| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use
of Estimates The
preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from these estimates. Significant estimates during the years ended December 31, 2018 and 2017 include the allowance for doubtful
accounts, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets and valuation
of deferred tax assets. Fair
Value of Financial Instruments and Fair Value Measurements The
Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which 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 consolidated balance sheets for cash and cash equivalents, prepaid rent, security deposit – current
portion, prepaid expenses and other current assets, deferred revenue, salary payable, and accrued liabilities and other payables
approximate their fair market value based on the short-term maturity of these instruments. ASC
825-10 “Financial Instruments”, allows
entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair
value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the
fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings
at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments. 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. Cash
and Cash Equivalents Cash
and cash equivalents consist of cash and short-term
highly liquid investments purchased with original maturities of three months or less. The Company maintains cash with various
financial institutions in China. At December 31, 2018 and 2017, cash balances in China are $84,306 and $237,561, respectively,
are uninsured. The Company has not experienced any losses in bank accounts and believes it is not exposed to any risks on its
cash in bank accounts. There were no cash equivalents at December 31, 2018 and 2017 . Concentrations
of Credit Risk Currently,
the Company’s operations are carried out
in China. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political,
economic and legal environment in China, and by the general state of China’s economy. The Company’s operations in
China are subject to specific considerations and significant risks not typically associated with companies in North America. The
Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Property
and Equipment Property
and equipment are stated at cost less accumulated
depreciation, and depreciated on a straight-line basis over the estimated useful lives of the assets. Cost represents the purchase
price of the asset and other costs incurred to bring the asset into its existing use. The cost of repairs and maintenance is expensed
as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated
depreciation are removed from the accounts, and any resulting gains or losses are included in income/loss in the year of disposition .
Estimated
useful life
Office
equipment and furniture 3
- 5 Years
Leasehold
improvement The
lesser of remaining lease term or 1 - 2 Years
Software 1
- 3 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 its book value. The Company did not record any impairment charge for the years ended
December 31, 2018 and 2017. Equity
Method Investment The
Company uses the equity method of accounting for its investment in, and earning or loss of, company that it does not control but
over which it does exert significant influence. In
the event the Company incurs losses in excess of the carrying amount of an equity investment and reduces the Company’s investment
balance to zero, the Company would not record additional losses unless (i) the Company guaranteed obligations of the investee,
(ii) the Company is otherwise committed to provide further financial support for the investee, or (iii) it is anticipated that
the investee’s return to profitability is imminent. If the Company provided a commitment to fund losses, it would continue
to record losses resulting in a negative equity method investment, which is presented as a liability. As of December 31, 2018,
the Company’s proportionate share of the losses of MMBD Trading exceeds its investment in MMBD Trading by $19,426. This
amount is recorded as “Investee losses in excess of investment controlled by major shareholders” on the accompanying
consolidated balance sheets as of December 31, 2018, due to the Company’s commitment for future financial support. The
Company periodically reviews its equity investment for impairment. Under the equity method of accounting, an impairment loss would
be recorded whenever the fair value of an equity investment is determined to be below its carrying amount and the reduction is
considered to be other than temporary. In judging “other than temporary,” the Company considers the length of time
and extent to which the fair value of the investment has been less than the carrying amount of the equity investment, the near-term
and long-term operating and financial prospects of the entity and the Company’s longer-term intent of retaining its investment
in the entity. The Company considers whether the fair value of its equity method investment has declined below its carrying value
whenever adverse events or changes in circumstances indicate that recorded value may not be recoverable. If the Company considers
any decline to be other than temporary (based on various factors, including historical financial results and the overall health
of the investee), then a write-down would be recorded to estimated fair value. See Note 6 for discussion of equity method investment. Deferred
Revenue Deferred
revenue represents income collected but not earned as of the reporting date. As of December 31, 2018 and 2017, deferred revenue
totaled $79,182 and $0, respectively. Value
Added Tax Gujia
is subject to a value added tax (“VAT”) of 3% for performing professional services. The amount of VAT liability is
determined by applying the applicable tax rate to the invoiced amount of professional services provided (output VAT) less VAT
paid on purchases made with the relevant supporting invoices (input VAT). The Company reports revenue net of PRC’s value
added tax for all the periods presented in the consolidated statements of operations. Revenue
Recognition Effective
January 1, 2018, the Company began recognizing revenue under Accounting Standards Codification Topic 606, Revenue from Contracts
with Customers (“ASC 606”), using the modified retrospective transition method. The adoption of ASC 606
had no impact on the Company’s consolidated financial statements, and there was no adjustment to beginning accumulated deficit
on January 1, 2018. The core principle of this new revenue standard is that a company should recognize revenue to depict
the transfer of promised goods or services to 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:
● Step
1: Identify the contract 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
● Step
5: Recognize revenue when the company satisfies a performance obligation The
Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is
entitled to in exchange for the goods it transfers to the customer. The Company recognizes revenue by providing professional services under written service contracts with
its customers. Revenue related to its service offerings is recognized over a period of time as the services are performed. The
Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers. Cost
of Revenue Cost of
revenue consists primarily of internal labor cost and related benefits, and other overhead costs that are directly attributable
to service provided Research
and Development Expenditures
for research and product development costs are expensed as incurred. For
the years ended December 31, 2018 and 2017, research and development expenses were $828,367 and $513,575, respectively. Selling
and Marketing Costs All
costs related to selling and marketing are expensed as incurred. For the year ended December 31, 2018, selling and marketing costs
were $171,016. The Company did not incur any selling and marketing expenses during the year ended December 31, 2017 . Operating
Leases Leases
where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating
leases. Payments made under operating leases are charged to the consolidated statements of operations and comprehensive loss on
a straight-line basis over the lease period. Segment
Information ASC
280 “Segment reporting” establishes standards for reporting information on operating segments in interim and annual
financial statements. All of the Company’s operations are considered by the chief operating decision maker to be aggregated
in one reportable operating segment. Income
Taxes The
Company accounts for income taxes using the asset/liability
method prescribed by ASC 740, “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
Company follows the accounting guidance for uncertainty
in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need
to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by
the tax authorities. As of December 31, 2018 and 2017, the Company had no significant uncertain tax positions that qualify for
either recognition or disclosure in the financial statements. Tax years that remain subject to examination are the years ended
December 31, 2018, 2017 and 2016. The Company recognizes interest and penalties related to significant uncertain income tax positions
in other expense. No such interest and penalties incurred for the years ended December 31, 2018 and 2017 . Foreign
Currency Translation The
reporting currency of the Company is the U.S.
dollar. The functional currency of the parent company, MMTEC, and MM Future, MM Fund, MM Capital and MM SPC, is the U.S. dollar
and the functional currency of Gujia and Meimei Zhengtong is the Chinese Renminbi (“RMB”). For the subsidiaries whose
functional currency is the RMB, result of operations and cash flows are translated at average exchange rates during the period,
assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical
exchange rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily
agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process
of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income/loss.
Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on
the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at
the exchange rates prevailing at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations
on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. All
of the Company’s revenue and expense transactions
are transacted in the functional currency of the operating subsidiaries. The Company does not enter into any material transaction
in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results
of operations of the Company . The
consolidated balance sheet amounts, with the
exception of equity, at December 31, 2018 and 2017 were translated at RMB 6.8632 to $1.00 and at RMB 6.5342 to $1.00, respectively.
Equity accounts were stated at their historical rates. The average translation rates applied to consolidated statements of operations
and cash flows for the years ended December 31, 2018 and 2017 were RMB 6.6174 and RMB 6.7518 to $1.00, respectively .
Comprehensive
Loss Comprehensive
loss is comprised of net loss and all changes
to the statements of shareholders’ equity, except those due to investments by shareholders, changes in paid-in capital and
distributions to shareholders. For the Company, comprehensive loss for the years ended December 31, 2018 and 2017 consisted of
net loss and unrealized (loss) gain from foreign currency translation adjustment . Per
Share Data ASC
Topic 260 “Earnings per Share,” requires
presentation of both basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted
EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Basic
net loss per common share are computed by dividing
net loss available to common shareholders by the weighted average number of shares of common stock outstanding during the period.
Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock, common
stock equivalents and potentially dilutive securities outstanding during each period. Common stock equivalents are not included
in the calculation of diluted loss per common share if their effect would be anti-dilutive. The following table presents a reconciliation
of basic and diluted net loss per common share:
Year Ended December 31, 2018 Year Ended December 31, 2017
Net loss for basic and diluted net loss per share of common stock $ (2,349,002 ) $ (919,198 )
Weighted average common stock outstanding – basic and diluted 39,600,000 54,000,000
Net loss per common share - basic and diluted $ (0.06 ) $ (0.02 ) The
Company did not have any common stock equivalents
and potentially dilutive common stock outstanding during the years ended December 31, 2018 and 2017 . Related
Parties Parties
are considered to be related to the Company if
the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control
with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families
of principal owners of the Company and its management and other parties with which the Company may deal with 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. The Company discloses all significant related party transactions
in Note 8 . Reclassification
Certain
prior period amounts have been reclassified to conform to the current period presentation. These reclassifications have no effect
on the previously reported financial position, results of operations and cash flows. Fiscal
Year End The
Company has adopted a fiscal year end of December 31st. Recent
Accounting Pronouncements In
May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-9, “Revenue from Contracts with
Customers (Topic 606)”, which was further updated by ASU 2016-08 in March 2016, ASU 2016-10 in April 2016, ASU 2016-11 in
May 2016, ASU 2016-12 in May 2016 and ASU 2016-20 in December 2016. ASC 606 outlines a single set of comprehensive principles
for recognizing revenue under U.S. GAAP and supersedes the revenue recognition guidance existed at the time. The main principle
of ASC 606 is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company
applied the ASC and its related updates on a modified retrospective basis as of January 1, 2018. The adoption of ASC 606 did not
impact the previously reported financial statements in any prior period nor did it result in a cumulative effect adjustment to
accumulated deficit. In
February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. In December 2017, January 2018, July 2018 and
December 2018, the FASB issued ASU 2017-13, ASU 2018-01, ASU 2018-10, ASU 2018-11 and ASU 2018-20 respectively, which contain
modifications and improvements to ASU 2016-02. Under ASU 2016-02, lessees will be required to recognize all leases (with the exception
of short-term leases) at the commencement date including a lease liability, which is a lessee’s obligation to make lease
payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the
lessee’s right to use, or control the use of, a specified asset for the lease term. Leases with a term of twelve months
or less will be accounted for similar to existing guidance for operating leases. The Company adopted this new guidance on January
31, 2019. The Company does not expect the new standard to have a material impact on its consolidated financial statements as all
its leases are with a term of twelve months or less as of the adoption date. In July 2018, the FASB issued ASU 2018-09, “Codification Improvements”, which affects a wide
variety of Topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance.
These amendments represent changes to clarify, correct errors in, or make minor improvements to the Codification, eliminating inconsistencies
and providing clarifications in current guidance. Some of the amendments do not require transition guidance and will be effective
upon issuance. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after
December 15, 2018, for public business entities. The adoption of this guidance is not expected to have a material impact on the
Company’s consolidated financial statements. |
