Variable interest entity

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable interest entity

Note 3 – Variable interest entity

On May 27, 2020, Infobird WFOE entered into the Contractual Arrangements with Infobird Beijing. The significant terms of these Contractual Arrangements are summarized in “Note 1 – Nature of business and organization” above. As a result, the Company classifies Infobird Beijing as a VIE which should be consolidated based on the structure as described in Note 1.

A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Infobird WFOE is deemed to have a controlling financial interest and be the primary beneficiary of Infobird Beijing because it has both of the following characteristics:

(1)	The power to direct activities at Infobird Beijing that most significantly impact such entity’s economic performance, and
(2)	The right to receive benefits from Infobird Beijing that could potentially be significant to such entity.

Pursuant to the Contractual Arrangements, Infobird Beijing pays service fees equal to all of its net income to Infobird WFOE. The Contractual Arrangements are designed so that Infobird Beijing operates for the benefit of Infobird WFOE and ultimately, the Company.

Under the Contractual Arrangements, the Company has the power to direct activities of the VIEs and can have assets transferred out of the VIEs. Therefore, the Company considers that there is no asset in the VIEs that can be used only to settle obligations of the VIEs, except for registered capital and PRC statutory reserves, if any. As the VIEs are incorporated as limited liability companies under the Company Law of the PRC, creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the VIEs.

Accordingly, the accounts of Infobird Beijing are consolidated in the accompanying consolidated financial statements. In addition, its financial positions and results of operations are included in the Company’s consolidated financial statements.

The carrying amount of the VIEs’ consolidated assets and liabilities are as follows:

	December 31, 2021			December 31, 2020
Current assets	$	8,777,215		$	7,285,853
Other assets		7,573,750			8,668,680
Total assets		16,350,965			15,954,533
Total liabilities		(21,063,981	)		(7,823,238	)
Net assets	$	(4,713,016)		$	8,131,295

	December 31, 2021		December 31, 2020
Current liabilities:
Accounts payable	$	500,742	$	552,540
Bank loans - current		4,496,883		3,065,134
Interest payable – related party		—		574,065
Other payables and accrued liabilities		947,980		687,702
Other payable - intercompany		11,023,791		—
Deferred revenue		2,218,458		1,755,967
Lease liabilities		185,145		—
Taxes payable		1,381,440		865,795
Total current liabilities		20,754,439		7,501,203
Deferred tax liabilities		81,992		322,035
Bank loans - noncurrent		131,603		—
Lease liabilities - noncurrent		95,947		—
Total liabilities	$	21,063,981	$	7,823,238

The summarized operating results of the VIEs are as follows:

	For the year ended December 31, 2021			For the year ended December 31, 2020		For the year ended December 31, 2019
Operating revenues*	$	9,984,064		$	14,532,941	$	18,248,289
Gross profit		2,520,414			9,814,848		10,261,143
Income (loss) from operations		(13,932,990	)		4,367,697		6,038,880
Net income (loss)	$	(13,836,367	)	$	4,060,160	$	5,101,828

*Includes $342,984 intercompany revenue to Infobird WFOE.