of a public business entity except for a requirement to include or inclusion of its financial statements or financial information in another entity’s filings with the SEC”. Management does not expect the adoption of ASU 2017-13 to have any material impact on its financial positions and results of operations or cash flows. The Company is still in progress of evaluating future impact of adopting this standard.

 

  

NOTE 4: ACCOUNTS RECEIVABLE 

 

Accounts receivable consist of the following:

 

		September 30, 2017				December 31, 2016
Accounts receivable		$	670,869			$	595,432
Less: Allowance for doubtful accounts			(10,110	)			(9,464	)
Accounts receivable, net		$	660,759			$	585,968

 

NOTE 5: PROPERTY AND EQUIPMENT, NET

 

Property and equipment consist of the following:

 

		September 30,				December 31,
		2017				2016
Capital Lease		$	174,277			$	156,814
Computer equipment			50,799				13,123
Leasehold improvement			26,815				20,441
Electronic equipment			17,419				18,214
Office equipment and furniture			18,779				6,143
			288,089				214,735
Less: Accumulated depreciation			(134,125	)			(103,528	)
		$	153,964			$	111,207

 

As of September 30, 2017, assets under capital lease of $174,277 represented server equipment (see Note 11). Depreciation expense for the three months ended September 30, 2017 and 2016 was $12,592 and $13,866, respectively. Depreciation expense for the nine months ended September 30, 2017 and 2016 was $43,358 and $41,137, respectively.

 

  

NOTE 6: INTANGIBLE ASSETS, NET

 

Intangible assets consist of the following:

 

		September 30,				December 31,
		2017				2016
Copyrights		$	932,572			$	872,991
Software			36,715				34,369
Trademark			6,924				6,482
Patent			166				156
			976,377				913,998
Accumulated amortization			(969,667	)			(905,832	)
Intangible assets, net		$	6,710			$	8,166

 

Intangible assets amounted to $6,710 and $8,166 as of September 30, 2017 and December 31, 2016, 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 $932,572). Copyrights are amortized based on their determined useful life, and tested annually for impairment. The amortization period ranges from 5 to 10 years. Amortization expense related to copyrights was $0 for the three months ended September 30, 2017 and 2016, respectively. Amortization expense related to copyrights was $0 for the nine months ended September 30, 2017 and 2016, respectively.

 

For the three months ended September 30, 2017 and 2016, total amortization expense amounted to $672 and $679, respectively. For the nine months ended September 30, 2017 and 2016, total amortization expense amounted to $2,001 and $5,447, respectively.

 

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

 

As of September 30,		Amount
2018		$	2,512
2019			2,039
2020			1,990
2021			169
		$	6,710

 

NOTE 7: ACCRUED EXPENSES

 

Accrued expenses consist of the following:

 

		September 30,				December 31,
		2017				2016
Accrued bonus		$	319,435			$	156,269
Accrued payroll			212,920				142,037
Accrued employee benefits and pension expenses			155,099				62,736
Accrued professional fees			35,707				108,923
Accrued sales taxes			20,649				40,811
Accrued office rent and management fees			15,633				-
Other			62,753				17,534
Total		$	822,196			$	528,310

 

  

NOTE 8: INCOME TAX

 

United States

 

The Company is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company has no taxable income for the period. The applicable income tax rate for the Company was 35% for the nine months ended September 30, 2017 and 2016. No tax benefit has been realized since a 100 % valuation allowance has offset deferred tax asset resulting from the net operating losses.

 

Anguilla

 

Worldwide Media Investments Corp. and Sky Media are incorporated in Anguilla, which does not tax income.

 

Seychelles

 

Dawnrain Media Co., Ltd., New Taoyard Cultural Transmission Co., Ltd., and Asia Well Ltd. are incorporated in Seychelles, 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 $3,956 (NT$120,000). No income tax liabilities existed as of September 30, 2017 and December 31, 2016 due to the Company’s continuing operating losses.

 

Provision for income tax consists of the following:

  

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2017				2016				2017				2016
Current
USA		$	-			$	-			$	-			$	-
Taiwan			-				-				-				-
Deferred
USA
Deferred tax assets for NOL carryforwards			(38,478	)			(31,700	)			(106,009	)			(1,117,626	)
Valuation allowance			38,478				31,700				106,009				1,117,626
Net changes in deferred income tax under non-current portion			-				-				-				-
Taiwan
Noncurrent portion
NOL carryforwards			(117,942	)			(64,277	)			(338,676	)			(97,661	)
Valuation allowance			117,942				64,277				338,676				97,661
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 Nine Months Ended September 30,
		2017				2016
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 September 30, 2017 and December 31, 2016 were as follows:

 

		September 30,				December 31,
		2017				2016
Deferred tax assets:
Net operating loss carryforwards		$	3,615,641			$	3,170,956
Less: Valuation allowance			(3,615,641	)			(3,170,956	)
Deferred tax assets, net		$	-			$	-

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making this assessment. As of September 30, 2017 and December 31, 2016, the Company accrued 100% valuation allowance against its deferred tax assets based on the assessment of the probability of future realization.

 

NOTE 9: STOCKHOLDERS’ EQUITY

 

As of September 30, 2017, 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. 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 Gorp. (“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.

 

In February, 2015, Ms. Chiu-li Tu paid off the bank loans obtained by NOWnews Network, amounted to approximately $809,343 as of December 31, 2014, on behalf of NOWnews Network. Immediately after the repayment, Ms. Tu and NOWnews Network entered an agreement that such repayment will be a shareholder contribution to NOWnews Network. This transaction was treated as a related party transaction. The Company has recorded additional paid-in capital of approximately $817,104 as of December 31, 2015 for this shareholder contribution.

 

On July 31, 2015, NOWnews Network entered an agreement with Alan Chen and Ms. Chiu-li Tu, pursuant to which, Alan Chen and Ms. Tu agreed to forgive to their debt due from NOWnews Network in the amount of approximately $116,255 (or NT$3.7 million) and $367,808 (or NT$11.6 million), respectively, as shareholder contribution to NOWnews Network. This transaction was treated as a related party transaction, and such shareholder contribution has been recorded as additional paid-in capital.

 

On August 5, 2015, NOWnews Network, Sky Media, Mr. Alan Chen and Ms. Tu entered a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Gamania Digital Entertainment Co. Ltd. (“Gamania Digital”) and Ta Ya Venture Capital Co. Ltd. (“Ta Ya”), in which there are two phases of stock transfers. In Phase I, NOWnews Network is committed to sell to Gamania Digital and Ta Ya 1,250,000 and 400,000 shares of outstanding shares of NOWnews Network at NT$10 per share, 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 at NT$30 per share, 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. On August 14, 2015, NOWnews Network has fulfilled its obligation of Phase I through issuance of 1,250,000 and 400,000 shares at NT$10 per share 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 September 8, 2015, NOWnews Network issued additional 350,000 shares at NT$10 per share to Gamania Digital for approximately $107,230 (or NT$3.5 million). On November 30, 2016, NOWnews Network issued additional 1,000,000 shares at NT$10 per share to Gamania Digital for approximately $313,283 (or NT$10 million). On March 16, 2017, NOWnews Network issued additional 2,200,000 shares at NT$10 per share to Gamania Digital for approximately $711,054 (or NT $22,000,000). On March 31, 2017, Sky Media purchased 1,065,000 shares of NOWnews Network held by Jin Hao Kang Marketing Co., Ltd for a purchase price of approximately US$30,930 (or NT$937,200). As a result, NOWnews Network remained the Company’s majority owned subsidiary in which Company indirectly holds 52.49% of the equity interest at September 30, 2017.

 

On October 4, 2016, the Company issued 660,000 shares of common stock to GIA Consultants Limited to fulfill the Financial Advisory Service Recognition Agreement (the “Agreement”) signed on September 20, 2016.In resolution of the Company’s outstanding obligations pertaining to the financial advisory services that have been rendered to the Company as of August 12, 2016, the Company and GIA Consultants Limited (“GIA”) entered into a Financial Advisory Service Recognition Agreement (the “Agreement”) on September 20, 2016, pursuant to which the Company agrees to issue 660,000 shares of common stock, par value $0.001 per share, to GIA in recognition of services that have been previously rendered to the Company as of August 12, 2016. The common stock price was $4.50 per share as of closing on August 12, 2016, totaling a sum of $2,970,000.

 

Dawnrain and New Taoyard had 30,000,000 issued and outstanding shares with a par value of $1 per share. Asia Well had 2,250,000 issued and outstanding shares with a par value of $1 per share. On May 16, 2017, the Company has completed the amendment of share registry to reduce the amount of the issued and outstanding shares to 10 shares of Dawnrain, 10 shares of New Taoyard, and 100 shares of Asia Well. Accordingly, the capital of $10, $10, and $100 has been paid to Dawnrain, New Taoyard, and Asia Well, respectively.

 

On June 22, 2017, the Company entered into a subscription agreement (the “Agreement”) with Wei Su Technology Holdings Co., Ltd. (the “Wei Su”). Wei Su was incorporated in September 2001 under the laws of Taiwan. Pursuant to the Agreement, Wei Su agreed to purchase 100,000 restricted shares of common stock, par value $.001 of the Company (“Share Purchase”) for an aggregate price of $530,000 (the “Subscription Price”). The Agreement contains a buy-back clause whereby Wei Su will have an option to have the Company buy back the shares issued to Wei Su under the Agreement at a price of $5.8 per share one year after Wei Su pays the full Subscription Price. The closing of the transactions contemplated under the Agreement is subject to the fulfillment of certain conditions, or on such other date and time as all parties may mutually determine (the “Closing Date”). As of September 30, 2017, the Company has not issued 100,000 shares to Wei Su.

 

  

NOTE 10: NON-CONTROLLING INTEREST

 

In August 2013, NOWnews Network established NOWnews International as a 55% owned subsidiary. Mr. Shu-sen Chang, the former Chairman of NOWnews Network, and one other shareholder, owns 10% and 35% of NOWnews International, respectively.

 

During September through December 2013, Sky Media acquired 66% of NOWnews Network from Mr. Alan Chen. Mr. Chen owned 84.3% of common stock of NOWnews Network prior to the Restructuring Transaction.

 

On August 14 and September 8, 2015, NOWnews Network issued additional 1,650,000 and 350,000 shares of common stock to non-controlling shareholders, respectively, pursuant to the Stock Purchase Agreement (see Note 9). As a result, Sky Media owned 57% of NOWnews Network.

 

On each of November 30, 2016 and March 16, 2017, NOWnews Network respectively issued additional 1,000,000 and 2,200,000 shares of common stock to non-controlling shareholders, pursuant to the Stock Purchase Agreement and addendums (see Note 9). As a result, Sky Media owned 52.49% of NOWnews Network as of September 30, 2017.

 

Non-controlling interest consisted of the following:

 

		September 30,				December 31,
		2017				2016
Beginning balance		$	641,118			$	492,851
Capital contribution by shareholders through debt conversion			-				-
Capital contribution by non-controlling interest			377,050				313,032
Net loss attributed to non-controlling interest			(668,560	)			(164,527	)
Other comprehensive loss attributable to non-controlling interest			(2,796	)			(238	)
Ending balance		$	346,812			$	641,118

 

  

NOTE 11: COMMITMENTS AND CONTINGENCIES

 

(1) Lease commitments

 

Capital Lease

 

From April, 2015, NOWnews Network entered into various capital lease agreements with Nextlink Technology Co., Ltd. (“Nextlink”), pursuant to which NOWNews Network agreed to lease multiple servers from Nextlink for the period ranges from sixteen months to two years. At the end of each contract and upon fulfillment of the lease obligations, the title of these servers and ownership shall be transferred to NOWnews Network. Because NOWnews Network takes ownership of the equipment at the completion of the lease contract, NOWnews Network determined that the arrangement represents a capital lease for the equipment. The Company recorded $167,517 as a capital lease for the equipment and began depreciating the equipment on a straight line basis over five years.

 

On June 21, 2017, NOWnews Network entered into another capital lease agreement with High Performance Information Co., Ltd. (“HPI”), pursuant to which NOWNews Network agreed to lease the Network Attached Storage (“NAS”) servers from HPI for three years with maturity date on May 31, 2020. At the end of this 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 $6,760 as a capital lease for the equipment and began depreciating the equipment on a straight line basis over three years.

 

Depreciation expense of those equipment under capital lease was $28,824 and $26,739 for the nine months ended September 30, 2017 and 2016, respectively.  Interest expense resulted from capital leases amounted to $159 and $1,110 for the nine months ended September 30, 2017 and 2016, respectively.

 

Operating Lease

 

Operating lease commitments consist of leases for office space and copy machines under various operating lease agreements which expire in August, 2022. 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 September 30,		Capital Leases Amount				Operating Leases Amount
2018		$	2,682			$	286,734
2019			2,301				287,785
2020			1,624				300,444
2021			-				311,776
2022			-				281,073
Total minimum payments		$	6,607			$	1,467,812

 

The Company incurred rent expenses of $72,289 and $21,233 for the three months ended September 30, 2017 and 2016, respectively. The Company incurred rent expenses of $139,638 and $62,941 for the nine months ended September 30, 2017 and 2016, respectively.

 

(2) Litigation

 

Defamation and General Matters

 

From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of copyrights and other intellectual property rights and other claims alleging defamation, invasion of privacy, or similar claims arising in connection with the news articles, pictures, and other contents published on the Company’s website.

 

Lai Matter

 

On July 11, 2014, Ms. Xiu-qing Lai filed a claim against NOWnews Network and five other companies (the “Five Companies”) who are unrelated to the Company, in the Taiwan Tainan District Court (the “Tainan District Court”) in connection to a news article edited by NOWnews Network and published on July 19, 2012 on the website of NOWnews Network and five other websites owned by the Five Companies, respectively. Ms. Lai claims that the news article contained a false statement that harms the reputation of Ms. Lai. Ms. Lai seeks approximately $18,134 (NT$550,000) in compensatory damages from NOWnews Network, $57,699 (NT$1,750,000) in aggregate from the Five Companies, and newspaper apologies from NOWnews Network and the Five Companies. Based on the agreements entered by NOWnews Network and the Five Companies, if any news content provided by NOWnews Network violates any regulations or infringes on any copyrights, NOWnews Network shall be responsible for any losses that may occur.

 

On January 6, 2015, the plaintiff agreed to settle this legal matter with NOWnews Network outside of court. NOWnews Network agreed to pay the plaintiff $13,188 (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 $13,188 (NT$400,000) of contingent loss in connection to this lawsuit settlement during the year ended December 31, 2014. As of December 31, 2016, NOWnews Network has made payment of approximately $13,188 (NT$400,000) and this action is closed.

 

  

(3) Shares to be issued

 

On August 5, 2015, NOWnews Network, Sky Media, Mr. Alan Chen and Ms. Tu entered a Stock Purchase Agreement with Gamania Digital, and Ta Ya, in which NOWnews Network is committed to sell to Gamania Digital, and Ta Ya of its outstanding shares through two Phases (see Note 9). The sale of Phase I has been completed on August 14, 2015. As of September 30, 2017, NOWnews Network has issued an aggregate of 3,550,000 shares to Gamania Digital in exchange for approximately $1,131,567 (or NT$ 35,500,000) in the sale of Phase II, which shall terminate on September 21, 2018 pursuant to the Stock Purchase Agreement and addendums.

 

NOTE 12: DISCONTINUED OPERATIONS

 

On December 27, 2013, NOWnews Network’s Board of Directors approved the termination of operations of NOWnews Network’s 55% owned subsidiary, NOWnews International (see Note 1). The results of the subsidiary have been presented as a discontinued operation in the statements of income and comprehensive income. There was no revenue, cost of sales, operating expenses, or any income taxes incurred from the discontinued entity during the nine months ended September 30, 2017.

 

Net income of discontinued operations during the nine months ended September 30, 2017 was as follows:

  

		For The Nine Months Ended
		September 30, 2017
Net revenue		$	-
Cost of goods sold			-
Selling, general, and administrative expenses			-
Other income			1
Income before income taxes			1
Income taxes			-
Net income		$	1

  

Net assets of discontinued operations as of September 30, 2017 were as follows:

 

Net assets:

 

		As of September 30, 2017
Cash & cash equivalents		$	14
Current assets		$	14
Accounts payable		$	173
Accrued expenses			411
Due to related parties			99,810
Current liabilities		$	100,394

 

  

NOTE 13: RELATED PARTY TRANSACTIONS

 

The related parties of the company with whom transactions are reported in these financial statements are as follows:

 

Name of entity or Individual		Relationship with the Company and its subsidiaries
Mega Media Investments Co., Ltd. (Taiwan Branch)		Entity controlled by Mr. Alan Chen
GASH Co., Ltd.		Entity controlled by Gamania Digital.
GASH Media Digital Marketing Co., Ltd		Entity controlled by GASH Co., Ltd.
Jin Hao Kang Marketing Co., Ltd.		Mr. Alan Chen is the Director of this entity.
Digicentre Co., Ltd.		Entity controlled by Gamania Digital.
WeBackers Co., Ltd.		Entity controlled by Gamania Digital.
Mr. Alan Chen		Controlling beneficiary shareholder of the Company.
Gamania Digital Entertainment Co., Ltd.		Entity owned 42.85% of NOWnews Network.
Jollywiz Digital Technology Co., Ltd.		Entity controlled by Gamania Digital.
Chunghwa Wideband Best Network Co., Ltd.		Mr. Alan Chen is the Chairman and legal representative of this entity.

  

Transactions

 

		For the Nine Months Ended September 30,
		2017				2016
Sales to Mega Media Investments Co., Ltd. (Taiwan Branch)		$	64,783			$	76,369
Sales to GASH Co., Ltd.			29,508				3,707
Sales to GASH Media Digital Marketing Co., Ltd.			4,527				31,674
Sales to Jin Hao Kang Marketing Co., Ltd.			-				29,423
Sales to WeBackers Co., Ltd.			-				4,634
Sales to Digicentre Co., Ltd.			-				3,089
Total		$	98,818			$	148,896

 

The primary services provided by NOWnews Network to these related parties were advertisement space on NOWnews Network’s website.

 

  

Due from related parties

 

		September 30,				December 31,
		2017				2016
Trade receivable from GASH Co., Ltd.		$	10,386			$	-
Trade receivable from Mega Media Investments Co., Ltd. (Taiwan Branch)			-				57,230
Trade receivable from WeBackers Co., Ltd.			-				1,873
Trade receivable from Jin Hao Kang Marketing Co., Ltd.			-				795
Total		$	10,386			$	59,898

  

Due to related parties

 

		September 30,				December 31,
		2017				2016
Due to Mr. Alan Chen		$	876,392			$	881,203
Due to Jollywiz Digital Technology Co., Ltd.			27,996				-
Due to Gamania Digital Entertainment Co., Ltd.			692				-
Due to GASH Media Digital Marketing Co., Ltd.			-				16,410
Due to Digicentre Co., Ltd.			-				9,259
Due to Chunghwa Wideband Best Network Co., Ltd.			-				3,086
		$	905,080			$	909,958

  

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

  

NOTE 14: SUBSEQUENT EVENT 

 

Management has evaluated subsequent events through November 17, 2017, the date which the financial statements were available to be issued. All subsequent events requiring recognition as of September 30, 2017 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.”

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

  

This Management Discussion and Analysis (“MD&A”) contains “forward-looking statements”, which represent our projections, estimates, expectations or beliefs concerning among other things, financial items that relate to management’s future plans or objectives or to our future economic and financial performance. In some cases, you can identify these statements by terminology such as “may”, “should”, “plans”, “believe”, “will”, “anticipate”, “estimate”, “expect” “project”, or “intend”, including their opposites or similar phrases or expressions. You should be aware that these statements are projections or estimates as to future events and are subject to a number of factors that may tend to influence the accuracy of the statements. These forward-looking statements should not be regarded as a representation by the Company or any other person that the events or plans of the Company will be achieved. You should not unduly rely on these forward-looking statements, which speak only as of the date of this MD&A. Except as may be required under applicable securities laws, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this MD&A or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe under “Risk Factors” in our reports filed with the Securities and Exchange Commission. Actual results may differ materially from any forward looking statement. 

 

Overview

 

 We were incorporated as Forever Zen Ltd. on March 20, 2010 under the laws of the State of Nevada. On December 13, 2013, we changed our name to NowNews Digital Media Technology Co Ltd. with the plan to enter into the business of internet media and news content. Prior to the Share Exchange as defined below, we were a development stage company and had not yet realized any revenues from our planned operations.

 

On November 14, 2014, we entered into and closed a share exchange agreement (the “Share Exchange Agreement”), with Worldwide Media Investments Corp., an Anguilla corporation (“Worldwide”), the shareholders of Worldwide, and NOWnews Network Co., Ltd., a Taiwan corporation (“NOWnews Network”). Pursuant to the Share Exchange Agreement, the Company issued an aggregate of 20,000,000 shares of common stock to the shareholders of Worldwide in exchange for all the issued and outstanding capital stock of Worldwide (the “Share Exchange”). Worldwide, through its wholly owned subsidiary, Sky Media Investments Co., Ltd. (“Sky Media”), owned 66% of all the issued and outstanding capital stock of NOWnews Network immediately following the Share Exchange.

 

As a result of the consummation of the Share Exchange on November 14, 2014, NOWnews Network became, indirectly through Worldwide and Sky Media, a majority-owned subsidiary of the Company. We are now, through NOWnews Network, engaged in creating, collecting and distributing news and information through our website http://www.nownews.com/ and our applications on mobile phones or tablets.

 

We currently generate revenue primarily from online advertising and marketing services and news content licensing. We historically had revenues from online product sales in the E-commerce business and editing services for customers. Since our editing service was not profitable, we ceased this service in December 2013. In addition, we also suspended our E-commerce business in April 2014 and eventually terminated the E-commerce business at the end of 2015 due to the continuous loss from this business. 

 

On August 5, 2015, NOWnews Network, Sky Media, Mr. Alan Chen and his spouse, Ms. 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 and addendums, NOWnews Network issued 1,650,000, 350,000, 1,000,000, and 2,200,000 shares to non-controlling shareholders on August 14, 2015, September 8, 2015, November 30, 2016, and March 16, 2017, respectively. On February 22, 2017, Sky Media entered into a stock purchase agreement with Jin Hao Kang Marketing Co., Ltd (“Jin Hao Kang”), pursuant to which Sky Media purchased 1,065,000 shares of NOWnews Network held by Jin Hao Kang for a purchase price of NT $937,200 (approximately US$30,930). The transaction was completed on March 31, 2017. As a result of this purchase of stock, NOWnews Network remained the Company’s majority owned subsidiary in which Company indirectly holds 52.49% of the equity interest at September 30, 2017.

 

On August 19, 2015, we incorporated Dawnrain Media Co., Ltd. (the “Dawnrain”) in the Republic of Seychelles (“Seychelles”). Dawnrain is our wholly owned subsidiary. On August 27, 2015, Dawnrain incorporated New Taoyard Cultural Transmission Co., Ltd. (the “New Taoyard”) in Seychelles. On November 15, 2016, we incorporated Asia Well Ltd. (the “Asia Well”) in Seychelles. These three Seychelles companies are holding companies and have not carried out substantive business operations of their own. Prior to May 16, 2017, each of Dawnrain and New Taoyard had 30,000,000 issued and outstanding shares with a par value of $1 per share, and Asia Well had 2,250,000 issued and outstanding shares with a par value of $1 per share. On May 16, 2017, Dawnrain and New Taoyard respectively amended their share registry, reducing the amount of the issued and outstanding shares from 30,000,000 to 10. On the same date, Asia Well amended its share registry and reduced the amount of the issued and outstanding shares from 2,250,000 to 100.

 

  

On August 1, 2017, New Taoyard entered into a share purchase agreement (the “Lovelife Agreement) with Shanghai Lovelife Trading Co., Ltd. (the “Lovelife”), a limited liability formed in the People’s Republic of China, and its sole shareholder and director. Pursuant to the Lovelife Agreement, New Taoyard shall acquire 100% of the registered capital interest of Lovelife in an aggregate amount of USD160,000. As of the date of this report, no capital has been paid into the Lovelife.

 

Results of Operations for the Three Months Ended September 30, 2017 and 2016 

 

		For The Three Months Ended
		September 30,								Change in
		2017				2016				$				%
Net revenue		$	959,833			$	843,153			$	116,680				14
Cost of revenue			(856,134	)			(599,410	)			(256,724	)			43
Gross profit			103,699				243,743				(140,044	)			(57	)
Selling expenses			(281,415	)			(165,826	)			(115,589	)			70
General and administrative expenses			(453,720	)			(268,712	)			(185,008	)			69
Total operating expense			(735,135	)			(434,538	)			(300,597	)			69
Operating loss			(631,436	)			(190,795	)			(440,641	)			231
Other income (expense)
Interest income			186				1				185				18500
Interest expense			(68	)			(253	)			185				(73	)
Other income, net			853				399				454				114
Total other income			971				147				824				561
Loss from continuing operations before income taxes			(630,465	)			(190,648	)			(439,817	)			231
Income taxes			-				-				-				-
Loss from continuing operations			(630,465	)			(190,648	)			(439,817	)			231
Loss from discontinued operations, net of income taxes			-				-				-				-
Net loss			(630,465	)			(190,648	)			(439,817	)			231
Net loss attributable to noncontrolling interests:
Net loss from continuing operations			245,070				43,174				201,896				468
Net loss from discontinued operations			-				-				-				-
Total net loss attributable to noncontrolling interest			245,070				43,174				201,896				468
Net loss attributable to NowNews Digital Media Technology Co., Ltd.		$	(385,395	)		$	(147,474	)		$	(237,921	)			161

 

Net Revenue

 

Our net revenue for the three months ended September 30, 2017 was $0.96 million, an increase of $0.12 million, or 14%, from $0.84 million for the three months ended September 30, 2016. The increase was primarily due to the increase in advertisement revenue.

 

Advertising

 

Our advertising avenue was $0.90 million for the three months ended September 30, 2017, an increase of $0.13 million, or 17%, from $0.77 million for the three months ended September 30, 2016. We will continue focus on the internet advertising and marketing business.

 

Licensing and Services

 

Our revenue from content licensing was $0.06 million for the three months ended September 30, 2017, a decrease of $0.01 million, or 19%, from $0.07 million for the three months ended September 30, 2016.

 

 

Cost of Revenue

 

Cost of revenue mainly consists of advertisement costs, content licensing costs, website maintenance costs, and labor costs.

 

Cost of revenue was $0.86 million for the three months ended September 30, 2017, an increase of $0.26 million, or 43%, as compared to $0.60 million for the three months ended September 30, 2016. The increase was primarily attributable to the increase of $0.20 million in labor costs and $0.10 million in advertisement costs.

 

Gross Profit

 

Gross profit decreased approximately $0.14 million, or 57%, to $0.10 million for the three months ended September 30, 2017, as compared to $0.24 million for the same period in 2016, mainly due to the increase in cost of revenue. Gross profit margin was 11% for the three months ended September 30, 2017 as compared to 29% for the same period in 2016.

 

Selling Expenses

 

Total selling expenses consist primarily of payroll, labor and health insurance, and advertisement expenses. The amount increased by $0.11 million, or 70%, from $0.17 million for the three months ended September 30, 2016, to $0.28 million for the three months ended September 30, 2017. The increase in selling expenses was primarily due to the increase in performance bonus for salespersons.

  

General and Administrative Expenses

 

General and administrative expenses primarily consist of payroll, welfare, labor and health insurance, post-retirement benefits, office rent and management fees, depreciation & amortization expenses, professional services, litigation settlement payments, and expenses for other general corporate activities. General and administrative expenses increased by approximately $0.18 million, or 69%, from $0.27 million for the three months ended September 30, 2016 to $0.45 million for the three months ended September 30, 2017. The increase in general and administration expenses was principally due to the increase in office rent and payroll expenses.

  

Net Loss

 

As a result of the above factors, we had net loss of approximately $0.63 million for the three months ended September 30, 2017 as compared to net loss of approximately $0.19 million for the three months ended September 30, 2016, representing an increase of loss of $0.44 million, or approximately 231%.

 

Results of Operations for the Nine Months Ended September 30, 2017 and 2016

  

		For The Nine Months Ended
		September 30,								Change in
		2017				2016				$				%
Net revenue		$	2,626,493			$	2,226,207			$	400,286				18
Cost of revenue			(2,366,681	)			(1,547,846	)			(818,835	)			53
Gross profit			259,812				678,361				(418,549	)			(62	)
Selling expenses			(755,729	)			(464,133	)			(291,596	)			63
General and administrative expenses			(1,215,550	)			(717,063	)			(498,487	)			70
Financial advisory service fee			-				(2,970,000	)			2,970,000				(100	)
Total operating expense			(1,971,279	)			(4,151,196	)			2,179,917				(53	)
Operating loss			(1,711,467	)			(3,472,835	)			1,761,368				(51	)
Other income (expense)
Interest income			399				106				293				276
Interest expense			(159	)			(1,110	)			951				(86	)
Other income (expense), net			(428	)			2,678				(3,106	)			(116	)
Total other income (expense)			(188	)			1,674				(1,862	)			(111	)
Loss from continuing operations before income taxes			(1,711,655	)			(3,471,161	)			1,759,506				(51	)
Income taxes			-				-				-				-
Loss from continuing operations			(1,711,655	)			(3,471,161	)			1,759,506				(51	)
Income from discontinued operations, net of income taxes			1				1				-				-
Net loss			(1,711,654	)			(3,471,160	)			1,759,506				(51	)
Net loss attributable to noncontrolling interests:
Net loss from continuing operations			668,561				119,448				549,113				460
Net income loss from discontinued operations			(1	)			(1	)			-				-
Total net loss attributable to noncontrolling interest			668,560				119,447				549,113				460
Net loss attributable to NowNews Digital Media Technology Co., Ltd.			(1,043,094	)			(3,351,713	)			2,308,619				(69	)

 

 

Net Revenue

 

Our net revenue for the nine months ended September 30, 2017 was $2.63 million, an increase of $0.40 million, or 18% from $2.23 million for the nine months ended September 30, 2016. The increase was primarily due to the increase in advertisement revenue.

 

Advertising

 

Our advertising avenue was $2.46 million for the nine months ended September 30, 2017, an increase of $0.43 million, or 21%, from $2.03 million for the nine months ended September 30, 2016. The increase was mainly attributable to the increase in internet advertising revenue and advertisement revenue by clicks for the nine months ended September 30, 2017.

 

Licensing and Services

 

Our revenue from content licensing was $0.17 million for the nine months ended September 30, 2017, a decrease of $0.03 million, or 12%, from $0.20 million for the nine months ended September 30, 2016.

 

Cost of Revenue

 

Cost of revenue mainly consists of advertisement costs, content licensing costs, website maintenance costs, and labor costs.

 

Cost of revenue was $2.37 million for the nine months ended September 30, 2017, an increase of $0.82 million, or 53%, as compared to $1.55 million for the nine months ended September 30, 2016. The increase was mainly due to the increase of $0.49 million in labor costs and $0.26 million in advertisement costs.

 

Gross Profit

 

Gross profit decreased approximately $0.42 million, or 62%, to $0.26 million for the nine months ended September 30, 2017, as compared to $0.68 million for the same period in 2016, due to the increase in cost of revenue. Gross profit margin was 10% for the nine months ended September 30, 2017 as compared to 30% for the same period in 2016.

 

Selling Expenses

 

Selling expenses primarily consist of payroll, labor and health insurance, and advertisement expenses. The amount increased by $0.29 million, or 63%, from $0.46 million for the nine months ended September 30, 2016, to $0.75 million for the nine months ended September 30, 2017. The increase in selling expenses was primarily due to the increase in labor costs resulting from the increase in the number of salespersons and the increase in performance bonus for 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, and expenses for other general corporate activities. General and administrative expenses increased by approximately $0.50 million, or 70%, from $0.72 million for the nine months ended September 30, 2016 to $1.22 million for the nine months ended September 30, 2017. The increase in general and administration expenses were principally due to the increase in office rent and payroll expenses.

  

Financial advisory service fee – related party

 

Financial advisory service fee has decreased to $0 for the nine months ended September 30, 2017, a decrease of approximately $2.97 million, or 100%, as compared to $2.97 million for the nine months ended September 30, 2016. In resolution of the Company’s obligations pertaining to the financial advisory services that have been rendered to the Company as of August 12, 2016, the Company and GIA Investments Corp. (“GIA”) entered into a Financial Advisory Service Recognition Agreement (the “Agreement”) on September 20, 2016, pursuant to which the Company agrees to issue 660,000 shares of common stock, par value $0.001 per share, to GIA in recognition of services that have been previously rendered to the Company as of August 12, 2016. The common stock price was $4.50 per share as of closing on August 12, 2016, totaling an aggregate sum of $2.97 million. Such payment obligations for the services provided by GIA have never been agreed upon between the Company and GIA until near the date of the filing of the Company’s June 30, 2016 Form 10-Q Quarterly Report. Pursuant to the payment obligations being affirmative as of August 12, 2016, such obligations had been accrued by the Company as expenses as of June 30, 2016. On October 4, 2016, the Company issued 660,000 shares of common stock to GIA Investments Corp. to fulfill the Agreement signed on September 20, 2016. The Company did not receive financial advisory service from GIA and was not obligated to pay financial advisory service fee for the nine months ended September 30, 2017.

 

  

Net Loss

 

As a result of the above factors, we had net loss of approximately $1.71 million for the nine months ended September 30, 2017 as compared to net loss of approximately $3.47 million for the nine months ended September 30, 2016, representing a decrease of loss of $1.76 million, or approximately 51%.

 

Liquidity and Capital Resources

 

Our unaudited consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. 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 $8,975,389 and $7,932,295, and stockholders’ deficits of $1,194,997 and $1,380,173 as of September 30, 2017 and December 31, 2016, respectively. The net loss attributable to common stockholders is of $1,043,094 and $3,351,713 for the nine months ended September 30, 2017 and 2016, respectively. In addition, current liabilities exceed current assets by $1,070,877 and $858,428 as of September 30, 2017 and December 31, 2016, 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 September 30, 2017, we had working capital deficit of $1,070,877 as compared to working capital deficit of $858,428 as of December 31, 2016. We had cash and cash equivalents of $352,812 as of September 30, 2017, an increase of $108,121 or 44% from $244,691 as of December 31, 2016. Our principal sources and uses of funds were as follows:

 

		For the Nine Months Ended September 30,
		2017				2016
Net cash used in operating activities		$	(1,399,511	)		$	(452,116	)
Net cash used in investing activities			(109,406	)			(5,310	)
Net cash provided by financing activities			1,600,496				213,099
Net cash (used in) provided by discontinued operations			(4,261	)			1
Effect of exchange rate change on cash and cash equivalents			16,542				6,054
Net increase (decrease) in cash and cash equivalents		$	103,860			$	(238,272	)

 

 

Net cash used in operating activities of continuing operations was approximately $1,399,511 for the nine months ended September 30, 2017, compared to net cash used in operating activities of approximately $452,116 for the nine months ended September 30, 2016, representing an increase of approximately $947,395. The increase in net cash used in operating activities was primarily due the decrease in accrued financial advisory service fee – related party of $2.97 million and the decrease in net loss of $1.76 million. 

 

Net cash used in investing activities of continuing operations was approximately $109,406 for the nine months ended September 30, 2017, compared to net cash used in investing activities of approximately $5,310 for the nine months ended September 30, 2016, representing an increase of approximately $104,096. The increase in cash used in investing activities was primarily due to an acquisition of subsidiary equity interest of $0.03 million and the purchase of fixed assets of $0.07 million during the nine months ended September 30, 2017.

 

Net cash provided by financing activities of continuing operations amounted to approximately $1,600,496 for the nine months ended September 30, 2017, compared to approximately $213,099 cash provided by during the nine months ended September 30, 2016, representing an increase of approximately $1,387,397. The increase in net cash provided from financing activities was mainly attributable to the increase in capital contributions of $1.09 million from noncontrolling interest and the increase of $0.53 million from stock subscriptions received in advance during the nine months ended September 30, 2017.

 

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 September 30, 2017 and December 31, 2016, the Company has uninsured deposits in banks of $139,235 and $122,508, respectively.

 

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 September 30, 2017 and December 31, 2016, the Company assessed the allowance for doubtful accounts of $10,110 and $9,464, 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 to 5 years
Computer Equipment	5 years
Office Equipment and Furniture	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 nine months ended September 30, 2017 and the year ended December 31, 2016, 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 $89,256 and $58,655 for the nine months ended September 30, 2017 and 2016, respectively. The total amounts for such employee benefits, which were expensed as incurred, were $34,246 and $20,545 for the three months ended September 30, 2017 and 2016, 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 September 30, 2017 and December 31, 2016.

 

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 September 30, 2017 and December 31, 2016, 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 nine months ended September 30, 2017 and 2016, no options or warrants were issued or outstanding.

 

Discontinued operations

 

Results of the Company’s discontinued entity have been presented in discontinued operations in the financial statements. See Note 1 and Note 12 for additional information.

 

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 January 2017, the FASB issued Accounting Standard Update 2017-03, Accounting Changes & Error Corrections and Investments – Equity Method and Joint Ventures: Amendments to SEC Paragraphs pursuant to Staff Announcements (“ASU 2017-03”), which amends various FASB Codification Topics. Public business entities are required to adopt this ASU for fiscal years beginning after December 15, 2019, with other entities adopting it for fiscal years beginning after December 15, 2020. Early adoption is permitted as of annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. The Company does not expect the adoption of this ASU to have a material effect on its consolidated financial statements.

 

In December 2016, the FASB issued Accounting Standard Update 2016-20 , Technical Corrections & Improvements to Topic 606: Revenue from Contracts with Customers (“ASU 2016-20”), which makes minor corrections or improvements to the Codification related to ASU 2014-09 Revenue from Contracts with Customers (the new Revenue Recognition Standard). The effective date for ASU 2016-20 is the same as the effective date for ASU 2014-09 Revenue from Contracts with Customers which date was deferred by ASU 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. Public business entities are required to adopt this ASU for fiscal years beginning after December 15, 2017, with other entities adopting it for fiscal years beginning after December 15, 2018, with interim reporting periods beginning after December 15, 2019. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company has begun the process of evaluating the potential impact of adoption of this ASU and does not expect the adoption of this ASU or the adoption of the related new Revenue Recognition standard to have a material effect on its consolidated financial statements.

 

On November 17, 2016, the FASB issued Accounting Standard Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, to address the diversity in the classification and presentation of changes in restricted cash on the statement of cash flows under Topic 230. The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. The Company is still in progress of evaluating future impact of adopting this standard.

 

On October 26, 2016, the FASB issued Accounting Standards Update No. 2016-17—Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control to amend the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. Under the amendments, a single decision maker is not required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety. Instead, a single decision maker is required to include those interests on a proportionate basis consistent with indirect interests held through other related parties. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

On October 24, 2016, Accounting Standards Update No. 2016-16—Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory to prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. In addition, interpretations of this guidance have developed in practice for transfers of certain intangible and tangible assets. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP. To more faithfully represent the economics of intra-entity asset transfers, the amendments in this Update require that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this Update do not change GAAP for the pre-tax effects of an intra-entity asset transfer under Topic 810, Consolidation, or for an intra-entity transfer of inventory. The Company is still in progress of evaluating future impact of adopting this standard.

 

On August 26, 2016, the FASB issued Accounting Standard Update 2016-15, Statement of Cash Flows (Topic 230), a consensus of the FASB’s Emerging Issues Task Force. The Update is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.  The amendments in this Update provide guidance on the following eight specific cash flow issues: Issue 1 - Debt prepayment or debt extinguishment costs.  Issue 2 - Settlement of zero-coupon debt instruments. . Issue 3 - Contingent consideration payments made after a business combination.  Issue 4 - Proceeds from the settlement of insurance claims.  Issue 5 - Proceeds from the settlement of corporate-owned life insurance (COLI) policies, including bank-owned life insurance (BOLI) policies.  Issue 6 - Distributions received from equity method investments. Issue 7 - Beneficial interests in securitization transactions. . Issue 8 - Separately identifiable cash flows and application of the predominance principle.  The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in this Update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is still in progress of evaluating future impact of adopting this standard.

 

  

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. In September 2017, the FASB issued ASU 2017-13, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842). The main objective of this pronouncement is to clarify the effective date of the adoption of ASC Topic 606 and ASC Topic 842 and the definition of public business entity as stipulated in ASU 2014-09 and ASU 2016-02. ASU 2014-09 provides that a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. ASU 2016-12 requires that “a public business entity and certain other specified entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. All other entities are required to adopt ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020”. ASU 2017-13 clarifies that the SEC would not object to certain public business entities electing to use the non-public business entities effective dates for applying ASC 606 and ASC 842. ASU 2017-13, however, limits such election to certain public business entities that “otherwise would not meet the definition of a public business entity except for a requirement to include or inclusion of its financial statements or financial information in another entity’s filings with the SEC”. Management does not expect the adoption of ASU 2017-13 to have any material impact on its financial positions and results of operations or cash flows. The Company is still in progress of evaluating future impact of adopting this standard.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable. 

 

Item 4.  Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in the reports filed under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to the Company's management, including the Company's chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company’s management, the Company’s chief executive officer and chief financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the quarter ended September 30, 2017. Based upon that evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective.

  

Changes in Internal Controls over Financial Reporting

 

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

 

On September 18, 2017, the Company’s former Chief Executive Officer resigned and the Board of Directors of the Company appointed Mr. Chi-Yuan Chang as the Interim Chief Financial Officer.

 

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

 

 

PART II - OTHER INFORMATION

 

Item 1.  Legal Proceedings.

 

None.

 

Item 1A. Risk Factors

 

Not applicable.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

Not applicable.

 

 

Item 6. Exhibits.

 

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

 

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)
31.1		Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.*
31.2		Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer.*
32.1		Section 1350 Certifications of Chief Executive Officer.**
32.2		Section 1350 Certifications of Chief Financial Officer.**
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.

(2)

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

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	NOWNEWS DIGITAL MEDIA TECHNOLOGY CO. LTD.
Date: November 20, 2017	By:	/s/ Shuo-Wei Shih
		Shuo-Wei Shih
		Chief Executive Officer
		(Principal Executive Officer)
Date: November 20, 2017	By:	/s/ Chi-Yuan Chang
		Chi-Yuan Chang
		Interim Chief Financial Officer
		(Principal Accounting and Financial Officer)