OMPHALOS, CORP.
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
233,962
|
|
$
|
37,643
|
|
Accounts
receivable, net
|
|
183,133
|
|
|
82,541
|
|
Inventory, net
|
|
14,100
|
|
|
97,900
|
|
Prepaid
and other current assets
|
|
49,518
|
|
|
26,778
|
|
Total current assets
|
|
480,713
|
|
|
244,862
|
|
|
|
|
|
|
|
|
Leasehold Improvements and Equipment, net
|
|
2,796
|
|
|
4,295
|
|
Intangible assets, net
|
|
18,088
|
|
|
18,502
|
|
Deposits
|
|
3,512
|
|
|
3,293
|
|
Total Assets
|
$
|
505,109
|
|
$
|
270,952
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts
payable
|
$
|
110,427
|
|
$
|
74,372
|
|
Accrued salaries and
bonus
|
|
17,091
|
|
|
27,462
|
|
Accrued
expenses
|
|
29,298
|
|
|
20,388
|
|
Income tax payable
|
|
1,307
|
|
|
1,225
|
|
Advance
from customers
|
|
51,863
|
|
|
23,459
|
|
Due to related parties
|
|
612,930
|
|
|
335,322
|
|
Loan from
shareholders current portion
|
|
164,582
|
|
|
154,321
|
|
Total current liabilities
|
|
987,498
|
|
|
636,549
|
|
|
|
|
|
|
|
|
Long-term Liabilities
|
|
|
|
|
|
|
Loan from
shareholders
|
|
822,912
|
|
|
771,607
|
|
Total liabilities
|
|
1,810,410
|
|
|
1,408,156
|
|
|
|
|
|
|
|
|
Stockholders' Deficit
|
|
|
|
|
|
|
Common stock, $0.0001 par
value, 120,000,000
shares
authorized,
30,063,759 shares issued and
outstanding
as
of June 30, 2017 and December 31, 2016, respectively
|
|
3,007
|
|
|
3,007
|
|
Additional paid-in
capital
|
|
47,523
|
|
|
47,523
|
|
Other
comprehensive income
|
|
502,013
|
|
|
578,405
|
|
Accumulated deficit
|
|
(1,857,844
|
)
|
|
(1,766,139
|
)
|
Total Stockholders' deficit
|
|
(1,305,301
|
)
|
|
(1,137,204
|
)
|
|
|
|
|
|
|
|
Total Liabilities and
Stockholders' Deficit
|
$
|
505,109
|
|
$
|
270,952
|
|
See accompanying Notes to Condensed Consolidated Financial
Statements
F-1
OMPHALOS, CORP.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND
OTHER COMPREHENSIVE INCOME
(LOSS)
(UNAUDITED)
|
|
FOR THE
SIX
|
|
|
FOR THE
THREE
|
|
|
|
MONTHS
ENDED JUNE
|
|
|
MONTHS
ENDED JUNE
|
|
|
|
30,
|
|
|
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, net
|
$
|
484,019
|
|
$
|
612,277
|
|
$
|
280,003
|
|
$
|
175,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
267,700
|
|
|
313,542
|
|
|
155,228
|
|
|
129,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
216,319
|
|
|
298,735
|
|
|
124,775
|
|
|
45,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
291,968
|
|
|
345,178
|
|
|
132,623
|
|
|
160,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(75,649
|
)
|
|
(46,443
|
)
|
|
(7,848
|
)
|
|
(115,162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
42
|
|
|
46
|
|
|
42
|
|
|
46
|
|
Interest
expense
|
|
(14,694
|
)
|
|
(9,170
|
)
|
|
(7,441
|
)
|
|
(4,632
|
)
|
Gain (loss) on foreign
currency exchange
|
|
(1,404
|
)
|
|
2,694
|
|
|
(12,019
|
)
|
|
(875
|
)
|
Total other income (expenses)
|
|
(16,056
|
)
|
|
(6,430
|
)
|
|
(19,418
|
)
|
|
(5,461
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for
income taxes
|
|
(91,705
|
)
|
|
(52,873
|
)
|
|
(27,266
|
)
|
|
(120,623
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
-
|
|
|
21,055
|
|
|
-
|
|
|
(5,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
$
|
(91,705
|
)
|
$
|
(73,928
|
)
|
$
|
(27,266
|
)
|
$
|
(115,138
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
30,063,759
|
|
|
30,063,759
|
|
|
30,063,759
|
|
|
30,063,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
$
|
(0.00
|
)
|
$
|
(0.01
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive (Loss)
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(91,705
|
)
|
$
|
(73,928
|
)
|
$
|
(27,266
|
)
|
$
|
(115,138
|
)
|
Foreign currency translation
adjustment, net of tax
|
|
(76,392
|
)
|
|
(16,096
|
)
|
|
625
|
|
|
(1,190
|
)
|
Comprehensive (Loss) Income
|
$
|
(168,097
|
)
|
$
|
(90,024
|
)
|
$
|
(26,641
|
)
|
$
|
(116,328
|
)
|
See accompanying Notes to Condensed Consolidated Financial
Statements
F-2
OMPHALOS, CORP.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
|
|
Six Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
Net loss
|
$
|
(91,705
|
)
|
$
|
(73,928
|
)
|
Adjustments to
reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
Amortization and
depreciation
|
|
3,401
|
|
|
3,790
|
|
Allowance for inventory value decline
|
|
-
|
|
|
(66,984
|
)
|
Foreign currency
exchange (gain) loss
|
|
1,405
|
|
|
(2,694
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
Decrease (Increase) in accounts
receivable
|
|
(94,343
|
)
|
|
(40,423
|
)
|
Decrease (Increase)
in inventory
|
|
89,586
|
|
|
75,592
|
|
Decrease (Increase) in prepaid
and other assets
|
|
(20,792
|
)
|
|
15,648
|
|
Increase (Decrease)
in accounts payable
|
|
30,861
|
|
|
(16,347
|
)
|
Increase (Decrease) in accrued
expenses
|
|
(4,606
|
)
|
|
(1,440
|
)
|
Increase (Decrease)
in income tax payable
|
|
-
|
|
|
21,054
|
|
Increase (Decrease) in advance
from customers
|
|
26,629
|
|
|
(58,444
|
)
|
Increase (Decrease)
in due to related parties
|
|
253,269
|
|
|
94,616
|
|
Net cash provided by(used in) operating activities
|
|
193,705
|
|
|
(49,560
|
)
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and
cash equivalents
|
|
2,614
|
|
|
3,292
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
196,319
|
|
|
(46,268
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning
|
|
37,643
|
|
|
74,982
|
|
Ending
|
$
|
233,962
|
|
$
|
28,714
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
Interest expense
|
$
|
14,694
|
|
$
|
9,170
|
|
Income tax
|
$
|
-
|
|
$
|
-
|
|
See accompanying Notes to Condensed Consolidated Financial
Statements
F-3
OMPHALOS, CORP.
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2017
(UNAUDITED)
1.
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States (GAAP) for interim financial reporting and in accordance with
instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, the unaudited condensed consolidated financial statements
contained in this report reflect all adjustments that are normal and recurring
in nature and considered necessary for a fair presentation of the financial
position and the results of operations for the interim periods presented. The
year-end condensed balance sheet data was derived from audited financial
statements, but does not include all disclosures required by GAAP. The results
of operations for the interim period are not necessarily indicative of the
results expected for the full year. These unaudited, condensed consolidated
financial statements, footnote disclosures and other information should be read
in conjunction with the financial statements and the notes thereto included in
the Companys Annual Report on Form 10-K for the year ended December 31, 2016.
Organization
Omphalos
Corp. was incorporated as Soyodo Group Holdings, Inc. (the Soyodo) under the
laws of Delaware in March 2003. On February 5, 2008, Soyodo acquired the
outstanding shares of Omphalos Corp. Omphalos Corp. (the Omphalos BVI) , a
British Virgin Islands company incorporated on October 30, 2001. For accounting
purposes, the acquisition was treated as a recapitalization of Omphalos BVI.
Omphalos BVI owns 100% of Omphalos Corp. (Taiwan), All Fine Technology Co., Ltd.
(Taiwan), and All Fine Technology Co., Ltd. (B.V.I.). Omphalos Corp. (Taiwan)
was incorporated on February 13, 1991 under the laws of Republic of China. All
Fine Technology Co., Ltd. (Taiwan) was incorporated on March 23, 2004 under the
laws of Republic of China. All Fine Technology Co., Ltd. (B.V.I.) was
incorporated on February 2, 2005 under the laws of the British Virgin Islands.
Omphalos Corp. (B.V.I.) and its subsidiaries supplies a wide range of equipment
and parts including reflow soldering ovens and automated optical inspection
machines for printed circuit board (PCB) manufacturers in Taiwan and China.
Soyodo entered into an Agreement and
Plan of Merger (the Merger Agreement) with Omphalos, Corp., a Nevada
corporation which went effective on April 18, 2008. Pursuant to the Merger
Agreement, Soyodo was merged with and into the surviving corporation, Omphalos
Corp. The certificate of incorporation and bylaws of the surviving corporation
became the certificate of incorporation and bylaws of the Company, and the
directors and officers of Soyodo became the members of the board of directors
and officers of the Company. Following the execution of the Merger Agreement,
the Company filed with the Secretary of State of Delaware and Nevada, a
Certificate of Merger. Omphalos, Corp was incorporated on April 15, 2008 under
the laws of the state of Nevada. The main purpose of the merger is to change the
companys name to Omphalos, Corp.
Basis of Consolidation
The condensed consolidated financial statements include the accounts of Omphalos
Corp. and its wholly owned subsidiaries. All significant intercompany accounts
and transactions are eliminated.
Going Concern
The Company has incurred a significant net loss during the past two
years and had an accumulated deficit of $1,857,844 and $1,766,139 as of June 30,
2017 and December 31, 2016, respectively. The accompanying consolidated
financial statements have been prepared assuming that the Company will continue
as a going concern. This basis of accounting contemplates the recovery of the
Companys assets and the satisfaction of liabilities in the normal course of
business. This presentation presumes funds will be available to finance ongoing
research and development, operations and capital expenditures and permit the
realization of assets and the payment of liabilities in the normal course of
operations for the foreseeable future.
F-4
There can be no assurances that there
will be adequate financing available to the Company and the consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
The Company has taken certain
restructuring steps to provide the necessary capital to continue its operations.
These steps included: (1) Tightly budgeting and controlling all expenses; (2)
Expanding product lines and recruiting a strong sales team to significantly
increase sales revenue and profit in 2017; (3) The Company plans to continue
actively seeing additional funding opportunities to improve and expand upon its
product lines.
Use of Estimates
The
preparation of 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 financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and cash in time
deposits, certificates of deposit and all highly liquid debt instruments with
original maturities of three months or less.
Accounts Receivable
Accounts receivables are carried at original invoice amount less estimates made
for doubtful receivables. Management determines the allowance for doubtful
accounts on a quarterly basis based on a review of the current status of
existing receivables, account aging, historical collection experience,
subsequent collections, management's evaluation of the effect of existing
economic conditions, and other known factors. The provision is provided for the
above estimates made for all doubtful receivables. Account balances are charged
off against the allowance only when the Company considers it is probable that a
receivable will not be recovered. Recoveries of trade receivables previously
written off are recorded when received.
Inventory
Inventory is
carried at the lower of cost and net realizable value. Net realizable value
(NRV) is defined as estimated selling prices less costs of completion, disposal,
and transportation. Cost is determined by using the specific identification
method. The Company periodically reviews the age and turnover of its inventory
to determine whether any inventory has become obsolete or has declined in value,
and charges to operations for known and anticipated inventory obsolescence.
Inventory consists substantially of finished goods and is net of an allowance
for slow-moving inventory of $444,117 and $416,428 at June 30, 2017 and December
31, 2016, respectively.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation is computed on the straight-line method over the estimated useful
lives of the related assets as follows:
Automobile
|
|
5 years
|
|
Furniture and fixtures
|
|
3 years
|
|
Machinery and equipment
|
|
3 to 5 years
|
|
Leasehold improvements
|
|
55 years
|
|
Expenditures for major renewals and
betterment that extend the useful lives of property and equipment are
capitalized. Expenditures for repairs and maintenance are charged to expense as
incurred. When property and equipment are retired or otherwise disposed of, the
asset and accumulated depreciation are removed from the accounts and the
resulting profit or loss is reflected in the statement of income for the
period.
The accumulated depreciation was $117,028 and $108,058 at June
30, 2017 and December 31, 2016, respectively. Depreciation expense was $1,770
and $2,263 for the six months ended June 30, 2017 and 2016, respectively.
Depreciation expense was $896 and $1,143 for the three months ended June 30,
2017 and 2016, respectively.
Intangible Assets
Include cost of patent applications that are deferred and charged to operations
over their useful lives. The accumulated amortization is $32,125 and $28,580 at
June 30, 2017 and December 31, 2016, respectively. Amortization of intangible assets was $1,631 and
$1,527 for the six months ended June 30, 2017 and 2016, respectively.
Amortization of intangible assets was $826 and $771 for the three months ended
June 30, 2017 and 2016, respectively.
F-5
Revenue Recognition
The
Company derives revenues from the sale of equipment and parts to customers. The
Companys standard shipping term is Free on Board (FOB) shipping point. The
Company recognizes revenue upon shipment for the sales under the term FOB
shipping point. For the sales under other shipping term arrangements, such as
FOB destination, the Company recognizes revenue when title passes to and the
risks and rewards of ownership have transferred to the customer based on the
terms of the sales. Usually no returns, discounts or other allowances are
provided to customers. Shipping and handling charges to
customers are
included in net sales. Shipping and handling charges incurred by the Company are
included in cost of goods sold.
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.
Research and Development Expenses
Research and development costs are generally expensed as incurred.
Statement of cash
flows
In accordance with FASB ASC Topic 230, Statement of Cash
Flows, cash flows from the Companys 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
The
Company accounts for income taxes in accordance with ASC 740, Income Taxes,
which requires that the Company recognize deferred tax liabilities and assets
based on the differences between the financial statement carrying amounts and
the tax basis of assets and liabilities, using enacted tax rates in effect in
the years the differences are expected to reverse. Deferred income tax benefit
(expense) results from the change in net deferred tax assets or deferred tax
liabilities. A valuation allowance is recorded when, in the opinion of
management, it is more likely than not that some or all of any deferred tax
assets will not be realized.
Stock Based Compensation
The Company applies the fair value provisions of ASC 718,
Compensation-Stock Compensation
(ASC 718). ASC 718 requires the
recognition of compensation expense, using a fair-value based method, for costs
related to all share-based payments including stock options. ASC 718 requires
companies to estimate the fair value of share-based payment awards on the grant
date using an option pricing model. The Company does not have any awards of
stock-based compensation issued and outstanding at June 30, 2017 and December
31, 2016.
Loss Per Share
The
Company has adopted Accounting Standards Codification subtopic 260-10, Earnings
Per Share (ASC 260-10) which specifies the computation, presentation and
disclosure requirements of earnings per share information. Basic earnings per
share have been calculated based upon the weighted average number of common
shares outstanding. Common equivalent shares are excluded from the computation
of the diluted loss per share if their effect would be anti-dilutive. For the
six months ended June 30, 2017 and 2016, the Company did not have any common
equivalent shares.
F-6
Impairment of Long-Lived Assets
The Company has adopted Accounting Standards Codification subtopic
360-10, Property, Plant and Equipment (ASC 360-10). ASC 360-10 requires that
long-lived assets and certain identifiable intangibles held and used by the
Company be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company evaluates its long lived assets for impairment annually or more often if
events and circumstances warrant. Events relating to recoverability may include
significant unfavorable changes in business conditions, recurring losses, or a
forecasted inability to achieve break-even operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based upon
forecasted undiscounted cash flows. Should impairment in value be indicated, the
carrying value of intangible assets will be adjusted, based on estimates of
future discounted cash flows resulting from the use and ultimate disposition of
the asset. ASC 360-10 also requires assets to be disposed of be reported at the
lower of the carrying amount or the fair value less costs to sell. Management
has determined that no impairments of long-lived assets currently exist.
Foreign-currency Transactions
Foreign-currency transactions are recorded in New Taiwan dollar
(NTD) at the rates of exchange in effect when the transactions occur. Gains or
losses resulting from the application of different foreign exchange rates when
cash in foreign currency is converted into New Taiwan dollar, or when
foreign-currency receivables or payables are settled, are credited or charged to
income in the year of conversion or settlement. On the balance sheet dates, the
balances of foreign-currency assets and liabilities are restated at the
prevailing exchange rates and the resulting differences are charged to current
income except for those foreign currencies denominated investments in shares of
stock where such differences are accounted for as translation adjustments under
stockholders equity.
Translation Adjustment
The Company financial statements are presented in the U.S. dollar ($), which is
the Companys reporting currency, while its functional currency is New Taiwan
dollar (NTD). Transactions in foreign currencies are initially recorded at the
functional currency rate ruling at the date of transaction. Any differences
between the initially recorded amount and the settlement amount are recorded as
a gain or loss on foreign currency transaction in the consolidated statements of
income. Monetary assets and liabilities denominated in foreign currency are
translated at the functional currency rate of exchange ruling at the balance
sheet date. Any differences are taken to profit or loss as a gain or loss on
foreign currency translation in the statements of income.
In accordance with ASC 830, Foreign
Currency Matters, the Company translates the assets and liabilities into U.S.
dollar ($) using the rate of exchange prevailing at the balance sheet date and
the statements of operations and cash flows are translated at an average rate
during the reporting period. Adjustments resulting from the translation from NTD
into U.S. dollar are recorded in stockholders equity as part of accumulated
other comprehensive income.
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.
Recently Issued Accounting
Pronouncements
In August 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and
Cash Payments (ASU 2016-15). ASU 2016-15 reduces diversity in practice by
providing guidance on the classification of certain cash receipts and payments
in the statement of cash flows. ASU 2016-15 clarifies that when cash receipts
and cash payments have aspects of more than one class of cash flows and cannot
be separated, classification will depend on the predominant source or use. ASU
2016-15 is effective on a retrospective basis for fiscal years, and for interim
periods within those fiscal years, beginning after December 15, 2017, with early
adoption permitted. The Company is currently evaluating the potential effect of
this ASU on its consolidated financial statements.
In March 2016, the FASB issued ASU No.
2016-08, Revenue from Contracts with Customers (Topic 606) Principal versus
Agent Considerations (ASU 2016-08), which clarifies the implementation
guidance for principal versus agent considerations in ASU 2014-09. In April
2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers
(Topic 606) Identifying Performance Obligations and Licensing (ASU 2016-10), which amends the guidance in ASU 2014-09
related to identifying performance obligations and accounting for licenses of
intellectual property. The Company must adopt ASU 2016-08 and ASU 2016-10 with
ASU 2014-09. The new revenue standard may be applied retrospectively to each
prior period presented or retrospectively with the cumulative effect recognized
as of the date of adoption. The Company is currently evaluating the timing of
its adoption and the impact of adopting the new revenue standard on its
consolidated financial statements.
In February 2016, the FASB issued ASU
2016-02, Lease (Topic 842). The core principle of Topic 842 is that a lessee
should recognize the lease assets and liabilities that arise from leases in the
statement of financial position. For public business entities, this update is
effective for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years. Early application is permitted. The Company
is currently evaluating the impact of the adoption of this update on its
consolidated financial statements.
F-7
2.
|
RELATED-PARTY TRANSACTIONS
|
Operating Leases
The Company leases its facility from a
shareholder under an operating lease agreement which expires on January 31,
2019. The monthly base rent is approximately $1,800. Rent expense under this
lease agreement amounted to approximately $10,970 and $10,270 for the six months
ended June 30, 2017 and 2016, respectively, and approximately $5,940 and $5,170
for the three months ended June 30, 2017 and 2016, respectively.
Loan from related
party
On July 26, 2013, the Company entered a
loan agreement bearing interest at a fixed rate at 3% per annum with its
shareholder to advance NT$5,000,000, equivalent approximately $164,582 for
working capital purpose. The term of the loan started from July 30, 2013 with
maturity date on July 29, 2015. On July 31, 2015, the loan with the same amount
of NT$5,000,000, equivalent approximately $164,582, and the same fixed interest
rate of 3% per annum was extended for another two years starting from August 1,
2015 with maturity date on July 31, 2017. On August 1, 2017, the loan with the
same amount of NT$5,000,000, equivalent approximately $164,582, and the same
fixed interest rate of 3% per annum was extended for another three years
starting from August 1, 2017 with maturity date on July 31, 2020.
On December 31, 2013, the Company
entered another loan agreement bearing interest at a fixed rate at 3% per annum
with its officer and shareholder to advance NT$5,000,000, equivalent
approximately $164,582 for working capital purpose. The term of the loan started
from January 1, 2014 with maturity date on December 31, 2015. On December 31,
2015, the loan with the same amount of NT$5,000,000, equivalent approximately
$164,582, and the same fixed interest rate of 3% per annum was extended for
another two years starting from January 1, 2016 with maturity date on December
31, 2018.
On July 5, 2015, the Company entered
another loan agreement bearing interest at a fixed rate at 3% per annum with its
shareholder to advance NT$10,000,000, equivalent approximately $329,165, for
working capital purpose. The term of the loan started from July 1, 2015 with
maturity date on June 30, 2018.
On July 1, 2016, the Company entered
another loan agreement bearing interest at a fixed rate at 3% per annum with its
shareholder to advance NT$10,000,000, equivalent approximately $329,165, for
working capital purpose. The term of the loan started from July 1, 2016 with
maturity date on June 30, 2019.
As of June 30, 2017 and December 31,
2016, there were $987,494 and $925,928 advances outstanding, of which $164,582
and $154,321 were presented under current liabilities, respectively. Interest
expense was $14,694 and $9,170 for the six months ended June 30, 2017 and 2016,
respectively. Interest expense was $7,441 and $4,632 for the three months ended
June 30, 2017 and 2016, respectively.
Advances from related party
-
The Company also has advanced funds from its officer and
shareholder for working capital purposes. The Company has not entered into any
agreement on the repayment terms for these advances. The advances bear no
interest rate and are due upon demand by shareholders. As of June 30, 2017 and
December 31, 2016, there were $612,930 and $335,322 advances outstanding,
respectively.
F-8
The Company is incorporated in the
State of Nevada in the United States of America and is subject to the U.S.
federal and state taxation. Income before income taxes for the six months ended
June 30, 2017 and 2016 includes the results of operations of Taiwan and British
Virgin Islands. Omphalos Corp. (B.V.I.) and All Fine Technology Co., Ltd.
(B.V.I.) are incorporated in British Virgin Islands and are not required to pay
income tax. Omphalos Corp. and All Fine Technology Co., Ltd. are incorporated in
Taiwan and are subject to Taiwan tax law. The statutory tax rate under Taiwan
tax law is 17%. Omphalos Corp. has incurred losses for the six months ended June
30, 2017, but had net income of $123,845 for the six months ended June 30, 2016.
All Fine Technology Co., Ltd. has incurred losses for the six months ended June
30, 2017 and 2016. As a result, no additional tax liability was accrued for the
six months ended June 30, 2017.
The provision for income taxes
calculated at the statutory rates in the combined statements of income is as
follows:
|
|
|
Six months Ended
|
|
|
Six Months Ended
|
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
Current provision:
|
|
|
|
|
|
|
|
Computed (provision for)
income taxes at statutory rates in U.S.
|
$
|
-
|
|
$
|
-
|
|
|
Computed (provision for) income taxes at
statutory rates in BVI
|
|
-
|
|
|
-
|
|
|
Computed (provision
for)income taxes at statutory rates in Taiwan
|
|
-
|
|
|
21,055
|
|
|
Total current provision
|
|
-
|
|
|
21,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred provision:
|
|
|
|
|
|
|
|
U.S
|
|
-
|
|
|
-
|
|
|
BVI
|
|
-
|
|
|
-
|
|
|
Taiwan- Net operating loss carryforward
|
|
-
|
|
|
-
|
|
|
Valuation allowance
|
|
-
|
|
|
-
|
|
|
Total deferred provision
|
|
-
|
|
|
-
|
|
|
Provision for income taxes
|
$
|
-
|
|
$
|
21,055
|
|
The following is a reconciliation of
the statutory tax rate to the effective tax rate for the six months ended June
30, 2017 and 2016:
|
|
|
Six Months ended
|
|
|
Six Months ended
|
|
|
|
|
June30, 2017
|
|
|
June 30, 2016
|
|
|
U.S. Federal tax at statutory
rate
|
|
34%
|
|
|
34%
|
|
|
Valuation allowance
|
|
(34%
|
)
|
|
(34%
|
)
|
|
Foreign income tax- Taiwan
|
|
17%
|
|
|
17%
|
|
|
Other (a)
|
|
(17%
|
)
|
|
0%
|
|
|
Effective tax rate
|
|
0%
|
|
|
17%
|
|
(a) Other represents expenses incurred
by the Company that are not deductible for Taiwan income taxes and changes in
valuation allowance for Taiwanese entities for the six months ended June 30,
2017 and 2016, respectively.
The Company has evaluated subsequent events through the date
which the financial statements were available to be issued. All subsequent
events requiring recognition as of June 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.
******
F-9