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
March 31, 2022and 2021. 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 this report.
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 Regionof 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. Forward-Looking Statements Statements in the following discussion and throughout this registration statement that are not historical in nature are "forward-looking statements." You can identify forward-looking statements by the use of words such as "expect," "anticipate," "estimate," "may," "will," "should," "intend," "believe," and similar expressions. Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk and we can give no assurances that our expectations will prove to be correct. Actual results could differ from those described in this registration statement because of numerous factors, many of which are beyond our control. These factors include, without limitation, those described under Item 1A "Risk Factors." We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this registration statement or to reflect actual outcomes. Please see "Forward Looking Statements" at the beginning of this report.
The following discussion of our financial condition and results of operations should be read in conjunction with our combined and consolidated financial statements and accompanying notes and other financial information contained elsewhere in this report.
We are not required to obtain permission from the Chinese authorities to operate or issue securities to foreign investors.
We are currently at the market introduction phase as we are preparing to launch our first batch of smart chargers to the market. For the years ended
March 31, 2022and 2021, we reported a net loss of $60,166and $133,331, respectively. As of March 31, 2022, we had current assets of $91,269and current liabilities of $1,887,152. As of March 31, 2021, we had current assets of $107,492and current liabilities of $1,844,578. 34 Our financial statements for the years ended March 31, 2022and 2021 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. We operate through our wholly-owned subsidiary Powertech Corporation Limited, a limited liability company organized under the laws of Hong Kong. We currently provide solutions for other companies who are in the fields of developing high power, high voltage power supply and wireless charging technologies. We are currently preparing trial sales of our 65W AC-DC Type C PD chargers, USB-C multiport hub, USB-C mini hub, 65W power bank with 30,000mAh and other accessories through our online store. Results of Operations
Comparison of the years ended
The following table sets forth certain operational data for the years indicated: Fiscal Years Ended March 31, 2022 2021 Revenue, net
$ 385,406 $ 77,389Cost of revenue (68,046 ) (40,555 ) Gross profit 317,360 36,834 Operating expenses: Research and development expenses (59,385 ) (94,966 ) Sales and marketing expenses (915 ) - General and administrative expenses (317,226 ) (78,707 ) Loss from operation (60,166 ) (136,839 ) Other income, net - 3,508 Loss before income taxes (60,166 ) (133,331 ) Income tax expense - - Net loss $ (60,166 ) $ (133,331 )Revenue
During the year ended
Year ended March 31, 2022 March 31, 2022 Percentage Accounts Customer Revenues of revenues receivable TLD Optoelectronic Technology Limited
$ 385,406100% $ - 35
During the year ended
Year ended March 31, 2021 March 31, 2021 Percentage Accounts Customer Revenues of revenues receivable Intelligent Media (
Hong Kong) Company Limited (related party) $ 77,389100% $ 38,587Cost of Revenue Cost of revenue for the years ended March 31, 2022and 2021, was $68,046and $40,555, respectively. The increase was primarily attributable to the allocation to direct staff cost associated with R&D of the wireless charging project.
Gross Profit We achieved a gross profit of
$317,360and $36,834for the years ended March 31, 2022and 2021, respectively. The increase in gross profit was attributable to an increase in revenue from our research businesses.
Research and development (“R&D”) expenses
Research and development expenses was
$59,385and $94,966for the years ended March 31, 2022and 2021, respectively. The decrease in expenses was primarily attributable to the decrease in R&D expenses associate with the wireless charging project, and allocation to direct cost associated with R&D support being rendered in revenue generating activities. Sales and Marketing Expenses
Sales and marketing expenses was
$915and $0for the years ended March 31, 2022and 2021, respectively. The expenses primarily include costs related to public relations and promotional expenses.
General and administrative (“G&A”) expenses
General and administrative expenses was
$317,226and $78,707for the years ended March 31, 2022and 2021, respectively. These expenses primarily include consulting fees, personnel related expenses, as well as costs incurred on other professional fees incurred in connection with general operations of the Company. The G&A expenses increased by approximately $238,519in the year ended March 31, 2022from $78,707in the year of 2021. The increase was primarily attributable to the increase in professional fees and salaries. Income Tax Expense
No income tax expense incurred during the year ended
Net loss As a result of the above, we reported net loss of
$60,166for the year ended March 31, 2022, as compared to $133,331for the year ended March 31,2021, a decrease was mainly attributable to market acceptance of our products and services, which led to revenue growth in the business operation. 36
Cash and capital resources
The following table summarizes the main components of our cash flows for the years ended
March 31, 20222021
Net cash provided by (used in) operating activities
Net cash used in investing activities
(13,097 ) Net cash (used in) provided by financing activities (103,654 ) 220,420
Net cash provided by (used in) operating activities
For the year ended
March 31, 2022, net cash provided by operating activities was $86,113, which consisted primarily of a net loss of $60,166, an increase in inventories of $9,252, an increase in deposits, prepayments and other receivables of $41,144, and a decrease of lease liabilities of $39,871, offset by a decrease in accounts receivable, related party of $38,541, an increase in accrued liabilities and other payables of $153,643, plus non-cash items such as, depreciation of $38,685, amortization of $4,308and non-cash lease expenses
$1,369. For the year ended March 31, 2021, net cash used in operating activities was $187,108, which consisted primarily of a net loss of $133,331, an increase in prepayments and deposits of $9,021, and increase in accounts receivable, related party of $38,587, an increase in inventories of $8,424, and a decrease of lease liabilities of $40,242, offset by an increase in accrued liabilities and other payables of $1,413, plus non-cash items such as, depreciation of $38,477and non-cash lease expenses of $2,607.
We expect to continue to rely on cash generated from our existing shareholder financing and private placements of our securities to fund our operations and future acquisitions.
For the year ended
For the year ended
For the year ended
For the year ended
We expect to incur significantly greater expenses in the near future as we expand our business or enter into strategic partnerships. We also expect our technology and development, sales and marketing expenses to increase as we enhance our e-commerce platform and spend more efforts in building up customers and communities and incur additional costs in investors and partnerships relationship for long-term corporate development. During the year, we did not pay 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 foreseeable future. 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 may include the sale of equity securities, which include common stock sold in private transactions, capital leases and short-term and long-term debts. While we believe that we will obtain external financing and the existing shareholders will continue to provide the additional cash to meet our obligations as they become due, 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 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 production, 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 operations.
If we cannot raise additional funds, we will have to cease our business activities. As a result, our common stock investors would lose their entire investment.
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 2023 to be significantly higher than 2022. As of
March 31, 2022, we had an accumulated deficit of $6,568,493. 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 March 31, 2022: Less than More than 5
Contractual Obligations Total 1 year 1-3 Years 3-5 Years Years $ $ $ $ $ Amounts due to related parties 1,683,063 1,683,063 - - - Tax obligation - - - - - Operating lease liability 38,697 38,697 Other contractual liabilities (1) 165,392 165,392 - - - Commercial commitments Bank loan repayment - - - - - Total obligations 1,887,152 1,887,152 - - -
(1) Includes all obligations included in “Accounts payable and other payables” in current liabilities of the “Consolidated balance sheet” which are contractually fixed as to their due date and amount.
Off-balance sheet arrangements
We do not participate in any off-balance sheet transactions. We have no warranties or obligations other than those arising from normal business dealings.
Significant Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in
the United Statesrequires 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. · Basis of presentation
These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in
· 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 year include the valuation and useful lives of intangible assets and deferred tax valuation allowance. · Basis of consolidation
The consolidated financial statements include the accounts of KRFG and its subsidiaries. All material intercompany balances and transactions within the Company have been eliminated on consolidation.
· 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 consolidated financial statements. For the years ended
March 31, 2022and 2021, the Company operates in one reportable operating segment in Hong Kong. · Cash and cash equivalents Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. 39 · Accounts receivable Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer's financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of March 31, 2022and 2021, there was no allowance for doubtful accounts. · Inventories
Inventories are stated at the lower of cost or market value (net realizable value), cost being determined on a first-in-first-out method. Costs include material costs. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. As of
March 31, 2022and 2021, the Company did not record an allowance for obsolete inventories, nor have there been any write-offs. · Intangible assets Intangible assets consist of trademarks and trade names. The intangible assets are stated at the purchase cost and are amortized based on their economic benefits expected to be realized and assessed for impairment annually. There was no impairment of intangible assets identified for the years ended March 31,
2022 and 2021. · Property and equipment
Property, plant and equipment are recorded at cost less accumulated amortization and accumulated impairment losses, if any. Depreciation is calculated on a 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 lives Office equipment 3 years Furniture and fixtures 3 years Computer equipment 3 years Expenditures for repair and maintenance are expensed as incurred. When assets have been 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 operations. · Website development costs The Company accounts for its website development costs in accordance with ASC 350-50, Website Development Costs. These costs, if any, are included in intangible assets in the accompanying consolidated financial statements. Upgrades or enhancements that add functionality are capitalized while other costs during the operating stage are expensed as incurred. The Company amortizes the capitalized website development costs over an estimated useful life of five years. 40 · 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 property and equipment owned and held 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 ended
March 31, 2022and 2021. · 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 or services.
The Corporation applies the following five steps to determine the appropriate amount of revenue to recognize when fulfilling 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. The Company's services revenue is derived from performing the research and development and technology development for the customers under fixed-price contracts. On fixed-price contracts that are expected not more than one year in duration, revenue is recognized pursuant to the proportional performance method based upon the proportion of actual costs incurred to the total estimated costs for the contract. The Company receives the periodic progress payments. Costs incurred in connection with the research and development, are included in cost of revenue. Product development costs charged to billable projects are recorded as cost of revenue, which consist primarily of costs associated with personnel, supplies and materials. · Government subsidies
A government subsidy is not recognized until there is reasonable assurance that: (a) the enterprise will comply with the conditions attached to the grant; and (b) the grant will be received. When the Company receives government subsidies but the conditions attached to the grants have not been fulfilled, such government subsidies are deferred and recorded under other payables and accrued expenses, and other long-term liability. The classification of short-term or long-term liabilities is depended on the management's expectation of when the conditions attached to the grant can be fulfilled. For the years ended
March 31, 2022and 2021, the Company received government subsidies of $0and $3,482, which are recognized as subsidy income in the consolidated statements of operations. 41 · Income taxes The Company adopted the ASC 740 Income taxprovisions 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 paragraph 740-10-25-13. 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. · Uncertain tax positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the years ended
March 31, 2022and 2021. · Net loss per share
The Company calculates net loss per share in accordance with ASC Topic 260, "Earnings per Share." Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. · 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 operations. The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company is operating in
Hong Kongand maintains its books and record in its local currency, Hong Kong Dollars ("HKD"), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, "Translation of Financial Statement", using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder's equity.
The conversion of amounts from HKD to US dollars has been made at the following exchange rates for the years ended
March 31, 2022 March 31,
Year-end HKD:US$ exchange rate 0.1277
Annualized average HKD:US$ exchange rate 0.1285 0.1290 42 · 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. · Leases 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 has chosen not to separate the rental elements and the other elements. Each rental component and related non-lease components are accounted for together as a single component.
· 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 is provided. · Related parties
The Company follows ASC 850-10,
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 interests. 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. 43 · Commitments and contingencies The Company follows the ASC 450-20, Commitmentsto 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. 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 disclosed. 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 or
liabilities at the closing date.
Level 2 Pricing inputs other than quoted prices in active markets included in
level 1, which are either directly or indirectly observable at
Level 3 Pricing inputs that are generally observable and unsubstantiated inputs
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 highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and lowest priority to unobservable inputs. If the inputs used to value the financial assets and financial liabilities fall under more than one level described above, the categorization is based on the lowest level that is significant for measuring the fair value of the instrument.
44 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. · Recent accounting pronouncements 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 became 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. The adoption of ASU 2021-04 on April 1, 2022will 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 does not believe that the future adoption of such pronouncements could have a material impact on its financial condition or results of operations.
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