Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  News  >  Business Leaders  >  All news

Business Leaders

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesHot NewsMost Read NewsRecomm.Business LeadersCalendar 
HomeAll newsMost read newsBusiness Leaders Biography 
The feature you requested does not exist. However, we suggest the following feature:

VALUE EXCHANGE INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-K)

share with twitter share with LinkedIn share with facebook
share via e-mail
0
03/30/2017 | 04:36pm CEST

The following management's discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, the following discussion contains certain forward-looking statement under the Private Securities Litigation Reform Act of 1995, as amended. See "Special Note Regarding Forward Looking Statements" above for certain information concerning those forward looking statements. Our financial statements are prepared in value="LC/us" idsrc="xmltag.org">U.S. dollars and in accordance with value="LC/us" idsrc="xmltag.org">U.S. GAAP.



Overview of our Business


value="OTC-PINK:VEII" idsrc="xmltag.org">Value Exchange International, Inc.

Our initial business was to operate a credit card processing and merchant-acquiring services company that provides POS - credit card clearing services to merchants and financial institutions in PRC and Hong Kong SAR. Since inception, we have strived to implement our business plan, including the key step of creating our Global Processing Platform ("SinoPay GPP") and establishing our website, www.sinopayments.com.

Specifically and currently, one of the Company's business lines, which is secondary or supplementary to our IT Business, is to be a provider of IP processing services in value="LR/asp" idsrc="xmltag.org">Asia to bank card-accepting merchants. We market our services to local merchants with regional retail locations across value="LR/asp" idsrc="xmltag.org">Asia Pacific as potential customers of their IP and related credit card and debit card processing systems. We offer interoperability through what is envisioned as a highly efficient infrastructure and perceived exceptional knowledge of the IP processing market through our SinoPay GPP platform. The SinoPay GPP system facilitates the processing of all major credit card types (Visa/MC/AMEX/Diners/Discover/JCB) and will be integrated with value="ACORN:3212535107" idsrc="xmltag.org">China UnionPay to provide processing of UnionPay Debit cards in value="LC/cn" idsrc="xmltag.org">China. VEII intends to deploy the SinoPay GPP platform throughout value="LR/asp" idsrc="xmltag.org">Asia with a focus on value="LC/cn" idsrc="xmltag.org">China, value="LC/hk" idsrc="xmltag.org">Hong Kong, value="LC/th" idsrc="xmltag.org">Thailand, value="LC/ph" idsrc="xmltag.org">Philippines, value="LC/my" idsrc="xmltag.org">Malaysia, value="LC/kr" idsrc="xmltag.org">Korea, and value="LC/jp" idsrc="xmltag.org">Japan.



                                       21

--------------------------------------------------------------------------------

As of the date of this Annual Report on Form 10-K, we still have not sold or implemented any IP Business to any customer. Our current focus is on growing the IT Business because of our judgment that IT Business presents a more promising segment for growing our revenues and attaining sustained profitability. While we will continue our efforts to sell the IP Business products and services, the IP Business will be more in the order of an optional product and service line, or a lead sales enticement for the IT Business, until we have sufficient funds or revenues to aggressively market and sell IP Business products and services.

Since we are focused on the retail sector, the offering of IT Business with an IP Business complementary offering makes sense in terms of fully leveraging all of our capabilities. Our hope is that the dual business lines may prove complementary in that each may lead to business opportunities for the other. As of the date of this Annual Report on Form 10-K, the IT Business and IP Business are presented as separate customer offerings and we have not made any progress in integrating IT Business and IP Business beyond offering them as menu of available services and products. We do not have a set time frame for integration and our efforts may be modified in the future based on then current circumstances. We do not view integration of the IT Business and IP Business as essential to our future operations, but we do view integration as a cost efficiency measure, especially to eliminate any duplicative overhead or lack of focus and consistency in marketing and sales efforts. No significant integration occurred in fiscal year 2016.

Enhancements to the functions of the IP Business products may be required to make them more attractive to the market. When and if we can attain sufficient revenues and/or funding, and subject to then current market demand, we may seek to offer a package of integrated IP Business and IT Business products and services as well as enhanced functionality for our IP Business products.

One factor affecting our IP Business is that POS customers tend to be sensitive to whether a POS provider is a long term provider of systems, services and maintenance. In light of our lack of any presence or financial performance in the IP Business, and the public availability of our financial information, as well as our lack of a prominent brand presence in our markets, we will probably have to significantly improve our financial and business performance to reassure prospective IP Business customers of our staying power as a provider of POS products, systems, and services and to fund the sort of sustained marketing and sales campaigns to increase the end users' awareness of IP Business brand and capabilities. Such campaigns are beyond our current financial wherewithal and may not be possible in fiscal year 2017.

Industry Trends and Economic Conditions.

The IT Business in value="LC/hk" idsrc="xmltag.org">Hong Kong and value="LC/cn" idsrc="xmltag.org">China is large and fragmented, comprised of thousands of competitors as well as being a highly competitive industry. A general trend affecting our IT Business is the trend of increasing competition for skilled labor. With a global economy and foreign competitors seeking to penetrate value="LC/hk" idsrc="xmltag.org">Hong Kong and value="LC/cn" idsrc="xmltag.org">China as markets as well as to tap into new pools of skilled workers in IT Business, we will undoubtedly face increasing competition for skilled workers in IT Business in the value="LC/hk" idsrc="xmltag.org">Hong Kong and value="LC/cn" idsrc="xmltag.org">China markets. We may be unable to afford or effectively compete for necessary skilled workers in value="LC/hk" idsrc="xmltag.org">Hong Kong and value="LC/cn" idsrc="xmltag.org">China and, if we are unable to afford or effectively compete for necessary skilled workers, our growth and ability to attain and sustain profit operations in the IT Business may fail. We have not experienced any significant problems in recruiting necessary skilled workers in fiscal years 2015 or 2016.

A common problem in the IT Business is retaining skilled workers throughout the duration of a project. Due to the global nature of the IT Business and the growing demand for skilled IT Business workers, a skilled IT business worker can often readily find higher paying positions with competitors, whether local or foreign. While we have not experienced retention problems due primarily to our focus on smaller, shorter term IT business projects, we may experience retention of skilled worker problems if we grow our IT Business and undertake longer term, more complex IT business projects for customers.

IT Business is often affected by general economic conditions in our markets and any decline in those conditions could adversely impact our business and financial performance. During periods of economic growth, customers general spend more for IT Business products and services. During periods of economic contraction or uncertainty, such spending generally decreases or is deferred. As such, the prospective business for our IT Business is generally greater during periods of economic growth or stability in value="LC/hk" idsrc="xmltag.org">Hong Kong or value="LC/cn" idsrc="xmltag.org">China and decreases during periods of economic decline or uncertainty in value="LC/hk" idsrc="xmltag.org">Hong Kong and value="LC/cn" idsrc="xmltag.org">China. In our global economy, and with PRC being still a principal export economy, adverse economic conditions globally or in other regions can adversely impact economic conditions in value="LC/hk" idsrc="xmltag.org">Hong Kong SAR and PRC. PRC has experienced a less dynamic growth in gross national product in the past year and this may reduce the willingness of customers to spend on IT Business or IP Business.



                                       22

--------------------------------------------------------------------------------

The IT Business is global and, with the growth of cloud computing, there is a growing capability and infrastructure for companies in a foreign nation to provide IT Business to customers around the globe as a complement to cloud computing. We have not seen any significant impact of cloud computing on our IT Business in fiscal years 2015 or fiscal year 2016, but we perceive that the expansion of cloud computing could allow foreign customers to provide IT Business products and services to its cloud computing customers in our value="LC/hk" idsrc="xmltag.org">Hong Kong and value="LC/cn" idsrc="xmltag.org">China core market. We may find it more difficult to compete for IT Business in value="LC/hk" idsrc="xmltag.org">Hong Kong and value="LC/cn" idsrc="xmltag.org">China if customers of IT Business elect to have cloud computing companies manage, repair and enhance IT Business products, software and systems.

The growth of cloud computing coupled with IT Business products and services as a ancillary component of the cloud computing menu of products and services could adversely impact our IT Business in value="LC/hk" idsrc="xmltag.org">Hong Kong and value="LC/cn" idsrc="xmltag.org">China markets.

We are examining if our operations could enter into a strategic relationship with a cloud computing company as part of a response to possible future competition from cloud computing companies, but have not taken any steps to pursuing or attaining such a relationship.

The nature of our IT Business is such that our most significant current asset is accounts receivable. Our most significant current liabilities are payroll related costs, which are generally paid either every two weeks or monthly. If the demand for our IT Business products and services increases, we may generally see an increase in our working capital needs, as we continue to pay our workers on a weekly or monthly basis while the related accounts receivable are outstanding for much longer than normal payment cycle, which may result in a decline in operating cash flows. Conversely, as the demand for our IT Business products and services declines, we may generally see a decrease in our working capital needs, as the existing accounts receivable are collected and not replaced at the same level, resulting in a decline of our accounts receivable balance, with less of an effect on current liabilities due to the shorter cycle time of the payroll related items. This may result in an increase in our operating cash flows; however, any such increase would not be sustainable in the event that a local or global economic downturn continued for an extended period.

In order for us to attain sustained success in the near term, we must continue to maintain and grow our customer base, provide high-quality service and satisfaction to our existing clients, and take advantage of cross-selling opportunities within and between the IT Business and IP Business. In the current economic environment, we must provide our customers with service offerings that are appropriately priced, satisfy their needs, and provide them with measurable business benefits. While we have recently experienced a more demand for our IT Business products and services, we believe that it is too early to determine if developments will translate into sustainable improvements in our pricing or margins in fiscal year 2017 or over the longer term.

The increasing need for cybersecurity products and technologies may be a future weakness of our business plan. We do not have a current cybersecurity product and service line beyond consultants engaged to provide cybersecurity services.

Cybersecurity companies may have an advantage over our business model in the future in that cybersecurity companies could leverage their cybersecurity offerings to also sell IT Business services and products that compete with our IT Business products and services. While we may explore enhanced cybersecurity offerings, but we have not identified or commenced launch of any new cybersecurity products as of the date of the filing of this Annual Report on Form 10-K.



Principal business


The principal business of VEI CHN for more than 15 years is to provide the IT Business, primarily to leading retailers in value="LC/hk" idsrc="xmltag.org">Hong Kong SAR, Macau SAR and PRC.

The primary services and products of the IT Business are:

a)

Systems maintenance and related service

VEI CHN Group provides development, customization of software and hardware, enhancements thereto and maintenance services for installed POS system. VEI CHN Group market, sell and maintain its own brand POS software - edgePOS as well as third party brands (e.g. NCR / value="ACORN:0260582666" idsrc="xmltag.org">Retalix, which is one of the leading POS software in the market). These software programs can often integrate with different IP systems.

Systems maintenance services consist of: i) software maintenance service, including software patches, software code revisions; ii) installing, testing and implementing software; iii) training of customer personnel for the use of software; and iv) technical support and administration for software systems.

Other services include system installation and implementation including i) project planning; ii) System Analysis; iii) design of the entire system; iv) hardware and consumables selection advice and sales; and v) system hardware maintenance. These services typically consist of customer projects for NSO and value="ACORN:2861167653" idsrc="xmltag.org">IMAC for retail, and ad-hoc custom system projects for other business sectors. Our primary focus is the retail sector in value="LC/hk" idsrc="xmltag.org">Hong Kong SAR and PRC.



                                       23

--------------------------------------------------------------------------------

b)

Systems development and integration

VEI CHN Group provides value-added software, which integrate with customer owned or licensed software, and ad-hoc software development projects for other business sectors. Besides use of proprietary, custom software code, our services may from time to time license standard third party software programs.

During January 2017, VEI CHN acquired 100% common stock of TapServices, Inc. ("TSI") for total consideration being $202,636. TSI is a limited liability corporation organized under the laws of value="LC/ph" idsrc="xmltag.org">the Philippines on March 24, 2009. TSI operations have been managed by Mr. Benny Lee, a director of VEI SHG. TSI commenced revenue generating operations in 2010 and focused on software and computer hardware maintenance on point of sale or "POS" systems for local value="LU/ph..manila" idsrc="xmltag.org">Manila, Philippines businesses. TSI business model in 2015 and 2016 has been to engage in the business of providing information, data, and communications technology services, to supply and deal in all related products, including computer hardware, software and application products, and to own, design, install, maintain, operate, integrate, sell, lease or otherwise deal in such systems, facilities, gateways, equipment, devices and POS terminals in the retail business. TSI's business line is essentially similar to the business line of VEI CHN Group in information technology and computer system consulting services and related products' sales. The customer base of TSI includes Robinson Retails Group ("RRG"), Ministop Convenience Stores, and Watson's Personal Health and Care (Phil.) Inc. in value="LC/ph" idsrc="xmltag.org">the Philippines. In 2015, TSI secured POS hardware sales contract for 1,000 units of NCR POS equipment to RRG, which sales contract had a face value of $2.2 million in gross revenues. TSI customarily combines maintenance contracts with hardware sales. TSI geographical market is the greater value="LU/ph..manila" idsrc="xmltag.org">Manila, Philippines region and adjacent areas.

Throughout fiscal year 2017, we are focusing and will focus its business in IT Business, and seek to expand its services to commercial customers in PRC and value="LR/asp" idsrc="xmltag.org">Asia Pacific Region. This strategy is based upon our subjective business judgment that the IT Business presents more opportunities for potential customer order in our core markets of Hong Kong SAR and value="LC/cn" idsrc="xmltag.org">China than the IP Business. Any expansion is subject to and limited by our then current funding and cash flow, commitment of our manpower, ability to handle additional work and availability of sufficient strategic partner or contractor assistance.

With respect to the IP Business, the Company will continue to seek to implement its IP Business and related credit card and debit card processing systems as part of an enhancement for the IT Business to the Retail Sector.

Financial Performance Highlights

The following are some financial highlights for the 2016:

·

Net revenue: Our net revenues were $3,999,395 for the year ended December 31, 2016, as compared to $3,737,171 for the year ended December 31, 2015, an increase of $262,224 or 7%.



·

Gross profit: Gross profit for the year ended December 31, 2016 was $1,128,757 or 28.2% of net revenues, as compared to $479,361 or 12.8% of net revenues, for the year ended December 31, 2015, an increase of $649,396 or 135.5%.

·

Income (loss) from operations: Our income from operations totaled $63,523 for the year ended December 31, 2016, as compared to loss from operations $642,931 for year ended December 31, 2015, a change of $706,454 or 109.9%. The change was mainly attributable to the increase in our gross profit and decrease in operating expenses.



·

Net income (loss): Our net income of $53,889 for the year ended December 31, 2016, compared to net loss $542,677 for the year ended December 31, 2015, a negative change of $596,566 or 109.9%.

·

Basic and diluted net income per share was $0.00 for the year ended December 31, 2016.



Results of Operations


Year Ended December 31, 2016 compared to the year ended December 31, 2015

The following table summarizes the results of our operations during the years ended December 31, 2016 and 2015 and provides information regarding the dollar and percentage increase or (decrease) from the 2015 year to the 2016 year.



                                       24

--------------------------------------------------------------------------------

RESULTS OF OPERATIONS

Comparison of Year Ended December 31, 2016 and 2015

The following tables set forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of net revenues.

(All amounts, other than percentages, in value="LC/us" idsrc="xmltag.org">U.S. dollars)


                                     2016           2015               Change
                                      US$            US$          US$          %
  NET REVENUES
  Service income                    3,999,395      3,737,171     262,224         7.0
  COST OF SERVICES
  Cost of service income          (2,870,638)    (3,257,810)     387,172      (11.9)
  GROSS PROFIT                      1,128,757        479,361     649,396       135.5
  Operating expenses:
  General and administrative
  expenses                        (1,068,279)    (1,116,054)      47,775       (4.3)
  Foreign exchange loss                 3,045        (6,238)       9,283     (148.8)
  INCOME (LOSS) FROM
  OPERATIONS                           63,523      (642,931)     706,454     (109.9)
  OTHER INCOME (EXPENSES)              25,570        113,798    (88,228)      (77.5)
  INCOME (LOSS) BEFORE PROVISION
  FOR INCOME TAXES                     89,093      (529,133)     618,226     (116.8)
  INCOME TAXES                       (35,204)       (13,544)    (21,660)     (159.9)
  NET INCOME (LOSS)                    53,889      (542,677)     596,566     (109.9)


Net revenues. Net revenues were $3,999,395 for the year ended December 31, 2016, as compared to $3,737,171 for the fiscal year ended December 31, 2015, an increase of $262,224 or 7%. This increase was primarily attributable to the increase in our revenue from 1) systems maintenance with revenue increasing from $2,401,359 for the year ended December 31, 2015 to $3,124,148 for the year ended December 31, 2016, offset by the decrease in our revenue from systems development and integration with revenue decreasing from $242,379 for the year ended December 31, 2015 to $222,037 for the year ended December 31, 2016; and 2) sales of hardware and consumables with revenue decreasing from $1,093,433 for the year ended December 31, 2015 to $653,210 for the year ended December 31, 2016.

Cost of services. Our cost of services is primarily comprised of our costs of technical staff and general overhead. Our cost of services increased to $2,870,638 or 71.8% of net revenues, for the year ended December 31, 2016, as compared to $3,257,810 or 87.2% of net revenues, for the year ended December 31, 2015, a decrease of $387,172 or 11.9%. The decrease in cost of services was mainly attributable to the decrease in our contracting fees to suppliers, offset by an increase in the cost of technical staff, since we are expanding our technical team for the growing demand of our service and therefore rely less on outsider suppliers.

Gross profit. Gross profit for the year ended December 31, 2016 was $1,128,757 or 28.2% of net revenues, as compared to 479,361 or 12.8% of net revenues, for the year ended December 31, 2015. The increase of gross profit was largely due to 1) increase in net revenues; and 2) decrease in cost of services in 2016, as compared with 2015.

General and administrative expenses. General and administrative expenses include the costs associated with staff and support personnel who manage our business activities, office rental expenses, depreciation charge for fixed assets, and professional fees paid to third parties. General and administrative expenses slightly decreased to $1,068,279 or 26.7% of net revenues, for the year ended December 31, 2016, as compared to $1,116,054 or 29.9% of net revenues, for the year ended December 31, 2015, a decrease of $47,775 or 4.3%. The primary reason for the decrease was attributable to a decrease audit fee and professional expenses since we incurred more in these area for our recapitalization in 2015.

Income (loss) from operations. As a result of the above analysis, our income from operations totaled $63,523 for the year ended December 31, 2016, as compared to loss from operations $642,931 for year ended December 31, 2015, a change of $706,454 or 109.9%. The change was mainly attributable to the increase in our gross profit and decrease in operating expenses.



                                       25

--------------------------------------------------------------------------------

Income taxes. The Company is subject to value="LC/us" idsrc="xmltag.org">United States federal income tax at a tax rate of 34% on any revenues subject to value="LC/us" idsrc="xmltag.org">U.S. taxation. No provision for income taxes in value="LC/us" idsrc="xmltag.org">the United States has been made as the Company had no value="LC/us" idsrc="xmltag.org">U.S. source income taxable in value="LC/us" idsrc="xmltag.org">the United States for the fiscal years ended December 31, 2016 and 2015.

VEI CHN, VEI HKG and KDSL were formed in value="LC/hk" idsrc="xmltag.org">Hong Kong and subject to value="LC/hk" idsrc="xmltag.org">Hong Kong income tax at a tax rate of 16.5% for the year ended December 31, 2016. Our VEI SHG was formed in value="LC/cn" idsrc="xmltag.org">China and subject to national and local income taxes within value="LC/cn" idsrc="xmltag.org">China at the applicable tax rate on the taxable income as reported in its PRC statutory financial statements in accordance with relevant income tax laws. value="LC/cn" idsrc="xmltag.org">China passed a new Enterprise Income Tax Law, or the "New EIT Law," and its implementing regulations, both of which became effective on January 1, 2008. VEI SHG subject to an income tax rate of 25% for the year ended December 31, 2016.

Income taxes expense increased to $35,204 or 0.9% of net revenues for the year ended December 31, 2016, as compared to $13,544 or 0.4% of net revenues for the year ended December 31, 2015. The increase was primarily attributable to the utilization of deferred assets from tax loss brought forward due to the increase in income before taxation for the year ended December 31, 2016.

Net (loss) income. As a result of the foregoing, we had a net income of $53,889 for the year ended December 31, 2016, compared to net income $542,677 for the year ended December 31, 2015, as a result of the factors described above concerning higher revenue, lower operating expenses and hence, higher relevant gross profits.

Liquidity and Capital Resources

As of December 31, 2016, we had cash and cash equivalents of $448,053. The following table provides detailed information about our net cash flow for all financial years presented in this report.



Cash Flows


(All amounts in  value="LC/us" idsrc="xmltag.org">U.S. dollars)


                                                              Year Ended
                                                             December 31,
                                                         2016            2015
                                                         US$             US$
  Net cash provided by (used in) operating
  activities                                              348,450       (224,626)
  Net cash used in investing activities                 (102,129)       (280,972)
  Net cash (used in) provided by financing
  activities                                            (216,642)         852,503
  Effect of exchange rate changes on cash and
  cash equivalents                                       (15,967)        (14,287)
  Net increase in cash and cash equivalents                13,712         332,618
  Cash and cash equivalents at the beginning of
  year                                                    434,341         101,723
  Cash and cash equivalents at the end of year            448,053         434,341



Operating Activities


Net cash provided by operating activities was $348,450 for the year ended December 31, 2016, which was a change of $573,076 from net cash used in operating activities of $224,626 for the year ended December 31, 2015. The change was primarily attributable to the following:

1)

Net income of $53,889 for the year ended December 31, 2016, compared to net loss of $542,677 for the year ended December 31, 2015; and

2)

A change of accounts payable, other payables and accrued liabilities and amounts due to related parties increased our operating cash balances by $346,946, $862,525 and $166,886 respectively; offset by

3)

A change of accounts receivable, amounts due from related parties, and deferred income decreased our operating cash balances by $418,236, $931,585 and $103,989 respectively.



                                       26

--------------------------------------------------------------------------------

Investing Activities

Net cash used in investing activities decreased to $102,129 in the year ended December 31, 2016, which was a decrease of $178,843 from $280,972 for the year ended December 31, 2015. The decrease in net cash used in investing activities was attributable to the purchase of plant and equipment by $102,129 for the year ended December 31, 2016.



Financing Activities


Net cash used in financing activities was $216,642 in the year ended December 31, 2016, which was a change of $1,069,145 from net cash provided by financing activities of $852,503 for the year ended December 31, 2015. The change was attributable to cash used in repayment of loan from a director amounts to $216,642 for the year ended December 31, 2016.

Future Financings

We believe that our cash on hand and cash flow from operations will meet our expected capital expenditure and working capital requirements for the next 12 months. However, we may in the future require additional cash resources due to changed business conditions, implementation of our strategy to expand our production capacity, sales, marketing and branding activities or other investments or acquisitions (such as TSI). If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

Our consolidated financial statements and accompanying notes have been prepared in accordance with value="LC/us" idsrc="xmltag.org">United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with value="LC/us" idsrc="xmltag.org">U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting years.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in note 2 of the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Basis of presentation and principle of consolidation

The consolidated financial statements include all of the assets, liabilities, revenues, expenses and cash flows of entities in which the Company has a controlling interest ("subsidiaries"). Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation.

Consolidated financial statements prepared following a reverse acquisition are issued under the name of the legal parent (accounting acquiree) (i.e. SNPY) but as a continuation of the financial statements of the legal subsidiary (accounting acquirer) (i.e VEI CHN), with one adjustment, which is to retroactively adjust the accounting acquirer's legal capital to reflect the legal capital of the accounting acquiree. That adjustment is required to reflect the capital of the legal parent (the accounting acquiree). Comparative information presented in those consolidated financial statements also is retroactively adjusted to reflect the legal capital of the legal parent (accounting acquiree).



                                       27

--------------------------------------------------------------------------------

The consolidated financial statements include the accounts of value="OTC-PINK:VEII" idsrc="xmltag.org">Value Exchange International, Inc. and the following subsidiaries:

1.

Value Exchange Int'l ( value="LC/cn" idsrc="xmltag.org">China) Limited, a wholly-owned subsidiary of the Company incorporated in value="LC/hk" idsrc="xmltag.org">Hong Kong as a private company on November 16, 2001;

2.

Value Exchange Int'l ( value="LU/cn..shangh" idsrc="xmltag.org">Shanghai) Limited, a wholly-owned subsidiary of the Company incorporated in value="LU/cn..shangh" idsrc="xmltag.org">Shanghai as a private company on September 2, 2008;

3.

Value Exchange Int'l ( value="LC/hk" idsrc="xmltag.org">Hong Kong) Limited, a wholly-owned subsidiary of the Company incorporated in value="LC/hk" idsrc="xmltag.org">Hong Kong as a private company on August 25, 2003 and acquired by VEI CHN on September 25, 2008;

4.

Ke Dao Solutions Limited, a wholly-owned subsidiary of the Company incorporated in value="LC/hk" idsrc="xmltag.org">Hong Kong as a private company on May 14, 2013.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in value="LC/us" idsrc="xmltag.org">the United States of America (" value="LC/us" idsrc="xmltag.org">U.S. GAAP"), and include the financial statements of the Company and all its wholly-owned subsidiaries that require consolidation. All material intercompany transactions and balances have been eliminated in the consolidation. The following entities were consolidated as of December 31, 2016:


                                      Place of              Ownership percentage
                                   incorporation           2016             2015
Value Exchange International,           USA           Parent Company   Parent Company
Inc.
Value Exchange Int'l (China)         Hong Kong             100%             100%
Limited
Value Exchange Int'l                    PRC                100%             100%
(Shanghai) Limited
Value Exchange Int'l (Hong           Hong Kong             100%             100%
Kong) Limited
Ke Dao Solutions Limited             Hong Kong             100%             100%



Use of estimates

Preparing consolidated financial statements in conformity with value="LC/us" idsrc="xmltag.org">U.S. GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring using management's estimates and assumptions relate to the collectability of its receivables, the fair value and accounting treatment of financial instruments, the valuation of long-lived assets and valuation of deferred tax liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates. In addition, different assumptions or circumstances could reasonably be expected to yield different results.

Accounts receivable and other receivables

Receivables include trade accounts due from customers and other receivables such as cash advances to employees, utility deposits paid and advance to suppliers. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentration, customer credit worthiness, current economic trends and changes in customer payment patterns to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Delinquent account balances are written-off after management has determined that the likelihood of collection is not probable and known bad debts are written off against the allowance for doubtful accounts when identified. As of December 31, 2016 and 2015, there was a $0 and $0 allowance for uncollectible accounts receivable, respectively. Management believes that the remaining accounts receivable are collectable.



                                       28

--------------------------------------------------------------------------------

Plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Expenditures for maintenance and repairs are charged to earnings as incurred. Major additions are capitalized. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of plant and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:



                                                Estimated Useful Life
    Leasehold improvements              Lesser of lease term or the estimated
                                                   useful lives of
                                                       5 years
    Computer equipment                                 5 years
    Computer software                                  5 years
    Office furniture and equipment                     5 years



Revenue recognition


Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured.

The Company's revenue is derived from three primary sources: (i) professional services for systems development and integration, including procurement of related hardware and software licenses on behalf of customers, if required; (ii) professional services for system maintenance normally for a period of one year; and (iii) sale of hardware and consumables during the service performed as stated above.

Multiple-deliverable arrangements

The Company derives revenue from fixed-price sale contracts with customers that may provide for the Company to procure hardware and software licenses with varied performance specifications specific to each customer and provide the technical services for systems development and integration of the hardware and software licenses. In instances where the contract price is inclusive of the technical services, the sale contracts include multiple deliverables. A multiple-element arrangement is separated into more than one unit of accounting if all of the following criteria are met:



-

The delivered item(s) has value to the customer on a stand-alone basis;


-

There is objective and reliable evidence of the fair value of the undelivered item(s); and


-

If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company.

The Company's multiple-element contracts generally include customer-acceptance provisions which provide for the Company to carry out installation, test runs and performance tests at the Company's cost until the systems as a whole can meet the performance specifications stated in the contracts. The delivered equipment and software licenses have no standalone value to the customer until they are installed, integrated and tested at the customer's site by the Company in accordance with the performance specifications specific to each customer. In addition, under these multiple-element contracts, the Company has not sold the equipment and software licenses separately from the installation, integration and testing services, and hence there is no objective and reliable evidence of the fair value for each deliverable included in the arrangement. As a result, the equipment and the technical services for installation, integration and testing of the equipment are considered a single unit of accounting pursuant to ASC Subtopic 605-25, Revenue Recognition - Multiple-Element Arrangements. In addition, the arrangement generally includes customer acceptance criteria that cannot be tested before installation and integration at the customer's site. Accordingly, revenue recognition is deferred until customer acceptance, indicated by an acceptance certificate signed off by the customer.

Revenues of maintenance services are recognized when the services are performed in accordance with the contract term.

Revenues of sale of software, if not bundled with other arrangements, are recognized when shipped and customer acceptance obtained, if all other revenue recognition criteria are met. Costs associated with revenues are recognized when incurred.



                                       29

--------------------------------------------------------------------------------

Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the years ended December 31, 2016 and 2015.


                                                   2016            2015
                                                     US$             US$
          NET REVENUES
          Service income
          - systems development and integration     222,037         242,379
          - systems maintenance                   3,124,148       2,401,359
          - sales of hardware and consumables       653,210       1,093,433
                                                  3,999,395       3,737,171


Billings in excess of revenues recognized are recorded as deferred revenue.

Income taxes

The Company accounts for income taxes in accordance with the accounting standard issued by the Financial Accounting Standard Board ("FASB") for income taxes. Under the asset and liability method as required by this accounting standard, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The charge for taxation is based on the results for the reporting period as adjusted for items which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.

Under the accounting standard regarding accounting for uncertainty in income taxes, a tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred.

Foreign currency translation

The functional currency and reporting currency of the Company is the value="LC/us" idsrc="xmltag.org">U.S. Dollar. ("US$" or "$"). The functional currency of the value="LC/hk" idsrc="xmltag.org">Hong Kong subsidiaries is the Hong Kong Dollar. The functional currency of the PRC subsidiary is RMB. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the exchange rate as quoted by the value="ACORN:1079708609" idsrc="xmltag.org">Hong Kong Monetary Authority ("HKMA") at the end of the period. Capital accounts are translated at their historical exchange rates when the capital transaction occurred. Translation adjustments resulting from this process are included in accumulated other comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.


          Year ended                December 31, 2016   December 31, 2015
          RMB : USD exchange rate        6.6324              6.2505
          Average period ended
          RMB : USD exchange rate        6.3421              6.1956



          Year ended                December 31, 2016   December 31, 2015
          HKD : USD exchange rate         7.800               7.800
          Average period ended
          HKD : USD exchange rate         7.800               7.800


Recent Accounting Pronouncements

See Note 2, "Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the respective dates of adoption, or expected adoption and effects of our consolidated financial position, results of operations and cash flows.



                                       30

--------------------------------------------------------------------------------

© Edgar Online, source Glimpses

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news about  
1  2  3  4  5  6  7  8  9  10Next

Advertisement
Most Read News 
03/24DJCHARLES SCHWAB : ProShares No Longer Wants to Pay Charles Schwab to Sell Its ETFs
03/24 RICHIE BOUCHER : Bank of Ireland CEO Boucher to retire before year-end
03/23DJROBERT IGER : Disney Extends CEO Iger's Tenure to 2019
03/23 WILLIAM ACKMAN : Ackman's Pershing Square Holdings seeks London listing
03/29DJELON MUSK : Tencent Backs Tesla With $1.8 Billion Stake -- WSJ
03/28DJDAVID EINHORN : David Einhorn Wants GM to Create Two Classes of Stock
03/28 MARY BARRA : Cnbc
More news
Popular Business Leaders 
William Ackman Alain Afflelou Bernard Arnault Max Azria Mary Barra Yannick Bolloré Thomas Buess Warren Buffett Jean-paul Clozel Gary Cohn Tim Cook Leonardo Del Vecchio Michael Dell Sebastian Ebel Klaus Engel Carlos Ghosn David Henry Jen-hsun Huang Carl Icahn Robert Iger Anshu Jain Isabelle Kocher Arnaud Lagardère Maurice Lévy Jack Ma Sergio Marchionne Marissa Mayer Lakshmi Mittal Rupert Murdoch Elon Musk Robert Peugeot Ferdinand Piëch Wolfgang Porsche Patrick Pouyanné Alexandre Ricard Wilbur Ross Charles Schwab Carlos Slim George Soros Rupert Stadler Bernard Tapie Ratan Tata Tidjane Thiam François Villeroy De Galhau Axel Weber Thomas Wilson Martin Winterkorn Dieter Zetsche Mark Zuckerberg
A-Z Business Leaders