Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
Forward Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable
terminology. These statements are only predictions.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual
results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. Except as required by applicable law, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.
Our unaudited interim consolidated financial statements for the three and nine months ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020 are expressed in US
dollars and are prepared in accordance with generally accepted accounting principles in the United States of America. They reflect all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are
necessary for fair presentation of our interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter. Our unaudited
consolidated financial statements and notes included therein have been prepared on a basis consistent with and should be read in conjunction with our audited financial statements and notes for the year ended December 31, 2020, as filed in our
annual report on Form 10-K.
The following discussion should be read in conjunction with our interim financial statements and the related notes that appear elsewhere in this quarterly report.
Business Overview
Organization and Corporate History
I-ON Digital Corp. (formerly known as I-ON Communications Corp.) was incorporated under the laws of the State of Delaware on June 18, 2013 as ALPINE 3 Inc. Alpine 3 Inc. was set up to serve
as a vehicle to effect an asset acquisition, merger, exchange of capital stock or other business combination with a domestic or foreign business. ALPINE 3 did not undertake any effort to cause a market to develop in its securities, either debt
or equity, before it successfully concluded a business combination. On April 4, 2014, The Michael J. Rapport Trust (the “Trust”) purchased 10,000,000 shares of common stock which was all of the outstanding shares of Alpine 3, Inc., and
subsequently changed the name to Evans Brewing Company Inc. (“EBC”) on May 29, 2014. On October 9, 2014 the Trust agreed to the cancellation of 9,600,000 of the shares of common stock that it had acquired and retained 400,000 shares of common
stock.
On October 15, 2014, Bayhawk and EBC entered into an Asset Purchase and Share Exchange Agreement (the “Agreement”), subject to receiving approval of the independent Bayhawk shareholders who
voted on the transaction. On September 17, 2015, the independent Bayhawk shareholders approved the agreement and Bayhawk sold to EBC and EBC purchased from Bayhawk assets of Bayhawk, including but not limited to the assets relating to the
Bayhawk Ales label and the Evans Brands (collectively, the “Transferred Assets”). Bayhawk retained ownership of 100% of the stock in Evans Brewing Co. (CA) (“Evans Brewing California”) which has the brewers license at City Brewery in Lacrosse,
WI. Based on the affirmative vote by the independent Bayhawk shareholders to approve the Asset Purchase transaction, EBC proceeded with the share exchange and tender offer to the Bayhawk shareholders, pursuant to which EBC offered to exchange
shares of EBC common stock for shares of Bayhawk common stock, on a one-for-one basis (the “Exchange Offer”). At the close of the share exchange on December 2, 2015, 4,033,863 Bayhawk shares were accepted and exchanged for 4,033,863 shares of
EBC common stock.
On January 25, 2018, Evans Brewing Company, Inc. consummated an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”), with I-ON Communications Co., Ltd., a company
organized under the laws of the Republic of Korea (South Korea) (“I-ON”) and I-ON Acquisition Corp., a wholly-owned subsidiary of the Company (“Acquisition”). Pursuant to the terms of the Merger Agreement, Acquisition merged with and into I-ON
in a statutory reverse triangular merger (the “Merger”) with I-ON surviving as a wholly-owned subsidiary of the Registrant. As consideration for the Merger, the Registrant agreed to issue the shareholders of I-ON (the “I-ON Holders”) an
aggregate of 26,000,000 shares of our Common Stock, in accordance with their pro rata ownership of I-ON capital stock. Following the Merger, the Registrant adopted the business plan of I-ON in information technology consultancy and software
development. On December 14, 2017, in connection with the Merger, the Company’s Board of Directors approved an amendment to its Certificate of Incorporation (the “Amendment”) to change its name to I-ON Communications Corp.
At the effective time of the Merger, our board of directors and officers were reconstituted by the appointment of Jae Cheol Oh as Chairman, Chief Executive Officer, and Chief Financial
Officer, Hong Rae Kim as Executive Director and Jae Ho Cho as Director. Michael Rapport resigned as President, Chief Executive Officer, and Chairman in connection with the Transaction and Evan Rapport resigned as Vice President and Director,
Kenneth Wiedrich resigned as Chief Financial Officer and Director and Kyle Leingang resigned as Secretary. Roy Robertson, Mark Lamb, Joe Ryan, and Kevin Hammons resigned as members of the Board of Directors and their respective committees.
On March 21, 2019, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to change the name of the Company to I-ON Digital Corp.
Following the Merger, as described more fully herein, the Company adopted the business plan of I-ON. I-ON was founded by Jae Cheol Oh, who currently serves as CEO. The Company’s roots are in
IT consultancy and software development. I-ON services South Korea’s enterprise content management system’s (CMS) market and specializes in advancing market-leading internet software applications to capitalize on rapidly growing market sectors.
After being awarded its first of numerous international patents in 2003, I-ON has since evolved into an industry-leading and recognized software developer and provider of on-premise and
cloud-based enterprise-class unstructured data management, digital experience and digital marketing software and solutions. I-ON’s portfolio of software and solutions serves the digital marketing and technology needs of organizations, enabling
clients to create, measure, and optimizes digital experiences for their audiences across marketing channels and devices. We believe these solutions help clients reduce the cost of content management and delivery, while increasing the return on
their investments in digital communication and marketing spend. As of its founding, the Company has serviced and continues to service over 1,000 blue-chip and middle-market clients across virtually all verticals in both private and public
sectors. The Company has meaningfully expanded its reach over the past decade and now currently markets, licenses and sells its products and services directly to clients in South Korea and Japan, as well as in Singapore, Malaysia, Indonesia,
Thailand, Vietnam, and the U.S. through value-added resellers and partnerships.
I-ON currently holds 6 international and over 20 domestic patents for both products and methodologies built into the 10 product offerings the Company currently has at market. These encompass
enterprise CMS, digital experience and service delivery software, digital marketing, smart mobility and analytics tools, and, more recently, energy management solutions as well as sports software and IT convergence services. Beginning in the
fourth quarter of 2018, the Company started endorsing its 7th generation cloud based Digital Experience (DXP) platform as a service offering known as ICE, which encompasses a more feature-rich front and back end CMS. The Company has designed
and developed industry-leading technologies that are compliant with global standards including GS (Good Software) and NET (New Excellent Technology). I-ON also holds numerous domestic and global industry awards, earning high rankings and
recognition from the likes of Gartner (Magic Quadrant 2014) and Red Herring (2014 Asia Top 100 Winner), among many others.
In addition to South Korea, Japan has particularly helped fuel I-ON’s growth over the past 10 years owing to the success of an exclusive licensing deal with Ashisuto, a large Japan-based
technology services firm that employs approximately 800 technical, engineering and marketing staff across 9 office locations. Ashisuto, which has provided technology services to Japan’s enterprises and government entities since 1973, currently
white labels and sells I-ON’s core CMS offering ICS6 to over 600 clients as NOREN 6.
As a result of global enterprise digital marketing trends and I-ON’s nearly 20 -year track record in South Korea, Japan and now, Southeast Asia, the Company’s objective is to continue to gain
market share in these markets. I-ON will continue to closely engage and consult with existing and prospective clients as their subject matter expert and digital strategist of choice across multiple touchpoints in the digital marketing and
technology ecosystem, helping Chief Marketing Officers (CMO) and Chief Information Officers (CIO) drive critical change and growth for their organizations.
I-ON has invested and continues to spend substantial revenue on research and development. The Company has over 100 employees as of December 31, 2020, approximately 90% of whom are considered
full-time. Research and development typically comprises of approximately 80 junior, mid to senior level engineers and developers, most of whom are based at the Company’ headquarters located at 15 Teheran-ro 10-gil, Gangnam-gu, Seoul, South
Korea, 06234.
Comparison of results of operations for the three months ended September 30, 2021 as compared to the three months ended
September 30, 2020
The following table sets forth selected items from our interim unaudited condensed consolidated statements of operations by dollar and as a percentage of our net sales for the periods
indicated:
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
September 30, 2020
|
|
|
Change
|
|
|
|
Amount
|
|
|
% of Revenue
|
|
|
Amount
|
|
|
% of Revenue
|
|
|
Amount
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
3,616,267
|
|
|
|
100.0
|
%
|
|
$
|
2,306,668
|
|
|
|
100.0
|
%
|
|
$
|
1,309,599
|
|
|
|
56.8
|
%
|
Cost of goods sold
|
|
|
2,494,644
|
|
|
|
69.0
|
%
|
|
|
1,497,499
|
|
|
|
64.9
|
%
|
|
|
997,145
|
|
|
|
66.6
|
%
|
Gross profit
|
|
|
1,121,623
|
|
|
|
31.0
|
%
|
|
|
809,169
|
|
|
|
35.1
|
%
|
|
|
312,454
|
|
|
|
38.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
239,108
|
|
|
|
6.6
|
%
|
|
|
96,932
|
|
|
|
4.2
|
%
|
|
|
142,176
|
|
|
|
146.7
|
%
|
General and administrative
|
|
|
491,738
|
|
|
|
13.6
|
%
|
|
|
389,215
|
|
|
|
16.9
|
%
|
|
|
102,523
|
|
|
|
26.3
|
%
|
Total operating expense
|
|
|
730,846
|
|
|
|
20.2
|
%
|
|
|
486,147
|
|
|
|
21.1
|
%
|
|
|
244,699
|
|
|
|
50.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
390,777
|
|
|
|
10.8
|
%
|
|
|
323,022
|
|
|
|
14.0
|
%
|
|
|
67,755
|
|
|
|
21.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
9,072
|
|
|
|
0.3
|
%
|
|
|
10,037
|
|
|
|
0.4
|
%
|
|
|
(965
|
)
|
|
|
-9.6
|
%
|
Foreign currency transaction gain(loss)
|
|
|
(6,953
|
)
|
|
|
-0.2
|
%
|
|
|
(535
|
)
|
|
|
0.0
|
%
|
|
|
(6,418
|
)
|
|
|
1,199.6
|
%
|
Miscellaneous income (expense), net
|
|
|
12,603
|
|
|
|
0.3
|
%
|
|
|
(8,977
|
)
|
|
|
-0.4
|
%
|
|
|
21,580
|
|
|
|
-240.4
|
%
|
Interest expense
|
|
|
(2,512
|
)
|
|
|
-0.1
|
%
|
|
|
(5,194
|
)
|
|
|
-0.2
|
%
|
|
|
2,682
|
|
|
|
-51.6
|
%
|
Total other income (expense), net
|
|
|
12,210
|
|
|
|
0.3
|
%
|
|
|
(4,669
|
)
|
|
|
-0.2
|
%
|
|
|
16,879
|
|
|
|
-361.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes, and non-controlling interest
|
|
|
402,987
|
|
|
|
11.1
|
%
|
|
|
318,353
|
|
|
|
13.8
|
%
|
|
|
84,634
|
|
|
|
26.6
|
%
|
Provision for income tax
|
|
|
(579,022
|
)
|
|
|
-16.0
|
%
|
|
|
24,748
|
|
|
|
1.1
|
%
|
|
|
(603,990
|
)
|
|
|
-2,439.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before non-controlling interest
|
|
|
982,009
|
|
|
|
27.2
|
%
|
|
|
293,605
|
|
|
|
12.7
|
%
|
|
|
688,404
|
|
|
|
234.54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest income
|
|
|
89
|
|
|
|
0.0
|
%
|
|
|
25
|
|
|
|
0.0
|
%
|
|
|
64
|
|
|
|
256.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ 981,920
|
|
|
|
27.2
|
%
|
|
$ 293,580
|
|
|
|
12.7
|
%
|
|
$688,340
|
|
|
|
234.57
|
%
|
Net sales increased by $5,961,795, or 95.2%, to $12,224,926 for the nine months ended September 30, 2021 from $6,263,131 for the nine months ended
September 30, 2020. The change in net sales reflected the following:
- Solution installation revenue increased by approximately $2,602,130 from approximately $551,238 for the nine months ended September 30, 2020 to
$3,153,367 for the nine months ended September 30, 2021 due to the Company focusing in sales effort in this area and signing up new projects with various customers since September 30, 2020 to September 30, 2021.
- Maintenance revenue increased by approximately $681,601 from approximately $1,186,796 for the nine months ended September 30, 2020 to $1,868,398
for the nine months ended September 30, 2021 due to increase in new contracts.
- License customization revenue increased by approximately $2,647,171 from approximately $3,284,696 for the nine months ended September 30, 2020 to
$5,931,867 for the nine months ended September 30, 2021 due to Company focusing in sales effort in this area and signing up new projects with various customers since September 30, 2020 to September 30, 2021.
Cost of Goods Sold
Cost of goods sold increased by $4,390,730 or 103.6%, to $8,626,293 for the nine months ended September 30, 2021 from $4,235,923 for the nine
months ended September 30, 2020. The increase was primarily due to using outsourcing services.
Gross Profit (Loss)
Gross profit increased by $1,571,425, or 77.5%, to gross profit of $3,598,633,or 29.4% of net sales, for the nine months ended September 30, 2021,
from gross profit of $2,027,208, or 32.4% of net sales, for the nine months ended September 30, 2020.
The increase was due to an increase in sales.
Research and development expenses increased by $334,271 or 66.7%, to $835,364 for the nine months ended September 30, 2021 from $501,093 for the
nine months ended September 30, 2020. The increase was mainly due to increase in headcount computer programmers at the research and development department.
General and Administrative
General and administrative expenses increased by $258,366 or 19.7%, to $1,569,211 for the nine months ended September 30, 2021 from $1,310,845
for the nine months ended September 30, 2020. The increase was due to increase in commission fees, service fees, and training expense.
Other income (expense) change was primarily due to increase in miscellaneous income from Japan.
Change in tax provision was not material.
Comparison of results of operations for the nine months ended September 30, 2021 as compared to the nine months ended
September 30, 2020
The following table sets forth selected items from our interim unaudited condensed consolidated statements of operations by dollar and as a percentage of our net sales for the periods
indicated:
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
September 30, 2020
|
|
|
Change
|
|
|
|
Amount
|
|
|
% of Revenue
|
|
|
Amount
|
|
|
% of Revenue
|
|
|
Amount
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
12,224,926
|
|
|
|
100.0
|
%
|
|
$
|
6,263,131
|
|
|
|
100.0
|
%
|
|
$
|
5,961,795
|
|
|
|
95.2
|
%
|
Cost of goods sold
|
|
|
8,626,293
|
|
|
|
70.6
|
%
|
|
|
4,235,923
|
|
|
|
67.6
|
%
|
|
|
4,390,370
|
|
|
|
103.6
|
%
|
Gross profit
|
|
|
3,598,633
|
|
|
|
29.4
|
%
|
|
|
2,027,208
|
|
|
|
32.4
|
%
|
|
|
1,571,425
|
|
|
|
77.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
835,364
|
|
|
|
6.8
|
%
|
|
|
501,093
|
|
|
|
8.0
|
%
|
|
|
334,271
|
|
|
|
66.7
|
%
|
General and administrative
|
|
|
1,569,211
|
|
|
|
12.8
|
%
|
|
|
1,310,845
|
|
|
|
20.9
|
%
|
|
|
258,366
|
|
|
|
19.7
|
%
|
Total operating expense
|
|
|
2,404,575
|
|
|
|
19.7
|
%
|
|
|
1,811,938
|
|
|
|
28.9
|
%
|
|
|
592,637
|
|
|
|
32.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
1,194,058
|
|
|
|
9.8
|
%
|
|
|
215,270
|
|
|
|
3.4
|
%
|
|
|
978,788
|
|
|
|
454.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
32,595
|
|
|
|
0.3
|
%
|
|
|
33,007
|
|
|
|
0.5
|
%
|
|
|
(412
|
)
|
|
|
-1.2
|
%
|
Foreign currency transaction gain(loss)
|
|
|
(29,912
|
)
|
|
|
-0.2
|
%
|
|
|
10,443
|
|
|
|
0.2
|
%
|
|
|
(40,355
|
)
|
|
|
-386.4
|
%
|
Miscellaneous income, net
|
|
|
23,622
|
|
|
|
0.2
|
%
|
|
|
50,229
|
|
|
|
0.8
|
%
|
|
|
(26,607
|
)
|
|
|
-53.0
|
%
|
Interest expense
|
|
|
(10,866
|
)
|
|
|
-0.1
|
%
|
|
|
(18,470
|
)
|
|
|
-0.3
|
%
|
|
|
7,604
|
|
|
|
-41.2
|
%
|
Total other income, net
|
|
|
15,439
|
|
|
|
0.1
|
%
|
|
|
75,209
|
|
|
|
1.2
|
%
|
|
|
(59,770
|
)
|
|
|
-79.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes, and non-controlling interest
|
|
|
1,209,497
|
|
|
|
9.9
|
%
|
|
|
290,479
|
|
|
|
4.6
|
%
|
|
|
919,018
|
|
|
|
316.4
|
%
|
Provision for income tax
|
|
|
(506,438
|
)
|
|
|
-4.1
|
%
|
|
|
132,933
|
|
|
|
2.1
|
%
|
|
|
(639,392
|
)
|
|
|
-481.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before non-controlling interest
|
|
|
1,715,936
|
|
|
|
14.0
|
%
|
|
|
157,546
|
|
|
|
2.5
|
%
|
|
|
1,558,390
|
|
|
|
989.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest income (loss)
|
|
|
(409
|
)
|
|
|
0.0
|
%
|
|
|
422
|
|
|
|
0.0
|
%
|
|
|
(831
|
)
|
|
|
-196.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ 1,016,345
|
|
|
|
14.0
|
%
|
|
$ 157,124
|
|
|
|
2.5
|
%
|
|
$1,559,221
|
|
|
|
992.4
|
%
|
Net sales increased by $5,953,784, or 95.1%, to $12,216,915 for the nine months ended September 30, 2021 from $6,263,131 for the nine months ended September 30, 2020. The change in net sales
reflected the following:
- Solution installation revenue increased by approximately $2,602,130 from approximately $551,238 for the nine months ended September 30, 2020 to $3,153,367 for the nine months ended
September 30, 2021 due to the Company focusing in sales effort in this area and signing up new projects with various customers since September 30, 2020 to September 30, 2021.
- Maintenance revenue increased by approximately $681,601 from approximately $1,186,796 for the nine months ended September 30, 2020 to $1,868,398 for the nine months ended September 30, 2021
due to increase in new contracts.
- License customization revenue increased by approximately $2,647,171 from approximately $3,284,696 for the nine months ended September 30, 2020 to $5,931,867 for the nine months ended
September 30, 2021 due to Company focusing in sales effort in this area and signing up new projects with various customers since September 30, 2020 to September 30, 2021.
Cost of goods sold increased by $4,219,290 or 99.6%, to $8,455,923 for the nine months ended September 30, 2021 from $4,235,923 for the nine
months ended September 30, 2020. The increase was primarily due to using outsourcing services.
Gross Profit (Loss)
Gross profit increased by $1,734,494, or 85.6%, to gross profit of $3,761,702,or 30.8% of net sales, for the nine months ended September 30, 2021, from gross profit of $2,027,208, or 32.4% of
net sales, for the nine months ended September 30, 2020.
The increase was due to an increase in sales.
Research and development expenses increased by $334,271 or 66.7%, to $835,364 for the nine months ended September 30, 2021 from $501,093 for
the nine months ended September 30, 2020. The increase was mainly due to increase in headcount computer programmers at the research and development department.
General and Administrative
General and administrative expenses increased by $230,109 or 17.6%, to $1,540,954 for the nine months ended September 30, 2021 from $1,310,845 for the nine months ended September 30, 2020.
The increase was due to increase in commission fees, service fees, and training expense.
Other income (expense) change was primarily due to increase in foreign currency transaction loss.
Change in tax provision was not material.
Liquidity and Capital Resources
At September 30, 2021, the Company had cash and cash equivalents of $2,509,229. We estimate that we will require up to $3,000,000 of capital for the next twelve months of operations. We
estimate that our expenses will be comprised primarily of general expenses including particularly marketing, research and development costs, overhead, legal and accounting fees.
|
|
Nine Months Ended September 30,
|
|
Changes
|
|
|
|
2021
|
|
|
2020
|
|
Amount
|
|
%
|
|
Net cash provided by (used in) operating activities
|
|
|
(1,053,228
|
)
|
|
|
1,790,454
|
|
(2,843,682)
|
|
|
-158.8
|
%
|
Net cash used in investing activities
|
|
|
(48,523
|
)
|
|
|
(43,302
|
)
|
(5,221)
|
|
|
12.1
|
%
|
Net cash provided by (used in) financing activities
|
|
|
(297,463
|
)
|
|
|
391,064
|
|
(688,527)
|
|
|
-176.1
|
%
|
Effect of foreign currency translation on cash and cash equivalents
|
|
|
(626,102
|
)
|
|
|
14,093
|
|
(640,195)
|
|
|
-4,542,0
|
%
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(2,025,316
|
)
|
|
|
2,152,309
|
|
(4,177,625)
|
|
|
-194.1
|
%
|
Cash used in operating activities for the nine months ended September 30, 2021 was $1,053,228 compared to cash provided by $1,790,454 for the nine
months ended September 30, 2020. The cash used in operating activities was due to primarily decrease in account receivable of ($1,461,280) for the nine months ended September 30, 2021 compared to account receivable of $1,644,070 for the nine
months ended September 30, 2020.
Cash used in investing activities for the nine months ended September 30, 2021 was $48,524, compared to $43,302 for the nine months ended September
30, 2020, an increase of $5,222, or approximately 12.1%. The increase in cash used in investing activities was mainly due to net increase in purchase of investments of $4,421 for the nine months ended September 30, 2021 compared to $41,641 for
the nine months ended September 30, 2020.
Cash used in financing activities for the nine months ended September 30, 2021 was $297,463 compared to cash provided by $391,064 for the nine
months ended September 30, 2020. The cash used in financing activities was due to primarily payment on short-term borrowings of $132,625 for the nine months ended September 30, 2021 compared to $0 for the nine months ended September 30, 2020
and decrease of net receipt of government grants of $11,969 for the nine months ended September 30, 2021 compared to $505,552 for the nine months ended September 30, 2020.
Critical Accounting Policies
Our unaudited condensed consolidated interim financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. A
complete summary of these policies is included in Note 2 of the notes to our unaudited interim condensed consolidated financial statements. We have identified below the accounting policies that are of particular importance in the presentation
of our financial position, results of operations and cash flows, and which require the application of significant judgment by our management. Management has carefully considered the recently issued accounting pronouncements that altered
generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.