EDGAR 10-K Filing

Company CIK: 819926
Filing Year: 2021
Filename: 819926_10-K_2021_0001213900-21-021884.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
Currently, we are engaged in the sharing economy businesses.
On December 27, 2019 the Company acquires full ownership of ECrent Worldwide Company Limited to develop a global platform of P2P sharing of items and services.
On December 30, 2020 the Company and former shareholders of Jebe mutually agreed to terminate the Acquisition Agreement. As a result, the Company concluded it was no longer the primary beneficiary of Jebe.
With the market situation of the global sharing economy markets, we continued to pursue what we believe are high growth opportunities for the Company, particularly our new business divisions focused on the development of sharing economy platforms and related rental businesses within the company. These initiatives are still in an early stage and are dependent in large part on availability of capital to fund their future growth. We did not generate significant revenues from our sharing economy business initiatives in 2020. COVID-19 has caused the global consumer behavior changes in 2020, which affects P2P sharing development. While the world is implanting vaccination for COVID-19, we believe P2P sharing activities will resume during the second half of 2021.
Listing Status
On November 26, 2018, we received a staff determination notice from The Nasdaq Stock Market (“Nasdaq”) informing the Company that as a result of its failure to comply with Nasdaq’s shareholder approval requirements set forth in Listing Rule 5635(c) (the “Rule”), the staff determined to deny the Company’s request for continued listing based on a plan of compliance submitted on October 26, 2018. Our common stock was delisted from Nasdaq at the open of trading on December 5, 2018. Our common stock is currently trading on the OTC Markets under the symbol “SEII.”
Organization
We are a Nevada corporation. We were incorporated in Delaware on June 24, 1987 under the name Malex, Inc. We changed our corporate name to China Wind Systems, Inc. on December 18, 2007. On June 13, 2011, we changed our corporate name to Cleantech Solutions International, Inc. On August 7, 2012, we were converted into a Nevada corporation. On January 8, 2018, Nasdaq approved our corporate name change to Sharing Economy International Inc.
The Company’s main business initiatives are focused on targeting the technology and global sharing economy markets, by developing online platforms and rental business partnerships that will drive the global development of sharing through economical rental business models.
The following table sets forth our relationship our subsidiaries and the variable interest entities whose financial statements are consolidated with ours.
Name of Entity
Relationship to Us
Nature of Business
Sharing Economy International Inc.
N.A.
Holding company
Vantage Ultimate Limited (“Vantage”), a British Virgin Island (“BVI”) company
100% owned by us
Holding company
EC Assets Management Limited, a BVI company
100% owned by Vantage
Operates real estate and property management business
EC Rental Limited (“EC Rental”), a BVI company
100% owned by Vantage
Holding company
EC Power (Global) Technology Limited (“EC Power”), a BVI company
100% owned by EC Rental
Holding company
ECPower (HK) Company Limited, a HK company
100% owned by EC Power
Operates rental stations offering power banks for mobile charging on-demand and other items
Sharing Economy Investment Limited (“Sharing Economy”), a BVI company
100% owned by Vantage
Holding company and provision of management services
Global Bike Share (Mobile App) Limited, a BVI company
100% owned by Sharing Economy
Operates global bike sharing mobile app business
EC Advertising Limited (“EC Advertising”), a HK company
100% owned by Sharing Economy
Operates online media and advertising business
Xiamen Great Media Company Limited, a WFOE in the PRC
100% owned by EC Advertising
Operates marketing and advertising business, the business has not yet commenced
G-Coin Global Limited
100% owned by EC Advertising
Investment holding
Cleantech Solutions Limited (formerly known as EC (Fly Car) Limited), a BVI company
100% owned by Sharing Economy
Operates business that builds parts for flying car manufacturers, the business has not yet commenced
EC Manpower Limited, a HK company
100% owned by Vantage
Provision of consulting and office support services to group companies
EC Technology & Innovations Limited
(“EC Technology”), a BVI company
100% owned by Vantage
Holding company and provision of management services
Inspirit Studio Limited, a HK company
51% owned by EC Technology
Develops and operates a sharing economy mobile platform for courier services
3D Discovery Co., Limited, a HK company
100% owned by EC Technology
Develops an interactive virtual tour of a physical space using a mobile phone camera
EC Creative Limited (“EC Creative”), a BVI company
100% owned by Vantage
Holding company and provision of management services
Sharing Film International Limited, a HK company
100% owned by EC Creative
Production of films
Peak Equity International Limited (“Peak Equity”), a BVI company
100% owned by Vantage
Holding company
Universal Sharing Limited, a BVI company
100% owned by Peak Equity
Sales and marketing in Hong Kong
ECrent Worldwide Company Limited, a HK company
100% owned by Peak Equity
Operation of online platform in Hong Kong
ECrent Capital Holdings Limited, a BVI company
100% owned by Peak Equity
Licensing service
Our executive offices located at Cornwall Centre, No.85 Castle Peak Road, Castle Peak Bay, Tuen Mun, N.T., Hong Kong, telephone (852) 2583 2186.
Our website is www.seii.com. Information on our website or any other website does not constitute a part of this annual report.
Our Sharing Economy Business
Beginning in the second quarter of 2017 and throughout 2018, we established new business divisions to focus on the development of sharing economy platforms and related rental businesses. We believe a true peer-to-peer sharing economy based on rentals will take significant market share in both the business and consumer markets over the next few years.
Sharing economy business models are hosted through digital platforms that enable more precise, real-time measurement of spare capacity and have the ability to dynamically connect that capacity with those who need it. These digital platforms handle transactions that offer access over ownership through renting, lending, subscribing, reselling, swapping or donating. Consumers who use sharing economy business models are often more comfortable with transactions that involve deeper social interactions than traditional methods of exchange.
We have been exploring possible merger and acquisition opportunities that can bring to market more user-friendly platforms and convenient channels that allow people to rent what they need and make their lives easier. We are currently emphasizing the following areas:
On Demand Services
The ways people work and how services are provided has been changing, and there is a growing need for short-term services and workforces in the market. In December 2017, we acquired a 51% interest in Inspirit Studio Limited, which is engaged in developing a mobile app platform which provides instant errand services in a peer to peer model. BuddiGo, is our new mobile sharing platform that allows users to outsource daily chores and mundane tasks to “Buddies” who can spare idle time to run errands. According to iimediaResearch, the number of users participating in the peer-to-peer delivery sharing market in China has grown from 124 million in 2014 to 231 million in 2016, and experts expect it to grow to 353 million by the end of 2018.
During the year, BuddiGo, continuously promoted its service to the local market in Hong Kong. BuddiGo offers a wide range of errand services. Currently, about 80 percent of the orders received are for on-demand urgent delivery of items such as documents, flowers and cakes. Food delivery services are also available. During 2018, over 1,200 individuals have officially registered as sell-side buddies, who completed over 500 delivery orders in 2018, majority orders were happened in the third quarter. In addition, BuddiGo has signed up with a number of local business partners to provide ongoing delivery services for these clients. BuddiGo’s goal is to connect with the community and deliver localized content featuring BuddiGo’s core features and advantages. BuddiGo is actively seeking strategic investors or collaborative parties who are enthusiastic about its business model and can help achieve its business targets and expand into different countries.
Coworking and Coliving Development
According to Small Business Labs, the number of coworking spaces globally will exceed 30,000 by 2022, with over 5.1 million people utilizing coworking spaces. We are entering this market through partnerships and affiliations with current coworking and coliving space operators, including our recent acquisition of Anyworkspace.com, an online, real-time marketplace that connects workspace providers with clients who need temporary office and meeting spaces. In 2018, AnyWorkspace focused on enlarging its exposure to the general public. We are currently revamping AnyWorkspace’s corporate website, www.anyworkspace.com. AnyWorkspace will also focus on digital marketing activities for its market expansion plans when there is available cash flow or funds from investors.
Given the existing coworking spaces providers marketing their available spaces and managing individual online business platform themselves, we expect our current global online platform will take years to materialize its worldwide customer base. Therefore, the intangible asset amounted to $0.6 million (equivalent to HK$4.97 million) representing the online platform acquired has been fully impaired in the last quarter of 2018.
Technology Development
In January 2018, we acquired a 60% interest in 3D Discovery, an IT service provider that develops virtual tours for the real estate, hospitality and interior design industries. 3D Discovery’s space capturing and modeling technology is already used by some of Hong Kong’s leading property agencies to provide their clients with a truly immersive, first-hand experience of a physical space while saving them time and money. According to Goldman Sachs, the Real Estate virtual reality (“VR”) industry is predicted to reach US$2.6 billion in 2025, supported by a potential user base of over 1.4 million registered real estate agents in some of the world’s largest markets. Apart from its existing profitable operations, 3D Discovery is developing a mobile app, Autocap, which allows users to create an interactive virtual tour of a physical space by using a mobile phone camera.
3D Discovery successfully completed a number of projects during the year. First, its “3D Virtual Tours in Hong Kong” generated about 1,371,000 impressions in 2018. In addition, 3D Discovery partnered with Midland Realty, one of the largest real estate agencies in Hong Kong, to establish the “Creation 200 3D Virtual Tours.” This business unit generated $215,000 in revenue in 2018.
We have established both in-house engineering teams and engaged with external technology partners and advisors to develop a common underlying information and transaction platform which can be used by different sharing economy vertical applications. Our technical teams and partners include experts in blockchain, artificial intelligence, big data, digital imaging and video technologies, eCommerce and UI/UX, among others. We are working with our partners to develop SEII’s “Sharing Blocks,” a blockchain-based platform which provides functions for secured user profile information and transaction records through a “Blockchain as a Service” (BaaS) model, allowing third-party sharing economy applications to utilize and build a global consolidated and trustworthy sharing economy ecosystem. Our development team has completed the core engine development of “Sharing Blocks” and now undergoing system tests to ensure system performance, data integrity and accuracy, and security are all performing as expected.
In August 2017, we signed an agreement with ECoin Global Limited (“ECoin”) for the future purchase of ECoin redemption codes with an aggregate value of $50 million for total consideration of $20 million. We plan to resell the redemption codes in the form of ECrent gift cards at global locales through reseller channels, such as convenience stores. We are working with InComm, a global pre-payment network and solution provider, to sell the redemption codes with face values of HK$100, HK$300 and HK$500 at major convenience store networks in Hong Kong and Macau with other international locations to follow. On December 20, 2018, the agreement was terminated without recourse to the company. No sales were made under the agreement.
Sharing Communities
Because the sharing economy is predicated on the trust of all participants, we believe the best way to establish sharing behaviors is within communities. We are currently working with ECrent Capital Holdings Limited (“ECrent”), a private company incorporated in the British Virgin Islands focused on developing and operating a global rental platform to promote sharing economy across 30 countries and regions.
Asia Region:
In 2018, our subsidiary SEIL entered into a license agreement with ECRENT, regarding the grant of an exclusive and sub-licensable license from ECRENT to SEII to utilize certain software and trademarks in order to develop, launch, operate, commercialize, and maintain an online website platform in Taiwan, Thailand, India, Indonesia, Singapore, Malaysia, Philippines, Vietnam, Cambodia, Japan, and Korea. According to the latest amendment, ECRENT will guarantee that the operation of its related websites, mobile applications and business services will contribute revenue of US$13,000,000 (increased from US$10,000,000 according to the previously amended agreement) and gross profit of US$2,522,000 (up from US$1,940,000 as stated on the previously amended agreement) from the closing date of the License Agreement through December 31, 2019 (extended from June 30, 2019 per the previously amended agreement).
In August 2018, SEIL has entered into a License Agreement with PTI Corporation (“PTI”), that sublicenses SEIL’s exclusive license with ECRENT to utilize certain software and trademarks in order to develop, launch, operate, commercialize, and maintain an online website platform in South Korea. In return, PTI shall pay to SEIL $230,000 (“Consideration”). The License Agreement will be effective on September 1, 2018 through December 31, 2019. In addition, if the aggregate revenue during the period exceeds the Consideration, SEIL shall receive 30% of the difference between the aggregate revenue and the Consideration. During the third quarter of 2018, PTI commenced prelaunch activities to develop the platform.
On December 27, 2019, the Company acquired 100% equity interest of ECRENT, through Peak Equity International Limited in the consideration 7,200,000,000 shares of the Company’s common stock, at the price of $0.25, equal to $1,800,000,000.
After acquisition, the Company anticipated the re-organization of resources and its expansion plan across the Asian region.
Europe Region:
In August 2018, our subsidiary SEIL entered into a License Agreement with ECRENT regarding the grant of an exclusive and sub-licensable license from ECRENT to SEII to utilize certain software and trademarks in order to develop, launch, operate, commercialize, and maintain an online website platform in United Kingdom, Germany, France, Poland, Switzerland, Netherlands, Denmark, Russia, Italy, Spain, Portugal and Greece. In return, SEII shall issue to ECRENT 360,000 shares of restricted common stock. Closing of this transaction was conditioned on various conditions, including receipt of all necessary regulatory approvals. On October 9, 2018, the agreement was terminated by the parties, who have agreed to forego their respective rights under the agreement.
Proposed Acquisitions
Part of our growth strategy is to seek out potential acquisition targets or business partners to further develop our sharing economy businesses. While we have successfully completed a number of acquisitions over the past two years that we believe will ultimately improve our competitive position in the development of our sharing economy businesses, other proposed acquisitions have been terminated. The following previously announced proposed acquisitions have been terminated for the reasons set forth below:
Target
Contract
Reason for Terminating Contract
Winse Media
Exclusivity Agreement and Non-Disclosure Agreement entered into on March 8, 2018
The parties could not agree on the key terms including the pricing.
Ecoin Development Ltd
Letter of Intent entered into on September 7, 2017
The exclusive period lapsed.
Pandoodle
Entered into an Exclusivity Agreement dated February 8, 2018
The parties have decided to discontinue negotiations.
Icon Property Limited
Entered into MOU on March 14, 2018
The period allowed for the parties to enter into a definitive agreement has expired.
Oob Media HK
Entered into Exclusivity Agreements on May 10, 2018 and June 26, 2018
The parties have decided to discontinue negotiations.
Jidam
Entered into an Exclusivity Agreement dated June 29, 2018
The parties have decided to discontinue negotiations.
Shenzhen Xinsheng New Energy
Entered into a non-binding MOU on November 7, 2017
After further evaluation of the business, we concluded that the likely return did not justify the cost.
Shanghai Hong Chuan Culture Promulgation Co., Limited
Entered into an Exclusivity Agreement on December 21, 2017
The parties could not come to an agreeable acquisition price.
Channel Power Touch Media & EC Adv.
Entered into an Exclusivity Agreement on January 4, 2018
Channel Power’s business was closed during negotiations.
Quik Ventures
Entered into an Exclusivity Agreement on January 10, 2018
The parties could not come to an agreeable acquisition price.
iMusicTech & EC Tech
Entered into a non-binding MOU on January 18, 2018
After further evaluation of the business, we concluded that the likely return did not justify the cost.
JoGeep
Entered into an Exclusivity Agreement on January 29, 2018
Due diligence materials were not provided to our satisfaction.
Weiying Mtel & EC Tech
Entered into an Exclusivity Agreement on February 27, 2018
Target company shareholders decided not to sell the business during negotiations.
ECoin Global Limited
Entered into Transfer Agreement on August 4, 2017
Mutually agreed not to continue further with the agreement.
Gagfare Limited
Entered Sale and Purchase Agreement on August 17, 2018
Due to significant drop in share price of SEII, mutually agreed to terminate the Agreement.
BM Nine Limited
Entered into Agreement on January 18, 2018
Due to significant drop in share price of SEII, mutually agreed to terminate the Agreement.
ECRENT Capital Holdings
Entered into Exclusivity Agreement on June 11, 2017
After taking significant time of discussions and negotiation, mutually agreed to not proceeding further at this moment.
ECRENT Capital Holdings
Entered into License Agreement on August 16, 2018 covering Europe region
All necessary regulatory approvals were not met, thereon the Agreement was terminated.
Ever-Long Holdings Limited
Entered conditional share swap agreement on December 6, 2017
Conditions under the entered into between the parties could not be fulfilled per the contract
Marvel Finance Limited
Entered conditional share swap agreement on November 22, 2017
The deadline for completing the legal due diligence and financial due diligence and entering into a definitive agreement lapsed on February 28, 2018.
Marketing and Distribution
Our sharing economy businesses are still in a very early stage of development. We intend to market and sell our services for these businesses primarily through online media advertising. Online marketing consists of search engine marketing, display advertisements, referral programs and affiliate marketing. We have established a business unit, EC Advertising Limited, to support these endeavors. EC Advertising will provide resources to support the marketing needs of the sharing economy businesses via partnerships and acquisitions of advertising companies.
Growth Strategies
In 2017, we began studying and acquiring sharing economy platforms in different market disciplines. Following these efforts, we are now grouping our sharing economy markets in verticals such as coworking and co-living communities, on-demand peer-to-peer services, and other sharing communities.
We believe further mergers and acquisitions have the potential to grow the Company rapidly and aggressively in new market opportunities, technology, products and platforms. We will continue targeting the technology and global sharing economy markets, by developing online platforms and rental business partnerships that will drive the global development of sharing through economical rental business models.
Competition
The global sharing economy continues to evolve, and we face competition from technology companies, both large and small, throughout the world. The Company aims to become a pioneer in the development of sharing economy solutions. The group is developing different sharing economy applications with a common user and transaction processing engine, which will become a sharing economy ecosystem for the convenience of users as well as allowing the group to effectively share technologies and business data. Our different sharing economy solutions will have the ability to collaborate with each other, allowing us to provide one-stop combined solutions to the market. We believe the ability to leverage and collaborate between our different sharing businesses will increase our market competitiveness.
Source of Supply
In our sharing economy business, IT development resources are crucial for the near-term development of our sharing platforms. We are in the process of signing fixed man-day service contracts with our external development consultants to ensure the availability of IT development resources under a fixed pricing scheme for the near future. We will continue to expand our IT development support resources cross regionally to avoid the dependency on a single or small number of sources.
Research and Development
In our sharing economy business, we have established both in-house engineering teams and engaged with external technology partners and advisors to develop a common underlying information and transaction platform which can be used by different sharing economy vertical applications. Our technical teams and partners include experts in blockchain, artificial intelligence, big data, digital imaging and video technologies, eCommerce and UI/UX, among others. Given the early stage of the sharing economy business, we did not incur any R&D expenses in 2020 and 2019. We expect this to increase in 2021 as we work on building this business and the associated IT and transaction platforms.
Government Regulations
Environmental Regulations
Environmental commitments from the global communities will continue to help the development of sharing economy businesses in the coming years.
Business Licenses
We believe our sharing economy businesses are properly licensed with the appropriate government entities. However, because BuddiGo’s business model provides inner-city peer-to-peer delivery services, we could be identified as a member of the logistics industry by the governments of some countries where we conduct business. This could trigger additional licensing requirements.
Intellectual Property Rights
We intend to apply for more patents to protect our core technologies. We also have confidentiality and non-competition policies in place as part of our company employment guideline which is given to each employee, and we enter into nondisclosure agreements with third parties. However, we cannot assure you that we will be able to protect or enforce our intellectual property rights.
Employees
Sharing Economy Business
As of July 14, 2020, we had ten employees and several consultants who are engaged with us either individually or as a business entity.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment decision, and you should only consider an investment in our common stock if you can afford to sustain the loss of your entire investment. You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities. If any of the following risks occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to Our Business
For the year ended December 31, 2020, we incurred losses from continuing operations of $8 million, we cannot assure you that our losses will not continue and we believe that these matters raise substantial doubt about our ability to continue as a going concern for twelve months from the issuance date of this report.
Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in our accompanying consolidated financial statements, we had a loss from continuing operations of $8 million for the year ended December 31, 2020. Management believes that these matters, among others, raise substantial doubt about our ability to continue as a going concern for twelve months from the issuance date of this report. Management cannot provide assurance that we will ultimately achieve profitable operations or generate positive cash flow, or raise additional debt and/or equity capital. Management believes that our capital resources are not currently adequate to continue operating and maintaining our business strategy for twelve months from the date of this report.
We may seek to raise capital through additional debt and/or equity financings to fund our operations in the future. Although we have historically raised capital from sales of equity and from bank loans, there is no assurance that we will be able to continue to do so. If we are unable to raise additional capital or secure additional lending in the near future, management expects that we will need to curtail or cease operations. Our consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Our auditors have issued a “going concern” audit opinion.
Our independent auditors have indicated in their report on our December 31, 2020 consolidated financial statements that there is substantial doubt about our ability to continue as a going concern. We incurred loss from continuing operations and revenues decreased significantly. These conditions raise substantial doubt about our ability to continue as a going concern for the next twelve months from the issuance date of this report. We cannot provide assurance that we will ultimately achieve profitable operations or continue to be cash flow positive, or raise additional debt and/or equity capital. Management believes that our capital resources are not currently adequate to continue operating and maintaining our business strategy for twelve months from the date of this report.
We will require additional funds to expand our operations.
In view of both our decline in revenues, our loss from continuing operations for 2020 and 2019, and in connection with any expansion projects for our business, we will incur significant capital and operational expenses. We do not presently have any funding commitments other than our present credit arrangements which we do not believe are sufficient to enable us to expand our business. If we are unable to generate cash flow from operations and obtain necessary bank or other financing to pay for significant capital or operational expenses, we may be unable to finance our business, which may impair our ability to operate profitably. Because of our stock price and the worldwide economic situation, we may not be able to raise any additional funds that we require on favorable terms, if any. The failure to obtain necessary financing may impair our ability to expanse or business and remain profitable.
We rely on short term financing to fund our operations.
We have historically financed our operations through short-term bank loans, which have been refinanced upon maturity. At December 31, 2020, we had outstanding short-term bank loans of $6.4 million. We cannot assure you that we would be able to obtain alternative financing in the event that our lenders did not renew our short-term loans. Our failure to have the bank loans refinanced could materially impair our ability to operate our business.
You may suffer significant dilution if we raise additional capital.
If we need to raise additional capital to expand or continue operations, it may be necessary for us to issue additional equity or convertible debt securities. If we issue equity or convertible debt securities, our net tangible book value per share may decrease, and the percentage ownership of our current stockholders would be diluted, and any equity securities we may issue may have rights, preferences or privileges senior or more advantageous to our common stockholders.
Risk related to our Sharing Economy Businesses
Our Sharing Economy Businesses are in early-stage development with a limited operating history and a relatively new business model, which makes it difficult to evaluate our current business and future prospects and may increase the risk of your investment.
We started our business transition and operations in June 2017. Our limited operating history and relatively new business model may make it difficult to evaluate our current business and our future prospects. We have encountered and will continue to encounter risks and difficulties frequently experienced by companies in a rapidly changing market, including challenges in accurate financial planning and forecasting. We may not be able to successfully address these risks and difficulties, which could materially harm our business and operating results and financial condition. You should consider our business and prospects in light of the risks and difficulties we may encounter as an early-stage company.
Our operating results may fluctuate.
Our operating results may fluctuate as a result of a number of factors, many of which are beyond our control. The following factors may affect our operating results:
● Our ability to compete effectively.
● Our ability to continue to attract users to our platforms.
● The level of use of the Internet to look for rental and services information.
● Our ability to attract companies and individuals to pay in order to generate income from our platforms.
● Our focus on long term goals and short term results.
● Our ability to keep the platforms operational at a reasonable cost and without service interruptions.
● The success of our geographical and product expansion.
● Our ability to attract, motivate and retain top-quality employees.
● Federal, state or local government regulation that could impede the availability of products and services for which our platforms rendered.
● Our ability to upgrade and develop new products and services.
● The costs and results of litigation that we may face.
● Our ability to manage rental advertisement quality and other activities that violate our terms of services.
● Our ability to successfully expand, integrate and manage our acquisitions.
● Geographical events such as war, threat of war, terrorist actions or natural disasters.
Because our business is changing and evolving, our current operating results may not be useful to you in predicting our future operating results. In addition, online sharing economy markets have recently emerged, which may not provide you with relevant industry data for evaluating our business.
For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on past results as an indication of future performance. Quarterly and annual expenses as a percentage of net revenues may be significantly different from historical or projected rates. Our operating results in future quarters may fall below expectations, which could cause our stock price to fall.
If we do not continue to innovate and provide products and services that are useful to users, we may not remain competitive, and our operating results could suffer.
Our success depends on our ability to provide products and services to users looking for a high quality rental and services experience. Our competitors are constantly developing innovations in rental classified or transaction services to people. As a result, we must continue to invest significant resources in research and development in order to enhance our products and services, and introduce new high-quality products and services that people will use. If we are unable to predict user preferences or industry changes, or if we are unable to modify our products and services on a timely basis, we may lose users. Our operating results would also suffer if our innovations are not responsive to the needs of our users and advertisers, are not appropriately timed with market opportunity or are not effectively brought to market. As web and mobile application technology continues to develop, our competitors may be able to offer matching and communication features that are, or that are perceived to be, substantially similar or better than those generated by our platform and application services. This may force us to compete on bases other than quality of products and services and to expend significant resources in order to remain competitive.
Our business depends on a successful change in consumer behavior, and if such trend does not grow, our business and operating results would be harmed.
The growth and adaptation of sharing economy is a major factor for our platform to attract more users and advertisers. If the trend of sharing economy does not grow as predicted by the market, this will affect our business and operating results. As a result, we may need to change our business model accordingly.
If we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively.
Our performance will largely be dependent on the talents and efforts of highly skilled individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. Competition in our industry for qualified employees is intense. If we do not succeed in attracting excellent personnel or retaining or motivating existing personnel, we may be unable to grow effectively.
System failures could harm our business.
Our systems are vulnerable to damage or interruption from earthquakes, hurricanes, terrorist attacks, floods, fires, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our system, and similar events. Some of our data centers are located in areas with high risk of major earthquakes. Our data centers are also subject to break-ins, sabotage and international acts of vandalism, and to potential disruptions if the operators of these facilities have financial difficulties. Some of our systems are not fully redundant. The occurrence of a natural disaster, a decision to close a facility we are using without adequate notice or other unanticipated problems at our data centers could result in lengthy interruptions in our service. Any damage to or failure of our systems could result in interruptions in our service. Interruptions in our service could reduce our revenues and profits, and our brand could be damaged if people believe our system is unreliable.
Acquisitions could result in operating difficulties, dilution and other harmful consequences.
We have evaluated, and expect to continue to evaluate, a wide array of potential strategic transactions. From time to time, we may engage in discussions regarding potential acquisitions. Any of these transactions could be material to our financial condition and results of operations. In addition, the process of integrating an acquired company, business or technology may create unforeseen operating difficulties and expenditures and is risky. The areas where we may face risks include:
● The need to implement or remediate controls, procedures and policies appropriate for a larger public company at companies that prior to the acquisition lacked these controls, procedures and policies.
● Diversion of management time and focus from operating our business to acquisition integration challenges.
● Cultural challenges associated with integrating employees from the acquired company into our organization.
● Retaining employees from the businesses we acquire.
● The need to integrate each company’s accounting, management information, human resource and other administrative systems to permit effective management.
Also, the anticipated benefit of many of our acquisitions may not materialize. Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill, any of which could harm our financial condition. Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on favorable terms or at all.
As a distributor and host of Internet content, we will face potential liability and expense for legal claims based on the nature and content of the materials that we distribute or create, or that are accessible via our website.
As a distributor and host of original content and user-generated content, we will face potential liability based on a variety of theories, including defamation, libel, negligence, copyright or trademark infringement or other legal theories based on the nature, creation or distribution of this information, and under various laws, including the Lanham Act, the Copyright Act, the Federal Trade Commission Act, the Digital Millennium Copyright Act, Section 230 of the Communications Decency Act, and the European Union E-Commerce Directive. We may also be exposed to similar liability in connection with content that users post to our website through forums, blogs, comments, and other social media features. In addition, it is possible that visitors to our websites could make claims against us for losses incurred in reliance upon information provided via our websites. These claims, whether brought in the United States or abroad, could divert management time and attention away from our business and result in significant costs to investigate and defend, regardless of the merit of these claims. If we become subject to these or similar claims and are not successful in our defense, we may be forced to pay substantial damages. There is no guarantee that we will avoid future liability and potential expenses for legal claims based on the content available on our website. Should the content distributed through our website violate the rights of others or otherwise give rise to claims against us, we could be subject to substantial liability, which could have a negative impact on our business and financial performance.
Loss of trust in our brand would harm our reputation and adversely affect our business, financial condition and results of operations. Our success depends on attracting a large number of users to our website and retaining such users. In order to attract and retain users, we must remain a valuable source of listings. Because of our reliance on user-generated content, we must continually manage and monitor our content and detect incorrect or fraudulent information. If a significant amount of inaccurate or fraudulent information were not detected and removed by us in a timely manner, or if a significant amount of information was deemed by users or the media to be inaccurate or fraudulent, our brand, business and reputation could be harmed. Any damage to our reputation could harm our ability to attract and retain users, employees and advertisers, which would adversely affect our business and financial performance. In addition, significant adverse news reports or media, industry or consumer coverage of us would reflect poorly on our brands and could have an adverse effect on our business and financial performance.
We are subject to risks associated with information disseminated through our services.
Online services companies may be subject to claims relating to information disseminated through their services, including claims alleging defamation, libel, breach of contract, invasion of privacy, negligence, copyright or trademark infringement, among other things. The laws relating to the liability of online services companies for information disseminated through their services are subject to frequent challenges both in the United States and foreign jurisdictions. Any liabilities incurred as a result of these matters could require us to incur additional costs and harm our reputation and our business.
Our potential liability to third parties for the user-provided content on our sites, particularly in jurisdictions outside the United States where laws governing Internet transactions are unsettled, may increase. If we become liable for information provided by our users and carried on our service in any jurisdiction in which we operate, we could be directly harmed and we may be forced to implement new measures to reduce our exposure to this liability, including expending substantial resources or discontinuing certain service offerings, which could harm our business.
Failure to deal effectively with fraudulent activities on our platforms would increase our loss rate and harm our business, and could severely diminish merchant and consumer confidence in and use of our services.
We face risks with respect to fraudulent activities on our platforms and periodically receive complaints from users who may not have received the rental items or services or payment for the items or services. While we can, in some cases, suspend the accounts of users who fail to fulfill their payment or delivery obligations to other users, we do not have the ability to require users to make payment or deliver rental items or services, or otherwise make users whole. Although we plan to implement measures to detect and reduce the occurrence of fraudulent activities, combat bad user experiences and increase user satisfaction, including evaluating users on the basis of their transaction history and restricting or suspending their activity, there can be no assurance that these measures will be effective in combating fraudulent transactions or improving overall satisfaction among users. Our failure to effectively deal with fraudulent activities on our platform could result in a reduction in the ability to attract new users or retain current users, damage to our reputation, or a diminution in the value of our brand names.
Our BuddiGo Business
BuddiGo leverages a mobile payment solution that may affect BuddiGo’s short-term income
BuddiGo fully embeds a mobile payment solution as its major payment method. However, mobile payments have not yet been fully adopted by consumers in the targeted South East Asia markets, although recent statistics reveal a growing trend of mobile payment usage. Late adoption of mobile payments may possibly influence BuddiGo’s income in the short term.
Changes of government policy and regulations
Supported by a technology platform, BuddiGo provides instant delivery and logistics services by freelance idle human resources within the community. BuddiGo might be identified as a member of the logistics industry by the governments of some countries where we conduct business, which may cause necessary licensing requirements. Despite the majority of similar models that are widely authorized in U.S. and cities in mainland China, local government policies among South East Asia could influence the eligibility of our operations.
Concerns over the legitimacy of goods delivered via a P2P delivery model could potentially damage our reputation
BuddiGo’s business model is for inner-city peer-to-peer delivery services. As with all logistics and courier companies, there is no absolute policy or mechanism to ensure the legitimacy of goods that are being delivered. BuddiGo takes steps to mitigate this risk by requiring all goods’ senders to be registered with an instant messenger/social media account, credit card and mobile number. We also provide a disclaimer in our terms of use. However, should illegitimate or counterfeit goods be delivered using our platform, this could affect our reputation and adversely impact our business.
BuddiGo grocery purchasing service is susceptible to chargebacks associated with customer disputes, which could impact our relationships with banking and financial partners
BuddiGo provides a grocery purchasing service, whereby freelancers must pay in advance on behalf of the customers they are delivering the items to. As such, the BuddiGo model is susceptible to chargebacks associated with customer disputes. Such disputes could occur due to immoral activity, carelessness and/or misdirection from the buying and/or selling parties. These circumstances could potentially cause chargeback activities that result in the suspension of and blacklisting of our online payment account by certain banking or financial partners.
Shortage of supply forces may cause loss of business
BuddiGo makes use of idle human resources within a community to provide a variety of delivery/purchasing services. The majority of our workforce supply is obtained on a freelance basis and there is potential risk of a shortage of the supply of freelancers in certain circumstances, including an unexpected sudden growth of demand, public holidays and inclement weather. If transactions are not completed, this may raise concerns regarding income stability by our workforce supply.
Our 3D Discovery business
There are technical difficulties yet to be solved for the new space capturing mobile app.
The functionality of the space capturing in 3D Discovery is largely dependent on automatic photo stitching calculation. The nature of photo stitching is such that certain monotonous environment may affect the accuracy of the stitching. We are rectifying these issues by using AI technology and hardware accessories. This may delay the launch date of the mobile app and affect our market expansion plans.
The success of international market expansion of the new 3D Discovery mobile app will depend on our strategic partners in various countries.
Our strategy for 3D Discovery on international market expansion will be through partnerships and franchises. If we fail to manage/set standards to potential partners/franchisees, it can lower/delay our market penetration rate.
If we are unable to attract, train and retain technical and financial personnel, the 3D Discovery business may be materially and adversely affected.
Our future success of 3D Discovery depends, to a significant extent, on our ability to attract, train and retain technical personnel. Recruiting and retaining capable personnel, particularly those with expertise in our industries and in the industries to which we market, are vital to our success. There is substantial competition for qualified technical and financial personnel, and there can be no assurance that we will be able to attract or retain our technical personnel. If we are unable to attract and retain qualified employees, our business may be materially and adversely affected.
Our failure to protect our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights or defend against third-party allegations of infringement may be costly.
We rely primarily on technology secrets and contractual restrictions to protect our intellectual property. Nevertheless, these afford only limited protection and the actions we take to protect our intellectual property rights may not be adequate and we may not be able to protect our intellectual property under the laws of various countries. As a result, third parties may infringe or misappropriate our proprietary technologies or other intellectual property rights, which could have a material adverse effect on our business, financial condition or operating results. In addition, policing unauthorized use of proprietary technology can be difficult and expensive. Litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others and the enforcement of intellectual property rights in some countries may be difficult. We cannot assure you that the outcome of any litigation will be in our favor. Intellectual property litigation may be costly and may divert management attention as well as expend our other resources away from our business. An adverse determination in any such litigation will impair our intellectual property rights and may harm our business, prospects and reputation. In addition, we have no insurance coverage against litigation costs and would have to bear all costs arising from such litigation to the extent we are unable to recover them from other parties. The occurrence of any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.
3D Discovery faces intense competition from companies that have greater resources than we do, we may not be able to compete successfully and we may lose or be unable to gain market share.
The markets for 3D Discovery products are intensely competitive. Many of our competitors have established more prominent market positions as well as existing relationship with potential customers, and if we fail to attract and retain customers and establish successful distribution networks in our target markets for our products, we will be unable to increase our sales. Many of our existing and potential competitors have substantially greater financial, technical and other resources than we do. Our competitors’ greater size in some cases provides them with a competitive advantage with respect to development and operational costs because of their economies of scale. Many of our competitors also have greater brand name recognition, more established distribution networks and larger customer bases. As a result, they may be able to devote greater resources to the research, development, promotion and sale of their products or respond more quickly to evolving industry standards and changes in market conditions than we can. Our failure to adapt to changing market conditions and to compete successfully with existing or new competitors may materially and adversely affect our financial condition and results of operations. Further, from time to time, we have had to adjust the prices of our services to remain competitive.
Risks Related to our Common Stock
Our stock price has been and may continue to be volatile.
The trading price of our common stock has been and is expected to continue to be highly volatile as well as subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include:
● Quarterly variations in our results of operations.
● Announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments.
● Our ability to develop and market new and enhanced products on a timely basis.
● Our ability to generate income from Shengxin.
● Changes in governmental regulations or in the status of our regulatory approvals.
● Changes in earnings estimates or recommendations by securities analysts.
● Market reaction to problems encountered by other Chinese companies that became public companies in the United States through the reverse merger process.
● Market reaction to reports written by investors about us and about Chinese companies in general.
● General economic conditions and slow or negative growth of related markets.
These broad market and industry factors may seriously affect the market price of our Common Stock, regardless of our actual operating performance.
Our common stock is quoted on the OTC Pink, which may limit the liquidity and price of our common stock more than if our common stock were listed on the Nasdaq Stock Market or another national exchange.
Our securities are currently quoted on the Over-the-Counter Markets, specifically the OTC Pink (the “OTC Pink”), an inter-dealer automated quotation system for equity securities. Quotation of our securities on the OTC Pink may limit the liquidity and price of our securities more than if our securities were listed on the Nasdaq Stock Market or another national exchange. As an OTC Pink company, we do not attract the extensive analyst coverage that accompanies companies listed on national securities exchanges. Further, institutional and other investors may have investment guidelines that restrict or prohibit investing in securities traded on the OTC Pink. These factors may have an adverse impact on the trading and price of our common stock.
Penny stock regulations may impose certain restrictions on marketability of our securities.
Our common stock is subject to penny stock rules, which may discourage broker-dealers from effecting transactions in our common stock or affect their ability to sell our securities. As a result, purchasers and current holders of our securities could find it more difficult to sell their securities. Trading volume of OTC Pink stocks have been historically lower and more volatile than stocks traded on an exchange or the Nasdaq Stock Market. In addition, we may be subject to rules of the SEC that impose additional requirements on broker-dealers when selling penny stocks to persons other than established customers and accredited investors. In general, an accredited investor is a person with net worth in excess of $1,000,000 or annual income exceeding $200,000 individually, or $300,000 together with his or her spouse. The relevant SEC regulations generally define penny stocks to include any equity security not traded on an exchange or the Nasdaq Stock Market with a market price (as defined in the regulations) of less than $5 per share. Under the penny stock regulations, a broker-dealer must make a special suitability determination as to the purchaser and must have the purchaser’s prior written consent to the transaction. Prior to any transaction in a penny stock covered by these rules, a broker-dealer must deliver a disclosure schedule about the penny stock market prepared by the SEC. Broker-dealers must also make disclosure concerning commissions payable to both the broker-dealer and any registered representative and provide current quotations for the securities. Finally, broker-dealers are required to send monthly statements disclosing recent price information for the penny stock held in an account and information on the limited market in penny stocks.
Our reduced stock price may adversely affect our liquidity.
Our common stock has limited trading history. Many market makers are reluctant to make a market in stock with a trading price of less than $5.00 per share, as well as shares quoted on the OTC Pink. To the extent that we have fewer market makers for our common stock, our volume and liquidity will likely decline, which could further depress our stock price.
If we fail to develop and maintain effective internal controls, our ability to provide accurate financial statements and comply with the requirements of the Sarbanes-Oxley Act of 2002 could be impaired, which could cause our stock price to decrease substantially.
Prior to November 2007, the Huayang Companies operated as private companies without public reporting obligations, and they committed limited personnel and resources to the development of the external reporting and compliance obligations that would be required of a public company. We are continuing to attempt to institute changes to satisfy our obligations in under the Sarbanes-Oxley Act. In Item 9A of this annual report, we report that our disclosure controls and procedures and our internal controls over financial reporting were not effective at December 31, 2017. We are continuing to attempt to institute changes to satisfy our obligations under the Sarbanes-Oxley Act. Any failure of our internal controls or our ability to provide accurate financial statements could cause the trading price of our common stock to decrease substantially.
We intend to issue additional equity and stock options to employees and consultants as compensation in the future, which will result in dilution to existing and new investors.
We provide and intend to continue to provide additional equity-based compensation to our employees, officers, directors, consultants and independent contractors through an equity incentive plan. Our equity incentive plan permits the award of options to purchase shares of common stock and the issuance of restricted shares of our common stock. Because stock options granted under the plan will generally only be exercised when the exercise price for such option is below the then market value of the common stock, the exercise of such options or the issuance of shares will cause dilution to the book value per share of our common stock and to existing and new investors.
We do not anticipate paying any cash dividends.
We presently do not anticipate that we will pay any dividends on any of our capital stock in the foreseeable future. We presently intend to retain all earnings, if any, to implement our business plan; and we do not anticipate the declaration of any dividends in the foreseeable future.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
In Hong Kong, we currently use an office space on a monthly rate.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS.
On or about November 14, 2017, a complaint was filed in the United States District Court for the Eastern District of New York, captioned Morris Ackerman v. Cleantech Solutions International, Inc. The complaint alleged that the Company’s proxy statement, which included a proposal to amend the Company’s long-term incentive plan to provide for the grant of incentive and non-qualified options and stock grants to employees and others, did not comply with the disclosure requirements for proxy statements. The parties reached a confidential settlement on or about December 20, 2017, and the plaintiff voluntarily dismissed the action with prejudice on or about January 2, 2018.
On February 2, 2018, the law firm of Ellenoff Grossman & Schole LLP (“EGS”) filed a complaint against us along with a number of companies and individuals in an effort to recover their legal fees in connection with services provided to the other defendants. The lawsuit contends that we are the alter ego or successor in interest of those other defendants. On April 30, 2018, EGS filed a stipulation of dismissal without prejudice to remove us as a defendant of the complaint.
Save as reported above, we are not a party to any legal proceedings and we are not aware of any claims or actions pending or threatened against us. In the future, we might from time to time become involved in litigation relating to other claims arising from our ordinary course of business.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information.
Our common stock was traded on The NASDAQ Capital Market under the symbol “CLNT” from December 29, 2011 to January 7, 2018 and on January 8, 2018, our trading symbol was changed its symbol to “SEII”. ON December 5, 2018 our common stock was delisted from NASDAQ and now our common stock is quoted on the OTC Pink operated by the OTC Markets Group, under the symbol “SEII.” Trading in OTC Pink stocks can be volatile, sporadic and risky, as thinly traded stocks tend to move more rapidly in price than more liquid securities. Such trading may also depress the market price of our common stock and make it difficult for our stockholders to resell their common stock. Our common stock does not have an established public trading market. The following table sets forth, for the periods indicated, the reported high and low closing bid quotations for our common stock by calendar quarters during 2020 and 2019. These prices reflect inter-dealer quotations, do not include retail markups, markdowns or commissions and do not necessarily reflect actual transactions.
High
Low
High
Low
First quarter
$ 18.50
$ 18.50
$ 0.45
$ 0.10
Second quarter
$ 10.00
$ 8.50
$ 0.54
$ 0.12
Third quarter
$ 5.50
$ 5.50
$ 0.49
$ 0.17
Fourth quarter
$ 0.05
$ 0.03
$ 0.48
$ 0.11
On March 26, 2021, the last sale price of our common stock as reported by OTC Markets was $0.04 per share.
Shareholders
As of January 15, 2021, we had approximately 1,231 record holders of our common stock.
Transfer Agent
The transfer agent for the common stock is Empire Stock Transfer Inc. The transfer agent’s address is 1859 Whitney Mesa Dr., Henderson, Nevada 89014, and its telephone number is (702) 818-5898.
Dividend Policy
We have not paid cash dividends on our common stock since we became public through reverse acquisition. We intend to keep any future earnings to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future.
Equity Compensation Plan Information
The following table summarizes the equity compensation plans under which our securities have been or may be issued as of December 31, 2020.
Plan Category Number of securities to be issued upon exercise of outstanding options and warrants Weighted-
average exercise price of outstanding options and warrants
Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders $ 0
Equity compensation plan not approved by security holders $ 0
In September 2016, the Company’s board of directors adopted, and in November 2016, the stockholders approved the Company’s 2016 long-term incentive plan, which covers 125,000 shares of common stock. As of December 31, 2020, there were no shares of common stock available for issuance pursuant to the 2016 plan.
We did not have any equity compensation plans that were not approved by stockholders.
Unregistered Sales of Equity Securities and Use of Proceeds
All unregistered sales of equity securities during financial year ended December 31, 2020 have been previously disclosed in filings made by the Company with the United States Securities and Exchange Commission.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA
As a smaller reporting company, we are not required to provide the information called for by Item 6 of Form 10-K.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
The Company has turned fully into developing the sharing economy businesses in 2020. Unfortunately the COVID-19 situation has created adverse market conditions to sharing economy due to the changes in consumer and business market behaviors.
Governments around the world has further commitment to the environmental protections, so we still believe in the future development of sharing economy. The company is in the process of changing the business models on our sharing economy platforms so they fit to the changed market behaviors and be continued to expand our markets.
The company plans to expand into the Asia and U.S. markets in 2021.
Recent developments
Inspirit Studio
During the period, BuddiGo, the sharing economy mobile platform developed by Inspirit Studio Limited (“Inspirit Studio”), continuously promoted its service to the local market in Hong Kong. BuddiGo offers a wide range of errand services. Currently, about 80 percent of the orders [to be updated] received are for on-demand urgent delivery of items such as documents, flowers and cakes. Food delivery services are also available. During 2018, over 1,200 individuals have officially registered as sell-side buddies, who completed over 500 delivery orders in 2018, majority orders were happened in the third quarter. In addition, BuddiGo has signed up with a number of local business partners to provide ongoing delivery services for these clients. BuddiGo’s goal is to connect with the community and deliver localized content featuring BuddiGo’s core features and advantages. BuddiGo is actively seeking strategic investors or collaborative parties who are enthusiastic about its business model and can help achieve its business targets and expand into different countries.
3D Discovery Co. Limited
3D Discovery, an IT service provider that develops virtual tours for the real estate, hospitality and interior design industries. 3D Discovery’s space capturing and modeling technology is already used by some of Hong Kong’s leading property agencies to provide their clients with a truly immersive, first-hand experience of a physical space while saving them time and money. According to Goldman Sachs, the Real Estate virtual reality (“VR”) industry is predicted to reach US$2.6 billion in 2025, supported by a potential user base of over 1.4 million registered real estate agents in some of the world’s largest markets. Apart from its existing profitable operations, 3D Discovery is developing a mobile app, Autocap, which allows users to create an interactive virtual tour of a physical space by using a mobile phone camera.
3D Discovery successfully completed a number of projects during the year. First, its “3D Virtual Tours in Hong Kong” generated about 1,371,000 impressions in 2018. In addition, 3D Discovery partnered with Midland Realty, one of the largest real estate agencies in Hong Kong, to establish the “Creation 200 3D Virtual Tours.” This business unit generated HK$1.7 million in revenue in 2018.
EC Advertising Limited
Following the acquisition of BuddiGo, AnyWorkspace and 3D Discovery by the Company during the period between late 2017 and the first half year of 2018, EC Advertising Limited (“EC Advertising”) has been developing opportunities for these three platforms to attract advertisers.
During the period, we established a wholly-owned subsidiary in Xiamen, Fujian Province of Mainland China, which is intended to cover our advertising business in this region. We started meeting with a number of potential clients there and anticipate that this advertising company will confirm with them several marketing campaigns. In order to maximize our exposure to the potential clients in Mainland China, we are developing a strategic media plan which will cover major cities in Mainland China such as Beijing, Shanghai, Guangzhou and Shenzhen. Major banks, real estate developers and consumer products manufacturers and retailers are our target clients. More importantly, our presence in Mainland China can facilitate the rollout of franchise programs of our business units, which is one of the revenue drivers for the Company.
ECrent Platform Business
Asia Region:
In 2018, our subsidiary SEIL entered into a license agreement with ECRENT, regarding the grant of an exclusive and sublicensable license from ECRENT to SEII to utilize certain software and trademarks in order to develop, launch, operate, commercialize, and maintain an online website platform in Taiwan, Thailand, India, Indonesia, Singapore, Malaysia, Philippines, Vietnam, Cambodia, Japan, and Korea. According to the latest amendment, ECRENT will guarantee that the operation of its related websites, mobile applications and business services will contribute revenue of US$13,000,000 (increased from US$10,000,000 according to the previously amended agreement) and gross profit of US$2,522,000 (up from US$1,940,000 as stated on the previously amended agreement) from the closing date of the License Agreement through December 31, 2019 (extended from June 30, 2019 per the previously amended agreement).
In August, SEIL has entered into a License Agreement with PTI Corporation (“PTI”), that sublicenses SEIL’s exclusive license with ECRENT to utilize certain software and trademarks in order to develop, launch, operate, commercialize, and maintain an online website platform in South Korea. In return, PTI shall pay to SEIL $230,000 (“Consideration”). The License Agreement will be effective on September 1, 2018 through December 31, 2019. In addition, if the aggregate revenue during the period exceeds the Consideration, SEIL shall receive 30% of the difference between the aggregate revenue and the Consideration. During the third quarter of 2018, PTI commenced prelaunch activities to develop the platform.
Europe Region:
In August 2018, our subsidiary SEIL entered into a License Agreement with ECRENT regarding the grant of an exclusive and sublicensable license from ECRENT to SEII to utilize certain software and trademarks in order to develop, launch, operate, commercialize, and maintain an online website platform in United Kingdom, Germany, France, Poland, Switzerland, Netherlands, Denmark, Russia, Italy, Spain, Portugal and Greece. In return, SEII shall issue to ECRENT 360,000 shares of restricted common stock. Closing of this transaction was conditioned on various conditions, including receipt of all necessary regulatory approvals. On October 9, 2018, the agreement was terminated by the parties, who have agreed to forego their respective rights under the agreement.
Going forward, we will continue targeting the technology and global sharing economy markets, by developing online platforms and rental business partnerships that will drive the global development of sharing through economical rental business models.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, inventories, recovery of long-lived assets, income taxes, the fair value of equity method investment, the fair value of assets held for sale and the valuation of equity transactions.
We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements.
Accounts Receivable
We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We periodically review our accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
As a basis for estimating the likelihood of collection has been established, we consider a number of factors when determining reserves for uncollectable accounts. We believe that we use a reasonably reliable methodology to estimate the collectability of our accounts receivable. We review our allowances for doubtful accounts on at least a quarterly basis. We also consider whether the historical economic conditions are comparable to current economic conditions. If the financial condition of our customers or other parties that we have business relations with were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
Intangible Assets
In January 2018, in connection the acquisition of 3D Discovery and AnyWorkspace, the Company acquired their technologies. The technology of 3D Discovery covers a 3D virtual tour solution for the property industry and the technology of AnyWorkspace covers management software for an online, real-time marketplace that connects workspace providers with clients who need temporary office and meeting spaces.
Revenue Recognition
In May 2014, FASB issued an update Accounting Standards Update (“ASU”) (“ASU 2014-09”) establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard, which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. We adopted this standard in 2018 using the modified retrospective approach, which requires applying the new standard to all existing contracts not yet completed as of the effective date and recording a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Based on an evaluation of the impact ASU 2014-09 will have on our sources of revenue, we have concluded that ASU 2014-09 did not have a material impact on the process for, timing of, and presentation and disclosure of revenue recognition from customers.
We recognize revenues from the sale of equipment upon shipment and transfer of title. The other elements may include installation and, generally, a one-year warranty. Equipment installation revenue is valued based on estimated service person hours to complete installation and is recognized when the labor has been completed and the equipment has been accepted by the customer, which is generally within a couple days of the delivery of the equipment. Warranty revenue is valued based on estimated service person hours to complete a service and generally is recognized over the contract period.
All other product sales with customer specific acceptance provisions are recognized upon customer acceptance and the delivery of the parts or service. Revenues related to spare part sales are recognized upon shipment or delivery based on the trade terms.
We recognized revenue from the rental of batteries when earned.
Income Taxes
We are governed by the Income Tax Law of the PRC, Inland Revenue Ordinance of Hong Kong and the U.S. Internal Revenue Code of 1986, as amended. We account for income taxes using the asset/liability method prescribed by ASC 740, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probably that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is charged to equity. Deferred tax assets and liabilities are offset when they related to income taxes levied by the same taxation authority and we intend to settle its current tax assets and liabilities on a net basis.
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Act”), a tax reform bill which, among other items, reduces the current federal income tax rate to 21% from 35%. The rate reduction is effective January 1, 2018, and is permanent.
The Act has caused the Company’s deferred income taxes to be revalued. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through income tax expense. Pursuant to the guidance within SEC Staff Accounting Bulletin No. 118 (“SAB 118”), as of December 31, 2017, the Company recognized the provisional effects of the enactment of the Act for which measurement could be reasonably estimated. Since the Company has provided a full valuation allowance against its deferred tax assets, the revaluation of the deferred tax assets did not have a material impact on any period presented. The ultimate impact of the Act may differ from these estimates due to the Company’s continued analysis or further regulatory guidance that may be issued as a result of the Act.
Stock-based Compensation
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the vesting period or immediately if the award is non-forfeitable. The Accounting Standards Codification also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Additionally, effective January 1, 2017, the Company adopted the Accounting Standards Update No. 2016-09 (“ASU 2016-09 ”), Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 permits the election of an accounting policy for forfeitures of share-based payment awards, either to recognize forfeitures as they occur or estimate forfeitures over the vesting period of the award. The Company has elected to recognize forfeitures as they occur and the cumulative impact of this change did not have any effect on the Company’s consolidated financial statements and related disclosures.
Through September 30, 2018, pursuant to ASC 505-50 - “Equity-Based Payments to Non-Employees”, all share-based payments to non-employees, including grants of stock options, were recognized in the consolidated financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. The Company periodically reassessed the fair value of non-employee share based payments until service conditions are met, which generally aligns with the vesting period of the equity instrument, and the Company adjusts the expense recognized in the consolidated financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company early adopted ASU No. 2018-07 in the fourth quarter of 2018 and there was no cumulative effect of adoption.
Currency Exchange Rates
Our functional currency is the U.S. dollar, and the functional currency of our operating subsidiaries is the RMB and Hong Kong Dollar. Substantially all of our sales are denominated in RMB. As a result, changes in the relative values of U.S. dollars and RMB affect our reported levels of revenues and profitability as the results of our operations are translated into U.S. dollars for reporting purposes. In particular, fluctuations in currency exchange rates could have a significant impact on our financial stability due to a mismatch among various foreign currency-denominated sales and costs. Fluctuations in exchange rates between the U.S. dollar and RMB affect our gross and net profit margins and could result in foreign exchange and operating losses.
Our exposure to foreign exchange risk primarily relates to currency gains or losses resulting from timing differences between signing of sales contracts and settling of these contracts. Furthermore, we translate monetary assets and liabilities denominated in other currencies into RMB, the functional currency of our operating subsidiary. Our results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate at the end of the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in our statement of shareholders’ equity. We have not used any forward contracts, currency options or borrowings to hedge our exposure to foreign currency exchange risk. We cannot predict the impact of future exchange rate fluctuations on our results of operations and may incur net foreign currency losses in the future.
Our financial statements are expressed in U.S. dollars, which is the functional currency of our parent company. The functional currency of our operating subsidiaries and affiliates is RMB and the Hong Kong dollar. To the extent we hold assets denominated in U.S. dollars, any appreciation of the RMB or HKD against the U.S. dollar could result in a charge in our statement of operations and a reduction in the value of our U.S. dollar denominated assets. On the other hand, a decline in the value of RMB or HKD against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, “ Leases (Topic 842) ”. ASU 2016-02 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to recognize a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The pronouncement requires a modified retrospective method of adoption and is effective on January 1, 2019, with early adoption permitted. The adoption of ASU 2016-02 is not expected to have an impact on the Company’s consolidated financial position, results of operations and cash flows.
In July 2017, the FASB issued ASU 2017-11, Accounting for Certain Financial Instruments with Down Round Features , or ASU 2017-11, which updates the guidance related to the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. Under ASU 2017-11, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. ASU 2017-11 is effective for public entities for all annual and interim periods beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact that the adoption of ASU 2017-11 will have on our consolidated financial statements.
On December 22, 2017 the SEC staff issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the TCJA). SAB 118 provides a measurement period that should not extend beyond one year from the enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but for which they are able to determine a reasonable estimate, it must record a provisional amount in the financial statements. Provisional treatment is proper in light of anticipated additional guidance from various taxing authorities, the SEC, the FASB, and even the Joint Committee on Taxation. If a company cannot determine a provisional amount to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA. We have applied this guidance to our financial statements.
In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This standard amends Accounting Standards Codification 740, Income Taxes (ASC 740) to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the Tax Reform Act) pursuant to Staff Accounting Bulletin No. 118, which allows companies to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance. As described in the footnotes to the Annual Report on Form 10-K, the Company’s accounting for the tax effects of enactment of the Tax Reform Act is being assessed; however, in certain cases, as described below, we made a reasonable estimate of the effects on our existing deferred tax balances and valuation allowance. The Company determined that the $5.4 million recorded in connection with the re-measurement of certain deferred tax assets and liabilities, and corresponding valuation allowance was a provisional amount and a reasonable estimate at December 31, 2018.
In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment. ASU 2018-07 aligns the accounting for share based payments granted to non-employees with that of share based payments granted to employees. We adopted this ASU on its effective date of January 1, 2019. The adoption of this ASU did not have a material impact on our financial position, results of operations, cash flows, or presentation thereof.
In July 2018, the FASB issued ASU 2018-09, Codification Improvements. The amendments in ASU 2018-09 affect a wide variety of Topics in the FASB Codification and apply to all reporting entities within the scope of the affected accounting guidance. The Company has evaluated ASU 2018-09 in its entirety and determined that the amendments related to Topic 718-740, Compensation-Stock Compensation-Income Taxes, are the only provisions that currently apply to the Company. The amendments in ASU 2018-09 related to Topic 718-740, Compensation-Stock Compensation-Income Taxes, clarify that an entity should recognize excess tax benefits related to stock compensation transactions in the period in which the amount of the deduction is determined. The amendments in ASU 2018-09 related to Topic 718-740 are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company does not expect the adoption of the new standard to have a material impact on the Company’s Consolidated Financial Statements.
In July 2018, the FASB issued ASU 2018-10 Leases (Topic 842), Codification Improvements and ASU 2018-11 Leases (Topic 842), Targeted Improvements, to provide additional guidance for the adoption of Topic 842. ASU 2018-10 clarifies certain provisions and correct unintended applications of the guidance such as the application of implicit rate, lessee reassessment of lease classification, and certain transition adjustments that should be recognized to earnings rather than to stockholders’ equity. ASU 2018-11 provides an alternative transition method and practical expedient for separating contract components for the adoption of Topic 842. In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases with terms greater than 12 months. ASU 2018-11, ASU 2018-10, and ASU 2016-02 (collectively, “the new lease standards”) are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect the new lease standards will have on its Consolidated Financial Statements; however, the Company anticipates recognizing assets and liabilities arising from any leases that meet the requirements under the new lease standards on the adoption date and including qualitative and quantitative disclosures in the Company’s Notes to the Consolidated Financial Statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes or modifies certain disclosures and in certain instances requires additional disclosures. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. We will adopt this standard on its effective date of January 1, 2020. We do not expect the adoption of this ASU to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. We will adopt this standard on its effective date of January 1, 2020. We are currently evaluating the impact of this ASU on our financial position, results of operations, cash flows, or presentation thereof.
In October 2018, the FASB issued ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities, that changes the guidance for determining whether a decision-making fee paid to a decision makers and service providers are variable interests. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. We will adopt this standard on its effective date of January 1, 2020. We do not expect the adoption of this ASU to have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.
In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842) Codification Improvements, which provides clarification on implementation issues associated with adopting ASU 2016-02. The implementation issues noted in ASU 2019-01 include determining the fair value of the underlying asset by lessors that are not manufacturers or dealers, presentation on the statement of cash flows for sales-type and direct financing leases, and transition disclosures related to Topic 250, Accounting Changes and Error Corrections. We will apply the guidance, if applicable, as of January 1, 2019, the date we adopted ASU 2016-02. The adoption of this ASU did not have a material impact on our financial position, results of operations, cash flows, or presentation thereof.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. We do not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to our consolidated financial condition, results of operations, cash flows or disclosures.
RESULTS OF OPERATIONS
Discontinuance of PRC operations
On December 30, 2019, the Company’s Board of Directors approved to enter into a VIE Termination Agreement relating to the termination of the Consulting Services Agreement, Operating Agreement, Equity Pledge Agreement, Option Agreement, Voting Rights Proxy Agreement dated October 12, 2007 with Huayang Companies. Upon the termination of these VIE agreements, the China business was previously operated by VIEs or Huayang Companies was closed down and fully written-off at December 31, 2019. The assets and liabilities of Huayang Companies have been accounted for as discontinued operations in the Company’s consolidated balance sheets for all years presented. The operating results related to these lines of business have been included in discontinued operations in the Company’s consolidated statements of operations for all years presented. Hence, the Company allows more resources to focus on the operation of sharing economy business.
Acquisition of ECRent Group
On December 27, 2019, the Company completed the Acquisition of Peak Equity International Limited and Subsidiaries (collectively “Peak Equity”) (the “Acquisition”) for its 100% equity interest. The consideration of the Acquisition totaled approximately 7,200,000,000 shares of the Company’s common stock, at the price of $0.25, equal to $1,800,000,000.
This Acquisition is considered as related party transaction, whereas Ms. Deborah Yuen (a spouse of Mr Chan Tin Chi), an affiliate of YSK 1860 Co., Limited, which is a shareholder of the Company, previously controlled Peak Equity during 2017 and 2018.
The Acquisition will be accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 805, Business Combinations, using the reverse acquisition method whereas Peak Equity is considered as the accounting acquirer and the Company as the acquired party. The purchase price allocation is based on net recognized values of SEII’s (accounting acquire) identifiable assets and liabilities.
Disposal of AnyWork Space operations
On March 24, 2020, the Company sold its equity interest of 80% in AnyWorkspace Limited. The assets and liabilities of AnyWorkspace Companies have been accounted for as discontinued operations in the Company’s consolidated balance sheets for all periods presented. The operating results related to these lines of business have been included in discontinued operations in the Company’s and consolidated statements of operations for all periods presented.
Years Ended December 31, 2020 and 2019
The following table sets forth the results of our operations for the years ended December 31, 2020 and 2019 (dollars in thousands):
Years Ended December 31,
Dollars Dollars
Revenues $ 52 $ 30
Cost of revenues
Gross profit
Operating expenses 3,227 7,044
Loss from operations (3,176 ) (7,039 )
Other (expense) income, net (3,613 ) 4,483
Loss from continuing operations before provision for income taxes (6,789 ) (2,556 )
Provision for income taxes - -
Loss from continuing operations (6,789 ) (2,556 )
Income (loss) from discontinued operations, net of income taxes - (24,951 )
Net loss (6,789 ) (27,507 )
Other comprehensive loss:
Foreign currency translation adjustment (55 )
Comprehensive loss $ (6,844 ) $ (27,485 )
Revenues. During the year ended December 31, 2020, we recognized revenues from our sharing economy business of approximately $52,000 compared to approximately $30,000 for the year ended December 31, 2019.
Cost of revenues. Cost of revenues includes the domain and hosting charges. For the year ended December 31, 2020, cost of revenues was approximately $1,000 as compared to approximately $25,000 for the year ended December 31, 2019, a decrease of approximately $24,000, or 96%.
Gross profit and gross margin. Our gross profit was approximately $51,000 for the year ended December 31, 2020 as compared to gross profit of approximately $4,900 for the year ended December 31, 2019, representing gross margins of 98.3% and 16.3% respectively, an increase year over year. The increase in our gross margin for 2020 was primarily attributed to the tight cost control. We expect that our gross margin will remain at its current levels by increasing more exposure to the market.
Operating expenses. For the year ended December 31, 2020 operating expenses were approximately $3,227,000 as compared to approximately $7,044,000 for the year ended December 31, 2019, a decrease of approximately $3,817,000, or 54,19%, and consisted of the following:
Loss from operations. As a result of the factors described above, for the year ended December 31, 2020, loss from operations amounted to approximately $3,176,000, as compared to approximately $7,039,000 for the year ended December 31, 2019.
Other income (expense), net. Other expense, net of other income, includes interest income, interest expense, loss on foreign currency translation loss, dividend income, impairment loss on intangible asset, impairment loss on other receivables, impairment loss on marketable securities, gain on disposal of marketable securities, gain from deconsolidation of VIEs, amounted to approximately $3,613,000 for the year ended December 31, 2020. As compared to the year ended December 31, 2019, total other income, net, amounted to approximately $4,483,000, mainly consisted of interest income, interest expense, loss on foreign currency translation, and gain from deconsolidation of VIEs.
Income tax provision. Income tax expense was $0 for the year ended December 31, 2020, as compared to $0 for the year ended December 31, 2019.
Loss from continuing operations. As a result of the foregoing, our loss from continuing operations was approximately $6,789,000, or $(0.07) per share (basic and diluted), for the year ended December 31, 2020, as compared with loss from continuing operations of approximately $2,556,000, or $(0.01) per share (basic and diluted), for the year ended December 31, 2019, a change of approximately $4,233,000 or 165%.
Loss from discontinued operations, net of income taxes. Our income from discontinued operations was approximately $0, or $(0.00) per share (basic and diluted), for the year ended December 31, 2020, as compared with loss from discontinued operations of approximately $24,951,000, or $(0.13) per share (basic and diluted), for the year ended December 31, 2019, a change of approximately $25,023,000 or 100%.
The summarized operating result of discontinued operations included our consolidated statements of operations is as follows (dollars in thousands):
Fiscal Years Ended
December 31,
Revenues $ - $ 6,661
Cost of revenues - (11,683 )
Gross profit (loss) - (5,022 )
Operating expenses: - (19,697 )
Loss from operations - (24,719 )
Other income (expense), net - (232 )
Income (loss) from discontinued operations, before income taxes - (24,951 )
Income taxes - -
Income (loss) from discontinued operations, net of income taxes $ - $ (24,951 )
Net loss. As a result of the foregoing, our net loss was approximately $6,788,000, or $(0.06) per share (basic and diluted), for the year ended December 31, 2020, as compared with net loss of approximately $27,508,000, or $(0.14) per share (basic and diluted), for the year ended December 31, 2019, a change of approximately $20,720,000, or 75%.
Foreign currency translation loss. The functional currency of our subsidiaries and variable interest entities operating in the PRC is the Chinese Yuan or Renminbi (“RMB”). The financial statements of our subsidiaries are translated to U.S. dollars using period end rates of exchange for assets and liabilities, and average rates of exchange (for the period) for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations. As a result of foreign currency translations, which are a non- cash adjustment, we reported a foreign currency translation loss of $55,000 for the year ended December 31, 2020, as compared to a foreign currency translation gain of $22,000 for the year ended December 31, 2019. This non-cash loss had the effect of increasing our reported comprehensive loss.
Comprehensive loss. As a result of our foreign currency translation loss, we had comprehensive loss for the year ended December 31, 2020 of approximately $6,844,000, compared to comprehensive loss of approximately $27,485,000 for the year ended December 31, 2019.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. At December 31, 2020 and 2019, we had cash balances of $1,805,417 and $83,667, respectively. These funds are located in financial institutions mainly located in Hong Kong and the PRC.
The following table sets forth a summary of changes in our working capital from December 31, 2019 to December 31, 2020 (dollars in thousands):
December 31,
December 31,
Change Percentage Change
Working capital:
Total current assets $ 3,967 $ 5,636 $ (1,669 ) (30 )%
Total current liabilities 11,707 8,683 3,024 35 %
Working capital deficit $ (7,740 ) $ (3,047 ) $ (4,693 ) (154 )%
Our working capital deficit increased by $4,693,000 to $7,740,000 at December 31, 2020 from $3,047,000 at December 31, 2019. This increase in working deficit is primarily attributable to the new proceeds from bank loans.
Because the exchange rate conversion is different for the consolidated balance sheets and the consolidated statements of cash flows, the changes in assets and liabilities reflected on the consolidated statements of cash flows are not necessarily identical with the comparable changes reflected on the consolidated balance sheets.
For the Years Ended
December 31,
Net Cash Used in Operating Activities $ (1,544,186 ) $ (6,304,868 )
Net Cash Provided by (Used in) Investing Activities 1,332,707 (4,632,237 )
Net Cash Provided by Financing Activities 1,962,194 10,245,031
Effect of Exchange Rate Changes in Cash and Cash Equivalents (28,965 ) (73,776 )
Cash and Cash Equivalents at Beginning of Year 83,667 883,462
Cash and Cash Equivalents at End of Year 1,805,417 117,612
Less: Cash and cash equivalents from discontinued operations - (33,945 )
Cash and cash equivalents from continuing operations, end of Year $ 1,805,417 $ 83,667
Cash Flow in Operating Activities
For the year ended December 31, 2020, net cash used in operating activities was approximately $1,544,000, which consists of the net cash used in operating activities of approximately $1,544,000 from continuing operations and approximately $0 from discontinued operations.
For the year ended December 31, 2019, net cash used in operating activities was approximately $6,305,000, which consists of the net cash used in operating activities of approximately $1,026,000 from continuing operations and approximately $5,279,000 from discontinued operations.
Cash Flow in Investing Activities
For the year ended December 31, 2020, we had net cash provided by investing activities of approximately $1,333,000 from continuing operations and approximately $0 from discontinued operations. The total net cash provided by investing activities primarily mainly related to the disposal of investment in marketable securities and proceeds from disposal of a subsidiary.
For the year ended December 31, 2019, we had net cash used in investing activities of approximately $4,632,000 from continuing operations and $0 from discontinued operations. The total net cash used in investing activities primarily mainly related to the purchases of property and equipment and the investment in marketable securities.
Cash Flow in Financing Activities
For the year ended December 31, 2020, we had net cash provided by financing activities of approximately $1,962,000 from continuing operations and $0 from discontinued operations. We received advances from related party of approximately $103,000, received net proceeds from issuance of note payable of approximately $183,000, and received net proceeds from bank loans of approximately $1,735,000, offset by, repayment of bank loan of approximately $59,000.
For the year ended December 31, 2019, we had net cash provided by financing activities of approximately $11,351,000 from continuing operations, offset by net cash used in of $1,106,000 from discontinued operations. We received advances from related party of approximately $820,000, received net proceeds from bank loans of approximately $9,658,000, and received proceeds from sale of common stock of approximately $905,000, offset by, repayment of related party advances of approximately $32,000.
We have historically funded our capital expenditures through cash flow provided by operations and bank loans. We intend to fund the cost with cash flow from our operations and by obtaining financing mainly from local banking institutions with which we have done business in the past. We believe that the relationships with local banks are in good standing and we have not encountered difficulties in obtaining needed borrowings from local banks.
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operations, and cash flows. The following tables summarize our contractual obligations as of December 31, 2020 (dollars in thousands), and the effect these obligations are expected to have on our liquidity and cash flows in future periods.
Payments Due by Period
Contractual obligations: Total Less than
1 year 1-3 years 3-5 years 5 + years
Bank loans (1) $ 11,386,559 $ 6,446,139 $ 381,377 $ 390,304 $ 4,168,739
Convertible note payable (2) 595,750 595,750 - - -
Total $ 11,982,309 $ 7,041,889 $ 381,377 $ 390,304 $ 4,168,739
(1) Bank loans consisted of short term and long-term bank loans.
(2) $94,167 will be converted into common shares in 2021.
Off-balance Sheet Arrangements
Except as discussed below, we have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Foreign Currency Exchange Rate Risk
We produce and sell almost all of our products in China. Thus, most of our revenues and operating results may be impacted by exchange rate fluctuations between RMB and US dollars. For the years ended December 31, 2020 and 2019, we had unrealized foreign currency translation loss of approximately $56,000 and unrealized foreign currency translation gain of approximately $22,000, respectively, because of changes in the exchange rate.
Inflation
The effect of inflation on our revenue and operating results was not significant.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable for smaller reporting companies

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SHARING ECONOMY INTERNATIONAL INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
CONTENTS
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Balance Sheets - As of December 31, 2020 and 2019
Consolidated Statements of Operations and Comprehensive Loss - For the Years Ended December 31, 2020 and 2019
Consolidated Statements of Changes in Stockholders’ Deficit - For the Years Ended December 31, 2020 and 2019
Consolidated Statements of Cash Flows - For the Years Ended December 31, 2020 and 2019
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Sharing Economy International Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sharing Economy International Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, consolidated statements of changes in stockholders’ equity, and consolidated statements of cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the notes to consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cash flows for the years ended December 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.
The Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the accompanying financial statements, the Company has suffered recurring losses from operations, generated negative cash flows from operating activities, has an accumulated deficit that raise substantial doubt exists about Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans in regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Audit Alliance LLP
We have served as the Company’s auditor since 2020.
April 16, 2021
SHARING ECONOMY INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
(Restated)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,805,417 $ 83,667
Accounts receivable, net of allowance for doubtful accounts 38,814
Prepaid expenses and other receivables 132,644 1,019,883
Marketable securities 1,989,823 4,532,296
Total current assets 3,966,698 5,636,151
OTHER ASSETS:
Property and equipment, net 487,336 620,075
Intangible assets, net 156,767 1,108,407
Total other assets 644,103 1,728,482
Total assets $ 4,610,801 $ 7,364,633
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term bank loans $ 6,446,139 $ 4,676,184
Convertible note payable, net of unamortized debt discount 595,750 838,571
Accounts payable 1,264,706 516,341
Accrued liabilities 932,220 279,941
Due to related parties 2,468,375 2,365,504
Deferred revenue -
Income taxes payable - 6,802
Total current liabilities 11,707,297 8,683,343
LONG-TERM LIABILITIES:
Long-term loan 4,940,420 4,981,361
Total liabilities 16,647,717 13,644,704
Commitments and contingencies
STOCKHOLDERS’ DEFICIT:
Preferred stock, Series A $0.001 par value; 50,000,000 shares authorized;
531,600 and 0 issued and outstanding at December 31, 2020 and 2019, respectively -
Common stock $0.001 par value; 7,400,000,000 shares authorized; 172,883,475 and 3,988,372 shares issued and outstanding at December 31, 2020 and 2019, respectively 172,883 3,989
Common stock to be issued - 140,379
Additional paid-in capital 61,700,634 60,773,853
Accumulated deficits (73,020,134 ) (66,300,687 )
Accumulated other comprehensive (loss) income - foreign currency translation adjustment (13,246 ) 42,597
Total stockholders’ deficit attributed to SEII (11,159,331 ) (5,339,869 )
Non-controlling interest (877,585 ) (960,202 )
Total stockholders’ deficit (12,036,916 ) (6,300,071 )
Total liabilities and stockholders’ deficit $ 4,610,801 $ 7,364,633
# Post a fifty for one (50:1) reverse split effective on October 13, 2020.
See notes to consolidated financial statements.
SHARING ECONOMY INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Years Ended
December 31,
REVENUES $ 51,925 $ 29,655
COST OF REVENUES (853 ) (24,812 )
Gross profit 51,072 4,843
OPERATING EXPENSES:
Depreciation and amortization 337,683 299,874
Selling, general and administrative 2,684,310 5,811,832
Written-off prepayments 122,514 -
Impairment loss on goodwill 82,692 932,883
Total operating expenses 3,227,199 7,044,589
LOSS FROM OPERATIONS (3,176,127 ) (7,039,746 )
OTHER INCOME (EXPENSE):
Interest income
Interest expense (965,163 ) (322,201 )
Dividend income 3,052 -
Impairment loss on intangible asset (750,000 ) -
Impairment loss on other receivables (705,000 ) -
Impairment loss on marketable securities (1,951,091 ) -
Gain on disposal of marketable securities 428,621 -
Unrealised gain on marketable securities 292,126 -
Loss on disposal of a subsidiary (70,900 ) -
Gain from deconsolidation of VIE - 4,731,804
Loss on foreign currency translation 3,678 (1,955 )
Other income 102,139 75,438
Total other (expense) income, net (3,612,518 ) 4,483,203
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES (6,788,645 ) (2,556,543 )
Income taxes provision - -
LOSS FROM CONTINUING OPERATIONS (6,788,645 ) (2,556,543 )
DISCONTINUTED OPERATIONS:
Income (loss) from discontinued operations, net of income taxes - (24,951,086 )
NET LOSS (6,788,645 ) (27,507,629 )
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST (69,198 ) (420,532 )
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (6,719,447 ) $ (27,087,097 )
COMPREHENSIVE LOSS:
Net loss $ (6,788,645 ) $ (27,507,629 )
Foreign currency translation (loss) gain (55,843 ) 22,302
Comprehensive loss $ (6,844,488 ) $ (27,485,327 )
Net loss attributable to non-controlling interest $ (69,198 ) $ (420,532 )
Foreign currency translation gain from non-controlling interest 1,541
Comprehensive loss attributable to common stockholders $ (6,776,831 ) $ (27,064,927 )
NET LOSS PER COMMON SHARE:
Continuing operations - basic and diluted $ (0.06 ) $ (0.01 )
Discontinued operations - basic and diluted 0.00 (0.13 )
Net loss per common share - basic and diluted $ (0.06 ) $ (0.14 )
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted 107,723,188 188,332,818
# Post a fifty for one (50:1) reverse split effective on October 13, 2020.
See notes to consolidated financial statements.
SHARING ECONOMY INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the Years Ended December 31, 2020 and 2019
For the year ended December 31, 2019
Common Stock Common stock to be issued Additional
Accumulated
Other Non- Total
Number of
Number of
Paid-in Retained Statutory Comprehensive controlling Stockholders’
Shares Amount Shares Amount Capital Earnings Reserve Income Interest Deficit
Balance, December 31, 2018 (restated) 3,770,139 $ 3,770 140,378,844 $ 140,379 $ 65,515,431 $ (40,099,942 ) $ 2,352,592 $ 2,695,362 $ (539,802 ) $ 30,067,790
Common stock issued for cash 63,800 - - 905,036 - - - - 905,100
Common stock issued for services to consultants and service providers 34,987 - - 399,901 - - - - 399,936
Common stock surrendered for services from consultants and service providers (11,250 ) (11 ) - - (947,937 ) - - - - (947,948 )
Common stock issued upon conversion of debt 5,333 - - 49,995 - - - - 50,000
Common stock issued for donation 1,709 - - 259,596 - - - - 259,598
Common stock issued for acquisition of ECoin’s Redemption Codes 55,147 - - 749,945 - - - - 750,000
Gain from bargain purchase of ECRent - -
(7,199,900 ) 7,931,951 - - - 732,051
Common stock issued for acquisition of G-Coin 68,507 - - 897,367 - - - - 897,436
De-consolidation of VIEs - - - - 144,419 (7,045,599 ) (2,352,592 ) (2,675,067 ) - (11,928,839 )
Net loss for the year - - - - - (27,087,097 ) - - (420,532 ) (27,507,629 )
Foreign currency translation adjustment - - - - - - - 22,302 22,434
Balance, December 31, 2019 (restated) 3,988,372 $ 3,989 140,378,844 140,379 $ 60,773,853 $ (66,300,687 ) $ - $ 42,597 $ (960,202 ) $ (6,300,071 )
For the year ended December 31, 2020
Preferred Stock Common Stock Common stock to be issued
Accumulated
Number
of
Shares Amount Number
of
Shares Amount Number
of
Shares Amount Additional
Paid-in
Capital Retained
Earnings Other
Comprehensive
Income Non-
controlling
Interest Total
Stockholders’
Deficit
Balance, January 1, 2020 - - 3,988,372 $ 3,989 140,378,844 $ 140,379 $ 60,773,853 $ (66,300,687 ) $ 42,597 $ (960,202 ) $ (6,300,071 )
Common stock issued for acquisition of Peak Equity Group - - 140,378,844 140,379 (140,378,844 ) (140,379 ) - - - - -
Common stock issued for services from consultants and service providers 531,600 16,000 - - 477,460 - - - 478,008
Common stock issued upon conversion of debt - - 28,170,787 28,170 - - 449,650 - - - 477,820
NCI from disposal of subsidiary - - - - - - - - - 67,712 67,712
Acquisition of NCI - - - - - - - - - 82,562 82,562
Fractional shares from reverse split - - 329,472 - - (329 ) - - - -
Net loss for the year - - - - - - - (6,719,447 ) - (69,198 ) (6,788,645 )
Foreign currency translation adjustment - - - - - - - - (55,843 ) 1,541 (54,302 )
Balance, December 31, 2020 531,600 172,883,475 $ 172,883 - $ - $ 61,700,634 $ (73,020,134 ) $ (13,246 ) $ (877,585 ) $ (12,036,916 )
# Post a fifty for one (50:1) reverse split effective on October 13, 2020.
See notes to consolidated financial statements.
SHARING ECONOMY INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,788,645 ) $ (27,507,629 )
Less: net income (loss) from discontinued operations - (24,951,086 )
Net loss from continuing operations (6,788,645 ) (2,556,543 )
Adjustments to reconcile net loss from operations to net cash used in operating activities:
Depreciation 134,691 28,980
Allowance for doubtful accounts - 48,952
Amortization of intangible assets 202,992 270,894
Impairment loss of intangible assets 750,000 -
Impairment loss of other receivables 705,000 -
Impairment loss of marketable securities 1,951,091 33,975
Impairment loss of goodwill 82,692 898,908
Gain from deconsolidation of VIE & subsidary - (4,731,804 )
Written-off prepayment 122,514 813,992
Stock-based employment compensation -
Stock-based professional fees 523,008 3,018,829
Stock-based donation - 259,598
Loss on disposal of a subsidiary 70,900 -
Amortization of debt discount 7,179 162,170
Gain on sale of marketable securities (428,621 ) -
Unrealised gain on marketable securities (292,126 ) -
Changes in operating assets and liabilities:
Notes receivable - 150,126
Accounts receivable (38,509 ) 91,228
Prepaid expenses and other receivables 14,725 20,409
Accounts payable and accrued expenses 748,366 463,237
Other payable 697,252 -
Income tax payable (6,802 ) -
Deferred revenue -
CASH FLOWS USED IN OPERATING ACTIVITIES - continuing operations (1,544,186 ) (1,026,116 )
CASH FLOWS USED IN OPERATING ACTIVITIES - discontinued operations - (5,278,752 )
CASH FLOWS USED IN OPERATING ACTIVITIES (1,544,186 ) (6,304,868 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (99,941 )
Purchase of marketable securities (11,482,148 ) (4,532,296 )
Purchase of non-controlling interest (154 ) -
Proceeds from disposal of marketable securities 12,803,705 -
Proceeds from disposal of a subsidiary 8,252 -
Dividend received 3,052 -
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES - continuing operations 1,332,707 (4,632,237 )
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES - discontinued operations - -
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,332,707 (4,632,237 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of bank loan (58,824 ) -
Proceeds from bank loan 1,735,147 9,657,545
Proceeds from issuance of note payable 183,000 -
Advances from related party 102,871 820,061
Repayment to related party - (31,604 )
Proceeds from sale of common stock, net - 905,100
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES - continuing operation 1,962,194 11,351,102
CASH FLOWS USED IN FINANCING ACTIVITIES - discontinued operations - (1,106,071 )
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 1,962,194 10,245,031
Effect of exchange rate changes (28,965 ) (73,776 )
Net decrease in cash and cash equivalents 1,721,750 (765,850 )
Cash and cash equivalents - beginning of year 83,667 883,462
Cash and cash equivalents - end of year 1,805,417 117,612
Less: Cash and cash equivalents from discontinued operations - (33,945 )
Cash and cash equivalents from continuing operations - end of year $ 1,805,417 $ 83,667
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid in continuing operations for:
Interest $ 263,369 $ 322,201
Income taxes $ - $ -
Cash paid in discontinued operations for:
Interest $ - $ -
Income taxes $ - $ -
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock issued for redemption of convertible note and accrued interest $ 477,820 $ 50,000
Stock issued for acquisition of non-wholly owned subsidiaries $ - $ 1,828,494
Stock issued for services from consultants and vendors $ 478,008 $ -
Stock issued for accrued liabilities $ - $ 1,641,254
See notes to consolidated financial statements.
SHARING ECONOMY INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND ORGANIZATION
Sharing Economy International Inc. (the “Company”) was incorporated in Delaware on June 24, 1987 under the name of Malex, Inc. On December 18, 2007, the Company’s corporate name was changed to China Wind Systems, Inc. and on June 13, 2011, the Company changed its corporate name to Cleantech Solutions International, Inc. On August 7, 2012, the Company was converted into a Nevada corporation. On January 8, 2018, the Company changed its corporate name to Sharing Economy International Inc.
Through its affiliated companies, the Company manufactures and sells textile dyeing and finishing machines. The Company is the sole owner of Fulland Limited (“Fulland”), a Cayman Island limited liability company, which was organized on May 9, 2007. Fulland owns 100% of the capital stock of Green Power Environment Technology (Shanghai) Co., Ltd. (“Green Power”) and, until December 30, 2016, Fulland owned 100% of Wuxi Fulland Wind Energy Equipment Co., Ltd. (“Fulland Wind”). Green Power is and Fulland Wind was a wholly foreign-owned enterprise (“WFOE”) organized under the laws of the People’s Republic of China (“PRC” or “China”). Green Power is a party to a series of contractual arrangements, as fully described below, dated October 12, 2007 with Wuxi Huayang Heavy Industries, Co., Ltd. (“Heavy Industries”), formerly known as Wuxi Huayang Electrical Power Equipment Co., Ltd., and Wuxi Huayang Dyeing Machinery Co., Ltd. (“Dyeing”), both of which are limited liability companies organized under the laws of, and based in, the PRC. Heavy Industries and Dyeing are sometimes collectively referred to as the “Huayang Companies.”
Fulland was organized by the owners of the Huayang Companies as a special purpose vehicle for purposes of raising capital in accordance with requirements of the PRC State Administration of Foreign Exchange (“SAFE”). On May 31, 2007, SAFE issued an official notice known as Hui Zong Fa [2007] No. 106 (“Circular 106”), which requires the owners of any Chinese company to obtain SAFE’s approval before establishing any offshore holding company structure for foreign financing as well as subsequent acquisition matters in China. Accordingly, the owners of the Huayang Companies, Mr. Jianhua Wu and his wife, Ms. Lihua Tang, submitted their application to SAFE in early September 2007. On October 11, 2007, SAFE approved their application, permitting these Chinese citizens to establish Fulland as a special purpose vehicle for any foreign ownership and capital raising activities by the Huayang Companies.
Dyeing, which was formed on August 17, 1995, produces and sells a variety of high and low temperature dyeing and finishing machinery for the textile industry. The Company refers to this segment as the dyeing and finishing equipment segment. On December 26, 2016, Dyeing and an unrelated individual formed Wuxi Shengxin New Energy Engineering Co., Ltd. (“Shengxin”), a limited liability company organized under the laws of the PRC in which Dyeing has a 30% equity interest and the unrelated third party holds a 70% interest, pursuant to an agreement dated December 23, 2016. Shengxin intends to develop, construct and maintain photovoltaic power generation projects, known as solar farms, in China, mainly in the provinces of GuiZhou and YunNan. In April 2018, Shengxin secured and invested in a large solar PV project in GuiZhou province. Shengxin paid RMB40.0 million for the project rights and also engaged a local contractor to proceed with building the project. However, on June 1, 2018, the Chinese government halted installation of new solar farms for the remainder of the year and reduced subsidies for projects already under construction. In September 2018, due to significance doubt about the status of this project and recoverability of the Company’s investment, the Company fully impaired the value of its investment in Shengxin.
Fulland Wind was formed on August 27, 2008. In 2009, the Company began to produce and sell forged products through Fulland Wind. Through Fulland Wind, the Company manufactured and sold forged products, including wind products such as shafts, rolled rings, gear rims, gearboxes, bearings and other components and finished products and assemblies for the wind power and other industries, including large-scale equipment used in the manufacturing process for the various industries.
On November 20, 2019, EC Advertising Limited and Au Chi Tong entered into a Consulting Agreement, whereby Sharing Economy International, Inc. (the “Company”) shall issue 400,000 shares of common stock to the consultant in exchange for consulting services offered to the Company and its subsidiaries. The foregoing description of the Consulting Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Agreement, which is incorporated herein by reference and attached hereto as Exhibit 10.1.
On December 14, 2019, ECoin Global Limited and EC Power (Global) Technology Limited entered into a Transfer Agreement relating to the transfer of redemption codes in exchange for 2,757,353 shares of common stock of the Company.
On December 18, 2019, Ying Huihao and EC Advertising Limited entered into a Sale and Purchase Agreement with respect to G-Coin Worldwide Limited (“G-Coin”), whereby the Company shall issue 3,425,328 shares of common stock in exchange for two vessels owned by G-Coin.
On December 16, 2019, Sharing Economy International, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “Agreement”) with Sze Man Cheung, a Hong Kong citizen, for the purchase and sale of 2,500,000 shares of common stock for an aggregate amount of US$705,000, or US$0.282 per share.
On December 27, 2019, the Company completed the Acquisition of Peak Equity International Limited and Subsidiaries (collectively “Peak Equity”) (the “Acquisition”) for its 100% equity interest. The consideration of the Acquisition totaled approximately 7,200,000,000 shares of the Company’s common stock, at the price of $0.25, equal to $1,800,000,000.
On December 30, 2019, Green Power Environment Technology (Shanghai) Co., Ltd. And Wuxi Huayang Dye Machinery Co. Ltd. entered into a VIE Termination Agreement relating to the termination of the Consulting Services Agreement, Operating Agreement, Equity Pledge agreement, Option Agreement, Voting Rights Proxy Agreement dated October 12, 2007. The operation in China was considered as discontinued operations and fully written-off at December 31, 2019.
On March 24, 2020, the Company sold its equity interest of 80% in AnyWorkspace Limited for a consideration of approximately $8,251 with a loss on disposal of $70,900.
On August 14, 2020, the Company acquired the remaining equity interest of 40% in 3D Discovery Co. Limited for a consideration $154.
On December 30, 2020, the Company’s Board of Directors approved to enter into a Termination Agreement with Jebe Production Group Limited.
The Company’s latest business initiatives are focused on targeting the technology and global sharing economy markets, by developing online platforms and rental business partnerships that will drive the global development of sharing through economical rental business models. In connection with the new business initiatives, the Company formed or acquired the following subsidiaries:
● Vantage Ultimate Limited (“Vantage”), a company incorporated under the laws of British Virgin Islands on February 1, 2017 and is wholly-owned by the Company.
● Sharing Economy Investment Limited (“Sharing Economy”), a company incorporated under the laws of British Virgin Islands on May 18, 2017 and is wholly-owned by Vantage.
● EC Advertising Limited (“EC Advertising”), a company incorporated under the laws of Hong Kong on March 17, 2017 and is a wholly-owned by Sharing Economy.
● EC Rental Limited (“EC Rental”), a company incorporated under the laws of British Virgin Islands on May 22, 2017 and is wholly-owned by Vantage.
● EC Assets Management Limited (“EC Assets”), a company incorporated under the laws of British Virgin Islands on May 22, 2017 and is wholly-owned by Vantage.
● Cleantech Solutions Limited (formerly known as EC (Fly Car) Limited), a company incorporated under the laws of British Virgin Islands on May 22, 2017 and is a wholly-owned by Sharing Economy.
● Global Bike Share (Mobile App) Limited, a company incorporated under the laws of British Virgin Islands on May 23, 2017 and is a wholly-owned by Sharing Economy.
● EC Power (Global) Technology Limited (“EC Power”), a company incorporated under the laws of British Virgin Islands on May 26, 2017 and is wholly-owned by EC Rental.
● ECPower (HK) Company Limited, a company incorporated under the laws of Hong Kong on June 23, 2017 and is wholly-owned by EC Power.
● EC Manpower Limited, a company incorporated under the laws of Hong Kong on July 3, 2017 and is wholly-owned by Vantage.
● EC Technology & Innovations Limited (“EC Technology”), a company incorporated under the laws of British Virgin Islands on September 1, 2017 and is wholly-owned by Vantage.
● Inspirit Studio Limited (“Inspirit Studios”), a company incorporated under the laws of Hong Kong on August 24, 2015, and 51% of its shareholding was acquired by EC Technology on December 8, 2017.
● EC Creative Limited (“EC Creative”), a company incorporated under the laws of British Virgin Islands on January 9, 2018 and is wholly-owned by Vantage.
● 3D Discovery Co. Limited (“3D Discovery”), a company incorporated under the laws of Hong Kong on February 24, 2015, 60% of its shareholdings was acquired by EC Technology on January 19, 2018 and remaining 40% of its shareholdings was acquired by EC Technology on August 14, 2020.
● Sharing Film International Limited, a company incorporated under the laws of Hong Kong on January 22, 2018 and is a wholly-owned by EC Creative.
●
AnyWorkspace Limited (“AnyWorkspace”), a company incorporated under the laws of Hong Kong on November 12, 2015, and 80% of its shareholding was acquired by Sharing Economy on January 30, 2018. On March 24, 2020, the Company disposed 80% equity interest of AnyWorkspace.
● Xiamen Great Media Company Limited (“Xiamen Great Media”), a company incorporated under the laws of the PRC on September 5, 2018 and is a wholly-owned by EC Advertising.
NOTE 2 - GOING CONCERN UNCERTAINTIES
These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company had a net loss of approximately $6,788,645 for the year ended December 31, 2020. The net cash used in operations were approximately $1,544,186 for the year ended December 31, 2020. Management believes that its capital resources are not currently adequate to continue operating and maintaining its business strategy for the next twelve months from the date of this report. The Company may seek to raise capital through additional debt and/or equity financings to fund its operations in the future. Although the Company has historically raised capital from sales of equity and from bank loans, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail or cease operations.
Management believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 - SIGIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company is on a fiscal year ending December 31; as such the year ended December 31, 2020 is referred to as “fiscal 2020”, and the year ended December 31, 2019 is referred to as “fiscal 2019”.
Principles of Consolidation
The Company’s consolidated financial statements include the financial statements of its wholly-owned and majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation.
Discontinued Operations
On December 30, 2019 the Company’s Board of Directors approved to enter into a VIE Termination Agreement relating to the termination of the Consulting Services Agreement, Operating Agreement, Equity Pledge Agreement, Option Agreement, Voting Rights Proxy Agreement dated October 12, 2007 with Huayang Companies. The operations in China were closed down and fully written-off at December 31, 2019. The assets and liabilities of Huayang Companies have been accounted for as discontinued operations in the Company’s consolidated balance sheets for all years presented. The operating results related to these lines of business have been included in discontinued operations in the Company’s consolidated statements of operations for all years presented.
Use of estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates in the years ended December 31, 2020 and 2019 include the allowance for doubtful accounts on accounts and other receivables, the allowance for obsolete inventory, the useful life of property and equipment and intangible assets, assumptions used in assessing impairment of long-term assets and valuation of deferred tax assets, the fair value of equity method investment, the fair value of assets held for sale, accruals for taxes due, and the value of stock-based compensation.
Cash and cash equivalents
For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. The Company maintains with various financial institutions mainly in the PRC, Hong Kong and the U.S. At December 31, 2020 and 2019, cash balances held in banks in the PRC and Hong Kong of $1,805,417 and $83,667, respectively, are uninsured.
Available-for-sale marketable securities
Available-for-sale marketable securities are reported at fair value using the market approach based on the quoted prices in active markets at the reporting date. The Company classifies the valuation techniques that use these inputs as Level 1 of fair value measurements. Any unrealized losses that are deemed other-than-temporary are included in current period earnings and removed from accumulated other comprehensive income (loss).
Realized gains and losses on marketable securities are included in current period earnings. For purposes of computing realized gains and losses, the cost basis of each investment sold is generally based on the weighted average cost method.
The Company regularly evaluates whether the decline in fair value of available-for-sale securities is other-than-temporary and objective evidence of impairment could include:
● The severity and duration of the fair value decline;
● Deterioration in the financial condition of the issuer; and
● Evaluation of the factors that could cause individual securities to have an other-than-temporary impairment.
During the year ended December 31, 2020 and 2019, $0 and $33,975 was recognized as impairment loss as other-than-temporary decline in fair value, respectively.
Fair value of financial instruments
The Company adopted the guidance of ASC Topic 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. The Company did not measure these assets at fair value at December 31, 2020 and 2019.
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, prepaid expenses and other receivables, short-term bank loans, convertible notes payable, note payable, accounts payable, accrued liabilities, amount due to a related party and income taxes payable approximate their fair market value based on the short-term maturity of these instruments.
ASC Topic 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
The following table presents information about the Company’s assets and liabilities that were measured at fair value as of December 31, 2020 and 2019, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
December 31, Quoted Prices In Active Markets Significant Other Observable Inputs Significant Other Unobservable Inputs
Description (Level 1) (Level 2) (Level 3)
Assets:
Marketable securities, available-for-sale $ 1,989,823 $ 1,989,823 $ - $ -
December 31, Quoted Prices In Active Markets Significant Other Observable Inputs Significant Other Unobservable Inputs
Description (Level 1) (Level 2) (Level 3)
Assets:
Marketable securities, available-for-sale $ 4,532,296 $ 4,532,296 $ - $ -
As of December 31, 2020 and 2019, the Company did not have any nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements, at least annually, on a recurring basis, nor did the Company have any assets or liabilities measured at fair value on a non-recurring basis.
Concentrations of credit risk
The Company’s operations are carried out in the PRC and Hong Kong. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC and Hong Kong, and by the general state of the economies in the PRC and Hong Kong. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. Substantially all of the Company’s cash is maintained with state-owned banks within the PRC and Hong Kong, and none of these deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts. A significant portion of the Company’s sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk with respect to trade accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.
Accounts receivable
Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. At December 31, 2020 and 2019, the Company has established, based on a review of its outstanding balances, an allowance for doubtful accounts in the amounts of $0 and $11,028,252 for discontinued operations, respectively. For the continuing operations, the allowance for doubtful accounts was amounted to $0 and $48,952, respectively.
Property and equipment
Property and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in the statements of operations in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
Useful life
Office equipment and furniture
5 years
Vehicles
5 years
Vessels
5 years
Depreciation expense from continuing operations for the year ended December 31, 2020 and 2019 amounted to $134,691 and $28,980, respectively.
Depreciation expense from discontinued operations for the year ended December 31, 2020 and 2019 amounted to $0 and $565,008, respectively.
Impairment of long-lived assets and intangible asset
In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. At December 31, 2020 and 2019, the Company conducted an impairment assessment on property, equipment and intangible asset based on the guidelines established in ASC Topic 360 to determine the estimated fair market value of property, equipment and intangible asset as of December 31, 2020 and 2011. Such analysis considered future use of such equipment, consultation with equipment resellers, subsequent sales of price of equipment held for sale, and other industry factors. Upon completion of the 2020 impairment analysis, the Company recorded impairment charges on long-lived assets of $705,000 and $0 for the year ended December 31, 2020 and 2019, in relation to its continued operations. The Company recorded impairment charges on long-lived assets of $0 and $565,008 for the year ended December 31, 2020 and 2019, in relation to its discontinued operations.
Revenue recognition
In May 2014, FASB issued an update Accounting Standards Update (“ASU”) (“ASU 2014-09”) establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard, which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. The Company adopted this standard in 2018 using the modified retrospective approach, which requires applying the new standard to all existing contracts not yet completed as of the effective date and recording a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Based on an evaluation of the impact ASU 2014-09 will have on the Company’s sources of revenue, the Company has concluded that ASU 2014-09 did not have a material impact on the process for, timing of, and presentation and disclosure of revenue recognition from customers.
Continuing operations
The Company derives its revenues from the sale of license and advertising right and in a term of certain periods. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
● identify the contract with a customer;
● identify the performance obligations in the contract;
● determine the transaction price;
● allocate the transaction price to performance obligations in the contract; and
● recognize revenue as the performance obligation is satisfied.
Discontinued operations
The Company recognizes revenues from the sale of equipment upon shipment and transfer of title. The other elements may include installation and, generally, a one-year warranty. Equipment installation revenue is valued based on estimated service person hours to complete installation and is recognized when the labor has been completed and the equipment has been accepted by the customer, which is generally within a couple days of the delivery of the equipment. Warranty revenue is valued based on estimated service person hours to complete a service and generally is recognized over the contract period.
All other product sales with customer specific acceptance provisions are recognized upon customer acceptance and the delivery of the parts or service. Revenues related to spare part sales are recognized upon shipment or delivery based on the trade terms.
Income taxes
The Company is governed by the Income Tax Law of the PRC, Inland Revenue Ordinance of Hong Kong and the U.S. Internal Revenue Code of 1986, as amended. The Company accounts for income taxes using the asset/liability method prescribed by ASC 740, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
On December 22, 2017, the United States signed into law the Tax Cuts and Jobs Act (the “Act”), a tax reform bill which, among other items, reduces the current federal income tax rate in the United States to 21% from 35%. The rate reduction is effective January 1, 2018, and is permanent.
The Act has caused the Company’s deferred income taxes to be revalued. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through income tax expense. Pursuant to the guidance within SEC Staff Accounting Bulletin No. 118 (“SAB 118”), as of December 31, 2020, the Company recognized the provisional effects of the enactment of the Act for which measurement could be reasonably estimated. Since the Company has provided a full valuation allowance against its deferred tax assets, the revaluation of the deferred tax assets did not have a material impact on any period presented. The ultimate impact of the Act may differ from these estimates due to the Company’s continued analysis or further regulatory guidance that may be issued as a result of the Act.
The Company applied the provisions of ASC 740-10-50, “Accounting for Uncertainty in Income Taxes,” which provides clarification related to the process associated with accounting for uncertain tax positions recognized in the Company’s financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of December 31, 2020 and 2019, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.
Stock-based compensation
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment topic of ASC Topic 718, which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the vesting period or immediately if fully vested and non-forfeitable. The Financial Accounting Standards Board (“FASB”) also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Foreign currency translation
The reporting currency of the Company is the U.S. dollar. The functional currency of the parent company is the U.S. dollar and the functional currency of the Company’s operating subsidiaries is the Chinese Renminbi (“RMB”) or Hong Kong dollars (HKD). For the subsidiaries and affiliates, whose functional currencies are the RMB or HKD, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive loss.
The Company did not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.
Translation of amounts from RMB and HKD into US$ has been made at the following exchange rates for the years ended December 31, 2020 and 2019:
December 31,
December 31,
Year-end RMB:US$ exchange rate 7.0682 7.1363
Year average RMB:US$ exchange rate 7.0324 6.8609
Year-end HK$:US$ exchange rate 7.7502 7.7872
Year average HK$:US$ exchange rate 7.8000 7.8000
Loss per share of common stock
ASC Topic 260 “Earnings per Share,” requires presentation of both basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.
Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The Company did not have any common stock equivalents or potentially dilutive common stock outstanding during the years ended December 31, 2020 and 2019. In a period in which the Company has a net loss, all potentially dilutive securities are excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact.
The following table presents a reconciliation of basic and diluted net loss per share:
Years Ended
December 31,
Net loss for basic and diluted attributable to common shareholders $ (6,719,447 ) $ (27,087,097 )
From continuing operations (6,719,447 ) (2,136,011 )
From discontinued operations $ - $ (24,951,086 )
Weighted average common stock outstanding
- Basic 107,723,188 188,332,818
- Diluted 108,071,277 188,332,818
Net loss per share of common stock
From continuing operations - basic $ (0.06 ) $ (0.01 )
From discontinued operations - basic 0.00 (0.13 )
Net loss per common share - basic $ (0.06 ) $ (0.14 )
Net loss per share of common stock
From continuing operations - diluted $ (0.06 ) $ (0.01 )
From discontinued operations - diluted 0.00 (0.13 )
Net loss per common share - diluted $ (0.06 ) $ (0.14 )
Noncontrolling interest
The Company accounts for noncontrolling interest in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to the its noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.
Comprehensive loss
Comprehensive loss is comprised of net loss and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive loss for the years ended December 31, 2020 and 2019 included net loss and unrealized (loss) gain from foreign currency translation adjustments.
Reclassification
Certain reclassifications have been made in prior year’s consolidated financial statements to conform to the current year’s financial presentation. The reclassifications have no effect on previously reported net income (loss) and related to the reclassification of discontinued operations.
Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
Accounting Standards Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”) in order to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous generally accepted accounting principles. ASU 2016-02 requires a lessee to recognize a lease liability for future lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term on the balance sheet for most lease arrangements. The new standard also changes many key definitions, including the definition of a lease. The new standard includes a short-term lease exception for leases with a term of 12 months or less, as part of which a lessee can make an accounting policy election not to recognize right-of-use assets and lease liabilities. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases using classification criteria that are substantially similar to the previous guidance in ASC 840.
ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) and early adoption is permitted. In August 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements, which provides a new transition option in which an entity initially applies ASU 2016-02 at the adoption date and recognizes a cumulative-effect adjustment in the period of adoption. Prior period comparative balances will not be adjusted. The Company used the new transition option and was also utilizing the package of practical expedients that allows it to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases. We also used the short-term lease exception for leases with a term of 12 months or less. Additionally, the Company used the practical expedient that allowed each separate lease component of a contract and the associated non-lease components to be treated as a single lease component. The exercise of lease renewal options is at our discretion and the renewal to extend the lease terms are not included in the Company’s Right-Of-Use assets and lease liabilities as they are not reasonably certain of exercise. The Company will evaluate the renewal options and when they are reasonably certain of exercise, the Company will include the renewal period in its lease term. As of the January 1, 2019, effective date the Company identified one finance lease arrangement in which it is a lessee.
In calculating the present value of the lease payments, the Company applied an individual discount rate for each of its leases, and determined the appropriate discount rate based on the remaining lease terms at the date of adoption. As the lessee to several lease agreements, the Company did not have insight into the relevant information that would be required to arrive at the rate implicit in the lease. Therefore, the Company utilized its outstanding borrowings as a benchmark to determine the incremental borrowing rate for its leases. The benchmark rate was adjusted to arrive at an appropriate discount rate for each lease.
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which expands the scope of Compensation - Stock Compensation (“Topic 718”) to include share-based payment transactions for acquiring goods and services from nonemployees. This amendment applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The Company adopted ASU 2018-07 on January 1, 2019. The impact was immaterial to the financial statements.
In June 2018, the FASB issued ASU No. 2018-08, Not-For-Profit Entities - Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made (“ASU 2018-08”). ASU 2018-08 clarifies how an entity determines whether a resource provider is participating in an exchange transaction by evaluating whether the resource provider is receiving commensurate value in return for the resources transferred. The guidance is effective for annual periods beginning after June 15, 2018, including interim periods within those annual periods, and has been adopted on a modified prospective basis. The modified prospective adoption is applied to agreements that are not completed as of the effective date, or entered into after the effective date. Under the modified prospective adoption approach, prior period results have not been restated and no cumulative-effect adjustment has been recorded. The Company does not expect this standard to have a material impact on its financial statements.
Accounting Standards Issued, Not Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU requires measurement and recognition of expected credit losses for financial assets. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for the Company beginning January 1, 2023. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the potential effect of this standard on its financial statements. The Company does not expect this standard to have a material impact on its financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (“ASU 2018-13”), which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The amendment is effective for interim and annual reporting periods beginning after December 15, 2019. The Company is currently assessing the impact this will have on the financial statements.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (“ASU 2018-18”), which clarifies the interaction between ASC 808, Collaborative Arrangements and ASC 606, Revenue from Contracts with Customers. Certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction. ASU 2018-18 should be applied retrospectively to the date of initial application of ASC 606. This guidance is effective for interim and fiscal periods beginning after December 15, 2019. The Company is currently assessing the impact this will have on the financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company does not expect the adoption of this standard to have a material impact on our financial position, results of operations or cash flows.
NOTE 4 - BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY
On August 14, 2020, the Company completed the acquisition of 40% equity interest of 3D Discovery Co. Limited (the “Acquisition”). The total consideration of the acquisition is $154.
The purchase price allocation resulted in $82,692 of goodwill, as below:
Acquired assets: US$
Cash and cash equivalents $ 2,762
Trade receivables
Other receivables
Non-current assets 103,412
106,369
Less: Assumed liabilities
Accrued liabilities (1,171 )
Other payable (2,181 )
Amount due to related parties (185,555 )
(188,907 )
Fair value of net assets acquired (82,538 )
Goodwill recorded 82,692
Cash consideration allocated $ 154
The Acquisition was accounted for as a business combination in accordance with ASC 805 “Business Combinations”. The Company has allocated the purchase price consideration based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets identified as of the acquisition date and considered a number of factors including valuations from management estimation. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.
The goodwill is fully impaired for the year ended December 31, 2020.
NOTE 5 - DISCONTINUED OPERATIONS
On December 30, 2019 the Company’s Board of Directors approved to enter into a VIE Termination Agreement relating to the termination of the Consulting Services Agreement, Operating Agreement, Equity Pledge Agreement, Option Agreement, Voting Rights Proxy Agreement dated October 12, 2007 with Huayang Companies. The operations in China were closed down and fully written-off at December 31, 2019. The assets and liabilities of Huayang Companies have been accounted for as discontinued operations in the Company’s consolidated balance sheets for all years presented. The operating results related to these lines of business have been included in discontinued operations in the Company’s consolidated statements of operations for all years presented.
On March 24, 2020, the Company sold its equity interest of 80% in AnyWorkspace Limited. The assets and liabilities of AnyWorkspace Companies have been accounted for as discontinued operations in the Company’s consolidated balance sheets for all periods presented. The operating results related to these lines of business have been included in discontinued operations in the Company’s consolidated statements of operations for all periods presented.
The summarized operating result of discontinued operations included in the Company’s consolidated statements of operations is as follows:
Years Ended
December 31,
Revenues $ - $ 6,661,473
Cost of revenues - (11,683,813 )
Gross profit (loss) - (5,022,340 )
Operating expenses - (19,696,644 )
Loss from operations - (24,718,984 )
Other income (expense), net - (232,102 )
Income (loss) from discontinued operations, net of income taxes $ - $ (24,951,086 )
NOTE 6 - PROPERTY AND EQUIPMENT
At December 31, 2020 and 2019, property and equipment consisted of the following:
Useful life December 31,
December 31,
Office equipment 3 - 5 years 25,872 25,815
Motor vehicle 5 years 72,382 72,382
Yacht infinite 591,404 588,592
689,658 686,789
Less: accumulated depreciation
(202,322 ) (66,714 )
$ 487,336 $ 620,075
Depreciation expense from continuing operations for the years ended December 31, 2020 and 2019 amounted to $134,691 and $28,980.
NOTE 7 - INTANGIBLE ASSETS
At December 31, 2020 and 2019, intangible assets consisted of the following:
Useful life December 31,
December 31,
Other intangible assets 3 - 5 years 844,246 843,817
Redemption code 5 years 750,000 750,000
Goodwill infinite 27,353 27,353
1,621,599 1,621,170
Less: accumulated amortization
(714,832 ) (512,763 )
Less: impairment loss
(750,000 ) -
$ 156,767 $ 1,108,407
Amortization of intangible assets attributable to future periods is as follows:
Year ending December 31: Amount
$ 103,889
18,018
7,507
Thereafter -
$ 129,414
Amortization expense from continuing operations for the years ended December 31, 2020 and 2019 amounted to $202,992 and $270,894 respectively. Amortization expense from discontinued operations for the years ended December 31, 2020 and 2019 amounted to $0 and $84,219, respectively. Impairment loss from continuing operations for the years ended December 31, 2020 and 2019 amounted to $750,000 and $0 respectively. No impairment loss from discontinued operations recognised for the years ended December 31, 2020 and 2019.
NOTE 8 - BANK LOANS
Bank loans of $5,064,142 represented amount due to one financial institution in Hong Kong that are repayable in a term of 30 years, with 360 monthly installments and interest is charged at the annual rate of 2.5% below its best lending rate.
Revolving credit line of $6,322,417 is expected to be repaid in the next twelve months and interest is charged at the rate of 1.63% per annum over the Hong Kong Dollar Best Lending Rate.
At December 31, 2020, the banking facilities of the Company were secured by:
● Personal guarantee by the directors of the Company’s subsidiary;
● Legal charge and rental assignment over the leasehold land and buildings owned by its related companies which are controlled by the major shareholder of the Company, Mr. Chan Tin Chi; and
● Hong Kong Mortgage Corporation Limited.
At December 31, 2020 and 2019, bank loans consisted of the following:
December 31,
December 31,
Mortgage loan $ 5,064,142 $ 5,098,796
Line of revolving loan 6,322,417 4,558,749
Short-term bank loans - 1,195,297
Total bank loans 11,386,559 10,852,842
Less: Total bank loans - discontinued operations - (1,195,297 )
Total bank loans - continuing operations $ 11,386,559 $ 9,657,545
Reclassifying as:
Current portion $ 6,446,139 $ 4,676,184
Long-term portion (more than 12 months) 4,940,420 4,981,361
Total bank loans $ 11,386,559 $ 9,657,545
Interest related to the bank loans from continuing operations was $263,369 and $322,201 for the years ended December 31, 2020 and 2019, respectively.
Interest related to the bank loans from discontinued operations was $0 and $147,631 for the years ended December 31, 2020 and 2019, respectively.
All interests are included in interest expense on the accompanying consolidated statements of operations.
NOTE 9 - CONVERTIBLE NOTE PAYABLE
Securities purchase agreement and related convertible note and warrants
On May 2, 2018, pursuant to a securities purchase agreement, the Company closed a private placement of securities with Iliad Research and Trading, L.P. (the “Investor”) pursuant to which the Investor purchased a Convertible Promissory Note (the “Iliad Note”) in the original principal amount of $900,000, convertible into shares of common stock of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in the Iliad Note, and a two year Warrant to purchase 134,328 shares of Common Stock at an exercise price of $7.18 per share (the “Warrant”). In connection with the Iliad Note, the Company paid an original issue discount of $150,000 and paid issuance costs of $45,018 which will be reflected as a debt discount and amortized over the Iliad Note term. The Iliad Note bears interest at 10% per annum, is unsecured, and is due on the date that is fifteen months from May 2, 2018. The warrants shall expire on the last calendar day of the month in which the second anniversary of the Issue Date occurs.
On November 8, 2018, the Company converted an aggregate of $27,811 and $47,189 outstanding principal and interest of the Iliad Note, respectively, into a total of 36,621 shares of its common stock.
On January 11, 2019, the Company converted an aggregate of $34,103 and $15,897 outstanding principal and interest of the Iliad Note, respectively, into 266,667 shares of its common stock.
On April 30, 2020, the Company converted an aggregate of $100,000 and $0 outstanding principal and interest of the Iliad Note, respectively, into 10,059 shares of its common stock.
During the December, 2020, the Company converted an aggregate of $235,000 and $158,017 outstanding principal and interest of the Iliad Note, respectively, into 18,944,773 shares of its common stock.
The Investor has the right at any time after May 2, 2018 until the outstanding balance has been paid in full to convert all or any part of the outstanding balance into shares of common stock of the Company at conversion price of $6.70 per share (the “Lender Conversion Price”). The Lender Conversion Price is subject to certain adjustments set forth in the Iliad Note. The conversion price for each Redemption Conversion (the “Redemption Conversion Price”) shall be the lesser of (a) the Lender Conversion Price, and (b) the Market Price; provided, however, in no event shall the Redemption Conversion Price be less than $2.00 per share (“Conversion Price Floor”) unless the Company waive the Conversion Price Floor.
This debt instrument includes embedded components including a put option. The Company evaluated these embedded components to determine whether they are embedded derivatives within the scope of ASC 815 that should be separately carried at fair value. ASC 815-15-25-1 provides guidance on when an embedded component should be separated from its host instrument and accounted for separately as a derivative. Based on this analysis, the Company believes that the put option is clearly and closely related to the debt instrument and does not meet the definition of a derivative. Accordingly, in connection with this Iliad Note, the Company recorded a debt discount for (a) the original issue discount of $150,000 (b) the relative fair value of the warrants issued of $152,490 and (c) legal fees and other fees paid in connection with the Iliad Note aggregating $45,018. There is no beneficial conversion feature on this Iliad Note. The debt discount shall be accreted on a straight line basis over the term of this Iliad Note.
On April 7, 2020, pursuant to a securities purchase agreement, the Company closed a private placement of securities with Power Up Lending Group Ltd. (“Power Up”) pursuant to which Power Up purchased a Convertible Promissory Note (the “Power Up Note”) in the original principal amount of $83,000, with additional tranches of up to $1,000,000 in the aggregate over the next twelve (12) months, subject to the discretion of both parties. The Power Up Note is convertible into shares of the common stock of the Company at a price equal to 65% of the average of the two (2) lowest trading prices for the Company’s common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. The Power Up Note bears interest at 8% per annum and is due on October 7, 2021.
During the December, 2020, the Company converted an aggregate of $127,820 and $0 outstanding principal and interest of the Power Up Note, respectively, into 8,228,775 shares of its common stock.
On April 14, 2020, the Company and Black Ice Advisors, LLC (“Black Ice”) entered into a Securities Purchase Agreement, whereby the Company issued a note to Black Ice (the “Black Ice Note”) in the original principal amount of $110,000.The Black Ice Note contains an original issue discount of $10,000 which will be reflected as a debt discount and amortized over the Black Ice Note term. The Black Ice Note is convertible into shares of the common stock of the Company at a price equal to 60% of the lowest trading price of the Company’s common stock for the fifteen (15) prior trading days including the day upon which a Notice of Conversion is received by the Company. The Black Ice Note bears interest at 10% per annum and is due on April 14, 2021.
During the December, 2020, the Company converted an aggregate of $15,000 and $0 outstanding principal and interest of the Black Ice Note, respectively, into 987,180 shares of its common stock.
At December 31, 2020 and 2019, convertible debt consisted of the following:
December 31,
December 31,
Principal $ 598,571 $ 838,571
Unamortized discount (2,821 ) -
Convertible debt, net $ 595,750 $ 838,571
The amortization of discount was $7,179 and $162,170 for the years ended December 31, 2020 and 2019.
As of December 31, 2020 and 2019, accrued interest amounted to $701,794 and $63,303, respectively.
NOTE 10 - RELATED PARTY TRANSACTIONS
Due to related parties
From time to time, during 2020 and 2019, the Company receive advances from Chan Tin Chi Family Company Limited (formerly known as YSK 1860 Co., Limited), who is the major shareholder of the Company for working capital purposes. These advances are non-interest bearing and are payable on demand. During the years ended December 31, 2020, the Company repaid to Chan Tin Chi Family Company Limited for working capital totaled $228,393. During the years ended December 31, 2019, the Company received advances from Chan Tin Chi Family Company Limited for working capital totaled $788,457. As of December 31, 2020 and 2019, amounts due to Chan Tin Chi Family Company Limited amounted to $1,817,569 and $2,045,962, respectively.
As of December 31, 2020 and 2019, amounts due to related companies amounted to $650,806 and $319,542, respectively.
The amounts are unsecured, interest-free and have no fixed terms of repayment.
NOTE 11 - STOCKHOLDERS’ DEFICIT
In March 2020, an amendment to The Company’s Articles of Incorporation to increase the number of shares of common stock which the Company is authorized to issue from 250,000,000 to 7,450,000,000 was approved. The Company issued the remaining 140,378,844 shares of common stock to Peak Equity shareholders in April 13, 2020.
Effective May 20, 2020, the Board of Directors of the Company and one stockholder holding an aggregate of 4,679,260,000 shares of common stock on such date approved an amendment to the Company’s Articles of Incorporation effecting a fifty-for-one (50:1) reverse split (the “Reverse Stock Split”) of the Company’s outstanding shares of common stock. The Reverse Stock Split was effective on the OTC Markets Group, Inc. as of the opening of business on October 13, 2020. As a result of the Reverse Stock Split, each 50 shares of the Company’s common stock outstanding on such date was exchanged for one share of the Company’s common stock. The number of authorized shares and par value remain unchanged. All share and per share information in this financial statements and footnotes have been retroactively adjusted for the period and years presented, unless otherwise indicated, to give effect to the forward stock split.
As of December 31, 2020 and 2019, the Company has 172,883,435 shares and 3,988,372 shares of common stock issued and outstanding, respectively.
As of December 31, 2020 and 2019, the Company has 531,600 shares and 0 shares of Series A preferred stock issued and outstanding, respectively.
Preferred stock issued for services and acquisition of a non-wholly owned subsidiary
During the year ended December 31, 2020, the Company issued an aggregate of 531,600 shares of preferred stock to one consultant and vendors for the services rendered and to be rendered. These shares were valued at the fair market value on the grant date using the reported closing share price on the date of grant. At the end of each financial reporting period prior to issuance of these shares, the fair value of these shares is measured using the fair value of the Company’s preferred stock at reporting date. During the year ended December 31, 2020, the fair value of the above mentioned shares issued and the change in value of the shares to be issued was $202,008. The Company recognizes stock-based professional fees over the period during which the services are rendered by such consultant or vendor. For the year ended December 31, 2020, the Company recorded stock-based consulting and service fees to service provider of $202,008. In connection with the issuance/future issuance of shares to consultants and vendors, the Company recorded prepaid expenses of $0 which will be amortized over the remaining service period.
Common stock issued for services
During the year ended December 31, 2020, pursuant to consulting and service agreements, the Company issued an aggregate of 16,000 shares of common stock to several consultants and vendors for the services rendered and to be rendered. These shares were valued at the fair market value on the grant date using the reported closing share price on the date of grant. At the end of each financial reporting period prior to issuance of these shares, the fair value of these shares is measured using the fair value of the Company’s preferred stock at reporting date. During the year ended December 31, 2020, the fair value of the above mentioned shares issued and the change in value of the shares to be issued was $276,000. The Company recognizes stock-based professional fees over the period during which the services are rendered by such consultant or vendor. For the year ended December 31, 2020, the Company recorded stock-based consulting and service fees to service provider of $276,000.
Common stock issued for debt conversion
In April 2020, the 10,059 shares of its common stock upon conversion of debt (note 9).
In December 2020, the Company issued 28,160,728 shares of its common stock upon conversion of debt (note 9).
NOTE 12 - CONCENTRATIONS
Customers
For the years ended December 31, 2020 and 2019, there are no customers representing more than 10% of the Company’s revenue.
Suppliers
For the years ended December 31, 2020 and 2019, there are no vendors representing more than 10% of the Company’s purchase.
NOTE 13 - COMMITMENT AND CONTINGENCIES
Litigation
On April 25, 2019, ECPower (HK) Company Limited (“EC Power”), a subsidiary of SEII, filed a claim against The Dairy Farm Limited (“Dairy Farm”) in respect of the cooperation agreement between the two parties for the battery rental business at 7-Eleven outlets in Hong Kong during the period from September 2017 to February 2018. The claim is for a total compensation of HK$1,395,000 (approximately $178,846) which comprises of (i) HK$45,000 (approximately $5,769) as compensation for interest and administration cost incurred as a result of Dairy Farm’s delay in payment of EC Power’s share of the rental income, and (ii) HK$1,350,000 (approximately $173,077) as compensation for Dairy Farm’s early termination of the cooperation agreement without any valid proof of fault on the part of EC Power.
Legal proceedings:
On June 10, 2020, the Company’s subsidiary, Ecrent Worldwide Company Limited (“Ecrent Worldwide”), a wholly owned subsidiary of Universal Sharing Limited (formerly known as Ecrent Holdings Limited), received a writ of summon (the “Summon”) issued by Messrs Wilkinson & Grist on behalf of Mr. Michael Andrew BERMAN and Mr. Eric Hans ISRAEL, who were the former Chief Executive Officer and Chief Financial Officer of Ecrent (America) Company Limited (“Ecrent America”) and Ecrent (USA) Company Limited (“Ecrent USA”). Both Ecrent America and Ecrent USA were the former subsidiaries of Universal Sharing Limited. On the same day, the Summon also delivered to Mr. Chan Tin Chi, the major shareholder of SEII and his spouse, Ms. Deborah Yuen Wai Ming. Pursuant to the US Judgement dated on September 25, 2019 issued by the Supreme Court of the State of New York County of Nassau, the Summon demands Ecrent Worldwide, Mr. Chan Tin Chi, and Ms. Deborah Yuen Wai Ming to fully settle an amount of approximately $241,706 and $103,841 to Mr. Berman and Mr. Israel, respectively representing the unpaid salary, benefits, expenses and incentive bonus. SEII intends to dispute these proceedings that the US Judgement is not enforceable under the Hong Kong jurisdiction.
In accordance with applicable accounting guidance, the Company records accruals for certain of its outstanding legal proceedings, investigations or claims when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would make a loss contingency both probable and reasonably estimable. The Company discloses the amount of the accrual if the financial statements would be otherwise misleading.
When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. However, if the loss (or an additional loss in excess of the accrual) is at least a reasonable possibility and material, then the Company discloses an estimate of the possible loss or range of loss, if such estimate can be made or discloses that an estimate cannot be made.
NOTE 14 - SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after December 31, 2020, up through April 16, 2021, the Company issued the audited consolidated financial statements.
The Company is currently in default under Iliad Note with the outstanding balance of $503,571 in principal and $733,909 accrued interest at December 31, 2020. At the date of filing, both parties have not reached into the mutual agreement.
On April 8, 2020, the Company and shareholder of OOB HK Media HK Limited (“OOB HK”) Entered into a Share Exchange Agreement, whereby the Company shall issue 239,387,189 shares of series A convertible preferred stock at a price of $0.33 per share, in exchange of 100% ownership of OOB HK, which owns 100% of Tone Rich (Shanghai) Limited that holds 69.6% of OOB Media (Sichuan) Company Limited, an advertising media technology and agency company.
On March 3, 2021, the Company approved to grant a bonus in aggregate of 8,333,335 shares of common stock, par value $0.001, to the Board of Directors and Advisory Committee members.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, our management, including Chan Che Chung Anthony, our chief executive officer, and Lam Ka Man, our chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2020.
Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our 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, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.
Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive officer and our chief financial officer. Based on that evaluation, Mr. Chan and Ms. Lam concluded that, because our internal controls over financial reporting are not effective, as described below, our disclosure controls and procedures were not effective as of December 31, 2020.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. During our assessment of the effectiveness of internal control over financial reporting as of December 31, 2020, management identified significant deficiencies related to (i) the U.S. GAAP expertise of our internal accounting staff and chief financial officer, (ii) our internal audit functions and (iii) a lack of segregation of duties within accounting functions. Although management believes that these deficiencies do not amount to a material weakness, our internal controls over financial reporting were not effective at December 31, 2020.
Due to our size and nature, particularly in view of the reduced scope of our operations, segregation of all conflicting duties may not always be possible and may not be economically feasible, and we continue to rely on third parties for a significant portion of the preparation of our financial statements. As a result, we have not been able to take steps to improve our internal controls over financial reporting during the year ended December 31, 2020. However, to the extent possible, we will implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals.
A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.
In light of these material weaknesses, we performed additional analyses and procedures in order to conclude that our consolidated financial statements for the year ended December 31, 2020 included in this Annual Report on Form 10-K were fairly stated in accordance with the U.S. GAAP. Accordingly, management believes that despite our material weaknesses, our consolidated financial statements for the year ended December 31, 2020 are fairly stated, in all material respects, in accordance with the U.S. GAAP.
Auditor Attestation
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Controls over Financial Reporting
There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART III

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCES
Our current directors and executive officers are:
Name Age Position
Chan Che Chung Anthony Chief executive officer, chairman and director
Lam Ka Man Chief financial officer
Ping Kee Lau Director
Cheng Wai Yin 2,3 Director
Shao Yuan Guo 1,2,3 Director
Lo Yu Ming 1,2,3 Director
1 Member of the audit committee.
2 Member of the compensation committee.
3 Member of the corporate governance/ nominating committee.
Che Chung Anthony Chan has over 20 year experience in sales and general management. Previously, he was the managing director of Nibou Transmission Machinery Co., Ltd (Hong King & China). He has a Master Business Administration degree from the University of Wales. We believe Anthony Chan has relevant sales and management experience which is useful for the development of our business in Hong Kong.
Lam Ka Man has served as our Chief Financial Officer and Treasurer since December 3, 2019. She has over 20 years’ experience in accounting and general management. She has previously acted as an internal auditor of manufacturing factories in Hong Kong and China. We believe Lam Ka Man has relevant accounting and management experience which is useful for the development our business in Hong Kong & China. Lam Ka Man’s background an internal auditor led to our conclusion that she should be serving as our Chief Financial Officer, in light of our business and structure.
Ping Kee Lau has been our Executive Director since March 2017, has been a director of Golden Creation Enterprise Limited since late 2014 and a director of Y.R.P. Investment Limited since 2013, both of which are investment entities. For more than two years prior thereto, Mr. Lau was a consultant to Y.R.P. Investment Limited. Mr. Lau received a B.A. in history from Chu Hai College in Hong Kong and his M.A. in philosophy for Ecole Pratique des Hautes Edudes in Paris. Mr. Lau’s experience with investment entities is important to us. We nominated Mr. Lau as a director because we believe that his experience as a director and in investment is important for the Company as we continue to grow and develop our business.
Cho Fu Li has over ten years of experience in auditing, accounting and banking, and is a member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants. We nominated Mr. Li as a director because we believe that his accounting and finance experience is important to improve our financial accounting controls.
Shao Yuan Guo has served as a director since December 3, 2019, and has over 10 years of experience in banking and financial services with Industrial and Commercial Bank of China and The People’s Bank of China in China. He has over 20 years of management experience in the weaving and garment manufacturing industries. We nominated Mr. Guo as a director because we believe his investment and management experience in China is important for the future development of the Company in the market.
Lo Yu Ming has the management experience for more than 28 years and have been the director of human resources management in Greater China in major multinational companies over 20 years. Dr. Lo not only graduated a bachelor of arts degree, but also the master of business administration, a bachelor of Law, a master of law in China, and a doctorate in business administration. He is a senior professional trainer and has provided training and consulting service for major multinational companies, such as Hong Kong Government, Nokia, ING Insurance, Fedex, Thomason Multimedia, Duracell, Schrinder, Hong Kong Management Association (HKMA), San Miguel, etc.
Our directors are elected for a term of one (1) year and until their successors are elected and qualified.
Committees
Our business, property and affairs are managed by or under the direction of the board of directors. Members of the board are kept informed of our business through discussion with the chief executive and financial officers and other officers, by reviewing materials provided to them and by participating at meetings of the board and its committees.
Our board of directors has three committees - the audit committee, the compensation committee and the corporate governance/nominating committee. The audit committee is comprised of Mr. Shao and Mr. Lo, with Ms. Lo serving as Chairman. The compensation committee is comprised of Mr. Shao, Mr. Lo and Mr. Cheng, with Mr. Shao serving as Chairman. The corporate governance/nominating committee is comprised of Mr. Shao, Mr. Lo and Mr. Cheng, with Mr. Cheng serving as Chairman. Our Plan is administered by the compensation committee.
Our audit committee is involved in discussions with our independent auditor with respect to the scope and results of our year-end audit, our quarterly results of operations, our internal accounting controls and the professional services furnished by the independent auditor. Our board of directors has adopted a written charter for the audit committee which the audit committee reviews and reassesses for adequacy on an annual basis.
The compensation committee oversees the compensation of our chief executive officer and our other executive officers and reviews our overall compensation policies for employees generally. If so authorized by the board of directors, the committee may also serve as the granting and administrative committee under any option or other equity-based compensation plans which we may adopt. The compensation committee does not delegate its authority to fix compensation; however, as to officers who report to the chief executive officer, the compensation committee consults with the chief executive officer, who may make recommendations to the compensation committee. Any recommendations by the chief executive officer are accompanied by an analysis of the basis for the recommendations. The committee will also discuss compensation policies for employees who are not officers with the chief executive officer and other responsible officers. The compensation committee has the responsibilities and authority relating to the retention, compensation, oversight and funding of compensation consultants, legal counsel and other compensation advisers, as well as the requirement to consider six independence factors before selecting, or receiving advice from, such advisers.
The corporate governance/nominating committee is involved in evaluating the desirability of and recommending to the board any changes in the size and composition of the board, evaluation of and successor planning for the chief executive officer and other executive officers. The qualifications of any candidate for director will be subject to the same extensive general and specific criteria applicable to director candidates generally.
The board and its committees held the following number of meetings during 2020:
Board of directors
Audit committee
Compensation committee
Nomination committee
The meetings include meetings that were held by means of a conference telephone call, but do not include actions taken by unanimous written consent.
Each director attended at least 75% of the total number of meetings of the board and those committees on which he served during the year.
Our non-management directors had no meetings during 2020.
Compensation Committee Interlocks and Insider Participation
Aside from his service as director, no member of our compensation committee had any relationship with us as of December 31, 2020.
Section 16(a) Compliance
Section 16(a) of the Securities Exchange Act of 1934, requires our directors, executive officers and persons who own more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other of our equity securities. No officer or director was delinquent in filing reports pursuant to Section 16(a).

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION.
The following summary compensation table indicates the cash and non-cash compensation earned during the years ended December 31, 2020 and 2019 by each person who served as chief executive officer and chief financial officer during the years ended December 31, 2020 and 2019. No other executive officer received compensation equal or exceeding $100,000.
Summary Annual Compensation Table
Name and Principal Position Fiscal Year Salary
($) Bonus
($) Stock
Awards
($) All Other
Compensation
($) Total
($)
Chan Che Chung Anthony 309,853 309,853
chief executive officer, chairman (1) 357,949 357,949
Lam Ka Man 23,077 23,077
chief financial officer (2) 4,230 4,230
Jianhua Wu, 0
chief executive officer (3) 0
(1) Mr. Chan has been our chief executive officer and chairman since July 28, 2020.
(2) Ms. Lam has been our chief financial officer since December 3, 2019.
(3) Mr. Wu has been our chief executive officer since June 3, 2017 and resigned as chief executive officer on July 28, 2020.
Compensation of Directors
We do not have any agreements or formal plan for compensating our current directors for their service in their capacity as directors, although our board may, in the future, award stock options to purchase shares of common stock to our current directors.
The following table provides information concerning the compensation of each member of our board of directors whose compensation is not included in the Summary Compensation Table for his or her services as a director and committee member for 2020. The value attributable to any stock grants is computed in accordance with ASC Topic 718.
Name Fees earned or paid in cash
($) Stock
awards
($) Total
($)
Ping Kee Lau 27,692 - 27,692
Cho Fu Li (1) 7,662 - 7,662
Shao Yuan Guo 32,077 - 32,077
Lo Yu Ming (2) 13,154 - 13,154
Ying Ying Wong (3) 40,569 - 40,569
Cheng Wai Yin (4) 9,237 - 9,237
(1) Resigned as a director from July 20, 2020
(2) Been a director since July 20, 2020
(3) Been a director since December 14, 2017 and resigned on August 24, 2020
(4) Been a director since August 31, 2020

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table provides information as to shares of common stock beneficially owned as of the filing date of this report, by:
● each current director;
● each current officer named in the summary compensation table;
● each person owning of record or known by us, based on information provided to us by the persons named below, to own beneficially at least 5% of our common stock; and
● all current directors and executive officers as a group.
Name of Beneficial Owner Amount and
Nature of
Beneficial
Ownership
% of Class
Chan Che Chung Anthony 2,136,752 1.10 %
Lam Ka Man 0.00 %
Ping Kee Lau 1,068,576 0.55 %
Shao Yuan Guo 854,701 0.44 %
Lo Yu Ming 854,701 0.44 %
Cheng Wai Yin 854,701 0.44 %
All current officers and directors as a group 5,769,531 2.97 %
ECinteract Company Limited 43,368,894 22.39 %
Chan Tin Chi Family Company Limited (1)(2) 93,585,201 48.32 %
Total 142,723,626 73.68 %
* less than 1%.
(1) Mr. Chan Tin Chi owns 99% of the issued and outstanding ordinary shares of Chan Tin Chi Family Company Limited (formerly known as YSK 1860 Co., Limited).
(2) Address is Redhill Peninsula, House 74 Cedar Drive, Tai Tam, Hong Kong

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
Director Independence
We believe that three (3) of our directors, Mr. Li, Mr. Leng and Ms. Wong, are independent directors, pursuant to the Nasdaq definition of independence. Our Board has determined that Ms. Wong is an audit committee financial expert. Mr. Wu and Mr. Lau are not independent directors.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table sets forth the fees billed by our principal independent accountants, Audit Alliance LLP, for each of our last two fiscal years for the categories of services indicated.
Years Ended
December 31,
Category
Audit Fees $ 60,000 $ 50,000
Audit Related Fees $ 13,500 $ 31,000
Tax Fees $ 0 $ 0
All Other Fees $ 0 $ 0
Audit fees. Consists of fees billed for the audit of our annual financial statements, review of our Form 10-K, review of our interim financial statements included in our Form 10-Q and services that are normally provided by the accountant in connection with year-end statutory and regulatory filings or engagements.
Audit-related fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees”, review of our Forms 8-K filings and services that are normally provided by the accountant in connection with non-year-end statutory and regulatory filings or engagements.
Tax fees. Consists of professional services rendered by a company aligned with our principal accountant for tax compliance, tax advice and tax planning.
Other fees. The services provided by our accountants within this category consisted of advice and other services relating to SEC matters, registration statement review, accounting issues and client conferences.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The audit committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. The independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date. The audit committee may also pre-approve particular services on a case-by-case basis. All services have been pre-approved by the audit committee.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit
Number
Description
List of subsidiaries *
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Schema
101.CAL
XBRL Taxonomy Calculation Linkbase
101.DEF
XBRL Taxonomy Definition Linkbase
101.LAB
XBRL Taxonomy Label Linkbase
101.PRE
XBRL Taxonomy Presentation Linkbase