HANJIAO GROUP, INC. The following discussion and analysis of our Company's financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in the report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors. See "Cautionary Note Concerning Forward-Looking Statements" on page 2.
Impact of COVID-19 on our business
The outbreak of COVID-19 that started in lateJanuary 2020 in the PRC had negatively affected our business. InMarch 2020 , theWorld Health Organization declared COVID-19 as a pandemic and has resulted in quarantines, travel restrictions, and the temporary closure of stores and business facilities inChina and theU.S. in the subsequent months. Given the rapidly expanding nature of the COVID-19 pandemic, and because substantially all of the Company's business operations and its workforce are concentrated inChina , the Company's business, results of operations, and financial condition for the first half of 2020 have been adversely affected. Management believes that COVID-19 could have a material impact on its financial results for the year 2020 and could cause the potential impairment of certain assets. To mitigate the overall financial impact of COVID-19 on the Company's business, management has worked closely with its service centers to enhance their marketing and promotion activities during the third quarter of 2020 that were designed to generate sales in the third and
fourth quarters of 2020. OverviewHanjiao Group, Inc. , known formerly asAS Capital, Inc. ("ASIN") and its subsidiaries and variable interest entity (collectively, the "Company" or "we") is engaged in the business of selling healthcare and other related products to the middle-aged and elderly market segments in the PRC through its online to offline platform. We conduct business primarily through our variable interest entity ("VIE"),Beijing Luji Technology Co., Ltd. ("Beijing Luji") that was formed inBeijing, China onMarch 27, 2007 . Beijing Luji operates its "Fozgo" branded online to offline ("O2O") E-commerce marketplace. The O2O platform integrates our E-commerce platform with physical outlets to connect consumers and merchants in a dynamic marketplace. Our platform not only offers users the convenience of making online purchases, but also provides the possibility to purchase and receive products and services offline. Currently, our core product categories include sales of home appliances (such as water purifiers and air purifiers), health foods and cosmetics products. As ofSeptember 30, 2020 , Beijing Luji has 178 branch offices with outlets across the PRC with approximately 159,000 users. In 2018, it was granted with hi-tech enterprise status in the PRC. 32 History
We were incorporated onJune 15, 2006 under the laws of theState of Nevada asJupiter Resources, Inc. 75,000,000 shares of stock was authorized all as common stock with a par value$0.001 and no other classes of stock were authorized. OnMarch 25, 2009 , the articles were amended to authorize an addition of 10 million preferred shares making a total of 85,000,000 shares authorized (75M common, 10M preferred). OnApril 30, 2009 the Company filed an amendment to change the name of the corporation toRineon Group, Inc. OnMay 14, 2009 , the board of directors of the Company authorized a change in the fiscal year end of the Company fromMay 31 to December 31 .
From inception toNovember 1, 2018 , the date of the filing of the Company's Form 15, the Company attempted unsuccessfully to enter into business combinations with various target companies. There was no business activity between the filing of the Form 15 and prior toAugust 9, 2018 . The Company had Exchange Act disclosure requirements fromJanuary 11, 2008 toNovember 10, 2010 . The Company has no knowledge or records related to the assets referenced above and therefor there is some level of uncertainty in the above descriptions.Prior Company management was unresponsive to shareholders and had refused to respond to requests to meet statutory requirements to get current with the secretary of state and theSecurities and Exchange Commission's filing requirements. Accordingly, onAugust 9, 2018 ,XTC, Inc. was appointed to serve as the custodian of the Company in a shareholder filed action with theEighth Judicial District Court inClark County, Nevada and was instructed to revive the company.XTC, Inc. was a shareholder of record as shown in the court documents of 500 common shares attached as Exhibit 99.1 to this Quarterly Report. XTC acquired its 500 common shares onJune 14, 2018 in the open market at a price of$0.05 per share. OnSeptember 25, 2018 , the Company filed a Certificate of Designation whereby the following preferred shares were designated and the rights, privileges and designations of the Series A and C Convertible Preferred Stock were amended
and restated.
· The number of Series A Convertible Preferred was increased from 36,000
to 1,000,000.
· 3,000,000 shares of Series B Convertible Preferred Stock were created
with no voting rights, and conversion rights of 1000:1, with the
restriction that holders cannot convert to hold more the 4.95% of
issued and outstanding common stock.· 1,000,000 shares of Series C Convertible Preferred Stock were created
with each Series C having 100,000 votes per share, with 1:1 conversion
rights.
On September 25, 2018 , the Company issued 964,000 shares of Series A Convertible
Preferred shares to XRC, LLC at $0.001 per share and 1,000,000 shares of Series
C Convertible Preferred shares at $0.001 per share to XRC, LLC , a company
controlled by Chris Lotito , in exchange for paying the costs to revive the
Company with the State of Nevada , giving it voting control.
On September 28, 2018 , a shareholders meeting was held wherein the shareholders
gave the board authority to reorganize the Company, including making possible a
name change, and/or engaging in a reverse stock split. In addition, the Series A
shareholders voted to approve a reverse split of the Series A Convertible
Preferred and to authorize a new designation.
On October 1, 2018 , the Company made filings with the Nevada Secretary of State
to change our name to "AS Capital, Inc. " and approve a 1 for 10 reverse stock
split for the Common stock and a 1 for 1,000 reverse of the Series A Convertible
Preferred, with conversion rights of 1 common share for every 12,000 shares of
Series A Convertible Preferred Stock held. As a result, the number of issued and
outstanding Series A Convertible Preferred Stock was reduced to 1,000 shares.
On
33 Change in Control OnJune 4, 2019 , ASIN, aNevada corporation,XRC, LLC , aColorado limited liability company ("XRC") andGao Xue Ran ("Purchaser") entered into a Stock Purchase Agreement (the "SPA"), pursuant to which the Purchaser agreed to purchase from XRC 11,000,000 shares of common stock of the Company, par value$0.001 , and 964 shares of Series A Convertible Preferred Stock of the Company, par value$0.001 (collectively, the "Shares"), for aggregate consideration of$410,000 in accordance with the terms and conditions of the SPA. XRC was the controlling shareholder of the Company. The acquisition of the Shares was consummated onJuly 18, 2019 , and the Shares were ultimately purchased by the following three individuals using their own personal funds: Percentage of Issued and Name No. of Shares Outstanding Consideration Paid Gao Xue Ran 8,581,063 of Common Stock; 76.61% 319,840 964 shares of Series A Preferred Stock $ Zhang Yan Hua 1,935,633 of Common Stock 17.28% $ 72,146 Cheung Kwok Chiu Kris 483,304 of Common Stock 4.31% $ 18,014 Upon the consummation of the sale of the Shares,Chris Lotito , our Chief Executive Officer and sole director, andJohn Karatzaferis , our President, resigned from all of their positions with the Company, effectiveJuly 18, 2019 . Their resignations were not due to any dispute or disagreement with the Company on any matter relating to the Company's operations, policies or practices. Concurrently with such resignations,Gao Xue Ran was appointed to serve as the Chief Executive Officer, Chief Financial Officer, President, Secretary and sole Director of the Company.Ms. Gao served in her positions without compensation.
Acquisition of
OnAugust 6, 2020 ,ASIN and HanJiao International Holding Limited ("HanJiao") consummated a Share Exchange Agreement (the "Share Exchange Transaction"). In connection with the Share Exchange Transaction, ASIN issued 86,000,000 shares of its common stock to acquire all the equity shares ofHanJiao . Upon the completion of the Share Exchange Transaction, the shareholders ofHanJiao own approximately 88.5% of the common stock of ASIN. In connection with the Share Exchange Transaction, effectiveAugust 6, 2020 , the following individuals were appointed to serve in the capacities set forth next to their names until his or her successor(s) shall be duly elected or appointed, unless he or she resigns, is removed from office or is otherwise disqualified from serving as an executive officer or director of the Company:Name Positions Tian Xiangyang Chief Executive Officer, Director and Chairperson of the Board of Director Shan Yonghua Chief Financial Officer, and Director Tian Zhihai Chief Operating Officer and DirectorYin Jianen Secretary and DirectorWang Jirui Director Upon the consummation of the Share Exchange Transaction,Gao Xue Ran resigned from all of her positions with the Company, effectiveAugust 6, 2020 . Her resignation was not due to any dispute or disagreement with the Company on any matter relating to the Company's operations, policies or practices.
Effective
34 Results of Operations Our unaudited condensed consolidated financial statements have been prepared on a going concern basis, which assumes that we will be able to continue to operate in the future in the normal course of business. In our unaudited condensed consolidated financial statements for the three and nine months endedSeptember 30, 2020 , it has included a note about our ability to continue as a going concern due to consecutive quarterly losses from operations in 2020 as a result of COVID-19. Business closures in the PRC and limitations on business operations arising from COVID-19 has significantly disrupted Beijing Luji's ability to generate revenues and cash flow during the nine months of 2020.
Comparison for the Three Months Ended
The following table sets forth certain financial data for the three months ended
For the Three Months Ended September 30, Percentage
2020 2019 Change
Dollars % Dollars % %
Revenues $ 81.7 100.0 $ 8,031.8 100.0 (99.0 )
Cost of revenues (407.8 ) (499.1 ) (827.2 ) (10.3 ) (50.7 )
Gross (loss) profit (326.1 ) (399.1 ) 7,204.6 89.7 (104.5 )
General and
administrative
expenses 758.7 928.6 2,226.2 27.7 (65.9 )
Selling expenses 1,291.6 1,580.9 1,426.4 17.8 (9.5 )
Finance income, net (3.5 ) (4.3 ) (14.0 ) (0.2 ) (75.0 )
Total operating
expenses 2,046.8 2,505.3 3,638.6 45.3 (43.7 )
Operating (loss)
income (2,372.9 ) (2,904.4 ) 3,566.0 44.4 (166.5 )
Other expenses, net (712.6 ) (872.2 ) (671.6 ) (8.4 ) 6.1
Total other
expenses, net (712.6 ) (872.2 ) (671.6 ) (8.4 ) 6.1
(Loss) income before
provision for income
taxes (3,085.5 ) (3,776.6 ) 2,894.4 36.0 (206.6 )
Provision for income
taxes - - 361.6 4.5 (100.0 )
Net (loss) income $ (3,085.5 ) (3,776.6 ) $ 2,532.8 31.5 (221.8 )
Foreign currency
translation
adjustment 23.3 28.5 (454.8 ) (5.7 ) (105.1 )
Comprehensive (loss)
income $ (3,062.2 ) (3,748.1 ) $ 2,078 25.9 (247.4 )
35
Revenues: Revenues were approximately $82,000 and approximately $8.0 million for
the three months ended September 30, 2020 and 2019 respectively. The decrease in
revenues of approximately $8.0 million or 99.0% is due primarily to business
interruptions arising from COVID-19. During the three months ended September 30,
2020 and 2019, all revenues were generated in the PRC. During the period of
three months ended September 30, 2020 , revenues were mainly attributable to the
sales of home appliances, smart watches, health foods, and cosmetics products,
representing 36.8%, 19.1%, 12.0%, and 1.75% of revenues, respectively. During to
the same period of 2019, the revenues were mainly attributable to the sales of
health foods, home appliances and cosmetics products, representing 83.2%, 13.2%
and 0.27% of revenues, respectively. During the three months ended September30,
2020 and 2019, no customers accounted for 10% or more of total revenues.
Cost of revenues: Cost of revenues consists primarily of the cost of merchandise
sold, delivery cost, service fees, sales incentives and commissions that are
directly attributable to the sale of certain designated products. Cost of
revenues of approximately $408,000 for the three months ended September 30, 2020
consisted of provision for slow-moving inventory of approximately $263,000 . The
decrease in cost of revenues of approximately $419,000 or 50.7% from the
comparable period of 2019 was due mainly to decrease in product sales as a
result of COVID-19.
There were two suppliers that accounted for more than 10% of total purchases,
for the three months ended September 30, 2020 and 2019, respectively. One
supplier (Shandong Kangqi Wood Industry Co. Ltd. ) accounted for 75%, and the
other (Suzhou Jianli Space Health Technology Co. Ltd. ) accounted for 19% for the
three months ended September 30, 2020 . One supplier (Harbin Xinyue Technology
Co. Ltd. ) accounted for 73%, and the other (Zhongji Technology Services Co.
Ltd. ) accounted for 12% for the three months ended September 30, 2019 .
Gross (Loss) Profit. Gross loss for the three months ended September 30, 2020 of
approximately $326,000 was attributed mainly to the provision for slowing-moving
inventory of approximately $263,000 . Gross profit for the three months ended
September 30, 2019 of approximately $7.2 million was attributed mainly to
revenues of approximately $8.0 million .
General and Administrative Expenses. General and administrative expenses ("G&A
expenses") consist primarily of costs in salary and benefits for our general
administrative and management staff, facilities costs, depreciation expenses,
professional fees, audit fees, and other miscellaneous expenses incurred in
connection with general operations. G&A expenses decreased 65.9% or
approximately $1.5 million from approximately $2.2 million for the three months
ended September 30, 2019 was due primarily to the decrease in advisory fees,
salary and benefits.
Selling Expenses. Selling expenses consist mainly of payroll and benefits for
employees involved in the sales and distribution functions, meeting/event fees,
advertisement, and marketing and selling expenses that are related to events and
activities at the Company's service centers designed to promote product sales.
Selling expenses decreased by 9.4% or approximately $134,000 to approximately
$1.3 million in the three months ended September 30, 2020 from approximately
$1.4 million in the same period of 2019. The decrease was due mainly to the
impact of COVID-19 as certain marketing and other promotional activities had
been postponed in 2020.
Finance Income, net. Total net financial income was approximately $3,000 and
$14,000 for the three months ended September 30, 2020 , and 2019, respectively.
The decrease was due mainly to lower interest form bank and related bank
products in the three months period ended September 30, 2020 .
Operating (Loss) Income. Operating loss was approximately $2.4 million for the
three months ended September 30, 2020 , compared to approximately $3.6 million of
operating income for the same period of 2019. The decrease in operating income
in 2020 was due primary to the significant decline in revenues in 2020 dueto the impact of COVID-19. 36 Total Other Expenses, net. Other expenses consist mainly of estimated tax penalties and charitable contributions. Total net other expenses were approximately$713,000 for the three months endedSeptember 30, 2020 , compared to approximately$672,000 for the same period of 2019. The increase in total net other expenses was due primary to increase in estimated tax penalty, net of income from equity investment in 2020. Provision for Income Taxes. No provision for income taxes was recorded for the three months endedSeptember 30, 2020 since the Company reported a pre-tax loss of approximately$3.1 million in 2020, as compared to approximately$362,000 of income tax provision for the same period of 2019 when the Company reported a pre-tax income of approximately$2.9 million .
Net (Loss) Income. As a result of the factors described above, net loss was
approximately
Comprehensive Loss (Income). Comprehensive loss was approximately$3.1 million for the three months endedSeptember 30, 2020 , as compared to other comprehensive income of approximately$2.1 million for the three months endedSeptember 30, 2019 .
Comparison for the Nine Months Ended
The following table sets forth certain financial data for the nine months ended September30, 2020 and 2019 (in thousands):
For the Nine Months Ended September 30, Percentage
2020 2019 Change
Dollars % Dollars % %
Revenues $ 210.2 100.0 $ 59,089.9 100.0 (99.6 )
Cost of revenues (613.1 ) (291.7 ) (38,115.5 ) (64.5 ) (98.4 )
Gross (loss) profit (402.9 ) (191.7 ) 20,974.4 35.5 (101.9 )
General and administrative
expenses 2,746.0 1,306.4 6,402.3 10.8 (57.1 )
Selling expenses 4,950.0 2,354.9 3,057.4 5.2 61.9
Finance (income) expenses,
net (173.6) (82.6 ) 81.1 0.1 (314.1 )
Total operating expenses 7,522.4 3,578,7 9,540.8 16.1 (21.2 )
Operating (loss) income (7,925.3 ) (3,770.4 ) 11,433.6
19.3 (169.3 )
Other expenses, net (3,481.6 ) (1,656.3 ) (1,832.9 ) (3.1 ) 90.0
Total other expenses, net (3,481.6 ) (1,656.3 ) (1,832.9 ) (3.1 ) 90.0 (Loss) income before provision for income taxes (11,406.9 ) (5,426.7 ) 9,600.7 16.2 (218.8 ) Provision for income taxes - - 1,797.3
3.0 (100.0 )
Net (loss) income $ (11,407.0 ) (5,426.7 ) $ 7,803.4 13.2 (246.2 )
Foreign currency translation
adjustment (69.4 ) (33.0 ) (484.2 ) (0.8 ) (85.7 )
Comprehensive (loss) income $ (11,476.3 ) (5,459.8 ) $ 7,319.2 12.4 (256.8 ) 37 Revenues: Revenues were approximately$210,000 and approximately$59.1 million for the nine months endedSeptember 30, 2020 , and 2019, respectively. The decrease in revenues of approximately$58.9 million or 99.6% is due primarily to business interruptions arising from COVID-19. During the nine months endedSeptember 30, 2020 and 2019, all revenues were generated in the PRC. During the period of nine months endedSeptember 30, 2020 , revenues were mainly attributable to the sales of home appliances, smart watches, health foods, and cosmetics products, representing 21.6%, 39.5%, 12.3%, and 1.7% of revenues, respectively. During to the same period of 2019, revenues were mainly attributable to the sales of health food, home appliances and cosmetics products, representing 69.4%, 17.5% and 11.9% of revenues, respectively. During the nine months endedSeptember 30, 2020 and 2019, no customers accounted for 10% or more of total revenues. Cost of revenues: Cost of revenues consists primarily of the cost of merchandise sold, delivery cost, service fees, sales incentives and commissions that are directly attributable to the sale of certain designated products. Cost of revenues of approximately$613,000 for the nine months endedSeptember 30, 2020 consisted of provision for slow-moving inventory of approximately$450,000 . The decrease in cost of revenues of approximately$37.5 million or 98.4% from the comparable period of 2019 was due mainly to decrease in product sales as a result of COVID-19. There were two suppliers that accounted for more than 10% of total purchases, for the nine months endedSeptember 30, 2020 and 2019, respectively. One supplier (Baoqing Meilai Modern Agriculture Service Co. Ltd. ) accounted for 62%, and the other (Shandong Kangqi Wood Industry Co. Ltd. ) accounted for 10% for the nine months endedSeptember 30, 2020 . One supplier (Harbin Xinyue Technology Co. Ltd. ) accounted for 68%, and the other (Zhongji Technology Services Co. Ltd. ) accounted for 11% for the nine months endedSeptember 30, 2019 . Gross (Loss) Profit. Gross loss for the nine months endedSeptember 30, 2020 of approximately$403,000 was attributed mainly to the provision for slowing-moving inventory of approximately$450,000 . Gross profit for the nine months endedSeptember 30, 2019 of approximately$21.0 million was attributed mainly to revenues of approximately$59.1 million . General and Administrative Expenses. General and administrative expenses ("G&A expenses") consist primarily of costs in salary and benefits for our general administrative and management staff, facilities costs, depreciation expenses, professional fees, audit fees, and other miscellaneous expenses incurred in connection with general operations. G&A expenses decreased 57.1% or approximately$3.7 million from approximately$6.4 million for the nine months endedSeptember 30, 2019 was due primarily to the decrease in advisory fees, salary and benefits. Selling Expenses. Selling expenses consist mainly of payroll and benefits for employees involved in the sales and distribution functions, meeting/event fees, advertisement, and marketing and selling expenses that are related to events and activities at the Company's service centers designed to promote product sales. Selling expenses increased by 61.9% or approximately$1.9 million to approximately$5.0 million in the nine months endedSeptember 30, 2020 from approximately$3.1 million in the same period of 2019. The increase was due mainly to costs incurred in marketing and other promotional activities in 2020 designed to offset the negative impact of COVID-19. Finance Income, net. Total net financial income and expense were approximately$174,000 and$81,000 for the nine months endedSeptember 30, 2020 , and 2019, respectively. The increase was due mainly to interest income earned in the nine months period endedSeptember 30, 2020 . Operating (loss) Income. Operating loss was approximately$7.9 million for the nine months endedSeptember 30, 2020 , compared to approximately$11.4 million of operating income for the same period of 2019. The decrease in operating income in 2020 was due primary to the significant decline in revenues in 2020 due
to the impact of COVID-19. 38 Total Other Expenses, net. Other expenses consist mainly of estimated tax penalties and charitable contributions. Total net other expenses were approximately$3.5 million for the nine months endedSeptember 30, 2020 , compared to approximately$1.8 million for the same period of 2019. The increase in total net other expenses was due primary to donation toBinzhou Red Cross Society for approximately$1.4 million and estimated tax penalties related to unpaid VAT and income taxes of approximately$2.3 million . Provision for Income Taxes. No provision for income taxes was recorded for the nine months endedSeptember 30, 2020 , since the Company reported a pre-tax loss of approximately$11.4 million in 2020, as compared to approximately$1.8 million of income tax provision for the same period of 2019 when the Company reported pre-tax income of approximately$9.6 million .
Net (loss) Income. As a result of the factors described above, net loss was
approximately
Comprehensive Loss (Income). Comprehensive loss was approximately$11.4 million for the nine months endedSeptember 30, 2020 , as compared to other comprehensive income of approximately$7.3 million for the nine months endedSeptember 30, 2019 .
Liquidity and Capital Resources
As of
The following table sets forth a summary of our cash flows for the periods as
indicated:
For the Nine Months ended
September 30,
2020 2019
(Unaudited) (Unaudited)
Net cash (used in) provided by operating activities
$ (1,788,623 ) $ (11,658,276 ) Net cash (used in) financing activities$ (1,724,779 ) $ (185,818 ) Effect of exchange rate changes on cash and cash equivalents$ 30,376 $ (944,766 ) Net (decrease) increase in cash and cash equivalents$ (24,951,435 ) $ 13,310,863 Cash and cash equivalents at beginning of period$ 28,919,817 $ 18,019,682 Cash and cash equivalents at end of period$ 3,968,382 $
31,330,545 39
The following table sets forth a summary of our working capital:
September 30, December 31,
2020 2019 Variation %
(Unaudited)
Total Current Assets $ 12,997,021 $ 31,095,695 $ (18,098,674 ) (58.2 )
Total Current Liabilities $ 29,043,499 $ 32,496,887 $ (3,453,388 ) (10.6 )
Working Capital $ (16,046,478 ) $ (1,401,192 ) $ (14,645,285 ) 1,045.2
Working Capital. The deterioration in the Company's working capital was due mainly to the negative impact of COVID-19 as the Company experienced a significant decline in its revenues.
For the nine months endedSeptember 30, 2020 , cash used in operating activities was approximately$21.5 million . For nine months endedSeptember 30, 2019 , cash provided by operating activities was approximately$26.1 million . The key factors attributing to the net cash outflows of approximately$21.5 million in 2020 include: net loss of approximately$11.4 million due mainly to drop in revenues; increase in advance to suppliers and inventories of approximately$6.0 million and$1 million , respectively; and increase in estimated tax penalties of approximately$2.4 million . The key reasons for the net cash flows from operation of approximately$26.1 million in the same period of 2019 include: net income of approximately$7.8 million ; change in due from related parties, net of approximately$10.5 million , and change in accrued expenses of approximately$9.6 million . Net cash used in investing activities was approximately$1.8 million for the nine months endedSeptember 30, 2020 , as compared to net cash used in investing activities of$11.7 million for the nine months endedSeptember 30, 2019 . The change of approximately$10 million was due primary to net changes in (1) purchases of property and equipment of approximately$1.8 million , and (2) investment in equity investee of$11.6 million . Net cash used in financing activities was approximately$1.7 million for the nine months endedSeptember 30, 2020 , as compared to net cash used in financing activities of approximately$0.2 million for the nine months endedSeptember 30, 2019 . The increase was due mainly to increase in dividends paid of approximately$0.5 million , and (2) Repayment of loans of approximately$1.0 million .
Off-Balance Sheet Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholders' equity, or that are not reflected in our financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and
development services with us. Critical Accounting Policies We prepare our financial statements in conformity with accounting principles generally accepted bythe United States of America ("U.S. GAAP"), which require us to make judgments, estimates, and assumptions that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any related disclosures. Although there were no material changes made to the accounting estimates and assumptions in the past three years, we continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. We believe that our accounting policies involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates. Accordingly, the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations are summarized in "Note 3 - Summary of Significant Accounting Policies" in the notes to our unaudited condensed consolidated financial statements.
Recent Accounting Pronouncements
See "Note 3 - Summary of Significant Accounting Policies" in the notes to our unaudited condensed consolidated financial statements for a discussion of recent accounting pronouncements. The Company believes that other recent accounting pronouncement will not have a material effect on the Company's consolidated financial position, results of operations and cash flows. 41
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