Item 1. Financial Statements.
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Consolidated Balance Sheets
As at March 31, 2021 (Not Reviewed) and December 31, 2020 (Not Audited)
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
Note
|
|
$
|
|
|
$
|
|
|
|
|
(Not Reviewed)
|
|
|
(Not Audited)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
4
|
|
|
5,728
|
|
|
|
4,192
|
|
Accounts receivables
|
5
|
|
|
42,391
|
|
|
|
67,626
|
|
Related party loan
|
|
|
|
515,305
|
|
|
|
515,888
|
|
Total current assets
|
|
|
|
563,424
|
|
|
|
587,706
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net of accumulated depreciation and amortization
|
6
|
|
|
100,289
|
|
|
|
102,580
|
|
Deferred tax asset
|
10
|
|
|
91,311
|
|
|
|
94,824
|
|
Total non-current assets
|
|
|
|
191,600
|
|
|
|
197,404
|
|
Total assets
|
|
|
|
755,024
|
|
|
|
785,110
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity/(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payables
|
|
|
|
286,574
|
|
|
|
318,522
|
|
Accrued and other liabilities
|
7
|
|
|
83,579
|
|
|
|
85,039
|
|
Long-term debt – current position
|
8
|
|
|
23,739
|
|
|
|
24,094
|
|
Line of credit
|
9
|
|
|
197,507
|
|
|
|
200,897
|
|
Total current liabilities
|
|
|
|
591,399
|
|
|
|
628,552
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt – non-current position
|
8
|
|
|
50,816
|
|
|
|
60,303
|
|
Total non-current liabilities
|
|
|
|
50,816
|
|
|
|
60,303
|
|
Total liabilities
|
|
|
|
642,215
|
|
|
|
688,855
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
|
Authorized: $0.001 par value, 10,000,000 shares authorized
Issued and outstanding: nil preferred shares
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
|
|
|
|
Authorized: $0.001 par value, 290,000,000 shares authorized
Issued and outstanding: 73,590,730 and 73,590,730, respectively
|
|
|
|
123,953
|
|
|
|
123,953
|
|
Additional paid in capital
|
|
|
|
3,442,920
|
|
|
|
3,442,920
|
|
Adjustments to equity to reflect retroactive application of reverse acquisition of accounting
|
|
|
|
(53,511
|
)
|
|
|
(53,511
|
)
|
Accumulated losses
|
|
|
|
(3,420,420
|
)
|
|
|
(3,426,540
|
)
|
Foreign currency translation differences
|
11
|
|
|
19,867
|
|
|
|
9,433
|
|
Total stockholders’ surplus/(deficit)
|
|
|
|
112,809
|
|
|
|
96,255
|
|
Total liabilities and stockholders’ equity
|
|
|
|
755,024
|
|
|
|
785,110
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Consolidated Statement of Operations
For the three months ended March 31, 2021 and 2020 (Not Reviewed)
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|
|
Three Months ended March
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Note
|
|
$
|
|
|
$
|
|
|
|
|
(Not Reviewed)
|
|
|
(Not Reviewed)
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
31,096
|
|
|
|
93,586
|
|
Cost of sales
|
|
|
|
(25,821
|
)
|
|
|
(81,625
|
)
|
Gross profit
|
|
|
|
5,275
|
|
|
|
11,961
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
2,292
|
|
|
|
1,952
|
|
Selling, general and administrative expenses
|
|
|
|
2,661
|
|
|
|
4,022
|
|
Professional service fees
|
|
|
|
158
|
|
|
|
66
|
|
Total operating expenses
|
|
|
|
5,111
|
|
|
|
6,040
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) from operations
|
|
|
|
164
|
|
|
|
5,921
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expenses)
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
11,749
|
|
|
|
4,512
|
|
Interest expense
|
|
|
|
(1,553
|
)
|
|
|
(1,415
|
)
|
Foreign currency transaction loss
|
|
|
|
(2,090
|
)
|
|
|
(12,932
|
)
|
Total other income/(expenses)
|
|
|
|
8,106
|
|
|
|
(9,835
|
)
|
Income/(loss) from continuing operations before income tax expenses
|
|
|
|
8,270
|
|
|
|
(3,914
|
)
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit/(expense)
|
10
|
|
|
(2,150
|
)
|
|
|
751
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) after income tax expense for the period
|
|
|
|
6,120
|
|
|
|
(3,163
|
)
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(loss)
|
|
|
|
|
|
|
|
|
|
Exchange differences arising on translation of foreign operations
|
|
|
|
10,434
|
|
|
|
(34,607
|
)
|
Other comprehensive income/(loss)
|
|
|
|
10,434
|
|
|
|
(34,607
|
)
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the period
|
|
|
|
16,554
|
|
|
|
(37,745
|
)
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/gain per share
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
|
–
|
|
|
|
–
|
|
Weighted average number of common stock outstanding
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
|
73,590,730
|
|
|
|
73,590,730
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Consolidated Statement of Changes in Stockholders’ Equity
/ (Deficit)
For the three months ended March 31, 2021 and 2020 (Not Reviewed)
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Shares
|
|
|
|
Amount
|
|
|
|
Additional
Paid in Capital
|
|
|
|
Other
Comprehensive Earnings
|
|
|
|
Accumulated
Losses
|
|
|
|
Adjustments
to equity to reflect retroactive application of reverse acquisition accounting
|
|
|
|
Total (Deficit)
/Equity
|
|
Balance at December 31, 2020
|
|
|
73,590,730
|
|
|
$
|
123,953
|
|
|
$
|
3,442,920
|
|
|
$
|
9,433
|
|
|
$
|
(3,426,540
|
)
|
|
$
|
(53,511
|
)
|
|
$
|
96,255
|
|
Income after income tax expense for the year
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
6,120
|
|
|
|
–
|
|
|
|
6,120
|
|
Other comprehensive income for the year
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
10,434
|
|
|
|
–
|
|
|
|
–
|
|
|
|
10,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021
|
|
|
73,590,730
|
|
|
$
|
123,953
|
|
|
$
|
3,442,920
|
|
|
$
|
19,867
|
|
|
$
|
(3,420,420
|
)
|
|
$
|
(53,511
|
)
|
|
$
|
112,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
73,590,730
|
|
|
$
|
123,953
|
|
|
$
|
3,442,920
|
|
|
$
|
44,871
|
|
|
$
|
(3,512,096
|
)
|
|
$
|
(53,511
|
)
|
|
$
|
46,137
|
|
Loss after income tax expense for the year
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(3,163
|
)
|
|
|
–
|
|
|
|
(3,138
|
)
|
Other comprehensive loss for the year
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(34,607
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(34,607
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2020
|
|
|
73,590,730
|
|
|
$
|
123,953
|
|
|
$
|
3,442,920
|
|
|
$
|
10,264
|
|
|
$
|
(3,515,259
|
)
|
|
$
|
(53,511
|
)
|
|
$
|
(8,367
|
)
|
The accompanying notes are an integral part of these consolidated financial
statements
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Consolidated Statement of Cash Flows
For the three months ended March 31, 2021 and 2020 (Not Reviewed)
|
|
Three Months ended March
|
|
|
|
2021
|
|
|
2020
|
|
|
|
$
|
|
|
$
|
|
|
|
(Not Reviewed)
|
|
|
(Not Reviewed)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net Profit/(loss)
|
|
|
6,120
|
|
|
|
(3,163
|
)
|
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,292
|
|
|
|
1,952
|
|
FBT employee contribution
|
|
|
–
|
|
|
|
26
|
|
Net difference on foreign exchange
|
|
|
2,090
|
|
|
|
12,932
|
|
(Increase)/decrease in trade and other receivables
|
|
|
25,235
|
|
|
|
1,549
|
|
Increase/(decrease) in trade and other payables
|
|
|
(33,409
|
)
|
|
|
75,592
|
|
Decrease in other liabilities
|
|
|
–
|
|
|
|
(30,713
|
)
|
(Increase)/decrease in deferred tax asset
|
|
|
3,513
|
|
|
|
15,416
|
|
Net cash provided by/(used in) operating activities
|
|
|
5,841
|
|
|
|
73,591
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Advances to related entities
|
|
|
–
|
|
|
|
(9,529
|
)
|
Net cash used in investing activities
|
|
|
–
|
|
|
|
(9,529
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Repayment of borrowings
|
|
|
(3,390
|
)
|
|
|
(14,320
|
)
|
Repayment of advances from related entities
|
|
|
583
|
|
|
|
–
|
|
Payment of finance lease liabilities
|
|
|
(9,841
|
)
|
|
|
(38,270
|
)
|
Net cash provided by/(used in) financing activities
|
|
|
(12,648
|
)
|
|
|
(52,590
|
)
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
(6,807
|
)
|
|
|
11,472
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
8,343
|
|
|
|
(28,508
|
)
|
Cash and cash equivalents at the beginning of period
|
|
|
4,192
|
|
|
|
22,764
|
|
Cash and cash equivalents at the end of period
|
|
|
5,728
|
|
|
|
5,728
|
|
The accompanying notes are an integral part of these consolidated financial
statements
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Notes to Consolidated Statements
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Sincerity Applied Material Holdings
Corp (the “Company’’) is a specialized provider of technologically advanced packing materials for the automotive, packaging,
building & construction, and engineering industries, with headquarters located near Melbourne, Australia. The Company’s primary
customer is an unrelated entity with global operations that accounts for approximately 80% - 90% of The Company’s revenue, and The
Company’s primary suppliers are in China and Malaysia.
The accompanying financial statements
include the accounts of Sincerity Applied Material Holdings Corp which is a company domiciled in Australia. These financial statements
have been prepared in accordance with the accounting principles generally accepted in the United States (“GAAP”) and Regulation
S-X published by the US Securities and Exchange Commission (the “SEC”). Certain prior period amounts have been reclassified
to conform to the current period presentation. Such reclassifications had no effect on the prior period net income, accumulated deficit,
net assets, or total shareholders’ deficit. The Company has evaluated events or transactions through the date of issuance of this
report in conjunction with the preparation of these consolidated financial statements. All amounts presented are in US dollars, unless
otherwise noted.
The financial statements, except for
cash flow information, have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement
at fair value of selected non-current assets, financial assets and financial liabilities. The amounts presented in the financial statements
have been rounded to the nearest dollar.
The financial statements have been
prepared on the going concern basis, which assumes continuity of normal business activities and the realization of assets and the settlement
of liabilities in the ordinary course of business.
At March 31,2021, the company had a
current asset deficiency of $27,975 and net asset surplus of $112,809 (December 31, 2020 current asset deficiency of $40,846 and net asset
surplus of $96,256). The Company reported an after tax income of $6,120 for the year (March 31, 2020 after tax loss: $3,163).
Despite the current asset deficiency,
the company has prepared the financial statements on a going concern basis that contemplates the continuity of normal business activity,
realization of assets and settlement of liabilities at the amounts recorded in the financial statements in the ordinary course of business.
The company believes that there are
reasonable grounds to support the fact that it will be able to pay its debts as and when they become due and payable. In forming this
opinion, the Group has considered the following factors:
|
(i)
|
The company has the ability to raise fund through private placements and convertible notes;
|
|
(ii)
|
The company has been streamlining its operation by reducing operation costs; and
|
|
(iii)
|
Applying for financial assistance from the Australian Government available for businesses impacted by COVID-19
|
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Notes to Consolidated Statements
If the Company is unable to continue
as a going concern it may be required to realize its assets and extinguish its liabilities other than in the ordinary course of business
at amounts different from those stated in the financial statements.
The financial statements do not include
adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities
that might be necessary should the Company not continue as a going concern.
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP’’) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
1.5
|
Foreign Currency Translation
|
The functional currency of the Company
is its local currency, the Australian dollar (AUD). The financial statements of the Company have been translated into U.S. dollars (USD).
All balance sheet accounts, other than those in stockholder’s deficiency, which are translated, based on historical rates accumulated
over time, have been translated using the exchange rate in effect at the balance sheet date. Income statement amounts have been translated
using the average exchange rate in effect for the period ended March 31, 2021. Accumulated net translation adjustments have been reported
separately in other comprehensive loss in the financial statements. Foreign currency translation adjustments resulted in a loss of $10,434
for the period ended March 31, 2021; such translation adjustments are not subject to income taxes. Foreign currency transaction losses
resulting from exchange rate fluctuations on transactions denominated in a currency other than the AUD, the functional currency, totaled
$2,090 for the period ended March 31, 2021, and is included in the accompanying statement of income for the period.
1.6
|
Cash and Cash Equivalents and Concentration of Credit Risk
|
The Company considers all highly liquid
short term investments with original maturities of three months or less at the date of acquisition to be cash equivalents. The carrying
value of cash and cash equivalents approximates fair value due to the short term nature of these instruments.
The Company’s financial instruments
exposed to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents are held in several
Australian bank accounts. The Company regularly assesses the level of credit risk we are exposed to and whether there are better ways
of managing credit risk. The Company invests its cash and cash equivalents with reputable financial institutions. The Company has not
incurred any losses related to these deposits.
The Company carries its accounts receivable
at cost less an allowance for doubtful accounts. The Company evaluates its accounts receivable on a regular basis and establishes an allowance
for doubtful accounts, when deemed necessary, based on a history of past write- offs and collections and current credit conditions. A
receivable is considered past-due based either on contractual terms or payment history. Accounts are written off as uncollectible after
collection efforts have failed. In addition, The Company does not generally charge interest on past-due accounts or require collateral.
It is at least reasonably possible that changes may occur in the near term that would affect management’s estimate of the allowance
for doubtful accounts. At March 31, 2021, management determined that no allowance for doubtful accounts was required.
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Notes to Consolidated Statements
1.8
|
Property and Equipment
|
Property and equipment are recorded
at cost. Costs of renewal and improvements that substantially extend the useful lives of assets are capitalized. Maintenance and repair
costs are expensed when incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets,
generally five years.
Derecognition
An item of plant and equipment is derecognized
upon disposal or when no further economic benefits are expected from its use or disposal.
Payables are carried at amortized cost
and, due to their short-term nature, they are not discounted. They represent liabilities for goods and services provided to the Company
prior to the end of the financial period that are unpaid and arise when the Company becomes obliged to make future payments in respect
of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.
Provisions are recognized when the
Company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits
will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle
the obligation at the end of the reporting period.
Leases of fixed assets, where substantially
all the risks and benefits incidental to the ownership of the asset – but not the legal ownership – are transferred to entities
in the consolidated group, are classified as finance leases.
Finance leases are capitalized by recognizing
an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum
lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and
the lease interest expense for the period.
Leased assets are depreciated on a
straight-line basis over the shorter of their estimated useful lives or the lease term.
Lease payments for operating leases,
where substantially all the risks and benefits remain with the lessor, are recognized as expenses on a straight-line basis over the lease
term.
1.12
|
Loans and Borrowings
|
All loans and borrowings are initially
recognized at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.
After initial recognition, interest-bearing
loans and borrowings are subsequently measured at amortized cost using the effective interest method. Amortized cost is calculated by
taking into account any issue costs, and any discount or premium on settlement.
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Notes to Consolidated Statements
The Company recognizes revenue when
the goods are delivered at the port of shipment by the supplier, the price is fixed or determinable, and collectability is reasonably
assured.
Interest revenue is recognized using
the effective interest method, which for floating rate financial assets is the rate inherent in the instrument.
All revenue is stated net of the amount
of goods and services tax.
We account for income taxes using the
asset and liability method, under which the current income tax expense or benefit is the amount of income tax expected to be payable or
refundable in the current year. Deferred tax assets and liabilities are recorded for the estimated future tax consequences of temporary
differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, and for operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the year in which the temporary differences are expected to be recovered or settled.
We evaluate the realizability of our
deferred tax assets and establish a valuation allowance when it is more likely than not that all or a portion of our deferred tax assets
will not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals
of existing taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations.
If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would
make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
We account for the uncertainty in income
tax components based on tax positions taken or expected to be taken in a tax return. To recognize a benefit, a tax position must be more
likely than not to be sustained upon examination by taxing authorities. We do not recognize tax benefits that have a less than 50 percent
likelihood of being sustained. Our policy is to recognize interest and tax penalties related to unrecognized tax benefits in income tax
expense; no interest or tax penalties on uncertain tax benefits have been recorded through March 31, 2021.
1.15
|
Goods and Services Tax (GST)
|
Revenues, expenses and assets are recognized
net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).
Receivables and payables are stated
inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with
other receivables or payables in the statement of financial position.
Cash flows are presented on a gross
basis. The GST components of cash flows arising from investing or financing activities, which are recoverable from or payable to the ATO,
are presented as operating cash flows included in receipts from customers or payments to suppliers.
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Notes to Consolidated Statements
1.16
|
Impairment of Long-Lived Assets
|
The Company reviews long-lived assets,
including fixed assets, for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully
recoverable. Impairment is present when the sum of undiscounted estimated future cash flows expected to result from use of the asset is
less than carrying value. If impairment is present, the carrying value of the impaired asset is reduced to its fair value. Fair value
is determined based on discounted cash flows or appraised values, depending on the nature of the asset. During the period ended March
31, 2021, no impairment losses were recognized for long-lived assets.
1.17
|
Stock-Based Compensation
|
The Company recognizes all employee
share-based compensation as a cost in the consolidated financial statements. Equity-classified awards principally related to stock options,
restricted stock units (“RSUs”) and performance stock units (“PSU”), are measured at the grant date fair value
of the award. The Company determines grant date fair value of stock option awards using the Black-Scholes option-pricing model. The fair
value of restricted stock awards is determined using the closing price of the Company’s common stock on the grant date. For service
based vesting grants, expense is recognized over the requisite service period based on the number of options or shares expected to ultimately
vest. For performance based vesting grants, expense is recognized over the requisite period until the performance obligation is met, assuming
that it is probable. No expense is recognized for performance-based grants until it is probable the vesting criteria will be satisfied.
Forfeitures are estimated at the date of grant and revised when actual or expected forfeiture activity differs materially from original
estimates.
Stock-based payments to non-employees
are re-measured at each reporting date and recognized as services are rendered, generally on a straight-line basis. The Company believes
that the fair values of these awards are more reliably measurable than the fair values of the services rendered.
1.18
|
Earnings (Loss) per Common Share
|
Basic earnings (loss) per common share
is computed by dividing income or losses available to common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per common share is computed similar to basic net income or losses per share except that the denominator
is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants
and stock options had been issued and of the additional common shares were dilutive. Diluted earnings (loss) per common share is based
on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying
the treasury stock method for the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under
the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance,
if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under if
–converted method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period
(or at the time of issuance, if later).
1.19
|
Accumulated Other Comprehensive Income (Loss)
|
Comprehensive income (loss) is presented
net of applicable income taxes in the accompanying consolidated statements of stockholders’ equity and comprehensive income (loss).
Other comprehensive income (loss) is comprised of revenues, expenses, gains, and losses that under GAAP are reported as separate components
of stockholders’ equity instead of net income (loss).
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Notes to Consolidated Statements
1.20
|
Recently Issued Accounting Standards
|
The Company continually assesses any
new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement
affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial
statements and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change.
The Company currently does not have any recent accounting pronouncements that they are studying and feel may be applicable.
1.21
|
Reverse Acquisition Accounting
|
In accordance with “reverse acquisition”
accounting treatment, our historical financial statements as of period ends, and for periods ended, prior to the Acquisition will be replaced
with the historical financial statements of Sincerity Australia Pty Ltd (“SAPL”), prior to the Acquisition, in all future
filings with the SEC. Consequently retroactive adjustments have been made to the equity balances of SAPL to reflect the equity balances
of the legal parent company Sincerity Applied Materials Holdings Corp as required under ASC 805 and the application of reverse acquisition
accounting.
The outbreak of the novel strain of
coronavirus (“COVID-19”) and the ongoing pandemic, has resulted in governments worldwide enacting various emergency measures
to combat the spread of the virus. These measures, which include the implementation of travel bans, border shutdowns, self-imposed quarantine
periods, closing of non-essential businesses and social distancing, have caused material disruption to businesses globally resulting in
an economic slowdown. In addition, global equity markets have experienced significant volatility and weakness. Governments and central
banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions.
To date, the COVID-19 pandemic had
a material negative impact on the Group’s results of operations with reduced orders from its customers and the Group having to apply
for government assistance where available.
2.
|
Critical Accounting Estimates and Judgements
|
The Directors evaluate estimates and
judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates
assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within
the Company.
Key Estimates
The Company determines the estimated
useful lives and related depreciation and amortization charges for its property and equipment and finite life intangible assets. The useful
lives could change significantly as a result of technical innovations or some other event. The depreciation and amortization charge will
increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been
abandoned or sold will be written off or written down.
The Company is subject to income taxes
in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many
transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain.
The Company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law.
Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred
tax provisions in the period in which such determination is made.
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Notes to Consolidated Statements
Key Judgements
|
(i)
|
Provision for impairment of receivables
|
The provision for impairment of receivables
assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent sales experience,
the ageing of receivables, historical collection rates and specific knowledge of the individual debtors’ financial position.
The Company assessed that no indicators
of impairment existed at the reporting date and as such no impairment testing was performed.
The consolidated entity operates predominantly
in one industry and one geographical segment, those being sales of technical advanced plastics materials in Australia, respectively.
4.
|
Cash and Cash Equivalents
|
Cash at the end of the financial periods
as shown in the statement of cash flows is reconciled to items in the balance sheets as follows:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
Cash at bank
|
|
$
|
4,966
|
|
|
$
|
3,419
|
|
Petty Cash
|
|
|
762
|
|
|
|
773
|
|
|
|
$
|
5,728
|
|
|
$
|
4,192
|
|
5.
|
Account Receivables and Other Assets
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Account Receivables
|
|
$
|
42,391
|
|
|
$
|
67,626
|
|
|
|
$
|
42,391
|
|
|
$
|
67,626
|
|
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Notes to Consolidated Statements
6.
|
Property, Plant and Equipment
|
|
|
March 31,2021
|
|
|
December 31, 2020
|
|
|
Estimated Useful Lives
|
|
|
|
|
|
|
|
|
|
Vehicles
|
|
$
|
131,242
|
|
|
$
|
131,242
|
|
|
5 years
|
Office equipment and furniture and fixtures
|
|
|
25,565
|
|
|
|
25,565
|
|
|
5 years
|
|
|
|
156,807
|
|
|
|
156,807
|
|
|
|
Less: accumulated depreciation
|
|
|
56,518
|
|
|
|
54,227
|
|
|
|
Total, net of accumulated depreciation
|
|
$
|
100,289
|
|
|
$
|
102,580
|
|
|
|
7.
|
Accrued and Other Liabilities
|
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Current
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
83,579
|
|
|
$
|
85,039
|
|
|
|
$
|
83,579
|
|
|
$
|
85,039
|
|
The Company has a chattel mortgage
outstanding at March 31, 2021 secured by a motor vehicle requiring monthly payments approximating $2,861 (and a final payment approximating
$49,215) that includes interest approximating 6.2%, and maturing on August 22, 2022. The components of the balance due under the chattel
mortgage at March 31, 2021 are as follows:
|
|
March 31, 2021
|
|
|
December 31,2020
|
|
|
|
|
|
|
|
|
Chattel mortgage
|
|
$
|
50,816
|
|
|
$
|
60,303
|
|
Less: current portion
|
|
|
(23,739
|
)
|
|
|
(24,094
|
)
|
|
|
$
|
27,077
|
|
|
$
|
36,209
|
|
Maturities of long-term debt at March
31, 2021 for each of the next five years and in the aggregate, are as follows:
|
|
March 31, 2021
|
|
|
December 31,2020
|
|
|
|
|
|
|
|
|
Next 12 months
|
|
$
|
34,332
|
|
|
$
|
34,787
|
|
2 years
|
|
|
63,521
|
|
|
|
73,054
|
|
|
|
$
|
97,853
|
|
|
$
|
107,841
|
|
SINCERITY APPLIED MATERIALS HOLDINGS CORP.
Notes to Consolidated Statements
|
|
March 31, 2021
|
|
|
December 31,2020
|
|
|
|
|
|
|
|
|
Business Loan
|
|
$
|
116,890
|
|
|
$
|
119,284
|
|
Business Credit Card
|
|
|
617
|
|
|
|
1,613
|
|
Short-term borrowing
|
|
|
80,000
|
|
|
|
80,000
|
|
|
|
$
|
197,507
|
|
|
$
|
200,897
|
|
The Company has a total $950,000 (AUD) bank credit
line (approximately $722,190 (USD) at March 31, 2021) personally guaranteed by certain Company officers, and secured by real property
owned by those officers, available to be used for core business working capital requirements, $800,000 (AUD) of which is designated as
the “mortgage loan” portion with the remaining balance of $150,000 (AUD) designated as the “business loan” portion.
The mortgage loan portion of the credit line is subject to the bank’s business mortgage index rate (5.94% per annum at March 31,
2021) minus 2.23% per annum for a maximum term of 30 years from the first drawdown date, and the business loan portion of the credit line
is subject to the bank’s business mortgage index rate minus 1.08% per annum for a maximum term of 15 years from the first drawdown
date. The business loan at March 31, 2021, $116,890 (USD) is drawn and payable on the business loan; no drawings have been made on the
mortgage loan as of the balance sheet date. Interest only is due monthly in arrears for the first 3 years from the first drawdown date
for draws from the mortgage loan and from the business loan.
(a)
|
The components of tax (expense)/income comprise:
|
|
|
March 31, 2021
|
|
|
March 31,2020
|
|
|
|
|
|
|
|
|
Current tax
|
|
|
|
|
|
|
|
|
- Australia
|
|
$
|
2,150
|
|
|
$
|
751
|
|
- US
|
|
|
–
|
|
|
|
–
|
|
Total
|
|
$
|
2,150
|
|
|
$
|
751
|
|
(b)
|
The prima facie tax on profit from ordinary activities before income tax is reconciled to income tax as follows:
|
Profit/(loss) from continuing operations before income tax
expense:
- Australia
|
|
|
8,270
|
|
|
$
|
(2,888
|
)
|
- US
|
|
|
–
|
|
|
|
(1,026
|
)
|
- Hong Kong
|
|
|
–
|
|
|
|
–
|
|
Total
|
|
|
8,270
|
|
|
$
|
(3,914
|
)
|
Income tax expense/(credit) at statutory rate:
- Australia
|
|
$
|
2,150
|
|
|
$
|
(751
|
)
|
- US
|
|
|
–
|
|
|
|
(210
|
)
|
- Hong Kong
|
|
|
–
|
|
|
|
–
|
|
Total
|
|
$
|
2,150
|
|
|
$
|
(961
|
)
|
10.
|
Income Tax Expense (continued)
|
Tax effect amounts which are not deductible/(taxable) in
calculating taxable income:
Other non-allowable items
|
|
$
|
–
|
|
|
$
|
(210
|
)
|
Valuation allowance
|
|
|
–
|
|
|
|
–
|
|
Consolidated income tax expense/(income)
|
|
$
|
(2,150
|
)
|
|
$
|
(210
|
)
|
On December 22, 2017, new tax reform
legislation in the U.S., known as the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law. At March 31, 2021, the
Company has not yet completed its accounting assessment for the tax effects of the enactment of the Act; however, as described below,
the Company has made a reasonable estimate of the effects on the existing deferred tax balances.
As a result of the lower enacted corporate
tax rate, the Company has remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse
in the future, which is generally 21%. The provisional amount recorded related to the remeasurement of our tax balance was $Nil that is
fully offset by accumulated losses from earlier periods.
Staff Accounting Bulletin No. 118 (“SAB
118”) was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available,
prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act.
In accordance with SAB 118, the Company has provisionally determined that there is no deferred tax benefit or expense with respect to
the remeasurement of certain deferred tax assets and liabilities due to the full valuation allowance against net deferred tax assets.
The Company is still analyzing certain aspects of the Act and refining its calculations, which could potentially affect the measurement
of these balances or potentially give rise to new deferred tax amounts. Additional analysis of the law and the impact to the Company will
be performed and any impact will be recorded in the respective quarter in 2021.
11.
|
Other Comprehensive Earnings
|
|
|
March 31, 2021
|
|
|
March 31,2020
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation reserve
|
|
$
|
19,867
|
|
|
$
|
10,264
|
|
12.
|
Capital and Leasing Commitments
|
There was no capital or leasing expenditure
at March 31, 2021.
From
time to time, we may be a defendant and plaintiff in various legal proceedings arising in the normal course of our business. We are currently
not a party to any material legal proceedings or government actions, including any bankruptcy, receivership, or similar proceedings. In
addition, we are not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations.
Furthermore, as of the date of this quarterly, our management is not aware of any proceedings to which any of our directors, officers,
or affiliates, or any associate of any such director, officer, affiliate, or security holder is a party adverse to our company or has
a material interest adverse to us.
14.
|
Related Party Transactions
|
Sincerity Australia Pty Ltd which is
incorporated in Australia and Prana Hong Kong Limited which is incorporated in Hong Kong are wholly owned subsidiaries of Sincerity Applied
Materials Holdings Corp. Prana Hong Kong Limited is under process of de-registration.
|
(b)
|
Outstanding balances with related parties
|
The following balances are outstanding
at reporting date in relation to transactions with related parties:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
Loan to Stockholder
|
|
$
|
518,755
|
|
|
$
|
519,338
|
|
|
|
Three Months ended March
|
|
|
|
2021
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Purchase from Shanghai Sincerity Co Ltd
|
|
$
|
–
|
|
|
$
|
–
|
|
15.
|
Events After the Reporting Period
|
There has not arisen in the interval
between the end of the financial period and the date of these financial statements any other item, transaction or event of a material
and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operation of the company, the results
of those operations, or the state of affairs of the company, in future financial years except for:
|
(a)
|
On August 5, 2021, the New York County Supreme Court has granted Section 3(a)(10) of the Securities Acto fo 1933 as amended exempts the offer and sale of securities in certain exchange transactions from the registration statement requirements in the case of Infinity Fund LLC v Sincerity Applied Materials Holdings Corp.
|
|
(b)
|
On August 20, 2020, the Group has entered into
a stock purchase agreement with Simcor (Jiangsu) Materials Technology Ltd (SMTL), a company formed in the Peoples Republic of China with
its registered address at No 67, Yanzhen East Rd, Niutang, Wujin, Changzhou, Jiangsu, China. SMTL will sell to the group 2,000,000 ordinary
shares to the Group for a consideration of USD 2,500,000. SMTL also will issue and sell to the Group 5,000,000 ordinary shares for a consideration
of USD 4,500,000.
The Group has issued a USD 7,000,000 promissory
note to the shareholder of SMTL and assigned the debt to Infinity Fund LLC for the same amount of USD 7,000,000 subject to the granting
of Section 3(a)(10) of the Securities Act of 1933 as described in Note 15(a). This transaction has not been settled and accounted for
at the date of this report.
|
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
The following management’s discussion and
analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in this report.
The management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations
and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,”
“plan,” “intend,” “anticipate,” “target,” “estimate,” “expect”
and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,”
etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks
and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking
statements. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking
statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect
events or circumstances occurring after the date of this report.
The following discussion highlights the Company’s
results of operations and the principal factors that have affected our financial condition, as well as our liquidity and capital resources
for the periods described, provides information that management believes is relevant for an assessment and understanding of the statements
of financial condition and results of operations presented herein. The following discussion and analysis are based on the Company’s
unaudited financial statements contained in this Quarterly Report, which we have prepared in accordance with United States generally accepted
accounting principles. You should read this discussion and analysis together with such financial statements and the related notes thereto.
Company Overview
Through our wholly owned subsidiary, Sincerity
Australia Pty Ltd. (“SAPL”), we primarily operate as a distributor and reseller of applied materials, particularly plastics,
with an extensive network in China of high quality suppliers for a wide range of both basic and high application polymer products ranging
from generic construction materials to high end breathable stretch film and antibacterial sheeting. SAPL is based in Melbourne, Australia
and distributes to a number of larger resellers and end users, including Visy Industries (trading as Pratt Group America in the USA),
one of the world’s largest packaging and recycling groups.
SAPL’s business was commenced in 2009 by
James Zhang, our Chairman, President and Chief Executive Officer and the son of the founder of (i) Changzhou Sincerity Plastics and Chemicals
Technology Ltd. (“Sincerity China”), a well-established plastics and applied materials manufacturer with a 20-year operating
history, based in Changzhou, China, and (ii) Shanghai Sincerity Co. Ltd., a Shanghai, China based company through which most of the products
we purchase from Sincerity China are sourced and sold to us. SAPL originally commenced operations by supplying basic extruded plastic
components (moldings, auto interior components, kitchen splash backs etc.) to the Australian auto, retail and construction industries.
In 2015, SAPL began importing specialty high quality plastic trays and film for use in fresh food packaging and distribution. The first
major customer for this business was the Propac Group, leading supplier of plastic packaging materials to Coles, one of Australia’s
2 dominant supermarket chains.
Over the past 3 years, SAPL has refocused its
marketing efforts towards larger resellers and distributors in Australia, allowing SAPL to build strong relationships with key industry
players who acquire its products for their own distribution and reseller networks. Research and investment in addressing the key fresh
food issue of plastic film “breathability” has created a unique technology platform whereby air circulation in packaged foods
can be adjusted according to the type of food. This has the effect of prolonging shelf life, key to building relationship metrics within
the food retailing industry. SAPL recently started to supply Visy Industries, with high technology, breathable plastic film for use in
Visy Industries’ packaging supply contract with the other dominant player in Australia’s supermarket industry.
Presently all of SAPL’s revenue is derived
from sales within the Australian market, however, due to the strong international presence of SAPL’s major customers such as Visy,
particularly in the US, combined with the technology metrics of SAPL’s product range (breathable stretch film and antibacterial
polymer products), it is expected that SAPL’s products will be increasingly utilized in global markets.
SAPL will continue with the process of further
vertical integration of its product range. Value adding packaging technology, such as breathable film, and ventilated stretch film, is
expected to provide an innovative edge over our competition. Rapid growth in demand from fresh fruit and vegetable packaging is already
reflected through increasing sales to Visy Industries and will also allow SAPL to transition these new products to the global market.
SAPL supplies Australian market with a well-diversified
product range, while commodity type provides a strong foundation of business grow, the value adding innovations on each product will bring
SAPL to the next level and expand for beyond Australia.
SAPL’s flag ship range in ventilated packaging
are in the final stage of commercial production, and it is expected to disrupt the fresh produce packaging market with strong performance
and competitive price.
|
|
|
Three Months ended March
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Note
|
|
$
|
|
|
$
|
|
|
|
|
(Not Reviewed)
|
|
|
(Not Reviewed)
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
31,096
|
|
|
|
93,586
|
|
Cost of sales
|
|
|
|
(25,821
|
)
|
|
|
(81,625
|
)
|
Gross profit
|
|
|
|
5,275
|
|
|
|
11,961
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
2,292
|
|
|
|
1,952
|
|
Selling, general and administrative expenses
|
|
|
|
2,661
|
|
|
|
4,022
|
|
Professional service fees
|
|
|
|
158
|
|
|
|
66
|
|
Total operating expenses
|
|
|
|
5,111
|
|
|
|
6,040
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) from operations
|
|
|
|
164
|
|
|
|
5,921
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expenses)
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
11,749
|
|
|
|
4,512
|
|
Interest expense
|
|
|
|
(1,553
|
)
|
|
|
(1,415
|
)
|
Foreign currency transaction loss
|
|
|
|
(2,090
|
)
|
|
|
(12,932
|
)
|
Total other income/(expenses)
|
|
|
|
8,106
|
|
|
|
(9,835
|
)
|
Income/(loss) from continuing operations before income tax expenses
|
|
|
|
8,270
|
|
|
|
(3,914
|
)
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit/(expense)
|
10
|
|
|
(2,150
|
)
|
|
|
751
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) after income tax expense for the period
|
|
|
|
6,120
|
|
|
|
(3,163
|
)
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income /(loss)
|
|
|
|
|
|
|
|
|
|
Exchange differences arising on translation of foreign operations
|
|
|
|
10,434
|
|
|
|
(34,607
|
)
|
Other comprehensive income/(loss)
|
|
|
|
10,434
|
|
|
|
(34,607
|
)
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the period
|
|
|
|
16,554
|
|
|
|
(37,745
|
)
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/gain per share
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
|
–
|
|
|
|
–
|
|
Weighted average number of common stock outstanding
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
|
73,590,730
|
|
|
|
73,590,730
|
|
Revenues
Revenue was $31k for the three months ended March
31, 2021, compared to $93k for the three months ended March 31, 2020, a decrease of $62k. The decrease can be attributed to timing and
quantity of orders by our customers and the type of products they purchase, which can vary in margin.
Selling, general and administrative expenses
Selling, general and administrative expenses was
$2.6k for the three months ended March 31, 2021, compared to $4k for the three months ended March 31, 2020. The decrease was primarily
due to reduction in business activities in the quarter.
Employee expenses
No employee expenses were incurred for the 3 months
ended March 31, 2021 and March 31, 2020.
Professional service fees
Professional service fees were minimal for
the three months ended March 31, 2021 and 2020. The lower professional service fees incurred for the 3 months ended March 31, 2021
and 2020 was to due to reduced consultant costs.
Other Income and Expenses
The increase in other income and expenses was
due to the business receiving financial assistance from the Australian Government in response to the effects of COVID-19 and foreign currency
transaction loss due to the depreciation of the Australian dollar against the US Dollar.
Liquidity and Capital Resources
At March 31,2021, the company had a current asset
deficiency of $27,975 and net asset surplus of $112,809 (December 31, 2020 current asset deficiency of $40,846 and net asset surplus of
$96,256). The Company reported an after tax income of $6,120 for the year (March 31, 2020 after tax loss: $3,163).
Our primary uses of cash have been for operations.
The main sources of cash have been sales to customers.
The Company believes that cash flow from operations
will be sufficient to sustain its current level of operations for at least the next three months of operations.
As of March 31, 2021, we had cash and cash equivalent
of approximately $6,000, which might not be sufficient to fund our operating and capital needs in the short term. The Company has been
seeking funding from various sources as discussed below:
|
(i)
|
The company has the ability to raise fund through private placements and convertible notes;
|
|
(ii)
|
The company has been streamlining its operation by reducing operation costs; and
|
|
(iii)
|
Applying for financial assistance from the Australian Government available for businesses impacted by COVID-19
|
In the three months ended
March 31, 2021, the net cash generated from operating activities primarily reflects the profit from operations of approximately $6,000
with approximately $4,000 in changes in operating assets and liabilities, offset by non-cash items of approximately $2,000 and amortization
and depreciation of approximately $2,000 that had no effect on cash flows.
Net cash generated from
or used for investing activities was $nil for the three months ended March 31, 2021.
Net cash used in financing
activities was approximately $13,000 for the three months ended March 31, 2021 compared to approximately $53,000 used in financial activities
for the three months ended March 31, 2020 and receipt from related parties for the three months ended March 31, 2021.
Critical Accounting Estimates and Judgements
The Directors evaluate estimates and judgements
incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable
expectation of future events and are based on current trends and economic data, obtained both externally and within the Company.
Key Estimates
The Company determines the estimated useful lives
and related depreciation and amortization charges for its property and equipment and finite life intangible assets. The useful lives could
change significantly as a result of technical innovations or some other event. The depreciation and amortization charge will increase
where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned
or sold will be written off or written down.
The Company is subject to income taxes in the
jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions
and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company
recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where the final
tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions
in the period in which such determination is made.
Key Judgements
(i)
|
Provision for impairment of receivables
|
The provision for impairment of receivables
assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent sales experience,
the ageing of receivables, historical collection rates and specific knowledge of the individual debtors’ financial position.
The Company assessed that no indicators of impairment existed
at the reporting date and as such no impairment testing was performed.