The following Management's Discussion and Analysis of Financial Condition and
Results of Operations is intended to provide information necessary to understand
our audited consolidated financial statements for the two-year period ended
December 31, 2019 and highlight certain other information which, in the opinion
of management, will enhance a reader's understanding of our financial condition,
changes in financial condition and results of operations. In particular, the
discussion is intended to provide an analysis of significant trends and material
changes in our financial position and the operating results of our business
during the fiscal year ended December 31, 2019, as compared to the fiscal year
ended December 31, 2018. This discussion should be read in conjunction with our
consolidated financial statements for the two-year period ended December 31,
2019 and related notes included elsewhere in this Annual Report on Form 10-K.
These historical financial statements may not be indicative of our future
performance. This Management's Discussion and Analysis of Financial Condition
and Results of Operations contains numerous forward-looking statements, all of
which are based on our current expectations and could be affected by the
uncertainties and risks described throughout this filing, particularly in "Item
1A. Risk Factors."
44
Corporate Overview and History
Our business aim is to build a secure and convenient e-commerce ecosystem to
customers and merchants through our introduction of services and products
including: (i) electronic payment service; and (ii) virtual marketplace both of
which are available on the portal, KinerjaPay.com, (the "Portal"). In addition
to access to the Portal, our Android and iPhone based mobile application
includes additional in-app services to mobile phone users such as social
engagement and digital entertainment (the "Mobile App"). A virtual marketplace,
powered by our proprietary electronic payment service and gamified with in-app
entertainment features, creates a one-stop-shop e-commerce platform for users to
BUY, PAY and PLAY. We brand our virtual marketplace under the name of KMALL, our
electronic payment solution under the name of KPAY, and our gamification
features under the name of KGAMES.
The Company was incorporated in Delaware on February 12, 2010 under the name
Solarflex Corp. for the purpose of developing, manufacturing and selling a solar
photovoltaic element ("Equipment"), an equipment that converts light into
electrical flow (also known as a photovoltaic cell) based on certain proprietary
technology to enable an increase in solar energy conversion efficiency and
provide energy at a lower cost. From 2010 through mid-2015, we did not
successfully use the Equipment to develop a working prototype, nor was there any
estimated timeline for our ability to put the working prototype in production.
Since the Company did not generate any revenue from the technology, we
determined that it was not in the best interest of the Company or its
shareholders to continue devoting resources and incurring expenditures towards
efforts to commercialize the technology using the Equipment.
On November 10, 2015, the Company entered into an Asset Purchase Rescission
Agreement with IEC (the "Rescission Agreement") pursuant to which: (i) we
transferred and assigned all right, title and interest in the Equipment back to
IEC; (ii) IEC returned 333,333 of the 2,000,000 Shares back to the Company;
(iii) IEC transferred and assigned the remaining 1,666,667 Shares to Mr. Edwin
Witarsa Ng ("Mr. Ng"), a resident of Indonesia, who was appointed as Chairman of
our Board of Directors, in consideration for a cash payment by Mr. Ng of $20,000
to IEC. The rationale of the Rescission Agreement was based upon the
Registrant's determination not to pursue the use and commercial exploitation of
the Equipment in furtherance of its former solar energy business plan.
On December 1, 2015, the Company entered into a license agreement (the "License
Agreement") with P.T. Kinerja Indonesia, an entity organized under the laws of
Indonesia and controlled by Mr. Ng ("PT Kinerja"), for an exclusive, world-wide
license to use and commercially exploit technology and intellectual property
owned by PT Kinerja (the "KinerjaPay IP") and its website, KinerjaPay.com (the
"Portal"). The Portal, and the technology behind it, KinerjaPay IP, create an
e-commerce platform that provides electronic payment solutions to customers and
merchants for bill payment, money transfer and online shopping. KinerjaPay.com
is among the first portals that allow users to conveniently top up mobile phone
credit in Indonesia.
Pursuant to the License Agreement, the Company agreed to: (i) change the name of
the Company to KinerjaPay Corp.; (ii) implement a reverse split of the Company's
shares of common stock on a one-for-thirty (1:30) basis; and (iii) raise equity
capital in the minimum offering amount of $500,000 and the maximum offering
amount of $2,500,000 through the offering of units at a price of $0.50. Each
unit consists of 1 share of common stock and 1 Class A warrant exercisable for a
period of 24 months to purchase 1 additional share of common stock at $1.00
("Unit Offering"). The Unit Offering is only being made to "accredited
investors" who are not U.S. Persons pursuant to Regulation S promulgated by the
SEC under the Securities Act of 1933, as amended (the "Securities Act"). On
January 20, 2016, the Company closed its first Unit Offering receiving
subscription proceeds in excess of $500,000. To date, the Company has raised
$1,540,000 pursuant to subsequent Unit Offerings.
On March 10, 2016, the Company's name changed to KinerjaPay Corp., and its
one-for-thirty (1:30) reverse stock split became effective.
On April 6, 2016, PT Kinerja Pay Indonesia ("PT Kinerja Pay"), a wholly-owned
subsidiary of the Company, was organized under the laws of Indonesia, for the
purpose of developing and managing the Company's e-commerce business ranging
from electronic payment solutions, virtual marketplace, and any other strategies
within the e-commerce ecosystem in Indonesia.
On August 31, 2018, the Company completed the acquisition of its licensor PT
Kinerja Indonesia (PT Kinerja"), which became a wholly-owned subsidiary of the
Company. PT Kinerja Indonesia continues to provide the technology solutions
needed by the Company to support its e-commerce business and may expand into
cloud computing services and other IT service-related businesses.
45
On September 13, 2018, PT Kinerja Simpan Pinjam ("PT Kinerja SP"), a
wholly-owned subsidiary of PT Kinerja, was organized under the laws of Indonesia
for the purpose of developing and managing a peer-to-peer ("P2P") lending
platform focusing on micro-lending activities. PT Kinerja SP was renamed to PT
Kinerja SG on August 30, 2019 to comply with the naming convention permitted by
Financial Service Authority (Otoritas Jasa Keuangan - "OJK") of Indonesia.
On February 28, 2019, Kinerja Pay Ltd. a wholly-owned subsidiary of PT Kinerja,
was incorporated in the State of Nevada. The subsidiary has no employees or
operations, aside from a bank account to receive cash proceeds from security
purchase agreements and convertible debentures, which is then transferred to its
parent company or other entities owned by KinerjaPay Corp.
Material Developments During Fiscal 2019 and 2018
On August 31, 2018, the Company completed its acquisition of PT. Kinerja
Indonesia, the former corporate parent and licensor of the Company's IP
technology, which entity was controlled by Edwin Ng, our CEO, sole director and
principal shareholder. The purpose of this acquisition was to enable the Company
to consolidate all of its previous accumulated gross revenue to the date of the
acquisition. In addition, acquisition enabled the Company to consolidate its IP
technology and manage its 1,500 square-feet data center located in North
Sumatra. The Company believes that the acquisition will make the Company more
cost efficient. The terms of the acquisition provide for the payment of
$1,200,000 to PT Kinerja Indonesia's shareholders pursuant to a promissory note
due in twenty-four (24) months, bearing interest at 6% per annum, which note may
be prepaid by the Company at any time. As of August 31, 2018, the Service
Agreement between the Company and PT Kinerja Indonesia was terminated. The note
issued to PT Kinerja Indonesia's shareholders on August 31, 2018 had a maturity
date of August 31, 2020. The parties are negotiating a long-term extension of
the note, which should be completed during the 4th quarter of 2020 at terms and
conditions satisfactory to the Company.
On September 13, 2018, the Company incorporated PT. Kinerja SimpanPinjam
("KSP"), a new wholly-owned subsidiary, for the purpose of managing its a
peer-to-peer (P2P) lending platform focusing on micro-lending activities under
the KFUND brand. At present, KSP is in the process of being registered with
Otoritas Jasa Keuangan ("OJK"), an Indonesian governmental agency overseeing and
regulating the financial service sector in Indonesia. KSP was incorporated with
capital of Rp1,000,000,000 or approximately $70,000 and we expect to increase
the capital of KSP within the next year by an additional Rp2,500,000,000 or
approximately $175,000.
Results of Operations
Comparison of the year ended December 31, 2019 to the year ended December 31,
2018
Revenue
During the year ended December 31, 2019, we generated gross revenues of
$449,434, with costs of sales of $431,604 for net revenues of $17,830, compared
to gross revenues of $2,825,676, with costs of sales of $2,821,191 for gross
profit of $4,485 for the year ended December 31, 2018.
Expenses
Our expenses for the year ended December 31, 2019 are summarized as follows in
comparison to the year ended December 31, 2018:
Year Ended December 31,
2019 2018
Marketing Expenses $ 188,645 $ 228,686
General and administrative 8,622,461 6,282,352
Depreciation 44,855 65,086
Other expense (11,109,859 ) (1,822,021 )
46
Marketing expenses for the year ended December 31, 2019 decreased by 17.5%
compared to marketing expenses for the same period in 2018. The higher amount in
2018 was the result of the Company trying to grow their business on their
portal, which has been reduced during the current year.
General and administrative expenses for the year ended December 31, 2019
increased by 37.2% compared to general and administrative expenses for the same
period in 2018. The main components of general and administrative expenses in
2019 consisted of approximately $2,979,000 in consulting fees, substantially all
of which were in stock based compensation; approximately $758,000 of which is
for the current year amortization of the Series D preferred shares issued to FRS
Lending in connection with their 3 year employment agreement; approximately
$3,559,000 for the Series E preferred shares issued to the CEO for his services
in the negotiation with PT Investa Wahana Group related to a presumed
subscription to purchase shares of Series G and Series F Preferred Stock under a
Reg S Subscription Agreement that has not yet closed; approximately $586,000 in
legal and professional fees; and approximately $200,000 for audit and accounting
services. The legal and professional fees are primarily fees related to the
convertible debentures, both for issuance and opinion letters related to the
conversions of the convertible debentures. Included in general and
administrative expenses in the year ending December 31, 2018 was approximately
$2,088,000 in consulting fees, approximately $3,358,000 in shares issued for
services, and approximately $865,000 in legal and professional fees. Included in
the shares issued for services was $871,000 for the Series B preferred shares
issued to the CEO for 51% of the voting control of the Company.
Depreciation expense decreased 31.1% in the year ended December 31, 2019 as
compared to the same period in 2019, due to a re-evaluation of the useful life
of the fixed assets associated with the PT Kinerja acquisition.
Other expense in the year ended December 31, 2019 increased by approximately
$9,289,000 as compared to the same period in 2018, substantially due to the
increase in expense items arising from the convertible debentures. Amortization
of the debt discount, the majority of which is related to the valuation of the
derivatives and warrants issued in connection with the convertible debentures,
increased by approximately $4,172,000; Financing costs which are mostly the
result of the fair value of the bifurcated derivative liability at inception
resulting in the debt discount being greater than the face amount of the debt
and the excess amount being immediately expensed as financing costs, increased
by approximately $2,752,000, and the expense related to the change in the fair
value of the Warrant liability increased by $979,000. Additionally, Penalties
and loss on conversion of debt increased by approximately $1,337,000,
significantly all of which is from the recognition of a loss on the modification
of the conversion price of the Series A preferred stock.
Working Capital
December 31,
2019 2018
Current assets $ 2,236,390 $ 401,785
Current liabilities 8,495,709 3,996,097
Working capital deficiency $ (6,259,319 ) $ (3,594,312 )Current assets increased by approximately $1,835,000, which was primarily
attributable to the following: (i) approximately $308,000 in additional notes
receivable; and (ii) an increase in prepaid expenses, consisting of
approximately $1,130,000 of the current portion of shares issued to consultants,
and the $322,000 related to finder's fees paid to various parties in connection
with an expected equity investment in the Company and a related standby letter
of credit. Current liabilities increased by approximately $4,500,000, which was
primarily attributable to the following: (i) an increase of approximately
$370,000 in convertible debentures, net of the debt discount; (ii) an increase
of $2,901,000 in the derivative liability, related to the convertible features
of the current year outstanding convertible debentures meeting the qualification
for derivative accounting, (iii) an increase of $821,000 in the warrant
liability, which arose out of the convertible features of the convertible
debentures requiring the warrants to be classified out of equity due to not
being able to determine if there are sufficient authorized and unissued common
shares of the Company, mostly related to new warrants issued in the current year
and (iv) increases in accounts payable and accrued expenses, including accrued
interest related to the convertible debentures and the promissory note, related
party.
47
Liquidity and Capital Resources
Year Ended December 31,
2019 2018
Net loss $ (19,947,990 ) $ (8,393,660 )
Net cash used in operating activities (3,300,532 ) (2,037,691 )
Net cash used in investing activities (506,173 ) (11,650 )
Net cash provided by financing activities 3,648,543 2,119,000
Decrease in cash and cash equivalents, including
foreign currency translation amount $ (49,924 ) $ (90,735 )
Net cash used in operating activities increased by approximately 62.0% for the
year ended December 31, 2019, as compared with the same period in 2018. The
increase in cash used was a result of the increase in the net loss of
approximately 138%, plus the increase in non-cash activities, including the
increase to the loss on preferred stock of approximately $1,335,000, the
increase in financing costs of approximately $2,952,000, the net decrease in the
fair value of the derivative and warrant liabilities of $611,000 compared to
$123,000 in 2018, and the amortization of debt discount of $4,355,000 for the
year ended December 31, 2019 as compared to $183,500 for fiscal 2018. The
expenses arising from stock issued for services, decreased by approximately
$1,535,000. The changes in net assets and liabilities were fairly consistent
between years, aside from increases in accrued liabilities and accrued interest.
Net cash used in investing activities for the year ended December 31, 2018 was
primarily for the purchase of convertible notes receivable. Net cash used in
investing activities in 2018 was primarily for the purchase of fixed assets,
offset in by the cash received in the PT Kinerja KI acquisition.
During the year ended December 31, 2019, financing activities consisted of
approximately $4,344,000 in proceeds from convertible debentures and
approximately $146,000 in proceeds from the issuance of common stock, offset by
approximately $445,000 in payments on the convertible debentures, the payment of
approximately $304,000 on the promissory note, related party and approximately
$86,000 for the repurchase of common shares. Our financing activities during the
year ended December 31, 2018, consisted of $1,519,000 in proceeds from
convertible debentures, $100,000 in cash received in warrants exercise and
$500,000 in proceeds from the issuance of Series A Preferred Stock.
Convertible Note Agreements
During the year ended December 31, 2019, the Company issued numerous convertible
debentures consisting of principal of approximately $4,251,000, with varying
convertible rates. See Item 5 above for a detailed discussion of the individual
convertible debentures issued during the year ended December 31, 2019.
Going Concern
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern. The
Company has not established sufficient revenue to cover its operating costs, and
as such, has incurred an operating loss since inception. For the year ended
December 31, 2019, the Company had a net loss of approximately $19,948,000. At
December 31, 2019, the Company had an accumulated deficit of approximately
$38,093,000 and a working capital deficit of approximately $6,259,000. These
factors raise substantial doubt about the Company's ability to continue as a
going concern, within one year from the issuance date of this filing. The
Company's ability to continue as a going concern is dependent on its ability to
raise the required additional capital or debt financing to meet short and
long-term operating requirements. During the year ended December 31, 2019, the
Company received net cash proceeds of approximately $4,224,000 from the issuance
of new convertible debentures. Subsequent to December 31, 2019, the Company
received approximately $496,000 in cash proceeds from the issuance of new
convertible debentures. Additional financing may not be available upon
acceptable terms, or at all. If adequate funds are not available or are not
available on acceptable terms, the Company may not be able to take advantage of
prospective business endeavors or opportunities, which could significantly and
materially restrict our operations. The Company continues to pursue external
financing alternatives to improve its working capital position. The accompanying
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
48
Future Financing
We will require additional funds to implement our growth strategy for our
business. Subsequent to year end, we have raised approximately an additional
$496,000, from convertible debentures. Additionally, on December 10, 2018, we
entered into a signed commitment with PT. Investa Wahana Group, Indonesia to
invest $200 million, subscribing for $100 million in shares of the Company's
Series F Convertible Preferred Stock and an addition $100 million in shares of
the Company's Series G Convertible Preferred Stock. In addition, during the
year-ended December 31, 2019, the Company has negotiated with third parties who
also expressed an interest in subscribing for shares of the Company's authorized
Series F and Series G Preferred Stock. To date, we have not received the
subscription proceeds, from any third-party investors who have expressed
interest in subscribing for Series F and G Preferred Stock nor can there be any
assurance that the Company will be able to successfully close any of the pending
proposals from third-party investors for such securities. Nevertheless, the
Company has continued discussions, albeit intermittently, for the purpose of
closing one or more subscriptions for the Series F and Series G Preferred Stock.
However, not including funds needed for capital expenditures or to pay down
existing debt and trade payables, we anticipate that we will need to raise an
additional $3,000,000 to cover all of our operational expenses over the next 12
months. These funds may be raised through equity financing, debt financing, the
sale by the Company of shares of common stock of third-party public companies
issued upon conversion by the Company of convertible notes issued to the
Company, or other sources, some of which may result in further dilution in the
equity ownership of our shares. There can be no assurance that additional
financing will be available to us when needed or, if available, that such
financing can be obtained on commercially reasonable terms. If we are not able
to obtain the additional necessary financing on a timely basis, or if we are
unable to generate significant revenues from operations, we will not be able to
meet our other obligations as they become due, and we will be forced to scale
down or perhaps even cease our operations.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in the notes to our
financial statements included in this Annual Report on Form 10-K for the fiscal
year ended December 31, 2019. We believe that the accounting policies below are
critical for one to fully understand and evaluate our financial condition and
results of operations.
Fair Value Measurement
The Company measures fair value under a framework that utilizes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value. The hierarchy gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (level 1 measurements) and
the lowest priority to unobservable inputs (level 3 measurements). The three
levels of inputs which prioritize the inputs used in measuring fair value are:
? Level 1: Inputs to the valuation methodology are unadjusted quoted prices for
identical assets or liabilities in active markets that the Company has the
ability to access.
? Level 2: Inputs to the valuation methodology include:
- Quoted prices for similar assets or liabilities in active markets;
- Quoted prices for identical or similar assets or liabilities in inactive
markets;
- Inputs other than quoted prices that are observable for the asset or
liability;
- Inputs that are derived principally from or corroborated by observable market
data by correlation or other means.
49
If the asset or liability has a specified (contractual) term, the level 2 input
must be observable for substantially the full term of the asset or liability.
? Level 3: Inputs to the valuation methodology are unobservable and significant
to the fair value measurement.
The assets or liability's fair value measurement level within the fair value
hierarchy is based on the lowest level of any input that is significant to the
fair value measurement. Valuation techniques used need to maximize the use of
observable inputs and minimize the use of unobservable inputs.
The Company did not have any Level 1 or Level 2 assets and liabilities at
December 31, 2019. The Derivative and warrant liabilities at December 31, 2019,
are Level 3 fair value measurements.
Revenue Recognition
The Company has eight different revenue products, including, Mobile phone
prepaid, Kinerja Store, Payment Gateway Services, Instant Pay Fees Collection,
Marketplace Merchant Partners, Marketplace Merchant Users, Remittance, and
Unipin. To date substantially all our revenue has been earned in the mobile home
prepaid product.
Effective January 1, 2018, the Company adopted ASC 606 - Revenue from Contracts
with Customers. Under ASC 606, the Company recognizes revenue from the
commercial sales of products, licensing agreements and contracts to perform
pilot studies by applying the following steps: (1) identify the contract with a
customer; (2) identify the performance obligations in the contract; (3)
determine the transaction price; (4) allocate the transaction price to each
performance obligation in the contract; and (5) recognize revenue when each
performance obligation is satisfied.
Income Taxes
Deferred income tax assets and liabilities are computed for differences between
the financial statement and tax basis of assets and liabilities that will result
in taxable or deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
In addition, our management performs an evaluation of all uncertain income tax
positions taken or expected to be taken in the course of preparing our income
tax returns to determine whether the income tax positions meet a "more likely
than not" standard of being sustained under examination by the applicable taxing
authorities. This evaluation is required to be performed for all open tax years,
as defined by the various statutes of limitations, for federal and state
purposes.
Earnings per Common Share:
The Company computes net income (loss) per share in accordance with ASC 260,
Earning per Share. ASC 260 requires presentation of both basic and diluted
earnings per share (EPS) on the face of the income statement. Basic EPS is
computed by dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method and
convertible preferred stock using the if-converted method. In computing Diluted
EPS, the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is
anti-dilutive. For the year ended December 31, 2019, the Company had
approximately $2,768,000 in convertible debentures whose approximately
84,472,000 underlying shares are convertible at the holders' option at
conversion prices ranging from fixed conversion prices of $1.75 through $0.15
and variable conversion rates of 60% to 65% of the defined trading price and
approximately 8,452,000 warrants with an exercise price of $3.00 to $0.15,
certain warrants having exercise prices which reset to 65% of defined trading
price upon future dilutive issuances, which were not included in the calculation
of diluted EPS as their effect would be anti-dilutive. For the year ended
December 31, 2018, the Company had approximately $1,742,000 in convertible
debentures whose approximately 11,906,000 underlying shares are convertible at
the holders' option at conversion prices ranging from - a fixed conversion price
of $1.75 to a variable conversion rate of 60% to 65% of the defined trading
price and approximately 4,293,000 warrants with an exercise price of $2.00 to
$0.20, which were not included in the calculation of diluted EPS as their effect
would be anti-dilutive.
50
Accounting For Obligations And Instruments Potentially To Be Settled In The
Company's Own Stock:
We account for obligations and instruments potentially to be settled in the
Company's stock in accordance with FASB ASC 815, Accounting for Derivative
Financial Instruments. This issue addresses the initial balance sheet
classification and measurement of contracts that are indexed to, and potentially
settled in, the Company's own stock.
Embedded derivatives are separated from the host contract and carried at fair
value when (1) the embedded derivative possesses economic characteristics that
are not clearly and closely related to the economic characteristics of the host
contract and (2) a separate, standalone instrument with the same terms would
qualify as a derivative instrument. The derivative is measured both initially
and in subsequent periods at fair value, with changes in fair value recognized
on the Statement of Operations.
Recently Issued Accounting Standards
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) The
standard requires all leases that have a term of over 12 months to be recognized
on the balance sheet with the liability for lease payments and the corresponding
right-of-use asset initially measured at the present value of amounts expected
to be paid over the term. Recognition of the costs of these leases on the income
statement will be dependent upon their classification as either an operating or
a financing lease. Costs of an operating lease will continue to be recognized as
a single operating expense on a straight-line basis over the lease term. Costs
for a financing lease will be disaggregated and recognized as both an operating
expense (for the amortization of the right-of-use asset) and interest expense
(for interest on the lease liability). This standard was effective for interim
and annual periods beginning January 1, 2019 and must be applied on a modified
retrospective basis to leases existing at, or entered into after, the beginning
of the earliest comparative period presented in the financial statements. The
Company adopted ASC 842 on January 1, 2019, with no impact on their financial
statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13
amends the guidance on the impairment of financial instruments. This update adds
an impairment model (known as the current expected credit losses model) that is
based on expected losses rather than incurred losses. Under the new guidance, an
entity recognizes, as an allowance, its estimate of expected credit losses. In
November 2018, ASU 2016-13 was amended by ASU 2018-19, Codification Improvements
to Topic 326, Financial Instruments - Credit Losses. ASU 2018-19 changes the
effective date of the credit loss standards (ASU 2016-13) to fiscal years
beginning after December 15, 2021, including interim periods within those fiscal
years. The Company does not believe that the impact of adopting this standard
will have a material effect on its financial statements.
On July 13, 2017, the FASB issued a two-part Accounting Standards Update (ASU),
No. 2017-11, I. Accounting for Certain Financial Instruments With Down Round
Features and II. Replacement of the Indefinite Deferral for Mandatorily
Redeemable Financial Instruments of Certain Nonpublic Entities and Certain
Mandatorily Redeemable Noncontrolling Interests With a Scope Exception. The ASU
is effective for public business entities for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2018. For all other
organizations, the amendments are effective for fiscal years beginning after
December 15, 2019, and interim periods within fiscal years beginning after
December 15, 2020. Early adoption is permitted. This guidance was adopted
January 1, 2018 and has been applied to the financial instruments issued during
the years ended December 31, 2019 and 2018, which have down round features.
In June 2018, the FASB issued ASU 2018-07, "Compensation - Stock Compensation
(Topic 718): Improvements to Nonemployee Share-Based Payment Accounting" that
expands the scope of ASC Topic 718 to include share-based payment transactions
for acquiring goods and services from nonemployees. An entity should apply the
requirements of ASC Topic 718 to nonemployee awards except for certain
exemptions specified in the amendment. The guidance is effective for fiscal
years beginning after December 15, 2018, including interim reporting periods
within that fiscal year. Early adoption is permitted. The adoption of ASU
2017-09 did not have any impact on the Company's consolidated financial
statements and related disclosures.
51
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to stockholders.
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