| Summary of Significant Accounting Policies | Note
2 – Summary of Significant Accounting Policies
(a) Basis
of Presentation The
accompanying unaudited (a) condensed consolidated balance sheet as of December 31, 2020, which has been derived from audited financial
statements, and (b) the unaudited interim condensed financial statements have been prepared in accordance pursuant to the rules
and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information
and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting
principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. Therefore,
it is suggested that these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated
financial statements and notes included in the Company’s Current Report on Form 8-K dated March 19, 2021, filed with the
Securities and Exchange Commission. In
the opinion on management, in addition to the adjustments to record the business combination (the “Business Combination”)
between Newborn Acquisition Corp (“Newborn”), the Company, and Nuvve Corp., pursuant to which the Company acquired
the outstanding shares of Nuvve Corp. (see paragraph below), the accompanying unaudited condensed consolidated financial statements
reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive
loss, cash flows, and stockholders’ equity for the interim periods, but are not necessarily indicative of the results to
be anticipated for the full year 2021 or any future period. The
Business Combination between Newborn, a Special Purpose Acquisition Company (“SPAC”), the Company, prior to the Business
Combination a wholly owned subsidiary of Newborn, and Nuvve Corp., prior to the Business Combination a privately held operating
company, pursuant to which the Company acquired the outstanding shares of Nuvve Corp. (see Business Combination below) was accounted
for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method
of accounting, Newborn was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting
purposes, the Reverse Recapitalization was treated as the equivalent of Nuvve Corp. issuing stock for the net assets of Newborn,
accompanied by a recapitalization. The net assets recorded from Newborn are stated at historical cost, with no goodwill or other
intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization
are those of Nuvve Corp. The shares and corresponding capital amounts and earnings per share available for common stockholders
prior to the Business Combination have been retroactively restated to reflect the exchange ratio established in the Business Combination.
(b) Principles
of Consolidation The
condensed consolidated financial statements include the accounts and operations of the Company and its wholly owned subsidiaries.
All intercompany accounts and transactions have been eliminated upon consolidation.
(c) Business
Combination The
Company is party to a merger agreement (as amended, the “Merger Agreement”), dated as of November 11, 2020 and amended
as of February 20, 2021, by and among Newborn, a Cayman Islands company, the Company, a Delaware corporation and prior to the
Business Combination a wholly owned subsidiary of Newborn, Nuvve Merger Sub Inc., a Delaware corporation and prior to the Business
Combination a wholly-owned subsidiary of the Company (the “Merger Sub”), Nuvve Corp., a Delaware corporation, and
Ted Smith, an individual, as the representative of the stockholders of Nuvve Corp. On
March 16, 2021, Newborn held an extraordinary general meeting of its shareholders, at which Newborn’s shareholders approved
the Business Combination, along with certain other related proposals. On
March 19, 2021 (the “Closing Date”), the parties consummated the Business Combination. Pursuant to the Merger Agreement,
the Business Combination was effected in two steps: (i) Newborn reincorporated to the State of Delaware by merging with and into
the Company, with the Company surviving as the publicly-traded entity (the “Reincorporation Merger”); and (ii) immediately
after the Reincorporation Merger, Merger Sub merged with and into Nuvve, with Nuvve surviving as a wholly-owned subsidiary of
the Company (the “Acquisition Merger”). Immediately
prior to the effectiveness of the Reincorporation Merger and the Acquisition Merger, the Company filed its Amended and Restated
Certificate of Incorporation with the Delaware Secretary of State, pursuant to which, among other things, the Company changed
its name to “Nuvve Holding Corp.” and adopted certain other changes that the Company’s Board of Directors deemed
appropriate for an operating public company. In
connection with the entry into the Merger Agreement, on November 11, 2020, Newborn entered into subscription agreements (the “Subscription
Agreements”) with certain accredited investors (the “PIPE Investors”), under which, immediately before the closing
of the Business Combination, the PIPE Investors purchased 1,425,000 ordinary shares of Newborn, at a purchase price of $10.00
per share, for an aggregate purchase price of $14,250,000 (the “PIPE”). The PIPE Investors also received warrants
to purchase 1,353,750 ordinary shares of Newborn (the “PIPE Warrants”) that were identical to Newborn’s other
outstanding warrants. Also,
on November 11, 2020, Nuvve Corp. entered into a bridge loan agreement with an accredited investor, under which, on November 17,
2020, the investor purchased a $4,000,000 6% Senior Secured Convertible Debenture from Nuvve Corp. (the “Bridge Loan”),
which automatically converted into shares of Nuvve Corp.’s common stock immediately before the closing of the Business Combination. Upon the closing of the Reincorporation Merger, each of Newborn’s
outstanding units was automatically separated into its constituent securities, and Newborn’s outstanding securities (including the
Newborn ordinary shares and Newborn warrants purchased by the PIPE Investors) were converted into a like number of equivalent securities
of the Company, except that each of Newborn’s rights was converted automatically into one-tenth of one share of the Company’s
common stock in accordance with its terms. Upon
the closing of the Acquisition Merger, each share of Nuvve Corp.’s common stock outstanding immediately prior to the effective
time of the Acquisition Merger (including the shares issued upon conversion of Nuvve Corp.’s preferred stock and upon conversion
of the Bridge Loan as described above) automatically was converted into approximately 0.21240305 shares (the “Closing Exchange
Ratio”) of the Company’s common stock, for an aggregate of 9,122,996 shares of the Company’s common stock. Each
outstanding option to purchase Nuvve Corp.’s common stock (“Nuvve Options”) was assumed by the Company and converted
into an option to purchase a number of shares of the Company’s common stock equal to the number of shares of Nuvve Corp.’s
common stock subject to such option immediately prior to the effective time multiplied by the Closing Exchange Ratio, for an aggregate
of 1,303,610 shares of the Company’s common stock, at an exercise price equal to the exercise price immediately prior to
the effective time divided by the Closing Exchange Ratio. The
Closing Exchange Ratio was determined by taking (i) a number of shares of the Company’s common stock equal to (A) the Closing
Merger Consideration (as defined below), divided by (B) $10.00 per share, and dividing it by (ii) the sum of (x) the total number
of shares of Nuvve Corp.’s common stock outstanding as of immediately prior to closing (including the shares issued upon
conversion of Nuvve Corp.’s preferred stock, but excluding the shares issued upon conversion of the Bridge Loan) and (y)
the total number of shares of Nuvve Corp.’s common stock issuable upon exercise of Nuvve Options outstanding immediately
prior to the closing. The “Closing Merger Consideration” was determined by taking $100,000,000, subtracting the amount
of Nuvve Corp.’s indebtedness for borrowed money as of the closing of the Acquisition Merger (excluding Payroll Protection
Program loans eligible for forgiveness – see Note 7), which was zero, and adding the aggregate exercise price of the Nuvve
Options outstanding as of the date of the Merger Agreement or granted prior to the closing of the Acquisition Merger, which was
$4,265,785. Additionally,
the former stockholders of Nuvve Corp. may be entitled to receive up to 4.0 million earn-out shares of the Company’s common
stock if, for the fiscal year ending December 31, 2021, the Company’s revenue equals or exceeds $30,000,000. The former
Nuvve Corp. stockholders will be entitled to a portion of the earn-out shares only if they continue to hold their shares of the
Company’s common stock received in the Acquisition Merger through the earn-out payment date. Pursuant
to a purchase and option agreement, dated as of November 11, 2020 (the “Purchase and Option Agreement”), between the
Company and EDF Renewables, Inc. (“EDF Renewables”), a former stockholder of Nuvve Corp. and the owner of more than
5% of the Company’s common stock, immediately after the closing, the Company repurchased 600,000 shares of the Company’s
common stock from EDF Renewables at a price of $10.00 per share. In addition, on the Closing Date, EDF Renewables exercised its
option to sell an additional $2,000,000 of shares of the Company’s common stock back to the Company at a price per share
of $14.87 (the average closing price over the five preceding trading days). The share repurchase was completed on April 26, 2021
(see Note 15). As
agreed between the parties to the Merger Agreement, immediately following the closing of the Acquisition Merger, the Company’s
board of directors consisted of seven directors, five of whom were designated by Nuvve and two of whom were designated by Newborn.
A majority of the directors qualified as independent directors under rules of Nasdaq. In
Newborn’s initial public offering, Newborn issued 5,750,000 units at $10.00 per unit. Each unit issued in the initial public
offering consisted of one ordinary share, one warrant to purchase one-half of an ordinary share (the “Public Warrant”),
and one right automatically convertible into one-tenth of an ordinary upon completion of an initial business combination. Concurrently
with the initial public offering, Newborn sold to its sponsor 272,500 units at $10.00 per unit in a private placement. Each unit
in the private placement consisted of one ordinary share, one warrant to purchase one-half of an ordinary share (the “Private
Warrant”), and one right automatically convertible into one-tenth of an ordinary upon completion of an initial business
combination. Newborn received net proceeds of approximately $57,989,380 from the public and private units. Upon closing of the
initial public offering and the private placement, $57,500,000 was placed by Newborn in a trust account with Continental Stock
Transfer & Trust Company acting as trustee (the “Trust Account”). On the Closing Date of the Business Combination,
the balance in the Trust Account was $58,471,961. After the closing of the Business Combination, and other transactions described
above, including payment of $18,630 for redemptions of ordinary shares by Newborn stockholders, payment of transaction costs of
$3,702,421, repayment of loans made by Newborn’s sponsor to Newborn of $487,500, repurchase of $6,000,000 in common shares
held by EDF Renewables, and transfer into an escrow account with Silicon Valley Bank of $495,000 to cover the balance of the Company’s
PPP Loan payable (Note 7) the Company received total net proceeds from the Trust Account in cash of $47,768,410. Also
on March 19, 2021, the PIPE closed, and the Company received cash proceeds, net of $2,500 of transaction costs of $14,247,500.
(d) Emerging
Growth Company Section
102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) permits emerging growth companies (“EGC”)
to delay complying with new or revised financial accounting standards that do not yet apply to private companies (that is, those
that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under
the Exchange Act). The Company qualifies as an EGC. The JOBS Act provides that an EGC can elect to opt-out of the extended transition
period and comply with the requirements that apply to non-EGCs, but any such election to opt-out is irrevocable. The Company has
elected not to opt-out of such an extended transition period, which means that when a standard is issued or revised and it has
different application dates for public or private companies, the Company, as an EGC, can adopt the new or revised standard at
the time private companies adopt the new or revised standard. This different adoption timing may make a comparison of the Company’s
financial statements with another public company which is neither an EGC nor an EGC that has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
(e) COVID-19 In
early 2020, an outbreak of a novel coronavirus (COVID-19) occurred in the United States, along with other countries globally.
On March 11, 2020, the World Health Organization assessed the novel coronavirus outbreak and characterized it as a pandemic. Subsequent
to the declaration of a pandemic, a variety of federal, state, and local governments have taken actions in response to the pandemic,
which have ranged by jurisdiction but are generally expected to result in a variety of negative economic consequences, the scope
of which is not clearly known. The Company continues to monitor the situation closely but, at this time, is unable to predict
the cumulative impact, both in terms of severity and duration, that the coronavirus pandemic has and will have on its business,
operating results, cash flows and financial condition, and it could be material if the current circumstances continue to exist
for a prolonged period of time. In addition to any direct impact on Nuvve’s business, it is reasonably possible that the
estimates made by management in preparing Nuvve’s financial statements have been, or will be, materially and adversely impacted
in the near term as a result of the COVID-19 outbreak.
(f) Use
of Estimates The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may
affect the reported amounts of assets and liabilities, the 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. Significant estimates and
assumptions made by management include the impairment of intangible assets, the net realizable value of inventory, the fair value
of share-based payments, the fair value of notes payable conversion options, revenue recognition, and the recognition and disclosure
of contingent liabilities. Management
evaluates its estimates on an ongoing basis. Actual results could materially vary from those estimates.
(g) Warrants The
Company reviews the terms of warrants to purchase its common stock to determine whether warrants should be classified as liabilities
or stockholders’ equity in its consolidated balance sheet. In order for a warrant to be classified in stockholders’
equity, the warrant must be (a) indexed to the Company’s equity and (b) meet the conditions for equity classification in
Accounting Standards Codification (“ASC”) Subtopic 815-40, Derivatives and Hedging – Contracts in an Entity’s
Own Equity
(h) Foreign
Currency Matters For
Nuvve Corp., Nuvve SaS, and Nuvve LTD, the functional currency is the U.S. dollar. All local foreign currency asset and liability
amounts are remeasured into U.S. dollars at balance sheet date exchange rates, except for inventories, prepaid expenses, and property,
plant, and equipment, which are remeasured at historical rates. Foreign currency income and expenses are remeasured at average
exchange rates in effect during the year, except for expenses related to balance sheet amounts which are remeasured at historical
exchange rates. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency
other than the functional currency are included in other income (expense) in the condensed consolidated statements of operations. The
financial position and results of operations of the Company’s non-U.S. dollar functional currency subsidiary, Nuvve Denmark,
are measured using the subsidiary’s local currency as the functional currency. The Company translates the assets and liabilities
of Nuvve Denmark into U.S. dollars using exchange rates in effect at the balance sheet date. Revenues and expenses for the subsidiary
are translated using rates that approximate those in effect during the period. The resulting translation gain and loss adjustments
are reflected as a foreign currency translation adjustment in accumulated other comprehensive income (loss) within stockholders’
equity in the condensed consolidated balance sheets. Foreign currency translation adjustments are included in other comprehensive
income in the condensed consolidated statements of operations and comprehensive loss.
(i) Cash
and Restricted Cash The
Company maintains cash balances that can, at times, exceed amounts insured by the Federal Deposit Insurance Corporation, which
is up to $250,000. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant
credit risk in this area. Pursuant
to the Business Combination agreement, $495,000 of the proceeds received from Newborn’s trust account were required to be
set aside in trust for the possible repayment of the Company’s Payroll Protection Plan (“PPP”) loan (Note 7).
The Company has applied for forgiveness of the PPP loan, at which time the $495,000 in trust would be released to the Company.
(j) Accounts
Receivable Accounts
receivable consist primarily of payments due from customers under the Company’s contracts with customers. The Company performs
ongoing credit evaluations of customers to assess the probability of accounts receivable collection based on a number of factors,
including past transaction experience with the customer, assessment of their credit history, and review of the invoicing terms
of the contract. The Company maintains reserves for potential credit losses on customer accounts when deemed necessary. Based
on the analysis the Company did not record an allowance for doubtful accounts as of March 31, 2021 or December 31, 2020.
(k) Concentrations
of Credit Risk Revenue
for customers that accounted for 10% or more of revenue for the three months ended March 31, 2021 and 2020, are summarized
below:
2021 2020
Customer 1 (grant revenue) 37 % 29 %
Customer 2 (grant revenue) 13 % 12 %
Customer 3 (grant revenue) * 25 %
Customer 4 (services revenue) 18 % * Accounts
receivable balances for customers that accounted for 10% or more of accounts receivable at March 31, 2021, and December 31, 2020,
is summarized below:
March 31, December 31,
Customer 1 (grant revenue) 44 % 15 %
Customer 2 (grant revenue) * 19 %
Customer 3 (product revenue) * 27 %
Customer 4 (product revenue) * 10 %
Customer 5 (product revenue) * 10 %
* Amount
represents less than 10%
(l) Inventories Inventories,
consisting primarily of EV charging stations, are stated at the lower of cost or net realizable value. The Company values its
inventories using the first-in, first-out method. Cost includes purchased products. Net realizable value is based on current selling
prices less costs of disposal. At March 31, 2021 and December 31, 2020, the Company’s inventories consisted solely of finished
goods. Should demand for the Company’s products prove to be significantly less than anticipated, the ultimate realizable
value of the Company’s inventories could be substantially less than the amount shown on the accompanying condensed consolidated
balance sheets.
(m) Property
and Equipment, Net Property
and equipment are carried at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the
estimated useful lives of the respective asset. Maintenance and repairs are expensed as incurred while betterments are capitalized.
Upon sale or disposition of assets, any gain or loss is included in the condensed consolidated statement of operations.
(n) Intangible
Assets Intangible
assets consist of patents which are amortized over the period of estimated benefit using the straight-line method. No significant
residual value is estimated for intangible assets.
(o) Impairment
of Long-Lived Assets The
Company evaluates long-lived assets, for impairment, including evaluating the useful lives for amortizing intangible assets, whenever
events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future
cash flows (undiscounted and without interest charges) from the use of an asset are less than the carrying value, a write-down
would be recorded to reduce the related asset to its estimated fair value. There were no such write-downs for the three months
ended March 31, 2021 and 2020.
(p) Investments
in Equity Securities Without Readily Determinable Fair Values Investments
in equity securities of nonpublic entities without readily determinable fair values are carried at cost minus impairment, if any,
plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment
of the same issuer. The Company reviews its equity securities without readily determinable fair values on a regular basis to determine
if the investment is impaired. For purposes of this assessment, the Company considers the investee’s cash position, earnings
and revenue outlook, liquidity, and management ownership, among other factors, in its review. If management’s assessment
indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current earnings
an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount. In
February 2019, During 2019, the Company invested in Dreev SaS, (“Dreev”), a VIE, and determined it was not the primary
beneficiary of the VIE (see Note 5). Dreev is a nonpublic entity, for which there is no readily determinable fair value. As of
March 31, 2021 and December 31, 2020, the Company’s investment in Dreev was accounted for as an investment in equity securities
without a readily determinable fair value. The Company did not recognize an impairment loss on its investment during the three
months ended March 31, 2021 or the year ended December 31, 2020.
(q) Employee
Savings Plan The
Company maintains a savings plan on behalf of its employees that qualifies under Section 401(k) of the Internal Revenue Code.
Participating employees may contribute up to the statutory limits. During the three months ended March 31, 2021 and the year ended
December 31, 2020, the Company did not contribute to the savings plan.
(r) Fair
Value Measurement The
Company’s financial instruments consist principally of cash, accounts receivable, accounts payable and accrued expenses,
convertible notes payable, convertible debenture, the conversion option on the notes payable and warrants. Fair value is defined
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. In determining fair value, the Company utilizes valuation techniques that maximize the use
of observable inputs and minimizes the use of unobservable inputs to the extent possible. The Company also considers counterparty
risk and its own credit risk in its assessment of fair value. The
categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant
to the fair value measurement. The inputs used to measure fair value are prioritized based on a three-level hierarchy. The three
levels of inputs used to measure fair value are defined as follows:
● Level
1 – Quoted prices in active markets for identical assets or liabilities.
● Level
2 – Other inputs that are observable directly or indirectly, such as quoted prices for similar assets and liabilities or
market corroborated inputs.
● Level
3 – Unobservable inputs are used when little or no market data is available, which requires the Company to develop its own
assumptions about how market participants would value the assets or liabilities.
(s) Net
Loss Per Share Attributable to Common Stockholders The
Company’s basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable
to common stockholders by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss
per share attributable to common stockholders is computed by giving effect to all potential dilutive common stock equivalents
outstanding for the period. The dilutive effect of these potential common shares is reflected in diluted earnings per share by
application of the treasury stock method. For purposes of this calculation, shares issuable upon the conversion of the Series
A Convertible Preferred stock (Note 8) exercise of warrants (Note 8), exercise of the unit purchase option (Note 8), and options
to purchase common stock (Note 9) are considered common stock equivalents but have been excluded from the calculation of diluted
net loss per share attributable to common stockholders as their effect is antidilutive.
(t) Revenue
Recognition The
Company accounts for revenues under ASC Topic 606, Revenue from Contracts with Customers The
Company determines revenue recognition through the following steps:
● Identification
of the contract, or contracts, with a customer;
● Identification
of the performance obligations in the contract;
● Determination
of the transaction price;
● Allocation
of the transaction price to the performance obligations in the contract; and
● Recognition
of revenue when, or as, the Company satisfies a performance obligation. The
Company’s revenue is primarily derived from sales of EV charging stations, fees for cloud computing services related to
providing access to the Company’s GIVe platform, extended warranty and maintenance services. The Company also has performed
certain software development services and received government grants. GIVe platform access is considered a monthly series comprising
of one performance obligation and fixed fees are recognized as revenue in the period the services are provided to and consumed
by the customer. The transaction price for each contract is allocated between the identified performance obligations based on
relative estimated standalone selling prices. Products
Services
The
Company has entered into various agreements for research and development and software development services. The terms of these
arrangements typically include terms whereby the Company receives milestone payments in accordance with the scope of services
outlined in the respective agreement or is reimbursed for allowable costs. At
the inception of each arrangement that includes milestone payments, the Company evaluates whether a significant reversal of cumulative
revenue associated with achieving the milestones is probable and estimates the amount to be included in the transaction price
using the most likely amount method. If it is probable that a significant reversal of cumulative revenue would not occur, the
associated milestone value is included in the transaction price. The Company applies considerable judgment in evaluating factors
such as the scientific, regulatory, commercial, and other risks that must be overcome to achieve a particular milestone in making
this assessment. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all
milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments
are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. The
Company sells an extended warranty contract on the charging stations, which includes maintenance of the equipment for a period
(e.g., three years, five years, 10 years, 12 years). The warranty provides the customer with assurance that the product will function
as intended for the period of the contract and maintenance services related to the equipment. Since the warranty provides a customer
with a service in addition to the assurance that the product complies with agreed-upon specifications, the promised service is
a performance obligation. Access to the warranty services represent a series of distinct services that are substantially the same
and have the same pattern of transfer to the customer, and the Company recognizes warranty revenue ratably with the passage of
time. Revenue
for other service contracts is recognized over time using an input method where progress on the performance obligation is measured
based on the proportion of actual costs incurred to date relative to the total costs expected to be required to satisfy the performance
obligation. Grant
revenue Not-for-Profit-Entities-Revenue
Recognition, Revenues
from each grant are based upon internal costs incurred that are specifically covered by the grant. Revenue is recognized as the
Company incurs expenses that are related to the grant. The Company believes this policy is consistent with the overarching premise
in ASC 606, to ensure that it recognizes revenues to reflect the transfer of promised goods or services to customers in an amount
that reflects the consideration to which it expects to be entitled in exchange for those goods or services, even though there
is no “exchange” as defined in the ASC. The Company believes the recognition of revenue as costs are incurred and
amounts become earned/realizable is analogous to the concept of transfer of control of a service over time under ASC 606. The
Company considers contract modifications to exist when the modification either creates new or makes changes to the existing enforceable
rights and obligations. Contract modifications for services that are not distinct from the existing contract are accounted for
as if they were part of that existing contract. In these cases, the effect of the contract modification on the transaction price
and the measure of progress for the performance obligation to which it relates are recognized as an adjustment to revenue (either
as an increase in or a reduction of revenue) on a cumulative catch-up basis. Contract modifications for goods or services that
are considered distinct from the existing contract are accounted for as separate contracts. The
Company’s contract liabilities consist solely of deferred revenue related to amounts billed or received in advance of services
or products delivered.
(u) Cost
of Revenue Cost
of revenue consists primarily of costs of material, including hardware and software costs, and costs of providing services, including
employee compensation and other costs associated with supporting these functions.
(v) Contract
Costs Under
ASC Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers
(w) Income
Taxes The
Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740, Income Taxes, The
Company applies certain provisions of ASC 740, which includes a two-step approach to recognizing and measuring uncertain tax positions.
The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it
is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes,
if any. The second step is to measure the tax benefit or obligation as the largest amount that is more than 50% likely of being
realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax
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