NOTES
TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
U.S. dollars, unless stated otherwise)
Note 1 – Nature of business and organization
Infobird Co., Ltd (“Infobird Cayman” or
the “Company”) is a holding company incorporated on March 26, 2020 under the laws of the Cayman Islands. The Company has no
substantive operations other than holding all of the outstanding share capital of Infobird International Limited (“Infobird HK”)
established under the laws of Hong Kong on April 21, 2020.
Infobird HK is also a holding company holding all
of the outstanding equity of Infobird Digital Technology (Beijing) Co., Ltd (“Infobird WFOE”) which was established on May
20, 2020 under the laws of the People’s Republic of China (“PRC” or “China”).
The Company, through its variable interest entity
(“VIE”), Beijing Infobird Software Co., Ltd (“Infobird Beijing”), a PRC limited liability company established
on October 26, 2001, and through its subsidiaries, is a software-as-a-service (“SaaS”) provider of innovative AI-powered (artificial
intelligence enabled) customer engagement solutions in China. The Company primarily provides standard and customized customer relationship
management cloud-based services, such as SaaS, and business process outsourcing (“BPO”), services to its clients.
On October 17, 2013, Infobird Beijing established
its 90.18% owned subsidiary, Guiyang Infobird Cloud Computing Co., Ltd (“Infobird Guiyang”), a PRC limited liability company.
Infobird Guiyang also engages in software development and mainly provides BPO services to its customers. On June 20, 2012, Infobird Beijing
established a 99.95% owned subsidiary, Anhui Xinlijia E-commerce Co., Ltd (formerly known as Anhui Infobird Software Information Technology
Co., Ltd) (“Infobird Anhui”), a PRC limited liability company. Infobird Anhui also engages in software development and mainly
provides cloud services and technology solutions to customers.
On May 27, 2020, Infobird Cayman completed a reorganization
of entities under common control of its then existing shareholders, who collectively owned all of the equity interests of Infobird Cayman
prior to the reorganization. Infobird Cayman and Infobird HK were established as the holding companies of Infobird WFOE. Infobird WFOE
is the primary beneficiary for accounting purposes of Infobird Beijing and its subsidiaries. All of these entities are under common control
which results in the consolidation of Infobird Beijing and subsidiaries which have been accounted for as a reorganization of entities
under common control at carrying value. Infobird WFOE is deemed to have a controlling financial interest and be the primary beneficiary
for accounting purposes of Infobird Beijing because it has both of the following characteristics: (1) the power to direct activities
at Infobird Beijing that most significantly impact such entity’s economic performance, and (2) the right to receive benefits from
Infobird Beijing that could potentially be significant to such entity. The unaudited interim condensed consolidated financial statements
are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying
unaudited interim condensed consolidated financial statements of Infobird Cayman.
On December
2, 2021, Infobird Beijing completed its 51% acquisition of Shanghai Qishuo Technology Inc. (“Shanghai Qishuo”), a PRC limited
liability company and a SaaS provider of big data analysis to retail stores aimed at operation improvement, for approximately $1.3 million
(RMB 8.6 million). Shanghai Qishuo is a fast-growing provider of consumer product and retail store digitalization solutions.
The accompanying unaudited interim condensed consolidated
financial statements reflect the activities of Infobird Cayman and each of the following entities:
INFOBIRD
CO., LTD AND SUBSIDIARIES
NOTES
TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
U.S. dollars, unless stated otherwise)
Schedule of consolidated financial statements |
|
|
|
|
Name |
|
Background |
|
Ownership |
Infobird
International Limited (“Infobird HK”) |
|
● A Hong Kong
company
● Incorporated on April 21, 2020
● A holding company |
|
100% owned by Infobird
Cayman |
Infobird Digital Technology
(Beijing) Co., Ltd (“Infobird WFOE”) |
|
● A PRC limited
liability company and deemed a wholly foreign
owned enterprise (“WFOE”)
● Incorporated on May 20, 2020
● Registered capital of $15,000,000 (RMB 106,392,000)
● A holding company |
|
100% owned by Infobird
HK |
Beijing Infobird Software
Co., Ltd (“Infobird Beijing”) |
|
● A PRC limited
liability company
● Incorporated on October 26, 2001
● Registered capital of $2,417,947 (RMB 16,624,597)
● Software developing that provides software as a service (SaaS) |
|
VIE of Infobird WFOE |
Guiyang Infobird Cloud
Computing Co., Ltd
(“Infobird Guiyang”) |
|
● A PRC limited
liability company
● Incorporated on October 17, 2013
● Registered capital of $1,777,645 (RMB 12,222,200)
● Software developing that provides software as a service (SaaS) |
|
90.18% owned by Infobird
Beijing |
Anhui Xinlijia E-commerce
Co., Ltd (formerly known as Anhui Infobird Software Information Technology Co., Ltd) (“Infobird Anhui”) |
|
● A PRC limited
liability company
● Incorporated on June 20, 2012
● Registered capital of $1,454,440 (RMB 10,000,000)
● Software developing that provides software as a service (SaaS) |
|
99.95% owned by Infobird
Beijing |
Shanghai Qishuo Technology
Inc. (“Shanghai Qishuo”) |
|
● A PRC limited
liability company
● Incorporated on April 10, 2014
● Registered capital of $156,922 (RMB 1,000,000)
● Software developing that provides software as a service (SaaS) |
|
51% owned by Infobird Beijing |
Contractual Arrangements
Due to legal restrictions on foreign ownership and
investment in, among other areas, the development and operation of information technology in China, including cloud computing and big
data analytics, the Company operates its businesses in which foreign investment is restricted or prohibited in the PRC through certain
PRC domestic companies. Neither the Company nor its subsidiaries own any equity interest in Infobird Beijing. As such, Infobird Beijing
is controlled through contractual arrangements in lieu of direct equity ownership by the Company or any of its subsidiaries. Such contractual
arrangements consist of a series of three agreements, along with shareholders’ powers of attorney (“POAs”) and spousal
consent letters (collectively the “Contractual Arrangements”, which were signed on May 27, 2020).
The significant terms of the Contractual Arrangements
are as follows:
Exclusive Business Cooperation Agreement
Pursuant to the exclusive business cooperation agreement
between Infobird WFOE and Infobird Beijing, Infobird WFOE has the exclusive right to provide Infobird Beijing with technical support services,
consulting services and other services, including technical support and training, business management consultation, consultation, collection
and research of technology and market information, marketing and promotion services, customer order management and customer services,
lease equipment or properties, provide legitimate rights to use software license, provide deployment, maintenances and upgrade of software,
design installation, daily management, maintenance and updating network system, hardware and database, and other services requested by
Infobird Beijing from time to time to the extent permitted under PRC law. In exchange, Infobird WFOE is entitled to a service fee that
equals to all of the consolidated net income. The service fee may be adjusted by Infobird WFOE based on the actual scope of services rendered
by Infobird WFOE and the operational needs and expanding demands of Infobird Beijing. Pursuant to the exclusive business cooperation agreement,
the service fees may be adjusted based on the actual scope of services rendered by Infobird WFOE and the operational needs of Infobird
Beijing.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
The exclusive business cooperation agreement remains
in effect unless terminated in accordance with the following provision of the agreement or terminated in writing by Infobird WFOE.
During the term of the exclusive business cooperation
agreement, Infobird WFOE and Infobird Beijing shall renew the operation term prior to the expiration thereof so as to enable the exclusive
business cooperation agreement to remain effective. The exclusive business cooperation agreement shall be terminated upon the expiration
of the operation term of either Infobird WFOE or Infobird Beijing if the application for renewal of the operation term is not approved
by relevant government authorities. If an application for renewal of the operation term is not approved, according to the PRC Company
Law, the expiration of the operation term may lead to the dissolution and cancellation of such PRC company.
Exclusive Option Agreements
Pursuant to the exclusive option agreements among
Infobird WFOE, Infobird Beijing and the shareholders who collectively owned all of Infobird Beijing, such shareholders jointly and severally
grant Infobird WFOE an option to purchase their equity interests in Infobird Beijing. The purchase price shall be the lowest price then
permitted under applicable PRC laws. Infobird WFOE or its designated person may exercise such option at any time to purchase all or part
of the equity interests in Infobird Beijing until it has acquired all equity interests of Infobird Beijing, which is irrevocable during
the term of the agreements.
The exclusive option agreements remains in effect
until all equity interest held by shareholders in Infobird Beijing has been transferred or assigned to Infobird WFOE and/or any other
person designated by the Infobird WFOE in accordance with such agreement.
Equity Interest Pledge Agreements
Pursuant to the equity interest pledge agreements,
among Infobird WFOE, Infobird Beijing, and the shareholders who collectively owned all of Infobird Beijing, such shareholders pledge all
of the equity interests in Infobird Beijing to Infobird WFOE as collateral to secure the obligations of Infobird Beijing under the exclusive
business cooperation agreement and exclusive option agreements. These shareholders are prohibited from transferring the pledged equity
interests without the prior consent of Infobird WFOE unless transferring the equity interests to Infobird WFOE or its designated person
in accordance to the exclusive option agreements.
The equity interest pledge agreements shall come into
force the date on which the pledged interests are recorded, which is within three (3) days after signing of the agreements on May 27,
2020, under Infobird Beijing’s register of shareholders and are registered with the competent Administration for Market Regulation
of Infobird Beijing until all of the obligations to Infobird WFOE have been fulfilled completely by Infobird Beijing. Nineteen shareholders
of Infobird Beijing have registered the pledges of equity interest with the competent Civil Code of the PRC and Infobird Beijing intends
to register the pledge of equity interest of one shareholder with the competent Administration for Market Regulation once practicable.
Shareholders’ Powers of Attorney (“POAs”)
Pursuant to the shareholders’ POAs, the shareholders
of Infobird Beijing give Infobird WFOE an irrevocable proxy to act on their behalf on all matters pertaining to Infobird Beijing and to
exercise all of their rights as shareholders of Infobird Beijing, including the (i) right to attend shareholders meeting; (ii) to exercise
voting rights and all of the other rights including but not limited to the sale or transfer or pledge or disposition of the shares held
in part or in whole; and (iii) designate and appoint on behalf of the shareholder the legal representative, the directors, supervisors,
the chief executive officer and other senior management members of Infobird Beijing, and to sign transfer documents and any other documents
in relation to the fulfillment of the obligations under the exclusive option agreements and the equity interest pledge agreements. The
shareholders’ POAs shall remain in effect while the shareholders of Infobird Beijing hold the equity interests in Infobird Beijing.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Spousal Consent Letters
Pursuant to the spousal consent letters, the spouses
of the shareholders of Infobird Beijing commit that they have no right to make any assertions in connection with the equity interests
of Infobird Beijing, which are held by the shareholders. In the event that the spouses obtain any equity interests of Infobird Beijing,
which are held by the shareholders, for any reasons, the spouses of the shareholders shall be bound by the exclusive option agreement,
the equity interest pledge agreement, the shareholder POA and the exclusive business cooperation agreement and comply with the obligations
thereunder as a shareholder of Infobird Beijing. The letters are irrevocable and shall not be withdrawn without the consent of Infobird
WFOE.
Based on the foregoing contractual arrangements, which
grant Infobird WFOE effective control of Infobird Beijing and subsidiaries and enable Infobird WFOE to receive all of their expected residual
returns, the Company accounts for Infobird Beijing as a VIE. Accordingly, the Company consolidates the accounts of Infobird Beijing and
subsidiaries for the periods presented herein, in accordance with Regulation S-X-3A-02 promulgated by the Securities Exchange Commission
(“SEC”), and Accounting Standards Codification (“ASC”) 810-10, Consolidation.
Note 2 – Summary of significant accounting policies
Liquidity
In assessing liquidity, the Company monitors and analyzes
cash on-hand and operating expenditure commitments. The Company’s liquidity needs are to meet working capital requirements and operating
expense obligations.
Historically, the Company finances its
operations through internally generated cash, short-term loans and payable from related parties and equity financing. As of June 30,
2022, the Company had approximately $1.4 1,420,792
million in cash which primarily consists of cash on hand and bank deposits, which are unrestricted as to withdrawal and use and
are deposited with banks in China and Hong Kong. The Company also had approximately $6.7
6,657,270 million in short term investment which are investment in wealth management products which can be redeemed upon three
months’ notice and approximately $0.6
million from escrow account which will become unrestricted in April 2023. The Company’s working capital was approximately $1.7
million at June 30, 2022, approximately $1.7 million of which was deferred revenue which the Company expects to realize and the
Company does not expect to make any significant refund based on historical experience. Therefore, the Company’s working
capital excluding deferred revenue was approximately $3.3 million. The Company will require a minimum of approximately $1.5 million
over the next twelve months upon issuance of this unaudited interim condensed consolidated financial
statements to operate at its current level, either from operating activities or funding.
If the Company is unable to realize its assets within
the normal operating cycle of a twelve (12) month period, the Company may have to consider supplementing its available sources of funds
through the following sources:
● |
other available sources of financing from PRC banks and other financial institutions; |
● |
financial support from the Company’s related parties and shareholders; and |
● |
issuance of convertible debt. |
Based on the above considerations, the Company’s
management is of the opinion that it has sufficient funds to meet the Company’s working capital requirements and debt obligations
as they become due over the next twelve (12) months.
Basis of presentation
The accompanying
unaudited interim condensed consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
and applicable rules and regulations of the SEC, regarding financial reporting, and include all normal and recurring adjustments that
management of the Company considers necessary for a fair presentation of its financial position and operation results. Certain information
and footnote disclosures normally included in financial statements prepared in conformity with U.S. GAAP have been condensed or omitted
pursuant to such rules and regulations. The results of operations are not necessarily indicative of results to be expected for any other
interim period or for the full year. Accordingly, these statements should be read in conjunction with the Company’s audited financial
statements as of and for the years ended December 31, 2021.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Principles of consolidation
The unaudited interim condensed consolidated financial
statements include the financial statements of the Company and its subsidiaries, which include the wholly-foreign owned enterprise and
VIE over which the Company exercises control and, when applicable, entities for which the Company has a controlling financial interest
or is the primary beneficiary for accounting purposes. Infobird WFOE is deemed to have a controlling financial interest and be the primary
beneficiary for accounting purposes of Infobird Beijing because it has both of the following characteristics: (1) the power to direct
activities at Infobird Beijing that most significantly impact such entity’s economic performance, and (2) the right to receive benefits
from Infobird Beijing that could potentially be significant to such entity. All transactions and balances among the Company and its subsidiaries
have been eliminated upon consolidation.
Use of estimates and assumptions
The preparation of unaudited interim condensed consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the unaudited interim condensed consolidated
financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates
reflected in the Company’s unaudited interim condensed consolidated financial statements include the useful lives of property and
equipment and intangible assets, software development costs, impairment of long-lived assets, allowance for doubtful accounts, revenue
recognition, share-based compensation, allowance for deferred tax assets and uncertain tax position. The inputs into the Company’s
judgments and estimates consider the economic implications of COVID-19 on the Company’s critical and significant accounting estimates.
Actual results could differ from these estimates.
Foreign currency translation and transaction
The reporting currency of the Company is the U.S.
dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities
are translated at the noon buying rate in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal
Reserve Bank of New York at the end of the period. The statement of income accounts are translated at the average translation rates and
the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated
other comprehensive income (loss). Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated
in a currency other than the functional currency are included in the results of operations as incurred.
Translation adjustments included in accumulated other
comprehensive income (loss) amounted to $445,710 and $592,218 as of June 30, 2022 and December 31, 2021, respectively. The balance sheet
amounts, with the exception of equity at June 30, 2022 and December 31, 2021 were translated at 6.6981 RMB and 6.3726 RMB, respectively.
The equity accounts were stated at their historical rate. The average translation rates applied to statement of income accounts for the
six months ended June 30, 2022 and 2021 were 6.4791 RMB and 6.4702 RMB to $1.00, respectively. Cash flows are also translated at average
translation rates for the periods, therefore, amounts reported on the statements of cash flows will not necessarily agree with changes
in the corresponding balances on the consolidated balance sheets.
Cash
Cash consists of cash on hand, demand deposits and
time deposits placed with banks or other financial institutions and have original maturities of less than three (3) months.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Accounts receivable, net
Accounts receivable include trade accounts due from
customers. Accounts are considered overdue after thirty (30) days from payment due date. In establishing the required allowance for doubtful
accounts, management considers historical collection experience, aging of the receivables, the economic environment, industry trend analysis,
and the credit history and financial conditions of the customers. Management reviews its receivables on a regular basis to determine if
the bad debt allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written off against allowance
for doubtful accounts after management has determined that the likelihood of collection is not probable. As of June 30, 2022 and December
31, 2021, allowance for doubtful accounts were $3,900,525 and $2,478,341, respectively.
Other receivables, net
Other receivables primarily include advances to employees
and other deposits. Management regularly reviews the aging of receivables and changes in payment trends and records allowances when management
believes collection of amounts due are at risk. Accounts considered uncollectable are written off against allowances after exhaustive
efforts at collection are made. As of June 30, 2022 and December 31, 2021, allowance for doubtful accounts were $7,384 and $7,761, respectively.
Prepayments
Prepayments are cash deposited or advanced to suppliers
for future service rendering. The amounts are refundable and bear no interest. For any advances to suppliers determined by management
that such advances will not be in receipts or refundable, the Company will recognize an allowance account to reserve such balances. Management
reviews its advances to suppliers on a regular basis to determine if the allowance is adequate, and adjusts the allowance when necessary.
Delinquent account balances are written off against allowance for doubtful accounts after management has determined that the likelihood
of collection is not probable. Management continues to evaluate the reasonableness of the valuation allowance policy and update it if
necessary. As of June 30, 2022 and December 31, 2021, no allowance for the doubtful accounts were deemed necessary.
Short term investments
Short-term investments are investments in
wealth management product with underlying in bonds offered by private entities and other equity products. The investments can be
redeemed upon three months’ notice and their carrying values approximate their fair values. The gain (loss) from sale of any
investments and fair value change are recognized in the statements of income and comprehensive income. Loss from short term
investments for six months ended June 30, 2022 and 2021 amounted to $434,669,
and 0 nil, respectively.
Escrow
In connection with the closing of the Company’s initial public offering
in April 2021, $600,000 of the net proceeds received from the initial public offering was deposited in an escrow account, and the Company
is restricted to withdraw for twenty-four months after the closing date of the initial public offering. The fund will become unrestricted
and available to the Company in April, 2023.
Long-term deposits
Long-term deposits primarily included rental deposits,
and deposits made by the Company to vendors to secure the service contract. The deposits are generally more than one year and the amounts
are refundable and bear no interest. For any deposits determined by management that such deposit will not be in receipts or refundable,
the Company will recognize an allowance account to reserve such balances. Management reviews the long- term deposits on a regular basis
to determine if the allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written off against
allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. Management continues
to evaluate the reasonableness of the valuation allowance policy and update it if necessary. As of June 30, 2022 and December 31, 2021,
allowance for doubtful accounts were nil 0 and $63,083, respectively.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Property and equipment, net
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful
lives are as follows:
Schedule of Property and equipment useful lives |
|
|
|
|
Useful Life |
Leasehold improvements |
|
Shorter
of the remaining lease
terms or estimated useful lives |
Electronic devices |
|
3-5 years |
Office equipment, fixtures and furniture |
|
3-5 years |
Automobile |
|
3-5 years |
Computer and network equipment |
|
3-5 years |
The cost and related accumulated depreciation of assets
sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income and
comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments,
which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to
determine whether subsequent events and circumstances warrant revised estimates of useful lives.
Construction-in-progress represents contractor and
labor costs, design fees and inspection fees in connection with the construction of the Company’s building for a cloud computing
facility in Guiyang, China. As a result of further delays of the project related to local governments’ limitation of economic activities
in response to the resurgence of COVID-19 variants, the Company recorded full impairment of its construction in progress for the year
ended December 31, 2021.
Intangible assets
The Company’s intangible assets with definite
useful lives primarily consist of licensed software, capitalized development costs, platform system, and land-use rights. The Company
amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment.
The Company typically amortizes its intangible assets with definite useful lives on a straight-line basis over the shorter of the contractual
terms or the estimated useful lives.
Intangible assets are stated at cost less accumulated
amortization. Amortization is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful
lives are as follows:
Schedule of Intangible assets useful lives |
|
|
|
|
Useful Life |
Licensed software |
|
5 years |
Capitalized development
cost |
|
5 years |
Platform development |
|
5 years |
Customer relationship |
|
4 years |
Land use right |
|
40 years |
Capitalized development costs
The Company follows the provisions of ASC 350-40,
“Internal Use Software”, to capitalize certain direct development costs associated with internal-used software. ASC 350-40
provides guidance on capitalization of the costs incurred for computer software developed or obtained for internal use. The Company expenses
all costs incurred during the preliminary project stage of its development, and capitalizes costs incurred during the application development
stage. Costs incurred relating to upgrades and enhancements to the application are capitalized if it is determined that these upgrades
or enhancements add additional functionality to the application. Development costs cease capitalization upon completion of all substantial
testing when the software is substantially complete and ready for its intended use and are amortized on a straight-line basis over the
estimated useful life, which is generally five years. Amortization of internal-use software begins when the software is ready for its
intended use. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes
in circumstances occur that could impact the recoverability of these assets.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
If, after the development of internal-use
software is completed, the Company decides to market the software, proceeds received from the license of the computer software, net
of direct incremental costs of marketing, such as commissions, software reproduction costs, warranty and service obligations, and
installation costs, shall be applied against the carrying amount of that software. As of June 30, 2022 and December 31,
2021, the Company applied nil 0 against carrying amount of capitalized software that was subsequently sold to customers as the
software were fully amortized.
Land use rights
All land in the PRC is owned by the government. However,
the government grants “land use rights.” This land use rights are for 40 years and expire in 2055. The Company amortizes the
land use rights over the forty-year term of the land use rights on a straight-line basis. The carrying value of the land use rights was
reduced by government grant received when the conditions stipulated under the grant were fulfilled. As a result of delay due to impact
of COVID-19, the Company had fully impaired the remaining balance of land use right for the year ended December 31, 2022 as a result of
further delays of the project related to aforementioned impairment in construction in progress.
Impairment for long-lived assets
Long-lived assets, including property and equipment
and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant
adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not
be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected
to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset
plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified,
the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when
available and appropriate, to comparable market values. As of June 30, 2022 and December 31, 2021, approximately $3.7 million of long-lived
assets impairment were recognized including approximately $2.0 million of construction-in-progress, $0.4 million of land use rights due
to continuing delay of construction as impacted by COVID -19 and $1.3 impairment on the intangible assets as the carrying value of
the long-lived assets exceed future cashflows expected to be generated from the assets. No additional impairment of long-lived assets
was record for the six months ended June 30, 2022.
Business combination
The purchase price of an acquired company is allocated
between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values,
with the residual of the purchase price recorded as goodwill. Transaction costs associated with business combinations are expensed as
incurred and are included in general and administrative expenses in the Company’s consolidated statements of operations. The results
of operations of the acquired business are included in the Company’s operating results from the date of acquisition.
Goodwill
Goodwill represents the excess of the consideration
paid for an acquisition over the fair value of the net identifiable assets of the acquired subsidiaries at the date of acquisition. Goodwill
is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred.
Goodwill is carried at cost less accumulated impairment losses. If impairment exists, goodwill is immediately written off to its fair
value and the loss is recognized in the consolidated statements of operations and comprehensive loss. Impairment losses on goodwill are
not reversed.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
The Company reviews the carrying value of intangible
assets not subject to amortization, including goodwill, to determine whether impairment may exist annually or more frequently if events
and circumstances indicate that it is more likely than not that an impairment has occurred. The Company has the option to assess qualitative
factors to determine whether it is necessary to perform further impairment testing in accordance with ASC 350-20, as amended by ASU 2017-04.
If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of the reporting
unit is less than its carrying amount, then the impairment test described below is required. The Company compares the fair values of each
reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill
is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, impairment is recognized for the
difference, limited to the amount of goodwill recognized for the reporting unit. Estimating fair value is performed by utilizing various
valuation techniques, with the primary technique being a discounted cash flow.
Fair value measurement
The accounting standard regarding fair value of financial
instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments
held by the Company.
The accounting standards define fair value, establish
a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures.
The three levels are defined as follow:
● |
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
● |
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. |
● |
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. |
Financial instruments included in current assets and
current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the
short period of time between the origination of such instruments and their expected realization and their current market rates of interest.
Government Grants
Government grants primarily consist of financial grants
received from local governments for operating a business in their jurisdictions and compliance with specific policies promoted by the
local governments. There are no defined rules and regulations to govern the criteria necessary for companies to receive such benefits,
and the amount of financial subsidy is determined at the discretion of the relevant government authorities. Government grants of non-operating
nature and with no further conditions to be met are recorded as non-operating income in “Other income, net” when received.
The government grants are related to acquisition of assets. The grants are recorded as “deferred government grants” included
in the accrued expenses and other current liabilities line item in the consolidated balance sheets when received. Once the Company fulfills
the conditions stipulated under the grant, the grant amount is deducted from the carrying amount of the asset with a corresponding reduction
in the deferred government grant balance.
Noncontrolling Interests
The Company’s noncontrolling interests represent
the minority shareholders’ ownership interests related to the Company’s subsidiaries, including 0.05% for Infobird Anhui as
of June 30, 2022 and December 31, 2021, 9.82% for Infobird Guiyang as of June 30, 2022 and December 31, 2021 and 49% for Shanghai Qishuo
as of June 30, 2022 and December 31, 2021. The noncontrolling interests are presented in the unaudited interim condensed consolidated
balance sheets, separately from equity attributable to the shareholders of the Company. Noncontrolling interests in the results of the
Company’s operation are presented on the unaudited interim consolidated statements of operations and comprehensive loss as allocations
of the total income or loss for the six months ended June 30, 2022 and 2021 between noncontrolling interests holders and the shareholders
of the Company.
Noncontrolling interests consist of the following:
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Schedule of Noncontrolling interests |
| | | |
| | |
|
For the six months ended June 30, | |
For the year ended December 31, |
|
2022 | |
2021 |
|
| |
|
Infobird Guiyang |
$ | (97,690 | ) | |
$ | (73,283 | ) |
Infobird Anhui |
| (73 | ) | |
| (12 | ) |
Shanghai Qishuo |
| 889,183 | | |
| 923,447 | |
Total |
$ | 791,420 | | |
$ | 850,152 | |
Revenue recognition
The Company recognized its revenue under Accounting
Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606). The Company recognizes revenue which represents
the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled
in such exchange. The Company identifies contractual performance obligations and determines whether revenue should be recognized at a
point in time or over time, based on when control of goods and services are provided to customers.
The Company’s contracts with customers generally
do not include a general right of return relative to the delivered products or services.
The Company applied practical expedient when sales
taxes were collected from customers, meaning sales tax is recorded net of revenue, instead of cost of revenue, which are subsequently
remitted to governmental authorities and are excluded from the transaction price.
Revenues are generated from (1) customized cloud-based services, (2) standard cloud-based
services, (3) BPO services, (4) business integration solution services, and (5) professional services and other.
(1) Revenue from customized cloud-based services
The Company derives its customized cloud-based revenues
from subscription services which are comprised of subscription fee from granting customers’ access to the customized SaaS, voice/data
plan, which includes telecommunication usage such as telephone calls and messaging that our customers can subscribe for, and technical
support. The provision of customized SaaS, voice/data plan and technical support is considered as one performance obligation as the services
provided are not distinct within the context of the contract whereas the customer can only obtain benefit when the services are provided
together. The Company uses monthly utilization records based on the number of user accounts subscribed for by customers, an output measure,
to recognize revenue over time as there is simultaneous consumption and delivery of services.
(2) Revenue from standard cloud-based services
The Company also derives its standard cloud-based
revenues from subscription services which are comprised of subscription fee from granting customers access to its software through the
internet. The Company’s standard cloud-based solutions represent a series of services such as calling, voice recording and technical
support. These services are made available to the customer continuously throughout the contractual period, however, the extent to which
the customer uses the services may vary at the customers’ discretion. The standard cloud-based services are considered to have one
single performance obligation. The Company uses monthly utilization records based on the number of user accounts subscribed for by customers,
an output measure, to recognize revenue over time as there is simultaneous consumption and delivery of services.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
The Company also enters into contracts with customers
where the customers pay a fixed fee to access a fixed number of user accounts over the subscription period as specified in the contracts;
therefore, the customers receive and consume the benefits of the cloud services throughout the subscription period so revenue is recognized
ratably over the contractual subscription period that the services are delivered, beginning on the date the service is made available
to the customers.
Contract performance periods generally are one year,
and pursuant to the contracts, full payments are generally collected in advance, with payment to be made within three months after execution
of the contract. Contracts generally do not contain significant financing components or variable consideration.
(3) Revenue from BPO services
The Company provides BPO services to operate the call
centers for its customers. Customers using these services are not permitted to take possession of the Company’s software and the
contract term is for a defined period, where customers pay a monthly service fee. These services are considered as one performance obligation
as the customers do not obtain benefit for each separate service. Revenues are recognized over time over contractual period using the
time elapsed output method as BPO services are provided.
Contract performance periods generally are one year,
and pursuant to the contracts, full payments for several months of services are generally collected in advance. Contracts generally do
not contain significant financing components or variable consideration.
(4) Business Integration Solution Services
Revenue
Since 2020, the Company provides business integration
solution services to its customers and expects to expand its customer base from such services and develop the customers to become subscribers
to SaaS services with software upgrades and continued services once they become more familiar with the Company’s products. The services
include sale of the Company’s software license or development of customized software to fit the customers’ needs and sales
of hardware integrated with the Company’s software.
- |
Revenue from
software development |
The Company generates revenue from development and
sale of software license including (1) standard software and (2) customized software developed per customers’ specifications. Contract
terms from each software development contract generally do not contain significant financing components or variable consideration.
Standard software is developed and offered as standard
cloud-based services. The Company sold the license for standard software because some customers show obvious preference of software licensing
over software-as-a-service, for reasons such as concerns about the safety of cloud-based services and potential higher price of subscription
in total compared with one-time on-premise fee. Therefore, as part of the Company’s sales and market strategy, it offers licenses
for its standard software to allow the customers to first start utilizing its products in their daily operation and then aim to evolve
them to become subscribers with its standard cloud-based services to enjoy benefits of software upgrades and continued services. Licenses
for standard software provide the customer with a right to use the software. Standard software licenses are typically made available to
customers with immediate access to the software. The Company recognizes revenue for these standard software licenses at the point in time
when the customer has access and thus control over the software.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Customized software is software developed catering
to the needs of specific customers who require initial customization or development of new solutions before subscription to our cloud-based
services. For example, the Company has entered into a two-stage agreement to provide services to a municipal government agency to
first develop an information technology system and customize and configure its cloud call center into the IT system, and then provide
cloud-based services and charge subscription fees. Because the customized software the Company developed are to solve certain business
pain points in a certain scenario within or across industries, once developed, it plans to further apply them in serving other customers
that share similar needs and business models. The Company aims to replicate its initial customization and development and achieve economies
of scale after it delivers its products to more customers within the same industry. Contract terms are generally less than one year. The
design, development, and installation of the customized software is considered as one performance obligation as these promises are not
separately identifiable as the customers do not obtain benefits from these services on their own. The Company’s software development
service contracts are generally recognized at a point in time when the customer accepted the customized software with satisfactory testing
result.
- |
Revenue from sales of hardware with software integration |
The Company is responsible for providing hardware
procurement, software design and implementation, installation and maintenance services in order to fulfill the contract. Design, integration
and installation of hardware and software are considered as one performance obligation, as the customer does not benefit from each individual
service on its own stand, but instead is benefited by the provision of these services as a whole. For contracts that the Company have
no alternative use of the customized system without incurring significant additional costs and when the Company has right to payment for
performance completed, the Company recognized revenue over time based on measurement of progress towards completion using output methods
when it could appropriately measure the customization progress towards completion by reaching certain milestones specified in contracts.
For other contracts that the Company is only entitled to payment after completion and inspection of project, revenue is recognized at
a point in time after completion of software implementation and hardware installation, and the transfer of control to the customer.
Certain business integration solution services contracts
also require the Company to provide post-contract services (“PCS”) which include maintenance and technical support. The provision
of maintenance and technical support is considered one single performance obligation because maintenance and technical support are not
distinct within the context of the contract. The Company is obligated to provide a single, continuous, integrated service throughout
the contract term. As such, the Company allocates the contract price between revenue from business integration solution services and provision
of PCS, using the expected cost plus margin approach. The expected cost plus margin approach requires the Company to forecast the expected
costs of satisfying the performance obligation and then add a reasonable margin for that good or service. Revenue allocated to PCS is
deferred and recognized on a straight-line basis over the estimated period PCS are expected to be provided. For the six months ended June
30, 2022 and 2021, $0 and $51,137 were allocated to PCS, respectively.
For contracts that involved third party service providers,
the Company assesses if the Company controls the goods and services before they were transferred to the customer or if the Company’s
responsibility is merely to facilitate the provision of goods and service to the customer. For products and goods that were directly shipped
from the vendor to the customer and the vendor is responsible for providing services including installing, set up and warranty services
after completion of the project, the Company records revenue from these contracts on a net basis when the services are provided and controlled
by the third party service provider.
(5) Professional services and other revenues
The Company also generates revenue from data analysis
services and other professional services where a separate contract is entered into with the customer when the customer needs the product
or services.
The service revenue from data analysis service is
recognized based on the service performed, an output measure, over the contractual period.
Other professional services consist primarily of technical
consulting services. The Company recognizes revenue ratably over the contractual period as the customer simultaneously receives and consumes
the benefits as the Company performs.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Contract performance periods generally range from
month to month, completion of service to one year, and payment terms are generally prepaid to 30 days. Contracts generally do not contain
significant financing components or variable consideration.
Contract balances
The Company records receivables related to revenue
when it has an unconditional right to invoice and receive payment.
The Company invoices its customers for its services
on a monthly basis. Deferred revenue consists primarily of customer billings made in advance of performance obligations being satisfied
and revenue being recognized. The Company’s disaggregated revenue streams are summarized and disclosed in Note 17.
Cost of revenues
Cost of revenues consists primarily of personnel costs
(including salaries, social insurance and benefits) for employees involved with the Company’s operations and product support; third
party service fees including cloud and data usage, hosting fees and amortization and depreciation expenses associated with capitalized
software, platform system and hardware. In addition, cost of revenues also includes cost of hardware, outsourcing contracted customer
service representatives, customer surveys, contracted software development costs and allocated shared costs, primarily including facilities,
information technology and security costs.
Warranty
The Company generally provides limited warranties
for work performed under its business integration solution contracts. At the time a sale is recognized, the Company records estimated
future warranty costs under ASC 460. Such estimated costs for warranties are estimated at completion and these warrants are not service
warranties separately sold by the Company. Generally, the estimated claim rates of warranty are based on actual warranty experience or
Company’s best estimate. As of June 30, 2022 and December 31, 2021, accrued warranty liability amounted to $13,824 and $14,530 is
classified in the caption “other payables and accrued liabilities” in the accompanying unaudited interim condensed consolidated
balance sheets.
Advertising costs
Advertising costs amounted to $214,793 and $45,490
for the six months ended June 30, 2022 and 2021, respectively. Advertising costs are expensed as incurred and included in selling expenses.
Leases
The Company adopted FASB ASU 2016-02, “Leases”
(Topic 842) for the year ended December 31, 2021, and elected the practical expedients that does not require the Company to reassess:
(1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing
leases and (3) initial direct costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted
to make an accounting policy election not to recognize lease assets and liabilities. The Company also adopted the practical expedient
that allows lessees to treat the lease and non-lease components of a lease as a single lease component. Upon adoption, the Company recognized
approximately $0.3 million right of use (“ROU”) assets and same amount of lease liabilities based on the present value of
the future minimum rental payments of leases, using an incremental borrowing rate of 4.8% based on the duration of lease terms.
Operating lease ROU assets and lease liabilities are
recognized at the adoption date or the commencement date, whichever is earlier, based on the present value of lease payments over the
lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company use its incremental borrowing
rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing
rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments,
in a similar economic environment and over a similar term.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Lease terms used to calculate the present value of
lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable
certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating
lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception,
therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Its leases generally
do not provide a residual guarantee. The operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line
basis over the lease term.
The Company reviews the impairment of its ROU assets
consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets
when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment
of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax
cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested
asset group and include the associated operating lease payments in the undiscounted future pre-tax cashflows.
Research and development
Research and development expenses include salaries
and other compensation-related expenses to the Company’s research and product development personnel, as well as office rental, depreciation,
amortization and related expenses for the Company’s research and product development team. The Company recognizes software development
costs in accordance with ASC 350-40 “Software—internal use software”. The Company expenses all costs that are incurred
in connection with the planning and implementation phases of development, and costs that are associated with maintenance of the existing
websites or software for internal use. Certain costs associated with developing internal-use software are capitalized when such costs
are incurred within the application development stage of software development.
The Company also follows the provisions of FASB ASC
985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20
requires that software development costs incurred in conjunction with product development be charged to research and development expense
until technological feasibility is established using either the detail design approach or working model approach. Thereafter, until the
product is released for sale, software development costs should be capitalized and reported at the lower of unamortized cost or net realizable
value of the related product. For the six months ended June 30, 2022 and for the year ended December 31, 2021, no software costs were
capitalized due to the short timing between technological feasibility and release of software.
Share-based Compensation
The Company accounts for share-based compensation
awards in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment
transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation
expense over the requisite service period. The Company accounts for share-based compensation awards to non-employees in accordance with
FASB ASC Topic 718 amended by ASU 2018-07. Under FASB ASC Topic 718, share-based compensation granted to non-employees has been determined
as the fair value of the consideration received or the fair value of equity instrument issued, whichever is more reliably measured and
is recognized as an expense as the goods or services are received.
Value added taxes
Revenue represents the invoiced value of service,
net of value added tax (“VAT”). The VAT is based on gross sales price and VAT rates range up to 6%, depending on the type
of service provided. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their
output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in tax payable. All of the VAT returns filed by the
Company’s subsidiaries in China have been and remain subject to examination by the tax authorities for five years from the date
of filing.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Income taxes
The Company accounts for current income taxes in accordance
with the laws of the relevant tax authorities. The charge for taxation is based on the results for the fiscal year as adjusted for items
which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance
sheet date.
Deferred taxes are accounted for using the asset and
liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in
the unaudited interim condensed consolidated financial statements and the corresponding tax basis used in the computation of assessable
tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized
to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled.
Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity,
in which case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes
are provided for in accordance with the laws of the relevant taxing authorities. The Company presents deferred tax assets and liabilities
as noncurrent in the balance sheet based on an analysis of each taxpaying component within a jurisdiction.
An uncertain tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. No penalties and
interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. PRC tax returns filed
in 2021 and 2020 are subject to examination by any applicable tax authorities.
Comprehensive loss
Comprehensive loss consists of two components, net
loss and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under
GAAP are recorded as an element of equity but are excluded from net income. Other comprehensive income (loss) consists of a foreign currency
translation adjustment resulting from the Company not using the U.S. dollar as its functional currencies.
Loss per share
The Company computes earnings (loss) per share (“EPS”)
in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is
measured as net income divided by the weighted average ordinary shares outstanding for the period. Diluted EPS presents the dilutive effect
on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted
at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e.,
those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the six months
ended June 30, 2022 and 2021, there were no dilutive shares.
Warrants
The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing
Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers
whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480,
and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed
to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement”
in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires
the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while
the warrants are outstanding.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
For issued or modified warrants that meet all of the
criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time
of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to
be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The Company evaluated its warrants and
determined the warrants are indexed to the Company’s own stock as the warrants do not contain any exercise contingencies, the
warrants’ settlement amount equals the difference between the fair value of the Company’s common stock price and the warrant
contract strike price and the only variables which could affect the settlement amount would be inputs to the fair value for a fixed-for-fixed
option on equity shares. The Company also analyzed ASC 815-40-25 to determine whether the warrant contracts should be classified in stockholders’
equity in the Company’s statements of financial condition and concluded that the warrant contracts meet all of the criteria for
classification as equity as the Company is not require to net settle. Based on this analysis, the Company determined the warrant contracts
should be classified as equity.
Employee benefits
The full-time employees of the Company are entitled
to staff welfare benefits including medical care, housing fund, pension benefits, unemployment insurance and other welfare, which are
PRC government mandated defined contribution plans. The Company is required to accrue for these benefits based on certain percentages
of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash
contributions to the state-sponsored plans out of the amounts accrued. Total expenses for the plans were $486,517 and $292,730 for the
six months ended June 30, 2022 and 2021, respectively.
Statutory reserves
Pursuant to the laws applicable to the PRC, PRC entities
must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain
cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the
aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC
(“PRC GAAP”) at each year-end). If the Company has accumulated loss from prior periods, the Company is able to use the current
period net income after tax to offset against the accumulate loss.
Segment reporting
ASC 280, “Segment Reporting”, establishes
standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure
as well as information about geographical areas, business segments and major customers in financial statements for detailing the Company’s
business segments.
Recently issued accounting pronouncements
In May 2019, the FASB issued ASU 2019-05, which is
an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured
at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial
Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting
for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized
cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The
amendments in this ASU address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for
certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase
comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets.
Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13
while still providing financial statement users with decision-useful information. ASU 2019-05 is effective for the Company for annual
and interim reporting periods beginning January 1, 2023 after FASB delayed the effective date for non-public companies with ASU 2019-10.
The Company is currently evaluating the impact of this new standard on its unaudited interim condensed consolidated financial statements
and related disclosures.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
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)”. The amendments
in this Update provide the following guidance for a modification or an exchange of a freestanding equity-classified written call option
that is not within the scope of another Topic: (1) 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 as an exchange of the
original instrument for a new instrument. (2) 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 as follows: a. For a modification or an exchange that
is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements
(hereinafter, referred to as a “debt” or “debt instrument”), as the difference between the fair value of the modified
or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged. Specifically,
an entity should consider: a. An increase or a decrease in the fair value of the modified or exchanged written call option in applying
the 10 percent cash flow test and/or calculating the fees between debtor and creditor in accordance with Subtopic 470-50, Debt—Modifications
and Extinguishments. ii. An increase (but not a decrease) in the fair value of the modified or exchanged written call option in calculating
the third-party costs in accordance with Subtopic 470-50. b. For all other modifications or exchanges, as the excess, if any, of the fair
value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified
or exchanged. c. 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 on the basis of the substance of the transaction, in the same manner
as if cash had been paid as consideration, as follows: a. A financing transaction to raise equity. The effect should be recognized as
an equity issuance cost in accordance with the guidance in Topic 340, Other Assets and Deferred Costs. b. A financing transaction to raise
or modify debt. The effect should be recognized as a cost in accordance with the guidance in Topic 470, Debt, and Topic 835, Interest.
c. Other modifications or exchanges that are not related to financings or compensation for goods or services or other exchange 3 transactions
within the scope of another Topic. The effect should be recognized as a dividend. For entities that present EPS in accordance with Topic
260, that dividend should be an adjustment to net income (or net loss) in the basic EPS calculation. An entity should recognize the effect
of a modification or an exchange of a freestanding equity-classified written call option to compensate for goods or services in accordance
with the guidance in Topic 718, Compensation—Stock Compensation. In a multiple-element transaction (for example, one that includes
both debt financing and equity financing), the total effect of the modification should be allocated to the respective elements in the
transaction. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including
interim periods within those fiscal years. Adoption of this new update did not materially impact the Company’s unaudited interim
condensed consolidated financial statements and related disclosures after the Company’s evaluation.
Except as mentioned above, the Company does not believe
other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s
unaudited interim condensed consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.
Note 3 – Variable interest entity
On May 27, 2020, Infobird WFOE entered into the Contractual
Arrangements with Infobird Beijing. The significant terms of these Contractual Arrangements are summarized in “Note 1 – Nature
of business and organization” above. As a result, the Company classifies Infobird Beijing as a VIE which should be consolidated
based on the structure as described in Note 1.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
A VIE is an entity that has either a total equity
investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose
equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected
residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has
a controlling financial interest in a VIE is deemed to be the primary beneficiary for accounting purposes and must consolidate the VIE.
Infobird WFOE is deemed to have a controlling financial interest and be the primary beneficiary for accounting purposes of Infobird Beijing
because it has both of the following characteristics:
(1) |
The power to direct activities at Infobird Beijing that most significantly impact such entity’s economic performance, and |
|
|
(2) |
The right to receive benefits from Infobird Beijing that could potentially be significant to such entity. |
Pursuant to the Contractual Arrangements, Infobird
Beijing pays service fees equal to all of its net income to Infobird WFOE. The Contractual Arrangements are designed so that Infobird
Beijing operates for the benefit of Infobird WFOE and ultimately, the Company.
Under the Contractual Arrangements, the Company has
the power to direct activities of the VIEs and can have assets transferred out of the VIEs. Therefore, the Company considers that there
is no asset in the VIEs that can be used only to settle obligations of the VIEs, except for registered capital and PRC statutory reserves,
if any. As the VIEs are incorporated as limited liability companies under the Company Law of the PRC, creditors of the VIEs do not have
recourse to the general credit of the Company for any of the liabilities of the VIEs.
Accordingly, the accounts of Infobird Beijing are
consolidated in the accompanying unaudited interim condensed consolidated financial statements. In addition, its financial positions and
results of operations are included in the Company’s unaudited interim condensed consolidated financial statements.
The carrying amount of the VIEs’ consolidated
assets and liabilities are as follows:
Schedule of VIEs’ consolidated assets and liabilities |
| | | |
| | |
|
As of
June 30,
2022 | |
As of
December 31, 2021 |
|
| |
|
Current assets |
$ | 4,453,013 | | |
$ | 8,777,215 | |
Other assets |
| 8,172,692 | | |
| 7,573,750 | |
Total assets |
| 12,625,705 | | |
| 16,350,965 | |
Total liabilities |
| (23,339,531 | ) | |
| (21,063,981 | ) |
Net deficits |
$ | (10,713,826 | ) | |
$ | (4,713,016 | ) |
|
| | | |
| | |
|
As of
June 30,
2022 | |
As of
December 31,
2021 |
|
| |
|
Current liabilities: |
| | | |
| | |
Accounts payable |
$ | 396,942 | | |
$ | 500,742 | |
Bank loans - current |
| 3,621,883 | | |
| 4,496,883 | |
Other payables and accrued liabilities |
| 1,281,629 | | |
| 947,980 | |
Other payable - intercompany |
| 15,016,203 | | |
| 11,023,791 | |
Deferred revenue |
| 1,665,352 | | |
| 2,218,458 | |
Lease liabilities |
| 64,729 | | |
| 185,145 | |
Taxes payable |
| 1,173,135 | | |
| 1,381,440 | |
Total current liabilities |
| 23,219,873 | | |
| 20,754,439 | |
Deferred tax liabilities |
| 41,129 | | |
| 81,992 | |
Bank loans - noncurrent |
| 73,059 | | |
| 131,603 | |
Lease liabilities - noncurrent |
| 5,470 | | |
| 95,947 | |
Total liabilities |
$ | 23,339,531 | | |
$ | 21,063,981 | |
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
The summarized operating results of the VIEs are as
follows:
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2022 |
|
For the six months ended June 30, 2021 |
|
|
|
|
Operating revenues |
$ |
2,579,750 |
|
|
$ |
4,521,597 |
|
Gross profit |
|
919,104 |
|
|
|
777,116 |
|
Loss from operations |
|
(6,331,420 |
) |
|
|
(4,321,805 |
) |
Net loss |
$ |
(6,440,381 |
) |
|
$ |
(6,201,971 |
) |
Included 35,563 intercompany revenue recognized from Infobird WFOE for
the six months ended June 30, 2021.
Include $485,351 intercompany research and development expense incurred
from Infobird WFOE for the six months ended June 30, 2022.
Note 4 — Business combination
Acquisition of Shanghai Qishuo:
On December
2, 2021, Infobird Beijing completed its 51% acquisition of Shanghai Qishuo, a PRC limited liability company and a SaaS provider of big
data analysis to retail stores aimed at operation improvement, for approximately $1.3 million (RMB 8.6 million). Shanghai Qishuo is a
fast-growing provider of consumer product and retail store digitalization solutions. Before the acquisition, its business was mainly focused
on shoes and footwear retail stores digital operation transformation. Shanghai Qishuo is experienced in this market through serving leading
clothing brands in China and has leveraged its deep understanding of retail clothing
and footwear store operations.
The acquisition of Shanghai Qishuo will enable the
Company to further penetrate the consumer product and retail industries. The synergy of Shanghai Qishuo and the Company’s other
subsidiaries will allow the Company to combine industry-specific experiences and products to optimize the Company’s standardized
products and offer additional innovative solutions for real business problems.
The Company’s acquisition of Shanghai Qishuo
was accounted for as business combination in accordance with ASC 805. The Company then allocated the fair value of consideration of Shanghai
Guoyu based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. The Company estimated
the fair values of the assets acquired and liabilities assumed at the acquisition date in accordance with the Business Combination standard
issued by the FASB with the valuation methodologies using level 3 inputs, except for other current assets and current liabilities were
valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities
assumed and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent
appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general
and administrative expense.
The following table summarizes the fair value of the
identifiable assets acquired and liabilities assumed on the acquisition date, which represents the net purchase price allocation on the
date of the acquisition of Shanghai Qishuo based on valuation performed by an independent valuation firm engaged by the Company and translated
the fair value from RMB to USD using the exchange rate on December 2, 2021 at the rate of USD 1.00 to RMB 6.38.
Schedule of fair value of business combination |
| | |
|
Fair Value |
Consideration paid |
$ | 1,340,903 | |
Fair value of noncontrolling interest |
| 966,862 | |
Less: fair value of net assets of Shanghai Qishuo |
| | |
Cash |
| 36,369 | |
Other current assets |
| 98,830 | |
Fixed assets |
| 55,550 | |
Intangibles – customer relationship |
| 172,514 | |
Other current liabilities |
| (64,101 | ) |
Total fair value of net assets |
| 299,162 | |
Goodwill as of acquisition date |
$ | 2,008,603 | |
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Customer relationship, including the customer list
in the retail industry which will be revenue driver for Shanghai Qishuo has a fair value of approximately $172,514 and estimated finite
useful life of 4 years from the acquisition.
Approximately $2.0 million of goodwill arising from
the acquisition is mainly attributable to the excess of the consideration paid over the fair value of the net assets acquired that cannot
be recognized separately as identifiable assets under U.S. GAAP, and comprise (a) the assembled work force and (b) the
expected but unidentifiable business growth as a result of the synergy resulting from the acquisition.
The amounts of revenue and net loss that resulted
from the acquisition and were included in the unaudited interim condensed consolidated statements of operations and comprehensive income
(loss) during the six months ended June 31, 2022 were $139,902 and $30,080, respectively.
Pro forma results of operations from the acquisition
for the year ended December 31, 2021 were immaterial.
Note 5 — Short term investments
Short term investments consist of the following:
Schedule of short term investments |
| |
| |
| |
|
|
Carrying Value at
June 30,
2022 | |
Fair Value Measurement at June 30, 2022 | |
|
|
| |
Level 1 | |
Level 2 | |
Level 3 |
Short term investments |
$ | 6,657,270 | | |
$ | — | | |
$ | — | | |
$ | 6,657,270 | |
Short-term investments are investments in
wealth management product with underlying in bonds offered by private entities and other equity and debt products. The investments
can be redeemed upon three months’ notice and their carrying values approximate their fair values. Loss from short term
investments for the six months ended June 30, 2022 and 2021 amounted to $434,669
and 0 nil, respectively.
Note 6 – Accounts receivable,
net
Accounts receivable, net consist of the following:
Schedule of Accounts receivable |
| | | |
| | |
|
As of June 30, 2022 | |
As of December 31, 2021 |
|
| |
|
Accounts receivable |
$ | 6,804,714 | | |
$ | 8,816,071 | |
Allowance for doubtful accounts |
| (3,900,525 | ) | |
| (2,478,341 | ) |
Total accounts receivable, net |
$ | 2,904,189 | | |
$ | 6,337,730 | |
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Movements of allowance for doubtful accounts are as follows:
Schedule of Movements of allowance for doubtful accounts |
| | | |
| | |
|
For the six months ended June 30, 2022 | |
For the year ended December 31, 2021 |
|
| |
|
Beginning balance |
$ | 2,478,341 | | |
$ | 123,890 | |
Addition |
| 1,594,755 | | |
| 2,440,018 | |
Reversal |
| — | | |
| (117,040 | ) |
Exchange rate effect |
| (172,571 | ) | |
| 31,473 | |
Ending balance |
$ | 3,900,525 | | |
$ | 2,478,341 | |
Note 7 – Property and equipment, net
Property and equipment consist of the following:
Schedule of Property and equipment |
| | | |
| | |
|
As of
June 30, 2022 | |
As of
December 31,2021 |
|
| |
|
Electronic devices |
$ | 87,695 | | |
$ | 86,371 | |
Office equipment, fixtures and furniture |
| 217,356 | | |
| 237,217 | |
Automobile |
| 57,419 | | |
| 60,352 | |
Computer and network equipment |
| 383,806 | | |
| 403,410 | |
Leasehold improvement |
| 383,425 | | |
| 418,261 | |
Subtotal |
| 1,129,701 | | |
| 1,205,611 | |
Less: accumulated depreciation and amortization |
| (953,526 | ) | |
| (951,020 | ) |
Total |
$ | 176,175 | | |
$ | 254,591 | |
Depreciation expense for six months ended June 30,
2022 and 2021, amounted to $57,076 and 46,243, respectively.
Note 8 – Intangible assets, net
The Company’s intangible assets with definite
useful lives primarily consist of licensed software, capitalized development costs, platform system, and land use rights. The following
table summarizes the components of acquired intangible asset balances as of June 30, 2022 and December 31, 2021:
Schedule of Intangible assets |
|
|
|
|
|
|
|
|
As
of June 30, 2022 |
|
As
of December 31, 2021 |
|
|
|
|
Licensed software |
$ |
2,758,883 |
|
|
$ |
2,899,801 |
|
Capitalized development costs |
|
4,525,858 |
|
|
|
4,757,030 |
|
Platform system |
|
42,699 |
|
|
|
44,880 |
|
Customer relationships |
|
164,226 |
|
|
|
172,614 |
|
Less: accumulated amortization |
|
(3,509,079 |
) |
|
|
(3,095,844 |
) |
Intangible assets, net |
$ |
3,982,587 |
|
|
$ |
4,778,481 |
|
Amortization expense for the six month ended June
30,2022 and 2021 amounted to $582,730 and $462,000, respectively.
Amortization expense of capitalized development costs
was $411,050 and $394,754 during the six months ended June 30, 2022 and 2021, respectively. The carrying value of capitalized development
costs at June 30, 2022 and December 31, 2021 was $2,884,561 and $3,443,642, respectively. The Company recorded impairment on capitalized
development cost of $1.3 million for the year ended December 31, 2021 as the carrying value of our long-lived assets exceed future cashflows
expected to be generated as a result of reduced profit projection due to resurgence of COVID-19 in first quarter of 2022 that caused business
interruption for our customers. No additional impairment was record for the six months ended June 30, 2022.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
The estimated amortization is as follows:
Schedule of Intangible Assets Future Amortization Expense | | |
| | |
For the six months June 30, | |
Estimated amortization expense |
| |
|
2023 | | |
| 1,090,395 | |
2024 | | |
| 1,063,923 | |
2025 | | |
| 1,014,309 | |
2026 | | |
| 645,874 | |
Thereafter | | |
| 168,086 | |
Total | | |
$ | 3,982,587 | |
Note 9 — Goodwill
Goodwill represents the excess of the consideration
paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiaries at the date of acquisition. Goodwill
is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred.
The following table summarizes the components of acquired goodwill balances as of:
Schedule of goodwill |
|
|
|
|
As
of
June 30, 2022 |
|
As
of
December 31, 2021 |
|
|
|
|
Goodwill from Shanghai Qishuo acquisition(a) |
|
1,912,102 |
|
|
|
2,009,769 |
|
|
(a) |
See Note 4 for details. |
Note 10 – Other payables and accrued liabilities
Other payables and accrued liabilities consist of
the following:
Schedule of Other payables and accrued liabilities |
|
|
|
|
|
|
|
|
As of June 30, 2022 |
|
As of December 31, 2021 |
|
|
|
|
Salary payables |
$ |
1,219,460 |
|
|
$ |
846,761 |
|
Employee reimbursement and benefit payables |
|
10,257 |
|
|
|
63,586 |
|
Professional fees payable |
|
12,196 |
|
|
|
— |
|
Other miscellaneous payables |
|
29,130 |
|
|
|
23,099 |
|
Warranty liability |
|
13,824 |
|
|
|
14,530 |
|
Total other payables and accrued liabilities |
$ |
1,284,867 |
|
|
$ |
947,976 |
|
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Note 11 – Bank loans
Outstanding balances on bank loans consisted of the following:
Schedule of bank loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
Name |
|
Maturities |
|
Interest
rate |
|
Collateral/Guarantee |
|
As
of June 30, 2022 |
|
As
of
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
Bank
of Beijing |
|
March and April
2021 (1) , February and March 2022, and March 2023 (2) |
|
|
4.8% - 5.0 |
% |
|
Guarantee by Beijing
SMEs Credit Re-guarantee Co., Ltd* |
|
$ |
2,985,922 |
|
|
$ |
3,138,436 |
|
Shanghai
Pudong Development Bank |
|
February 2022 (3) |
|
|
4.4 |
% |
|
N/A |
|
|
— |
|
|
|
470,765 |
|
BOC Fullerton
Bank |
|
February 2024 (4) |
|
|
8.5 |
% |
|
*** |
|
|
175,297 |
|
|
|
234,676 |
|
China Merchants
Bank |
|
March 2023 (5) |
|
|
4.3 |
% |
|
Guarantee by Beijing Zhong Guan
Chun Technology Finance Guarantee Co., ** |
|
|
447,888 |
|
|
|
784,609 |
|
Jiangsu
Suning Bank |
|
April
2023 (6) |
|
|
18.0 |
% |
|
N/A |
|
|
85,835 |
|
|
|
— |
|
Total |
|
|
|
|
|
|
|
|
|
|
3,694,942 |
|
|
|
4,628,486 |
|
|
|
|
|
|
|
|
|
Noncurrent |
|
|
(73,059 |
) |
|
|
(131,603) |
|
|
|
|
|
|
|
|
|
Current |
|
$ |
3,621,883 |
|
|
$ |
4,496,883 |
|
* |
Beijing
SMEs Credit Re-guarantee Co., Ltd is a financial services company and provides credit re-guarantee business and short-term capital
operation to small and medium enterprises. In addition, Qing Tang, the spouse of Yimin Wu, the Company’s Chairman of the Board
of Directors and Chief Executive Officer, has provided real estate property as collateral of approximately $3.1 million (RMB 20,000,000)
with Beijing SMEs Credit Re-guarantee Co., Ltd to secure the guarantee with Bank of Beijing. |
** |
Beijing
Zhong Guan Chun Technology Finance Guarantee Co., Ltd is a financial services company and provides credit guarantee business and
short-term capital operation to small business. Yimin Wu also provided a personal guarantee for the loan during the contract period. |
*** |
Yimin
Wu and Qing Tang provided personal guarantees for the loan during the contract period. |
The Company incurred approximately $81,000 and $83,000
of guarantee fees during the six months ended June 30, 2022 and 2021, respectively.
(1) In March 2020, Infobird Beijing renewed the line
of credit for a two-year period with Bank of Beijing. In March and April 2020, Infobird Beijing renewed the two loan contracts with Bank
of Beijing to obtain loans in a total amount of approximately $3.1 million (RMB 20,000,000) for operation purposes. The loans bear interest
rates ranging from 4.8% to 5.0% with the maturity dates in March and April 2021 and were renewed as stated below.
(2) In February and March 2021, Infobird Beijing renewed
the two loan contracts with Bank of Beijing to obtain loans in a total amount of approximately $3.1 million (RMB 20,000,000) for operation
purposes. The loans bear interest rate of 4.8% with the maturity dates in February and March 2022. The loans were repaid in March 2022.
On March 3, 2022, the Company renewed the line of credit for two years and obtained a $3.1 million (RMB 20, 000,000) loan with one year
term and interest rate of 5.0% due in March 2023.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
(3) In February 2021, the Company entered into a loan
agreement with Shanghai Pudong Development Bank in the amount of RMB 3,000,000 (approximately $0.5 million) due in February 2022. The
loan was repaid in February 2022 and was not renewed.
(4) In February 2021, the Company obtained a line
of credit from BOC Fullerton Bank in the amount of RMB 2,000,000 (approximately $0.3 million) which expires in February 2026. The Company
entered into a loan agreement in the same amount which is due in February 2024 with monthly repayment amount of approximately $9,700.
The Company borrowed approximately $0.3 million and repaid approximately $0.1 million as of June 30, 2022.
(5) In March 2021, the Company obtained a line of
credit from China Merchants Bank in the amount of RMB 5,000,000 (approximately $0.8 million) to be due in March 2023. Under
the line of credit, the Company is able to issue bankers acceptance notes, which can be endorsed and assigned to vendors as payments for
purchases. The Company paid interest at stated rate under the line of credit and transferred the bankers acceptance notes to its subsidiaries
Infobird Guiyang and Infobird Anhui where the subsidiaries exchanged the notes for cash. The Company repaid the line of credit in March
2022 and obtained a cash loan of approximately $0.4 million under the line of credit with 4.3% interest rate to be due on March 2023.
(6) In April 2022, the Company obtained a line of
credit from Suning Bank in the amount of RMB 680,000 (approximately $0.1 million). On the same month, the Company has withdrew the full
amount of aforementioned line of credit with 18.0% interest rate to be due on April 2023.
Interest expense pertaining to the above bank loans
for the six months ended June 30, 2022 and 2021 amounted to 108,283 and 128,290, respectively.
Note 12 – Related party balances and transactions
Loan Guarantee – related party
Qing Tang, the spouse of Yimin Wu, has provided real
estate property as collateral of approximately $3.2 million (RMB 22,000,000) with Beijing SMEs Credit Re-guarantee Co., Ltd to secure
a guarantee with Bank of Beijing for the line of credit in the amount of approximately $3.0 million (RMB 20,000,000). See Note 11 for
more details.
Yimin Wu also provided a personal guarantee for the
Company’s loan from China Merchants Bank during the contract period. See note 11 for details.
Yimin Wu and Qing Tang also provided personal guarantees
for the Company’s loan from BOC Fullerton Bank during the contract period. See note 11 for details.
Note 13 – Taxes
Income tax
Cayman Islands
Under the current laws of the Cayman Islands, the
Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands
withholding tax will be imposed.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Hong Kong
Infobird HK is incorporated in Hong Kong and is subject
to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant
Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. The Company did not make any provisions for Hong Kong profit tax as
there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax law, Infobird HK is exempted
from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.
PRC
Infobird WFOE, Infobird Beijing, Infobird Anhui, Infobird
Guiyang and Shanghai Qishuo are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the
PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and
practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), domestic enterprises and Foreign
Investment Enterprises (the “FIE”) are usually subject to a unified 25% enterprise income tax rate while preferential tax
rates, tax holidays and even tax exemption may be granted on case-by-case basis. EIT grants preferential tax treatment to certain High
and New Technology Enterprises (“HNTEs”). Under this preferential tax treatment, HNTEs are entitled to an income tax rate
of 15%, subject to a requirement that they re-apply for HNTE status every three years. Infobird Beijing maintained the “high-tech
enterprise” tax status which is validated until July 2023, which reduced its statutory income tax rate to 15%. Infobird Guiyang
qualifies for 15% preferential income tax rate for enterprises whose core business is one of the industrial projects listed in the Catalogue
of Encouraged Industries in western regions of China.
In addition, 75% of research and development expenses
of Infobird Beijing, Infobird Anhui, Infobird Guiyang,and Qishuo are subject to additional deduction from pre-tax income while such deduction
cannot exceed the total amount of pre-tax income.
Tax savings for the six months ended June 30, 2022
and 2021 amounted to $(782,893) and $(623,301), respectively, with the 10% preferential tax rate reduction and additional deduction of
75% of research and development expenses.
The Company’s basic and diluted loss per shares
would have been lower by $0.15 and $0.12 per share for the six months ended June 30, 2022 and 2021, respectively, without the preferential
tax rate reduction and research and development expenses reduction.
Income tax benefit amounted to $38,125 for six months
ended June 30, 2022, while income tax expense amounted to $32,061 for the six months ended June 30, 2021.
Significant components of the provision for income
taxes are as follows:
Schedule of provision for income taxes |
|
|
|
|
|
|
|
|
For the
six months ended June 30, 2022 |
|
For
the six months ended June 30, 2021 |
|
|
|
|
Current |
$ |
— |
|
|
$ |
— |
|
Deferred |
|
(38,125 |
) |
|
|
32,061 |
|
Provision for (benefit of) income taxes |
$ |
(38,125 |
) |
|
$ |
32,061 |
|
Deferred tax assets and liabilities – China
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Significant components of deferred tax assets and
liabilities were as follows:
Schedule of deferred tax assets and liabilities | |
| | | |
| | |
| |
As of June 30, | |
As of December 31, |
Deferred tax assets: | |
2022 | |
2021 |
| |
| |
|
Allowance for doubtful account | |
$ | 584,183 | | |
$ | 379,566 | |
Net operating loss carryforward | |
| 2,866,914 | | |
| 2,258,401 | |
Long-lived assets impairment | |
| 533,361 | | |
| 560,604 | |
Deferred tax assets | |
| 3,984,458 | | |
| 3,198,571 | |
Deferred tax liabilities: | |
| | | |
| | |
Recognition of intangible assets arising from business combinations | |
| (21,041 | ) | |
| (22,917 | ) |
Capitalized development costs | |
| (626,492 | ) | |
| (724,353 | ) |
Change in valuation allowance | |
| (3,378,053 | ) | |
| (2,533,293 | ) |
Deferred tax liabilities, net | |
$ | (41,128 | ) | |
$ | (81,992 | ) |
The Company had net operating loss (NOL) carryforward
of approximately $22.0 million and $15.0 million from the Company’s PRC and Hong Kong subsidiaries as of June 30, 2022 and December
31, 2021, respectively. In addition, the Company had approximately $3.9 million and $2.5 million of allowance for doubtful accounts held
at its PRC subsidiaries as of June 30, 2022 and December 31, 2021, respectively. As the Company believes it is more likely than not that
its PRC and Hong Kong operations will not be able to fully utilize its deferred tax assets related to the net operating loss carryforwards
in the PRC and Hong Kong, and allowance for doubtful accounts in the PRC, the Company provided 100% allowance on deferred tax assets net
of deferred tax liabilities of approximately $3.4 million related to PRC and Hong Kong subsidiaries at June 30, 2022.
The Company recognized deferred tax liabilities related
to the excess of the intangible assets reporting basis over its income tax basis as a result of capitalized development costs. The deferred
tax liabilities will reverse as the intangible assets are amortized for financial statement reporting purposes.
Uncertain tax positions
The Company evaluates each uncertain tax position
(including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits
associated with the tax positions. As of June 30, 2022 and December 31, 2021, the Company did not have any significant unrecognized uncertain
tax positions. The Company did not incur interest and penalties tax for the six months ended June 30, 2022 and 2021. The Company does
not anticipate any significant increases or decreases in unrecognized tax benefits in the next twelve (12) months from June 30, 2022.
Value added tax
All of the Company’s service revenues that are
earned and received in the PRC are subject to a Chinese VAT at a rate of 6% of the gross proceeds or at a rate approved by the Chinese
local government.
Taxes payable consisted of the following:
Schedule of Taxes payable |
|
|
|
|
|
|
|
|
As
of
June 30, 2022 |
|
As of
December 31, 2021 |
|
|
|
|
VAT taxes payable |
$ |
431,127 |
|
|
$ |
485,016 |
|
Income taxes payable |
|
194,026 |
|
|
|
205,477 |
|
Other taxes payable |
|
2,311 |
|
|
|
11,380 |
|
Total |
$ |
627,464 |
|
|
$ |
701,873 |
|
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Note 14 – Concentration of risk
Credit risk
Financial instruments that potentially subject the
Company to significant concentrations of credit risk consist primarily of cash in bank. As of June 30, 2022 and December 31, 2021, $1,207,224
and $2,597,037 were deposited with financial institutions located in the PRC, respectively. Deposit insurance system in China only insured
each depositor at one bank for a maximum of approximately $77,000 (RMB 500,000). As of June 30, 2022 and December 31, 2021, $678,386 and
$1,859,021 are over the China deposit insurance limit which is not covered by insurance, respectively. The Hong Kong Deposit Protection
Board pays compensation up to a limit of HKD 500,000 (approximately USD 64,000) if the bank with which an individual/a company hold
its eligible deposit fails. As of June 30, 2022 and December 31, 2021, cash balance of $807 and $3,693,725 was maintained at financial
institutions in Hong Kong, of which none and $3,565,513 was subject to credit risk, respectively.
HK$500,000 (approximately $64,000) of the Company’s
short term investment in Hong Kong is protected by the Investor Compensation Fund. Approximately $6.6 million of the Company’s investment
is subject to credit risk.
The Company is also exposed to risk from its accounts
receivable and other receivables. These assets are subjected to credit evaluations. An allowance has been made for estimated unrecoverable
amounts which have been determined by reference to past default experience and the current economic environment.
A majority of the Company’s expense transactions
are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets and liabilities are denominated in
RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be
transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances
in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies
which require certain supporting documentation in order to affect the remittance.
The Company’s functional currency is the RMB,
and its financial statements are presented in U.S. dollars. The RMB depreciated by 5.1% from December 31, 2021 to June 30, 2022. It is
difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar
in the future. The change in the value of the RMB relative to the U.S. dollar may affect the Company’s financial results reported
in the U.S. dollar terms without giving effect to any underlying changes in its business or results of operations. Currently, the Company’s
assets, liabilities, revenues and costs are denominated in RMB.
To the extent that the Company needs to convert U.S.
dollars into RMB for capital expenditures and working capital and other business purposes, appreciation of RMB against U.S. dollar would
have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if the Company decides to convert
RMB into U.S. dollar for the purpose of making payments for dividends, strategic acquisition or investments or other business purposes,
appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to the Company.
Customer concentration risk
For the six month ended June 30, 2022, one customer
accounted for 22.6% of the Company’s total revenues. For the six month ended June 30, 2021, three customers accounted for 45.6%,
10.7%, and 10.3% of the Company’s total revenues, respectively.
As of June 30, 2022, three customers accounted for
44.3%, 20.9%, and 18.8% of the total balance of accounts receivable. As of December 31, 2021, four customers accounted for 34.7%,
22.7%, 17.1% and 14.7% of the total balance of accounts receivable, respectively.
Vendor concentration risk
For the six months ended June 30, 2022, one vendor
accounted for 11.4% of the Company’s total purchases. For the six months ended June 30, 2021, two vendors accounted for 31.8% and
18.9% of the Company’s total purchases, respectively.
As of June 30, 2022, two vendors accounted for 67.3%
and 20.6% of the total balance of accounts payable, respectively. As of December 31, 2021, two vendors accounted for 73.4% and 23.1% of
the total balance of accounts payable, respectively.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Note 15 – Equity
Ordinary shares
Infobird Cayman was established under the laws of
the Cayman Islands on March 26, 2020. On September 9, 2022, the Company effected the 1-for-5
Share Consolidation of its ordinary shares pursuant to the Company’s second amended and restated memorandum and articles of association. The
Company has retroactively restated all share and per share data for all of the periods presented pursuant to ASC 260 to reflect the Share
Consolidation. Prior to September 9, 2022, the authorized number of ordinary shares was 50,000,000 (pre-Share Consolidation) ordinary
shares with a par value of $0.001 (pre-Share Consolidation) per ordinary share, and 19,000,000 (pre-Share Consolidation) ordinary shares
were issued on March 26, 2020.
On April 22, 2021, the Company completed its initial
public offering (“IPO”) of 1,250,000 ordinary shares, par value $0.005 per share, and on June 8, 2021, issued 25,000 ordinary
shares pursuant to the underwriter’s partial exercise of its over-allotment option in connection with the IPO, at a public offering
price of $20.00 per share, which resulted in net proceeds to the Company of approximately $20.8 million after deducting underwriting discounts
and commissions and other expenses.
During the year ended December 31, 2021, the Company
granted 14,000 ordinary shares to two consulting firms based on grant date fair value of $150,600 to be amortized over stated services
period.
Upon execution of 1-for-5
Share Consolidation, the Company recognized additional 4,315 shares of ordinary share due to round up.
As a result of 1-for-5
Share Consolidation, the Company had 10,000,000 authorized ordinary shares, par value $0.005 per share, of which 5,093,315 were
issued and outstanding as of June 30, 2022 and December 31, 2021.
Warrants
In connection with the IPO, on April 22, 2021, the
Company issued warrants to purchase 125,000 ordinary shares at $20.00 per share, are exercisable upon issuance and will expire on March
31, 2026 which is five years from the effective of the registration statement. As of June 30, 2022, the Company had warrants to purchase
125,000 ordinary shares outstanding with an exercise price of $20.00 per share and remaining lives of 3.65 years.
The Company’s outstanding warrants are classified
as equity since they qualify for exception from derivative accounting as they are considered to be indexed to the Company’s own
stock and require net share settlement. The fair value of the warrants of approximately $1.3 million is valued based on the Black-Scholes-Merton
model and is recorded as additional paid-in capital from common stock based on the relative fair value of net proceeds received using
the following assumptions:
Schedule of assumptions used |
|
|
|
Annual
dividend yield |
|
— |
|
Expected
life (years) |
|
5.0 |
|
Risk-free
interest rate |
|
0.92 |
% |
Expected
volatility |
|
95.15 |
% |
Following is a summary of the status of warrants outstanding
and exercisable as of June 30, 2022:
Schedule of warrants outstanding | | |
| | | |
| | |
| |
Warrants | |
Weighted Average Exercise Price |
Warrants outstanding, as of December 31, 2020 | | |
| — | | |
$ | — | |
Issued | | |
| 125,000 | | |
| 20.0 | |
Exercised | | |
| — | | |
| — | |
Expired | | |
| — | | |
| — | |
Warrants outstanding, as of December 31, 2021 | | |
| 125,000 | | |
| 20.0 | |
| | |
| — | | |
| — | |
Warrants outstanding, as of June 30, 2022 (unaudited) | | |
| 125,000 | | |
$ | 20.0 | |
| | |
| | | |
| | |
Warrants exercisable, as of June 30, 2022 (unaudited) | | |
| 125,000 | | |
$ | 20.0 | |
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Share-based compensation
During the year ended December 31, 2021, the
Company granted 14,000
ordinary shares to two consulting firms based on grant date fair value of $150,600
to be amortized over the services period. For the six months ended June 30, 2022 and 2021, share based compensation expense was
amounted to $10,134
and 0 nil, respectively. As of June 30, 2022, the share-based compensations had been fully amortized by the Company.
Restricted assets
The Company’s ability to pay dividends is primarily
dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments
of dividends by Infobird WFOE, Infobird Beijing, Infobird Anhui, Infobird Guiyang and Qishuo (collectively “Infobird PRC entities”)
only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of
operations reflected in the accompanying unaudited interim condensed consolidated financial statements prepared in accordance with U.S.
GAAP differ from those reflected in the statutory financial statements of Infobird PRC entities.
Infobird PRC entities are required to set aside at
least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of
its registered capital. In addition, Infobird PRC entities may allocate a portion of its after-tax profits based on PRC accounting standards
to enterprise expansion fund and staff bonus and welfare fund at its discretion. Infobird PRC entities may allocate a portion of its after-tax
profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary
funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination
by the banks designated by State Administration of Foreign Exchange.
As a result of the foregoing restrictions, Infobird
PRC entities are restricted in their ability to transfer their assets to the Company. Foreign exchange and other regulation in the PRC
may further restrict Infobird PRC entities from transferring funds to the Company in the form of dividends, loans and advances. As of
June 30, 2022 and December 31, 2021, amounts restricted are the paid-in-capital, registered capital and statutory reserves of Infobird
PRC entities, which amounted to approximately $18.7 million and $15.7 million, respectively.
Statutory reserves
As of June 30, 2022 and December 31, 2021, The Company’s
PRC entities collectively attributed $449,136 of retained earnings for the statutory reserves.
Note 16 – Lease
The Company determines if a contract contains a lease
at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial
reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the
non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when
the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic penalty. All
of the Company’s real estate leases are classified as operating leases. The leases generally do not contain options to extend at
the time of expiration and the weighted average remaining lease terms are 0.4 years.
The Company entered into various non-cancellable operating
lease agreements for offices and employee dormitories as of June 30, 2022. Upon adoption of FASB ASU 2016-02, the Company recognized approximately
$0.4 million right of use (“ROU”) assets and same amount of lease liabilities based on the present value of the future minimum
rental payments of leases, using a discount rate of 4.8% based on duration of lease terms. The Company’s lease agreements
do not contain any material residual value guarantees or material restrictive covenants. The Company’s lease liabilities under the
remaining operating leases as of June 30, 2022 for the next five years is as follows:
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Schedule of minimum lease payments under the remaining operating leases | |
| | |
| |
June 30, |
2023 | |
$ | 132,264 | |
2024 | |
| 5,509 | |
Total undiscounted lease payments | |
| 137,773 | |
Total lease liabilities | |
$ | 132,328 | |
Rent expense for the six months ended June 30, 2022 and 2021 was $122,503 and $268,121 respectively.
Note 17 – Commitments and contingencies
Legal
From time to time, the Company is party to certain
legal proceedings, as well as certain asserted and un-asserted claims. Amounts accrued, as well as the total amount of reasonably possible
losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the unaudited interim condensed
consolidated financial statements.
Variable interest entity structure
In the opinion of management, (i) the corporate structure
of the Company is in compliance with existing PRC laws and regulations; (ii) the Contractual Arrangements are valid and binding, and do
not result in any violation of PRC laws or regulations currently in effect; and (iii) the business operations of Infobird WFOE and the
VIEs are in compliance with existing PRC laws and regulations in all material respects.
However, there are substantial uncertainties regarding
the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC
regulatory authorities will not ultimately take a contrary view to the foregoing opinion of its management. If the current corporate structure
of the Company or the Contractual Arrangements is found to be in violation of any existing or future PRC laws and regulations, the Company
may be required to restructure its corporate structure and operations in the PRC to comply with changing and new PRC laws and regulations.
In the opinion of management, the likelihood of loss in respect of the Company’s current corporate structure or the Contractual
Arrangements is remote based on current facts and circumstances.
COVID-19
In March 2020, the World Health Organization declared
COVID-19 a pandemic. The pandemic has resulted in quarantines, travel restrictions, and the
temporary closure of stores and facilities in China and elsewhere. Given the rapidly expanding nature of the COVID-19 pandemic,
and because substantially all of the Company’s business operations and workforce are concentrated in China, the Company’s
business, results of operations, and financial condition have been adversely affected for the year ended December 31, 2021. The impact
of COVID-19 on the macroeconomic outlook of China and any business disruption due to further resurgence of COVID-19 in early 2022 may
have adverse financial impacts for the Company for the remaining of 2022 and beyond and cannot be reasonably estimated at this time.
Note 18 – Segment information and revenue
analysis
The Company follows ASC 280, Segment Reporting, which
requires that companies disclose segment data based on how management makes decisions about allocating resources to each segment and evaluating
their performances. The Company has one reporting segment. The Company’s chief operating decision maker has been identified as the
chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of
the Company and hence the Company has only one reportable segment. The Company does not distinguish between markets or segments for the
purpose of internal reporting. The Company’s long-lived assets are substantially all located in the PRC and all of the Company’s
revenues are derived from the PRC.
INFOBIRD CO., LTD AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Disaggregated information of revenues by business
lines are as follows:
Schedule of Disaggregated information of revenues |
| | | |
| | |
|
For the six months ended
June
30, 2022 | |
For the six months ended
June 30, 2021 |
|
| |
|
Standard cloud-based services |
$ | 1,243,483 | | |
$ | 843,252 | |
Business process outsourcing services |
| 1,046,074 | | |
| 1,162,071 | |
Business integration services |
| 278,434 | | |
| 2,036,741 | |
Other revenues |
| 11,758 | | |
| 443,971 | |
Total revenues |
$ | 2,579,749 | | |
$ | 4,486,035 | |
Note 19 – Subsequent Events
The Company evaluated all events and transactions
that occurred after June 30, 2022 up through December 8, 2022, the date the Company issued these unaudited interim condensed consolidated
financial statements.
On September
9, 2022, the Company effected the 1-for-5 Share Consolidation of its ordinary shares pursuant to the Company’s second amended
and restated memorandum and articles of association. The Company has retroactively restated all share and per share data for
all of the periods presented pursuant to ASC 260 to reflect the Share Consolidation.
On September 29, 2022, the Company has entered into
a Securities Purchase Agreement (the “Agreement 1”) with a purchaser. Pursuant to the Agreement 1, the Company agreed to sell
to this purchaser 500,000 shares of common stock for a consideration of $277,500. On September 29, 2022, the Company issued 500,000 shares
to this purchaser.
On October 8, 2022, the Company has entered into a
Securities Purchase Agreement (the “Agreement 2”) with a purchaser. Pursuant to the Agreement 2, the Company agreed to sell
to this purchaser 500,000 shares of common stock for a consideration of $287,500. On October 8, 2022, the Company issued 500,000 shares
to this purchaser.
On August, September, and October 2022, the Company
had early terminated various office leases located in Beijing and Guiyang, resulted in reduction of right of use asset and lease liabilities
of approximately $0.1 million.
On November 9, 2022, the Company has entered into
a Securities Purchase Agreement (the “Agreement 3”) with a purchaser. Pursuant to the Agreement 3, the Company agreed to sell
to this purchaser 500,000 shares of common stock for a consideration of $202,500. On November 9, 2022, the Company issued 500,000 shares
to this purchaser.
In November 2022, the Company has executed a convertible
note purchase agreement (the “Purchase Agreements”) with an investor under which the investor may subscribe at eighty percentage
of the face value up to approximately $12.5 million in aggregate principal amount of the Company’s two-year convertible notes (the
“Notes”). Closing of the issuance of the Notes is expected to be before December 31, 2022 and is subject to the increase in
the Company’s authorized share capital and customary closing conditions. The Company expects to use the proceeds from issuance of
the Notes for general corporate and working capital purposes and potential acquisition or investment.
F-36
EXHIBIT INDEX
Number |
Description of Document |
101.INS |
Inline XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |