| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES | 2. Summary of Significant Accounting Policies and Practices Basis of presentation The accompanying consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
for information pursuant to the rules and regulations of the SEC. Principles of consolidation The consolidated financial statements include
the financial statements of the Company and its subsidiaries, which include the wholly- foreign owned enterprise (“WFOE”)
and variable interest entities (“VIEs”) over which the Company exercises control and, when applicable, entities for which
the Company has a controlling financial interest or is the primary beneficiary. All transactions and balances among the Company and its
subsidiaries have been eliminated upon consolidation. Use of estimates and assumptions The preparation of 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 disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s consolidated
financial statements include the useful lives of plant and equipment and intangible assets, capitalized development costs, impairment
of long-lived assets, allowance for doubtful accounts, revenue recognition, allowance for deferred tax assets and uncertain tax position,
and inventory allowance. Actual results could differ from these estimates. Foreign currency translation and transaction The reporting currency of the Company is
the U.S. dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets
and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. The
statement of income accounts is translated at the average translation rates and the equity accounts are translated at historical rates.
Translation adjustments resulting from this process are included in accumulated other comprehensive income. 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. Translation adjustments included in accumulated
other comprehensive income (loss) amounted to $1,741,696, $(1,478,667) and $(956,929) as of December 31, 2020, 2019 and 2018, respectively.
The balance sheet amounts, with the exception of shareholders’ equity at December 31, 2020, 2019 and 2018 were translated at 6.52
RMB, 6.98 RMB and 6.88 RMB, respectively. The shareholders’ equity accounts were stated at their historical rate. The average translation
rates applied to statement of income accounts for the years ended December 31, 2020, 2019 and 2018 were 6.90 RMB, 6.89 RMB and 6.62 RMB
to $1.00, respectively. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the
statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet. Cash and cash equivalents Cash and cash equivalents consist of cash
on hand; demand deposits and time deposits placed with banks or other financial institutions and have original maturities of less than
three months. Restricted cash Amount mainly includes pledged deposits
for bank loans of the Company. As of December 31, 2020 and 2019, restricted cash amounted to $0 and $5,000,000, respectively. Accounts receivable, net Accounts receivable include trade accounts
due from customers. Accounts are considered overdue after 30 days. In establishing the required allowance for doubtful accounts, management
considers historical collection experience, aging of the receivables, the economic environment, industry trend analysis, and the credit
history and financial conditions of the customers. Management reviews its receivables on a regular basis to determine if the bad debt
allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful
accounts after management has determined that the likelihood of collection is not probable. As of December 31, 2020 and 2019, allowance
for the doubtful accounts was $605,444 and $1,467,374, respectively. Other receivables, net Other receivables primarily include deposits
for business acquisitions, setup of research center, advances to employees, and others. Management regularly reviews the aging of receivables
and changes in payment trends and records allowances when management believes collection of amounts due are at risk. Accounts considered
uncollectable are written off against allowances after exhaustive efforts at collection are made. As of December 31, 2020 and 2019, allowance
for the doubtful accounts was $32,937 and $42,676, respectively. Inventories Inventories are comprised of finished goods
and are stated at the lower of cost or net realizable value using the weighted average method. Management reviews inventories for obsolescence
and cost in excess of net realizable value quarterly and records a reserve against the inventory when the carrying value exceeds net realizable
value. Prepayments, net Current Prepayments are cash deposited or advanced
to suppliers for future inventory purchases. This amount is refundable and bears no interest. For any advances to suppliers determined
by management that such advances will not be in receipts of inventories or refundable, the Company will recognize an allowance account
to reserve such balances. Management reviews its advances to suppliers on a regular basis to determine if the allowance is adequate, and
adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management
has determined that the likelihood of collection is not probable. The Company’s management continues to evaluate the reasonableness
of the valuation allowance policy and update it if necessary. As of December 31, 2020 and 2019, allowance for the doubtful accounts was
$147,630 and $188,264, respectively. Non-current Non-current prepayment represents cash deposited
or advanced for software development expenditure. This amount is refundable and bears no interest. Property and equipment, net Property and equipment are stated at cost
less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.
The estimated useful lives are as follows:
Category Depreciation method Estimated useful lives
Building Straight-line 20 years
Electronic devices Straight-line 3 years
Office equipment, fixtures and furniture Straight-line 3 years
Automobile Straight-line 3 years The cost and accumulated depreciation of
assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income
and comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and
betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation
to determine whether subsequent events and circumstances warrant revised estimates of useful lives. Intangible assets The Company’s intangible assets with
definite useful lives primarily consist of software development costs, patents and licensed software. The Company amortizes its intangible
assets with definite useful lives over their estimated useful lives and reviews these assets for impairment. The Company typically amortizes
its intangible assets with definite useful lives on a straight-line basis over the shorter of the contractual terms or the estimated useful
lives of five to ten years. Software development costs The Company follows the provisions of ASC
350-40, “Internal Use Software”, to capitalize certain direct development costs associated with internal- used software. ASC
350-40 provides guidance on capitalization of the costs incurred for computer software developed or obtained for internal use. The Company
expenses all costs incurred during the preliminary project stage of its development, and capitalizes costs incurred during the application
development stage. Costs incurred relating to upgrades and enhancements to the application are capitalized if it is determined that these
upgrades or enhancements add additional functionality to the application. The capitalized development cost is amortized on a straight-line
basis over the estimated useful life, which is generally five years. Management evaluates the useful lives of these assets on an annual
basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. Research and development Research and development expenses include
salaries and other compensation-related expenses to the Company’s research and product development personnel, as well as office
rental, depreciation and related expenses for the Company’s research and product development team. The Company expenses all costs
that are incurred in connection with the planning and implementation phases of development, and costs that are associated with maintenance
of the existing websites or software for internal use. Impairment for long-lived assets Long-lived assets, including property and
equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a
significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an
asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets
are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use
of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment
is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows
approach or, when available and appropriate, to comparable market values. As of December 31, 2020, 2019 and 2018, no impairment of long-lived
assets was recognized. Long-term investments Long-term investments include cost method investment and equity
method investments. Entities in which the Company has the ability
to exercise significant influence, but does not have a controlling interest, are accounted for using the equity method. Significant influence
is generally considered to exist when the Company has voting shares between 20% and 50%, and other factors, such as representation on
the Board of Directors, voting rights and the impact of commercial arrangements, are considered in determining whether the equity method
of accounting is appropriate. Under this method of accounting, the Company records its proportionate share of the net earnings or losses
of equity method investees and a corresponding increase or decrease to the investment balances. Dividends received from the equity method
investments are recorded as reductions in the cost of such investments. The Company accounts for investments with
less than 20% of the voting shares and does not have the ability to exercise significant influence over operating and financial policies
of the investee using the cost method. The Company records cost method investments at the historical cost in its consolidated financial
statements and subsequently records any dividends received from the net accumulated earrings of the investee as income. Dividends received
in excess of earnings are considered a return of investment and are recorded as reduction in the cost of the investments. Long-term investments are evaluated for impairment
when facts or circumstances indicate that the fair value of the long-term investments is less than its carrying value. Impairment is recognized
when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss
is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of
the impairment; (iii) extent to which fair value is less than cost; financial condition and near term prospects of the investments; and
(v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. No event had occurred
and indicated that other-than-temporary impairment existed and therefore the Company did not record any impairment charges for its investments
for the years ended December 31, 2020, 2019 and 2018. Fair value measurement The accounting standard regarding fair value
of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of
financial instruments held by the Company. The accounting standards define fair value,
establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value
measures. The three levels are defined as follow: Level 1 inputs to the valuation methodology
are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 inputs to the valuation methodology
include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability,
either directly or indirectly, for substantially the full term of the financial instruments. Level 3 inputs to the valuation methodology
are unobservable and significant to the fair value. Revenue recognition The Company adopted Accounting Standards
Update (“ASU”) 2014-09 Revenue from Contracts with Customers (ASC 606). The ASU requires the use of a new five-step model
to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer,
(ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to
the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective
performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. Sales of interactive toys The Company recognizes sales of interactive
toys revenues upon shipment or upon receipt of products by the customer, depending on the terms, provided that: there are no uncertainties
regarding customer acceptance; persuasive evidence of an agreement exists documenting the specific terms of the transaction; the sales
price is fixed or determinable; and collectability is reasonably assured. Management assesses the business environment, the customer’s
financial condition, historical collection experience, accounts receivable aging, and customer disputes to determine whether collectability
is reasonably assured. The Company routinely enters into arrangements
with its customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise.
Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified
factors such as sales to consumers. The costs of these programs are recorded as sales adjustments that reduce gross sales in the period
the related sale is recognized. The products sold in the PRC are subject
to a Chinese value-added tax (“VAT”). VAT taxes are presented as a reduction of revenue. Mobile games Internal developed platform The Company operates the mobile games as
live services that allow players to play for free. Within these games, players can purchase virtual currency to obtain virtual goods
to enhance the game-playing experience. On the platform, players purchase virtual currency and/or virtual goods through various widely
accepted payment methods offered in the games, including Alipay or WeChat and online bank transfer service providers. Advance payments
from customers for virtual goods that are non-refundable that specify our obligations are recorded to deferred revenue. All other advance
payments that do not meet these criteria are recorded as advances from customers. For virtual goods purchases upon immediately use with
no future game-playing benefits, the Company recognizes such virtual goods purchase upon receipts of payment from the paying players.
For virtual goods purchases for the conversion of future game-playing benefits or throughout the players’ playing life, the Company
recognizes such virtual goods purchases ratably over the estimated average playing period of paying players for the applicable game,
starting from the point in time when virtual items are delivered to the players’ accounts and all other revenue recognition criteria
are met. The Company records revenue generated from mobile games on a gross basis as the Company is acting as the principal to fulfill
all obligations related to the game operation. Fees paid to distribution channels and payment channels are recorded as cost of revenues. The Company considers the average period
that players typically play the games and other game player behavior patterns, as well as various other factors to arrive at the best
estimates for the estimated playing period of the paying players for each game. On a quarterly basis, the Company determined the estimated
average playing period for paying players by analyzing paying players for that game who made their first virtual goods purchase during
that period and counting their cumulative login days for each game. The Company then averages the time periods to determine the estimated
paying playing period for that game. If a new game is launched and only a limited period of paying player data is available, then the
Company considers other qualitative factors, such as the playing patterns for paying players for other games with similar characteristics
and playing patterns of paying players, such as targeted players and purchasing frequency. While the Company believes its estimates to
be reasonable based on available game player information, the Company may revise such estimates based on new information indicating a
change in the game player behavior patterns and any adjustments are applied prospectively. Based on the Company’s analysis, the
estimated average playing period of paying players is approximately one to three months, and this estimate has been consistent since the
Company’s initial analysis. No change has been made in such estimate during any of the periods presented. Future usage patterns
may differ from historical usage patterns and therefore the estimated average playing periods may change in the future. Third-party platform The Company also licenses third-parties to
operate the Company’s mobile games developed internally through mobile platforms and receives revenue-based royalty payments from
all the third-party licensee operators on a monthly basis. The revenue- based royalty payments are recognized
when all other revenue recognition criteria are met. The Company records the mobile game royalty revenue on a net basis, as the Company
does not have the primary responsibility for fulfillment and acceptability of the game services. Information service In this year, the company engages in new
service which provides products and technical services to customers generating from third-party media channels (such as WeChat official
accounts, mini programs, APP, Tik Tok, Toutiao, Quick Worker, etc.), company then charged according to the information services that contracted
with the individual users. The sales revenue of the information service
fee is recognised after the customer confirms the service provided is correct. The premise is: the customer has no uncertainty in the
acceptance, the sales price is fixed and determinable when contracted, and the retrievability is also reasonably guaranteed. Communication service The communication service is mainly divided
into three modules: SMS agency service, agency fee from mobile recharge and IDC service. SMS agency service and mobile recharge service
provides customer services through the company’s platform; and IDC service which providing broadband, IP and others for customers’
router equipment. The sales revenue will be recognized after the customer confirms the statement generated from the platform. The premise
is: the customer has no uncertainty in the acceptance, the sales price is fixed and determinable when contracted, and the retrievability
is also reasonably guaranteed. Shipping and handling Shipping and handling costs amounted to $74,882,
$125,640 and $114,558 for the years ended December 31, 2020, 2019 and 2018, respectively. Shipping and handling costs are expensed as
incurred and included in selling expenses. Advertising costs Advertising costs amounted to $2,763, $31,176
and $87,956 for the years ended December 31, 2020, 2019 and 2018, respectively. Advertising costs are expensed as incurred and included
in selling expenses. Operating leases A lease for which substantially all the benefits
and risks incidental to ownership remain with the lessor is classified by the lessee as an operating lease. All leases of the Company
are currently classified as operating leases. The Company records the total expenses on a straight-line basis over the lease term, and
the accounting of operating lease in this report has been updated to reflect the adoption of FASB’s new guidance on the recognition
and measurement of leases. Government subsidies Government subsidies mainly represent amounts
granted by local government authorities as an incentive for companies to promote development of the local technology industry. The Company
receives government subsidies related to government sponsored projects, and records such government subsidies as a liability when it is
received. The Company records government subsidies as other income when there is no further performance obligation. Total government subsidies amounted to $29,194,
$221,467 and $94,088 for the years ended December 31, 2020, 2019 and 2018, respectively. Value added taxes Revenue represents the invoiced value of
service, net of VAT. The VAT is based on gross sales price and VAT rates range up to 13%, depending on the type of service provided. Entities
that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT
balance between input VAT and output VAT is recorded in tax payable. All of the VAT returns filed by the Company’s subsidiaries
in China have been and remain subject to examination by the tax authorities for five years from the date of filing. Income taxes The Company accounts for current income taxes
in accordance with the laws of the relevant tax authorities. The charge for taxation is based on the results for the fiscal year as adjusted
for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by
the balance sheet date. Deferred taxes are accounted for using the
asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities
in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle,
deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that
it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is
calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred
tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which
case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes
are provided for in accordance with the laws of the relevant taxing authorities. Comprehensive income Comprehensive income consists of two components,
net income and other comprehensive (loss) income. Other comprehensive (loss) income refers to revenue, expenses, gains and losses that
under U.S. GAAP are recorded as an element of shareholders’ equity but are excluded from net income. Other comprehensive (loss)
income consists of a foreign currency translation adjustment resulting from the Company not using the U.S. dollar as its functional currencies. Earnings per share The Company computes earnings per share (“EPS”)
in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is
measured as net income divided by the weighted average ordinary share outstanding for the period. Diluted EPS presents the dilutive effect
on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted
at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e.,
those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. The dilutive shares
were 1,305,380 and 0 for the years ended December 31, 2020 and 2019. Employee benefits The full-time employees of the Company are
entitled to staff welfare benefits including medical care, housing fund, pension benefits, unemployment insurance and other welfare, which
are government mandated defined contribution plans by law. The Company is required to accrue for these benefits based on certain percentages
of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash
contributions to the state-sponsored plans out of the amounts accrued. Total expenses for the plans were $29,333, $81,118 and $81,735
for the years ended December 31, 2020, 2019 and 2018, respectively. Statutory reserves Pursuant to the laws applicable to the PRC,
PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject
to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit
until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted
in the PRC (“PRC GAAP”) at each year-end). For foreign invested enterprises and joint ventures in the PRC, annual appropriations
should be made to the “reserve fund”. For foreign invested enterprises, the annual appropriation for the “reserve fund”
cannot be less than 10% of after-tax profits until the aggregated appropriations reach 50% of the registered capital (as determined under
PRC GAAP at each year-end). If the Company has accumulated loss from prior periods, the Company is able to use the current period net
income after tax to offset against the accumulate loss. Recently issued accounting pronouncements In January 2020, the FASB issued ASU No.
2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives
and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging
Issues Task Force) (“ASU 2020-01”), which clarifies the interactions of the accounting for certain equity securities under
ASC 321, investments accounted for under the equity method of accounting in ASC 323, and the accounting for certain forward contracts
and purchased options accounted for under ASC 815. ASU 2020-01 could change how an entity accounts for (i) an equity security under the
measurement alternative and (ii) a forward contract or purchased option to purchase securities that, upon settlement of the forward contract
or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance
with ASC 825. These amendments improve current U.S. GAAP by reducing diversity in practice and increasing comparability of the accounting
for these interactions. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 31, 2020. Early adoption is permitted. The Company is currently in the process of evaluating the of adopting ASU 2020-01 on its
consolidated financial statements and related disclosure. In August 2020, the FASB issued ASU No. 2020-06,
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which focuses on amending
the legacy guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. ASU
2020-06 simplifies an issuer’s accounting for convertible instruments by reducing the number of accounting models that require separate
accounting for embedded conversion features. ASU 2020-06 also simplifies the settlement assessment that entities are required to perform
to determine whether a contract qualifies for equity classification. Further, ASU 2020-06 enhances information transparency by making
targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance, i.e., aligning the diluted
EPS calculation for convertible instruments by requiring that an entity use the if-converted method and that the effect of potential share
settlement be included in the diluted EPS calculation when an instrument may be settled in cash or shares, adding information about events
or conditions that occur during the reporting period that cause conversion contingencies to be met or conversion terms to be significantly
changed. This update will be effective for the Company’s fiscal years beginning after December 15, 2021, and interim periods within
those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and interim periods
within those fiscal years. Entities can elect to adopt the new guidance through either a modified retrospective method of transition or
a fully retrospective method of transition. The Company is currently in the process of evaluating the impact of adopting ASU 2020-06 on
its consolidated financial statements and related disclosure. |
