This discussion summarizes the significant factors affecting the operating
results, financial condition, liquidity and cash flows of the Company and its
subsidiary for the fiscal years ended December 31, 2021, and 2020. The
discussion and analysis that follows should be read together with the section
entitled “Cautionary Note Concerning Forward-Looking Statements” and our
consolidated financial statements and the notes to the consolidated financial
statements included elsewhere in this annual report on Form 10-K.
Except for historical information, the matters discussed in this section are
forward looking statements that involve risks and uncertainties and are based
upon judgments concerning various factors that are beyond the Company’s control.
Consequently, and because forward-looking statements are inherently subject to
risks and uncertainties, the actual results and outcomes may differ materially
from the results and outcomes discussed in the forward-looking statements. You
are urged to carefully review and consider the various disclosures made by us in
32 Table of Contents
Currency and exchange rate
Unless otherwise noted, all currency figures quoted as “U.S. dollars”, “dollars”
or “US$” refer to the legal currency of the United States. References to “Hong
Kong Dollar” are to the Hong Kong Dollar, the legal currency of the Hong Kong
Special Administrative Region of the People’s Republic of China. Throughout this
report, assets and liabilities of the Company’s subsidiaries are translated into
U.S. dollars using the exchange rate on the balance sheet date. Revenue and
expenses are translated at average rates prevailing during the period. The gains
and losses resulting from translation of financial statements of foreign
subsidiaries are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders’ equity.
We are not required to obtain permission from the Chinese authorities to operate
or to issue securities to foreign investors.
We, through our subsidiaries are currently engaged in the rendering of financial
and money lending services in Hong Kong and operating an online platform to sell
and distribute the arts and collectibles to end-users, with the use of
blockchain technologies and minting tokens.
We are at a development stage company and reported a net loss of $25,149,399 for
the years ended December 31, 2021 and a net income of $467,725 for the year
ended December 31, 2020. We had current assets of $23,981,701 and current
liabilities of $22,748,075 as of December 31, 2021. As of December 31, 2020, our
current assets and current liabilities were $14,721,331 and $15,271,366,
Our financial statements for the years ended December 31, 2021 and 2020 have
been prepared assuming that we will continue as a going concern. Our
continuation as a going concern is dependent upon improving our profitability
and the continuing financial support from our stockholders. Our sources of
capital in the past have included the sale of equity securities, which include
common stock sold in private transactions and public offerings, capital leases
and short-term and long-term debts.
Results of Operations.
Comparison of the fiscal years ended December 31, 2021 and 2020
The following table sets forth certain operational data for the years indicated:
Fiscal Years Ended December 31, 2021 2020 Revenues: Lending segment $ 6,413,284 $ 4,356,617 Arts and collectibles technology ("ACT") segment 3,645,265 - Total revenue 10,058,549 4,356,617 Cost of revenue: Lending segment (733,937 ) (839,709 ) ACT segment (1,020,704 ) - Total cost of revenue (1,754,641 ) (839,709 ) Gross profit 8,303,908 3,516,908 Operating expenses: Sales and marketing (1,680,536 ) (122,701 ) Technology and support (9,222,103 ) - Corporate development (5,418,075 ) - General and administrative expenses (16,077,156 ) (3,099,322 ) Income (loss) from operation (24,093,962 ) 294,885 Other income (expense), net (621,180 ) 166,788 Income (loss) before income taxes (24,715,142 ) 461,673 Income tax benefit (expense) (434,257 ) 6,052 Net income (loss) $ (25,149,399 ) $ 467,725 33 Table of Contents Revenue
For the year ended December 31, 2021 and 2020, there was no single customer
whose revenue exceeded 10% of the revenue.
Year ended December 31, 2021 December 31, 2021 Percentage Accounts Customer Revenues of revenues receivable $ - - % $ - % - Total: $ - - % Total: $ - Cost of Revenue
Cost of revenue of approximately $1,754,641 and $839,709 for the year ended
December 31, 2021 and 2020, respectively, consisted primarily of interest
expense and cost of purchasing collectibles.
34 Table of Contents Gross Profit
We achieved a gross profit of $8,303,908 and $3,516,908 for the years ended
December 31, 2021 and 2020, respectively. The increase in gross profit is
attributable to an increase in our lending and ACT volume.
Sales and Marketing Expenses
Sales and marketing expenses of $1,680,536 and $122,701 for the year ended
December 31, 2021 and 2020, respectively, primarily include costs related to
public relations, consultancy fee, advertising and marketing programs, and
Technology and support Expenses
Technology and support expenses of $9,222,103 and $0 for the year ended December
31, 2021 and 2020, respectively, including (i) development of the DOT(digital
ownership token), an effective application of NFT technologies to real world
assets, both tangible and intangible, (ii) research and development of
blockchain smart contracts and other coding to apply the most suitable
blockchains for DOTs and maintaining a distributed ledger to record all
transactions and (iii) Development of a client management system to facilitate
the sale and purchase of DOTs by both crypto and non-crypto natives.
Corporate Development Expenses
Corporate development expenses of $5,418,075 and $0 for the year ended December
31, 2021 and 2020, respectively, primarily include personnel-related expenses
incurred to support our corporate development.
General and Administrative Expenses (“G&A”)
General and administrative expenses of $16,077,156 and $3,099,322 for the years
ended December 31, 2021 and 2020, respectively. These expenses primarily include
professional fees, audit fees, other miscellaneous expenses incurred in
connection with general operations and personnel-related expenses incurred to
support our business, including legal, finance, executive, and other support
operations. G&A expenses increased by approximately $12,977,834 in the year
ended December 31, 2021 from $3,099,322 for the same period of 2020.
Income Tax Expense (Benefit)
We incurred income tax expense of $434,257 during the year ended December 31,
We incurred income tax benefit of $6,052 during the year ended December 31,
Liquidity and Capital Resources
As of December 31, 2021 and December 31, 2020, we had cash and cash equivalents
of $1,131,128 and $773,381.
We expect to incur significantly greater expenses in the near future as we
develop our product offerings or enter into strategic partnerships. We also
expect our general and administrative expenses to increase as we expand our
finance and administrative staff, add infrastructure, and incur additional costs
related to being reporting act company, including directors’ and officers’
insurance and increased professional fees. We believe that we will require
approximately $50 million over the next 12-24 months to implement our business
plan. For the immediate future, we intend to finance our business expansion
efforts through equity purchase by institutional banks, and loans from existing
shareholders or financial institutions.
We have never paid dividends on our Common Stock. Our present policy is to apply
cash to investments in product development, acquisitions or expansion;
consequently, we do not expect to pay dividends on Common Stock in the
35 Table of Contents Going Concern Uncertainties
Our continuation as a going concern is dependent upon improving our
profitability and the continuing financial support from our stockholders. Our
sources of capital in the past have included the sale of equity securities,
which include common stock sold in private transactions and public offerings,
lease liability and short-term and long-term debts. In addition, with respect to
the ongoing and evolving coronavirus (COVID-19) outbreak, which was designated
as a pandemic by the World Health Organization on March 11, 2020, the outbreak
has caused substantial disruption in international economies and global trades
and if repercussions of the outbreak are prolonged, could have a significant
adverse impact on our business. Given the addition political and public health
challenges, our ability to obtain external financing or financing from existing
shareholders to fund our working capital needs has been materially and adversely
impacted, and there can be no assurance that we will be able to raise such
additional capital resources on satisfactory terms. We believe that our current
cash and other sources of liquidity discussed below are adequate to support
general operations for at least the next 12 months.
We require additional funding to meet its ongoing obligations and to fund
anticipated operating losses. Our auditor has expressed substantial doubt about
our ability to continue as a going concern. Our ability to continue as a going
concern is dependent on raising capital to fund its initial business plan and
ultimately to attain profitable operations. These consolidated financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets and liabilities that may
result in the Company not being able to continue as a going concern.
We expect to incur marketing and professional and administrative expenses as
well expenses associated with maintaining our filings with the Commission. We
will require additional funds during this time and will seek to raise the
necessary additional capital. If we are unable to obtain additional financing,
we may be required to reduce the scope of our business development activities,
which could harm our business plans, financial condition and operating results.
Additional funding may not be available on favorable terms, if at all. We intend
to continue to fund its business by way of equity or debt financing and advances
from related parties. Any inability to raise capital as needed would have a
material adverse effect on our business, financial condition and results of
If we cannot raise additional funds, we will have to cease business operations.
As a result, our common stock investors might lose all of their investment.
Years Ended December 31, 2021 2020
Net cash used in operating activities $ (4,881,128 ) $ (3,948,758 )
Net cash used in investing activities (2,044,551 ) (229,061 )
Net cash provided by financing activities $ 7,187,734 $ 4,510,111
Net Cash Used In Operating Activities.
For the year ended December 31, 2021, net cash used in operating activities was
$4,881,128 which consisted primarily of a net loss of $25,149,399, digital
assets received of $3,277,589, an increase in loan receivables of $6,910,730, an
increase in inventory of $894,091, an increase in prepayment and other
receivable of $175,765, offset by amortization of $829,575, imputed interest
expense of $620,508, digital assets paid of $3,231,988, issuance of common stock
for goods and services rendered of $25,290,203, inventories purchase in lieu of
shares of $476,903, a decrease in loan interest receivables of $118,903, an
increase of account payables of $240,156, an increase in other payable and
accruals of $66,385, loss on written-off of property and equipment of $166,302,
and an increase in income tax payable of $434,257.
For the year ended December 31, 2020, net cash used in operating activities was
$3,948,758, which consisted primarily of a net income of $467,725, an increase
in accrued liabilities and other payables of $239,052, offset by gain from
forgiveness of related party debts of $52,147, an increase in loan receivables
of $3,329,068, an increase in loan interest receivable of $498,959, and increase
in prepayment and other receivables of $743,857.
We expect to continue to rely on cash generated through financing from our
existing shareholders and private placements of our securities to finance our
operations and future acquisitions in the next twelve months.
Net Cash Used In Investing Activities.
For the year ended December 31, 2021 and 2020, net cash used in investment
activities was $2,044,551 and $229,061, respectively. The net cash used in
investing activities for the year ended December 31, 2021 mainly consisted of
purchase of intangible assets of $2,039,270. The net cash used in investing
activities for the year ended December 31, 2020 consisted of purchase of
property and equipment of $229,061.
Net Cash Provided By Financing Activities.
For the year ended December 31, 2021, net cash provided by financing activities
was $7,187,734 consisting of advance from related parties of $11,444,456 and
repayment of loan payable of $4,256,722.
For the year ended December 31, 2020, net cash provided by financing activities
was $4,510,111 consisting primarily of advances from related parties of
$3,063,087 and proceeds from loan payable of $1,447,024.
36 Table of Contents Material Cash Requirements
We have not achieved profitability since our inception and we expect to continue
to incur net losses for the foreseeable future. We expect net cash expended in
2022 to be significantly higher than 2021. As of December 31, 2021, we had an
accumulated deficit of $26,436,477. Our material cash requirements are highly
dependent upon the additional financial support from our major shareholders in
the next 12 – 18 months.
We had the following contractual obligations and commercial commitments as of December 31, 2021: Contractual Less than More than 5 Obligations Total 1 year 1-3 Years 3-5 Years Years $ $ $ $ $ Amounts due to related parties 20,954,836 20,954,836 - - - Tax obligation 431,463 431,463 - - - Accounts payable 240,156 240,156 - - - Loan Payable 489,836 489,836 - - - Other contractual liabilities (1) 399,968 399,968 - - - Commercial commitments - - - - - Bank loan repayment - - - - - Total obligations 22,516,259 22,516,259 - - -
(1) Includes all obligations included in “Accrued liabilities and other
payables” in current liabilities in the “Consolidated Balance Sheet” that are
contractually fixed as to timing and amount.
On June 17, 2021, the Company entered into a Share Acquisition Agreement (the
“Share Acquisition Agreement”), by and among the Company, Massive Treasure and
the holders of common shares of Massive Treasure. Under the terms and conditions
of the Share Acquisition Agreement, the Company offered to issue 1,078,269,470
shares of common stock of the Company, in consideration for all the issued and
outstanding shares in Massive Treasure. Lee Ying Chiu Herbert, our director, is
the beneficial holder of 47,500 common shares, or 95%, of the issued and
outstanding shares of Massive Treasure. As of December 31, 2021, there are
800,000,000 shares of common stock pending to be issued to Lee Ying Chiu
Off-Balance Sheet Arrangements
We have no outstanding off-balance sheet guarantees, interest rate swap
transactions or foreign currency contracts. We do not engage in trading
activities involving non-exchange traded contracts.
Critical Accounting Policies and Estimates.
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires our
management to make assumptions, estimates and judgments that affect the amounts
reported, including the notes thereto, and related disclosures of commitments
and contingencies, if any. We have identified certain accounting policies that
are significant to the preparation of our consolidated financial statements.
These accounting policies are important for an understanding of our financial
condition and results of operations. Critical accounting policies are those that
are most important to the presentation of our financial condition and results of
operations and require management’s subjective or complex judgment, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain and may change in subsequent periods. Certain accounting
estimates are particularly sensitive because of their significance to
consolidated financial statements and because of the possibility that future
events affecting the estimate may differ significantly from management’s current
judgments. We believe the following accounting policies are critical in the
preparation of our consolidated financial statements.
· Use of estimates and assumptions
In preparing these consolidated financial statements, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities in
the balance sheet and revenues and expenses during the years reported. Actual
results may differ from these estimates. If actual results significantly differ
from the Company’s estimates, the Company’s financial condition and results of
operations could be materially impacted. Significant estimates in the period
include the impairment loss on digital assets, valuation and useful lives of
intangible assets and deferred tax valuation allowance.
· Basis of consolidation
The consolidated financial statements include the accounts of COSG and its
subsidiaries. All significant inter-company balances and transactions within the
Company have been eliminated upon consolidation.
· Cash and cash equivalents
37 Table of Contents
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.
· Digital assets
The Company’s digital assets mainly represent the cryptocurrencies held in its
e-wallet. The Company accounts for its digital assets in accordance with
Financial Accounting Standards Board (“FASB”) ASC Topic 350, “General
Intangibles Other Than Goodwill” (“ASC 350”). ASC 350 requires assets to be
measured based on the fair value of the consideration given or the fair value of
the assets (or net assets) acquired, whichever is more clearly evident and,
thus, more reliably measurable. Accordingly, if the fair market value at any
point during the reporting period is lower than the carrying value an impairment
loss equal to the difference will be recognized in the consolidated statement of
operations. If the fair market value at any point during the reporting period is
higher than the carrying value, the basis of the digital assets will not be
adjusted to account for this increase. Gains on digital assets, if any, will be
recognized upon sale or disposal of the assets.
The Company’s cryptocurrencies are deemed to have an indefinite useful life;
therefore amounts are not amortized, but rather are assessed for impairment.
· Loan receivables, net
Loans receivables are carried at unpaid principal balances, less the allowance
for loan losses and charge-offs. The loans receivables portfolio consists of
real estate mortgage loans, commercial and personal loans.
Loans are placed on nonaccrual status when they are past due 180 days or more as
to contractual obligations or when other circumstances indicate that collection
is not probable. When a loan is placed on nonaccrual status, any interest
accrued but not received is reversed against interest income. Payments received
on a nonaccrual loan are either applied to protective advances, the outstanding
principal balance or recorded as interest income, depending on an assessment of
the ability to collect the loan. A nonaccrual loan may be restored to accrual
status when principal and interest payments have been brought current and the
loan has performed in accordance with its contractual terms for a reasonable
period (generally six months).
If the Company determines that a loan is impaired, the Company next determines
the amount of the impairment. The amount of impairment on collateral dependent
loans is charged off within the given fiscal quarter. Generally the amount of
the loan and negative escrow in excess of the appraised value less estimated
selling costs, for the fair value of collateral valuation method, is charged
off. For all other loans, impairment is measured as described below in Allowance
for Loan Losses.
· Allowance for loan losses ("ALL")
The adequacy of the Company’s ALL is determined, in accordance with ASC Topic
450-20 Loss Contingencies includes management’s review of the Company’s loan
portfolio, including the identification and review of individual problem
situations that may affect a borrower’s ability to repay. In addition,
management reviews the overall portfolio quality through an analysis of
delinquency and non-performing loan data, estimates of the value of underlying
collateral, current charge-offs and other factors that may affect the portfolio,
including a review of regulatory examinations, an assessment of current and
expected economic conditions and changes in the size and composition of the loan
The ALL reflects management’s evaluation of the loans presenting identified loss
potential, as well as the risk inherent in various components of the portfolio.
There is significant judgment applied in estimating the ALL. These assumptions
and estimates are susceptible to significant changes based on the current
environment. Further, any change in the size of the loan portfolio or any of its
components could necessitate an increase in the ALL even though there may not be
a decline in credit quality or an increase in potential problem loans.
38 Table of Contents · Property and equipment
Property and equipment are stated at cost less accumulated depreciation and
accumulated impairment losses, if any. Depreciation is calculated on the
straight-line basis over the following expected useful lives from the date on
which they become fully operational and after taking into account their
estimated residual values:
Expected useful life Computer and office equipment 5 years
Expenditure for repairs and maintenance is expensed as incurred. When assets
have retired or sold, the cost and related accumulated depreciation are removed
from the accounts and any resulting gain or loss is recognized in the results of
· Intangible assets
Intangible assets represented the acquired technology software, licensed
technology know-how, trademark and trade names for its internal use to
facilitate and support its platform operation. They are stated at the purchase
cost and are amortized based on their economic benefit expected to be realized.
· 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 and
intangible assets 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 years
· Revenue recognition
The Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue
from Contracts with Customers (Topic 606) (“ASU 2014-09”) using the full
retrospective transition method. The Company’s adoption of ASU 2014-09 did not
have a material impact on the amount and timing of revenue recognized in its
consolidated financial statements.
Under ASU 2014-09, the Company recognizes revenue when control of the promised
goods or services is transferred to customers, in an amount that reflects the
consideration the Company expects to be entitled to in exchange for those goods
The Company applies the following five steps in order to determine the
appropriate amount of revenue to be recognized as it fulfills its obligations
under each of its agreements:
· identify the contract with a customer; · identify the performance obligations in the contract; · determine the transaction price; · allocate the transaction price to performance obligations in the contract; and · recognize revenue as the performance obligation is satisfied.
Revenue is recognized when the Company satisfies its performance obligation
under the contract by transferring the promised product to its customer that
obtains control of the product and collection is reasonably assured. A
performance obligation is a promise in a contract to transfer a distinct product
or service to a customer. Most of the Company’s contracts have a single
performance obligation, as the promise to transfer products or services is not
separately identifiable from other promises in the contract and, therefore, not
The Company is licensed to originate personal loan, company loan and mortgage
loan in Hong Kong. During the years ended December 31, 2021 and 2020, the
Company originated loans generally ranging from $644 to $579,000, with terms
ranging from 1 week to 120 months. The Company mainly derives a portion of its
revenue from loan which is specifically excluded from the scope of this
standard, that is, interest on loan receivable is accrued monthly and credited
to income as earned.
39 Table of Contents
Arts and Collectibles Technology Business
Commencing from October 1, 2021, the Company launched its online platform in the
sale and distribution of arts and collectibles, with the use of blockchain
technologies and minting tokens. The item of arts and collectibles is
individually monetized as non-interchangeable unit of data stored on a
blockchain, which is a form of digital ledger that can be sold, in the form of a
minting token on the online platform. The Company involves with the following
activities to earn its revenue in this segment:
Sale of arts and collectibles products: The Company recognizes revenue derived
from the sales of the arts and collectibles when the Company has transferred the
risks and rewards to the customers. The minted item of the individual art or
collectibles which are sold in crypto asset transaction is the only performance
obligation under the fixed-fee arrangements. The corresponding fees received
upon each sale transaction is recognized as revenue, is recognized when the
designated token, minted with the corresponding art and collectibles is
delivered to the end user, together with the transfer of both digital and
Transaction fee income: The Company also generates revenue through transaction
fees transacted on its platform or other marketplaces. The Company charges a fee
to individual customer at the secondary transaction level, which is allocated to
the single performance obligation. The transaction fee is collected from the
customer in digital assets, with revenue measured based on a certain percentage
of the value of digital assets at the time the transaction is executed. The
Company’s service is comprised of a single performance obligation to provide a
platform facilitating the transfer of its DOTs. The Company considers its
performance obligation satisfied, and recognizes revenue, at the point in time
the transaction is processed.
In this segment, the transaction consideration that the Company receives is a
non-cash consideration in the form of digital assets, which are
cryptocurrencies. The Company measures the related cryptocurrencies at fair
value on the date received, at the same time, the revenue is recognized. Fair
value of the digital asset award received is determined using the average U.S.
dollar spot rate of the related digital currency at the time of receipt.
Expenses associated with operating the Arts and Collectibles Technology
Business, such as minting cost and purchase cost of collectibles and artworks
are also recorded as cost of revenues.
At the inception of an arrangement, the Company determines whether the
arrangement is or contains a lease based on the unique facts and circumstances
present. Leases with a term greater than one year are recognized on the balance
sheet as right-of-use assets, lease liabilities and long-term lease liabilities.
The Company has elected not to recognize on the balance sheet leases with terms
of one year or less. Operating lease liabilities and their corresponding
right-of-use assets are recorded based on the present value of lease payments
over the expected remaining lease term. However, certain adjustments to the
right-of-use assets may be required for items such as prepaid or accrued lease
payments. The interest rate implicit in lease contracts is typically not readily
determinable. As a result, the Company utilizes its incremental borrowing rates,
which are the rates incurred to borrow on a collateralized basis over a similar
term an amount equal to the lease payments in a similar economic environment.
In accordance with the guidance in ASC Topic 842, components of a lease should
be split into three categories: lease components (e.g. land, building, etc.),
non-lease components (e.g. common area maintenance, consumables, etc.), and
non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed
and in-substance fixed contract consideration (including any related to
non-components) must be allocated based on the respective relative fair values
to the lease components and non-lease components.
The Company made the policy election to not separate lease and non-lease
components. Each lease component and the related non-lease components are
accounted for together as a single component.
· Income taxes
The Company adopted the ASC 740 “Income tax” provisions of paragraph
740-10-25-13, which addresses the determination of whether tax benefits claimed
or expected to be claimed on a tax return should be recorded in the consolidated
financial statements. Under paragraph 740-10-25-13, the Company may recognize
the tax benefit from an uncertain tax position only if it is more likely than
not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits
recognized in the consolidated financial statements from such a position should
be measured based on the largest benefit that has a greater than fifty percent
(50%) likelihood of being realized upon ultimate settlement. Paragraph
740-10-25-13 also provides guidance on de-recognition, classification, interest
and penalties on income taxes, accounting in interim periods and requires
increased disclosures. The Company had no material adjustments to its
liabilities for unrecognized income tax benefits according to the provisions of
The estimated future tax effects of temporary differences between the tax basis
of assets and liabilities are reported in the accompanying balance sheets, as
well as tax credit carry-backs and carry-forwards. The Company periodically
reviews the recoverability of deferred tax assets recorded on its balance sheets
and provides valuation allowances as management deems necessary.
· Foreign currencies translation
Transactions denominated in currencies other than the functional currency are
translated into the functional currency at the exchange rates prevailing at the
dates of the transaction. Monetary assets and liabilities denominated in
currencies other than the functional currency are translated into the functional
currency using the applicable exchange rates at the balance sheet dates. The
resulting exchange differences are recorded in the consolidated statement of
40 Table of Contents
The reporting currency of the Company is United States Dollar (“US$”) and the
accompanying consolidated financial statements have been expressed in US$. In
addition, the Company is operating in Hong Kong and maintains its books and
record in its local currency, Hong Kong Dollars (“HKD”) and Singapore Dollars
(“SGD”), which is a functional currency as being the primary currency of the
economic environment in which the operations are conducted. In general, for
consolidation purposes, assets and liabilities of its subsidiary whose
functional currency is not US$ are translated into US$, in accordance with ASC
Topic 830-30, “Translation of Financial Statement”, using the exchange rate on
the balance sheet date. Revenues and expenses are translated at average rates
prevailing during the period. The gains and losses resulting from translation of
financial statements of foreign subsidiary are recorded as a separate component
of accumulated other comprehensive income within the statements of changes in
Translation of amounts from HKD and SGD into US$ has been made at the following
exchange rates for the following periods:-
December 31, December 31, 2021 2020 Year-end HKD:US$ exchange rate 0.1283 0.1290 Annualized average HKD:US$ exchange rate 0.1287 0.1289 December 31, December 31, 2021 2020 Year-end SGD:US$ exchange rate 0.7411 N/A Annualized average SGD:US$ exchange rate 0.7443 N/A · Comprehensive income
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 other comprehensive income, as presented in
the accompanying consolidated statements of changes in 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.
· Segment reporting
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 the consolidated financial statements.
· Retirement plan costs
Contributions to retirement plans (which are defined contribution plans) are
charged to general and administrative expenses in the accompanying statements of
operation as the related employee service are provided.
· Related parties
The Company follows the ASC 850-10, “Related Party Disclosures” for the
identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the
Company; b) entities for which investments in their equity securities would be
required, absent the election of the fair value option under the Fair Value
Option Subsection of section 825-10-15, to be accounted for by the equity method
by the investing entity; c) trusts for the benefit of employees, such as pension
and Income-sharing trusts that are managed by or under the trusteeship of
management; d) principal owners of the Company; e) management of the Company; f)
other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g) other parties that can significantly
influence the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
The consolidated financial statements shall include disclosures of material
related party transactions, other than compensation arrangements, expense
allowances, and other similar items in the ordinary course of business. However,
disclosure of transactions that are eliminated in the preparation of
consolidated or combined financial statements is not required in those
statements. The disclosures shall include: a) the nature of the relationship(s)
involved; b) a description of the transactions, including transactions to which
no amounts or nominal amounts were ascribed, for each of the periods for which
income statements are presented, and such other information deemed necessary to
an understanding of the effects of the transactions on the financial statements;
c) the dollar amounts of transactions for each of the periods for which income
statements are presented and the effects of any change in the method of
establishing the terms from that used in the preceding period; and d) amount due
from or to related parties as of the date of each balance sheet presented and,
if not otherwise apparent, the terms and manner of settlement.
· Commitments and contingencies
The Company follows the ASC 450-20, “Contingencies” to report accounting for
contingencies. Certain conditions may exist as of the date the financial
statements are issued, which may result in a loss to the Company but which will
only be resolved when one or more future events occur or fail to occur. The
Company assesses such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to
legal proceedings that are pending against the Company or un-asserted claims
that may result in such proceedings, the Company evaluates the perceived merits
of any legal proceedings or un-asserted claims as well as the perceived merits
of the amount of relief sought or expected to be sought therein.
41 Table of Contents
If the assessment of a contingency indicates that it is probable that a material
loss has been incurred and the amount of the liability can be estimated, then
the estimated liability would be accrued in the Company’s consolidated financial
statements. If the assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, and an
estimate of the range of possible losses, if determinable and material, would be
Loss contingencies considered remote are generally not disclosed unless they
involve guarantees, in which case the guarantees would be disclosed. Management
does not believe, based upon information available at this time that these
matters will have a material adverse effect on the Company’s financial position,
results of operations or cash flows. However, there is no assurance that such
matters will not materially and adversely affect the Company’s business,
financial position, and results of operations or cash flows.
· Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards
Codification for disclosures about fair value of its financial instruments and
has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification
(“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards
Codification establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value
measurements and related disclosures, paragraph 820-10-35-37 of the FASB
Accounting Standards Codification establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into
three (3) broad levels. The fair value hierarchy gives the highest priority to
quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. The three (3) levels of fair
value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting
Standards Codification are described below:
Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.
Financial assets are considered Level 3 when their fair values are determined
using pricing models, discounted cash flow methodologies or similar techniques
and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. If the inputs used to measure the
financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant
to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as
cash and cash equivalents, approximate their fair values because of the short
maturity of these instruments.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial
Accounting Standard Board (“FASB”) or other standard setting bodies and adopted
by the Company as of the specified effective date. Unless otherwise discussed,
the Company believes that the impact of recently issued standards that are not
yet effective will not have a material impact on its financial position or
results of operations upon adoption.
In January 2020, the Company adopted ASU No. 2017-04, “Intangibles and Other
(Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the
requirement to calculate the implied fair value of goodwill, but rather requires
an entity to record an impairment charge based on the excess of a reporting
unit’s carrying value over its fair value. Adoption of this ASU did not have a
material effect on the consolidated financial statements.
42 Table of Contents
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260),
Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock
Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own
Equity (Subtopic 815-40), (“ASU 2021-04”). This ASU reduces diversity in an
issuer’s accounting for modifications or exchanges of freestanding
equity-classified written call options (for example, warrants) that remain
equity classified after modification or exchange. This ASU provides guidance for
a modification or an exchange of a freestanding equity-classified written call
option that is not within the scope of another Topic. It specifically addresses:
(1) how an entity should treat a modification of the terms or conditions or an
exchange of a freestanding equity-classified written call option that remains
equity classified after modification or exchange; (2) how an entity should
measure the effect of a modification or an exchange of a freestanding
equity-classified written call option that remains equity classified after
modification or exchange; and (3) how an entity should recognize the effect of a
modification or an exchange of a freestanding equity-classified written call
option that remains equity classified after modification or exchange. This ASU
will be effective for all entities for fiscal years beginning after December 15,
2021. An entity should apply the amendments prospectively to modifications or
exchanges occurring on or after the effective date of the amendments. Early
adoption is permitted, including adoption in an interim period. The adoption of
ASU 2021-04 on January 1, 2022 did not have a material impact on the Company’s
financial statements or disclosures.
The Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do 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.
© Edgar Online, source Glimpses