OUR
BACKGROUND. The Company was incorporated in Texas on October 1, 2002 and in 2005 changed its business focus to advertising
and media in the emerging China market. Under the then new management, the Company commenced to position the Company to capitalize
on the growth of the Chinese advertising market where global companies are rushing into China to try to grab and hold the
attention of its 1.3 billion citizens.
|
Our
mission then was to become one of China's new age media companies through the use of new technologies and devices combined
with traditional media of TV, Newspapers, Magazines, Billboards and Internet to reach today's mobile society. In order to
facilitate this, the Company established 3 strategic business units being "Advertising", "Telecommunications
and Mobile Computing", and "Products and Services". However due to limited financial resources we
were not able to implement our business plans in the China media sector.
|
In
June 2012, the Group acquired A-Team Resources Sdn. Bhd. a company that distributes light appliances products in South East
Asia and Middle East to strengthen our Products and Services Business Unit. In January 2014 the Company disposed the
loss making light appliances and advertising operation to streamline the operation and to focus on its new acquisition on
telecom services business unit.
|
On
January 31, 2014 the Company acquired 63.2% in Clixster Mobile Sdn Bhd ("CMSB"), a mobile virtual network operator
("MVNO") in order to expand our telecommunication business unit with a focus on provision of mobile telecom service
through a MVNO platform initially in Malaysia and then to other regions.
|
The
operation in CMSB incurred significant losses in 2014 and in 2015. The Group determined to re-focus the operation
in the higher margin post-paid rather than pre-paid telecom services. As a result, on July 28, 2015, the Group
disposed of its investment in CMSB to refocus its MVNO business from pre-paid to post-paid telecom services and a digital
service provider.
|
In
September, 2015, New China Electronics Limited, a company wholly owned by our director, Mr. Ching Chiat Kwong, acquired a
total of 7,130,134,431 shares representing about 63.06% interests in the Company to become the controlling shareholder of
the Company. On January 8, 2016, New China then transferred 350,000,000 shares each to Andrew Hwan Lee and Ahmad Shukri Bin
Abdul Ghani, both directors of the Company. New China then held 6,430,134,431 shares representing 56.87% in the
Company.
|
On
September 27, 2015 the Board approved the change of company name from Clixster Mobile Group Inc. to Median Group Inc. and
the name change was effected on October 7, 2015.
|
In
December 2015, the Company acquired 51% interests in Naim Indah Mobile Communications Sdn Bhd ("NIMC"). NIMC is
a newly established MVNO holding all the necessary licenses to operate as an MNVO. However on December 2, 2016 the Company
disposed its equity interest in NIMC to focus on the development of its integrated Digital Services Platform rather than an
MVNO platform.
|
In
its new strategic plan, the Company's wholly owned subsidiary, Median Digital Sdn. Bhd. (formerly known as Grid Mobile Sdn.
Bhd.) ("MDSB") shall combine the telecommunication services together with its other financial technology (fintech)
services onto an integrated Digital Services Platform which is currently at early development stage.
In
October 2016, the Company raised $1,320,000 by issuing 120,000,000 shares at $0.011 per share. The money raised was to be used
for working capital.
On
November 30, 2016, the Company's wholly owned subsidiary MDSB signed a Memorandum of Understanding ("MOU") with
Mobisphere Sdn Bhd ("Mobisphere"). The Memorandum entails the collaboration of both parties to introduce and promote
financial technology ("fintech") solutions vis-a-vis an integrated mobile payment ecosystem equipped with virtual
account and digital wallet connected to membership, debit, prepaid and/or credit cards to Medium Digital members.
On
December 2, 2016, the Company disposed its 51% interest in NIMC for a fair market value of RM1,000,001 or about US$224,574 to
a company owned by directors of the Company, and realized a gain of $194,947. On or about the same date, our subsidiary company,
Grid Mobile Sdn. Bhd. ("Grid Mobile") entered into a Master Distribution Agreement with NICM whereby NIMC would appoint
Grid Mobile to be its preferred distributor of its mobile products and services in Malaysia for two years. Under this Master Distribution
Agreement, Grid Mobile has paid a refundable deposits of RM3,000,000 or about $738,000 to NIMC and Grid Mobile would not procure,
engage or appoint any other company that offers the same services as NIMC. To date the project has not started and it is expected
that the deposits shall be returned later on during the year.
On
June 15, 2017 the Company acquired 51% equity interest in GNS Technology (M) Sdn. Bhd. ("GNS Malaysia") by the issuance
of 166,666,667 new shares in the Company. GNS is engaged in the provision of network design, construction and maintenance services
for fibre optics backbone and Fiber-to-the-Home (FTTH") broadband services. Pursuant to the acquisition agreement, the Vendors
are entitled to an additional consideration of US$1,500,000 provided that GNS Malaysia accumulated audited profits record at least
US$3,000,000 for the 5 year period from December 31, 2017 to December 31, 2022. The additional consideration shall be paid by
the issuance of new shares in the Company at a price equal to the higher of (i) US$0.006 per share and (ii) the 20 days average
closing share price immediately prior to the parties agreeing on the accumulated audited profits stated above.
At
the date of this report, the Group will mainly concentrate on its Telecommunications and Mobile Business Unit and the network
design and construction business. The Group will terminate and streamline its advertising business unit and product services
unit until a viable business opportunity is available. During year ended. The revenue generated from the telecom services
and the newly acquired network design, construction and maintenance service for broadband services during the year ended December
31, 2017 was $6,120 and $381,517, respectively.
|
-
1 -
OUR
BUSINESS REVIEW AND FUTURE STRATEGY. The Group has 3 business units namely "Advertising",
"Products and Services" and "Telecommunication and Mobile Computing".
The management has determined to only focus our business in the Telecommunications and
Digital Services business unit going forward, and have the Advertising and Products and
Services business units inactive until viable business opportunities are presented.
|
|
2017
Products & Services Overview
|
In
2006, the Company announced the establishment of the Telecommunications and Mobile Computing Division to focus on the new
media advertising where we would take advantage of new convergent devices for telecommunications advertising. We have seen
over the years the importance of advertising through social media using telecommunication services.
|
In
December 2016, we signed a Master Distribution Agreement with our then 51% subsidiary, Naim Indah
Mobile Communications Sdn. Bhd. ("NIMC") for us to sell telecom services on NIMC's
MVNO telecom platform. As a result of the Master Distribution Agreement, we determined to concentrate
on the provision of services rather than the running of the MVNO Platform ourselves, and in December
2016 we sold NIMC to a company owned by two of our directors. In the first 3 quarters of 2017, we
derived $6,120 in telecom services and no revenue in the last quarter just then ended. Given the competitive
telecom services market, we have scaled back our telecom services division until we can identify a
niche market we can compete in. In the meantime, our newly acquired network design, construction and
maintenance service recorded a revenue of $29,103 for this quarter ended December 31, 2017 and a total
of $381,517 since the acquisition on June 15, 2017. We will continue to pursue the sale of telecom
services and concentrate on postpaid customers, where the margins are higher, through our partner
networks.
A
more thorough discussion on becoming a digital service provider and infrastructure provider are discussed below.
|
Towards Becoming A Digital
Service Provider
|
The
decision to become a DSP rests solely on providing the needs of a new generation of consumers. There has been a great shift
in consumers' behaviors. The way purchases are made, the types of media consumed, the way information are
obtained and the way trust and relationships are built. These have created new rules of consumer engagement where mobile platform
is highly utilized, allowing consumers to communicate, transact and gain almost instantaneous feedback and response. E-commerce
now is evolving into M-Commerce (mobile-commerce) and into S-Commerce (social-commerce) allowing customers to instantly transact
and share.
|
We
must seize the opportunity to build our business model around this market segment through our offerings with three main differentiators:
|
(i)
An advanced set of products and services that will disrupt the market landscape;
(ii)
A customer engagement model that is currently not offered by others; and
(iii) A
technology superiority and scalability that will support future growth.
|
The
first challenge to become a digital service provider involves a change in the mindset and culture; we need to view ourselves
not as a communication service provider but as a genuine digital competitor. We need to shift away from serving as a channel
and toward creating a platform, and the way for us to capitalize on the opportunities in the digital services domain and its
associated revenue is to build our business as a digital service provider. Our journey towards becoming a DSP has progressed
well over the past 3 months where we are building a solid eco-system that will enable us to offer attractive and disruptive
services to the market.
|
-
2 -
Key
Business Focus: Digital Service Provider
|
While
MVNO remains as its business focus, the Company would now focus on developing its Next Generation Intelligent Network (NGIN) and
Business Support System (BSS) as a platform to support White Label MVNO businesses. This platform is aimed to provide a leading-edge
telecommunication services as part of our Digital Services eco-system alongside the financial technology ("fintech")
solutions vis-a-vis an integrated mobile payment equipped with virtual account and digital wallet connected to membership, debit,
prepaid and/or credit cards.
Our
Mission Critical System
|
The
NGIN and BSS systems are required to provide a real-time unified charging across all services and devices, and payment methods
with differentiated service offerings with a quick time-to-market advantage to allow NIMC to quickly capitalize and execute on
market opportunities. Our BSS platform combines payment methods, with ‘on demand' payments for some services and recurring
subscription models for others.
*
|
Online
charging system (OCS)
is the central system that governs all subscribers' charging and rating. It is a system that
allows an operator to charge their customers, in real time, based on event or session service usage.
|
*
|
Policy
& Charging Rules Function (PCRF)
, a software component designated in real-time to determine policy rules that
accesses subscriber databases and other specialized functions, such as a charging system PCRF supports the creation
of rules and then automatically making policy decisions for each subscriber active on the network.
|
*
|
Business
Support Systems
(BSS)
are the components that we use to run its business operations towards customers. Together
with operations support systems (OSS), these are used to support various end-to-end telecommunication services.
BSS and OSS have their own data and service responsibilities.
|
*
|
Enterprise
Resource Planning (ERP)
is a system that handles all essential business functions such as accounting, HR, sales, marketing,
service, warehousing, and more. The SAP B1 system provides a complete visibility and better control help us run our end-to-end
business processes professionally.
|
We
are now at the final stage of negotiating the purchase of these systems from the respective solution provider. We expect to
complete the deployment of these systems by the end of Q2.
|
Infrastructure
Provider
The
principal activities of GNS are provision of network design, construction and maintenance services for fiber optics backbone and
Fiber-to-the-Home (FTTH) broadband services.
The
telecommunications industry comprised of many types of companies at different levels within the industry, all making products
and/or providing a service to supply local and long distance telephone service, internet service, and new technologies (including
VoIP, CATV, HDTV, and security) to the end users (residential, business, and institutional).
A
large portion of the telecommunications industry is comprised of equipment manufacturers (switch, router, and network component
companies) producing products that make and/or route connections from point-to-point via a central office location. Whether these
products are used in networks supporting wired or wireless applications, the ultimate goal for equipment manufacturers is to produce
an efficient, cost effective, and reliable product to support network service providers.
Solution
providers is another level of the telecommunications industry which is large in size. In this segment, companies source, develop,
and implement the network infrastructure that ‘service providers' will use to supply communication connections to
the end users. As a segue between component manufacturers and service providers, solutions providers greatly influence network
structures, protocols, and the successful implementation of emerging technologies.
The
other large segment of the telecommunications industry is service providers. This market is focused on providing communications,
in one form or other, to the end users. For most people, this segment is viewed as the face of the industry, delivering the final
product/service that the equipment manufacturers and solutions providers support. The most common applications for this segment
are premises networks, LAN (local area networks), WAN (wide area networks), and wireless networks.
GNS's
offerings are that of connectivity at multiple levels of the telecommunications industry ranging from standard cable assemblies
and loopbacks for the equipment manufacturing segment to optical drop cables to support service provider networks.
-
3 -
Moving
Forward
Moving
forward, we will continue to strive in executing our roadmap for growth which encompasses five key areas namely, strengthening
our talents and resources, expanding our product range, widening our geographical reach, improving customers' journey
and experience and enhancing our internal process. The positive results from these areas would create a stable platform
for the Group to spread its wings regionally and globally to unveil the vast potential of the digital services market
segment. Talks and negotiations are ongoing with several mobile network enablers and operators in the South East Asian
region. This would promulgate further the Group's vision and commitment in becoming a regional mobile service operator
with an assortment of deliverables that would satisfy the ravishing appetite of the customers. Being in a competitive
industry where customers' satisfaction is uncompromising, we are continuously ensuring that customers' experience
would be the fundamental element in all facets of our operation.
Technology
is the staple food of today's consumers, which is ever changing, we will be investing our resources into R&D,
talent enhancement, product innovation, and technology adoption in our delivery processes. This will enable us to be more
efficient in providing an unmatched customers' experience, which will translate into a faster and higher subscribers'
acquisition. We will continue to jointly work closely with mobile enablers to penetrate new markets and opportunities
this year and beyond.
Industry
Overview and Competition
Telecommunication
Market
Asia
Pacific
Asia
Pacific has been the biggest contributor to global subscriber growth in recent years and still has considerable room for
growth over the rest of the decade. As of the end of 2016, there were 2.7 billion unique subscribers in Asia Pacific,
accounting for two thirds of the region's population. More than half the world's mobile subscribers live in
Asia Pacific - mostly in China and India.
Over
the last few years there has been a dramatic shift towards higher speed mobile technology in Asia Pacific. In 2016, mobile
broadband (3G and above) became the dominant technology, accounting for just over half of total connections across the
region, up from 20% in 2012. 2016 was also the year 4G connections overtook 3G connections.
Other
previously ‘laggard' 4G markets such as Malaysia, Indonesia, Myanmar, the Philippines and India are now beginning
to see an accelerating migration to 4G, driven by ongoing network investment by mobile operators, increased competition,
falling device prices and growing consumer appetite for higher speed mobile. Overall in the region, 4G will account for
48% of total connections by 2020.
As
smartphone adoption continues to rise in the region (just over half of total connections were smartphones at the end of
2016) and as more users come online, an increasing range of mobile services are being consumed, including video, social
media, e-commerce and financial services.¹
For
the period ending January 2018 within the South East Asia nations, mobile connections as against the country's population
was led by Indonesia with a penetration rate of 157% followed by Vietnam (153%), Singapore (150%), Thailand (135%) and
Malaysia (133%). On the other hand, mobile broadband penetration was highest in Singapore (150%) and followed by Thailand
(134%), Malaysia (107%) Indonesia (84%) and Philippines (65%) with the worldwide average at 63%.³
On
mobile social media penetration, Singapore was ahead with 75% with Malaysia and Thailand closing in at 69%, 67% respectively.
They were followed by Philippines (59%), Vietnam (52%) and Indonesia (45%) with the worldwide average at 39%.
Meanwhile,
Thailand led the mobile banking penetration rate with 56% followed by Singapore and Malaysia (47% each), Vietnam (30%),
Philippines (28%) and Indonesia (27%)
The
active M-commerce countries were Thailand with a penetration rate of 52%, Malaysia (40%), Singapore (39%), Vietnam (33%) and Indonesia
(31%).⁴
|
-
4 -
Malaysia
Growth
in the information and communication sub-sector was also higher, reflecting higher demand for data communication and computer
services.
The
information and communication subsector continued to record a strong growth of 8.4% in 2017 (2016: 8.1%²).
|
In
the third quarter of 2017 (3Q2017), mobile-cellular penetration rate was at 131.8% (2Q2017: 133.7%) with 34.1 million (2Q2017:
33.4 million) mobile broadband subscriptions. There were 32.4 million (2Q2017: 33.0 million) prepaid subscriptions and 10.0 million
(2Q2017: 9.8 million) postpaid subscriptions. ⁵
¹
The Mobile Economy Asia Pacific 2017 - GSMA
²
Bank Negara Malaysia Annual Report 2017
³
Digital in 2018 : Global Overview - we are social & Hootsuite
⁴
Digital in 2018 : Southeast Asia- we are social & Hootsuite
⁵
Malaysian Communications and Multimedia Commission - Communications and Multimedia : Facts and Figures 3Q 2017
|
|
Fibre
Internet in Malaysia
Fiber
internet represents a faster broadband than practically any other type of broadband in Malaysia. "Faster" means that
more data transfers per second than other types of broadband services. Essentially, fibre optic technology converts electrical
signals that carry data into light, which are transferred via hair-thin glass cables. Fiber also supports simultaneous access
to internet, voice and television connections.
Fibre-optics
is a fairly recent development worldwide and particularly in Malaysia. It is available to limited areas because of the infrastructure
required. In Malaysia, it is typically known as Fibre to the Home (FTTH), and it is replacing ADSL in urban centres, bringing
with it a shift to 24-month package contracts typical of a UK or US internet provider.
Fiber
internet services in Malaysia typically provide speeds ranging from 5 Mbps to 100 Mbps. Companies offering FTTH include Time dotCom,
Telekom Malaysia's UniFi and Maxis among others. The fibre options are typically much faster than the ADSL and Wireless
Broadband options. However, fibre broadband in Malaysia is still not as fast as some fibre broadband options in the United States,
like Google Fibre, which offers up to 1 Gbps.
In
the third quarter of 2017 (3Q2017), household broadband penetration rate is 84.5% (2Q2017:83.7%) with 2.5 million fixed broadband
subscriptions. ¹
¹
Malaysian Communications and Multimedia Commission - Communications and Multimedia : Facts and Figures 3Q 2017
-
5 -
Plan
of operations
OUR
PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS.
We
hope to generate additional revenues in the next twelve months by engaging business operations through internal growth
and through strategic acquisitions.
|
We
have cash and cash equivalents of $10,131as of December 31, 2017; a decrease of about 99% from the previous period end of
December 31, 2016. In the opinion of management, the current funds will not satisfy our working capital requirements to operate
at our current level of activity for the next twelve months. To effectuate our business plan, during the next twelve months,
we must arrange for adequate funding to implement our plans of deploying our digital service provider and network service
provider businesses.
|
Management
intends to continue to raise additional financing through debt and equity financing or other means and interests that it deems
necessary, with a view to implementing our business plan and building a revenue base. We plan to use the proceeds of such
financings to provide working capital to our operations and increase our capital expenditure for marketing and working with
our co-operative partners. There can be no assurances that sufficient financing will be available on terms acceptable to us
or at all. Our forecast for the period for which financial resources will be needed to support our operations involves risks
and uncertainties and actual results could fail as a result of a number of factors.
|
Specifically,
we hope to accomplish the steps as set out in this report to implement our business plan in respect of developing and integrating
digital service provider and infrastructure provider. The success of our plans is subject to our ability to obtain adequate
funding. Such additional capital may be raised through public or private equity financing, borrowings, or other sources, such
as contributions from our officers and directors. If we are unable to obtain funds necessary to implement our business plan,
we may revise or scale back our business plan.
|
We
are not currently conducting any research and development activities, other than the continual development of our website.
We do not anticipate conducting any other research and development activities in the near future. In the event that we expand
our business scope, then we may need to hire additional employees or independent contractors as well as purchase or lease
additional equipment and open new office locations.
|
Governmental
Regulation
We
are subject to federal, state and local laws and regulations applied to businesses in general. We believe that we comply with
the requirements in Malaysia for any licenses or approvals to pursue our proposed business plan. In locations where we operate,
the applicable laws and regulations are subject to amendment or interpretation by regulatory authorities. Generally, such authorities
are vested with relatively broad discretion to grant, renew and revoke licensee and approvals, and to implement regulations. Licenses
may be denied or revoked for various reasons, including the violation of such regulations, conviction of crimes and the like.
Possible sanctions which may be imposed include the suspension of individual employees, limitations on engaging in a particular
business for specific periods of time, revocation of licenses, censures, redress to customers and fines. We believe that we are
in conformity with all applicable laws in all relevant jurisdictions. We may be prevented from operating if our activities are
not in compliance and must take action to comply with the relevant laws and regulations.
|
We
have posted our privacy policy and practices concerning the use and disclosure of any consumer information collected on our
website, www.mediangroupinc.com. Any failure by us to comply with posted privacy policies, Federal Trade Commission requirements
or other domestic or international privacy-related laws and regulations could result in proceedings by governmental or regulatory
bodies that could potentially harm our business, results of operations and financial condition. In this regard, there are
a large number of legislative proposals before the U.S. Congress and various state legislative bodies regarding privacy issues
related to online commerce to which the Group may participate in the future. It is not possible to predict whether or when
such legislation may be adopted, and certain proposals, if adopted, could harm our business by causing a decrease in the use
of our applications and services by our small business customers and thereby a decrease in our revenues. Such decreases could
be caused by, among other possible provisions, the required use of disclaimers or other requirements before consumers can
utilize our Internet technology solutions.
|
As
of the date of this report, we have 12 full time employees. From time to time, we utilize consultants or contractors for specific
assignments. None of our employees are represented by a labor union and we have never experienced a work stoppage. We believe
that our relationships with our employees are good.
|
-
6 -
There
are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually
occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading
price of our Common Stock could decline and investors could lose all or part of their investment.
|
Risks
Related to Our Business
|
Our
business is subject to various risks and uncertainties, including those set forth below. The risks and uncertainties described
below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem
to be immaterial may also materially and adversely affect our business operations. If any of the risks set out or referred
to below actually occur, our business, financial condition or results of our operations could be materially adversely affected.
|
Our
risks for the existing and future business disclosed in this section has included the setting up as a digital service provider
and the network service provider including design, construction and maintenance services, for broadband service in Malaysia.
|
RISKS
RELATED TO EXISTING AND PROPOSED OPERATIONS
|
If
we are unable to obtain additional funds from other financings we may have to curtail the scope of our operations significantly
and alter our business model
|
We
must achieve profitability for our business model to succeed. Prior to accomplishing this goal, we may need to raise additional
funds, from equity or debt sources. Our cash requirements are substantial and our current financial position is insufficient
to meet our cash needs in the future. If additional financing is not available when required or is not available on acceptable
terms, we may be unable to continue our operations at current or planned levels. In addition, any failure to raise additional
funds in the future may result in our inability to successfully secure our business platform, take advantage of business opportunities
or respond to competitive pressures, any of which circumstances could have a material adverse effect on our financial condition
and results of operations.
|
We
do not have substantial cash resources and if we cannot raise additional funds or generate more revenues, we will not be able
to pay our vendors and will probably not be able to continue as a going concern
|
We
will need to raise additional funds to pay outstanding debts, vendor invoices and execute our business plan. Our future cash
flows depend on our ability to enter into, and be paid under, contracts with our distributors for the telecom services business.
There can be no assurance that additional funds will be available when needed from any source or, if available, will be available
on terms that are acceptable to us.
|
We
may be required to pursue sources of additional capital through various means, including joint venture projects and debt or
equity financings. Future financings through equity investments will be dilutive to existing stockholders. Also, the terms
of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities
may include preferences, superior voting rights, the issuance of warrants or other convertible securities, which will have
additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and/or financing, including
investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required
to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants,
which will adversely impact our financial condition and results of operations.
|
Our
ability to obtain needed financing may be impaired by such factors as the weakness of capital markets
and the fact that we have not been profitable, which could impact the availability or cost of future
financings. If the amount of capital we are able to raise from financing activities, together with
our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that
we reduce our operations accordingly, we may be required to cease operations.
|
We
have a limited operating history, and it may be difficult for potential investors to evaluate our business
|
Currently
we are focusing our operation on being a digital service provider and the network service provider including design, construction
and maintenance services, for broadband service in Malaysia. Our limited operating history makes it difficult for potential
investors to evaluate our business or prospective operations. We are subject to all the risks inherent in the initial organization,
financing, expenditures, complications and delays inherent in a relatively new business. Investors should evaluate an investment
in us in light of the uncertainties encountered by such companies in a competitive environment. Our business is dependent
upon the implementation of our business plan, as well as the ability of our cooperative distributor, Angkasa, to sell our
telecom services to their membership. There can be no assurance that our efforts will be successful or that we will be able
to attain profitability.
|
-
7 -
Our
limited operating history and rapidly evolving business makes it difficult for us to accurately forecast revenues and expenses
|
We
have a limited operating history on which to base an evaluation of our business and prospects. Our
operating results may fluctuate as a result of a number of factors, many of which are outside of our
control. For these reasons, comparing our operating results on a period-to-period basis may not be
meaningful, and you should not rely on our past results as an indication of our future performance.
Our prospects must be considered in light of inherent risks, expenses, and difficulties encountered
by companies in their early stages of development, particularly in new and evolving markets.
We
have generated losses for the past years as our consumer electronics and advertising businesses has come under competitive
price pressure which the management is rationalizing the operation in order to be competitive. Most recently in 2015,
we determined to focus our telecom business from prepaid to postpaid business and a digital service provider. Accordingly,
our future prospects are uncertain in light of the risks and uncertainties experienced by early stage companies in evolving
industries, and in particular our future as a digital service provider and the network service provider including design,
construction and maintenance services, for broadband service in Malaysia. Due to our limited history and limited resources,
it is difficult for us to predict future revenues and operating expenses. If our digital service provider and network
service provider businesses develop slower than we expect, our losses may be higher than anticipated, we may have to curtail
parts of our business plan and the market price of our stock may decline.
Some
of the other risks and uncertainties of our business relate to our ability to:
|
|
-
|
offer
new and innovative products and services to attract and retain a larger consumer base;
|
|
-
|
attract
customers;
|
|
-
|
increase
awareness of our brand and continue to develop consumer and customer loyalty;
|
|
-
|
respond
to competitive market conditions;
|
|
-
|
respond
to changes in our regulatory environment;
|
|
-
|
manage
risks associated with intellectual property rights;
|
|
-
|
maintain
effective control of our costs and expenses;
|
|
-
|
raise
sufficient capital to sustain and expand our business;
|
|
-
|
attract,
retain and motivate qualified personnel; and
|
|
-
|
upgrade
our technology to support increased traffic and expanded services.
|
If
we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected.
|
We face significant competition and may suffer from a loss of users and customers as a result
|
We
expect to face significant competition in our digital service provider and the network service provider including design,
construction and maintenance services, for broadband service businesses, particularly from other companies that seek to provide
similar products and services. Many of these competitors have significantly greater financial resources and more personnel
than we do. They may also have longer operating histories and more experience in attracting and retaining and managing customers.
They may use their experience and resources to compete with us in a variety of ways, including by competing more for users,
customers, distributors, media channels and by investing more heavily in research and development and making acquisitions.
If we fail to compete effectively, our business, financial condition and results of operation will be adversely affected.
|
Our
business depends on a strong brand, and if we are not able to maintain and enhance our brand, our business and operating results
may be harmed
|
We
believe that recognition of our brand will contribute significantly to the success of our business. We also believe that maintaining
and enhancing our brand is critical to expanding our base of consumers and customers. As our market becomes increasingly competitive,
maintaining and enhancing our brand will depend largely on our ability to fund the advertising and promotion campaigns, which
may be increasingly difficult and expensive.
|
We
may face intellectual property infringement claims and other related claims that could be time-consuming and costly to defend
and may result in our inability to continue providing certain of our existing services
|
Technology
and service companies are frequently involved in litigation based on allegations of infringement of
intellectual property rights, unfair competition, and invasion of privacy, defamation and other violations
of third-party rights. The validity, enforceability and scope of protection of intellectual property,
particularly in Malaysia, are uncertain and still evolving. In addition, many parties are actively
developing and seeking protection for electronics technologies, including seeking patent protection.
There may be patents issued or pending that are held by others that cover significant aspects of our
technologies, products, business methods or services. As we face increasing competition and as litigation
becomes more common in Malaysia and elsewhere in Asia for resolving commercial disputes, we face a
higher risk of being the subject of intellectual property infringement claims.
Intellectual
property litigation is expensive and time consuming and could divert resources and management attention from the operations
of our businesses. If there is a successful claim of infringement, we may be required to pay substantial fines and damages
or enter into royalty or license agreements that may not be available on commercially acceptable terms, if at all. Our
failure to obtain a license of the rights on a timely basis could harm our business. Any intellectual property litigation
could have a material adverse effect on our business, financial condition or results of operations.
|
-
8 -
If
we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report
our financial results or prevent fraud
|
We
are subject to reporting obligations under the U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley
Act of 2002, adopted rules requiring every public company to include in its annual report a management report on such company's
internal controls over financial reporting which contains management's assessment of the effectiveness of the company's internal
controls over financial reporting. In addition, if the Company qualifies under certain revenue or market capitalization test
an independent registered public accounting firm must attest to and report on management's assessment of the effectiveness
of the company's internal controls over financial reporting. Our management may conclude that our internal controls
over financial reporting are not effective. Moreover, even if our management concludes that our internal controls over financial
reporting are effective, our independent registered public accounting firm may still decline to attest to our management's
assessment or may issue a report that is qualified if they are not satisfied with our controls or the level at which our controls
are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting
obligations as a public company will place a significant strain on our management, operational and financial resources and
systems for the foreseeable future. We are a company with limited accounting personnel and other resources with which to address
our internal financial controls and procedures. If we fail to timely achieve and maintain the adequacy of our internal financial
controls, we may not be able to conclude that we have effective internal controls over financial reporting at a reasonable
assurance level. Moreover, effective internal controls over financial reporting are necessary for us to produce reliable financial
reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls
over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which
in turn could harm our business and negatively impact the market price of our Common Stock.
|
The
recent global economic and financial market crisis has had and may continue to have a negative effect on our business and
results of operations
|
Global
economic conditions could have a negative effect on our business and results of operations like the
global economic downturn in 2008 when economic activity in China, United States and throughout much
of the world has undergone a sudden, sharp economic downturn following the housing downturn and subprime
lending collapse in both the United States and Europe. Since then the global credit and liquidity
have tightened in much of the world. Some of our customers in Malaysia may face business downturn
and credit issues, and could experience cash flow problems and other financial hardships, which could
affect timeliness of doing business with us.
Changes
in governmental banking, monetary and fiscal policies to restore liquidity and increase credit availability may not be
effective in alleviating the global economic declines. It is difficult to determine the breadth and duration of the economic
and financial market problems and the many ways in which they may affect our customers and our business in general. Nonetheless,
continuation or further worsening of these difficult financial and macroeconomic conditions could have a significant effect
on our business and results of operations.
|
Capital
markets are currently experiencing a period of dislocation and instability, which has had and could continue to have a negative
impact on the availability and cost of capital
|
The
general disruption in the U.S. capital markets has impacted the broader financial and credit markets and reduced the availability
of debt and equity capital for the market as a whole. These conditions could persist for a prolonged period of time or worsen
in the future. Our ability to access the capital markets may be restricted at a time when we would like, or need, to access
such markets, which could have an impact on our flexibility to react to changing economic and business conditions. The resulting
lack of available credit, lack of confidence in the financial sector, increased volatility in the financial markets and reduced
business activity could materially and adversely affect our business, financial condition, results of operations and our ability
to obtain and manage our liquidity. In addition, the cost of debt financing may be materially adversely impacted by these
market conditions.
|
Our
success depends on the continuing efforts of our senior management team and other key personnel and our business may be harmed
if we lose their services
|
Our
future success depends heavily upon the continuing services of the members of our senior management.
If one or more of our senior executives or other key personnel are unable or unwilling to continue
in their present positions, we may not be able to replace them easily or at all, and our business
may be disrupted and our financial condition and results of operations may be materially and adversely
affected. Competition for senior management and key personnel is intense, the pool of qualified candidates
is very limited, and we may not be able to retain the services of our senior executives or key personnel,
or attract and retain high-quality senior executives or key personnel in the future.
In
addition, if any member of our senior management team or any of our other key personnel joins a competitor or forms a
competing company, we may lose customers, distributors, know-how and key professionals and staff members. Each of our
executive officers and key employees has entered into an employment agreement with us which contains confidentiality and
non-competition provisions. Legal proceedings to enforce such provisions would be costly in both money and management
time and such provisions may not be enforced or enforceable.
|
-
9 -
The
success of our business depends on the continuing contributions of Andrew Hwan Lee and other key personnel who may terminate
their employment with us at any time, and we will need to hire additional qualified personnel
|
We
rely heavily on the services of Andrew Hwan Lee, our director and Chief Executive Officer, as well as several other management
personnel. Loss of the services of any such individuals would adversely impact our operations. In addition, we believe our
technical personnel represent a significant asset and provide us with a competitive advantage over many of our competitors
and that our future success will depend upon our ability to retain these key employees and our ability to attract and retain
other skilled financial, engineering, technical and managerial personnel. We do not currently maintain any "key man"
life insurance with respect to any of such individuals.
|
We
rely on highly skilled personnel and if we are unable to retain or motivate key personnel or hire qualified personnel, we
may not be able to grow effectively
|
Our
performance and future success depends on the talents and efforts of highly skilled individuals. We
will need to continue to identify, hire, develop, motivate and retain highly skilled personnel for
all areas of our organization. Competition in our industry for qualified employees is intense. Our
continued ability to compete effectively depends on our ability to attract new employees and to retain
and motivate our existing employees.
As
competition in our industry intensifies, it may be more difficult for us to hire, motivate and retain highly skilled personnel.
If we do not succeed in doing so, we may be unable to grow effectively.
|
We
have no business insurance coverage
|
We
do not have any business liability or disruption insurance coverage for our operations in Malaysia. Any business disruption,
litigation or natural disaster may result in our incurring substantial costs and the diversion of our resources.
|
We
are exposed to risks associated with the ongoing financial crisis and weakening global economy, which increase the uncertainty
of consumers purchasing products and/or services
|
The
recent severe tightening of the credit markets, turmoil in the financial markets, and weakening global economy are contributing
to a decrease in spending by consumers. If these economic conditions are prolonged or deteriorate further, the
market for our digital services will decrease accordingly.
|
Our
Company may experience rapid growth in operations, which may place, and may continue to place, significant demands on its
management, operational and financial infrastructure
|
If
the Company does not effectively manage its growth, the quality of its products and services could suffer, which could negatively
affect the Company's brand and operating results. To effectively manage this growth, the Company will need to continue to
improve its operational, financial and management controls and its reporting systems and procedures. Failure to implement
these improvements could hurt the Company's ability to manage its growth and financial position.
|
Our
Company's business faces inherent risk in the mobile communication industry
|
Our
Group's business is subject to certain risks inherent in the mobile communication industry. Our Group's revenue and operating
results could be adversely affect by many factors which include, amongst others, changes in general economic, business and
credit conditions, fluctuation in foreign exchange rates, changes in demand for and market acceptance of our products and
services, our ability to introduce new products and services and enhancements in a timely manner, rapid technological changes,
increase in operating expenses, lower profit margins due to pricing competition and delay in expansion plans.
|
Our
Group seeks to limit these business risks through, inter-alia prudent management policies, keeping abreast with new developments
and technologies in the relevant industries and maintaining good relationship with customers and suppliers. However there
can be no assurance that any changes in these factors will not have any material adverse effect on our Group's business.
|
Our
Company's business faces competition from local and foreign competitors
|
Our
Group faces competition from both local and foreign competitors which offer similar products that
of our Group offerings. Increased competition could result in competitive pricing resulting in lower
profit margins. However, our Group believes that we have competitive edge over our competitors; including
amongst others, quality services, captive customers through our distributors, access to R&D capabilities
and technological expertise acquired over the years.
Our
Group seeks to limit the competitive risks through, inter-alia constant review of our development and marketing strategies
to adapt to changes in economic conditions and market demands as well as focusing on certain markets and industries. However,
there can be no assurance that our Group will be able to compete effectively against our competitors and that competitive
pressure will not materially and adversely affect our Group's business, operations and results and or financial
condition.
|
-
10 -
Risks
Relating to Our Organization and Our Common Stock
|
Public
company compliance may make it more difficult for us to attract and retain officers and directors
|
The
Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices
of public companies. As a public company, we expect these new rules and regulations to increase our compliance costs and to
make certain activities more time consuming and costly. As a public company, we also expect that these new rules and regulations
may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may
be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors
or as executive officers.
|
We
may not be able to attract the attention of major brokerage firms
|
Securities
analysts of major brokerage firms may not provide coverage of us since there is no incentive to brokerage firms to recommend
the purchase of our Common Stock. No assurance can be given that brokerage firms will, in the future, want to conduct any
secondary offerings on behalf of our Company.
|
Our
stock price may be volatile
|
The
market price of our Common Stock is likely to be highly volatile and could fluctuate widely in price in response to various
factors, many of which are beyond our control, including the following:
|
|
*
|
changes
in our industry;
|
|
*
|
competitive
pricing pressures;
|
|
*
|
our
ability to obtain working capital financing;
|
|
*
|
additions
or departures of key personnel;
|
|
*
|
limited
"public float" in the hands of a small number of persons whose sales or lack of sales could result in positive or
negative pricing pressure on the market price for our Common Stock;
|
|
*
|
sales
of our Common Stock;
|
|
*
|
our
ability to execute our business plan;
|
|
*
|
operating
results that fall below expectations;
|
|
*
|
loss
of any strategic relationship;
|
|
*
|
regulatory
developments;
|
|
*
|
economic
and other external factors; and
|
|
*
|
period-to-period
fluctuations in our financial results.
|
In
addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated
to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the
market price of our Common Stock.
|
We
may not pay dividends in the future. Any return on investment may be limited to the value of our Common Stock
|
We
do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our
Common Stock will depend on earnings, financial condition and other business and economic factors
affecting us at such time as our board of directors may consider relevant. If we do not pay dividends,
our Common Stock may be less valuable because a return on your investment will only occur if our stock
price appreciates.
|
There
is currently no liquid trading market for our Common Stock and we cannot ensure that one will ever develop or be sustained
|
To
date there has not been an active trading market for our Common Stock. We cannot predict how liquid the market for our Common
Stock might become. As soon as is practicable after becoming eligible, we anticipate applying for listing of our Common Stock
on either the NYSE Amex Equities, The Nasdaq Capital Market or other national securities exchange, assuming that we can satisfy
the initial listing standards for such exchange. We currently do not satisfy the initial listing standards for any of these
exchanges, and cannot ensure that we will be able to satisfy such listing standards or that our Common Stock will be accepted
for listing on any such exchange. Should we fail to satisfy the initial listing standards of such exchanges, or our Common
Stock is otherwise rejected for listing and remains quoted on the OTC markets or is suspended from the OTC markets, the trading
price of our Common Stock could suffer and the trading market for our Common Stock may be less liquid and our Common Stock
price may be subject to increased volatility.
|
Furthermore,
for companies whose securities are quoted on the OTC markets, it is more difficult (i) to obtain accurate quotations, (ii)
to obtain coverage for significant news events because major wire services generally do not publish press releases about such
companies and (iii) to obtain needed capital.
|
-
11 -
Our
Common Stock is currently a "penny stock," which may make it more difficult for our investors to sell their shares
|
Our
Common Stock is currently and may continue in the future to be subject to the "penny stock" rules adopted under
Section 15(g) of the Exchange Act. The penny stock rules generally apply to companies whose Common Stock is not listed on
The NASDAQ Stock Market or other national securities exchange and trades at less than $4.00 per share, other than companies
that have had average revenue of at least $6,000,000 for the last three years or that have tangible net worth of at least
$5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things,
that brokers who trade penny stock to persons other than "established customers" complete certain documentation,
make suitability inquiries of investors and provide investors with certain information concerning trading in the security,
including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade
penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to
act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period,
it could have an adverse effect on the market, if any, for our securities. Since our securities are subject to the penny stock
rules, investors may find it more difficult to dispose of our securities.
|
Offers
or availability for sale of a substantial number of shares of our Common Stock may cause the price of our Common Stock to
decline
|
If
our stockholders sell substantial amounts of our Common Stock in the public market, or upon the expiration of any statutory
holding period under Rule 144, or issued upon the exercise of outstanding options or warrants, it could create a circumstance
commonly referred to as an "overhang" and in anticipation of which the market price of our Common Stock could fall.
The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability
to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that
we deem reasonable or appropriate.
|
Ching
Chiat Kwong, our major shareholder beneficially owns or holds the proxies for a substantial portion of our outstanding Common
Stock, which enables him to influence many significant corporate actions and in certain circumstances may prevent a change
in control that would otherwise be beneficial to our stockholders
|
Ching
Chiat Kwong currently beneficially owns and holds the proxies for approximately 77.14% of our outstanding Common Stock. As
such, he has a substantial impact on matters requiring the vote of the stockholders, including the election of our directors
and most of our corporate actions. This control could delay, defer, or prevent others from initiating a potential merger,
takeover or other change in our control, even if these actions would benefit our stockholders and us. This control could adversely
affect the voting and other rights of our other stockholders and could depress the market price of our Common Stock.
|
-
12 -
RISKS
RELATING TO THE BUSINESS
|
We
have a limited operating track record
|
We
have a limited operating and financial history in the network service provider, including design,
construction and maintenance services, for broadband service in Malaysia ("Network Service"),
upon which you may evaluate us. Our network services operation commenced operations in 2016. As a
result, your evaluation of us and our prospects will be based on a limited operating and financial
history. Therefore, it is difficult to accurately forecast our future revenue and budget our operating
expenses.
|
There
can be no assurance that our business model or any specific products or services will be profitable or competitive in the
long term against larger, facilities-based Network Service provider.
|
We
may experience significant fluctuations in our revenues and cash flows. We have experienced, and may continue to
experience, operating losses. In the event that we do become profitable, we can provide no assurances that such
profitability can or will be sustained in the future.
|
We
may not be able to successfully extend and/or launch existing or new products and services into the market
|
There
is a risk that we may not identify consumer trends correctly. Any new product or services we launch may not be
provided on a cost-effective or price-competitive basis due to a misreading of consumer demand or trends. Such
misjudgment may adversely affect the operational and financial results of us.
|
We
depend significantly on our network of traditional dealers and distributors for sales or our products and services
|
Our
digital services provider will be principally sold through our cooperative distributor and a network of traditional dealers
and distributors. Any dispute with them may disrupt sales and have an adverse effect on our operational and financial
results.
|
Dependence
on directors and key personnel
|
The
technology industry is growing and fast evolving, and the management and operation of the business requires the employment
of highly skilled knowledge workers, whether in technology or non-technology related fields. We recognize and believe that
our continuing success depends to a significant extent on the abilities and continuing efforts of its existing Managing and
Executive Directors and key personnel, and the ability of our Company to attract new personnel and retain its existing skilled
personnel. The labour market for skilled personnel in this field is highly competitive.
|
We
seek to mitigate this risk by offering its employees competitive salary/remuneration, benefit packages and also to offer internships
to undergraduates pursuing tertiary education in the telecommunications field for possible future employment with us.
|
If
one or more of these personnel are unable or unwilling to continue in their present positions, or if they join a competitor
or form a competing company, we may not be able to replace them easily. Our business may be significantly disrupted
and its financial condition and results of operations may be materially and adversely affected.
|
We
may be unable to adequately protect our intellectual property or may face intellectual property claims that may be costly
to resolve or may limit our ability to use our intellectual property in the future.
|
The
popularity of our products and services is dependent on the goodwill associated with our brand names and logos. In
the case of trademarks and service marks applied and/or registered with the Intellectual Property Corporation of Malaysia,
we have a perpetual, royalty-free licence to use such trademarks and service marks in Malaysia.
|
Our
digital service provider operation relies on a combination of trademarks, service marks and domain name registrations, common
law copyright protection and contractual restrictions to establish and protect their intellectual property. Any
third party may challenge our intellectual property. We may incur substantial costs in defending any claims relating
to its intellectual property rights.
|
Breach
of customer data protection could materially affect our reputation and business and subject us to liability
|
If
we are successful in our operations, we will develop a large database on our subscribers' information stored in various
business systems and used in many business processes. We are required under our licenses to take all reasonable
steps to ensure that parties who have access to our subscribers' information in the ordinary course of business do not
disclose such information without the prior consent of the subscribers. Under the Malaysian Personal Data Protection
Act 2010 ("PDPA") which regulates the processing of personal data in regards to commercial transaction and safeguard
the interests of data subjects, the penalty for non-compliance will be between RM100,000 - RM500,000 (about US$23,365
- US$116,822 at an exchange rate of 4.28) and /or imprisonment between 1-3 years.
|
-
13 -
ITEM
1B. UNRESOLVED STAFF COMMENTS
|
PROPERTY
HELD BY US. Neither the Company nor its subsidiaries own any properties or facilities.
|
On
April 1, 2016 the Company signed a tenancy agreement for the corporate office at Level 17, Tower 2, Bank Rakyat Twin Towers,
No. 33, Jalan Travers, 50470 Kuala Lumpur, Malaysia. Pursuant to the terms of the agreement, the Group lease the
7,537 sq. feet office for 3 years at a monthly rent of RM33,916.50 (approximately US$7,560) or annual rent of RM406,998 (approximately
US$90,720).
|
ITEM
3. LEGAL PROCEEDINGS
|
There
are no legal actions pending against us nor are any legal actions contemplated by us at this time.
|
ITEM
4. MINE SAFETY DISCLOSURES
|
|
Not
applicable.
|
-
14 -
PART
IV
ITEM
15. EXIBITS, FINANCIAL STATEMENT SCHEDULES
|
(a)
Index to Financial Statements and Financial Statement Schedules
|
Table of Contents
|
|
Report of Independent Registered Public Accounting
Firm
|
|
Consolidated Balance Sheets
|
|
Consolidated Statements of Operations
|
|
Consolidated Statement of Comprehensive Income
|
|
Consolidated Statements of Stockholders' Deficits
|
|
Consolidated Statements of Cash Flows
|
|
Notes to Consolidated Financial Statements
|
-
30 -
|
|
3.1
|
Articles
of Incorporation
(1)
|
3.1.1
|
Certificate
of Amendment to Articles of Incorporation
(2)
|
3.1.2
|
Certificate
of Amendment to Articles of Incorporation, as amended.
(3)
|
3.1.3
|
Certificate
of Amendment to Articles of Incorporation, as amended.
(5)
|
3.1.4
|
Certificate
of Amendment to Articles of Incorporation, as amended.
(6)
|
3.2
|
Bylaws
(1)
|
10.1
|
2007
Stock Incentive Plan
(4)
|
21.1*
|
List
of Subsidiaries
|
31.1*
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2*
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1*
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2*
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
1.
|
Incorporated by reference to our Registration
Statement on Form SB-2 as filed with the SEC on April 15, 2003.
|
2.
|
Incorporated by reference to our Current Report
on Form 8-K as filed with the SEC on February 3, 2005.
|
3.
|
Incorporated by reference to our Registration
Statement on Form SB-2 as filed with the SEC on September 26, 2005.
|
4.
|
Incorporated by reference to our Registration
Statement on Form S8 as filed with the SEC on March 8, 2007.
|
5.
|
Incorporated by reference to our Current Report
on Form 8-K as filed with the SEC on April 7, 2014.
|
6.
|
Incorporated by reference to our Current Report
on Form 8-K as filed with the SEC on October 12, 2015.
|
-
31 -
SIGNATURES
|
|
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 34, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
|
|
Median Group Inc.
|
|
a Texas corporation
|
|
|
|
/s/ Andrew Hwan Lee
|
|
---------------------------------------
|
|
Andrew Hwan Lee
|
|
Chief
Executive Officer
|
|
|
|
/s/ Mohd Suhaimi bin Rozali
|
|
---------------------------------------
|
|
Mohd Suhaimi bin Rozali
|
|
Chief
Financial Officer
|
|
|
In
accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
|
By:
|
/s/
Dato
Haji Abdul Fattah Abdullah
|
April 20, 2018
|
|
-----------------------------------------------------
|
|
|
Dato Haji Abdul Fattah Abdullah
|
|
Its:
|
Director
|
|
By:
|
/s/
Andrew
Hwan Lee
|
April 20, 2018
|
|
-----------------------------------------------------
|
|
|
Andrew Hwan Lee
|
|
Its:
|
President, Chief Executive Officer, Director
|
|
By:
|
/s/
Ahmad
Shukri Abdul Ghani
|
April 20, 2018
|
|
-----------------------------------------------------
|
|
|
Ahmad Shukri Abdul Ghani
|
|
Its:
|
Director
|
|
By:
|
/s/
Mohd.
Suhaimi bin Rozali
|
April 20, 2018
|
|
-----------------------------------------------------
|
|
|
Mohd Suhaimi bin Rozali
|
|
Its:
|
Chief Financial Officer, Company Secretary,
Treasurer
|
|
-
32 -
|
Exhibit
15(a
)
|
Median Group
Inc. and Subsidiary
|
Index to Consolidated
Financial Statements
|
For the Years Ended
December 31, 2017 and 2016
|
|
Table of Contents
|
Page
|
|
|
Report of Independent Registered Public Accounting
Firm
|
F-2
|
|
|
Consolidated Balance Sheets
|
F-3
|
|
|
Consolidated Statements of Operations
|
F-4
|
|
|
Consolidated Statement of Comprehensive Loss
|
F-5
|
|
|
Consolidated Statement of Stockholders' Equity
|
F-6
|
|
|
Consolidated Statements of Cash Flows
|
F-7
|
|
|
Notes to Consolidated Financial Statements
|
F-8 to F-18
|
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and
Board of Directors
|
Median Group Inc.
|
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of Median Group Inc. and its subsidiaries (the "Company")
as of December 31, 2017 and 2016, the related consolidated statements of operations and comprehensive loss, changes in stockholders'
deficits and cash flows for each of the two years in the period ended December 31, 2017, and the related notes (collectively referred
to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations
and its cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally
accepted in the United States of America.
Emphasis
of Matter
As
discussed in Note 2 to the consolidated financial statements, during 2017, the Company experienced a net loss of $201,391 and
negative operating cash flows of $1,020,057, at December 31, 2017, the Company had incurred cumulative net losses of $6,742,570
and working capital deficit of $668,199. Management's plans in regard to this matter are described in Note 2.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting
but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
HKCMCPA Company Limited
We
have served as the Company's auditor since 2013.
Hong
Kong, China
[date],
2018
F-2
MEDIAN
GROUP INC
|
CONSOLIDATED BALANCE
SHEETS
|
AS OF DECEMBER
31, 2017 AND DECEMBER 31, 2016
|
|
Notes
|
|
December
31
2017
|
|
December
31
2016
|
|
|
|
US$
|
|
US$
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
10,131
|
|
797,230
|
Accounts
receivables
|
|
|
32,237
|
|
-
|
Prepayments
and deposits
|
|
|
69,666
|
|
113,981
|
Amount
due from related parties
|
8
|
|
1,019,760
|
|
2,229
|
|
|
|
1,131,794
|
|
913,440
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
Property
and equipment, net
|
5
|
|
40,964
|
|
-
|
Intangible
assets - goodwill
|
4
|
|
541,307
|
|
-
|
|
|
|
582,271
|
|
-
|
|
|
|
|
|
|
Total
assets
|
|
|
1,714,065
|
|
913,440
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICITS
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
|
9,400
|
|
-
|
Other
payables and accruals
|
7
|
|
776,370
|
|
651,880
|
Amounts
due to related parties
|
8
|
|
1,014,223
|
|
806,812
|
Total
current liabilities
|
|
|
1,799,993
|
|
1,458,692
|
|
|
|
|
|
|
Long-term
debts:
|
|
|
|
|
|
Shareholder
loan
|
9
|
|
2,000,000
|
|
2,000,000
|
Total
non-current liabilities
|
|
|
2,000,000
|
|
2,000,000
|
|
|
|
|
|
|
Total
liabilities
|
|
|
3,799,993
|
|
3,458,692
|
|
|
|
|
|
|
Commitments
and contingencies
|
12
|
|
|
|
|
|
|
|
|
|
|
Stockholders
'
deficits:
|
|
|
|
|
|
Common
stock, no par value, 85,000,000,000 shares authorized, 11,593,899,627 (2016: 11,427,232,960) shares issued and outstanding
|
5
|
|
4,728,563
|
|
4,095,230
|
Accumulated
deficits
|
|
|
(6,742,570)
|
|
(6,519,665)
|
Accumulated
other comprehensive loss
|
|
|
(189,230)
|
|
(120,817)
|
Total
Median Group Inc. stockholders' deficits
|
|
|
(2,203,237)
|
|
(2,545,252)
|
Non-controlling
interest
|
|
|
117,309
|
|
-
|
Total
stockholders' deficits
|
|
|
(2,085,928)
|
|
(2,545,252)
|
Total
liabilities and stockholders' deficits
|
|
|
1,714,065
|
|
913,440
|
The
accompanying notes are an integral part of these consolidated financial statements
F-3
MEDIAN
GROUP INC
|
CONSOLIDATED STATEMENTS
OF OPERATIONS
|
FOR
THE YEAR ENDED DECEMBER 31, 2017 AND 2016
|
|
|
|
|
2017
|
|
2016
|
|
Notes
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Net revenue
|
|
|
387,637
|
|
43,495
|
Cost of revenue
|
|
|
(243,612)
|
|
(33,310)
|
|
|
|
|
|
|
Gross profit
|
|
|
144,025
|
|
10,185
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Administration
expenses
|
|
|
(272,635)
|
|
(913,782)
|
Total operating
expenses
|
|
|
(272,635)
|
|
(913,782)
|
|
|
|
|
|
|
Operating loss
|
|
|
(128,610)
|
|
(903,597)
|
|
|
|
|
|
|
Other income
(expenses)
|
|
|
|
|
|
Other
income
|
|
|
87,219
|
|
11,602
|
Gain
on disposal of subsidiaries
|
|
|
-
|
|
194,947
|
Interest
expenses
|
|
|
(160,000)
|
|
(160,000)
|
|
|
|
|
|
|
Net loss
|
|
|
(201,391)
|
|
(857,048)
|
|
|
|
|
|
|
Less: Net income
(loss) attributable to non-controlling interests
|
|
|
21,514
|
|
(180,168)
|
|
|
|
|
|
|
Net loss attributable
to Median Group Inc.
|
|
|
(222,905)
|
|
(676,880)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share attributable to Median Group Inc. shareholders - Basic and diluted
|
|
|
0.00
|
|
0.00
|
|
|
|
|
|
|
Basic and diluted
weighted average number of common shares*
|
|
|
11,518,557,161
|
|
11,331,890,494
|
*
|
Weighted
average number of shares used to compute basic and diluted loss per share for the year ended December 31, 2017 and 2016 are
the same since the effect of dilutive securities are anti-dilutive.
|
The
accompanying notes are an integral part of these consolidated financial statements.
F-4
MEDIAN
GROUP INC
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
|
FOR THE YEAR ENDED
DECEMBER 31, 2017 AND 2016
|
|
|
|
|
2017
|
|
2016
|
|
Notes
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Net loss
|
|
|
(201,391)
|
|
(857,048)
|
|
|
|
|
|
|
Other comprehensive
loss, net of tax
|
|
|
|
|
|
Foreign
currency translation loss
|
|
|
(61,036)
|
|
(90,452)
|
Release
of exchange reserve arising from disposal of subsidiaries
|
|
|
-
|
|
(17,493)
|
Total comprehensive
loss
|
|
|
(262,427)
|
|
(964,993)
|
Less: Net
income (loss) attributable to non-controlling interests
|
|
|
21,514
|
|
(180,168)
|
Less:
Other comprehensive income attributable to non-controlling interests - foreign currency translation gain
|
|
|
7,377
|
|
15,203
|
Total comprehensive
loss attributable to Median Group Inc.
|
|
|
(291,318)
|
|
(800,028)
|
The
accompanying notes are an integral part of these consolidated financial statements.
F-5
MEDIAN
GROUP INC
|
CONSOLIDATED STATEMENT
OF STOCKHOLDERS' EQUITY
|
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
Common
Stock
Amount
|
|
Accumulated
Other Comprehensive Income/ (Loss)
|
|
Accumulated
Deficits
|
|
Total
Median Group Inc. stockholders' deficits
|
|
Non-controlling
Interest
|
|
Total
Stockholders' Equity
|
|
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Balance at January 1, 2016
|
|
11,307,232,960
|
|
2,775,230
|
|
2,331
|
|
(5,842,785)
|
|
(3,065,224)
|
|
117,351
|
|
(2,947,873)
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation (loss) income
|
|
-
|
|
-
|
|
(105,655)
|
|
-
|
|
(105,655)
|
|
15,203
|
|
(90,452)
|
Release of exchange reserves arising from
disposal of subsidiary
|
|
-
|
|
-
|
|
(17,493)
|
|
-
|
|
(17,493)
|
|
47,614
|
|
30,121
|
|
|
-
|
|
-
|
|
(123,148)
|
|
-
|
|
(123,148)
|
|
62,817
|
|
(60,331)
|
Net loss for the year
|
|
-
|
|
-
|
|
-
|
|
(676,880)
|
|
(676,880)
|
|
(180,168)
|
|
(857,048)
|
Total comprehensive loss for the year
|
|
-
|
|
-
|
|
(123,148)
|
|
(676,880)
|
|
(800,028)
|
|
(117,351)
|
|
(917,379)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares
|
|
120,000,000
|
|
1,320,000
|
|
-
|
|
-
|
|
1,320,000
|
|
-
|
|
1,320,000
|
Balance at December 31, 2016 and at January 1, 2017
|
|
11,427,232,960
|
|
4,095,230
|
|
(120,817)
|
|
(6,519,665)
|
|
(2,545,252)
|
|
-
|
|
(2,545,252)
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation (loss) income
|
|
-
|
|
-
|
|
(68,413)
|
|
-
|
|
(68,413)
|
|
7,377
|
|
(61,036)
|
Net (loss) income for the year
|
|
-
|
|
-
|
|
-
|
|
(222,905)
|
|
(222,905)
|
|
21,514
|
|
(201,391)
|
Total comprehensive (loss) income for the year
|
|
-
|
|
-
|
|
(68,413)
|
|
(222,905)
|
|
(291,318)
|
|
28,891
|
|
(262,427)
|
Issuance of shares
|
|
166,666,667
|
|
633,333
|
|
-
|
|
-
|
|
633,333
|
|
-
|
|
633,333
|
Non-controlling interest from acquisition of a subsidiary
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
88,418
|
|
88,418
|
Balance at December 31, 2017
|
|
11,593,899,627
|
|
4,728,563
|
|
(189,230)
|
|
(6,742,570)
|
|
(2,203,237)
|
|
117,309
|
|
(2,085,928)
|
The
accompanying notes are an integral part of these consolidated financial statements.
F-6
MEDIAN
GROUP INC
|
CONSOLIDATED STATEMENTS
OF CASHFLOWS
|
FOR THE YEARS
ENDED DECEMBER 31, 2017 AND 2016
|
|
|
|
2017
|
|
2016
|
|
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net loss
|
|
|
(201,391)
|
|
(857,048)
|
Adjusted for non-cash items:
|
|
|
|
|
|
Depreciation
|
|
|
4,945
|
|
3,651
|
Gain on sale of a subsidiary
|
|
|
-
|
|
(194,947)
|
|
|
|
(196,446)
|
|
(1,048,344)
|
Changes in asset and liabilities
|
|
|
|
|
|
Increase (decrease) in assets:
|
|
|
|
|
|
Accounts receivables
|
|
|
(30,488)
|
|
6,970
|
Prepayments and deposits
|
|
|
248,339
|
|
(15,986)
|
Amount due from related
parties
|
|
|
(846,132)
|
|
369,180
|
(Decrease)/increase in liabilities:
|
|
|
|
|
|
Accounts payables
|
|
|
7,254
|
|
(6,273)
|
Other payables and accruals
|
|
|
(202,584)
|
|
18,631
|
Net cash used in operating activities
|
|
|
(1,020,057)
|
|
(675,822)
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
Purchase of fixed assets
|
|
|
-
|
|
(194,814)
|
Cash from acquisition
|
|
|
87,099
|
|
-
|
Cash flows from (used in) investing activities
|
|
|
87,099
|
|
(194,814)
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
Proceeds from share
issuance
|
|
|
-
|
|
1,320,000
|
Advances from related
parties
|
|
|
207,411
|
|
376,357
|
Cash flows from financing activities
|
|
|
207,411
|
|
1,696,357
|
|
|
|
|
|
|
Effect of exchange rate in comprehensive income
|
|
|
(61,552)
|
|
(105,655)
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(787,099)
|
|
720,066
|
Cash and cash equivalents - net, beginning
|
|
|
797,230
|
|
77,164
|
|
|
|
|
|
|
Cash and cash equivalents - net, ending
|
|
|
10,131
|
|
797,230
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
Interests paid
|
|
|
-
|
|
-
|
|
|
|
|
|
|
Income tax paid
|
|
|
-
|
|
-
|
|
|
|
|
|
|
Non-Cash Financing Activity
|
|
|
|
|
|
Acquisition of subsidiary through issuance of
common stock
|
|
|
633,333
|
|
-
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
F-7
MEDIAN
GROUP INC
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
NOTE
1
|
ORGANIZATION
|
Median
Group Inc. (the "Company") is a Texas corporation, incorporated on October 1, 2002.
In
January 2006, the Company established a wholly owned subsidiary Ren Ren Media Group Limited, a company incorporated in
Hong Kong, as its operating company in Hong Kong. In March 2007, the Company acquired all the outstanding shares of Good
World Investments Limited, a British Virgin Islands corporation that holds 50% of Beijing Ren Ren Health Culture Promotion
Limited, a company incorporated in China in the advertising and media business in China.
In
May 2009, the Group established a 50/50 joint venture company, ATC Marketing Limited, which is to be in the business of
marketing and distributing of convergent multimedia communication and internet devices.
In
June 2012, the Company acquired 100% equity interests of A-Team Resources Sdn. Bhd. ("A-Team"), a distributor
of electronics and light appliances, at a consideration price of $2,011,607 by the issuance of 558,779,837 shares, at
a price of $0.0036 per share.
On
January 15, 2014, the Company sold its subsidiaries namely Ren Ren Media Group Limited, A-Team Resources Sdn Bhd, Good
World Investments Limited and Beijing Ren Ren Health Culture Promotion Limited (the "Disposed Subsidiaries")
containing its light appliances distribution business and advertising business in China.
On
January 31, 2014, the Group closed the transaction to acquire 63.2% of Clixster Mobile Sdn. Bhd. ("CMSB"),
a company incorporated in Malaysia in exchange of 10,193,609,664 shares of common stock of the Company. CMSB is a mobile
virtual network provider and principally engaged in providing cellular and mobile broadband services in Malaysia. CMSB
was treated as the acquirer for accounting purpose since the original stockholders of CMSB owned a majority (85%) of the
shares of the Company's common stock immediately following the completion of the transaction. CMSB was the legal
acquiree but deemed to be the accounting acquirer. The Company was the legal acquirer but deemed to be the accounting
acquiree in the reverse merger. The historical financial statements prior to the acquisition are those of the accounting
acquirer (CMSB). Historical stockholders' equity of the acquirer prior to the merger are retroactively restated
(a recapitalization) for the equivalent number of shares received in the merger. Operations prior to the merger are those
of the acquirer. After completion of the transaction, the Company's consolidated financial statements include the
assets and liabilities, the operations and cash flow of the Company and its subsidiaries.
During
the year, on July 28, 2015, the Company disposed of its 63.2% of CMSB to refocus the business of the Group to sell post-paid
rather than prepaid telecom services for the mobile network virtual operator ("MNVO") operation, with a gain
of approximately $5 million.
As
announced in a Form 8-K on December 16, 2015 on December 11, 2015 the Company acquired a 51% interests in Naim Indah Mobile
Communication Sdn. Bhd. ("NIMC"), a company engaged in providing mobile communication services through MVNO
platform. NIMC has a registered capital of RM2,000,001 (or about US$480,000) of which the Company is required to pay RM1,000,001
(or about US$240,000) for its 51% interests. NIMC has an exclusive agreement with MyAngkasa Holdings Sdn. Bhd. ("MyAngkasa")
for the provision of telecom services to members of the National Cooperative Malaysia Bhd and known as Angkatan Koperasi
Kebangsaan Malaysia Berhad ("Angkasa"). Further details can be found in Note 13 of the financial statements
enclosed herein this report. The Company intends to focus on post-paid customers in working with Angkasa. Our director
Ahmad Shukri Abdul Ghani is a 30% shareholder of NIMC. MyAngkasa is a shareholder of the Company holding 50 million shares
or about 0.44% of the issued share capital of the Company.
In
October 2016, the Company raised $1,320,000 from independent third parties by issuing 120,000,000 shares at $0.011 per
share. This money raised was used for working capital.
On
December 2, 2016, the Company disposed its 51% interest in NIMC for a fair market value of RM1,000,001 or about US$224,574
to a company owned by directors of the Company, and realized a gain of $194,947. On or about the same date, our subsidiary
company, Grid Mobile Sdn. Bhd. ("Grid Mobile") entered into a Master Distribution Agreement with NICM whereby
NIMC would appoint Grid Mobile to be its preferred distributor of its mobile products and services in Malaysia for two
years. Under this Master Distribution Agreement, Grid Mobile has a refundable deposits of RM3,000,000 or about $738,000
to NIMC and Grid Mobile would not procure, engage or appoint any other company that offers the same services as NIMC.
To date the project has not started and it is expected that the deposits shall be returned later on during the year.
On
June 15, 2017 the Company acquired 51% equity interest in GNS Technology (M) Sdn. Bhd. ("GNS Malaysia") by
the issuance of 166,666,667 new shares in the Company. GNS is engaged in the provision of network design, construction
and maintenance services for fibre optics backbone and Fiber-to-the-Home (FTTH") broadband services. Pursuant to
the acquisition agreement, the Vendors are entitled to an additional consideration of US$1,500,000 provided that GNS Malaysia
accumulated audited profits record at least US$3,000,000 for the 5 year period from December 31, 2017 to December 31,
2022. The additional consideration shall be paid by the issuance of new shares in the Company at a price equal to the
higher of (i) US$0.006 per share and (ii) the 20 days average closing share price immediately prior to the parties agreeing
on the accumulated audited profits stated above.
At
the date of this report, the Group will mainly concentrate on its Telecommunications and Mobile Business Unit and the network
design and construction business. The Group will terminate and streamline its advertising business unit and product services unit
until a viable business opportunity is available. During year ended. The revenue generated from the telecom services and the newly
acquired network design, construction and maintenance service for broadband services during the year ended December 31, 2017 was
$6,120 and $381,517, respectively.
|
F-8
MEDIAN
GROUP INC
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
NOTE
2
|
UNCERTAINTY
OF ABILITY TO CONTINUE AS A GOING CONCERN
|
The
Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to
a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
As of December 31, 2017, the Company has an accumulated deficits totaling $6,742,570 and its current liabilities exceed its
current assets by $668,199. In view of the matters described above, recoverability of a major portion of the recorded asset
amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent
upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The consolidated
financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts
or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
|
Management
has taken steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company
with the ability to continue as a going concern. The Company is actively pursuing additional funding and potential merger
or acquisition candidates and strategic partners, which would enhance stockholders' investment. Management believes that the
above actions will allow the Company to continue operations through the next fiscal year.
|
NOTE
3
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Median
Group Inc. ("MGI" or the "Registrant"), a public traded and holding company was incorporated under the
laws of the State of Texas in October 2002.
|
All
references that refer to (the "Company" or "MGI" or "we" or "us" or "our")
are to MGI, and its wholly or majority owned subsidiaries unless otherwise differentiated. The Company was engaged
in the business of provision of telecom services and consultancy services.
|
These
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States ("US GAAP"), and are expressed in U.S. dollars. The Company's fiscal year end is December
31.
|
Principles
of Consolidation
|
The
consolidated financial statements for the year ended December 31, 2017 include the financial
statements of the Company and its wholly owned subsidiary Alpha Sunray Sdn. Bhd. and
and Median Digital Sdn.Bhd. (formerly Grid Mobile Sdn. Bhd.) and its newly acquired 51%
interests subsidiary in GNS Technology (M) Sdn. Bhd. from the date of acquisition of
June 15, 2017.
|
The
results of subsidiaries acquired or sold during the year are consolidated from their effective dates of acquisition or through
their effective dates of disposition, respectively.
|
All
significant inter-company transactions and balances have been eliminated on consolidation.
|
Business
Combination
The
Company accounts for business combinations using the acquisition method when control is transferred to the Company. The consideration
transferred by the Company to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values
of assets transferred, liabilities incurred and the equity interests issued by the Company, which includes the fair value
of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred,
except if related to the issue of debt or equity securities.
|
The
Company recognizes identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have
been previously recognized in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities
assumed are generally measured at their acquisition-date fair values.
Goodwill
is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of: (a) fair
value of consideration transferred, (b) the recognized amount of any non-controlling interest in the acquire, and (c) acquisition-date
fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets.
F-9
MEDIAN
GROUP INC
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
NOTE
3
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
The
preparation of consolidated financial statements in conformity with generally accepted accounting principles 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
years presented. Actual results could differ from those estimates.
|
Basic
earnings per share were computed by dividing net loss or net profit by the weighted average number of shares of common stock
outstanding during the year. Diluted loss and profit per common share for the years ended December 31, 2017 and 2016, respectively
are not presented as it would be anti-dilutive.
|
Fair
Value Measurements and Disclosures
|
ASC
820 "
Fair Value Measurements and Disclosures
" applies to all entities, transactions, and instruments that
require or permit fair value measurements, with specific exceptions and qualifications. The Company is required to disclose
estimated fair values of financial instruments. Unless otherwise indicated, the fair values of all reported assets and liabilities,
which represent financial instruments, none of which are held for trading purposes, approximate are carrying values of such
amounts.
|
Cash
and Cash Equivalents
|
Cash
and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial
institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of
such investments.
|
Trade
receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers
in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past
due accounts. An allowance for doubtful accounts is established and determined based on managements' assessment of known
requirements, aging of receivables, payment history, the customer's current credit worthiness and the economic environment.
The Company recorded no allowance for doubtful accounts for the years presented.
|
Property
and equipment is stated at costs. Depreciation are computed using the straight-line method over the estimated economic
useful lives as follows:
|
|
Office
equipment and computers
|
5 years
|
|
|
Motor
vehicle
|
5 years
|
|
Expenditure
for maintenance and repairs is expensed as incurred. The gain or loss on the disposal of plant and equipment is the difference.
|
Intangible
Assets
The
Company evaluates intangible assets for impairment, at least on an annual basis and whenever events or changes in circumstances
indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets,
other long-lived assets and, goodwill is measured by comparing their net book value to the related projected undiscounted cash
flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market
trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset
is considered impaired, and a second test is performed to measure the amount of impairment loss
Impairment
of long-lived assets
|
In
accordance with the provisions of ASC Topic 360, "
Impairment or Disposal of Long-Lived Assets
", all long-lived
assets such as plant and equipment held and used by the Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and
used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge
for the year/period presented.
|
Income
Taxes
|
|
The
Company accounts for income taxes under ASC 740 "Income Taxes". Under the asset and liability method of ASC
740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. 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. Under ASC 740, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance
is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets
through future operations.
ASC
740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial
statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially
be recognized in the financial statements when it is more likely than not the position will be sustained upon examination
by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit
that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full
knowledge of the position and relevant facts.
|
(a)
|
Current
Tax
|
|
Current
tax assets and liabilities are measured at the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted by the reporting date.
Current
taxes are recognized in the statement of income except to the extent that the tax relates to items recognized outside
the statement of income, either in other income or directly in equity.
|
(b)
|
Deferred
Tax
|
|
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 basis 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. The Company records a valuation allowance for deferred tax assets if, based upon the available evidence,
it is more likely than not that some or all of the deferred tax assets will not be realized.
|
F-10
MEDIAN
GROUP INC
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
NOTE
3
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)
|
ASC
718 "Compensation - Stock Compensation" prescribes accounting and reporting standards for all stock-based
payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation
rights. , may be classified as either equity or liabilities. The Company should determine if a present obligation to settle
the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets
exists if: (
a
) the option to settle by issuing equity instruments lacks commercial substance or (
b
) the present
obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the
transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.
|
The
Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of
ASC 505-50 "Equity - Based Payments to Non-Employees". Measurement of share-based payment transactions with
non-employees shall be based on the fair value of whichever is more reliably measurable: (
a
) the goods or services
received; or (
b
) the equity instruments issued. The fair value of the share-based payment transaction should be determined
at the earlier of performance commitment date or performance completion date.
|
Employees'
Pension Obligations
|
Contributions
to retirement schemes (which are defined contribution plans) are charged to general and
administrative expenses in the statements of operation and comprehensive income as and
when the related employee service is provided.
The
Company is required to make contribution under a defined contribution pension scheme for all of its eligible employees
in Malaysia. The Company is required to contribute a specified percentage of the participants' relevant income based
on their ages and wages level.
|
The
Company recognizes its revenue in accordance with the Securities and Exchange Commissions ("SEC") Staff Accounting
Bulletin No. 104, "Revenue Recognition in Financial Statements" ("SAB 104"). Revenue is recognized when
persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability
is reasonably assured. The recognition of revenues involves certain management judgments. The amount and timing of our revenues
could be materially different for any period if management made different judgments or utilized different estimates.
|
Revenue
is measured at the fair value of the consideration received or receivable, net of discounts and taxes applicable to the revenue.
|
Prepaid
telecom revenues are collected by its distributors and/or resellers through the sale of our branded prepaid or reload cards,
which are sold in a form of SIM/reload cards to its final customers through its distributors and/or resellers. The sale of
SIM, prepaid or reload cards is recognized as revenue when the products are delivered to its distributors and/or resellers,
based upon their request. Prepaid cards will expire two years after the date of card production if they have never been activated.
The proceeds from the expired cards are recognized as revenue upon expiration of cards.
|
Network
design services income is recognized as revenue when the services has been substantially provided..
|
Cost
of revenue consists primarily of cost of SIM and prepaid/reload cards, telecommunication services and traffic charges which
are directly attributable to the delivery of telecom service upon the activation of prepaid and/or reload cards.
|
F-11
MEDIAN GROUP INC
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
NOTE
3
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)
|
Foreign
Currency Translation
|
The
accounts of the Company's Malaysia subsidiaries are maintained, in the local currencies of their respective countries namely
Malaysia Ringgit (MYR). Such financial statements are translated into U.S. Dollars (USD) in accordance with ASC 830 "Foreign
Currency Translation" with the respective currency as the functional currency. According to the Statement, all assets
and liabilities were translated at the exchange rate on the balance sheet date, stockholder's equity are translated at the
historical rates and statement of operations items are translated at the weighted average exchange rate for the year. The
resulting translation adjustments are reported under other comprehensive income in accordance with ASC 220 "Comprehensive
Income". As of December 31, 2017 and 2016, the accumulated comprehensive loss was $189,230 and $120,817, respectively.
|
Translation
of amounts from its reporting currencies into US$ has been made at the following exchange rates for the respective year:
|
|
2017
|
|
|
2016
|
|
Year-end
MYR$:US$1 exchange rate
|
|
|
4.0465
|
|
|
|
4.4860
|
|
Annual
average MYR$:US$1 exchange rate
|
|
|
4.2806
|
|
|
|
4.18211
|
|
ASC
Topic 220, "
Comprehensive Income
" establishes standards for reporting and display of comprehensive income,
its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from
non-owner sources. Accumulated comprehensive income, as presented in the accompanying statements of stockholders' equity
consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included
in the computation of income tax expense or benefit.
|
ASC
Topic 280, "
Segment Reporting
" establishes standards for reporting information about operating segments
on a basis consistent with the Company's internal organization structure as well as information about geographical areas,
business segments and major customers in financial statements. The Company operates in one reportable operating segment in
Malaysia during the years ended December 31, 2017 and 2016.
|
Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making financial and operating decisions.
Companies are also considered to be related if they are subject to common control or common significant influence.
|
Recent
Accounting Pronouncements
|
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future
adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of
its operations.
|
In
May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")
No. 2014-09,
Revenue from Contracts with Customers
. The standard provides companies with a single model for accounting
for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific
revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the
customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance.
The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements
in the year of adoption, through a cumulative adjustment. In August 2015, the FASB issued ASU 2015-14,
Deferral of the
Effective Date
, which defers the required adoption date of ASU 2014-09 by one year. As a result of the deferred effective
date, ASU 2014-09 will be effective for the Company in its first quarter of fiscal 2018. Early adoption is permitted but not before
the original effective date of the new standard of the first quarter of fiscal 2017. The following ASUs were subsequently issued
by the FASB to clarify the implementation guidance in some areas and add practical expedients: In March 2016, ASU 2016-08,
Revenue from Contracts with Customers: Principal versus Agent Considerations;
in April 2016, ASU 2016-10,
Revenue
from Contracts with Customers: Identifying Performance Obligations and Licensing;
in May 2016, ASU 2016-12,
Revenue
from Contracts with Customers: Narrow Scope Improvements and Practical Expedients;
and in December 2016, ASU 2016-20,
Technical Corrections and Improvements to Revenue from Contracts with Customers
. The Company's is currently finalizing
its evaluation of standard product sales arrangements and has identified an adoption impact related to revenue from certain distributor
agreements which was deferred until the period in which the distributor sells through the inventory to the end customer. In connection
with the adoption of ASU 2014-09, the Company will change the recognition of sales to these distributors whereby revenue will
be estimated and recognized in the period in which the Company transfers control of the product to the distributor; the adoption
impact is not expected to be material. Other than this impact, the Company has not identified any expected impact on the timing
and measurement of revenue for standard product sales arrangements from the adoption of the standard and the Company is currently
formalizing its final conclusions. The Company is also formalizing its evaluation of the impact of adoption on non-product sales
arrangements, which represent less than five percent of revenue.
F-12
MEDIAN
GROUP INC
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
NOTE
3
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)
|
Recent
Pronouncements (Continued)
|
In
February 2016, the FASB issued ASU No. 2016-02,
Leases
. The standard requires that a lessee recognize the assets
and liabilities that arise from operating leases. A lessee should recognize in its balance sheet 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. 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. In transition, lessees and lessors are required to recognize and measure leases
at the beginning of the earliest period presented using a modified retrospective approach. The guidance in ASU 2016-02 is effective
for annual and interim reporting periods beginning after December 15, 2018.
In
March 2016, the FASB issued ASU No. 2016-09,
Improvements to Employee Share-Based Payment Accounting,
which
changes the accounting for employee share-based payments, including the accounting for income taxes, forfeitures,
and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the new guidance,
excess tax benefits associated with share-based payment awards will be recognized in the income statement when the awards
vest or settle, rather than in stockholders' equity. In addition, it will increase the number of shares an employer
can withhold to cover income taxes on share-based payment awards and still qualify for the exemption to liability classification.
The guidance was effective for the Company in the first quarter of 2017.
In
November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows - Restricted Cash
, which requires
entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in
the statement of cash flows. The guidance will be effective for the Company in its first quarter of fiscal 2018. Early
adoption is permitted, including adoption in an interim period, but any adjustments must be reflected as of the beginning
of the fiscal year that includes that interim period. The new standard must be adopted retrospectively.
In
January 2017, the FASB issued ASU No. 2017-04,
Intangibles - Goodwill and Other,
which eliminates
step two of the quantitative goodwill impairment test. Step two required determination of the implied fair value of a
reporting unit, and then a comparison of this implied fair value with the carrying amount of goodwill for the reporting
unit, in order to determine any goodwill impairment. Under the new guidance, an entity is only required to complete
a one-step quantitative test, by comparing the fair value of a reporting unit with its carrying amount, and any goodwill
impairment charge is determined by the amount by which the carrying amount exceeds the reporting unit's fair value.
However, the loss should not exceed the total amount of goodwill allocated to the reporting unit. The standard is effective
for the Company in the first quarter of 2020, with early adoption permitted as of January 1, 2017, and is to be applied
on a prospective basis.
In
March 2017, the FASB issued ASU No. 2017-07,
Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost
, which changes how employers that sponsor defined benefit pension or other postretirement
benefit plans present the net periodic benefit cost in the statement of operations. The new guidance requires entities
to report the service cost component in the same line item or items as other compensation costs. The other components
of net benefit cost are required to be presented in the statement of operations separately from the service cost component
and outside the subtotal of loss from operations. ASU 2017-07 also provides that only the service cost component
is eligible for capitalization. The standard is effective for the Company in the first quarter of 2018, with adoption
to be applied on a retrospective basis.
In
May 2017, the FASB issued ASU No. 2017-09,
Compensation-Stock Compensation: Scope of Modification
Accounting
, which provides clarification on when modification accounting should be used for changes to the terms
or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies
that modification accounting guidance should only be applied if there is a change to the value, vesting conditions or
award classification and would not be required if the changes are considered non-substantive. The amendments of this ASU
are effective for the Company in the first quarter of 2018, with early adoption permitted.
In
August 2017, the FASB issued ASU No. 2017-12,
Derivatives and Hedging - Targeted Improvements to Accounting for
Hedging Activities
, which modifies the presentation and disclosure of hedging results. Further, it provides partial
relief on the timing of certain aspects of hedge documentation and eliminates the requirement to recognize hedge ineffectiveness
separately in income. The amendments in this ASU are effective for the Company in the first quarter of 2019.
In
November 2017, the FASB has issued ASU No. 2017-14,
Income Statement—Reporting Comprehensive Income
(Topic
220),
Revenue Recognition
(Topic 605), and
Revenue from Contracts with Customers
(Topic 606). ASU 2017-14
includes amendments to certain SEC paragraphs within the FASB Accounting Standards Codification (Codification). ASU 2017-14
amends the Codification to incorporate the following previously issued guidance from the SEC. ‘The amendments in
ASU No. 2017-14 amends the Codification to incorporate SEC Staff Accounting Bulletin (SAB) No. 116 and SEC Interpretive
Release on Vaccines for Federal Government Stockpiles (SEC Release No. 33-10403) that bring existing SEC staff guidance
into conformity with the FASB's adoption of and amendments to ASC Topic 606, Revenue from Contracts with Customers.
In
September 2017, the FASB has issued ASU No. 2017-13,
Revenue Recognition
(Topic 605),
Revenue from Contracts
with Customers
(Topic 606),
Leases
(Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant
to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer
Comments." The amendments in ASU No. 2017-13 amends the early adoption date option for certain companies related
to the adoption of ASU No. 2014-09 and ASU No. 2016-02. Both of the below entities may still adopt using the public company
adoption guidance in the related ASUs, as amended. The effective date is the same as the effective date and transition
requirements for the amendments for ASU 2014-09 and ASU 2016-02.
Other
accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption
until a future date are not expected to have a material impact on the Company's consolidated financial statements upon adoption.
|
F-13
MEDIAN GROUP INC
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
NOTE
4
|
BUSINESS
COMBINATION
|
|
|
US$
|
Total
Costs to Allocate
|
|
|
Purchase
Price
|
|
633,333
|
|
|
|
Fixed
Allocation of Fair Value to GNS Technology Sdn Bhd
|
|
|
|
Assets
|
|
|
Cash
|
|
87,099
|
Due
from related parties
|
|
183,163
|
Current
Assets
|
|
205,773
|
Fixed
assets
|
|
45,393
|
Total
Assets
|
|
521,429
|
|
|
|
Liabilities
|
|
|
Provisions
and trade creditors
|
|
(2,129)
|
Due
to related parties
|
|
(338,856)
|
Total
Liabilities
|
|
(340,985)
|
|
|
|
Net
assets acquired
|
|
180,444
|
|
|
|
Less:
Minority interests acquired
|
|
(88,417)
|
Goodwill
|
|
541,307
|
|
|
|
Purchase
price
|
|
633,333
|
On
June 15, 2017, the Company issued 166,666,667 shares at the then market price of $0.0038 per share for a total share consideration
of $633,333 to satisfy the consideration for acquiring 51% equity interest in GNS Technology (M) Sdn. Bhd.
NOTE
5
|
PROPERTY
AND EQUIPMENT, NET
|
Property
and equipment is summarized as following:
|
|
|
December
31
2017
|
|
December
31
2016
|
|
|
US$
|
|
US$
|
Cost
|
|
|
|
|
Furniture,
fixtures and equipment
|
|
23,387
|
|
-
|
Motor
vehicle
|
|
25,375
|
|
-
|
|
|
48,762
|
|
-
|
Less:
|
|
|
|
|
Accumulated
depreciation
|
|
(7,987)
|
|
-
|
Effect
of foreign exchange
|
|
189
|
|
-
|
Balance
at end of year
|
|
40,964
|
|
-
|
|
|
|
|
|
NOTE
6
|
STOCKHOLDERS'
EQUITY
|
On
October 17, 2016, the Company issued 120,000,000 shares of the Company to 3 independent
parties at a price of $0.011 per share to raise a total cash proceed of approximately
$1,320,000. The proceeds for this placement shall be used for working capital of the
Company.
On
June 15, 2017, the Company issued 166,666,667 shares at the then market price of $0.0038 per share for a total share consideration
of $633,333 to satisfy the consideration for acquiring 51% equity interest in GNS Technology (M) Sdn. Bhd.
As
at December 31, 2017 and 2016, the Company had a total of 11,593,899,627 shares and 11,427,232,960 shares of its common
stock issued and outstanding, respectively.
|
The
Company adopts ASC 718 "Compensation - Stock Compensation" and requires companies to measure and recognize
the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value.
|
2007
Stock Incentive Plan
|
On
February 19, 2007, the Company adopted the 2007 Stock Incentive Plan allowing for the awarding of options to acquire shares
of common stock. This plan provides for the grant of incentive stock options to key employees, directors and consultants.
Options issued under this plan will expire over a maximum term of ten years from the date of grant.
|
On
March 8, 2007, the Company registered 38,400,000 shares underlying stock options under the 2007 Stock Incentive Plan with
the SEC pursuant to a registration statement on Form S-8.
|
During
the year 2007 to 2015, the Company had issued a total of 6,522,309 shares to its staff
and consultants for their service provided.
|
For
the years ended December 31, 2017 and 2016, the Company did not issue or grant any stock option under the 2007 Stock Incentive
Plan.
|
In
October 2017, the 2007 Stock Incentive Plan expired together with all the then shares available for issue. As of December
31, 2017 there was no share option plan in effect.
|
F-14
MEDIAN
GROUP INC
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
NOTE
8
|
OTHER
PAYABLES AND ACCRUALS
|
Other
payables and accruals consist of the following:
|
|
|
2017
|
|
2016
|
|
|
US$
|
|
US$
|
|
|
|
|
|
Potential
tax penalty liability
|
|
410,000
|
|
410,000
|
Other
payables and accruals
|
|
366,370
|
|
241,880
|
|
|
776,370
|
|
651,880
|
NOTE
9
|
AMOUNTS
DUE FROM/TO RELATED PARTIES
|
|
|
2017
|
|
2016
|
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Amounts
due from related parties:
|
|
|
|
|
|
-
Trade
|
|
826,469
|
|
-
|
|
-
Non-trade
|
|
193,291
|
|
2,229
|
|
|
|
1,019,760
|
|
2,229
|
|
|
|
|
|
|
|
Amounts
due to related parties:
|
|
|
|
|
|
-
Trade
|
|
-
|
|
-
|
|
-
Non-trade
|
|
1,014,223
|
|
806,812
|
|
|
|
1,014,223
|
|
806,812
|
|
|
|
|
|
|
The
trade receivable due from a related company which the two of our directors have interests,
is non-secured, non-interest bearing and repayable on demand. This trade receivable is
relates to the Master Distribution Agreement disclosed in 2016 accounts (Note 12(b))
where the Company is required to pay a refundable deposit and other costs for the use
of license to commence its telecom service. This trade receivable amount is expected
to be refunded later this year.
The
non-trade receivable amounts are due from related parties, which one of our subsidiary director has an interest. The non-trade
receivable amounts are unsecured, non-interest bearing and repayable on demand. The Company also has an option to offset
these amounts against certain amounts owed on amounts due to related parties.
The
amounts due to related parties are unsecured, non-interest bearing and repayable on demand. Imputed interest on these
amounts is considered insignificant.
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
|
US$
|
|
US$
|
|
|
|
|
|
Shareholder
loan
|
|
2,000,000
|
|
2,000,000
|
|
|
|
|
|
This
long term shareholder loan is unsecured and repayable on November 25, 2019, and bears interest of 8% per annum. The accrued
interest as at December 31, 2017 and 2016 were $160,000 and $160,000, respectively, and were reclassified as amounts due to
related parties.
|
F-15
MEDIAN
GROUP INC
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
NOTE
11
|
RELATED
COMPANY TRANSACTIONS
|
For
the year ended December 31, 2017, the Company paid US$47,083 (2016: $22,077) to its directors
and its officers remuneration for their services provided to the Company.
During
the year a Group subsidiary provided consulting services amount to US$53,355 to a company owned and controlled by our
directors.
In
early December 2016, the Company entered into a Master Distribution Agreement with a company beneficially owned by two
of our directors. Pursuant to the agreement, the Company would pay a refundable deposit of RM3 million or about US$677,000
to be the preferred distributor of telecom products and services (including access to the MVNO platform) in the territory
of Malaysia for a period of two years. The Company may receive certain rebates if it achieves sales of over RM10 million
(about US$2,257,000) for each anniversary year, and such rebates shall vary by products and services to be agreed by the
parties.
During
the year, on December 2, 2016, the Company sold all its interests representing 51% in Naim Indah Mobile Communications
Sdn. Bhd. to a company controlled by our directors for a fair market value of RM1,000,001 or about $224,574 and realized
a gain of $194,947. The transaction was made at arm's length.
|
Contributions
to retirement schemes (which are defined contribution plans) are charged to general and administrative expenses in the statements
of operation and comprehensive income as and when the related employee service is provided.
The
Company is required to make contribution under a defined contribution pension scheme for all of its eligible employees in Malaysia.
The Company is required to contribute a specified percentage of the participants' relevant income based on their ages and wages
level. The total contributions made were $2,119 and $0 for the years ended December 31, 2017 and 2016, respectively
No
provision was made for income tax for the year ended December 31, 2016, since the Company
and its subsidiaries had significant net operating loss for taxation purposes.
For
the years ended December 31, 2017 and 2016, the Company and its subsidiaries incurred net operating results for tax purposes
of approximately loss of $206,000 and a loss of $402,041, respectively. Total net operating losses carry forward as at
December 31, 2017 and 2016, (i) for Federal and State purpose were $12,320,959 and $12,114,959, respectively and (ii)
for its entities outside of the United States had $72,649 and $51,035 respectively. The net operating loss carry-forwards
may be used to reduce taxable income through the year 2037. The availability of the Company's net operating loss carry-forwards
are subject to limitation if there is a 50% or more change in the ownership of the Company's stock.
|
On
December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the "Act") resulting in significant modifications
to existing law. The Company has completed the accounting for the effects of the Act during the quarter ended December 31, 2017.
The Company's financial statements for the year ended December 31, 2017 reflect certain effects of the Act which includes
a reduction in the corporate tax rate from 34% to 21% as well as other changes.
There
was no significant difference between reportable income tax and statutory income tax. The gross deferred tax asset balance
as at December 31, 2017 and 2016 was approximately $5,061,611 and $5,170,610, respectively. A full valuation allowance has
been established against the deferred tax assets, as the utilization of the loss carry-forwards cannot reasonably be assured.
|
The
Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company
has not concluded all U.S. federal income tax matters for the years through fiscal 2017, with remaining fiscal years subject
to income tax examination by federal tax authorities.
|
The
Company's policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income tax
provision. The Company has not accrued or paid interest or penalties which were material to its results of operations for
the years ended December 31, 2017 and 2016.
The Company has adopted ASC 740-10 "
Accounting
for Income Taxes
" and recorded a liability for an uncertain income tax position, tax penalties and any imputed interest
thereon. The amount, recorded as an obligation, is $410,000 at December 31, 2017 (2016: $410,000).
|
A
reconciliation between the income tax computed at the Malaysia statutory rate and the Company's provision for income
tax is as follows:
|
|
|
2017
|
|
2016
|
|
|
|
|
|
Malaysia
statutory rate
|
|
24%
|
|
24%
|
Tax
allowance
|
|
-
|
|
-
|
Valuation
allowance - Loss carryforward under Malaysia rate
|
|
(24%)
|
|
(24%)
|
|
|
|
|
|
Provision
for income tax
|
|
-
|
|
-
|
As
of December 31, 2017 and 2016, there were no material deferred tax assets or liabilities to be recognized.
|
F-16
MEDIAN
GROUP INC
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
NOTE
14
|
CONCENTRATIONS
OF RISK
|
The
Company is exposed to the following concentrations of risk:
|
For
the years ended December 31, 2017 and 2016 the customer who accounted for 10% or more of the Company's revenues is presented
as follows:
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
2016
|
|
Revenue
|
|
Percentage
of Revenue
|
|
Trade
Receivable
|
|
Revenue
|
|
Percentage
of Revenue
|
|
Trade
Receivable
|
|
US$
|
|
|
|
US$
|
|
US$
|
|
|
|
US$
|
Customer
A
|
-
|
|
-
|
|
-
|
|
40,725
|
|
93.63%
|
|
-
|
Customer
B
|
328,935
|
|
86.22%
|
|
-
|
|
-
|
|
-
|
|
-
|
Customer
C
|
52,582
|
|
13.78%
|
|
29,103
|
|
-
|
|
-
|
|
-
|
Total:
|
381,517
|
|
100%
|
|
29,103
|
|
40,725
|
|
93.63%
|
|
-
|
During
the year, the Company was a provider of consulting services. In the opinion of the Board, it is therefore of no
value to disclose details of the Company's vendors.
|
Financial
instruments that are potentially subject to credit risk consist principally of trade receivables. The Company believes the
concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process
and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates
the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical
trends and other information.
|
The
reporting currency of the Company is US$, to date the majority of the revenues and costs are denominated in MYR. As a result,
the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations
in the exchange rate between US$ and MYR. If MYR depreciates against US$, the value of MYR revenues and assets as expressed
in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose
to substantial market risk.
|
(e)
|
Economic
and political risks
|
Substantially
all of the Company's services are conducted in Malaysia. The Company's operations are subject to various political,
economic, and other risks and uncertainties inherent in Malaysia. Among other risks, the Company's operations are subject
to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs
and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations
in Malaysia.
|
As
the Company has no significant interest-bearing assets, the Company's income and operating cash flows are substantially
independent of changes in market interest rates.
|
The
Company's interest-rate risk arises from shareholder loans. The Company manages interest rate risk by varying the issuance
and maturity dates variable rate debt, limiting the amount of variable rate debt, and continually monitoring the effects of
market changes in interest rates. As of December 31, 2017 and 2016, shareholder loan was at fixed interest rate.
|
F-17
MEDIAN
GROUP INC
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
NOTE
15
|
COMMITMENTS
AND CONTINGENCIES
|
The
Company's commitments and contingencies are set out below as follows:-
|
|
(a)
|
The
Company has operating lease of its corporate office in Malaysia for 3 years ending April
1, 2019. The annual lease is RM406,998 (approximately US$90,720).
|
As
of December 31, 2017, the Company has the aggregate future minimum rental payments due under various non-cancelable operating
leases in the next two years:
|
|
2017
|
|
2016
|
|
|
US$
|
|
US$
|
|
|
|
|
|
Year
ending December 31,
|
|
|
|
|
2017
|
|
-
|
|
90,726
|
2018
|
|
124,267
|
|
90,726
|
2019
|
|
36,989
|
|
22,682
|
|
|
161,256
|
|
204,134
|
|
(b)
|
As
at December 31, 2017, the Company has paid RM3,000,000 (approximately US$668,702) refundable
deposit under the Master Distribution Agreement.
|
NOTE
16
|
SUBSEQUENT
EVENTS
|
The
Company has evaluated all subsequent events through the date these consolidated financial statements were issued, and determined
that, other than as disclosed below, there were no subsequent events or transactions that require recognition or disclosures
in the financial statements.
|
F-18