What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-04-01 compared with 2023-04-12 · 66 added, 112 removed, 92 unchanged (66% of the section changed)

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Onfolio Holdings Inc.

acquires controlling interests in and actively manages online businesses that we believe (i) operate in sectors with long-term growth opportunities, (ii) have positive and stable cash flows, (iii) face minimal threats of technological or competitive obsolescence and (iv) can be managed by our existing team or have strong management teams largely in place.

Through the acquisition and growth of a diversified group of websites with these characteristics, we believe we offer investors in our shares an opportunity to diversify their own portfolio risk.

acquires controlling interests in and actively manages small online businesses that we believe (i) operate in sectors with long-term growth opportunities, (ii) have positive and stable cash flows, (iii) face minimal threats of technological or competitive obsolescence and (iv) can be managed by our existing team or have strong management teams largely in place.

Through the acquisition and growth of a diversified group of online businesses with these characteristics, we believe we offer investors in our shares an opportunity to diversify their own portfolio risk.

Onfolio Holdings Inc.

was incorporated on July 20, 2020 under the laws of Delaware to acquire and develop high-growth and profitable websites.

was incorporated on July 20, 2020 under the laws of Delaware to acquire and develop high-growth and profitable online businesses.

Unless the context otherwise requires, all references to “our Company,” “we,” “our” or “us” and other similar terms means Onfolio Holdings Inc., a Delaware corporation, and our wholly owned subsidiaries.

We believe that Q4 2022 marked the end of Onfolio 1.0, and the beginning of Onfolio 2.0.

Prior to our IPO in August 2022, we operated smaller “legacy” businesses, primarily focused around content and media publishing.

Throughout 2021 and 2022 we evolved our thesis and responded to changes in the Google search ranking algorithm, and started moving away from smaller content websites and towards more service businesses, agencies, online courses, and digital products.

With the money raised in our IPO, we acquired SEOButler.com (An SEO service agency), Proofreadanywhere.com (An online course) and two Wordpress security plugins collectively known as BWPS (Preventdirectaccess.com and Passwordprotectwp.com).

These types of businesses are favorable for the following reasons:

They are less subject to the google algorithm and other matters outside our control

They are larger businesses, with sufficient profitability to hire dedicated operators

A larger percentage of their revenues are recurring.

We believe recurring revenue is one of the most crucial forms of revenue for our Company.

Currently, the percentage of our revenue which is recurring is minimal, but we aim to increase recurring revenue substantially, both with additional offerings to our existing businesses (where possible), and with our future acquisition strategy.

The funds raised in our IPO facilitated the three aforementioned (and the one mentioned below) acquisitions in October 2022, which is why we believe Q4 was the dawn of Onfolio 2.0.

As a result of these acquisitions, revenue in Q4 was more than the previous quarters combined, while cost of revenue only increased marginally.

There is still some expense bloat in Q4 as a result of these one-time acquisition costs, IPO related expenses, deferred expenses that were paid lump-sum in Q4, and SG&A did have some ongoing increases as well, but we believe that moving forward into 2023, our Company is in a strong financial position.

Revenue in 2023 was up 136% in 2023 compared to 2022, an increase of just over $3,000,000.

This growth was achieved through the acquisitions we made in Q4 2022, which we held for a full year in 2023, and the additional acquisition we made in Q1 2023.

Our gross profit margin in 2023 was 62%, up from 54% in 2022.

This improvement was achieved through an effort by management to reduce the operating costs of our online businesses, driving them to run more efficiently.

In 2023 we noticed a slowdown of lending and a rise in interest rates, and we acted to weather the more difficult capital raising environment through austerity measures, using our remaining cash to extend our working capital runway as long as possible.

Despite those challenges, we closed and obtained full control on one acquisition, RevenueZen, in January 2024, which historically generated $1.4M in revenue in 2023.

Towards the end of 2023, we focused more on targeting B2B agencies and productized services for acquisition.

Historically, our best performing assets have been B2B marketing agencies, and the acquisition opportunities are rich in this space.

In 2024, we will look for opportunities to use our growing stature and track record to raise capital on attractive terms — this is a large area of focus for management.

Due to our cash constraints and desire to avoid issuing additional shares of common stock, we intend to use a mixture of debt, including seller notes, and preferred shares to close acquisitions moving forward — such as can be seen with our recent RevenueZen acquisition.

We are looking to make more acquisitions over the coming months of a similar structure, allowing us to maximize our runway while reducing our burn with a mixture of accretive acquisitions, and continuous expense reduction and optimization efforts.

Organic growth is also a major area we are looking to improve, but inorganic growth through acquisitions will ultimately be necessary and will be the catalyst for our profitability.

In the course of our regular financial review and in compliance with ASC350, in September 2023 we conducted a reassessment of our portfolio of subsidiaries, their performance and recent market developments.

Based on this review, which considered factors such as the financial landscape, the evolving M&A dynamics in this landscape, and prevailing market conditions, we have determined that the carrying value of certain subsidiaries no longer reflects their recoverable amount.

We noted lower than expected operating results for ProofreadAnywhere, WP Folio, and SEO Butler and as such performed a discounted cash flow test to determine the amount of impairment necessary.

We used a higher discount rate than previous valuations due to the increased interest rates and reduced business performances.

We concluded based on the recoverability test performed for Proofread Anywhere, WP Folio, and SEO Butler, that impairment related to goodwill was needed in the amounts of $2,061,763, $580,284, and $420,532, respectively, which were recognized in the Q3 2023 Form 10Q.

As always, management is dedicated to continuous improvement, pursuit of growth, and commitment to our shareholders.

Recent Developments

Asset Purchase Agreement - Contentellect Limited

On January 13, 2023, our Company’s wholly owned subsidiary, Onfolio Assets LLC, entered into an Asset Purchase Agreement (“Contentellect Asset Purchase Agreement”) with Contentellect Limited (“Contentellect”), a Guernsey limited liability company, and Mark Whitman, the sole owner of Contentellect.

Pursuant to the Contentellect Asset Purchase Agreement, Onfolio Assets LLC purchased from Contentellect substantially all of Contentellect’s assets utilized in the operation of the business of providing online (i) content writing services (including white label content creation, eBook writing and eCommerce product description writing), (ii) website link building services (including white label link building, HARO link building and SEO outreach services), (iii) social media marketing services, and (iv) virtual assistant services to individuals, businesses and agencies through the website that the domain name www.contentellect.com points at.

The Contentellect Asset Purchase Agreement closed on February 1, 2023.

Pursuant to the Contentellect Asset Purchase Agreement, and on the terms and conditions contained therein, at the closing, the Company purchased the Contentellect assets from Contentellect, all as more fully described in the Contentellect Asset Purchase Agreement.

The aggregate purchase price for the Contentellect assets of Eight Hundred and Fifty Thousand US Dollars ($850,000) was paid in cash at the closing.

See Note 11 of our accompanying audited financial statements.

We acquired Contentellect because we already operated three similar businesses (Getmelinks.com, Outreachmama.com and SEOButler.com), and we understand the business model.

We also believe that Contentellect adds a more B2B, enterprise clientele that Getmelinks.com, Outreachmama.com and SEOButler.com three lacks.

Productized-service businesses such as Contentellect are a large part of our current acquisition strategy, as well as in parallel industries or with parallel offerings, such as marketing services.

Asset Purchase Agreement - Hoang Huu Thinh

On October 3, 2022, Onfolio, LLC, our Company’s wholly owned subsidiary, entered into an Asset Purchase Agreement (“Hoang Asset Purchase Agreement”) with Hoang Huu Thinh, an individual (“Hoang”).

Pursuant to the Hoang Asset Purchase Agreement, Onfolio LLC purchased from Hoang, substantially all of the assets utilized in the operation of the business of providing a suite of optimization, customization, privacy and security products and services for WordPress websites (“WordPress Business”), with the core WordPress Business offerings consisting of (i) the WordPress plugin known as PREVENT DIRECT ACCESS available via the website preventdirectaccess.com, and (ii) the WordPress plugin known as PASSWORD PROTECT WORDPRESS available via the website passwordprotectwp.com.

The Hoang Asset Purchase Agreement closed on October 25 2022.

The aggregate purchase price for the WordPress Business was as follows:

(i) One Million Two Hundred Ninety Thousand US Dollars ($1,290,000.00) was paid in cash at the closing and Forty Thousand US Dollars ($40,000.00) will paid via a promissory made by Onfolio LLC payable to Hoang after the performance of certain obligations by Hoang and others as provided for in the Hoang Asset Purchase Agreement;

and (ii) up to One Hundred Fifty Nine Thousand Five Hundred US Dollars ($159,500.00) in cash pursuant to the earn-out provisions of the Hoang Asset Purchase Agreement.

See Note 4 of our accompanying audited financial statements.

Our acquisition of the two WordPress plugins, passwordprotectwp.com and previdentdirectaccess.com mark our first of what we hope to be many acquisitions in the WordPress plugin ecosystem.

WordPress plugins appeal to us because of the following:

Their ability to produce recurring revenue,

Our familiarity with the WordPress ecosystem which continues to grow its active user base,

Most WP plugins are B2B tools, which comprise an integral part of our investment strategy,

Wordpress plugins can be acquired for reasonable multiples because they are not growing as fast as other comparables, such as Shopify apps, and therefore have fewer buyers.

Share Purchase Agreement - i2W Ltd

On October 6, 2022, our Company entered into a Share Purchase Agreement (“Share Purchase Agreement”) with i2W Ltd, a company incorporated and registered in England and Wales (“Seller”), and Jonathan Kiekbusch, Ezekiel Daldy, and Lyndsay Kiekbusch, shareholders of the Seller (collectively, the “Guarantors”), for the purchase of all of the issued share capital (“Sale Shares”) of SEO Butler Limited, a company incorporated and registered in England and Wales(“SEO Butler”) .

SEO Butler operates as a productised service business operated via the seobutler.com website and the custom build order management system on orders.seobutler.com and under the SEOButler and PBNButler names.

Pursuant to the Share Purchase Agreement, the Company will purchase the Sale Shares from the Seller, all as more fully described in the Share Purchase Agreement.

The aggregate purchase price the Company paid for the Sale Shares was Nine Hundred and Fifty Thousand and 00/100 US Dollars ($950,000.00).

See Note 4 of our accompanying audited financial statements.

As with Contentellect.com, we acquired SEOButler because we already operated similar businesses (Getmelinks.com and Outreachmama.com), and we understand the business model.

Asset Sale and Purchase Agreement - BCP MEDIA, Inc.

On October 13, 2022, we and Onfolio, LLC, our Company’s wholly owned subsidiary, entered into an Asset Sale and Purchase Agreement (“BCP Asset Purchase Agreement”) with BCP Media, Inc., a Florida corporation(“BCP Media”) , and Caitlin Pyle and Cody Lister, principals of BCP Media.

The transaction closed on October 14, 2022.

Pursuant to the BCP Asset Purchase Agreement, the Company purchased from BCP Media, substantially all the Proofreading Business assets of BCP Media and assigned the acquired assets to Onfolio LLC, which, pursuant to the BCP Asset Purchase Agreement and certain ancillary agreements, will operate the business of online proofreading training via the following websites:

ProofreadAnywhere.com, WorkAtHomeSchool.com, and WorkYourWay2020.com.

The purchase price was paid as follows:

Four Million Four Hundred Ninety Nine Thousand US Dollars ($4,499,000.00) plus a warrant to purchase up to 20,000 shares of the Company’s common stock at the price of $4.75 per share (the “Warrant”), with Two Million One Hundred Thousand US Dollars ($2,100,000.00) paid in cash at the closing and Two Million Three Hundred Ninety Nine Thousand US Dollars ($2,399,000.00) paid via a secured promissory note(the “BCP Note”).

The BCP Note was made by Onfolio, LLC to BCP Media and guaranteed by our Company.

The BCP Note has the principal sum of Two Million Three Hundred Ninety-Nine Thousand and 00/100 US Dollars ($2,399,000.00) (the “Loan Amount”) and it matures on the one-year anniversary from the date of the BCP Note(the “Maturity Date”) .

Interest on the outstanding principal balance of, and all other sums owing under the Loan Amount, is three percent (3%) (the “Interest Rate”) , compounded annually.

Upon the occurrence of an Event of Default (as defined in the BCP Note), the Interest Rate automatically increases to the rate of eight percent (8%) per annum, compounded annually.

The Loan Amount is payable as follows:

(i) commencing on the date that is thirty (30) days from the date of the BCP Note, and continuing monthly on such same day thereafter, Onfolio, LLC shall make an interest only payment to BCP Media equal to Five Thousand Nine Hundred Ninety- Seven and 50/100 Dollars ($5,997.50) per month;

and (ii) the entire Loan Amount, together with all accrued but unpaid interest thereon, shall be due and payable by Onfolio, LLC to BCP Media on the Maturity Date.

See Note 4 of our accompanying audited financial statements.

We acquired Proofreadanywhere.com because we are familiar with its business model.

Digital courses, or education businesses are attractive acquisitions to us because:

They can scale with email marketing and paid advertising,

They can have recurring sales (though not currently present in proofreadanywhere),

They typically have high gross margins, and

There can be synergies between brands.

As with agencies, Wordpress plugins, and productized services, we anticipate making more acquisitions in the digital course space, particularly if they are “biz op” or related to building an income online

In January 2024, we acquired RevenueZen.com, an online service provider that works with B2B brands to grow their organic and referral traffic.

ReveueZen offers B2B marketing services such as search-engine optimization, Linkedin marketing and content marketing.

RevenueZen enjoys a strong reputation in its field, specializing in working with startups, healthcare, professional services, renewable energy, and financial services businesses, among others.

Our Company holds an 88% ownership stake in RevenueZen, while RevenueZen founders received a 12% roll-over equity interest and will serve in leadership roles in the Onfolio-owned RevenueZen team.

Emerging Growth Company

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comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency;”

submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and

disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.

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our ability to leverage technology and use and develop efficient processes;

our ability to effectively utilize a combination of cash, debt such as seller’s notes, and preferred shares when negotiating and structuring future deals;

our ability to attract and retain talented employees;

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Components of Results of Operations

The Company reported a net loss of $4,234,357 for the year ended December 31, 2022 compared to a net loss of $1,900,149 for the year ended December 31, 2022.

The Company reported a net loss of $8,144,821, which includes $5,291,055 in non-cash expenses, for the year ended December 31, 2023 compared to a net loss of $4,234,357, which includes $1,155,083 in non-cash expenses, for the year ended December 31, 2022.

The components of the increase in net loss for the current period are as follows:

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Revenue increased by $3,020,171, or 136% for the year ended December 31, 2023 compared to 2022.

The increase is primarily due to revenue from our three acquisitions completed during the fourth quarter of fiscal 2022, which increased revenue by approximately $845,000, including approximately $708,000 in digital product sales.

This increase was offset by a decline in product sales and advertising revenue.

The increase is primarily due to revenue from our three acquisitions completed during the fourth quarter of fiscal 2022, which increased revenue by approximately $2,500,000, including approximately $1,800,000 in digital product sales along with an increase of approximately $640,000 from Contentellect, acquired in the first quarter of fiscal 2023.

This increase was offset by a decline in product sales and advertising revenue from MightyDeals and other pre-IPO assets.

Cost of Revenue

For the Year Ended

$ Change from

% Change from

Cost of revenue, services

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Total Cost of Revenue

Cost of revenue decreased by $52,148, or 20%, primarily due to lower service revenue costs of $903,000, primarily from a decrease of $131,000 in labor costs related to the Company’s service revenue.

Costs associated with product revenue increased by approximately $38,000 during the year ended December 31, 2022, driven by the increase costs from the Company’s new businesses acquired, offset by better inventory management in its physical product sale businesses.

The components most significant to the Company’s cost of revenue are the costs of acquiring new inventory products, the costs of labor for content creation and website hosting and maintenance costs.

Cost of revenue increased by $975,793, or 96%, due to the increase resulting from the Company’s recent acquisitions.

The Company’s gross profit margins increased in the current period compared to the prior period due to the Company’s efforts to streamline operations and create efficiencies, and due to the increased sales from digital product sales with higher margins in the new businesses.

The components most significant to the Company’s cost of revenue are the costs of labor for service fulfillment, content creation, website hosting and maintenance costs and the costs of acquiring new inventory products for physical product sales.

Operating Expenses

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General and Administrative expenses increased by $1,768,823 or 41% during the year ended December 31, 2023 as compared to 2022.

The increase was primarily due to an increase of $1,181,000 in labor costs, as the Company filled out required roles for the business, amortization expense of $125,000 associated with the acquired intangible assets, an increase of $178,000 in stock-based compensation, an increase in advertising costs of $188,000, and an increase in audit costs of $49,500.

The increase was primarily due to an increase in advertising and marketing costs of $1,200,000, which includes the impact of new businesses acquired in late 2022 and early 2023, an increase in amortization expense of $615,000 associated with the acquired intangible assets not present in the comparable period, a $90,000 increase in other general and administrative costs including stock-based compensation, travel, merchant fees, and increased costs related to being a public company of $279,000, offset by a decrease in payroll and contractor costs of $85,000

Our general and administrative expenses consist primarily of consulting related expenses paid to contractors, stock-based compensation, advertising and marketing costs, and other expenses.

In the nearest future, we expect our general and administrative expenses to continue to increase to support business growth.

Over the long term, we expect general and administrative expenses to decrease as a percentage of revenue.

In the near future, our general and administrative expenses may continue to increase to support business growth.

Over the long term, we aim to have general and administrative expenses decreasing as a percentage of revenue.

Professional Fees and Acquisition Costs

Professional fees increased by $301,748, or 145% during the year ended December 31, 2022 compared to 2021 primarily due to increased due diligence, legal and accounting costs associated with the Company’s initial public offering process.

The Company also incurred $527,792 in acquisition costs directly related to the three acquisitions completed during the fourth quarter of 2022, including audit, legal and other professional fees.

Professional fees increased by $650,469, or 128% during the year ended December 31, 2023 compared to 2022 primarily due to increased due to increased legal and accounting costs associated with the Company’s compliance requirements as a public company.

The Company also incurred $326,899 during the year ended December 31, 2023 compared to $527,792 during the year ended December 31, 2022, including audit, legal and other professional fees related to acquisitions and potential acquisitions.

We expect acquisition costs to remain significant as we continue to grow based on acquisitions.

Impairment Loss

During the year ended December 31, 2023, after taking into account the lower than expected performances of the following businesses and the rising interest rates, the Company recognized impairment losses of $2,061,763 related to the BCP Media Acquisition, $580,284 related to the BWPS Acquisition, and $420,532 related to the SEO Butler Acquisition, $700,000 related to Mighty Deals website domains and $84,000 related to Pretty Neat Creative, operating under Onfolio Crafts LLC, and $105,937 related to various website domains operating under Onfolio Assets LLC for total aggregate impairment expense $3,952,516.

Management has a process to evaluate the viability and profitability of each business.

If and when management concludes that a business has a significantly reduced future value, management will assess the asset for possible impairment in the quarter management reaches that conclusion.

Other Income and Expense

Total other expense was $123,212 for the year ended December 31, 2022 compared to other income of $50,849 for the year ended December 31, 2021.

The decrease in other income was driven by a decline of $16,252 in equity method income from the Company’s equity method joint venture investment due to lower performance in that entity, a $34,306 loss on the sale of a website during the year ended December 31, 2022, and an impairment loss of $51,894 related to the Company’s investment in JV II and JV III as a result of lower performance in those entities.

Provision for Income Taxes

Income tax benefit was $0 for the year ended December 31, 2022 compared to benefit of $1,314, for the fiscal 2022 compared to 2022 primarily due to increased losses in the current year.

Total other income was $92,778 for the year ended December 31, 2023 compared to other expense of $123,212 for the year ended December 31, 2022.

The increase in other income was driven by higher interest income on the Company’s increased cash balances from funds raised in the Company’s initial public offering in the third quarter of 2022, and an impairment loss on sale of assets in 2022 not seen in 2023.

Liquidity and Capital Resources

As of December 31, 2022, our principal sources of liquidity consisted of cash and cash equivalents of $6,701,122 which was mainly on account of raising capital from sale of common stock and warrants in our IPO of $12,255,470 and the sale of preferred and common stock to the extent of $1,736,500 and $2,824,500, respectively, since inception.

As of December 31, 2023, our principal sources of liquidity consisted of cash and cash equivalents of $982,261 which was mainly on account of raising capital from sale of common stock and warrants in our IPO of $12,255,470.

In addition, the Company has raised $600,000 during a private offering of Preferred stock and repaid $2,439,000 on its acquisition-related notes payable.

The Company’s recurring losses from operations and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern.

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Net cash used in operating activities was $2,751,838 and $2,870,893 for the years ended December 31, 2023 and 2022.

The increase was primarily from the increase general and administrative costs as the Company expanded its operations.

The slight decrease was primarily from Company’s efforts to streamline costs, partially offset by the increased general and administrative costs from the acquired businesses for a full year compared to partial periods in the year ended December 31, 2022.

Investing Activities

Net cash used in investing activities was $850,000 and $4,283,219 for the years ended December 31, 2023 and 2022.

For the year ended December 31, 2022, the Company used $4,261,413 to acquire three businesses during the fourth quarter, $67,500 in additional investments in the JVs which, offset by $45,694 of proceeds from the sale of a website.

During the comparable period, the Company paid $784,000 for asset acquisitions completed, paid $49,401 for additional investments in joint ventures and received $75,000 in proceeds from the sale of a website.

For the year ended December 31, 2023, the Company used $850,000 to acquire a single business during the first quarter.

During 2022, the Company used $4,261,413 to acquire three businesses during the fourth quarter, $67,500 in additional investments in the JVs which, offset by $45,694 of proceeds from the sale of a website.

Financing Activities

Cash flows from financing activities was $12,109,373 and $3,097,017 for the years ended December 31, 2022 and 2021.

During the year 2022, we raised $12,104,667 in net proceeds from our initial public offering, $321,500 from sales of preferred stock in a private exempted offering, and $44,000 of proceeds from notes payable, which were partially offset by dividend payments of $142,239, payments on notes payable of $3,555 and payment of the contribution towards its investment in JV IV of $215,000.

During the year 2021, we raised the aggregate amount of $1,415,000 by issuing preferred stock to various investors in a private exempted offering, $2,010,000 from the sale of common stock in a private exempted offering, and $108,000 from the issuance of short term notes payable.

The Company made payments on various notes payable of $270,656 and paid $60,000 towards its investment in JV IV

Cash flows from financing activities was cash used of $2,156,650 and cash provided of $12,109,373 for the years ended December 31, 2023 and 2022.

During the year 2023, we raised $565,000 from the sales of preferred stock in a private exempted offering, which was offset by the repayment of the acquisition notes payable of $2,439,000, payments of preferred dividends of $213,691, and payments on note payables of $68,959 During the year 2022, we raised $12,104,667 in net proceeds from our initial public offering, $321,500 from sales of preferred stock in a private exempted offering, and $44,000 of proceeds from notes payable, which were partially offset by dividend payments of $142,239, payments on notes payable of $3,555 and payment of the contribution towards its investment in JV IV of $215,000.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes as defined by Item 303(a)(4) of SEC Regulation S-K, as of June 30, 2022.

Contractual Obligations

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We account for our interests in entities where we have virtually no influence over operating and financial policies under the cost method of accounting.

In such cases, our original investments are recorded at cost and any distributions received are recorded as income.

Our investments in OnFolio JV I, LLC (“JV I”), OnFolio JVII, LLC (“JVII”) and OnFolio JVIII, LLC (“JVIII”) are accounted for under the cost method.

In such cases, our original investments are recorded at the cost to acquire the interest and any distributions received are recorded as income.

All investments are subject to our impairment review policy.

The current investment in unconsolidated affiliates accounted for under the equity method consists of a 35.8% interest in OnFolio JV IV, LLC (“JV IV”), which is involved in the acquisition, development and operation of websites to produce adverting revenue.

The Company recognized the value of its investments in these joint ventures at carryover basis based on the amount paid by the CEO to the joint venture for Onfolio JV 1 LLC, and agreed to pay the joint venture the contribution for Onfolio JV II LLC and Onfolio JV III LLC at the carryover basis for the amount the interest was acquired for by the CEO.

The current investment in unconsolidated affiliates accounted for under the equity method consists of a 35.8% in interest in Onfolio JV IV, LLC (“JV IV”), which is involved in the acquisition, development and operation of online businesses to produce advertising revenue.

The initial value of an investment in an unconsolidated affiliate accounted for under the equity method is recorded at the fair value of the consideration paid.

Variable Interest Entities

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A primary beneficiary is the variable interest holder in a VIE with both the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and the obligation to absorb losses, or the right to receive benefits that could potentially be significant to the VIE.

Management concluded that the joint ventures do not qualify as variable interest entities under the requirements of ASC 810.

The Company is not considered the primary beneficiary of any VIE’s as the joint ventures do not qualify as variable interest entities under the requirements of ASC 810, as the joint ventures 1) have sufficient equity to finance its activities; 2) have equity owners that as a group have the characteristics of a controlling financial interest in the business, through the ability to vote on a majority basis to change the managing member of the respective joint ventures, and 3) are structured with substantive voting rights.

The Company accounts for its investments in the joint ventures under either the cost or equity method based on the equity ownership in each entity.

Revenue Recognition

The Company primarily earns revenue through website management, digital services, advertising and content placement on its websites, product sales, and digital product sales.

Management services revenue is earned and recognized on a monthly basis as the services are provided.

Advertising and content revenue is earned and recognized once the content is presented on the Company's sites in accordance with the customer requirements.

Product sales are recognized at the time the product is shipped to the customer.

In certain circumstances, products are shipped directly by a supplier to the end customer at the Company's request.

The Company determined that it is the primary obligor in these contracts due to being responsible for fulfilling the customer contract, establishing pricing with the customer, and taking on credit risk from the customer.

The Company recognizes revenue from these contracts with customers on a gross basis.

Digital product sales represent electronic content that is transferred to the customer at time of purchase.

The Company also earns revenue from online course subscriptions that may have monthly or annual subscriptions.

In circumstances when a customer purchases an annual subscription upfront, the Company defers the revenue until the performance obligation has been satisfied.

The Company follows the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (the “new revenue standard”) to all contracts using the modified retrospective method.

Revenue is recognized based on the following five step model:

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Recognition of revenue when, or as, the Company satisfies a performance obligation

The Company amortizes acquired definite-lived intangible assets over their estimated useful lives.

Other indefinite-lived intangible assets are not amortized but subject to annual impairment tests.

The Company primarily earns revenue through website management, advertising and content placement on its online businesses, and product sales.

Management services revenue is earned and recognized on a monthly basis as the services are provided.

Advertising and content revenue is earned and recognized once the content is presented on the Company’s sites in accordance with the customer requirements.

Product sales are recognized at the time the product is shipped to the customer.

Long-lived Assets

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Not applicable.

Financial Statements and Supplementary Data

Our Financial Statements of are attached as Appendix A (following Exhibits) and included as part of this Form 10-K Report.

A list of our Financial Statements is provided in response to Item 15 of this Form 10-K Report.

Changes In And Disagreements With Accountants On Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis