| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying condensed consolidated financial statements reflect
the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated
financial statements and notes.
l Basis of presentation The accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States
(“GAAP”) for interim financial reporting, and in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the unaudited consolidated financial statements contained in this report reflect all
adjustments that are normal and recurring in nature and considered necessary for a fair presentation of the financial position and the
results of operations for the interim periods presented. The year-end balance sheet data was derived from audited financial statements
but does not include all disclosures required by GAAP. The results of operations for the interim period are not necessarily indicative
of the results expected for the full year. These unaudited consolidated financial statements, footnote disclosures and other information
should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2020. These accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US
GAAP”).
l Use of estimates and assumptions In preparing these condensed consolidated financial
statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet
and revenues and expenses during the years reported. Actual results may differ from these estimates.
l Basis of consolidation The condensed consolidated financial statements
include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the
Company have been eliminated upon consolidation.
l Cash and cash equivalents Cash and cash equivalents are carried at cost
and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an
original maturity of three months or less as of the purchase date of such investments.
l Accounts receivable Accounts receivable are recorded at the invoiced
amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit
is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history. Accounts
receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified
amount are reviewed individually for collectability. At the end of fiscal year, the Company specifically evaluates individual customer’s
financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables.
The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to
make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are
taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against
the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does
not have any off-balance-sheet credit exposure related to its customers. As of September 30, 2021 and December 31, 2020, there were no
l Plant and equipment Plant and equipment are stated at cost less accumulated
depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected
useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
Schedule of useful lives of plant and equipment
Expected useful lives
Computer equipment 5 years
Furniture and fixtures 5 years
Leasehold improvements 5 years or over the shorter of the remaining term of the lease Expenditures for repairs and maintenance are expensed
as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any
resulting gain or loss is recognized in the results of operations.
l Software costs In accordance with the relevant FASB accounting
guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until
technological feasibility has been established, at and after which time these costs are capitalized until the product is available for
general release to customers. Once the technological feasibility is established per ASC 985-20, the Company capitalizes costs associated
with the acquisition or development of major software for internal and external use in the balance sheet. Costs incurred to enhance the
Company’s software products, after general market release of the services using the products, is expensed in the period they are
incurred. The Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent
that such changes allow the software to perform a task it previously did not perform. The Company also expenses website costs as incurred. Research and development expenditures in the development
of its own software are charged to operations as incurred. Based on the software development process, technological feasibility is established
upon completion of a working model, which also requires certification and extensive testing. Costs incurred by the Company between completion
of the working model and the point at which the product is ready for general release are immaterial.
l Impairment of long-lived assets In accordance with the provisions of ASC Topic
360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment and intangible assets
held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of
an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.
There has been no
l Revenue recognition The Company adopted Accounting Standards Codification
(“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, a performance obligation
is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue
is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of
revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services.
Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition
for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
• identify the contract with a customer;
• identify the performance obligations in the contract;
• determine the transaction price;
• allocate the transaction price to performance obligations in the contract; and
• recognize revenue as the performance obligation is satisfied. Revenue of the Company is derived from the organization
of competitions using video games. Most commonly, esports takes the form of organized, single player and multiplayer video game competitions.
Revenues are recognized when the competition is completed, and prize money is awarded. Revenues are earned through sponsorship fees on
a per tournament basis.
l Income taxes The Company adopted the ASC 740 Income tax provisions
of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return
should be recorded in the condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax
benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial
statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood
of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest
and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments
to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13. The estimated future tax effects of temporary
differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs
and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides
valuation allowances as management deems necessary.
l Foreign currencies translation Transactions denominated in currencies other than
the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency
using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the condensed consolidated
statement of operations. The reporting currency of the Company is United
States Dollar ("US$") and the accompanying condensed consolidated financial statements have been expressed in US$. In addition,
the Company’s subsidiaries are operating in Hong Kong and Malaysia and maintain their books and record in its local currency, Hong
Kong Dollars (“HKD”) and Malaysian Ringgit (“MYR”), which are their functional currencies, being the primary currency
of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of
the subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation
of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates
prevailing during the year. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded
as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity. Translation of amounts from HKD into US$ and
MYR into US$ have been made at the following exchange rates for the period ended September 30, 2021 and 2020:
Schedule of foreign currencies translation
September 30, 2021 September 30, 2020
Period-end HKD:US$ exchange rate 0.12843 0.12903
Period average HKD:US$ exchange rate 0.12876 0.12891
Period-end MYR:US$ exchange rate 0.23898 0.24067
Period average MYR:US$ exchange rate 0.24226 0.23632
l Comprehensive income ASC Topic 220, “Comprehensive Income”,
establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income
as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented
in the accompanying condensed consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains
and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
l Leases The Company adopted Topic 842, “Leases”
(“ASC 842”) and determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use
(“ROU”) assets, other current liabilities, and operating lease liabilities in our condensed consolidated balance sheets. Finance
leases are included in property and equipment, other current liabilities, and other long-term liabilities in our condensed consolidated
balance sheets. ROU assets represent the right to use an underlying
asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease
ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most
of the Company’s leases do not provide an implicit rate, the Company generally use the incremental borrowing rate based on the estimated
rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU
asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate
the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line
basis over the lease term. In accordance with the guidance in ASC 842, components
of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area
maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed
contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the
lease components and non-lease components.
l Net loss per share The Company calculates net income or loss per
share in accordance with ASC Topic 260, “Earnings per Share.” Basic income or loss per share is computed by dividing the net
income or loss by the weighted-average number of common shares outstanding during the year. Diluted income per share is computed similar
to basic income per share except that the denominator is increased to include the number of additional common shares that would have been
outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
l Related parties The Company follows the ASC 850-10, Related Party
for the identification of related parties and disclosure of related party transactions. Pursuant to section 850-10-20 the related parties
include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the
election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the
equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed
by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which
the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent
that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that
can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one
of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be
prevented from fully pursuing its own separate interests. The condensed consolidated financial statements
shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other
similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated
or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s)
involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each
of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects
of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements
are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount
due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of
settlement.
l Commitments and contingencies The Company follows the ASC 450-20, Commitments
to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result
in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such
contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal
proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the
perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected
to be sought therein. If the assessment of a contingency indicates that
it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would
be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potentially material
loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent
liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally
not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon
information available at this time that these matters will have a material adverse effect on the Company’s financial position, results
of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s
business, financial position, and results of operations or cash flows.
l Fair value of financial instruments The Company follows paragraph 825-10-50-10 of
the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments.
Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted
accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair
value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value
hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value
hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting
Standards Codification are described below:
Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data. Financial assets are considered Level 3 when their
fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant
model assumption or input is unobservable. The fair value hierarchy gives the highest priority
to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If
the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is
based on the lowest level input that is significant to the fair value measurement of the instrument. The carrying amounts of the Company’s financial
assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, other receivables and amount due from a director
approximate their fair values because of the short maturity of these instruments.
l Recent accounting pronouncements From time to time, new accounting pronouncements
are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company
as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that
are not yet effective will not have a material impact on its financial position or results of operations upon adoption. Accounting Standards Adopted In February 2016, the FASB issued ASU 2016-02,
Leases (“ASU 2016-02”) in order to increase transparency and comparability among organizations by recognizing right-of-use
assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous generally accepted accounting
principles. ASU 2016-02 requires a lessee to recognize a lease liability for future lease payments and a right-of-use asset representing
the right to use the underlying asset for the lease term on the balance sheet for most lease arrangements. The new standard also changes
many key definitions, including the definition of a lease. The new standard includes a short-term lease exception for leases with a term
of 12 months or less, as part of which a lessee can make an accounting policy election not to recognize right-of-use assets and lease
liabilities. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases
using classification criteria that are substantially similar to the previous guidance in ASC 840. ASU 2016-02 is effective for fiscal years beginning
after December 15, 2018 (including interim periods within those periods) and early adoption is permitted. In August 2018, the FASB issued
ASU 2018-11, Leases, Targeted Improvements, which provides a new transition option in which an entity initially applies ASU 2016-02 at
the adoption date and recognizes a cumulative-effect adjustment in the period of adoption. Prior period comparative balances will not
be adjusted. The Company used the new transition option and was also utilizing the package of practical expedients that allows it to not
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 existing leases. We also used the short-term lease exception for leases with a term of 12 months
or less. Additionally, the Company used the practical expedient that allowed each separate lease component of a contract and the associated
non-lease components to be treated as a single lease component. The exercise of lease renewal options is at our discretion and the renewal
to extend the lease terms are not included in the Company’s Right-Of-Use assets and lease liabilities as they are not reasonably
certain of exercise. The Company will evaluate the renewal options and when they are reasonably certain of exercise, the Company will
include the renewal period in its lease term. As of January 1, 2020, effective date the Company identified one finance lease arrangement
in which it is a lessee. In calculating the present value of the lease
payments, the Company applied an individual discount rate for each of its leases, and determined the appropriate discount rate based on
the remaining lease terms at the date of adoption. As the lessee to several lease agreements, the Company did not have insight into the
relevant information that would be required to arrive at the rate implicit in the lease. Therefore, the Company utilized its outstanding
borrowings as a benchmark to determine the incremental borrowing rate for its leases. The benchmark rate was adjusted to arrive at an
appropriate discount rate for each lease. In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This
ASU requires measurement and recognition of expected credit losses for financial assets. ASU 2016-13 also requires new disclosures for
financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for interim and fiscal
periods within those fiscal years beginning after December 15, 2019. Entities will apply the standard’s provisions as a cumulative-effect
adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Adopting the standard
did not have a material impact on the condensed consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13,
Fair Value Measurement (“ASU 2018-13”), which eliminates, adds and modifies certain disclosure requirements for fair value
measurements. The amendment is effective for interim and annual reporting periods beginning after December 15, 2020. Adopting the standard
did not have a material impact on the condensed consolidated financial statements. In November 2018, the FASB issued ASU No. 2018-18,
Collaborative Arrangements (“ASU 2018-18”), which clarifies the interaction between ASC 808, Collaborative Arrangements and
ASC 606, Revenue from Contracts with Customers. Certain transactions between participants in a collaborative arrangement should be accounted
for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity from presenting consideration from
a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction. ASU 2018-18 should
be applied retrospectively to the date of initial application of ASC 606. This guidance is effective for interim and fiscal periods beginning
after December 15, 2020. Adopting the standard did not have a material impact on the condensed consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12,
Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2020-12”), which eliminates certain exceptions related
to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition
of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes
and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.
The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, with early
adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively.
Adopting the standard did not have a material impact on the condensed consolidated financial statements. Accounting Standards Issued, Not Adopted In March 2020, the FASB issued ASU 2020-04, Reference
Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848), which provides temporary
optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting
burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates such as the Secured
Overnight Financing Rate (SOFR). This guidance is effective upon issuance and generally can be applied through the end of calendar year
2022. The Company is currently evaluating the impact and applicability of this new standard. |
