HOTAPP BLOCKCHAIN : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K) | MarketScreener

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2019 COMPARED TO YEAR ENDED DECEMBER 31, 2018Results of OperationsFor the years ended December 31, 2019 and 2018RevenueRevenue consists primarily of the services rendered on software projects. Some of the projects require significant software production. The Company had no revenue during the year ended December 31, 2019. In 2018, three projects were completed, one of which was started in 2017. Total revenue for the year ended December 31, 2018 for continuing operations were $140,652, including $115,135 from related parties. Total revenue for the year ended December 31, 2018 for discontinued operations were $7,325.Cost of revenueCost of revenue consists primarily of salary and outside consulting expenses incurred directly by the projects. Total cost of revenue for the years ended December 31, 2019 and 2018 for continuing operations were $0 and $74,129, respectively. Total cost of revenue for the years ended December 31, 2019 and 2018 for discontinued operations were $0 and $4,527, respectively.General and AdministrativeGeneral and administrative expenses consist primarily of salary and benefits, professional fees, rental expenses and maintenance expenses of existing software framework. We expect to maintain our general and administrative expenses with moderate changes in line with business activities. Total general and administrative expenses for the years ended December 31, 2019 and 2018 for continuing operations were $323,585 and $413,922, of which $0 and $7,842 were depreciation expenses, respectively. Total general and administrative expenses for the years ended December 31, 2019 and 2018 for discontinued operations were $3,710 and $99,726, of which $48 and $6,544 were depreciation expenses, respectively.Other (Expenses) / IncomeFor the years ended December 31, 2019 and 2018, we have incurred a net balance of $34,113 and $(43,641) in foreign exchange gain/(loss), of which $0 and $168 are realized foreign exchange gain, $299,255 and $0 in gain on disposal of investment, $0 and $(8,303) in (loss) on disposal of fixed assets, and $55 and $22 in interest income, respectively for continuing operations. For the years ended December 31, 2019 and 2018, we have incurred $(2) and $(236) in unrealized foreign exchange (loss), and $0 and $415 in other sundry income, respectively for discontinued operations.Liquidity and Capital ResourcesAt December 31, 2019, we had cash of $55,752, working capital deficit of $1,272,422. The decrease in cash and increase in working capital deficit during year 2019 were primarily due to incurred operating losses.We had a total stockholders’ deficit of $1,272,320 and an accumulated deficit of $5,616,908 as of December 31, 2019 compared with a total stockholders’ deficit of $1,193,272 and an accumulated deficit of $5,623,034 as of December 31, 2018. This difference is primarily due to the net effect of the net income incurred and the loss in foreign currency translation with depreciation in US dollar, the presentation currency during the year.For the year ended December 31, 2019, we recorded a net income of $6,126.We had net cash used in operating activities of $389,488 for the year ended December 31, 2019. We had a positive change of $588 due to prepaid expenses and a positive change of $462 due to security deposit and other assets. We had a negative change of $100,000 due to promissory note of a related party. We had a negative change of $12,756 due to accounts payable and accrued expenses.

18

For the year ended December 31, 2018, we recorded a net loss of $496,070.We had net cash used in operating activities of $327,476 for the year ended December 31, 2018. We had a positive change of $57,698 due to accounts receivable. We had a positive change of $6,944 due to prepaid expenses and a positive change of $7,928 due to security deposit and other assets. We had a positive change of $29,458 due to accounts payable and accrued expenses.In the year ended December 31, 2019, we spent $102 in other non-current assets and have a net cash inflow $68,940 on the disposal of subsidiary, resulting in net cash provided by investing activities of $68,838 for the year.In the year ended December 31, 2018, we spent $1,517 on the acquisition of fixed assets, resulting in net cash used in investing activities of $1,517 for the year.For the year ended December 31, 2019, we had net cash provided by financial activities of $274,867 due to advances from related parties.For the year ended December 31, 2018, we had net cash provided by financial activities of $301,897 due to advances from related parties.We will need to raise additional capital through equity or debt financings. However, we cannot be certain that such capital (from SeD or third parties) will be available to us or whether such capital will be available on a term that is acceptable to us. Any such financing likely would be dilutive to existing stockholders and could result in significant financial and operating covenants that would negatively impact our business. If we are unable to raise sufficient additional capital on acceptable terms, we will have insufficient funds to operate our business and pursue our business plan.Consistent with Section 144 of Delaware General Corporation Law, it is our current policy that all transactions between us and our officers, directors and their affiliates will be entered into only if such transactions are approved by a majority of the disinterested directors, are approved by vote of the stockholders, or are fair to us as corporation as of the time it is authorized, approved or ratified by the board. We will conduct an appropriate review of all related party transactions on an ongoing basis.Critical Accounting PoliciesOur discussion and analysis of the financial condition and results of operations are based upon the Company’s financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for revenue recognition, allowance for doubtful accounts, inventory reserves and income taxes. These policies require that we make estimates in the preparation of our financial statements as of a given date.Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.Revenue recognitionAccounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“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. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The Company adopted this new standard on January 1, 2018 under the modified retrospective method to all contracts not completed as of January 1, 2018 and the adoption did not have a material effect on our financial statements but we expanded our disclosures related to contracts with customers below.
19

Revenue is recognized when (or as) the Company transfers promised goods or services to its customers in amounts that reflect the consideration to which the Company expects to be entitled to in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and transfers over control of the promised goods or services to its customers. Costs to obtain or fulfill a contract are expensed as incurred.Disaggregation of RevenueWe generate revenue from a project involving provision of services and web/software development for customers. In respect to the provision of services, the agreements are less than one year with cancellable clause and customers are typically billed on a monthly basis. The following table depicts the disaggregation of revenue according to revenue type and is consistent with how we evaluate our financial performance:
For the year ended December 31,
2019

Provision Web /
of Software
Services Development Total

Primary Geographical Markets

Continuing operations
North America $- $- $-
Asia – – –
$- $- $-

Discontinued operations
Asia $- $- $-
$- $- $-

Timing of Revenue Recognition
Goods transferred at a point in time $- $- $-
Services transferred over time – – –
$- $- $-

For the year ended December 31,
2018

Provision Web /
of Software
Services Development Total

Primary Geographical Markets
Continuing operations
North America $115,135 $- $115,135
Asia – 25,517 25,517
$115,135$25,517$140,652

Discontinued operations
Asia $- $7,325$7,325
$- $7,325$7,325

Timing of Revenue Recognition
Goods transferred at a point in time $- $32,842$32,842
Services transferred over time 115,135 – 115,135
$115,135$32,842$147,977

20

Contract assets and contract liabilitiesBased on our contracts, we usually invoice our customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our contracts do not give rise to contract assets or liabilities under ASC 606. Accounts receivable are recorded when the right to consideration becomes unconditional.Remaining performance obligationsAs of December 31, 2019, the aggregate amount of the transaction price allocated to the remaining performance obligation is $0.Income taxesCurrent income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics.The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. The Group did not recognize any income tax due to uncertain tax position or incur any interest and penalties related to potential underpaid income tax expenses for the years ended December 31, 2019 or 2018, respectively.Recent Accounting PronouncementsRecent accounting pronouncementsOn Feb. 25, 2016, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) (the Update). The ASU requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. In July 2018, the FASB issued ASU 2018-10 and ASU 2018-11, Codification Improvements to Topic 842, Leases, amending various aspects of Topic 842. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.Topic 842 is effective for annual and interim periods beginning in the first quarter 2019, with early adoption permitted. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. We have adopted the new standard on January 1, 2019 and use the effective date as our date of initial application.The new standard provides a number of optional practical expedients in transition. We elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs, and we do not expect to elect the use-of-hindsight.The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. For those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also elected the practical expedient to not separate lease and non-lease components for all of our leases.The adoption of Topic 842 had no material impact on the Company.
21

In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from accumulated Other Comprehensive Income, or ASU 2018-02, which requires the reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects arising from the change in the reduction of the U.S. federal statutory income tax rate to 21% from 35%. ASU 2018-02 is effective for interim and annual periods beginning after December 15, 2018. We have adopted ASU 2018-02 on January 1, 2019. The adoption of this Update had no material effect on the Company.In June 2018, the FASB issued Accounting Standards Update No. 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Some of the areas for simplification apply only to nonpublic entities. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. We have adopted ASU 2018-07 on January 1, 2019. The adoption of this Update had no material effect on the Company.Off -Balance Sheet ArrangementsAs of December 31, 2019, we do not have any off-balance sheet arrangements, as defined under applicable SEC rule.© Edgar Online, source Glimpses

Original Source