FINGERMOTION, INC. The following management's discussion and analysis of the Company's financial condition and results of operations contain forward-looking statements that involve risks, uncertainties and assumptions including, among others, statements regarding our capital needs, business plans and expectations. In evaluating these statements, you should consider various factors, including the risks, uncertainties and assumptions set forth in reports and other documents we have filed with or furnished to theSEC and, including, without limitation, this Annual Report on Form 10-K filing for the fiscal year endedFebruary 28, 2021 , including the consolidated financial statements and related notes contained herein. These factors, or any one of them, may cause our actual results or actions in the future to differ materially from any forward-looking statement made in this document. Refer to "Cautionary Note Regarding Forward-looking Statements" and Item 1A. Risk Factors. Introduction The following discussion summarizes the results of operations for each of our fiscal years endedFebruary 28, 2021 andFebruary 29, 2020 and our financial condition as atFebruary 28, 2021 andFebruary 29, 2020 , with a particular emphasis on fiscal 2021, our most recently completed fiscal year. Overview The Company operates the following lines of business: (i) telecommunications products and services; (ii) SMS and MMS service; (iii) a rich communication services (RCS) platform; (iv) big data insights; and (v) a video game division (inactive).
Telecommunications Products and Services
The Company's current product mix consisting of payment and recharge services,
data plans, subscription plans, mobile phones, and loyalty points redemption.
Chinese mobile phone consumers often utilize third-party e-marketing websites to
pay their phone bills. If the consumer connected directly to the
telecommunications provider to pay his or her bill, the consumer would miss out
on any benefits or marketing discounts that e-marketers provide. Thus, consumers
log on to these e-marketers' websites, click into their respective phone
provider's store, and "top up," or pay, their telecommunications provider for
additional mobile data and talk time.
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To connect to the respective mobile telecommunications providers, these
e-marketers must utilize a portal licensed by the applicable telecommunication
company that processes the payment. We have been granted one of these licenses
by China United Network Communications Group Co., Ltd. ("China Unicom ") and
China Mobile Communications Corporation ("China Mobile"), each of which is a
major telecommunications provider in China . We principally earn revenue by
providing mobile payment and recharge services to customers of China Unicomand China Mobile. We conduct our mobile payment business throughShanghai JiuGe Technology Co., Ltd. ("JiuGe Techology"), our contractually controlled affiliate through the entry into a series of agreements known as variable interest agreements (the "VIE Agreements") inOctober 2018 . In the first half of 2018, JiuGe Technology secured contracts with China Unicom and China Mobile to distribute mobile data for businesses and corporations in nine provinces/municipalities, namelyChengdu ,Jiangxi ,Jiangsu ,Chongqing ,Shanghai , Zhuhai,Zhejiang ,Shaanxi andInner Mongolia . InSeptember 2018 , JiuGe Technology launched and commercialized mobile payment and recharge services to businesses for China Unicom. The JiuGe Technology mobile payment and recharge platform enables the seamless delivery of real-time payment and recharge services to third-party channels and businesses. We earn a rebate from each telecommunications company on the funds paid by consumers to the telecommunications companies we process. To encourage consumers to utilize our portal instead of using our competitors' platforms or paying China Unicom or China Mobile directly, we offer mobile data and talk time at a rate discounted from these companies' stated rates, which are also the rates we must pay to them to purchase the mobile data and talk time provided to consumers through the use of our platform. Accordingly, we earn income on the rebates we receive from China Unicom and China Mobile, reduced by the amounts by which we discount the mobile data and talk time sold through our platform.FingerMotion started and commercialized its "Business to Business" ("B2B") model by integrating with various e-commerce platforms to provide its mobile payment and recharge services to subscribers or end consumers. In the first quarter of 2019FingerMotion expanded its business by commercializing its first "Business to Consumer" ("B2C") model, offering the telecommunication providers' products and services, including data plans, subscription plans, mobile phones, and loyalty points redemption, directly to subscribers or customers of the e-commerce companies, such asPinDuoDuo ("PDD") and TMall ("TMALL"). The Company is planning to further expand its universal exchange platform by setting up B2C stores on several other major e-commerce platforms inChina . In addition to that, we have been assigned as one ofChina's Mobile's loyalty redemption partner where we will be providing the services for their customers via our platform. Additionally, as previously disclosed, onJuly 7, 2019 , JiuGe Technology, our contractually controlled affiliate, entered into that certainYunnan Unicom Electronic Sales Platform Construction and Operation Cooperation Agreement (the "Cooperation Agreement") with China Unicom'sYunnan subsidiary. Under the Cooperation Agreement, JiuGe Technology is responsible for constructing and operating China Unicom's electronic sales platform through which consumers can purchase various goods and services from China Unicom, including mobile telephones, mobile telephone service, broadband data services, terminals, "smart" devices and related financial insurance. The Cooperation Agreement provides that JiuGe Technology is required to construct and operate the platform's webpage in accordance with China Unicom's specifications and policies, and applicable law, and bear all expenses in connection therewith. As consideration for the service it provides under the Cooperation Agreement, JiuGe Technology receives a percentage of the revenue received from all sales it processes for China Unicom on the platform. The Cooperation Agreement expires three years from the date of its signature, but it may be terminated by (i) JiuGe Technology upon three months' written notice or (ii) by China Unicom unilaterally. During the recent fiscal year, the Company expanded its offering under their telecommunication product and services by increasing their product line revenue streams. InMarch 2020 ,FingerMotion secure a contract with both China Mobile and China Unicom to acquire new users to take up the respective subscription plans. Recently, inFebruary 2021 , we increased the mobile phones sales to end users using all of our platforms. SMS and MMS Services OnMarch 7, 2019 , the Company through JiuGe Technology acquiredBeijing XunLian TianXia Technology Co., Ltd. ("Beijing Technology"), a company in the business of providing mass SMS text services to businesses looking to communicate with large numbers of their customers and prospective customers. With this acquisition,the Company expanded into a second partnership with the telecom companies by acquiring bulk Short Message Service ("SMS") and Multimedia Messaging Service ("MMS") bundles at reduced prices and offering bulk SMS services to end consumers with competitive pricing.FingerMotion's subsidiary, Beijing Technology, retains a license from theMinistry of Industry and Information Technology ("MIIT") to operate the SMS and MMS business in the PRC. Similar to the mobile payment and recharge business, Beijing Technology is required to make a deposit or bulk purchase in advance and has secured business customers, including premium car manufacturers, hotel chains, airlines and e-commerce companies, that utilize Beijing Technology's SMS integrated platform to send bulk SMS text messages monthly. Beijing Technology has the capability to manage and track the entire process, including guiding the Company's customer to meet MIIT's guidelines on messages composed, until the SMS messages have been delivered successfully. -27- Table of Contents Rich Communication Services
InMarch 2020 , the Company began development of an RCS platform, also known as MaaP (Messaging as a Platform). This RCS platform will be a proprietary business messaging platform that enables businesses and brands to communicate and service their customers on the 5G infrastructure, delivering a better and more efficient user experience at a lower cost. For example, with the new 5G RCS message service, consumers will have the ability to list available flights by sending a message regarding a holiday and will also be able to book and buy flights by sending messages. This will allow telecommunication providers like China Unicom and China Mobile to retain users on their systems, without having to utilize third party apps or log onto the internet, which will increase their user retention. We expect this to open up a new marketing channel for the Company's current and prospective business partners. Big Data Insights InJuly 2020 , the Company launched its proprietary technology platform "Sapientus" as its big data insights arm to deliver data-driven solutions and insights for businesses within the insurance, healthcare, and financial services industries. Utilizing the information gathered via the Company's licensed access to telecommunication data, Sapientus transforms raw telco data into basic building blocks, statistical measures, and behavioral inferences, while layering in auxiliary contextual information, to extract behavioral insights and power revolutionary applications for insurance and financial services. The Company's proprietary risk assessment engine offers standard and customized scoring and appraisal services based on multi-dimensional factors. The Company has the ability to provide potential customers and partners with various big data enabled applications including preferred risk selection, precision marketing, product customization, and claims management (e.g. fraud detection). The Company's mission is to deliver the next generation of data-driven solutions in the financial services, healthcare, and insurance industries that result in more accurate risk assessments, more efficient processes, and a more delightful user experience. Our Video Game Division The video game industry covers multiple sectors and is currently experiencing a move away from physical games towards digital software. Advances in technology and streaming now allow users to download games rather than visiting retailers. Video game publishers are expanding their direct-to-consumer channels with mobile gaming, the current growth leader, and eSports and virtual reality gaining momentum as the next big sectors. InJune 2018 , we temporarily paused its publishing and operating plans for existing games, and the Company's board of directors decided to re-focus the company's resources into new business opportunities inChina , particularly the mobile phone payment and data business. Recent Developments OnDecember 2, 2020 , our contractually controlled subsidiary,Shanghai JiuGe Information Technology Co., Ltd. , andChina Mobile Financial Technology Co., Ltd. , a subsidiary of China Mobile, signed a strategic cooperation agreement to explore and create a new forward-leaning business model that combines the traditional loyalty point redemption business with an e-commerce platform designed to create a higher evolution of brand loyalty. OnDecember 11, 2020 , our board of directors approved an increase in the number of directors on the board of directors of the Company from three members to four members and appointedNg Eng Ho as a director of the Company to fill such vacancy created by the increase in the number of members on the board of directors of the Company. On the same day,Martin Shen resigned as CFO of the Company and the board of directors appointedLee Yew Hon as the CFO of the Company. On or aroundJanuary 25, 2021 , the Company's wholly owned subsidiary,Finger Motion Financial Company Limited's , big data analytic arm branded "Sapientus," entered into a services agreement with Pacific Life Re, a global life reinsurer serving the insurance industry with a comprehensive suite of products and services. Recently, our contractually controlled subsidiary,Shanghai JiuGe Information Technology Co., Ltd. , successfully entered into a volume-based contract with China Mobile Fujian with respect to our SMS services. -28- Table of Contents Results of Operations
Year Ended
The following table sets forth our results of operations for the fiscal years
ended
Year Ended Year Ended
February 28, 2021 February 29, 2020
Revenue $ 16,683,570 $ 9,131,294
Cost of revenue $ (15,036,876 ) $ (8,165,535 )
Total operating expenses $ (5,871,877 ) $ (4,031,803 )
Total other income (expenses) $ (152,891 ) $ 65,950
Net Loss attributable to the Company's
shareholders $ (4,381,974 ) $ (3,004,365 )
Foreign currency translation adjustment $ 136,942 $ 12,916
Comprehensive loss attributable to the
Company $ (4,245,567 ) $ (2,991,480 )
Basic Loss Per Share attributable to the
Company (0.13 ) (0.12 )
Diluted Loss Per Share attributable to the
Company (0.13 ) (0.12 )
Revenues
The following table sets forth the Company's revenue from its three lines of business for the periods indicated:
Year Ended Year Ended
February 28, 2021 February 29, 2020 Change (%)
Telecommunication Products & Services
1,822,081 76 % SMS & MMS Business$ 13,439,390 $ 7,309,213 84 % Big Data $ 33,077 $ - 100 % Total Revenue$ 16,683,570 $ 9,131,294 83 %
We recorded$16,683,570 in revenue for the year endedFebruary 28, 2021 , an increase of$7,552,276 or 83%, compared to the year endedFebruary 29, 2020 . This increase resulted from an increase in revenue of$1,389,022 ,$6,130,177 and$33,077 from our Telecommunication Products & Services, SMS & MMS business and Big Data business, respectively. We principally earn revenue by providing mobile payment and recharge services to customers of telecommunications companies inChina . Specifically, we earn a negotiated rebate amount from the telecommunications companies for all monies paid by consumers to those companies that we process. As we continue to develop our mobile recharge business, we expect that revenues will continue to grow. Our SMS texting service grows substantially compare to last year when it was recently acquired. The growth will be expected to flourish further with the Company continuing putting prepayment to purchase large bulk of inventories to be resold to our increasing corporate clientele. We also earned revenue during the most recently completed fiscal year from our new venture on subscription plan acquisition and mobile phone sales. The Company expects and hopes that these product offering will continue to provide additional revenue for the Company in the future. During the last quarter of the fiscal year, our Big Data division secured a contract with Pacific Life Re, a global life reinsurance serving the insurance industry with comprehensive suite of products and services, to develop a holistic multi-faceted risk rating concept, leveraging the Company's proprietary approach to analytics by drawing data from novel sources and filtering them through advance algorithms with the ultimate goal to apply new insights generated from ourFingerMotion's predictive model to the traditional insurance industry. This division has since recorded revenue and we expect additional revenue from this division in the future. Cost of Revenue The following table sets forth the Company's cost of revenue for the periods indicated: Year Ended Year Ended February 28, 2021 February 29, 2020 Telecommunication Products & Services$ 2,412,177 $ 1,651,855 SMS & MMS Business$ 12,624,698 $ 6,513,680 Big Data $ - $ - Total Cost of Revenue$ 15,036,875 $ 8,165,535
We recorded$15,036,875 in costs of revenue for the year endedFebruary 28, 2021 , an increase of$6,871,340 or 84%, compared to the year endedFebruary 29, 2020 . As previously mentioned, we principally earn revenue by providing mobile payment and recharge services to customers of telecommunications companies, subscription plans and mobile phone sales inChina . To earn this revenue, we incur cost of the product, certain customer acquisition costs, including discounts to our customers and promotional expenses, which is reflected in
our
cost of revenue.
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Gross profit
Our gross profit for the year ended
Amortization & Depreciation We recorded depreciation of$27,055 for fixed assets for the year endedFebruary 28, 2021 , an increase of$20,137 or 291%, compared to the year endedFebruary 29, 2020 . This increase resulted in purchase of equipment and investment in platforms.
General and Administrative Expenses
The following table sets forth the Company's general and administrative expenses for the periods indicated:
Year Ended Year Ended
February 28, 2021 February 29, 2020
Accounting $ 147,614 $ 193,299
Consulting $ 1,673,925 $ 677,082
Entertainment $ 152,290 $ 238,343
IT $ 71,369 $ -
Rent $ 107,730 $ 111,042
Salaries & Wages $ 1,687,977 $ 957,624
Technical Fee $ 44,316 $ -
Travelling $ 101,027 $ 234,148
Others $ 260,632 $ 252,071
Total G&A Expenses $ 4,246,880 $ 2,663,609 We recorded$4,246,880 in general and administrative expenses for the year endedFebruary 28, 2021 , an increase of$1,583,271 or 59%, compared to the year endedFebruary 29, 2020 . The increased consulting and staff salaries are principally the result of the commencement and building of our three lines of businesses. Marketing Cost The following table sets forth the Company's marketing cost for the periods indicated: Year Ended Year Ended February 28, 2021 February 29, 2020 Marketing Cost $ 364,160 $ -
We recorded$364,160 in marketing cost for the year endedFebruary 28, 2021 for our telecommunication products and services business. Marketing costs represent the costs of promoting our product offerings through all our platforms. Research & Development The following table sets forth the Company's research & development for the periods indicated: Year Ended Year EndedFebruary 28, 2021 February 29, 2020
Research & Development - Big Data $ 552,343 $ 390,288
We recorded$552,343 in research & development for the year endedFebruary 28, 2021 , as compared to$390,288 for the year endedFebruary 29, 2020 . The increase of$162,055 or 42% was due to increase in headcount for the Research & Development team and higher data access and usage fee charged by telecommunications company. The Insurtech division ofFingerMotion focuses on consumer behavioral insights extraction for the purpose of risk assessment. Insights are derived from various data sources with the primary sources being the telecommunication data. The initial phase of business application is to focus on insurance industry particularly in the area of underwriting risk rating, complementary claims adjudication and assessment, and risk segmentation & market penetration.
This division comprises of experienced actuaries, data scientists and computer programmers.
The expenses for research & development include associated wages and salaries, data access fees and IT infrastructure.
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The 1st stage of prototyping on Phase 1 - analytical framework and business applications have been completed and target to commercialize by the end of calendar 2021
Share Compensation Expenses
The following table sets forth the Company's share compensation expenses for the
periods indicated:
Year Ended Year Ended
February 28, 2021 February 29, 2020
Share compensation expenses $ 640,394 $ 970,988
We incurred fees of
Operating Expenses We recorded$5,871,877 in operating expenses for the year endedFebruary 28, 2021 as compared to$4,031,803 in operating expenses for the year endedFebruary 29, 2020 . The increase of$1,840,074 or 46% for the year endedFebruary 28 ,
2021 is as set forth above.
Net Loss attributable to the Company's shareholders
The net loss attributable to the Company's shareholders was$4,381,974 for the year endedFebruary 28, 2021 and$3,004,365 for the year endedFebruary 29, 2020 . The increase in net loss attributable to the Company's shareholders of$1,377,609 or 46% resulted primarily from the increase in total operating expenses as discussed above.
Liquidity and Capital Resources
The following table sets out our cash and working capital as ofFebruary 28, 2021 andFebruary 29, 2020 : As at February 28, As at February 29, 2021 2020 Cash reserves $ 850,717 $ 102,919 Working capital (deficiency)$ 2,992,232 $ (322,445 ) AtFebruary 28, 2021 , we had cash and cash equivalents of$850,717 as compared to cash and cash equivalents of$102,919 atFebruary 29, 2020 . In order for us to continue to operate our mobile payment business, we must deposit funds with our telecommunication companies from time to time in order to obtain access to the mobile data and talk-time we make available to consumers on our portal. Accordingly, the amount of cash we have on hand fluctuates significantly from period to period. The Company otherwise does not have any planned capital expenditures and has historically funded its operations from revenues and sales of securities, including convertible debt securities. We believe that our cash on hand, cash equivalents and short-term investments, along with our revenues from operations, will fund our projected operating requirements, fund our current operations and repay our outstanding indebtedness, in each case, for at least the next 12 months. However, to grow our business substantially, we will need to increase the amount of funds we have deposited with the telecommunications companies for which we process mobile recharge payments. Accordingly, we expect to seek additional capital through public or private sales of our equity or debt securities, or both. We might also enter into financing arrangements with commercial banks or nontraditional lenders. We cannot provide investors with any assurance that we will be able to raise additional funding from the sale of our equity or debt securities, or both, in order to increase our deposits with our telecommunications company clients, or if available, that such funding will be on terms acceptable to us.
We currently do not have any financing arrangements in place. We did, however,
raise
Statement of Cashflows
The following table provides a summary of cash flows for the periods presented:
Year Ended Year Ended
February 28, 2021 February 29, 2020 Net cash used in operating activities$ (4,271,618 ) $ (2,559,140 ) Net cash used in investing activities $ (238,485 ) $ (17,237 ) Net cash provided by financing activities$ 5,174,600 $ 1,301,386 Effect of exchange rates on cash & cash equivalents $ 83,301 $ 40,665 Net increase (decrease) in cash and cash equivalents $ 747,798$ (1,234,326 ) -31- Table of Contents
Cash Flow used in Operating Activities
Net cash used in operating activities increased by$1,712,478 in the year endedFebruary 28, 2021 compared to the year endedFebruary 29, 2020 , primarily due to an increase in accounts receivable of$1,437,329 (2020:$2,168,175 ), increase in other receivable of$906,265 (2020:$575,146 ), increase in inventories of$1,401 (2020; $nil) and decrease in accounts payable of ($230,118 ) (2020:$1,464,474 ), offset by a decrease in prepayment and deposit of$1,975,673 (2020:$87,313 ), increase in accrual and other payables of$2,509 (2020:$747,674 ) and increase in lease liability of$3,191 (2020: $nil).
Cash Flow used in Investing Activities
During the year ended
Cash Flow provided by Financing Activities
During the year endedFebruary 28, 2021 , financing activities provided cash of$5,174,600 compared to$1,301,386 during the year endedFebruary 29, 2020 . The increase of$3,873,214 in the year endedFebruary 28, 2021 was primarily due to decrease in due to related parties, loan from non-controlling stockholder and proceeds from issuance of shares of our common stock.
Off-balance sheet arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Subsequent events
We have determined that we do not have any material subsequent events to report.
Outstanding share data
At
Critical Accounting Policies The consolidated financial statements have been prepared in accordance withU.S. generally accepted accounting principles ("U.S. GAAP"). The consolidated financial statements include the financial statements of the Company, and its wholly-owned subsidiaries. All intercompany accounts, transactions, and profits have been eliminated upon consolidation. -32- Table of Contents Variable interest entity Pursuant toFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Section 810, "Consolidation" ("ASC 810"), the Company is required to include in its consolidated financial statements, the financial statements of its variable interest entities ("VIEs"). ASC 810 requires a VIE to be consolidated if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE's residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity. Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE's economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The reporting entity's determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de - facto agents, have the unilateral ability to exercise those rights. JiuGe Technology's actual stockholders do not hold any kick-out rights that affect the consolidation determination. Through the VIE agreements, the Company is deemed the primary beneficiary of JiuGe Technology. Accordingly, the results of JiuGe Technology have been included in the accompanying consolidated financial statements. JiuGe Technology has no assets that are collateral for or restricted solely to settle their obligations. The creditors of JiuGe Technology do not have recourse to the Company's general credit.
Certain Risks and Uncertainties
The Company relies on cloud-based hosting through a global accredited hosting provider. Management believes that alternate sources are available; however, disruption or termination of this relationship could adversely affect our operating results in the near-term.
Identifiable Intangible Assets
Identifiable intangible assets are recorded at cost and are amortized over 3-10 years. Similar to tangible property and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Impairment of Long-Lived Assets
The Company classifies its long-lived assets into: (i) computer and office equipment; (ii) furniture and fixtures, (iii) leasehold improvements, and (iv) finite - lived intangible assets.
Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be fully recoverable. It is possible that these assets could become impaired as a result of technology, economy or other industry changes. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, relief from royalty income approach, quoted market values and third-party independent appraisals, as considered necessary. The Company makes various assumptions and estimates regarding estimated future cash flows and other factors in determining the fair values of the respective assets. The assumptions and estimates used to determine future values and remaining useful lives of long-lived assets are complex and subjective. They can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as the Company's business strategy and its forecasts for specific market expansion.
Accounts Receivable and Concentration of Risk
Accounts receivable, net is stated at the amount the Company expects to collect,
or the net realizable value. The Company provides a provision for allowances
that includes returns, allowances and doubtful accounts equal to the estimated
uncollectible amounts. The Company estimates its provision for allowances based
on historical collection experience and a review of the current status of trade
accounts receivable. It is reasonably possible that the Company's estimate of
the provision for allowances will change.
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Lease
Operating and finance lease right-of-use assets and lease liabilities are
recognized at the commencement date based on the present value of the future
lease payments over the lease term. When the rate implicit to the lease cannot
be readily determined, the Company utilizes its incremental borrowing rate in
determining the present value of the future lease payments. The incremental
borrowing rate is derived from information available at the lease commencement
date and represents the rate of interest that the Company would have to pay to
borrow on a collateralized basis over a similar term and amount equal to the
lease payments in a similar economic environment. The right-of-use asset
includes any lease payments made and lease incentives received prior to the
commencement date. Operating lease right-of-use assets also include any
cumulative prepaid or accrued rent when the lease payments are uneven throughout
the lease term. The right-of-use assets and lease liabilities may include
options to extend or terminate the lease when it is reasonably certain that the
Company will exercise that option.
Cash and Cash Equivalents
Cash and cash equivalents represent cash on hand, demand deposits, and other
short-term highly liquid investments placed with banks, which have original
maturities of three months or less and are readily convertible to known amounts
of cash.
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is provided using the straight-line method for financial reporting
purposes at rates based on the estimated useful lives of the assets. Estimated
useful lives range from three to seven years. Land is classified as held for
sale when management has the ability and intent to sell, in accordance withASC Topic 360-45. Earnings Per Share
Basic (loss) earnings per share is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per share.
FASB Accounting Standard Codification Topic 260 ("ASC 260"), "Earnings Per
Share," requires that employee equity share options, non-vested shares and
similar equity instruments granted to employees be treated as potential common
shares in computing diluted earnings per share. Diluted earnings per share
should be based on the actual number of options or shares granted and not yet
forfeited, unless doing so would be anti-dilutive. The Company uses the
"treasury stock" method for equity instruments granted in share-based payment
transactions provided in ASC 260 to determine diluted earnings per share.
Antidilutive securities represent potentially dilutive securities which are
excluded from the computation of diluted earnings or loss per share as their
impact was antidilutive.
Revenue Recognition
The Company adopted ASC 606, Revenue from Contracts with Customers ("ASC 606")
beginning on January 1, 2018 using the modified retrospective approach. ASC 606
establishes principles for reporting information about the nature, amount,
timing and uncertainty of revenue and cash flows arising from the entity's
contracts to provide goods or services to customers. The core principle requires
an entity to recognize revenue to depict the transfer of goods or services to
customers in an amount that reflects the consideration that it expects to be
entitled to receive in exchange for those goods or services recognized as
performance obligations are satisfied. The Company has assessed the impact of
the guidance by reviewing its existing customer contracts and current accounting
policies and practices to identify differences that will result from applying
the new requirements, including the evaluation of its performance obligations,
transaction price, customer payments, transfer of control and principal versus
agent considerations. Based on the assessment, the Company concluded that there
was no change to the timing and pattern of revenue recognition for its current
revenue streams in scope of ASC 606 and therefore there was no material changes
to the Company's consolidated financial statements upon adoption of ASC 606.
The Company recognizes revenue from providing hosting and integration services
and licensing the use of its technology platform to its customers. The Company
recognizes revenue when all of the following conditions are satisfied: (1) there
is persuasive evidence of an arrangement; (2) the service has been provided to
the customer (for licensing, revenue is recognized when the Company's technology
is used to provide hosting and integration services); (3) the amount of fees to
be paid by the customer is fixed or determinable; and (4) the collection of fees
is probable. We account for our multi-element arrangements, such as instances
where we design a custom website and separately offer other services such as
hosting, which are recognized over the period for when services are performed.
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Income Taxes
The Company uses the asset and liability method of accounting for income taxes
in accordance with Accounting Standards Codification ("ASC") 740, "Income Taxes"
("ASC 740"). Under this method, income tax expense is recognized as the amount
of: (i) taxes payable or refundable for the current year and (ii) future tax
consequences attributable to differences between financial statement 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 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 the results of
operations in the period that includes the enactment date. A valuation allowance
is provided to reduce the deferred tax assets reported if based on the weight of
available evidence it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
Non-controlling interest
Non-controlling interests held 1% shares of one of subsidiary is recorded as a
component of our equity, separate from the Company's equity. Purchase or sales
of equity interests that do not result in a change of control are accounted for
as equity transactions. Results of operations attributable to the
non-controlling interest are included in our consolidated results of operations
and, upon loss of control, the interest sold, as well as interest retained, if
any, will be reported at fair value with any gain or loss recognized in
earnings.
Recent Issued Accounting Pronouncements
The Company does not believe recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.
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