UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
_______.TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission
file number:
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) (Zip Code) |
| ( |
| (Registrant’s telephone number, including area code) |
| None |
| (Former name, former address and former fiscal year, if changed since last report) |
Indicate
by check mark whether the registrant (1) has filed reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such
files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, Emerging Growth Company or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ¨ | . | Accelerated filer ¨ |
| Smaller reporting company |
||
| Emerging Growth Company |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨.
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| None | N/A | N/A |
As of November 8, 2021, there were shares of common stock issued and outstanding. The registrant’s common stock is quoted on the OTCQB Venture Market of The OTC Markets Group, Inc. under the trading symbol “VEII.”
| 1 |
FORM 10-Q
Value Exchange International, Inc.
INDEX
| Page | ||
| PART I - FINANCIAL INFORMATION | ||
| Item 1. Financial Statements | 3 | |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation | 25 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 38 | |
| Item 4. Controls and Procedures | 38 | |
| PART II - OTHER INFORMATION | ||
| Item 1. Legal Proceedings | 40 | |
| Item 1A. Risk Factors | 40 | |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 40 | |
| Item 3. Defaults Upon Senior Securities | 41 | |
| Item 4. Mine Safety Disclosures | 41 | |
| Item 5. Other Information | 41 | |
| Item 6. Exhibits | 42 | |
| Signatures | 43 |
| 2 |
ITEM 1. FINANCIAL STATEMENTS
VALUE EXCHANGE INTERNATIONAL, INC.
Financial Statements
| Page | ||
| Consolidated Balance Sheets (unaudited) | 4 | |
| Consolidated Statements of Operations and Comprehensive Income (unaudited) | 5 | |
| Consolidated Statements of Cash Flows (unaudited) | 6 | |
| Notes to the Consolidated Financial Statements (unaudited) | 7 |
| 3 |
VALUE EXCHANGE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| ASSETS | (unaudited) | |||||||
| CURRENT ASSETS | ||||||||
| Cash | ||||||||
| Accounts receivable, less allowance for doubtful accounts | ||||||||
| Amounts due from related parties | ||||||||
| Other receivables and prepayments | ||||||||
| Inventories | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Plant and equipment, net | ||||||||
| Deferred tax assets | ||||||||
| Goodwill | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Total non-current assets | ||||||||
| Total assets | ||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | ||||||||
| Other payables and accrued liabilities | ||||||||
| Deferred income | ||||||||
| Amounts due to related parties | ||||||||
| Operating lease liabilities, current | ||||||||
| Short term bank loan | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Deferred tax liabilities | ||||||||
| Long term bank loan | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Preferred stock, shares authorized, $ par value; shares issued and outstanding | ||||||||
| Common stock, shares authorized, $ par value; and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserves | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive losses | ( | ) | ||||||
| Total shareholders’ equity | ||||||||
| Non-controlling interest | ||||||||
| 2,210,581 | 1,268,343 | |||||||
| Total liabilities and shareholders’ equity | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
VALUE EXCHANGE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| Three Months | Nine Months | |||||||||||||||
| Ended September 30, | Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| NET REVENUES | ||||||||||||||||
| Service income | ||||||||||||||||
| COST OF SERVICES | ||||||||||||||||
| Cost of service income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign exchange gain (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| PROFIT FROM OPERATIONS | ||||||||||||||||
| OTHER INCOME (EXPENSES): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Finance cost | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| VAT refund | ||||||||||||||||
| Management fee income | ||||||||||||||||
| Others | ||||||||||||||||
| Total other income (expenses), net | ||||||||||||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | ||||||||||||||||
| INCOME TAXES (EXPENSES) CREDIT | ( | ) | ( | ) | ( | ) | ||||||||||
| NET INCOME | ||||||||||||||||
| OTHER COMPREHENSIVE INCOME: | ||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||||||
| COMPREHENSIVE INCOME | ||||||||||||||||
| ATTRIBUTABLE TO: | ||||||||||||||||
| Equity holders of the Company | ||||||||||||||||
| Non-controlling interests | ( | ) | ||||||||||||||
| Net income per share, basic and diluted | ||||||||||||||||
| Weighted average number of shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
VALUE EXCHANGE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | (unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net profit | ||||||||
| Adjustments to reconcile net profit to cash (used in) provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Interest income | ( | ) | ( | ) | ||||
| Interest expenses | ||||||||
| Finance costs on Right-of-use assets | ||||||||
| Loss on disposal of plant and equipment | ||||||||
| Deferred income taxes | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Other receivables and prepayments | ( | ) | ||||||
| Amounts due from related parties | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Other payables and accrued liabilities | ( | ) | ||||||
| Deferred income | ( | ) | ||||||
| Amounts due to related parties | ( | ) | ||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of plant and equipment | ( | ) | ( | ) | ||||
| Interest received | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Issued share capitals | ||||||||
| Proceeds from non-controlling interests | ||||||||
| Interest paid | ( | ) | ||||||
| Dividend paid | ( | ) | ||||||
| Principal payments on finance leases | ( | ) | ( | ) | ||||
| Proceeds from bank loan | ||||||||
| Repayment of bank loan | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| EFFECT OF EXCHANGE RATE ON CASH | ( | ) | ||||||
| (DECREASE) INCREASE IN CASH | ( | ) | ||||||
| CASH, beginning of period | ||||||||
| CASH, end of period | ||||||||
| SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash refund for income taxes | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Nature of Operations and Continuance of Business |
Value Exchange International, Inc.
(“VEII”, “Company”, “we” or “us”) was incorporated in the State of
The Company provides IT Business’ services and solutions to the retail sector through three operating subsidiaries located in Hong Kong SAR and People’s Republic of China (“PRC”).
On September 2, 2008, VEI CHN established its first operating subsidiary, Value Exchange Int’l (Shanghai) Limited (“VEI SHG”) in Shanghai, PRC, under the laws of the PRC. VEI SHG engages in software development, trading and servicing of computer hardware and software activities.
On September 25, 2008, VEI CHN acquired its second operating subsidiary, TAP Services (HK) Limited in Hong Kong which subsequently changed its name to Value Exchange Int’l (Hong Kong) Limited (“VEI HKG”) on May 14, 2013. VEI HKG engages in software development, trading and servicing of computer hardware and software activities.
| 7 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On May 14, 2013, VEI CHN further established another operating subsidiary, Ke Dao Solutions Limited in Hong Kong, which subsequently changed its name to Cumberbuy.com Limited (“CUMBERBUY”) on May 26, 2017. CUMBERBUY conducts consultancy services for IT Services and Solutions activities.
In January 2017, VEI CHN acquired
In January 2019, VEI SHG established an operating subsidiary, Value Exchange Int’l (Hunan) Limited (“VEI HN”) in Hunan, PRC, under the laws of the PRC. VEI HN engages in IT service call-center activities.
In February 2020, VEI SHG established an operating subsidiary, Shanghai Zhaonan Hengan Information Technology Co., Limited (“SZH”) in Shanghai, PRC, under the laws of the PRC. SZH engages in IT services.
As of September 30, 2021,
Impact of Coronavirus/COVID-19 Pandemic. Public health threats could adversely affect our ongoing or planned business operations. In particular, the outbreak in December 2019 of a novel coronavirus (“COVID-19”) in China and then into Hong Kong SAR and Philippines resulted in quarantines, restrictions on travel and other business and economic disruptions in our markets. Due to emergence of variants of COVID-19 (especially the “Delta” variant) and reluctance or failure of a significant portion of general population in our markets to become fully vaccinated, which portion allows emergence and spread of variants of COVID 19 and the resulting risk of the emergence of vaccine resistant strains of COVID 19, we cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the suppliers, distributers, resellers and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and adversely impacted. China and Hong Kong SAR, our primary markets, still experience travel and quarantine restrictions that do not allow return to regular operations and marketing efforts.
| 8 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | Summary of Significant Accounting Policies |
| a) | 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”), and include the financial statements of the Company and all its wholly-owned subsidiaries that require consolidation. All material intercompany transactions and balances have been eliminated in the consolidation. The Company’s fiscal year end is December 31st. The following entities were consolidated as of September 30, 2021:
| Place of incorporation | Ownership percentage | |||
| Parent Company | ||||
|
Technology Co., Ltd. |
PRC |
|
| b) | Use of Estimates |
Preparing consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring using management’s estimates and assumptions relate to the collectability of its receivables, the fair value and accounting treatment of financial instruments, the valuation of long-lived assets and valuation of deferred tax liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates. In addition, different assumptions or circumstances could reasonably be expected to yield different results.
| c) | Cash and Cash Equivalents |
For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of six months or less at the time of purchase to be cash equivalents. Cash includes cash on hand and demand deposits in accounts maintained with financial institutions or state-owned banks within the PRC and Hong Kong.
| d) | Interim Financial Statements |
These interim unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
| 9 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| e) | Accounts receivable and other receivables |
Receivables include trade accounts
due from customers and other receivables such as cash advances to employees, utility deposits paid and advances to suppliers. Management
reviews the composition of accounts receivable and analyzes historical bad debts, customer concentration, customer credit worthiness,
current economic trends and changes in customer payment patterns to determine if the allowance for doubtful accounts is adequate. An estimate
for doubtful accounts is made when collection of the full amount is no longer probable. Delinquent account balances are written-off after
management has determined that the likelihood of collection is not probable and known bad debts are written off against the allowance
for doubtful accounts when identified. As of September 30, 2021 and December 31, 2020, there was allowance amount to $
| f) | Inventories |
Inventories are valued at the lower of cost and net realizable value. Cost for inventories is determined using the “first-in, first-out” method.
Management reviews inventories for obsolescence or cost in excess of net realizable value periodically. The obsolescence, if any, is recorded as a provision against the inventory. The cost in excess of market value is written off and recorded as additional cost of sales.
| g) | Plant and equipment |
Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Expenditures for maintenance and repairs are charged to earnings as incurred. Major additions are capitalized. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of plant and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:
| Estimated Useful Life | ||
| Leasehold improvements |
Lesser of lease term or the estimated useful lives of | |
| Computer equipment | ||
| Computer software | ||
| Office furniture and equipment | ||
| Motor Vehicle | ||
| Building |
| h) | Goodwill and intangibles |
Intangibles with a definite life, including customer relationships and goodwill were recorded in connection with the acquisition of TSI. Intangible assets are amortized based on their estimated economic lives using the straight-line method with estimated lives as follows:
| Estimated Economic Life | ||
| Customer relationship |
Goodwill represents the excess of the cost of acquisition over the fair value of net assets acquired. Goodwill is not amortized, but is instead tested for impairment annually.
| 10 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| i) | Impairment of long-lived assets |
Property, Plant, and Equipment
The Company evaluates long-lived assets, including equipment, for impairment at least once per year and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired and an impairment loss equal to an amount by which the carrying value exceeds the fair value of the asset is recognized.
Impairment of Goodwill
The carrying value of goodwill is evaluated annually or more frequently if events or circumstances indicate that an impairment loss may have occurred. Such circumstances could include, but are not limited to, a significant adverse change in business climate, increased competition or other economic conditions. Under FASB Accounting Standard Codification (ASC) Topic 350 “Intangibles - Goodwill and Other”, goodwill is tested at a reporting unit level. The impairment test involves a two-step process. The first step involves comparing the fair value of the reporting unit to which the goodwill is assigned to its carrying amount. If this comparison indicates that a reporting unit’s estimated fair value is less than its carrying value, a second step is required. If applicable, the second step requires us to allocate the estimated fair value of the reporting unit to the estimated fair value of the reporting unit’s net assets, with any fair value in excess of amounts allocated to such net assets representing the implied fair value of goodwill for that reporting unit. If the carrying value of the goodwill exceeds its fair value, the carrying value is written down by an amount equal to such excess.
The goodwill impairment testing process involves the use of significant assumptions, estimates and judgments, and is subject to inherent uncertainties and subjectivity. Estimating a reporting unit’s discounted cash flows involves the use of significant assumptions, estimates and judgments with respect to a variety of factors, including sales, gross margin and selling, general and administrative rates, capital expenditures, cash flows and the selection of an appropriate discount rate. Projected sales, gross margin and selling, general and administrative expense rate assumptions and capital expenditures are based on our annual business plans and other forecasted results. Discount rates reflect market-based estimates of the risks associated with the projected cash flows of the reporting unit directly resulting from the use of its assets in its operations. These estimates are based on the best information available to us as of the date of the impairment assessment.
| 11 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| j) | Fair value of financial instruments |
The Company values its financial instruments as required by FASB ASC 320-12-65. The estimated fair value amounts have been determined by the Company, using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
| Level one — | Quoted market prices in active markets for identical assets or liabilities; | |
| Level two — | Inputs other than level one inputs that are either directly or indirectly observable; and | |
| Level three — | Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use. |
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The carrying values of the Company’s financial instruments; consisting of cash and cash equivalents, accounts receivable, accounts payable, other receivables and prepayments, other payables and accrued liabilities, balances with a related party, balances with related companies and amounts due to director approximate their fair values due to the short maturities of these instruments.
There was no asset or liability measured at fair value on a non-recurring basis as of September 30, 2021 and December 31, 2020.
| 12 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| k) | Comprehensive income |
U.S. GAAP generally requires that recognized revenue, expenses, gains and losses be included in net income or loss. Although certain changes in assets and liabilities are reported as separate components of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income or loss. The components of other comprehensive income or loss consist of foreign currency translation adjustments.
| l) | Earnings per share |
The Company reports earnings per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
| m) | Revenue recognition |
Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured.
The Company’s revenue is derived from three primary sources: (i) professional services for systems development and integration, including procurement of related hardware and software licenses on behalf of customers, if required; (ii) professional services for system maintenance normally for a period of one year; and (iii) sale of hardware and consumables during the service performed as stated above.
Multiple-deliverable arrangements
The Company derives revenue from fixed-price sale contracts with customers that may provide for the Company to procure hardware and software licenses with varied performance specifications specific to each customer and provide the technical services for systems development and integration of the hardware and software licenses. In instances where the contract price is inclusive of the technical services, the sale contracts include multiple deliverables. A multiple-element arrangement is separated into more than one unit of accounting if all of the following criteria are met:
| – | The delivered item(s) has value to the customer on a stand-alone basis; |
| – | There is objective and reliable evidence of the fair value of the undelivered item(s); and |
| – | If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. |
| 13 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s multiple-element contracts generally include customer-acceptance provisions which provide for the Company to carry out installation, test runs and performance tests at the Company’s cost until the systems as a whole can meet the performance specifications stated in the contracts. The delivered equipment and software licenses have no standalone value to the customer until they are installed, integrated and tested at the customer’s site by the Company in accordance with the performance specifications specific to each customer. In addition, under these multiple-element contracts, the Company has not sold the equipment and software licenses separately from the installation, integration and testing services, and hence there is no objective and reliable evidence of the fair value for each deliverable included in the arrangement. As a result, the equipment and the technical services for installation, integration and testing of the equipment are considered a single unit of accounting pursuant to ASC Subtopic 605-25, Revenue Recognition — Multiple-Element Arrangements. In addition, the arrangement generally includes customer acceptance criteria that cannot be tested before installation and integration at the customer’s site. Accordingly, revenue recognition is deferred until customer acceptance, indicated by an acceptance certificate signed off by the customer.
Revenues of maintenance services are recognized when the services are performed in accordance with the contract term.
Revenues of sale of software, if not bundled with other arrangements, are recognized when shipped and customer acceptance obtained, if all other revenue recognition criteria are met. Costs associated with revenues are recognized when incurred.
Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the nine months period ended September 30, 2021 and 2020.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| US$ | US$ | US$ | US$ | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| NET REVENUES | ||||||||||||||||
| Service income | ||||||||||||||||
| - systems development and integration | ||||||||||||||||
| - systems maintenance | ||||||||||||||||
| - sales of hardware and consumables | ||||||||||||||||
Billings in excess of revenues recognized are recorded as deferred revenue.
| 14 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| n) | Income taxes |
The Company accounts for income taxes in accordance with the accounting standard issued by the Financial Accounting Standard Board (“FASB”) for income taxes. Under the asset and liability method as required by this accounting standard, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The charge for taxation is based on the results for the reporting period 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. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.
Under the accounting standard regarding accounting for uncertainty in income taxes, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.
| o) | Operating leases |
Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases are charged to the statements of income on a straight-line basis over the lease periods.
| p) | Advertising costs |
The Company expenses the cost of advertising as incurred in the period in which the advertisements and marketing activities are first run or over the life of the endorsement contract. Advertising and marketing expense for the nine months ended September 30, 2021 and 2020 were insignificant.
| q) | Shipping and handling |
Shipping and handling cost incurred to ship computer products to customers are included in selling expenses. Shipping and handling expenses for the nine months ended September 30, 2021 and 2020 were insignificant.
| r) | Research and development costs |
Research and development costs are expensed as incurred and are included in general and administrative expenses. Research and development costs for the nine months ended September 30, 2021 and 2020 were insignificant.
| 15 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| s) | Foreign currency translation |
The functional currency and reporting currency of the Company is the U.S. Dollar. (“US$” or “$”). The functional currency of the Hong Kong subsidiaries is the Hong Kong Dollar. The functional currency of the PRC subsidiary is RMB. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the exchange rate as quoted by the Hong Kong Monetary Authority (“HKMA”) at the end of the period. Capital accounts are translated at their historical exchange rates when the capital transaction occurred. 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.
| Quarter ended | September 30, 2021 | September 30, 2020 | ||
| RMB : USD exchange rate | ||||
| three months average period ended | ||||
| HKD : USD exchange rate | ||||
| three months average period ended | ||||
| PESO : USD exchange rate | ||||
| three months average period ended | ||||
| Quarter ended | September 30, 2021 | September 30, 2020 | ||
| RMB : USD exchange rate | ||||
| nine months average period ended | ||||
| HKD : USD exchange rate | ||||
| nine months average period ended | ||||
| PESO : USD exchange rate | ||||
| nine months average period ended | ||||
| Quarter ended | September 30, 2021 | December 31, 2020 | ||
| RMB : USD exchange rate | ||||
| HKD : USD exchange rate | ||||
| PESO : USD exchange rate | ||||
| t) | Stock-based Compensation |
The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
| u) | Commitments and contingencies |
The Company follows FASB ASC Subtopic 450-20, “Loss Contingencies” in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.
| 16 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| v) | Segment Reporting |
The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operating results solely by monthly revenue from software development and maintenance services (but not by sub-services/product type or geographic area) and operating results of the Company and, as such, the Company has determined that the Company has one operating segment as defined by ASC Topic 280 “Segment Reporting”.
| w) | Recent accounting pronouncements |
In June 2016, FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective on January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a group is required to recognize an allowance based on its estimate of expected credit loss. We are currently evaluating the impact of this new guidance on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company currently intends to adopt this guidance for the fiscal year beginning January 1, 2020, and does not anticipate that the adoption of this guidance will have a material impact on its financial statements or disclosures because the Company does not currently have any recorded goodwill.
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In January 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
| 17 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 3. | Accounts receivable |
Accounts receivable consisted of the following as of September 30, 2021 and December 31, 2020:
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | ||||||||
| Accounts receivable | ||||||||
| Allowance for doubtful accounts | ( | ) | ||||||
| 636,392 | 599,436 | |||||||
All of the Company’s customers are located in the PRC, Hong Kong and Manila, Philippines. The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information.
| 4. | Other receivables and prepayments |
Other receivables and prepayments consisted of the following as of September 30, 2021 and December 31, 2020:
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | ||||||||
| Deposits and prepaid expense | ||||||||
| Others | ||||||||
| 343,951 | 414,342 | |||||||
| 5. | Inventories |
Inventories as of September 30, 2021 and December 31, 2020 consisted of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | ||||||||
| Finished goods | ||||||||
| 18 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 6. | Plant and equipment, net |
Plant and equipment consisted of the following as of September 30, 2021 and December 31, 2020:
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | ||||||||
| Leasehold improvements | ||||||||
| Office furniture and equipment | ||||||||
| Computer equipment | ||||||||
| Computer software | ||||||||
| Motor Vehicle | ||||||||
| Building | ||||||||
| Total | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Plant and equipment, net | ||||||||
Depreciation expense for the nine months
period ended September 30, 2021 and 2020 amounted to $
| 7. | Goodwill |
Goodwill consisted of the following as of September 30, 2021 and December 31, 2020:
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | ||||||||
| Goodwill arising from acquisition of TSI | ||||||||
| 8. | Leases |
Schedule of operating lease right of use assets
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| 19 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of lease liabilities are as follows:
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | ||||||||
| Lease liabilities, current | ||||||||
| Lease liabilities, non-current | ||||||||
| Present value of lease liabilities | ||||||||
Total lease cost for the nine months
period ended September 30, 2021 and 2020 amounted to $
The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2021:
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | ||||||||
| Year one | ||||||||
| Year two | ||||||||
| Year three | ||||||||
| Year four | - | - | ||||||
| Thereafter | - | - | ||||||
| Total undiscounted cash flows | ||||||||
| Less: Imputed interest | ( | ) | ( | ) | ||||
| Present value of lease liabilities | ||||||||
| 20 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 9. | Bank loan |
Bank loan and accruals consisted of the following as of September 30, 2021 and December 31, 2020:
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | ||||||||
| Long term bank loan | ||||||||
| Less: Current portion of long term bank loan | ( | ) | ( | ) | ||||
| Current portion of long term bank loan | ||||||||
As of September 30, 2021 and December
31, 2020, the above
| 10. | Other payables and accrued liabilities |
Other payables and accruals consisted of the following as of September 30, 2021 and December 31, 2020:
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | ||||||||
| Accrual | ||||||||
| Income taxes payable | ||||||||
| 756,601 | 831,817 | |||||||
Accrual mainly represents salary payables and fringe and social security accruals. According to the prevailing laws and regulations of the PRC, all eligible employees of the Company’s subsidiaries are entitled to staff welfare benefits including medical care, welfare subsidies, unemployment insurance and pension benefits through a PRC government-mandated multi-employer defined contribution plan. The Company’s subsidiaries are required to accrue for these benefits based on certain percentages of the qualified employees’ salaries. The Company’s subsidiary is required to make contributions to the plans out of the amounts accrued.
The Company’s subsidiaries incorporated
in Hong Kong manage a defined contribution Mandatory Provident Fund (the “MPF Scheme”) under the Mandatory Provident Fund
Schemes Ordinance, for all of its employees in Hong Kong. The Company is required to contribute
| 21 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 11. | Deferred income |
Deferred income consisted of the following as of September 30, 2021 and December 31, 2020:
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | ||||||||
| Service fees received in advance | ||||||||
| 12. | Statutory reserves |
Statutory reserves
The laws and regulations of the PRC require that before an enterprise distributes profits to its owners, it must first satisfy all tax liabilities, provide for losses in previous years, and make allocations in proportions determined at the discretion of the Board of Directors after the statutory reserves.
As stipulated by the Company Law of the PRC, as applicable to Chinese companies with foreign ownership, net income after taxation can only be distributed as dividends after appropriation has been made for the following:
| 1. | Making up cumulative prior years’ losses, if any; |
| 2. | Allocations to the “Statutory surplus reserve” of at least
10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to |
| 3. | Allocations to the discretionary surplus reserve, if approved in the shareholders’ general meeting. |
The statutory reserve fund is non-distributable
other than during liquidation and can be used to fund previous years’ losses, if any. It may be utilized for business expansion
or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the
par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than
| 22 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 13. | Related party and shareholder transactions |
Other than disclosed elsewhere in these financial statements, the Company also had the following related party balances and transactions:
Related party balances
| September 30, 2021 | December 31, 2020 | |||||||
| US$ | US$ | |||||||
| (unaudited) | ||||||||
| Due from related parties | ||||||||
| Value Exchange International Limited (i) | ||||||||
| Cucumbuy.com Limited (ii) | ||||||||
| SmartMyWays Co., Limited (iii) | ||||||||
| Retail Intelligent Unit Limited (iv) | ||||||||
| AppMyWays Co., Limited (v) | ||||||||
| Due to related parties | ||||||||
| TAP Technology (HK) Limited (vi) | ||||||||
| AppMyWays Co., Limited (v) | ||||||||
| Mr. Johan Pehrson (vii) | ||||||||
Related party transactions
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| US$ | US$ | US$ | US$ | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| Service income received from | ||||||||||||||||
| Value Exchange International Limited (i) | ||||||||||||||||
| Value E Consultant International (M) Sdn. Bhd (viii) | ||||||||||||||||
| TAP Technology (HK) Limited (vi) | ||||||||||||||||
| SmartMyWays Co., Limited (iii) | ||||||||||||||||
| ValueX International Pte. Ltd. (ix) | ||||||||||||||||
| AppMyWays Co., Limited (v) | ||||||||||||||||
| Subcontracting fees payable to | ||||||||||||||||
| Value Exchange International Limited (i) | ( | ) | ( | ) | ||||||||||||
| Value E Consultant International (M) Sdn. Bhd (viii) | ( | ) | ( | ) | ( | ) | ||||||||||
| TAP Technology (HK) Limited (vi) | ( | ) | ( | ) | ||||||||||||
| AppMyWays Co., Limited (v) | ( | ) | ( | ) | ||||||||||||
| 23 |
VALUE EXCHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 13. | Related party and shareholder transactions (Continued) |
| Management fees received from | ||||||||||||||||
| Value Exchange International Limited (i) | ||||||||||||||||
| TAP Technology (HK) Limited (vi) | ||||||||||||||||
| SmartMyWays Co., Limited (iii) | ||||||||||||||||
| Cucumbuy.com Limited (ii) | ||||||||||||||||
| Retail Intelligent Unit Limited (iv) | ||||||||||||||||
| (i) |
| (ii) |
| (iii) |
| (iv) |
| (v) |
| (vi) |
| (vii) |
| (viii) |
| (ix) |
| 24 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This report contains “forward-looking statements”. These forward-looking statements include, without limitation, statements containing the words “believes,” “anticipates,” “expects,” “intends,” “projects,” “will,” “should,” “may,” “hopes” and other words of similar import or the negative of those terms or expressions. Forward-looking statements in this report also include expectations of future levels of business development and related spending, general and administrative spending, levels of capital expenditures and operating results, sufficiency of our capital resources, our intention to pursue and consummate strategic opportunities available to us and effects as well as our ability to fund, and integrate and grow acquired business lines. Forward-looking statements are subject to certain known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to those described in “Risk Factors” contained in the Company’s reports filed with the SEC, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and subsequent filings with the SEC.
Certain Terms
Except as otherwise indicated by the context, references in this report to:
| · | “Company,” “we,” “us” and “our” are to the combined business of Value Exchange International, Inc., a Nevada corporation, and its consolidated subsidiaries; |
| · | “China,” “Chinese” and “PRC,” refer to the People’s Republic of China; |
| · | “Renminbi” and “RMB” refer to the legal currency of China; |
| · | “U.S. dollars,” “dollars” and “$” refer to the legal currency of the United States; |
| · | “SEC” or “Commission” refers to the United States Securities and Exchange Commission; |
| · | “Securities Act” refers to the Securities Act of 1933, as amended; and |
| · | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended. |
CORPORATE OVERVIEW
History of Value Exchange International, Inc.
Organization. We were incorporated in the State of Nevada on June 26, 2007 under the name “China Soaring Inc.” We changed the Company's name to “Sino Payments, Inc.” on November 26, 2008 and then further changed to the current name as “Value Exchange International, Inc.” in October 2016. Our Common Stock’s trading symbol changed at the same time from “SNPY” to “VEII.”.
Current Business Focus. We are a provider of customer-centric solutions for the retail industry in China, Hong Kong SAR and Philippines. We intend to seek expansion of that territory to other parts of Southeast Asia. By integrating market-leading Point-of-Sale/Point-of-Interaction (“POS/POI”), Merchandising, Customer Relations Management or “CRM” and related rewards, Locational Based (Global Positioning System (“GPS”) and Indoor Positioning System (“IPS”)) Marketing, Customer Analytics, Business Intelligence solutions, our products and services are intended to provide retailers with provide retailers with the capability to offer a consistent shopping experience across all channels, enabling them to easily and effectively manage the customer lifecycle on a one-to-one basis. We promote ourselves as a single information technology (“IT”) source for retailers who wanted to extend existing traditional transaction processing to multiple points of interaction, including the Internet, kiosks and wireless devices. Our products and services are focused on helping retailers realize the full benefits of Customer Chain Management with its suite of solutions that focus on the customer, on employees, and the infrastructure that supports the selling channel. Our retail solutions are installed in an estimated 30%-40% of POS/POI-suitable retailers in Hong Kong and Manila, Philippines, processing tens of millions of transactions a year. Company is headquartered in Hong Kong and with offices in Shenzhen, Guangzhou, Shanghai, Beijing, China; Manila, Manila, Philippines; and Kuala Lumpur, Malaysia. The foregoing is referred to as “IT Business”, which is our core business.
| 25 |
A standard element of the strategic plan is to expand the business into new markets in Southeast Asia. A lack of adequate working capital and outside funding has, in part, prevented the Company from implementing this expansion plan. The Company still intends to explore from time to time the expansion of the business into new markets by acquisition or funding new operations in new markets. As such, we intend to seek expansion of our current geographical markets to other parts of Southeast Asia by seeking new businesses and by possible acquisitions of existing businesses. Seeking new business and expanding our markets will require adequate and affordable funding or working capital and beating competition for the new business in those new markets. We may in the future, and we have historically been unable to, seek to obtain necessary funding for acquisitions or expansion of business in new markets. Acquisitions will require finding suitable acquisitions that will agree to terms and conditions acceptable to us and the successful integration of new businesses into our operations. We may be unable to win new business or acquire any new businesses and, consequently, we may be unable to expand our geographical markets. We have not expanded into any new markets by acquisition or otherwise during the fiscal year 2020 or in fiscal year 2021 to date and we may be unable to do so in 2021 or beyond due to funding constraints and lack of viable, available acquisitions as well as the common obstacles to penetration of new foreign markets.
The Company, through its operating subsidiaries, is focusing and will focus on its IT Business, and seek to expand, if and when possible, its IT Business services to commercial customers in PRC and Asia Pacific Region. This strategy is based upon our subjective business judgment that the IT Business presents more opportunities for potential customer order in our core markets of Hong Kong SAR and China than the “IP Business” (as defined below) and presents an industry segment that better suits our current technical capabilities, marketing capabilities and financial resources.
Initial Business Focus. Our initial intended, primary business was to operate a credit card processing and merchant-acquiring services company that provided credit card clearing services to merchants and financial institutions in PRC (“IP Business”). The IP Business was to be based on our concept of an electronic payment processing system known as “SinoPay GPP Platform”. The SinoPay GPP platform never became a viable revenue generating operation and we have focused on the IT Business since the 2014 acquisition of VEI CHN. As previously reported, efforts to develop and launch a new, updated e-payment platform in 2020 did not succeed due to lack of necessary funding and resulting cancellation of Company’s 51% equity stake in the venture. While the Company may seek to develop an electronic payment processing platform in the future, there can be no assurance that the Company will make that effort or develop a viable electronic payment processing platform in the future. The electronic payment processing industry is highly competitive and has major international companies as dominant competitors. Any effort to develop a future electronic payment processing would be subject to adequate funding, which funding may not be attainable by a small reporting company like the Company.
Smart Baggage Tag. Through a cooperative effort with another company, Company has the ability to market a smart baggage tag that allows consumers to track the location of their baggage through a smart phone or device using the smart baggage tag and related application. Efforts to promote the smart baggage tag were suspended in 2020 due to impact of COVID-19 pandemic on air travel. Company will re-evaluate promotion of the smart baggage tag to airports from time to time and when air travel returns to pre-COVID-19 pandemic levels, if ever. The prospects of the Smart Tag business as of the date of this Form 10-Q report are uncertain. The Company will have to determine if an expanded or sustained marketing effort for the Smart Tag is possible based on available resources and business priorities. The IT Business remains the focus of our business and funding.
Industry Trends and Economic Conditions.
The IT Business in Hong Kong and China is large and fragmented, comprised of thousands of competitors as well as being a highly competitive industry. A general trend affecting our IT Business is the trend of increasing competition for skilled labor. With a global economy and foreign competitors seeking to penetrate Hong Kong and China as markets as well as to tap into new pools of skilled workers in IT Business, we will undoubtedly face increasing competition for skilled workers in IT Business in the Hong Kong and China markets. We may be unable to afford or effectively compete for necessary skilled workers in Hong Kong, Philippines and China and, if we are unable to afford or effectively compete for necessary skilled workers, our growth and ability to attain and sustain profit operations in the IT Business may fail. We have not experienced any significant problems in recruiting necessary skilled workers in fiscal years 2020 or 2021 to date.
| 26 |
A common problem in the IT Business is retaining skilled workers throughout the duration of a project. Due to the global nature of the IT Business and the growing demand for skilled IT Business workers, a skilled IT business worker can often readily find higher paying positions with competitors, whether local or foreign. While we have not experienced retention problems due primarily to our focus on smaller, shorter term IT business projects, we may experience retention of skilled worker problems if we grow our IT Business and undertake longer term, more complex IT business projects for customers.
IT Business is often affected by general economic conditions in our markets and any decline in those conditions could adversely impact our business and financial performance. During periods of economic growth, customers general spend more for IT Business products and services. During periods of economic contraction or uncertainty, such spending generally decreases or is deferred. As such, the prospective business for our IT Business is generally greater during periods of economic growth or stability in Hong Kong or China or Manila, Philippines, respectively, and decreases during periods of economic decline or uncertainty in Hong Kong, China or Manila, Philippines. In our global economy, and with PRC being still a principal export economy, adverse economic conditions globally or in other regions can adversely impact economic conditions in Hong Kong, Philippines or China. China has experienced a less dynamic growth in gross national product in the past year and this may reduce the willingness of customers to spend on IT Business or IP Business.
The IT Business is global and, with the growth of cloud computing, there is a growing capability and infrastructure for companies in a foreign nation to provide IT Business to customers around the globe as a complement to cloud computing. We have not seen any significant impact of cloud computing on our IT Business in fiscal years 2019 or fiscal year 2020 to date, but we perceive that the expansion of cloud computing coupled with IT services and products could allow foreign companies to provide IT Business products and services to its cloud computing customers in our Hong Kong and China core markets as well as in the Philippines. We may find it more difficult to compete for IT Business in Hong Kong and China, and perhaps the Philippines, if customers of IT Business elect to have cloud computing companies manage, repair and enhance IT Business products, software and systems. The growth of cloud computing coupled with IT Business products and services as an ancillary component of the cloud computing menu of products and services could adversely impact our IT Business in Hong Kong and China markets as well as the Philippines.
The nature of our IT Business is such that our most significant current asset is accounts receivable. Our most significant current liabilities are payroll related costs, which are generally paid either every two weeks or monthly. If the demand for our IT Business products and services increases, we may generally see an increase in our working capital needs, as we continue to pay our workers on a weekly or monthly basis while the related accounts receivable are outstanding for much longer than normal payment cycle, which may result in a decline in operating cash flows. Conversely, as the demand for our IT Business products and services declines, we may generally see a decrease in our working capital needs, as the existing accounts receivable are collected and not replaced at the same level, resulting in a decline of our accounts receivable balance, with less of an effect on current liabilities due to the shorter cycle time of the payroll related items. This may result in an increase in our operating cash flows; however, any such increase would not be sustainable in the event that a local or global economic downturn continued for an extended period.
In order for us to attain sustained success in the near term, we must continue to maintain and grow our customer base, provide high-quality service and satisfy our existing clients, and take advantage of cross-selling opportunities between the IT Business and IP Business. In the current economic environment, we must provide our customers with service offerings that are appropriately priced, satisfy their needs, and provide them with measurable business benefits. While we have recently experienced more demand for our IT Business products and services, we believe that it is too early to determine if developments will translate into sustainable improvements in our pricing or margins in fiscal year 2021 or over the longer term.
| 27 |
The increasing need for cybersecurity products and technologies may be a future weakness of our business plan. We do not have a current cybersecurity product and service line beyond consultants engaged to provide cybersecurity services to customers and we have not current plans to develop a cybersecurity business line. Cybersecurity companies may have an advantage over our business model in the future in that cybersecurity companies could leverage their cybersecurity offerings to also sell IT Business services and products that compete with our IT Business products and services.
A common competitive threat to any IT companies is the emergence of new technologies or related services in demand by customers and the inability of IT companies to access or afford those new technologies and perform the related services. Technological innovations pose a significant potential competitive threat to smaller companies like the Company. Another common threat to small IT companies is larger IT companies engaging in predatory pricing or marketing to eliminate competition for certain customers or markets. Smaller IT companies cannot generally afford to engage in pricing competition with larger competitors.
We also face a possible competitive threat from Cloud computing services, which we do not provide to customers (except through third party providers). Cloud computing services can and do offer additional services to customers, which services can include the same IT Business services as our company. Cloud computing companies could leverage their relationship with customers to persuade them to use the Cloud computing service for IT Business needs. This leverage could pose a competitive threat to our IT Business. We lack the current financial and technical resources to compete in the Cloud computing business.
COVID 19 Pandemic. Since the beginning of 2020, the worldwide spread of the novel coronavirus (“COVID 19”) has been rapid and unprecedented. On March 11, 2020, the World Health Organization declared COVID 19 a global pandemic. Efforts to control the spread of COVID 19 have led governments and other authorities to impose restrictions which have resulted in business closures and disrupted global supply chains. In addition to reductions in business levels, the altered marketplace environment has negatively impacted our freight mix and shipment profile. The extent of the long term adverse effect of the COVID-19 pandemic on our business results is unknown and depends on future developments, including the severity and duration of the pandemic.
COVID 19 pandemic affected our primary operations in Hong Kong SAR, China and Manila, Philippines in first fiscal quarter of 2020 by forcing limited business travel, remote work arrangements by personnel, customers suspending or reducing operations and use of third-party services and suspension or cancellations of normal business activities by us and customers. While there has been a degree of easing restrictions on businesses in our main markets, there are still restrictions on our and customers’ business activities and restrictions on travel. Further, the COVID 19 pandemic may have a second wave of infections in the summer or fall of 2021, especially from new variants like the Delta variant of COVID 19, which would probably impose a continuation or increase in restrictions of business, marketing and business development activities. The full impact of COVID 19 pandemic and new variants of COVID 19 on our business may not be fully understood until the end of fiscal year or later due to the risk of new variants of COVID 19 emerging that is vaccine resistant and, as such, capable of significant disruption of the economies in our primary markets.
COVID 19 pandemic and variants of COVID 19, especially Delta variant, may make funding of new and existing business from third party sources more difficult or impossible for the Company due to demand for funding in 2020 and 2021 as well as the financial condition of the Company and its lack of hard assets for collateral. There is uncertainty as to the full impact of Delta variant of COVID 19 on economies in our markets in the future, especially when the full impact of Delta variant of COVID 19 on vaccinated persons and the possible emergence and then impact of future variants of COVID 19 is uncertain as of the date of the filing of this Form 10-Q report.
Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020. Company has not sought and does not intend to seek any assistance under the CARES Act as of the date of this Form 10-Q report. Our operations and personnel are not based in the U.S.
| 28 |
History of Value Exchange Int’l (China) Limited
VEI CHN was first established on November 16, 2001 in Hong Kong SAR with limited liability under the name of “Triversity Hong Kong Limited” and subsequently changed its name to “Triversity (Asia Pacific) Limited” on April 24, 2002 and then further changed its name to “TAP Investments Group Limited” on November 16, 2007. TAP Investments Group Limited changed to its current name as “Value Exchange Int’l (China) Limited” on May 13, 2013.
VEI CHN is an investment holding company with two subsidiaries established in Hong Kong SAR, namely TAP Services (HK) Limited which was incorporated on August 25, 2003 and acquired by VEI CHN on September 25, 2008, and subsequently changed to its current name as Value Exchange Int’l (Hong Kong) Limited (“VEI HKG”) on May 13, 2013. VEI CHN set up a wholly-owned Foreign Enterprise (WOFE) in Shanghai, PRC, in September 2, 2008 in the name of Value Exchange Int’l (Shanghai) Limited (“VEI SHG”). In January 2019, VEI SHG set up a 51% subsidiary in Hunan, PRC, in the name of Value Exchange Int’l (Hunan) Limited (“VEI HN”). In February 2020, VEI SHG set up a 51% subsidiary in Shanghai, PRC, in the name of Shanghai Zhaonan Hengan Information Technology Co., Limited (“SZH”).
Principal business
Company’s primary operating subsidiary is VEI CHN. The principal business of VEI CHN for more than 15 years is to provide the Information Technology Services and Solutions (consisting of select services and solutions in computer software programming and integration, and computer systems, Internet and information technology systems engineering, consulting, administration and maintenance, including e-commerce and payment processing) to the Retail Sector, primarily to leading retailers in Hong Kong SAR, Macau SAR and PRC and as more fully described below. As is customary in the industry, such services and solutions are provided by both company employees, contractors and consultants. The primary services and products of the IT Business are:
| a) | Systems maintenance and related service |
VEI CHN Group provides development, customization of software and hardware, enhancements thereto and maintenance services for installed POS system. VEI CHN Group markets, sells and maintains its own brand POS software – edgePOS as well as third party brands (e.g. NCR / Retalix), which is one of the leading POS software programs in the market. These software enhancements and programming can integrate with different IP systems.
Systems maintenance services consist of: i) software maintenance service, including software patches and software code revisions; ii) installing, testing and implementing software; iii) training of customer personnel for the use of software; and iv) technical support for software systems.
Other services include system installation and implementation, including i) project planning; ii) analysis of customer information and business needs from a IT perspective (“System Analysis”); iii) design of the entire system; iv) hardware and consumables selection advice and sales; and v) system hardware maintenance. These services typically consist of customer projects for New Store Opening (“NSO”) and Install, Move, Add and Change (“IMAC”) for retail, and ad-hoc custom system projects for other business sectors. Our primary focus is the retail sector in Hong Kong SAR, PRC and Manila, Philippines.
| b) | Systems development and integration |
VEI CHN Group provides value-added software, which integrates with customer owned or licensed software, and ad-hoc software development projects for other business sectors. Besides use of proprietary, custom software code, VEI CHN services may from time to time license standard third party software programs.
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Financial Performance Highlights
The following are some financial highlights for the third quarter of 2021:
| · | Net revenue: Our net revenues were $7,478,537 for the nine months ended September 30, 2021, as compared to $17,077,710 for the same period in 2020, a decrease of $9,599,173 or 56.2%. We are seeking to focus on higher profit margin work, which may result in lower gross and net revenues. We may be unable to be selective about customer projects in terms of profit margin criteria. |
| · | Gross profit: Gross profit for the nine months ended September 30, 2021 was $1,968,641 or 26.3% of net revenues, as compared to $1,363,060 or 8.0% of net revenues for the same period in 2020, an increase of $605,581 or 44.4%. |
| · | Profit from operations: Our profit from operations totaled $384,038 for the nine months ended September 30, 2021, as compared $47,007 for the same period in 2020, an increase of $337,031 or 717.0%. |
| · | Net income: We had a net income of $576,654 for the nine months ended September 30, 2021, compared to $305,169 for the same period in 2020, an increase of $271,485 or 89.0%. |
| · | Basic and diluted net income per share was $0.02 for the nine months ended September 30, 2021. |
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RESULTS OF OPERATIONS
Comparison of Three Months Ended September 30, 2021 and 2020
The following tables set forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of net revenues.
(All amounts, other than percentages, in U.S. dollars)
| Three Months Ended September 30, 2021 | Three Months Ended September 30, 2020 | |||||||||||||||
| US$ | As a percentage of revenues | US$ | As a percentage of revenues | |||||||||||||
| NET REVENUES | ||||||||||||||||
| Service income | 2,884,770 | 100 | % | 4,641,036 | 100 | % | ||||||||||
| COST OF SERVICES | ||||||||||||||||
| Cost of service income | (2,224,718 | ) | (77.1 | %) | (4,005,748 | ) | (86.3 | %) | ||||||||
| GROSS PROFIT | 660,052 | 22.9 | % | 635,288 | 13.7 | % | ||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | (483,767 | ) | (16.8 | %) | (437,258 | ) | (9.4 | %) | ||||||||
| Foreign exchange gain (loss) | 7,516 | 0.3 | % | (24,030 | ) | (0.5 | %) | |||||||||
| PROFIT FROM OPERATIONS | 183,801 | 6.4 | % | 174,000 | 3.7 | % | ||||||||||
| OTHER INCOME (EXPENSES) | 67,291 | 2.3 | % | 76,187 | 1.6 | % | ||||||||||
| INCOME BEFORE | ||||||||||||||||
| PROVISION FOR INCOME TAXES | 251,092 | 8.7 | % | 250,187 | 5.4 | % | ||||||||||
| INCOME TAXES EXPENSES | (162 | ) | 0.0 | % | (1,738 | ) | 0.0 | % | ||||||||
| NET INCOME | 250,930 | 8.7 | % | 248,449 | 5.4 | % | ||||||||||
Net revenues. Net revenues were $2,884,770 for the three months ended September 30, 2021, as compared to $4,641,036 for the same period in 2020, a decrease of $1,756,266 or 37.8%. This decrease was primarily attributable to the decrease in our revenue from i) sales of systems maintenance with revenues decreasing from $2,128,324 for the three months ended September 30, 2020 to $2,065,894 for the three months ended September 30, 2021; ii) sales of systems development and integration with revenue decreasing from $2,260,182 for the three months ended September 30, 2020 to $56,314 for the three months ended September 30, 2021; offset by iii) sales of hardware and consumables with revenues increasing from $252,530 for the three months ended September 30, 2020 to $ 762,562 for the three months ended September 30, 2021.
Cost of services. Our cost of services is primarily comprised of our costs of technical staff, contracting fees to suppliers and general operating overhead. Our cost of services decreased to $2,224,718 or 77.1% of net revenues, for the three months ended September 30, 2021, as compared to $4,005,748 or 86.3% of net revenues, for the same period in 2020, a decrease of $1,781,030 or 44.5%. The decrease in cost of services was mainly attributable to the decrease in contracting fees to suppliers and general operating overhead.
Gross profit. Gross profit for the three months ended September 30, 2021 was $660,052 or 22.9% of net revenues, as compared to $635,288 or 13.7% of net revenues, for the same period in 2020, an increase of $24,764 or 3.9%. The increase of gross profit was largely due to the decrease in cost of services, offset by the decrease in net revenues in this period, as compared with the same period of 2020.
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General and administrative expenses. General and administrative expenses include the costs associated with staff and support personnel who manage our business activities, office rental expenses, depreciation charge for fixed assets, and professional fees paid to third parties. General and administrative expenses increased to $483,767 or 16.8% of net revenues, for the three months ended September 30, 2021, as compared to $437,258 or 9.4% of net revenues, for the same period in 2020, an increase of $46,509 or 10.6%. The reasons for the increase was attributable to the increase in staff cost, and other administrative cost.
Profit from operations. As a result of the above, our profit from operations totaled $183,801 for the three months ended September 30, 2021, as compared to $174,000 for the same period in 2020, an increase of $9,801 or 5.6%.
Income taxes expenses. Income taxes expenses totaled $162 during the three months ended September 30, 2021, as compared to $1,738 for the same period in 2020, a decrease of $1,576 or 90.7%.
Net income. As a result of the foregoing, we had a net income of $250,930 for the three months ended September 30, 2021, compared to 248,449 for the same period in 2020, an increase of $2,481 or 1.0%, as a result of the factors described above.
Comparison of Nine Months Ended September 30, 2021 and 2020
The following tables set forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of net revenues.
(All amounts, other than percentages, in U.S. dollars)
| Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | |||||||||||||||
| US$ | As a percentage of revenues | US$ | As a percentage of revenues | |||||||||||||
| NET REVENUES | ||||||||||||||||
| Service income | 7,478,537 | 100 | % | 17,077,710 | 100 | % | ||||||||||
| COST OF SERVICES | ||||||||||||||||
| Cost of service income | (5,509,896 | ) | (73.7 | %) | (15,714,650 | ) | (92.0 | %) | ||||||||
| GROSS PROFIT | 1,968,641 | 26.3 | % | 1,363,060 | 8.0 | % | ||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | (1,578,541 | ) | (21.1 | %) | (1,295,399 | ) | (7.6 | %) | ||||||||
| Foreign exchange loss | (6,062 | ) | (0.1 | %) | (20,654 | ) | (0.1 | %) | ||||||||
| PROFIT FROM OPERATIONS | 384,038 | (21.2 | %) | 47,007 | (7.7 | %) | ||||||||||
| OTHER INCOME (EXPENSES) | 199,139 | 2.7 | % | 253,762 | 1.5 | % | ||||||||||
| INCOME BEFORE PROVISION | ||||||||||||||||
| FOR INCOME TAXES | 583,177 | 7.8 | % | 300,769 | 1.8 | % | ||||||||||
| INCOME TAXES (EXPENSES) | ||||||||||||||||
| CREDIT | (6,523 | ) | (0.1 | %) | 4,400 | 0.0 | % | |||||||||
| NET INCOME | 576,654 | 7.7 | % | 305,169 | 1.8 | % | ||||||||||
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Net revenues. Net revenues were $7,478,537 for the nine months ended September 30, 2021, as compared to $17,077,710 for the same period in 2020, a decrease of $9,599,173 or 56.2%. This decrease was primarily attributable to the increase in our revenues from i) sales of systems maintenance with revenues increasing from $5,505,283 for the nine months ended September 30, 2020 to $5,573,268 for the nine months ended September 30, 2021; ii) sales of hardware and consumables with revenues increasing from $926,162 for the nine months ended September 30, 2020 to $1,688,817 for the nine months ended September 30, 2021; offset by iii) sales of systems development and integration with revenue decreasing from $10,646,265 for the nine months ended September 30, 2020 to $216,452 for the nine months ended September 30, 2021.
Cost of services. Our cost of services is primarily comprised of our costs of technical staff, contracting fees to suppliers and overhead. Our cost of services decreased to $5,509,896 or 73.7% of net revenues, for the nine months ended September 30, 2021, as compared to $15,714,650 or 92.0% of net revenues, for the same period in 2020, a decrease of $10,204,754 or 64.9%. The decrease in cost of services was mainly attributable to the decrease in contracting fees to suppliers and general operating overhead.
Gross profit. Gross profit for the nine months ended September 30, 2021 was $1,968,641 or 26.3% of net revenues, as compared to $1,363,060 or 8.0% of net revenues, for the same period in 2020, an increase of $605,581 or 44.4%. The increase of gross profit was largely due to the decrease in cost of services, offset by the decrease in net revenues in this period, as compared with the same period of 2020.
General and administrative expenses. General and administrative expenses include the costs associated with staff and support personnel who manage our business activities, office rental expenses, depreciation charge for fixed assets, and professional fees paid to third parties. General and administrative expenses increased to $1,578,541 or 21.1% of net revenues, for the nine months ended September 30, 2021, as compared to $1,295,399 or 7.6% of net revenues, for the same period in 2020, an increase of $283,142 or 21.9%. The primary reason for the increase was attributable to the increase in staff cost, and other administrative cost.
Profit from operations. As a result of the above, our profit from operations totaled $384,038 for the nine months ended September 30, 2021, as compared to $47,007 for the same period in 2020, an increase of $337,031 or 717.0%.
Income tax (expenses) credit. Income taxes expenses totaled $6,523 during the nine months ended September 30, 2021, as compared to income taxes credit totaled $4,400 for the same period in 2020, a change of $10,923.
Net income. As a result of the foregoing, we had a net income of $576,654 for the nine months ended September 30, 2021, compared to $305,169 for the same period in 2020, an increase of $271,485 or 89.0%, as a result of the factors described above.
Liquidity and Capital Resources
As of September 30, 2021, we had cash and cash equivalents of $370,769. The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.
Cash Flows
(All amounts in U.S. dollars)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| US$ | US$ | |||||||
| Net cash (used in) provided by operating activities | (207,283 | ) | 909,047 | |||||
| Net cash used in investing activities | (30,288 | ) | (139,179 | ) | ||||
| Net cash provided by (used in) financing activities | 237,731 | (218,730 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents | (152,728 | ) | 23,441 | |||||
| Net (decrease) increase in cash and cash equivalents | (152,568 | ) | 574,579 | |||||
| Cash and cash equivalents at the beginning of period | 523,337 | 234,089 | ||||||
| Cash and cash equivalents at the end of period | 370,769 | 808,668 | ||||||
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Operating Activities
Net cash used in operating activities was $207,283 for the nine months ended September 30, 2021, which was a change of $1,116,330 from net cash provided by operating activities $909,047 for the same period of 2020. The change in net cash (used in) provided by operating activities was mainly attributable to the following:
| 1) | A change of Other receivables, deposit and prepayments, and Amounts due from related parties increased our operating cash balances by $336,507, and $221,598 respectively; offset by; |
| 2) | Net income of $576,654 for the nine months ended September 30, 2021, compared to $305,169 for the same period in 2020; and |
| 3) | A change of Accounts payable, Other payables and accrued liabilities, Deferred income, and Amounts due from related parties decreased our operating cash balances by $876,707, $184,470, $667,179 and $203,533. |
Investing Activities
Net cash used in investing activities was $30,288 for the nine months ended September 30, 2021, which was a decrease of $108,891 or 78.2% from $139,179 in the same period in 2020. The decrease in net cash used in investing activities was attributable to cash used in the purchase of plant and equipment by $30,868; offset by interest received by $580, during the nine months ended September 30, 2021.
Financing Activities
Net cash provided by financing activities was $406,922 for the nine months ended September 30, 2021, which was a change of $625,652 from net cash used in financing activities $218,730 in the same period in 2020. The change in net cash provided by (used in) financing activities was attributable to the Proceeds from non-controlling interests by $18,600, and Issued share capitals by $650,000; offset by repayment of bank loan by $28,981, Dividend paid by $169,191, and Principal payments on finance leases by $232,697, during the nine months ended September 30, 2021.
Future Financings
We believe that our cash on hand and cash flow from operations will meet our expected capital expenditure and working capital requirements for the next 12 months. However, we may in the future require additional cash resources due to changes in business conditions, implementation of our strategy to expand our production capacity, sales, marketing and branding activities or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects. We would need to raise capital to fund any expansion of business into new markets.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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Critical Accounting Policies
Our consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that 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 periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in note 2 of the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
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”), and include the financial statements of the Company and all its subsidiaries that require consolidation. All material intercompany transactions and balances have been eliminated in the consolidation. The Company’s fiscal year end is December 31st. The following entities were consolidated as of September 30, 2021:
| Place of incorporation | Ownership percentage | |||
| Value Exchange International, Inc. | USA | Parent Company | ||
| Value Exchange Int’l (China) Limited | Hong Kong | 100% | ||
| Value Exchange Int’l (Shanghai) Limited | PRC | 100% | ||
| Value Exchange Int’l (Hong Kong) Limited | Hong Kong | 100% | ||
| TapServices, Inc. | Philippines | 100% | ||
| Value Exchange Int’l (Hunan) Limited | PRC | 51% | ||
|
Shanghai Zhaonan Hengan Information Technology Co., Ltd. |
PRC |
51% |
Use of Estimates
Preparing consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring using management’s estimates and assumptions relate to the collectability of its receivables, the fair value and accounting treatment of financial instruments, the valuation of long-lived assets and valuation of deferred tax liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates. In addition, different assumptions or circumstances could reasonably be expected to yield different results.
Plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Expenditures for maintenance and repairs are charged to earnings as incurred. Major additions are capitalized. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of plant and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:
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| Estimated Useful Life | ||
| Leasehold improvements |
Lesser of lease term or the estimated useful lives of 5 years | |
| Computer equipment | 5 years | |
| Computer software | 5 years | |
| Office furniture and equipment | 5 years | |
| Motor Vehicle | 3 years | |
| Building | 5 years |
Revenue recognition
Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured.
The Company’s revenue is derived from three primary sources: (i) professional services for systems development and integration, including procurement of related hardware and software licenses on behalf of customers, if required; (ii) professional services for system maintenance normally for a period of one year; and (iii) sale of hardware and consumables during the service performed as stated above.
Multiple-deliverable arrangements
The Company derives revenue from fixed-price sale contracts with customers that may provide for the Company to procure hardware and software licenses with varied performance specifications specific to each customer and provide the technical services for systems development and integration of the hardware and software licenses. In instances where the contract price is inclusive of the technical services, the sale contracts include multiple deliverables. A multiple-element arrangement is separated into more than one unit of accounting if all of the following criteria are met:
| – | The delivered item(s) has value to the customer on a stand-alone basis; |
| – | There is objective and reliable evidence of the fair value of the undelivered item(s); and |
| – | If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. |
The Company’s multiple-element contracts generally include customer-acceptance provisions which provide for the Company to carry out installation, test runs and performance tests at the Company’s cost until the systems as a whole can meet the performance specifications stated in the contracts. The delivered equipment and software licenses have no standalone value to the customer until they are installed, integrated and tested at the customer’s site by the Company in accordance with the performance specifications specific to each customer. In addition, under these multiple-element contracts, the Company has not sold the equipment and software licenses separately from the installation, integration and testing services, and hence there is no objective and reliable evidence of the fair value for each deliverable included in the arrangement. As a result, the equipment and the technical services for installation, integration and testing of the equipment are considered a single unit of accounting pursuant to ASC Subtopic 605-25, Revenue Recognition — Multiple-Element Arrangements. In addition, the arrangement generally includes customer acceptance criteria that cannot be tested before installation and integration at the customer’s site. Accordingly, revenue recognition is deferred until customer acceptance, indicated by an acceptance certificate signed off by the customer.
Revenues of maintenance services are recognized when the services are performed in accordance with the contract term.
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Revenues of sale of software, if not bundled with other arrangements, are recognized when shipped and customer acceptance obtained, if all other revenue recognition criteria are met. Costs associated with revenues are recognized when incurred.
Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the nine months period ended September 30, 2021 and 2020.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| US$ | US$ | US$ | US$ | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| NET REVENUES | ||||||||||||||||
| Service income | ||||||||||||||||
| - systems development and integration | 56,314 | 2,260,182 | 216,452 | 10,646,265 | ||||||||||||
| - systems maintenance | 2,065,894 | 2,128,324 | 5,573,268 | 5,505,283 | ||||||||||||
| - sales of hardware and consumables | 762,562 | 252,530 | 1,688,817 | 926,162 | ||||||||||||
| 2,884,770 | 4,641,036 | 7,478,537 | 17,077,710 | |||||||||||||
Billings in excess of revenues recognized are recorded as deferred revenue.
Income taxes
The Company accounts for income taxes in accordance with the accounting standard issued by the Financial Accounting Standard Board (“FASB”) for income taxes. Under the asset and liability method as required by this accounting standard, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The charge for taxation is based on the results for the reporting period 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. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.
Under the accounting standard regarding accounting for uncertainty in income taxes, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.
Foreign currency translation
The functional currency and reporting currency of the Company is the U.S. Dollar. (“US$” or “$”). The functional currency of the Hong Kong subsidiaries is the Hong Kong Dollar. The functional currency of the PRC subsidiary is RMB. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the exchange rate as quoted by the Hong Kong Monetary Authority (“HKMA”) at the end of the period. Capital accounts are translated at their historical exchange rates when the capital transaction occurred. 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.
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| Quarter ended | September 30, 2021 | September 30, 2020 | ||
| RMB : USD exchange rate | 6.4874 | 6.9599 | ||
| three months average period ended | ||||
| HKD : USD exchange rate | 7.800 | 7.800 | ||
| three months average period ended | ||||
| PESO : USD exchange rate | 49.5606 | 50.1608 | ||
| three months average period ended | ||||
| Quarter ended | September 30, 2021 | September 30, 2020 | ||
| RMB : USD exchange rate | 6.4949 | 7.0351 | ||
| nine months average period ended | ||||
| HKD : USD exchange rate | 7.800 | 7.800 | ||
| nine months average period ended | ||||
| PESO : USD exchange rate | 48.3135 | 50.2129 | ||
| nine months average period ended | ||||
| Quarter ended | September 30, 2021 | December 31, 2020 | ||
| RMB : USD exchange rate | 6.4784 | 6.8590 | ||
| HKD : USD exchange rate | 7.800 | 7.800 | ||
| PESO : USD exchange rate | 50.4854 | 50.1608 | ||
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
Item 4. Controls and Procedures
The management of the Company, under the supervision and with the participation of the President (principal executive officer) and Chief Financial Officer (principal financial officer), evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act as of September 30, 2021. Based on such evaluations, the President and Chief Financial Officer concluded that as of September 30, 2021, the disclosure controls and procedures of the Company were effective at a reasonable assurance level in (1) recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and (2) ensuring that information required to be disclosed by the Company in such reports is accumulated and communicated to management, including the President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in the internal control over financial reporting of the Company during the third quarter of 2021 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
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Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design
of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply
judgment in evaluating the benefits of possible controls and procedures relative to their costs.
The inability to predict the duration, scope and severity if the COVID-19 pandemic, especially variants of COVID-19 that have and may in the future emerge, and the possibility of its reoccurrence or surging in future waves, as well as the lack of an effective, widely available vaccine against any mutations of COVID-19, creates the possibility of COVID-19 pandemic requiring a re-examination and possible adjustment of internal controls and systems.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. Risk factors for our company are set forth in our Annual Report on Form 10-K for the fiscal year end December 31, 2020 (“2020 Form 10-K) and other filings with the Commission. The risks described in Part I, Item 1A, "Risk Factors" in our 2020 Form 10-K could materially and adversely affect our business, financial condition and results of operations, and the trading price of our common stock could decline. These risk factors do not identify all risks that we face; our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. The “Risk Factors” section of the 2020 Form 10-K remains current in all material respects, except as stated below.
The emergence of Delta variant of COVID-19 in our markets, and the possible emergence of new variants that are vaccine resistant and could cause the same economic and business disruption as caused by the initial waive of the COVID-19 pandemic, coupled with significant portions of the general population in our markets (excepting Singapore with a reported 70% vaccination rate and pro-active testing protocol) not being fully vaccinated, which may allow new variants of COVID-19 to emerge that may be vaccine resistant and cause massive economic and business disruptions, have created uncertainty about the future impact of COVID-19 on our business and financial conditions and results. We do not operate in North America or other non-Asian markets.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On November 8, 2021, and as previously reported on Current Report on Form 8-K filed with the SEC on November 9, 2021, Company signed the following three separate registration rights agreements with Mr. Heng Fai Chan, which registration rights agreement grant piggyback registration rights for following shares:
(1) a registration rights agreement for 2,024,400 shares of Company Common Stock, $0.00001 par value, (“Common Stock”) to be acquired by Mr. Heng Fai Chan under a November 8, 2021 Stock Purchase Agreement between Mr. Heng Fai Chan and Mr. Yeung Chun Wing (also known as “Edmund Yeung”), who is an outside director of the Company;
(2) a registration rights agreement for 500,000 shares of Common Stock to be acquired by Mr. Heng Fai Chan from Mr. Seng Wee Tan (also known as “Kenneth Tan”), who is the President and a director of the Company, under a November 8, 2021 Stock Purchase Agreement between Mr. Heng Fai Chan and Mr. Seng Wee Tan; and
(3) a registration rights agreement for 674,800 shares of Common Stock to be acquired by Mr. Heng Fai Chan from Tai Kwong Ho under a November 8, 2021 Stock Purchase Agreement between Mr. Heng Fai Chan and Tai Kwong Ho.
| 40 |
The Company was not a party to the stock purchase agreements referenced above. The Company has been advised by the parties to those stock purchase agreements that the transactions thereunder were conducted outside of the United States and the closing of the purchase of the shares of Common Stock will be consummated within 15 days after November 8, 2021.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
| 41 |
Item 6. Exhibits
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.
| (1) | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Company with the Commission on April 13, 2021. |
| (2) | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Company with SEC on Nov. 9, 2021. |
| (3) | Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Company with SEC on Nov. 9, 2021. |
| (4) | Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by Company with SEC on Nov. 9, 2021. |
| 42 |
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Value Exchange International, Inc. | ||
| November 15, 2021 | /s/ | Tan Seng Wee Kenneth |
| By: | Tan Seng Wee Kenneth | |
| Its: | President and Director | |
| (Principal Executive Officer) | ||
| November 15, 2021 | /s/ | Channing Au |
| By: | Channing Au | |
| Its: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
43
EXHIBIT 31.1
CERTIFICATION
I, Kenneth Tan, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Value Exchange International, Inc. for the nine months ended September 30, 2021. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this interim report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this interim report is being prepared; |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
| a. | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Dated: November 15, 2021
/s/ Kenneth Tan
Kenneth Tan
President and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATION
I, Channing Au, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Value Exchange International, Inc. for the nine months ended September 30, 2021. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this interim report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this interim report is being prepared; |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
| a. | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Dated: November 15, 2021
/s/ Channing Au
Channing Au
Chief Financial Officer
(Principal financial and accounting officer)
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Value Exchange International, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021, as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Kenneth Tan, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: November 15, 2021
/s/ Kenneth Tan
Kenneth Tan
President and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Value Exchange International, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021, as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Channing Au, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: November 15, 2021
/s/ Channing Au
Channing Au
Chief Financial Officer
(Principal financial and accounting officer)
CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred Stock, Shares Authorized | 100,000,000 | 100,000,000 |
| Preferred Stock, Par or Stated Value Per Share | $ 0.00001 | $ 0.00001 |
| Preferred Stock, Shares Issued | 0 | 0 |
| Preferred Stock, Shares Outstanding | 0 | 0 |
| Common Stock, Shares Authorized | 100,000,000 | 100,000,000 |
| Common Stock, Par or Stated Value Per Share | $ 0.00001 | $ 0.00001 |
| Common Stock, Shares, Issued | 36,156,130 | 36,156,130 |
| Common Stock, Shares, Outstanding | 29,656,130 | 29,656,130 |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| NET REVENUES | ||||
| Service income | $ 2,884,770 | $ 4,641,036 | $ 7,478,537 | $ 17,077,710 |
| COST OF SERVICES | ||||
| Cost of service income | (2,224,718) | (4,005,748) | (5,509,896) | (15,714,650) |
| GROSS PROFIT | 660,052 | 635,288 | 1,968,641 | 1,363,060 |
| OPERATING EXPENSES: | ||||
| General and administrative expenses | (483,767) | (437,258) | (1,578,541) | (1,295,399) |
| Foreign exchange gain (loss) | 7,516 | (24,030) | (6,062) | (20,654) |
| PROFIT FROM OPERATIONS | 183,801 | 174,000 | 384,038 | 47,007 |
| OTHER INCOME (EXPENSES): | ||||
| Interest income | 189 | 207 | 580 | 546 |
| Interest expense | (7,821) | (9,788) | ||
| Finance cost | (3,170) | (2,548) | (11,533) | (8,825) |
| VAT refund | 981 | 38,198 | 29,211 | 110,742 |
| Management fee income | 63,275 | 37,856 | 163,771 | 116,302 |
| Others | 6,016 | 10,295 | 17,110 | 44,785 |
| Total other income (expenses), net | 67,291 | 76,187 | 199,139 | 253,762 |
| INCOME BEFORE PROVISION FOR INCOME TAXES | 251,092 | 250,187 | 583,177 | 300,769 |
| INCOME TAXES (EXPENSES) CREDIT | (162) | (1,738) | (6,523) | 4,400 |
| NET INCOME | 250,930 | 248,449 | 576,654 | 305,169 |
| ATTRIBUTABLE TO: | ||||
| Foreign currency translation adjustments | (18,406) | 29,440 | (123,055) | 6,770 |
| COMPREHENSIVE INCOME | 232,524 | 277,889 | 453,599 | 311,939 |
| Equity holders of the Company | 216,541 | 271,736 | 426,985 | 315,369 |
| Non-controlling interests | 15,983 | 6,153 | 26,614 | (3,430) |
| $ 232,524 | $ 277,889 | $ 453,599 | $ 311,939 | |
| Net income per share, basic and diluted | $ 0.01 | $ 0.01 | $ 0.02 | $ 0.01 |
| Weighted average number of shares outstanding | 36,156,130 | 29,656,130 | 33,742,527 | 29,656,130 |
Nature of Operations and Continuance of Business |
9 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2021 | ||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
| Nature of Operations and Continuance of Business |
Value Exchange International, Inc. (“VEII”, “Company”, “we” or “us”) was incorporated in the State of Nevada on June 26, 2007 under the name “China Soaring, Inc.”. The Company’s principal business, conducted through its operating subsidiaries, is to provide customer-centric information technology solutions for the retail industry in China, Hong Kong SAR and Manila, Philippines (“IT Business”). We do not conduct business in other markets, including the United States. By integrating market-leading Point-of-Sale/Point-of-Interaction (“POS/POI”), Merchandising, Customer Relations Management or “CRM” and related rewards, Locational Based (Global Positing System (“GPS”) and Indoor Positioning System (“IPS”)) Marketing, Customer Analytics and Business Intelligence solutions, VEII provides retailers with the capability to offer a consistent shopping experience across all marketing and sales channels, enabling them to easily and effectively manage the customer lifecycle on a one-to-one basis. VEII promotes itself as a single information technology (“IT”) source for retailers who want to extend existing traditional transaction processing to multiple points of interaction, including the Internet, kiosks and wireless devices. VEII services are focused on helping retailers realize the full benefits of Customer Chain Management with its suite of solutions that focus on the customer, on employees, and the infrastructure that supports the selling channel. VEII’s retail solutions are installed in an estimated 30%-40% of POS/POI-suitable retailers in Hong Kong and Manila, Philippines, processing tens of millions of transactions a year. Company is headquartered in Hong Kong and with offices in Shenzhen, Guangzhou, Shanghai, Beijing, China; Manila, Philippines, and Kuala Lumpur, Malaysia.
The Company provides IT Business’ services and solutions to the retail sector through three operating subsidiaries located in Hong Kong SAR and People’s Republic of China (“PRC”).
On September 2, 2008, VEI CHN established its first operating subsidiary, Value Exchange Int’l (Shanghai) Limited (“VEI SHG”) in Shanghai, PRC, under the laws of the PRC. VEI SHG engages in software development, trading and servicing of computer hardware and software activities.
On September 25, 2008, VEI CHN acquired its second operating subsidiary, TAP Services (HK) Limited in Hong Kong which subsequently changed its name to Value Exchange Int’l (Hong Kong) Limited (“VEI HKG”) on May 14, 2013. VEI HKG engages in software development, trading and servicing of computer hardware and software activities.
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On May 14, 2013, VEI CHN further established another operating subsidiary, Ke Dao Solutions Limited in Hong Kong, which subsequently changed its name to Cumberbuy.com Limited (“CUMBERBUY”) on May 26, 2017. CUMBERBUY conducts consultancy services for IT Services and Solutions activities.
In January 2017, VEI CHN acquired 100% of the capital stock of TapServices, Inc., a corporation organized under the laws of the Republic of the Philippines (the “TSI”). TSI engages in software development, trading and servicing of computer hardware and software activities in Philippines. TSI is operated as a subsidiary of VEI CHN. Prior to and continuing after the acquisition, TSI relied on VEI CHN for provision of IT services.
In January 2019, VEI SHG established an operating subsidiary, Value Exchange Int’l (Hunan) Limited (“VEI HN”) in Hunan, PRC, under the laws of the PRC. VEI HN engages in IT service call-center activities.
In February 2020, VEI SHG established an operating subsidiary, Shanghai Zhaonan Hengan Information Technology Co., Limited (“SZH”) in Shanghai, PRC, under the laws of the PRC. SZH engages in IT services.
As of September 30, 2021, the Company held four wholly-owned subsidiaries, and two subsidiaries with 51% ownership.
Impact of Coronavirus/COVID-19 Pandemic. Public health threats could adversely affect our ongoing or planned business operations. In particular, the outbreak in December 2019 of a novel coronavirus (“COVID-19”) in China and then into Hong Kong SAR and Philippines resulted in quarantines, restrictions on travel and other business and economic disruptions in our markets. Due to emergence of variants of COVID-19 (especially the “Delta” variant) and reluctance or failure of a significant portion of general population in our markets to become fully vaccinated, which portion allows emergence and spread of variants of COVID 19 and the resulting risk of the emergence of vaccine resistant strains of COVID 19, we cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the suppliers, distributers, resellers and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and adversely impacted. China and Hong Kong SAR, our primary markets, still experience travel and quarantine restrictions that do not allow return to regular operations and marketing efforts. |
Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies |
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and include the financial statements of the Company and all its wholly-owned subsidiaries that require consolidation. All material intercompany transactions and balances have been eliminated in the consolidation. The Company’s fiscal year end is December 31st. The following entities were consolidated as of September 30, 2021:
Preparing consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring using management’s estimates and assumptions relate to the collectability of its receivables, the fair value and accounting treatment of financial instruments, the valuation of long-lived assets and valuation of deferred tax liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates. In addition, different assumptions or circumstances could reasonably be expected to yield different results.
For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of six months or less at the time of purchase to be cash equivalents. Cash includes cash on hand and demand deposits in accounts maintained with financial institutions or state-owned banks within the PRC and Hong Kong.
These interim unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Receivables include trade accounts due from customers and other receivables such as cash advances to employees, utility deposits paid and advances to suppliers. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentration, customer credit worthiness, current economic trends and changes in customer payment patterns to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Delinquent account balances are written-off after management has determined that the likelihood of collection is not probable and known bad debts are written off against the allowance for doubtful accounts when identified. As of September 30, 2021 and December 31, 2020, there was allowance amount to $0 and $ for uncollectible accounts receivable. Management believes that the remaining accounts receivable are collectable.
Inventories are valued at the lower of cost and net realizable value. Cost for inventories is determined using the “first-in, first-out” method.
Management reviews inventories for obsolescence or cost in excess of net realizable value periodically. The obsolescence, if any, is recorded as a provision against the inventory. The cost in excess of market value is written off and recorded as additional cost of sales.
Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Expenditures for maintenance and repairs are charged to earnings as incurred. Major additions are capitalized. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of plant and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:
Intangibles with a definite life, including customer relationships and goodwill were recorded in connection with the acquisition of TSI. Intangible assets are amortized based on their estimated economic lives using the straight-line method with estimated lives as follows:
Goodwill represents the excess of the cost of acquisition over the fair value of net assets acquired. Goodwill is not amortized, but is instead tested for impairment annually.
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property, Plant, and Equipment The Company evaluates long-lived assets, including equipment, for impairment at least once per year and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired and an impairment loss equal to an amount by which the carrying value exceeds the fair value of the asset is recognized.
Impairment of Goodwill The carrying value of goodwill is evaluated annually or more frequently if events or circumstances indicate that an impairment loss may have occurred. Such circumstances could include, but are not limited to, a significant adverse change in business climate, increased competition or other economic conditions. Under FASB Accounting Standard Codification (ASC) Topic 350 “Intangibles - Goodwill and Other”, goodwill is tested at a reporting unit level. The impairment test involves a two-step process. The first step involves comparing the fair value of the reporting unit to which the goodwill is assigned to its carrying amount. If this comparison indicates that a reporting unit’s estimated fair value is less than its carrying value, a second step is required. If applicable, the second step requires us to allocate the estimated fair value of the reporting unit to the estimated fair value of the reporting unit’s net assets, with any fair value in excess of amounts allocated to such net assets representing the implied fair value of goodwill for that reporting unit. If the carrying value of the goodwill exceeds its fair value, the carrying value is written down by an amount equal to such excess.
The goodwill impairment testing process involves the use of significant assumptions, estimates and judgments, and is subject to inherent uncertainties and subjectivity. Estimating a reporting unit’s discounted cash flows involves the use of significant assumptions, estimates and judgments with respect to a variety of factors, including sales, gross margin and selling, general and administrative rates, capital expenditures, cash flows and the selection of an appropriate discount rate. Projected sales, gross margin and selling, general and administrative expense rate assumptions and capital expenditures are based on our annual business plans and other forecasted results. Discount rates reflect market-based estimates of the risks associated with the projected cash flows of the reporting unit directly resulting from the use of its assets in its operations. These estimates are based on the best information available to us as of the date of the impairment assessment.
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company values its financial instruments as required by FASB ASC 320-12-65. The estimated fair value amounts have been determined by the Company, using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The carrying values of the Company’s financial instruments; consisting of cash and cash equivalents, accounts receivable, accounts payable, other receivables and prepayments, other payables and accrued liabilities, balances with a related party, balances with related companies and amounts due to director approximate their fair values due to the short maturities of these instruments.
There was no asset or liability measured at fair value on a non-recurring basis as of September 30, 2021 and December 31, 2020.
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. GAAP generally requires that recognized revenue, expenses, gains and losses be included in net income or loss. Although certain changes in assets and liabilities are reported as separate components of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income or loss. The components of other comprehensive income or loss consist of foreign currency translation adjustments.
The Company reports earnings per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured.
The Company’s revenue is derived from three primary sources: (i) professional services for systems development and integration, including procurement of related hardware and software licenses on behalf of customers, if required; (ii) professional services for system maintenance normally for a period of one year; and (iii) sale of hardware and consumables during the service performed as stated above.
Multiple-deliverable arrangements
The Company derives revenue from fixed-price sale contracts with customers that may provide for the Company to procure hardware and software licenses with varied performance specifications specific to each customer and provide the technical services for systems development and integration of the hardware and software licenses. In instances where the contract price is inclusive of the technical services, the sale contracts include multiple deliverables. A multiple-element arrangement is separated into more than one unit of accounting if all of the following criteria are met:
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s multiple-element contracts generally include customer-acceptance provisions which provide for the Company to carry out installation, test runs and performance tests at the Company’s cost until the systems as a whole can meet the performance specifications stated in the contracts. The delivered equipment and software licenses have no standalone value to the customer until they are installed, integrated and tested at the customer’s site by the Company in accordance with the performance specifications specific to each customer. In addition, under these multiple-element contracts, the Company has not sold the equipment and software licenses separately from the installation, integration and testing services, and hence there is no objective and reliable evidence of the fair value for each deliverable included in the arrangement. As a result, the equipment and the technical services for installation, integration and testing of the equipment are considered a single unit of accounting pursuant to ASC Subtopic 605-25, Revenue Recognition — Multiple-Element Arrangements. In addition, the arrangement generally includes customer acceptance criteria that cannot be tested before installation and integration at the customer’s site. Accordingly, revenue recognition is deferred until customer acceptance, indicated by an acceptance certificate signed off by the customer.
Revenues of maintenance services are recognized when the services are performed in accordance with the contract term.
Revenues of sale of software, if not bundled with other arrangements, are recognized when shipped and customer acceptance obtained, if all other revenue recognition criteria are met. Costs associated with revenues are recognized when incurred.
Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the nine months period ended September 30, 2021 and 2020.
Billings in excess of revenues recognized are recorded as deferred revenue.
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company accounts for income taxes in accordance with the accounting standard issued by the Financial Accounting Standard Board (“FASB”) for income taxes. Under the asset and liability method as required by this accounting standard, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The charge for taxation is based on the results for the reporting period 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. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.
Under the accounting standard regarding accounting for uncertainty in income taxes, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.
Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases are charged to the statements of income on a straight-line basis over the lease periods.
The Company expenses the cost of advertising as incurred in the period in which the advertisements and marketing activities are first run or over the life of the endorsement contract. Advertising and marketing expense for the nine months ended September 30, 2021 and 2020 were insignificant.
Shipping and handling cost incurred to ship computer products to customers are included in selling expenses. Shipping and handling expenses for the nine months ended September 30, 2021 and 2020 were insignificant.
Research and development costs are expensed as incurred and are included in general and administrative expenses. Research and development costs for the nine months ended September 30, 2021 and 2020 were insignificant.
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The functional currency and reporting currency of the Company is the U.S. Dollar. (“US$” or “$”). The functional currency of the Hong Kong subsidiaries is the Hong Kong Dollar. The functional currency of the PRC subsidiary is RMB. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the exchange rate as quoted by the Hong Kong Monetary Authority (“HKMA”) at the end of the period. Capital accounts are translated at their historical exchange rates when the capital transaction occurred. 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.
The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
The Company follows FASB ASC Subtopic 450-20, “Loss Contingencies” in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operating results solely by monthly revenue from software development and maintenance services (but not by sub-services/product type or geographic area) and operating results of the Company and, as such, the Company has determined that the Company has one operating segment as defined by ASC Topic 280 “Segment Reporting”.
In June 2016, FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective on January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a group is required to recognize an allowance based on its estimate of expected credit loss. We are currently evaluating the impact of this new guidance on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company currently intends to adopt this guidance for the fiscal year beginning January 1, 2020, and does not anticipate that the adoption of this guidance will have a material impact on its financial statements or disclosures because the Company does not currently have any recorded goodwill.
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In January 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
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Accounts receivable |
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| Credit Loss [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts receivable |
Accounts receivable consisted of the following as of September 30, 2021 and December 31, 2020:
All of the Company’s customers are located in the PRC, Hong Kong and Manila, Philippines. The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. |
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Other receivables and prepayments |
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| Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other receivables and prepayments |
Other receivables and prepayments consisted of the following as of September 30, 2021 and December 31, 2020:
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Inventories |
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| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||
| Inventories |
Inventories as of September 30, 2021 and December 31, 2020 consisted of the following:
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Plant and equipment, net |
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Plant and equipment, net |
Plant and equipment consisted of the following as of September 30, 2021 and December 31, 2020:
Depreciation expense for the nine months period ended September 30, 2021 and 2020 amounted to $104,364 and $113,820, respectively. For the nine months period ended September 30, 2021 and 2020, no interest expense was capitalized into plant and equipment. |
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Goodwill |
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| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||
| Goodwill |
Goodwill consisted of the following as of September 30, 2021 and December 31, 2020:
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Leases |
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| Leases |
Schedule of operating lease right of use assets
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of lease liabilities are as follows:
Total lease cost for the nine months period ended September 30, 2021 and 2020 amounted to $11,533 and $8,825, respectively. Weighted-average remaining lease term is years, and weighted-average discount rate is 3%.
The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2021:
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Bank loan |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank loan |
Bank loan and accruals consisted of the following as of September 30, 2021 and December 31, 2020:
As of September 30, 2021 and December 31, 2020, the above bank loan secured by property and equipment with net carrying amount of $32,571 and $44,533 respectively. |
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Other payables and accrued liabilities |
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| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other payables and accrued liabilities |
Other payables and accruals consisted of the following as of September 30, 2021 and December 31, 2020:
Accrual mainly represents salary payables and fringe and social security accruals. According to the prevailing laws and regulations of the PRC, all eligible employees of the Company’s subsidiaries are entitled to staff welfare benefits including medical care, welfare subsidies, unemployment insurance and pension benefits through a PRC government-mandated multi-employer defined contribution plan. The Company’s subsidiaries are required to accrue for these benefits based on certain percentages of the qualified employees’ salaries. The Company’s subsidiary is required to make contributions to the plans out of the amounts accrued.
The Company’s subsidiaries incorporated in Hong Kong manage a defined contribution Mandatory Provident Fund (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for all of its employees in Hong Kong. The Company is required to contribute 5% of the monthly salaries for all Hong Kong based employees to the MPF Scheme up to a maximum statutory limit. |
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Deferred income |
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| Revenue Recognition and Deferred Revenue [Abstract] | ||||||||||||||||||||||||||||||||||||||||
| Deferred income |
Deferred income consisted of the following as of September 30, 2021 and December 31, 2020:
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Statutory reserves |
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| Extractive Industries [Abstract] | |||||||||||||
| Statutory reserves |
Statutory reserves
The laws and regulations of the PRC require that before an enterprise distributes profits to its owners, it must first satisfy all tax liabilities, provide for losses in previous years, and make allocations in proportions determined at the discretion of the Board of Directors after the statutory reserves.
As stipulated by the Company Law of the PRC, as applicable to Chinese companies with foreign ownership, net income after taxation can only be distributed as dividends after appropriation has been made for the following:
The statutory reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any. It may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital. |
Related party and shareholder transactions |
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| Related party and shareholder transactions |
Other than disclosed elsewhere in these financial statements, the Company also had the following related party balances and transactions:
Related party balances
Related party transactions
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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”), and include the financial statements of the Company and all its wholly-owned subsidiaries that require consolidation. All material intercompany transactions and balances have been eliminated in the consolidation. The Company’s fiscal year end is December 31st. The following entities were consolidated as of September 30, 2021:
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| Use of Estimates |
Preparing consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring using management’s estimates and assumptions relate to the collectability of its receivables, the fair value and accounting treatment of financial instruments, the valuation of long-lived assets and valuation of deferred tax liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates. In addition, different assumptions or circumstances could reasonably be expected to yield different results. |
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| Cash and Cash Equivalents |
For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of six months or less at the time of purchase to be cash equivalents. Cash includes cash on hand and demand deposits in accounts maintained with financial institutions or state-owned banks within the PRC and Hong Kong. |
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| Interim Financial Statements |
These interim unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. |
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| Accounts receivable and other receivables |
Receivables include trade accounts due from customers and other receivables such as cash advances to employees, utility deposits paid and advances to suppliers. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentration, customer credit worthiness, current economic trends and changes in customer payment patterns to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Delinquent account balances are written-off after management has determined that the likelihood of collection is not probable and known bad debts are written off against the allowance for doubtful accounts when identified. As of September 30, 2021 and December 31, 2020, there was allowance amount to $0 and $ for uncollectible accounts receivable. Management believes that the remaining accounts receivable are collectable. |
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| Inventories |
Inventories are valued at the lower of cost and net realizable value. Cost for inventories is determined using the “first-in, first-out” method.
Management reviews inventories for obsolescence or cost in excess of net realizable value periodically. The obsolescence, if any, is recorded as a provision against the inventory. The cost in excess of market value is written off and recorded as additional cost of sales. |
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| Plant and equipment |
Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Expenditures for maintenance and repairs are charged to earnings as incurred. Major additions are capitalized. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of plant and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:
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| Goodwill and intangibles |
Intangibles with a definite life, including customer relationships and goodwill were recorded in connection with the acquisition of TSI. Intangible assets are amortized based on their estimated economic lives using the straight-line method with estimated lives as follows:
Goodwill represents the excess of the cost of acquisition over the fair value of net assets acquired. Goodwill is not amortized, but is instead tested for impairment annually. |
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| Impairment of long-lived assets |
Property, Plant, and Equipment The Company evaluates long-lived assets, including equipment, for impairment at least once per year and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired and an impairment loss equal to an amount by which the carrying value exceeds the fair value of the asset is recognized.
Impairment of Goodwill The carrying value of goodwill is evaluated annually or more frequently if events or circumstances indicate that an impairment loss may have occurred. Such circumstances could include, but are not limited to, a significant adverse change in business climate, increased competition or other economic conditions. Under FASB Accounting Standard Codification (ASC) Topic 350 “Intangibles - Goodwill and Other”, goodwill is tested at a reporting unit level. The impairment test involves a two-step process. The first step involves comparing the fair value of the reporting unit to which the goodwill is assigned to its carrying amount. If this comparison indicates that a reporting unit’s estimated fair value is less than its carrying value, a second step is required. If applicable, the second step requires us to allocate the estimated fair value of the reporting unit to the estimated fair value of the reporting unit’s net assets, with any fair value in excess of amounts allocated to such net assets representing the implied fair value of goodwill for that reporting unit. If the carrying value of the goodwill exceeds its fair value, the carrying value is written down by an amount equal to such excess.
The goodwill impairment testing process involves the use of significant assumptions, estimates and judgments, and is subject to inherent uncertainties and subjectivity. Estimating a reporting unit’s discounted cash flows involves the use of significant assumptions, estimates and judgments with respect to a variety of factors, including sales, gross margin and selling, general and administrative rates, capital expenditures, cash flows and the selection of an appropriate discount rate. Projected sales, gross margin and selling, general and administrative expense rate assumptions and capital expenditures are based on our annual business plans and other forecasted results. Discount rates reflect market-based estimates of the risks associated with the projected cash flows of the reporting unit directly resulting from the use of its assets in its operations. These estimates are based on the best information available to us as of the date of the impairment assessment. |
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| Fair value of financial instruments |
The Company values its financial instruments as required by FASB ASC 320-12-65. The estimated fair value amounts have been determined by the Company, using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The carrying values of the Company’s financial instruments; consisting of cash and cash equivalents, accounts receivable, accounts payable, other receivables and prepayments, other payables and accrued liabilities, balances with a related party, balances with related companies and amounts due to director approximate their fair values due to the short maturities of these instruments.
There was no asset or liability measured at fair value on a non-recurring basis as of September 30, 2021 and December 31, 2020. |
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| Comprehensive income |
U.S. GAAP generally requires that recognized revenue, expenses, gains and losses be included in net income or loss. Although certain changes in assets and liabilities are reported as separate components of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income or loss. The components of other comprehensive income or loss consist of foreign currency translation adjustments. |
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| Earnings per share |
The Company reports earnings per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. |
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| Revenue recognition |
Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured.
The Company’s revenue is derived from three primary sources: (i) professional services for systems development and integration, including procurement of related hardware and software licenses on behalf of customers, if required; (ii) professional services for system maintenance normally for a period of one year; and (iii) sale of hardware and consumables during the service performed as stated above.
Multiple-deliverable arrangements
The Company derives revenue from fixed-price sale contracts with customers that may provide for the Company to procure hardware and software licenses with varied performance specifications specific to each customer and provide the technical services for systems development and integration of the hardware and software licenses. In instances where the contract price is inclusive of the technical services, the sale contracts include multiple deliverables. A multiple-element arrangement is separated into more than one unit of accounting if all of the following criteria are met:
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s multiple-element contracts generally include customer-acceptance provisions which provide for the Company to carry out installation, test runs and performance tests at the Company’s cost until the systems as a whole can meet the performance specifications stated in the contracts. The delivered equipment and software licenses have no standalone value to the customer until they are installed, integrated and tested at the customer’s site by the Company in accordance with the performance specifications specific to each customer. In addition, under these multiple-element contracts, the Company has not sold the equipment and software licenses separately from the installation, integration and testing services, and hence there is no objective and reliable evidence of the fair value for each deliverable included in the arrangement. As a result, the equipment and the technical services for installation, integration and testing of the equipment are considered a single unit of accounting pursuant to ASC Subtopic 605-25, Revenue Recognition — Multiple-Element Arrangements. In addition, the arrangement generally includes customer acceptance criteria that cannot be tested before installation and integration at the customer’s site. Accordingly, revenue recognition is deferred until customer acceptance, indicated by an acceptance certificate signed off by the customer.
Revenues of maintenance services are recognized when the services are performed in accordance with the contract term.
Revenues of sale of software, if not bundled with other arrangements, are recognized when shipped and customer acceptance obtained, if all other revenue recognition criteria are met. Costs associated with revenues are recognized when incurred.
Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the nine months period ended September 30, 2021 and 2020.
Billings in excess of revenues recognized are recorded as deferred revenue. |
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| Income taxes |
The Company accounts for income taxes in accordance with the accounting standard issued by the Financial Accounting Standard Board (“FASB”) for income taxes. Under the asset and liability method as required by this accounting standard, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The charge for taxation is based on the results for the reporting period 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. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.
Under the accounting standard regarding accounting for uncertainty in income taxes, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. |
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| Operating leases |
Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases are charged to the statements of income on a straight-line basis over the lease periods. |
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| Advertising costs |
The Company expenses the cost of advertising as incurred in the period in which the advertisements and marketing activities are first run or over the life of the endorsement contract. Advertising and marketing expense for the nine months ended September 30, 2021 and 2020 were insignificant. |
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| Shipping and handling |
Shipping and handling cost incurred to ship computer products to customers are included in selling expenses. Shipping and handling expenses for the nine months ended September 30, 2021 and 2020 were insignificant. |
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| Research and development costs |
Research and development costs are expensed as incurred and are included in general and administrative expenses. Research and development costs for the nine months ended September 30, 2021 and 2020 were insignificant. |
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| Foreign currency translation |
The functional currency and reporting currency of the Company is the U.S. Dollar. (“US$” or “$”). The functional currency of the Hong Kong subsidiaries is the Hong Kong Dollar. The functional currency of the PRC subsidiary is RMB. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the exchange rate as quoted by the Hong Kong Monetary Authority (“HKMA”) at the end of the period. Capital accounts are translated at their historical exchange rates when the capital transaction occurred. 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.
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| Stock-based Compensation |
The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. |
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| Commitments and contingencies |
The Company follows FASB ASC Subtopic 450-20, “Loss Contingencies” in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred. |
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| Segment Reporting |
The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operating results solely by monthly revenue from software development and maintenance services (but not by sub-services/product type or geographic area) and operating results of the Company and, as such, the Company has determined that the Company has one operating segment as defined by ASC Topic 280 “Segment Reporting”. |
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| Recent accounting pronouncements |
In June 2016, FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective on January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a group is required to recognize an allowance based on its estimate of expected credit loss. We are currently evaluating the impact of this new guidance on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company currently intends to adopt this guidance for the fiscal year beginning January 1, 2020, and does not anticipate that the adoption of this guidance will have a material impact on its financial statements or disclosures because the Company does not currently have any recorded goodwill.
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In January 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption. |
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Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The Company’s fiscal year end is December 31st. The following entities were consolidated as of September 30, 2021: | The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and include the financial statements of the Company and all its wholly-owned subsidiaries that require consolidation. All material intercompany transactions and balances have been eliminated in the consolidation. The Company’s fiscal year end is December 31st. The following entities were consolidated as of September 30, 2021:
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| Depreciation of plant and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows: | Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Expenditures for maintenance and repairs are charged to earnings as incurred. Major additions are capitalized. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of plant and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:
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| Intangible assets are amortized based on their estimated economic lives using the straight-line method with estimated lives as follows: | Intangibles with a definite life, including customer relationships and goodwill were recorded in connection with the acquisition of TSI. Intangible assets are amortized based on their estimated economic lives using the straight-line method with estimated lives as follows:
|
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| Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the nine months period ended September 30, 2021 and 2020. | Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the nine months period ended September 30, 2021 and 2020.
|
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| 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. | The functional currency and reporting currency of the Company is the U.S. Dollar. (“US$” or “$”). The functional currency of the Hong Kong subsidiaries is the Hong Kong Dollar. The functional currency of the PRC subsidiary is RMB. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the exchange rate as quoted by the Hong Kong Monetary Authority (“HKMA”) at the end of the period. Capital accounts are translated at their historical exchange rates when the capital transaction occurred. 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.
|
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Accounts receivable (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Loss [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts receivable consisted of the following as of September 30, 2021 and December 31, 2020: | Accounts receivable consisted of the following as of September 30, 2021 and December 31, 2020:
|
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Other receivables and prepayments (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other receivables and prepayments consisted of the following as of September 30, 2021 and December 31, 2020: | Other receivables and prepayments consisted of the following as of September 30, 2021 and December 31, 2020:
|
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Inventories (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
| Inventories as of September 30, 2021 and December 31, 2020 consisted of the following: | Inventories as of September 30, 2021 and December 31, 2020 consisted of the following:
|
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Plant and equipment, net (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Plant and equipment consisted of the following as of September 30, 2021 and December 31, 2020: | Plant and equipment consisted of the following as of September 30, 2021 and December 31, 2020:
|
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Goodwill (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
| Goodwill consisted of the following as of September 30, 2021 and December 31, 2020: | Goodwill consisted of the following as of September 30, 2021 and December 31, 2020:
|
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Leases (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of operating lease right of use assets | Schedule of operating lease right of use assets
|
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| The components of lease liabilities are as follows: | The components of lease liabilities are as follows:
|
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| The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2021: | The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2021:
|
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Bank loan (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank loan and accruals consisted of the following as of September 30, 2021 and December 31, 2020: | Bank loan and accruals consisted of the following as of September 30, 2021 and December 31, 2020:
|
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Other payables and accrued liabilities (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other payables and accruals consisted of the following as of September 30, 2021 and December 31, 2020: | Other payables and accruals consisted of the following as of September 30, 2021 and December 31, 2020:
|
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Deferred income (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||
| Revenue Recognition and Deferred Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||
| Deferred income consisted of the following as of September 30, 2021 and December 31, 2020 | Deferred income consisted of the following as of September 30, 2021 and December 31, 2020:
|
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Related party and shareholder transactions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related party balances | Other than disclosed elsewhere in these financial statements, the Company also had the following related party balances and transactions:
Related party balances
|
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| Related party transactions | Related party transactions
VALUE EXCHANGE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
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Nature of Operations and Continuance of Business (Details Narrative) |
1 Months Ended | 9 Months Ended | |
|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2021 |
Jan. 31, 2017 |
|
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||
| Entity Incorporation, State or Country Code | NV | ||
| Entity Incorporation, Date of Incorporation | Jun. 26, 2007 | ||
| Description of entity | the Company held four wholly-owned subsidiaries, and two subsidiaries with 51% ownership. | ||
| Tap Services Inc [Member] | |||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||
| Ownership percentage | 100.00% |
Depreciation of plant and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows: (Details) |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Leasehold Improvements [Member] | |
| Property, Plant and Equipment [Line Items] | |
| Estimated Useful Life | 5 years |
| Computer Equipment [Member] | |
| Property, Plant and Equipment [Line Items] | |
| Estimated Useful Life | 5 years |
| Software and Software Development Costs [Member] | |
| Property, Plant and Equipment [Line Items] | |
| Estimated Useful Life | 5 years |
| Furniture and Fixtures [Member] | |
| Property, Plant and Equipment [Line Items] | |
| Estimated Useful Life | 5 years |
| Vehicles [Member] | |
| Property, Plant and Equipment [Line Items] | |
| Estimated Useful Life | 3 years |
| Building [Member] | |
| Property, Plant and Equipment [Line Items] | |
| Estimated Useful Life | 5 years |
Intangible assets are amortized based on their estimated economic lives using the straight-line method with estimated lives as follows: (Details) |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Customer Relationships [Member] | |
| Finite-Lived Intangible Assets [Line Items] | |
| Estimated Economic Life | 3 years |
Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the nine months period ended September 30, 2021 and 2020. (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Revenues | $ 2,884,770 | $ 4,641,036 | $ 7,478,537 | $ 17,077,710 |
| Systems Development And Integration [Member] | ||||
| Revenues | 56,314 | 2,260,182 | 216,452 | 10,646,265 |
| Systems Maintenance [Member] | ||||
| Revenues | 2,065,894 | 2,128,324 | 5,573,268 | 5,505,283 |
| Sales Of Hardware And Consumables [Member] | ||||
| Revenues | $ 762,562 | $ 252,530 | $ 1,688,817 | $ 926,162 |
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. (Details) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
| China, Yuan Renminbi | |||||
| PESO : USD exchange rate | 6.4874 | 6.9599 | 6.4949 | 7.0351 | |
| PESO : USD exchange rate | 6.4784 | 6.8590 | |||
| Hong Kong, Dollars | |||||
| PESO : USD exchange rate | 7.800 | 7.800 | 7.800 | 7.800 | |
| PESO : USD exchange rate | 7.800 | 7.800 | |||
| Philippines, Pesos | |||||
| PESO : USD exchange rate | 49.5606 | 50.1608 | 48.3135 | 50.2129 | |
| PESO : USD exchange rate | 50.4854 | 50.1608 | |||
Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Accounting Policies [Abstract] | ||
| Allowance accounts receivable | $ 0 | $ 4,253 |
| Accounts Receivable, Allowance for Credit Loss | $ 0 | $ (4,253) |
Accounts receivable consisted of the following as of September 30, 2021 and December 31, 2020: (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Credit Loss [Abstract] | ||
| Accounts receivable | $ 636,392 | $ 603,689 |
| Allowance for doubtful accounts | 0 | (4,253) |
| Accounts receivable, net | $ 636,392 | $ 599,436 |
Other receivables and prepayments consisted of the following as of September 30, 2021 and December 31, 2020: (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Receivables [Abstract] | ||
| Deposits and prepaid expense | $ 283,507 | $ 299,790 |
| Others | 60,444 | 114,552 |
| Other receivables and prepayments | $ 343,951 | $ 414,342 |
Inventories as of September 30, 2021 and December 31, 2020 consisted of the following: (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Finished goods | $ 257,368 | $ 238,147 |
Plant and equipment, net (Details Narrative) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Property, Plant and Equipment [Abstract] | ||
| Depreciation expense | $ 104,364 | $ 113,820 |
Goodwill consisted of the following as of September 30, 2021 and December 31, 2020: (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Goodwill arising from acquisition of TSI | $ 206,812 | $ 206,812 |
Schedule of operating lease right of use assets (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Leases [Abstract] | ||
| Operating Lease, Right-of-Use Asset | $ 393,160 | $ 585,057 |
The components of lease liabilities are as follows: (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Leases [Abstract] | ||
| Lease liabilities, current | $ 243,283 | $ 303,687 |
| Lease liabilities, non-current | 144,231 | 277,111 |
| Present value of lease liabilities | $ 387,514 | $ 580,798 |
The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2021: (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Leases [Abstract] | ||
| Year one | $ 251,121 | $ 316,880 |
| Year two | 130,991 | 187,971 |
| Year three | 15,882 | 95,772 |
| Year four | ||
| Thereafter | ||
| Total undiscounted cash flows | 397,994 | 600,623 |
| Less: Imputed interest | (10,478) | (19,826) |
| Present value of lease liabilities | $ 387,514 | $ 580,798 |
Leases (Details Narrative) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Leases [Abstract] | ||
| Total lease cost | $ 11,533 | $ 8,825 |
| Weighted-average remaining lease term | 1 year 4 months 24 days | |
| Weighted-average discount rate | 3.00% | |
Bank loan and accruals consisted of the following as of September 30, 2021 and December 31, 2020: (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Debt Disclosure [Abstract] | ||
| Long term bank loan | $ 72,122 | $ 101,823 |
| Less: Current portion of long term bank loan | (40,292) | (38,874) |
| Bank loan | 31,830 | 62,949 |
| Current portion of long term bank loan | $ 40,292 | $ 38,874 |
Bank loan (Details Narrative) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Debt Disclosure [Abstract] | ||
| Bank collateral | bank loan secured by property and equipment | |
| Bank loan secured | $ 32,571 | $ 4,533 |
Other payables and accruals consisted of the following as of September 30, 2021 and December 31, 2020: (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Accrual | $ 738,181 | $ 737,142 |
| Income taxes payable | $ 18,420 | $ 94,675 |
Other payables and accrued liabilities (Details Narrative) |
Sep. 30, 2021 |
|---|---|
| Payables and Accruals [Abstract] | |
| Monthly salaries contribute | 5.00% |
Deferred income consisted of the following as of September 30, 2021 and December 31, 2020 (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Revenue Recognition and Deferred Revenue [Abstract] | ||
| Service fees received in advance | $ 227,500 | $ 254,937 |
Statutory reserves (Details Narrative) |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Remaining reserve percent | 25.00% |
| Maximum [Member] | |
| Banking Regulation, Maximum Payout Ratio | 0.50 |
Related party transactions (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|||||||||||||||
| Value Exchange International Limited [Member] | ||||||||||||||||||
| Related Party Transaction [Line Items] | ||||||||||||||||||
| Service income received | [1] | $ 486,465 | $ 486,465 | |||||||||||||||
| Subcontracting fees payable | [1] | (527,744) | (571,436) | |||||||||||||||
| Management fees received | [1] | 30,539 | 11,701 | 77,445 | 37,839 | |||||||||||||
| Value E Consultant International M Sdn Bhd [Member] | ||||||||||||||||||
| Related Party Transaction [Line Items] | ||||||||||||||||||
| Service income received | [2] | 14,054 | 18,069 | |||||||||||||||
| Subcontracting fees payable | [2] | (14,967) | (31,714) | (585) | ||||||||||||||
| T A P Technology H K Limited [Member] | ||||||||||||||||||
| Related Party Transaction [Line Items] | ||||||||||||||||||
| Service income received | [3] | 82,051 | 180,769 | |||||||||||||||
| Subcontracting fees payable | [3] | (37,446) | (79,128) | |||||||||||||||
| Management fees received | [3] | 7,692 | 7,692 | 23,077 | 23,077 | |||||||||||||
| Smart My Ways Co Limited [Member] | ||||||||||||||||||
| Related Party Transaction [Line Items] | ||||||||||||||||||
| Service income received | [4] | 23,249 | ||||||||||||||||
| Management fees received | [4] | 7,692 | 7,692 | 23,077 | 23,077 | |||||||||||||
| Value X International Pte Ltd [Member] | ||||||||||||||||||
| Related Party Transaction [Line Items] | ||||||||||||||||||
| Service income received | [5] | 159,581 | ||||||||||||||||
| App My Ways Co Limited [Member] | ||||||||||||||||||
| Related Party Transaction [Line Items] | ||||||||||||||||||
| Service income received | [6] | 506,040 | 382,043 | 530,977 | 382,043 | |||||||||||||
| Subcontracting fees payable | [6] | (257,949) | (514,359) | |||||||||||||||
| Cucumbuy.com Limited (ii) | ||||||||||||||||||
| Related Party Transaction [Line Items] | ||||||||||||||||||
| Management fees received | [7] | 7,692 | 7,692 | 23,077 | 23,077 | |||||||||||||
| Retail Intelligent Unit Limited (iv) | ||||||||||||||||||
| Related Party Transaction [Line Items] | ||||||||||||||||||
| Management fees received | [3] | $ 3,077 | $ 3,077 | $ 9,231 | $ 9,230 | |||||||||||||
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