| SUMMARY OF SIGNIFICANT POLICIES | Note 2 - SUMMARY OF SIGNIFICANT POLICIES Basis of Presentation The Company’s year-end is December 31; as such the year ended
December 31, 2020 is referred to as “fiscal 2020”, the year ended December 31, 2019 is referred to as “fiscal 2019”,
and the year ended December 31, 2018 is referred to as “fiscal 2018”. The accompanying consolidated financial statements are in accordance
with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the U.S. Securities
and Exchange Commission (“SEC”) rules. The Company included all adjustments that are necessary for the fair presentation of
our financial position, results of operations, and cash flows for the periods presented. This basis of accounting differs in certain material
respects from that used for the preparation of the books of account of the Company, which are prepared in accordance with the accounting
principles and the relevant financial regulations applicable to enterprises with limited liabilities established in China (“China
GAAP”), the accounting standards used in the places of their domicile. The accompanying consolidated financial statements reflect
necessary adjustments not recorded in the books of account of the Company to present them in conformity with U.S. GAAP. Principles of Consolidation The accompanying consolidated financial statements include the accounts
for AGM Holdings and all its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Foreign Currency Translation The accompanying consolidated financial statements are presented in
United States dollar (“$”), which is the reporting currency of the Company. For the subsidiaries whose functional currencies
are Renminbi (“RMB”), results of operations and cash flows are translated at average exchange rates during the period, assets
and liabilities are translated at the exchange rate at the end of the period, and equity is translated at historical exchange rates. The
resulting translation adjustments are included in determining other comprehensive income or loss. Transaction gains and losses are reflected
in the consolidated statements of income. The consolidated balance sheet balances, with the exception of equity
at December 31, 2020, 2019 and 2018 were translated at RMB6.5378, RMB6.9630 and RMB6.8764 to $1.00, respectively. The equity accounts
were stated at their historical rate. The average translation rates applied to consolidated statements of income and cash flows for the
year ended December 31, 2020, 2019 and 2018 were RMB6.9003, RMB6.9074 and RMB6.6146 to $1.00, respectively. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities on the date of the consolidated financial statements and the reported amounts of revenues and expenses during the
reporting periods. The Company bases its estimates and judgments on historical experience and on various other assumptions and information
that are believed to be reasonable under the circumstances. Estimates and assumptions of future events and their effects cannot be perceived
with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information
is obtained and as our operating environment changes. Significant estimates and assumptions by management include, among others, useful
lives and impairment of long-lived assets, allowance for doubtful accounts, and income taxes including the valuation allowance for deferred
tax assets. While the Company believes that the estimates and assumptions used in the preparation of the financial statements are appropriate,
actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are
reflected in the financial statements in the period they are determined to be necessary. Cash and cash equivalents Cash and cash equivalents are financial assets that are either cash
or highly liquid investments with an original maturity term of 90 days or less. At December 31, 2020, the Company’s cash equivalents
primarily consist cash in various financial institutions. Fair Value of Financial Instruments The Company follows the provisions of Accounting Standards Codification
(“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”). It clarifies the definition of fair value, prescribes
methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: Level 1-Inputs are unadjusted quoted prices in active markets for identical
assets or liabilities available at the measurement date. Level 2-Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other
than quoted prices that are observable, and inputs derived from or corroborated by observable market data. Level 3-Inputs are unobservable inputs which reflect the reporting
entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best
available information. The carrying amounts reported in the accompanying consolidated balance
sheets for cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses
and other payables, due to related parties, deferred revenue and income tax payable approximate their fair value based on the short-term
maturity of these instruments. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable consists principally of amounts due from trade
customers. Credit is extended based on an evaluation of the customer’s financial condition and collateral is not generally required. The Company maintains allowances for doubtful accounts for estimated
losses from the receivable amount that cannot be collected. The Company reviews the accounts receivable on a periodic basis and makes
general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability
of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical
payment history, its current credit-worthiness and current economic trends. In determining these estimates, the Company examines historical
write-offs of its receivables and reviews each client’s account to identify any specific customer collection issues. Management believes that the accounts receivable
are fully collectable. Therefore, no allowance for doubtful accounts is deemed to be required on its accounts receivable at December 31,
2020 and 2019. The Company historically has not experienced uncollectible accounts from customers granted with credit sales. Cost method investment Investments in which the Company does not have the ability to
exercise significant influence and does not have any control (generally 0-20 percent ownership), are accounted for under the cost method
of accounting and are included in the long-term assets on the consolidated balance sheets. The Company evaluates its cost method
investment whenever events or changes in circumstance indicate that the carrying amounts of such investment may be impaired. If a decline
in the value of a cost method investment is determined to be other than temporary, a loss is recorded in the current period. Equity method investment Investments in which the Company has the ability to exercise significant
influence, but do not control, are accounted for under the equity method of accounting and are included in the long-term assets on the
consolidated balance sheets. Under this method of accounting, the Company’s share of the net earnings or losses of the investee
is presented below the income tax line on the consolidated statements of operations. The Company evaluates its equity method investment
whenever events or changes in circumstance indicate that the carrying amounts of such investment may be impaired. If a decline in the
value of an equity method investment is determined to be other than temporary, a loss is recorded in the current period. Property and Equipment Property and equipment are stated at cost less accumulated depreciation.
Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Identifiable significant
improvements are capitalized and expenditures for maintenance, repairs, and betterments, including replacement of minor items, are charged
to expense. Depreciation is computed based on cost, less the estimated residual
value, if any, using the straight-line method over the estimated useful life. The residual value rate and useful life of property and
equipment are summarized as follows:
Property and Equipment Residual value Useful life
Electronic equipment 5 % 3 years
Office equipment 5 % 5 years Business Acquisition A contingency should be recognized at its acquisition date fair value
if that value can be determined. (The guidance in Topic 820 is used to determine fair value). If the acquisition-date fair value of contingency
cannot be determined, then an asset or liability is recognized for the contingency if it’s probable at the acquisition date that
such asset or liability exists and if its amount is reasonable estimable. A contingency is not recognized for a contingency in the accounting
for a business combination if: a) its fair value cannot be determined and b) the probable and reasonably estimate criteria are not met.
Instead, the contingency is disclosed and accounted for subsequent to the acquisition date in accordance with Topic 450. Pursuant to the Acquisition Agreement, the contingent consideration
consisted of compensatory arrangement for services to be performed by the officers of the acquiree, and such amounts are to be determined
in the future by both parties; therefore the fair value cannot be determined at the acquisition date. The Company as an acquirer did not
recognize a liability at the acquisition date. Goodwill and Other Intangible Assets Goodwill arises from business acquisition and is generally determined
as the excess of fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquire, over
the fair value of the nets assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired
in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least
annually or more frequently in events and circumstances exists that indicate that a goodwill impairment test should be performed. Intangible assets with definite useful lives are amortized over their
estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on our balance
sheet. Acquired intangible assets other than goodwill with finite lives are
stated at cost less accumulated amortization if there is any. Intangible assets mainly represent the domain name at cost, less accumulated
amortization on a straight-line basis over an estimated life of ten years.
Intangible Asset Residual value Useful life
AGM domain 0 % 10 years Impairment of Long-lived Assets In accordance with ASC Topic 360, the Company reviews long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable,
or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the
carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and
carrying amount. Lease Commitments On January 1, 2019, the Company adopted Accounting Standards Update
No. 2016-02, Leases (Topic 842) (ASU 2016-02), as amended, which supersedes the lease accounting guidance under Topic 840, and generally
requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet
and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. The Company determined if an arrangement is a lease at inception. Operating
leases are included in operating lease right-of-use (“ROU”) assets and short and long-term lease liabilities in our consolidated
balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our
consolidated balance sheets. As of adoption of ASC 842 and as of January 1, 2019, the adoption did
not have an impact on the Company s financial statements as the Company did not commitment any lease that are over twelve months at time
of adoption. Revenue Recognition The Company adopted Accounting Standards Codification
(“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) for all years presented. The
core principle of this new revenue standard is that a company should recognize revenue when control of the promised goods or services
is transferred to the customers, in an amount that reflects the consideration to which the Company expects to be entitled in exchange
for those goods or services. The following five steps are applied to achieve that core principle by the Company in its determination of
revenue recognition:
● Step 1: Identify the contract(s) with the customer;
● Step 2: Identify the performance obligations in the contract;
● Step 3: Determine the transaction price;
● Step 4: Allocate the transaction price to the performance obligations in the contract; and
● Step 5: Recognize revenue when or as the Company satisfies a performance obligation. The Company is a software developer, engaging in the development and
sale of enterprise application software, including accounting software and ERP software, and the software-related after-sales services
in China. Its mission is to provide easy-to use and effective solutions to minimize error, comply with the increasing regulatory complexity,
accommodate transactions volumes of businesses of various sizes, and thus streamlining their accounting and finance operations. The transaction price is allocated to each
performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is
recognized when that performance obligation is satisfied, at a point in time or over time as appropriate. The Company derives revenue from the sale of the following three items:
(1) packaged software products, (2) technical support plans, (3) software customization services, and bundle of products or services that
may include a combination of these items. We enter into contracts with customers that include promises to transfer various products and
services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized when
the promised goods or services are transferred to customers, in an amount that reflects the consideration allocated to the respective
performance obligation. We recorded and recognized revenues from both products and services in one account, which we present as revenues
and revenues from related parties in the accompanying consolidated statements of operations and comprehensive income. During the fiscal years ended December 31, 2020 and 2019, the Company
derives revenue from the sale of the following three items:
(1) Retail Software Products The Company’s packaged software products consist of accounting
software, fintech software, trading education software and other online-based management products. Each packaged software product includes
a perpetual software license and a one-year technical support plan. Revenue is recognized at a point in time upon the delivery of the
perpetual license, and in a period of time throughout the effective period for the technical support plan, which generally is recognized
over twelve months period. However, we did not record this revenue stream on our total revenue in fiscal 2020, 2019 and 2018 since we
discontinued business related to these products. We are continuing to develop retail software products for different industries.
(2) Technical Support Plans The Company sells our technical support plan either as a package with
our sale of software products or separately on its own. Each technical support plan has a unified effective period of one year. Revenue
is recognized in a period of time throughout the effective period for the technical support plan, generally is recognized over twelve
months period.
(3) Software Customization Services The Company delivers its software customization services by developing
customized features on software products to suit customers’ special needs. Upon receiving the purchase request from the customers,
the Company designs, develops, tests, and implements the specified features to our software products. The Company also includes a one-year
technical support plan specifically for the developed feature(s). Customers are able to request and purchase the service together with
a purchase of our software product, or separately if the customer has our software products in-use. Revenue is recognized at a point in
time upon customers’ acceptance of the feature(s), and revenue for the technical support plan is recognized over its service term,
which generally is for twelve months period. The Company reports revenues net of applicable sales taxes and related
surcharges. Costs of Revenues Our cost of revenues has two components: (1) cost of product revenue,
which includes direct costs of software products; labor costs and employee benefits for software development, data testing, bug fixes
and hacker prevention; research and development expenses (2) cost of services and other revenue, which reflects direct costs associated
with providing services, including data center and support costs related to delivering online services. Operating Leases The Company determines if an arrangement is a lease upon inception.
A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. The right to control the use of an asset includes the right to obtain substantially all of the economic benefits
of the underlying asset and the right to direct how and for what purpose the asset is used. Upon adoption of ASU 2016-02 and related standards,
operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over
the lease term. The discount rate used to calculate present value is the Company’s incremental borrowing rate or, if available,
the rate implicit in the lease. The Company includes options to renew the lease as part of the right of use lease asset and liability
when it is reasonably certain the Company will exercise the option. The Company also takes into considerations when certain lease contains
fair value purchase and termination options with an associated penalty. The Company reviews all leases for capital or operating classification
at their inception. The Company uses its incremental borrowing rate in the assessment of lease classification and define the initial lease
term to include the construction build-out period but to exclude lease extension periods. We conduct our operations primarily under operating
leases as of adoption of ASC 842 and as of January 1, 2019, the adoption did not have an impact on the Company’s s financial statements
as the Company did not commitment any lease that are over twelve months at time of adoption. Research and Development Expenses Research and development costs are expensed as incurred. The costs
primarily consist of the wage expenses incurred to continuously improve and upgrade the Company’s services. Research and development
expenses of the years ended December 31, 2020, 2019 and 2018 were $63,450, $127,117 and $1,028,249, respectively. Income Taxes The Company is governed by the Income Tax
Law of China, Inland Revenue Ordinance of Hong Kong and the U.S. Internal Revenue Code of 1986, as amended. The Company accounts for income
taxes using the asset/liability method prescribed by ASC 740, “Accounting for Income Taxes.” Under this method, deferred tax
assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities
using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation
allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or
all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or
loss in the period that includes the enactment date. The Act has caused the Company’s deferred income taxes to be
revalued. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through income tax expense. Pursuant
to the guidance within SEC Staff Accounting Bulletin No. 118 (“SAB 118”), as of December 31, 2017, the Company recognized
the provisional effects of the enactment of the Act for which measurement could be reasonably estimated. Since the Company has provided
a full valuation allowance against its deferred tax assets, the revaluation of the deferred tax assets did not have a material impact
on any period presented. The ultimate impact of the Act may differ from these estimates due to the Company’s continued analysis
or further regulatory guidance that may be issued as a result of the Act. The Company applied the provisions of ASC
740-10-50, “Accounting for Uncertainty in Income Taxes,” which provides clarification related to the process associated with
accounting for uncertain tax positions recognized in the Company’s financial statements. Audit periods remain open for review until
the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period
could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s
results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As
of December 31, 2020, 2019 and 2018, the Company had uncertain tax positions accrued, and will continue to evaluate for uncertain positions
in the future. Value Added Tax The amount of VAT liability is determined by applying the applicable
tax rate to the invoiced amount of software service provided. The Company reports revenue net of China’s VAT for all the periods
presented in the accompanying consolidated statements of operations. Comprehensive Income ASC 220 “Comprehensive Income” established standards for
reporting and display of comprehensive income, its components and accumulated balances. Components of comprehensive income include net
income and foreign currency translation adjustments. For the years ended December 31, 2020, 2019 and 2018, the only component of accumulated
other comprehensive income was foreign currency translation adjustments. Related Party Transactions A related party is generally defined as (i) any person and or their
immediate family hold 10% or more of the company’s securities (ii) the Company’s management, (iii) someone that directly or
indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the
financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer
of resources or obligations between related parties. The Company conducts business with its related parties in the ordinary course of
business. Related parties may be individuals or corporate entities. Transactions involving related parties cannot be presumed to be carried
out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about
transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to
those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical
to determine the fair value of amounts due from/to related parties due to their related party nature. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration
of credit risk are cash and cash equivalents, transaction monetary assets held for clients, mark to market assets for open trading positions,
and accounts receivable arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy
financial institutions or trading platforms. The Company routinely assesses the financial strength of the customer and, based upon factors
surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its
accounts receivable credit risk exposure beyond such allowance is limited. Reclassification Certain prior year amounts have been reclassified to conform to the
current period presentation. These reclassifications had no impact on the net earnings and financial position. Earnings per Ordinary Share Basic earnings per ordinary share is computed by dividing net earnings
attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Diluted earnings
per share is computed by dividing net income attributable to ordinary shareholders by the sum of the weighted-average number of ordinary
shares outstanding and dilutive potential ordinary shares during the period. Segment Reporting The Company uses the “management approach” in determining
reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief
operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable
segments. The Company’s chief operating decision maker has been identified as the chief executive officer of the Company who reviews
financial information of separate operating segments based on U.S. GAAP. The chief operating decision maker now reviews results analyzed
by customer. This analysis is only presented at the revenue level with no allocation of direct or indirect costs. Consequently, the Company
has determined that it has only one operating segment. Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic
740): Simplifying the Accounting for Income Taxes. This ASU provides an exception to the general methodology for calculating income taxes
in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This update also (1) requires an entity
to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental
amount incurred as a non-income-based tax, (2) requires an entity to evaluate when a step-up in the tax basis of goodwill should
be considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should
be considered a separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates
in the annual effective tax rate computation in the interim period that includes the enactment date. The standard is effective for the
Company for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently in the process
of evaluating the impact of the adoption on its consolidated financial statements. A variety of proposed or otherwise potential accounting standards are
currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature
of those proposed standards, we have not determined whether implementation of such proposed standards would be material to our consolidated
financial statements. |
