| Summary of Significant Accounting Policies | 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, 2024:
Schedule of consolidated entities
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%
Haomeng Technology (Shenzhen) Co., Limited
PRC
100%
Value E Consultant International (M) Sdn. Bhd
Malaysia
100%
b) Going Concern These financial statements have been
prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will
be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different
from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying
values and classification of assets and liabilities should the Company be unable to continue as a going concern. The Company has an operating
loss of $ 845,266 6,319,462 325,761 The Company has relied on debt funding
to pay for operating expenses and business development efforts in 2024 that were not covered by operating revenues. If the Company continues
to incur operating losses as incurred within twelve months of filing date and does not significantly increase its cash reserves, and if
the Company does not also receive additional funding from existing lenders or from other sources to provide the working capital needed
to cover those continuing operating losses, then the Company would be forced to reduce its operating expenses and business development
efforts and the issue of the Company as a going concern may arise. While the existing lenders of the Company and Company's majority shareholder
are affiliated, there can be no assurance of additional debt or equity funding for the Company from the existing lenders or the majority
shareholder. In considering our forecast for the next twelve months and the current cash and working capital as of the filing of this
Form 10-Q, such matters create a substantial doubt regarding the Company’s ability to meet its financial needs and continue as a
going concern. These financial statements do not include
any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities
that might result from this uncertainty.
c) Reclassifications Certain amounts on the accompanying consolidated cash flows
and consolidated statements of operations have been reclassified to conform to current period presentation.
d) 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 including convertible notes and
warrants, the valuation of long-lived assets and valuation of deferred taxes. 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.
e) Cash and Cash Equivalents For purposes of the cash flow statements,
the Company considers all highly liquid investments with original maturities of nine 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.
f) 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.
g) Accounts receivable, other receivables, and current expected credit losses Receivables include trade accounts due from customers and other receivables
such as cash advances to employees, utility deposits paid and advances to suppliers. The Company extends credit to its customers in the
normal course of business. The Company performs ongoing credit evaluations and generally does not require collateral. Payment terms are
generally ranging from 30 days to 60 days on customers. The Company carries its trade accounts receivable at invoice amounts, less an
allowance for credit losses. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for credit
losses based upon management’s estimates that include a review of the history of past write-offs and collections and an analysis
of current and future credit conditions. In estimating expected losses in the accounts receivable portfolio, customer-specific financial
data and macro-economic assumptions are utilized to project losses over a reasonable and supportable forecast period. Assumptions and
judgment are applied to measure amounts and timing of expected future cash flows, collateral values and other factors used to determine
the customers’ abilities to pay. As of September 30, 2024 and December 31, 2023, allowance for uncollectible accounts receivable
amounts to $ 155,301 155,301 no
h) 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. Cost is defined
as the cost to acquire products, cost of conversion and other related costs to bring inventory to present location and condition. Net
realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion,
disposal, and transportation. 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.
i) 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:
Schedule of estimated use full life of plant and equipment
Estimated Useful Life
Leasehold improvements
Lesser of lease term or the estimated
useful lives of 5
Computer equipment 5
Computer software 5
Office furniture and equipment 5
Motor Vehicle 3
Building 5
j) Goodwill 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.
k) 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.
l) Derivative accounting The Company analyzes all financial
instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815,
“Derivatives and Hedging Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease
in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between
embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. Derivative instruments
such as warrant and option derivatives are valued using the Black-Scholes simulation model. The Company has determined that Convertible
loan from affiliates, contains an embedded derivative in the form of payment via equity and has accounted for it in accordance with ASC
815. (see Note 12).
m) Fair value of financial instruments 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
following table represents the fair value hierarchy for the Company’s financial assets and liabilities measured at fair value on
a recurring basis as of:
Schedule of measured at fair value on a recurring basis
September 30, 2024
Level 1 Level 2 Level 3 Total
US$ US$ US$ US$
Liabilities:
Convertible loan and its fair
value for the derivative portion (See Note 12) - - 604,221 604,221
December 31, 2023
Level 1 Level 2 Level 3 Total
US$ US$ US$ US$
Liabilities:
Convertible loan and its fair value for the derivative portion (See Note 12) - - 1,061,282 1,061,282 As of September 30, 2024 and December
31, 2023, the fair values of the Company’s cash and cash equivalents, accounts receivable, inventory, accounts payable, other receivables
and prepayments, other payables and accrued liabilities, and balances with related parties approximated the carrying values of these instruments
presented in the Company’s consolidated balance sheets due to the short maturities of these instruments.
n) Comprehensive income (loss) 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.
o) 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.
p) Revenue recognition 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. We recognize revenue from contracts
with customers using the five-step model prescribed in ASC 606. 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 performance obligations. Determining whether such products and
services within a customer contract are considered distinct performance obligations that should be accounted for separately requires significant
judgment. Accordingly, we review customer contracts to identify all separate promises to transfer goods and services that would be considered
performance obligations. Judgment is also required in determining whether an option to acquire additional products and services within
a customer contract represents a material right that the customer would not receive without entering into that contract. The Company’s contracts often
contain multiple performance obligations, which 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 performance obligations 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. If a contract contains multiple performance obligations, the Company accounts for each distinct
performance obligation separately. The transaction price is allocated to the separate performance obligations on a relative stand-alone
selling price basis. Any discounts or expected potential future price concessions are considered when determining the total transaction
price. 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. We recognize revenue over time when
there is a continuous transfer of control to our customer. When control is transferred over time, revenue is recognized based on the extent
of progress towards completion of the performance obligation. Based on the nature of the products and services provided in the contract,
we use our judgment to determine if an input measure or output measure best depicts the transfer of control over time. If a contract does
not meet the criteria for recognizing revenue over time, we recognize revenue at a point in time. Revenues of maintenance services are
recognized when the services are performed in accordance with the contract term. For maintenance service contracts, a time-elapsed output
method is used to measure progress, and revenue is recognized straight-line over the term of the contract. For services contracts, we typically
satisfy our performance obligations as services are rendered and use a contract cost-based input method to measure progress. Contract
costs include labor, material and allocable indirect expenses. Revenue is recognized proportionally as contract costs are incurred plus
estimated fees. Revenues of sale of software, if not
bundled with other arrangements, are recognized when shipped and customer acceptance obtained at a point in time, 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, 2024 and 2023.
Schedule of revenue record
Three Months Nine months
2024 2023 2024 2023
US$ US$ US$ US$
(unaudited) (unaudited) (unaudited) (unaudited)
NET REVENUES
Service income
- systems development and integration 44,846 68,277 158,075 181,193
- systems maintenance 2,640,714 2,380,304 7,748,860 7,049,784
- sales of hardware and consumables 1,701,614 512,244 3,914,392 1,464,435
4,387,174 2,960,825 11,821,327 8,695,412 Billings in excess of revenues recognized are recorded as
deferred revenue.
q) Income taxes 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. 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 year incurred.
r) Lease accounting The Company categorize leases at their
inception as either operating or finance leases. Lease agreements cover certain office space, warehouse space, and vehicles. Most of these
leases are operating leases; however, certain vehicles are leased under finance leases. Operating leases are included in operating
lease right-of-use assets, current operating lease liabilities, and long-term operating lease liabilities in our consolidated balance
sheets. Finance leases are included in net property, current installments of long-term debt, and long-term debt in our consolidated balance
sheets. Leased assets represent our right to
use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.
Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over
the lease term. Operating lease liabilities and corresponding right-of-use assets include options to extend lease terms that are reasonably
certain of being exercised. As the Company’s leases generally do not provide an implicit discount rate, the Company uses the estimated
collateralized incremental borrowing rate (i.e. 3%) based on information available at the lease commencement date in determining the present
value of lease payments for use in the calculation of the operating lease liabilities and right-of-use assets. This rate is determined
using a portfolio approach based on the risk-adjusted rate of interest and requires estimates and assumptions including credit rating,
credit spread, and adjustments for the impact of collateral. The Company believes that this is the rate it would have to pay to borrow
an amount equal to the lease payments on a collateralized basis over a similar lease term. Leases that have a term of twelve months
or less upon commencement date are considered short-term in nature. Accordingly, short-term leases are not included on the consolidated
balance sheets and are expensed on a straight-line basis over the lease term, which commences on the date we have the right to control
the property.
s) 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.
No advertising and marketing expense for the nine months ended September 30, 2024 and 2023.
t) 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, 2024 and 2023 were $ 42,815 35,823
u) Research and development costs Research and development costs are
expensed as incurred and are included in general and administrative expenses. No research and development costs for the nine months ended
September 30, 2024 and 2023.
v) 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 Chinese subsidiaries is RMB. The functional currency of the Philippine subsidiary
is Peso. 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 (loss). 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.
Schedule of foreign currency translation
Quarter ended September 30, 2024 September 30, 2023
RMB : USD exchange rate 7.1687 7.2308
three months average period ended
HKD : USD exchange rate 7.800 7.800
three months average period ended
PESO : USD exchange rate 57.1429 54.0664
three months average period ended
MYR : USD exchange rate 4.4492 -
three months average period ended
Quarter ended September 30, 2024 September 30, 2023
RMB : USD exchange rate 7.1961 7.0075
nine months average period ended
HKD : USD exchange rate 7.800 7.800
nine months average period ended
PESO : USD exchange rate 55.8077 53.8659
nine months average period ended
MYR : USD exchange rate 4.6194 -
nine months average period ended
Quarter ended September 30, 2024 December 31, 2023
RMB : USD exchange rate 7.0254 7.2632
HKD : USD exchange rate 7.800 7.800
PESO : USD exchange rate 57.1429 54.7368
MYR : USD exchange rate 4.1239 -
w) 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. There
was no stock based compensation in the period.
x) 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.
y) 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”.
z) Recent accounting pronouncements In November 2023, the Financial Accounting
Standards Board (FASB) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07),
which requires an enhanced disclosure of significant segment expenses on an annual and interim basis. This guidance will be effective
for the annual periods beginning the year ended December 31, 2024, and for beginning January 1, 2025. Early adoption is permitted. Upon
adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. We do not expect
the adoption of this guidance to have a material impact on our consolidated financial statements. In December 2023, the FASB issued ASU
No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income
tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation
and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income
tax disclosures. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. Early adoption is
permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. We do not expect the adoption of this guidance
to have a material impact on our consolidated financial statements. In July 2023, the FASB issued Proposed
ASU No. 2023-ED500, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation
of Income Statement Expenses, which aims to provide investors with more useful information about an entity’s expenses by improving
disclosures on income statement expenses. The amendments in this Proposed ASU would require public business entities to disclose disaggregated
information about specific categories underlying certain income statement expense line items. The Company is evaluating this proposed
accounting standard. 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. |
