MVNC 10-Q
Marvion Inc. (MVNC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
or
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
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(IRS Employer Identification No.) |
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| MARVION INC. |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ ☐ NO
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).☒ ☐ NO
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐
YES ☒
As of September 30, 2023, the Company had outstanding shares of common stock.
MARVION INC. F/K/A BONANZA GOLDFIELDS CORP.
QUARTERLY REPORT-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
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INTRODUCTORY COMMENTS
We are not a Hong Kong operating company but a Nevada holding company with operations conducted through our wholly owned subsidiaries based in Hong Kong and Singapore. Our investors hold shares of common stock in Marvion Inc., the Nevada holding company. This structure presents unique risks as our investors may never directly hold equity interests in our Hong Kong subsidiary and will be dependent upon contributions from our subsidiaries to finance our cash flow needs. Our ability to obtain contributions from our subsidiaries are significantly affected by regulations promulgated by Hong Kong and Singaporean authorities. Any change in the interpretation of existing rules and regulations or the promulgation of new rules and regulations may materially affect our operations and or the value of our securities, including causing the value of our securities to significantly decline or become worthless. For a detailed description of the risks facing the Company associated with our structure, please refer to “Risk Factors – Risks Relating to Doing Business in Hong Kong.” set forth in the Company’s Annual Report on Annual Report-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 17, 2023 (the “Annual Report”).
Marvion Inc. and our Hong Kong subsidiaries are not required to obtain permission or approval from the China Securities Regulatory Commission, or CSRC, the Cybersecurity Administration Committee, or CAC, or any other Chinese authorities to operate our business or to issue securities to foreign investors. However, in light of the recent statements and regulatory actions by the People’s Republic of China (“the PRC”) government, such as those related to Hong Kong’s national security, the promulgation of regulations prohibiting foreign ownership of Chinese companies operating in certain industries, which are constantly evolving, and anti-monopoly concerns, we may be subject to the risks of uncertainty of any future actions of the PRC government in this regard including the risk that we inadvertently conclude that such approvals are not required, that applicable laws, regulations or interpretations change such that we are required to obtain approvals in the future, or that the PRC government could disallow our holding company structure, which would likely result in a material change in our operations, including our ability to continue our existing holding company structure, carry on our current business, accept foreign investments, and offer or continue to offer securities to our investors. These adverse actions could cause the value of our common stock to significantly decline or become worthless. We may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the CSRC, if we fail to comply with such rules and regulations, which would likely adversely affect the ability of the Company’s securities to continue to trade on the Over-the-Counter Bulletin Board, which would likely cause the value of our securities to significantly decline or become worthless.
There are prominent legal and operational risks associated with our operations being in Hong Kong. For example, as a U.S.-listed Hong Kong public company, we may face heightened scrutiny, criticism and negative publicity, which could result in a material change in our operations and the value of our common stock. It could also significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. We are subject to risks arising from the legal system in China where there are risks and uncertainties regarding the enforcement of laws including where the Chinese government can change the rules and regulations in China and Hong Kong, including the enforcement and interpretation thereof, at any time with little to no advance notice and can intervene at any time with little to no advance notice. Changes in Chinese internal regulatory mandates, such as the M&A rules, Anti-Monopoly Law, and Data Security Law, may target the Company's corporate structure and impact our ability to conduct business in Hong Kong, accept foreign investments, or list on an U.S. or other foreign exchange. By way of example, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. In April 2020, the Cyberspace Administration of China and certain other PRC regulatory authorities promulgated the Cybersecurity Review Measures, which became effective in June 2020. Pursuant to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security. On July 10, 2021, the Cyberspace Administration of China issued a revised draft of the Measures for Cybersecurity Review for public comments (“Draft Measures”), which required that, in addition to “operator of critical information infrastructure,” any “data processor” carrying out data processing activities that affect or may affect national security should also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad. The Cyberspace Administration of China has said that under the proposed rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations because of the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments,” The cybersecurity review will also investigate the potential national security risks from overseas IPOs. On January 4, 2022, the CAC, in conjunction with 12 other government departments, issued the New Measures for Cybersecurity Review (the “New Measures”). The New Measures amends the Draft Measures released on July 10, 2021 and became effective on February 15, 2022.
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The business of our subsidiaries are not subject to cybersecurity review with the Cyberspace Administration of China, given that: (i) we do not have one million individual online users of our products and services in Hong Kong; (ii) we do not possess a large amount of personal information in our business operations. In addition, we are not subject to merger control review by China’s anti-monopoly enforcement agency due to the level of our revenues which provided from us and audited by our auditor and the fact that we currently do not expect to propose or implement any acquisition of control of, or decisive influence over, any company with revenues within China of more than Renminbi (“RMB”) 400 million. Currently, these statements and regulatory actions have had no impact on our daily business operations, the ability to accept foreign investments and list our securities on an U.S. or other foreign exchange. However, since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments and list our securities on an U.S. or other foreign exchange. For a detailed description of the risks the Company is facing and the offering associated with our operations in Hong Kong, please refer to “Risk Factors – Risks Relating to Doing Business in Hong Kong.” set forth in the Annual Report.
The recent joint statement by the SEC and Public Company Accounting Oversight Board (“PCAOB”), and the Holding Foreign Companies Accountable Act (“HFCAA”) all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. Trading in our securities may be prohibited under the HFCAA if the PCAOB determines that it cannot inspect or investigate completely our auditor, and that as a result, an exchange may determine to delist our securities. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act which would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two thus reducing the time before our securities may be prohibited from trading or being delisted. On December 2, 2021, the U.S. Securities and Exchange Commission adopted rules to implement the HFCAA. Pursuant to the HFCAA, the PCAOB issued its report notifying the Commission that it is unable to inspect or investigate completely accounting firms headquartered in mainland China or Hong Kong due to positions taken by authorities in mainland China and Hong Kong. Our auditor is based in Kuala Lumpur, Malaysia and is subject to PCAOB’s inspection. It is not subject to the determinations announced by the PCAOB on December 16, 2021. However, in the event the Malaysian authorities subsequently take a position disallowing the PCAOB to inspect our auditor, then we would need to change our auditor to avoid having our securities delisted. Furthermore, due to the recent developments in connection with the implementation of the HFCAA, we cannot assure you whether the SEC or other regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. The requirement in the HFCAA that the PCAOB be permitted to inspect the issuer’s public accounting firm within two or three years, may result in the delisting of our securities from applicable trading markets in the U.S, in the future if the PCAOB is unable to inspect our accounting firm at such future time. Please see “Risk Factors- The Holding Foreign Companies Accountable Act requires the Public Company Accounting Oversight Board (PCAOB) to be permitted to inspect the issuer's public accounting firm within three years. This three-year period will be shortened to two years if the Accelerating Holding Foreign Companies Accountable Act is enacted. There are uncertainties under the PRC Securities Law relating to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC. If the U.S. securities regulatory agencies are unable to conduct such investigations, they may suspend or de-register our registration with the SEC and delist our securities from applicable trading market within the US.” set forth in the Annual Report.
In addition to the foregoing risks, we face various legal and operational risks and uncertainties arising from doing business in Hong Kong as summarized below and in “Risk Factors — Risks Relating to Doing Business in Hong Kong.” set forth in the Annual Report.
| · | Adverse changes in economic and political policies of the PRC government could have a material and adverse effect on overall economic growth in China and Hong Kong, which could materially and adversely affect our business. Please see “Risk Factors-We face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in Hong Kong and the profitability of such business.” and “Substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business that we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition.” set forth in the Annual Report. |
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| · | We are a holding company with operations conducted through our wholly owned subsidiaries based in Hong Kong and Singapore. This structure presents unique risks as our investors may never directly hold equity interests in our Hong Kong and Singapore subsidiaries and will be dependent upon contributions from our subsidiaries to finance our cash flow needs. Any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct business. We do not anticipate paying dividends in the foreseeable future; you should not buy our stock if you expect dividends. Please see “Risk Factors- Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other payments is limited.” set forth in the Annual Report. |
| · | There is a possibility that the PRC could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business or for the payment of dividends. We rely on dividends from our Hong Kong subsidiary for our cash and financing requirements, such as the funds necessary to service any debt we may incur. Any such controls or restrictions may adversely affect our ability to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. Please see “Risk Factors - Our Hong Kong subsidiary may be subject to restrictions on paying dividends or making other payments to us, which may restrict its ability to satisfy liquidity requirements, conduct business and pay dividends to holders of our common stock.”; “Risk Factors - PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to our Hong Kong subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand business.”; “Risk Factors - Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other payments is limited.” and “Transfers of Cash to and from our Subsidiaries” set forth in the Annual Report. | |
| · | PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our operating subsidiaries in Hong Kong. Substantial uncertainties exist with respect to the interpretation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations. Please see “Risk Factors- PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to our Hong Kong subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand business.” set forth in the Annual Report. |
| · | In light of China’s extension of its authority into Hong Kong, the Chinese government can change Hong Kong’s rules and regulations at any time with little or no advance notice, and can intervene and influence our operations and business activities in Hong Kong. We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges. However, if our subsidiaries or the holding company were required to obtain approval in the future, or we erroneously conclude that approvals were not required, or we were denied permission from Chinese authorities to operate or to list on U.S. exchanges, we will not be able to continue listing on a U.S. exchange and the value of our common stock would likely significantly decline or become worthless, which would materially affect the interest of the investors. There is a risk that the Chinese government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in Hong Kong-based issuers, which could result in a material change in our operations and/or the value of our securities. Further, any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers would likely significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. Please see “Risk Factors-We face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the Hong Kong and the profitability of such business.” and “Substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business that we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition.” and “The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges. However, to the extent that the Chinese government exerts more control over offerings conducted overseas and/or foreign investment in China-based issuers over time and if our PRC subsidiaries or the holding company were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange and the value of our common stock may significantly decline or become worthless, which would materially affect the interest of the investors.” set forth in the Annual Report. |
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| · | Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment. | |
| · | We may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. We may be liable for improper use or appropriation of personal information provided by our customers. Please see “Risk Factors- The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S exchanges. However, to the extent that the Chinese government exerts more control over offerings conducted overseas and/or foreign investment in China-based issuers over time and if our PRC subsidiaries or the holding company were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange and the value of our common stock may significantly decline or become worthless, which would materially affect the interest of the investors.” set forth in the Annual Report. | |
| · | Under the Enterprise Income Tax Law of the PRC (“EIT Law”), we may be classified as a “Resident Enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders. Please see “Risk Factors- Our global income may be subject to PRC taxes under the PRC Enterprise Income Tax Law, which could have a material adverse effect on our results of operations.” set forth in the Annual Report. |
| · | Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident Shareholders to personal liability, may limit our ability to acquire Hong Kong and PRC companies or to inject capital into our Hong Kong subsidiary, may limit the ability of our Hong Kong subsidiaries to distribute profits to us or may otherwise materially and adversely affect us. |
| · | You may be subject to PRC income tax on dividends from us or on any gain realized on the transfer of shares of our common stock. Please see “Risk Factors- Dividends payable to our foreign investors and gains on the sale of our shares of common stock by our foreign investors may become subject to tax by the PRC.” set forth in the Annual Report. | |
| · | We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. Please see “Risk Factors- We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.” set forth in the Annual Report. | |
| · | We are organized under the laws of the State of Nevada as a holding company that conducts its business through a number of subsidiaries organized under the laws of foreign jurisdictions such as Hong Kong, Singapore and the British Virgin Islands. This may have an adverse impact on the ability of U.S. investors to enforce a judgment obtained in U.S. Courts against these entities, bring actions in Hong Kong against us or our management or to effect service of process on the officers and directors managing the foreign subsidiaries. Please see “Risk Factors- Substantially all of our assets and a majority of our officers and directors are located in Hong Kong. The balance of our directors and officers are located in Singapore. As a result, it may be difficult for stockholders to enforce any judgment obtained in the United States against us, our officers or directors, which may limit the remedies otherwise available to our stockholders.” set forth in the Annual Report. | |
| · | U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China. | |
| · | There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits. Please see “Risk Factors- Our global income may be subject to PRC taxes under the PRC Enterprise Income Tax Law, which could have a material adverse effect on our results of operations.” set forth in the Annual Report. |
References in this registration statement to the “Company,” “BONZ,” “we,” “us” and “our” refer to Marvion Inc. f/k/a Bonanza Goldfields Corp., a Nevada company and all of its subsidiaries on a consolidated basis. Where reference to a specific entity is required, the name of such specific entity will be referenced.
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Transfers of Cash to and from Our Subsidiaries
Marvion Inc. f/k/a/ Bonanza Goldfields Corp. is a Nevada holding company with no operations of its own. We conduct our operations in Hong Kong primarily through our subsidiaries in Hong Kong and Singapore. We may rely on dividends or other transfers of cash or assets to be made by our Hong Kong and Singapore subsidiaries to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. If our Hong Kong and Singapore subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. To date, our subsidiaries have not made any transfers, dividends or distributions of cash flows or other assets to Marvion Inc. and Marvion Inc. has not made any transfers, dividends or distributions of cash flows or other assets to our subsidiaries.
Marvion Inc. is permitted under the Nevada laws to provide funding to and receive funding from our subsidiaries in Hong Kong and Singapore through loans or capital contributions without restrictions on the amount of the funds, subject to satisfaction of applicable government registration, approval and filing requirements. Our Hong Kong subsidiaries, Marvion (Hong Kong) Limited, Marvion Studios Limited (“MSL”) (Formerly known as Typerwise Limited) and Marvel Multi-dimensions Limited (“MMDL”), and our Singapore subsidiary Marvion Private Limited, are also permitted under the laws of Hong Kong and Singapore to provide and receive funding to and from Marvion Inc. through dividend distribution without restrictions on the amount of the funds. As of the date of this report, there has been no dividends or distributions among the holding company or the subsidiaries nor do we expect such dividends or distributions to occur in the foreseeable future among the holding company and its subsidiaries.
We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
Subject to the Nevada Revised Statutes and our bylaws, our board of directors may authorize and declare a dividend to shareholders at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend the value of our assets will exceed our liabilities and we will be able to pay our debts as they become due. There is no further Nevada statutory restriction on the amount of funds which may be distributed by us by dividend.
Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us. The laws and regulations of the PRC do not currently have any material impact on transfer of cash from Marvion Inc. to our Hong Kong subsidiaries or from our Hong Kong subsidiaries to Marvion Inc. There are no restrictions or limitation under the laws of Hong Kong imposed on the conversion of Hong Kong dollar (“HKD”) into foreign currencies and the remittance of currencies out of Hong Kong or across borders and to U.S. investors.
There is a possibility that the PRC could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business or for the payment of dividends. Any such controls or restrictions may adversely affect our ability to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. Please see “Risk Factors - Our Hong Kong subsidiary may be subject to restrictions on paying dividends or making other payments to us, which may restrict its ability to satisfy liquidity requirements, conduct business and pay dividends to holders of our common stock.”; “Risk Factors - PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to our Hong Kong subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand business.”; “Risk Factors - Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other payments is limited.”
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Current PRC regulations permit PRC subsidiaries to pay dividends to Hong Kong subsidiaries only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. As of the date of this report, we do not have any PRC subsidiaries.
The PRC government imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations, we may be unable to pay dividends on our common stock.
Cash dividends, if any, on our common stock will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%.
In order for us to pay dividends to our shareholders, we will rely on payments made from our Hong Kong and Singapore subsidiaries to Marvion Inc. If in the future we have PRC subsidiaries, certain payments from such PRC subsidiaries to Hong Kong subsidiaries will be subject to PRC taxes, including business taxes and VAT. As of the date of this report, we do not have any PRC subsidiaries and our Hong Kong and Singapore subsidiaries have not made any transfers, dividends or distributions nor do we expect to make such transfers, dividends or distributions in the foreseeable future.
Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC entity. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including, without limitation, that (a) the Hong Kong entity must be the beneficial owner of the relevant dividends; and (b) the Hong Kong entity must directly hold no less than 25% share ownership in the PRC entity during the 12 consecutive months preceding its receipt of the dividends. In current practice, a Hong Kong entity must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by a PRC subsidiary to its immediate holding company. As of the date of this report, we do not have a PRC subsidiary. In the event that we acquire or form a PRC subsidiary in the future and such PRC subsidiary desires to declare and pay dividends to our Hong Kong subsidiary, our Hong Kong subsidiary will be required to apply for the tax resident certificate from the relevant Hong Kong tax authority. In such event, we plan to inform the investors through SEC filings, such as a current report on Form 8-K, prior to such actions. See “Risk Factors – Risks Relating to Doing Business in Hong Kong.” set forth in the Annual Report.
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CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Annual Report-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical facts, included in this Annual Report-Q including, without limitation, statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s market projections, financial position, business strategy and the plans and objectives of management for future operations, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof); expansion and growth of the Company's business and operations; and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. However, whether actual results or developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, including general economic, market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control of the Company.
These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as "believes," "anticipates," "expects," "estimates," "plans," "may," "will," or similar terms. These statements appear in a number of places in this filing and include statements regarding the intent, belief or current expectations of the Company, and its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations for its limited history; (ii) the Company's business and growth strategies; and (iii) the Company's financing plans. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Such factors that could adversely affect actual results and performance include, but are not limited to, the Company's limited operating history, potential fluctuations in quarterly operating results and expenses, government regulation, technological change and competition. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report.
Consequently, all of the forward-looking statements made in this Annual Report-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MARVION INC. F/K/A BONANZA GOLDFIELDS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Digital assets, net | ||||||||
| Inventories, net | ||||||||
| Accounts receivables | ||||||||
| Short-term investments | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Deferred financing cost, net | ||||||||
| Intangible assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accrued liabilities and other payables | $ | $ | ||||||
| Accrued consulting and service fee | ||||||||
| Amounts due to related parties | ||||||||
| Convertible note payable | ||||||||
| Income tax payable | ||||||||
| Total current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders’ deficit: | ||||||||
| Preferred stock, par value $, shares authorized, and shares undesignated as of September 30, 2023 and December 21, 2022, respectively | ||||||||
| Preferred stock, Series A, par value $, shares designated, and shares issued and outstanding as of September 30, 2023 and December 21, 2022, respectively | ||||||||
| Preferred stock, Series B, par value $, shares designated, and shares issued and outstanding as of September 30, 2023 and December 21, 2022, respectively | ||||||||
| Preferred stock, Series C, par value $, share designated, and share issued and outstanding as of September 30, 2023 and December 21, 2022, respectively | ||||||||
| Common stock, par value $, shares authorized, and shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | ||||||||
| Common stock, $0.0001 par value, shares to be issued as of December 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
| 10 |
MARVION INC. F/K/A BONANZA GOLDFIELDS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross (loss) profit | ( | ) | ||||||||||||||
| Operating expenses: | ||||||||||||||||
| Technology and development expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Corporate development expenses | ( | ) | ( | ) | ( | ) | ||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Impairment loss of digital assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Gain (loss) on disposal of digital assets | ( | ) | ||||||||||||||
| Amortization of deferred financing costs | ( | ) | ( | ) | ||||||||||||
| Change in fair value of marketable securities | ||||||||||||||||
| Other expense | ( | ) | ( | ) | ||||||||||||
| Other income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax credit | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive income: | ||||||||||||||||
| Foreign currency adjustment gain (loss) | ( | ) | ||||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share: | ||||||||||||||||
| Basic (1) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted (1) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| (1) |
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
| 11 |
MARVION INC. F/K/A BONANZA GOLDFIELDS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| Preferred stock | Common stock | Common stock to be issued | Additional | Accumulated other compre- hensive | Total stock- holders | |||||||||||||||||||||||||||||||||||
| No. of | No. of | No. of | paid-in | income | Accumulated | (deficit) | ||||||||||||||||||||||||||||||||||
| shares | Amount | shares | Amount | shares | Amount | capital | (loss) | deficit | equity | |||||||||||||||||||||||||||||||
| For the Three and Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
| Foreign translation adjustment | – | – | – | |||||||||||||||||||||||||||||||||||||
| Net loss for the period | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Shares issued as commitment shares | – | – | ||||||||||||||||||||||||||||||||||||||
| Shares issued under share swap agreement | – | – | ||||||||||||||||||||||||||||||||||||||
| Shares issued under Share Exchange Agreement in prior years | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Foreign translation adjustment | – | – | – | |||||||||||||||||||||||||||||||||||||
| Net loss for the period | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Shares issued under Share Exchange Agreement in prior years | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Shares issued as commitment shares | – | – | ||||||||||||||||||||||||||||||||||||||
| Foreign translation adjustment | – | – | – | |||||||||||||||||||||||||||||||||||||
| Net loss for the period | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| For the Three and Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Foreign translation adjustment | – | – | – | |||||||||||||||||||||||||||||||||||||
| Net loss for the period | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Acquisition of licensed adaptation right | – | – | ||||||||||||||||||||||||||||||||||||||
| Foreign translation adjustment | – | – | – | |||||||||||||||||||||||||||||||||||||
| Net loss for the period | – | – | – | ( | ) | ( | ||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Foreign translation adjustment | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Net loss for the period | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
| 12 |
MARVION INC. F/K/A BONANZA GOLDFIELDS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of deferred financing cost | ||||||||
| Written off intangible assets | ||||||||
| Digital assets received as revenue | ( | ) | ( | ) | ||||
| Digital assets paid for expense | ||||||||
| Digital assets purchased / exchanged | ( | ) | ||||||
| Impairment loss of digital assets | ||||||||
| Loss on disposal of digital assets | ||||||||
| Change in fair value of marketable securities | ( | ) | ||||||
| Cost of inventories (non-cash) | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivables | ( | ) | ||||||
| Digital assets | ||||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accrued liabilities and other payable | ||||||||
| Accrued consulting and service fee | ||||||||
| Amounts due to related parties | ||||||||
| Income tax payable | ( | ) | ( | ) | ||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Cash flows from investing activity: | ||||||||
| Purchase of intangible assets | ( | ) | ||||||
| Net cash used in investing activity | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of convertible note payable | ||||||||
| Advance from related parties | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate on cash and cash equivalents | ( | ) | ( | ) | ||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of the period | ||||||||
| Cash and cash equivalents at end of the period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Shares issued under share swap agreement in exchange of marketable securities | $ | $ | ||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
| 13 |
MARVION INC. F/K/A BONANZA GOLDFIELDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BUSINESS BACKGROUND
Bonanza Goldfields Corp. was incorporated in the State of Nevada on March 6, 2008. The Company and its subsidiaries are hereinafter referred to as (the “Company”). On January 17, 2023, the Company amended its Articles of Incorporation to change its name to Marvion Inc.
Currently, the Company is principally engaged in the sale and distribution of media and entertainment products in its online platform, as well as the provision of financing, business development solutions & related professional services in Singapore and Hong Kong.
Description of subsidiaries
| Name |
Place of incorporation and kind of legal entity |
Principal activities and place of operation |
Particulars of registered/paid up share capital |
Effective interest held | ||||
| Marvion Holdings Limited | ||||||||
| Marvion Private Limited | ||||||||
| Marvion Group Limited | ||||||||
| Marvion (Hong Kong) Limited | ||||||||
| Marvion Studios Limited (Formerly known as Typerwise Limited) | ||||||||
| Marvel Multi-dimensions Limited |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
These accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the period ended September 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with Management’s Discussion and Analysis, and the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on April 17, 2023.
| 14 |
Use of estimates and assumptions
In preparing these unaudited condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted. Significant estimates in the period include the impairment loss on digital assets, valuation and useful lives of intangible assets and deferred tax valuation allowance.
Basis of consolidation
The unaudited condensed consolidated financial statements include the accounts of BONZ and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
Segment reporting
Accounting Standards Codification (“ASC”) Topic 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in unaudited condensed consolidated financial statements. Currently, the Company operates one reportable operating segment in Hong Kong and Singapore. Since 2023, the Company mainly focuses on Media & Entertainment Segment, while the Business Consulting Segment has scaled down its operation to minimal.
Cash and cash equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Digital assets
The Company’s digital assets represent the cryptocurrencies, including Binance USD, Tether, Binance Coin, Ethereum, OKB Token and OEC Token. The Company accounts for its digital assets in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 350, “General Intangibles Other Than Goodwill” (“ASC 350”). ASC 350 requires assets to be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable. Accordingly, if the fair market value at any point during the reporting period is lower than the carrying value an impairment loss equal to the difference will be recognized as “Impairment loss of digital assets” in the unaudited condensed consolidated statement of operations. If the fair market value at any point during the reporting period is higher than the carrying value the basis of the digital assets will not be adjusted to account for this increase. Gains on digital assets, if any, will be recognized upon sale or disposal of the assets.
The Company’s cryptocurrencies are deemed to have an indefinite useful life; therefore amounts are not amortized, but rather are assessed for impairment.
Inventories
Inventory consists of adaptation
rights products, which are stated at the lower of cost (first-in, first-out method) or net realizable value. Management regularly reviews
inventory on an item-by-item basis and provides an inventory allowance based on excess or obsolete inventory determined primarily by anticipated
future demand for our products. Inventory allowance is measured as the difference between the cost of the inventory and market value,
based on assumptions about future demand that are inherently difficult to assess. As of September 30, 2023 and December 31, 2022, the
Company did
Investments
Investments in equity investments in publicly traded companies in which the Company does not exercise significant influence are classified as available-for-sale securities. These securities are reported at fair values; based upon quoted market prices, and subsequent changes in the fair value are recognized in profit or loss, in the line item “Change in fair value of marketable securities”.
| 15 |
Intangible assets
Intangible assets consist
of licensed media content, trademarks and trade name. The intangible assets are amortized following the patterns in which the economic
benefits are consumed or straight-line over the estimated useful life. The Company periodically reviews the estimated useful lives of
these intangible assets and reviews these assets for impairment whenever events or changes in circumstances indicate that the carrying
value of the assets may not be recoverable. The determination of impairment is based on estimates of future undiscounted cash flows. If
an intangible asset is considered to be impaired, the amount of the impairment will be equal to the excess of the carrying value over
the fair value of the asset. The Company has recorded $
Impairment of long-lived assets
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the periods presented.
Revenue recognition
The Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”) using the full retrospective transition method. The Company's adoption of ASU 2014-09 did not have a material impact on the amount and timing of revenue recognized in its unaudited condensed consolidated financial statements.
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. |
Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains control of the product and collection is reasonably assured. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. Most of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct.
Media & Entertainment Business
Sale of licensed IP right and media products:
The sale and distribution of the licensed IP right and media content such as images, video, episode and films, in crypto and fiat currency transaction is the only performance obligation under the fixed-fee arrangement. These IP right and media content are individually monetized as non-interchangeable unit of data stored on a blockchain, a form of digital ledger that can be, in the form of a token on the online platform. The revenue is recognized for each sale when the designated content token is transferred to the end user.
Transaction fee income:
The Company also generates revenue through transaction fees transacted on its platform or other marketplaces. The Company charges a fee to individual customer at the secondary transaction level, which is allocated to the single performance obligation. The transaction fee is collected from the customer in digital assets, with revenue measured based on a certain percentage of the value of digital assets at the time the transaction is executed.
| 16 |
The Company’s service is comprised of a single performance obligation to provide a platform facilitating the transfer of its DOTs. The Company considers its performance obligation satisfied, and recognizes revenue, at the point in time the transaction is processed.
The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, at which time revenue is recognized. Fair value of the digital asset award received is determined using the average U.S. dollar spot rate of the related digital currency at the time of receipt.
Expenses associated with operating the media & entertainment business, such as token minting cost and licensed IP right cost are also recorded as cost of revenues. Amortization on licensed media content is also recorded as a component of cost of revenues.
During the nine months ended September 30, 2023 and 2022, the following table shows non-cash transactions by digital assets:
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenue earned and received by digital assets | $ | $ | ||||||
| Cost of revenue paid by digital assets | ( | ) | ||||||
| Digital assets purchased / exchanged | ||||||||
| Expense paid by digital assets | $ | ( | ) | $ | ( | ) | ||
Revenue is generated and earned from the rendering of marketing and strategic advisory services to the customers. The Company recognizes services revenue over the period in which such services are performed under fixed price contracts.
Income taxes
The Company adopted the ASC 740 “Income tax” provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the unaudited condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the unaudited condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
Deferred financial costs
Costs related to the issuance of debt are deferred as an asset and amortized to interest expense over the life of the related debt, using the straight-line method.
Uncertain tax positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the three and nine months ended September 30, 2023 and 2022.
| 17 |
The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
Foreign currencies translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the condensed consolidated statement of operations.
The reporting currency of the Company is United States Dollar (“US$”) and the accompanying unaudited condensed consolidated financial statements have been expressed in US$. In addition, the Company is operating in Hong Kong and Singapore, and maintains its books and record in its local currencies, Hong Kong Dollars (“HKD”) and Singapore Dollars (“SGD”) respectively, which are their respective functional currencies, being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes in shareholders’ equity.
Translation of amounts from HKD and SGD into US$ has been made at the following exchange rates for the period ended September 30, 2023 and 2022:
| September 30, 2023 | September 30, 2022 | |||||||
| Period-end HKD:US$ exchange rate | ||||||||
| Period average HKD:US$ exchange rate | ||||||||
| Period-end SGD:US$ exchange rate | ||||||||
| Period average SGD:US$ exchange rate | ||||||||
Comprehensive income
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying unaudited condensed consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
Related parties
The Company follows the ASC 850-10, “Related Party Disclosures” for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825-10-15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
| 18 |
The unaudited condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments and contingencies
The Company follows the ASC 450-20, “Contingencies” to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s unaudited condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
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The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses and other current assets, accrued liabilities and other payable, accrued consulting service fee, amounts due to related parties and income tax payable approximate their fair values because of the short maturity of these instruments.
| Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | ||||||||||||||
| Description | September 30, 2023 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
| Marketable equity securities | $ | $ | $ | $ | ||||||||||||
Fair value estimates are made at a specific point in time based on relevant market information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
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.
In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, to clarify the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. The ASU also introduced new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in ASU 2022-03 are effective for fiscal years beginning after December 15, 2023. The Company does not expect ASU No. 2022-03 to have a material effect on its consolidated financial statements.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
3. GOING CONCERN UNCERTAINTIES
The accompanying unaudited condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has generated
a recurring loss of $
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
| 20 |
4. REVENUE FROM CONTRACTS WITH CUSTOMERS
The table below presents our revenues by revenue source.
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Consulting service income | $ | $ | $ | $ | ||||||||||||
| Media and entertainment income: | ||||||||||||||||
| Sale of licensed IP right and media products | ||||||||||||||||
| Transaction fee income | ||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
The table below presents our revenues by geographic areas in which our customers were located.
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Hong Kong | $ | $ | $ | $ | ||||||||||||
| Rest of the World | ||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
5. SHORT-TERM INVESTMENTS
| September 30, 2023 | December 31, 2022 | |||||||
| Marketable securities, listed in Hong Kong | $ | $ | ||||||
Investments in marketable securities are accounted for at fair value with changes in fair value recognized in net income (loss). This investment was listed and publicly traded on Hong Kong Stock Exchange and it is considered as Level 1 in the fair value hierarchy.
As at September 30, 2023, the ownership percentage of the marketable securities, listed in Hong Kong was approximately 4.29%.
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
| September 30, 2023 | December 31, 2022 | |||||||
| Prepayment for technical knowhow license and service | $ | $ | ||||||
| Other prepayments and deposits | ||||||||
| Other receivables | ||||||||
| $ | $ | |||||||
7. INTANGIBLE ASSETS
As of September 30, 2023 and December 31, 2022, intangible assets consisted of the following:
| Estimated useful life | September 30, 2023 | December 31, 2022 | ||||||||
| At cost: | ||||||||||
| Licensed media content | $ | $ | ||||||||
| Trademarks and trade name | ||||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||||
| Intangible assets, net | $ | $ | ||||||||
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In October 2021, under the Sale and Purchase Agreement with Phoenix Waters Productions (HK) Limited, the Company was granted with an exclusive perpetual worldwide license to mint or produce token products for the distribution of 12-episode series of the video film at a fixed fee. This agreement allowed the Company to sell the corresponding media content by monetizing as non-interchangeable unit of data stored on a blockchain, a form of digital ledger that can be sold on its online platform. The management assessed the commercial life of this licensed media content and determined the estimated life of 3 years.
As of September 30, 2023, the estimated amortization expense for intangible assets for each of the succeeding five years and thereafter is as follows:
| Twelve months ending September 30: | Amount | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
Amortization of intangible assets was $
8. ACCRUED CONSULTING AND SERVICE FEE
For the nine months ended September 30, 2023,
the Company agreed to compensate certain business or professional service providers, which rendered IT development service, sale and marketing
service, corporate development service and administrative service. These consulting and service fees totaled
For the nine months ended September 30, 2022,
the Company agreed to compensate certain business or professional services providers, which rendered IT development service, sale and
marketing service, corporate development service and administrative service. These consulting and service fees totaled $
9. AMOUNTS DUE TO RELATED PARTIES
The amounts represented temporary payments/advances
from/to the Company’s directors and companies which are controlled by a director of the Company for working capital purpose, which
were unsecured, interest-free and had no fixed terms of repayments. The related parties balance was $
10. STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock
On January 10, 2022, the Company amended the Articles of Incorporation to increase the Company’s authorized capital from 2,000,000,000 to 300,000,000,000 shares, consisting of 270,000,000,000 shares of common stock, par value $0.0001, and 30,000,000,000 shares of preferred stock, par value $0.0001.
As of September 30, 2023 and December 31,2022, the Company’s authorized shares were shares of preferred stock, with a par value of $.
The Company has designated shares of its preferred stock as Series A Preferred Stock.
The Company has designated shares of its preferred stock as Series B Preferred Stock.
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The Company has designated share of its preferred stock as Series C Preferred Stock.
As of September 30, 2023 and December 31, 2022, the Company had and shares of Series A Preferred Stock issued and outstanding, respectively.
As of September 30, 2023 and December 31, 2022, the Company had and shares of Series B Preferred Stock issued and outstanding, respectively.
As of September 30, 2023 and December 31, 2022, the Company had and share of Series C Preferred Stock issued and outstanding, respectively.
Common stock
On January 10, 2022, the Company amended the Articles of Incorporation to increase the Company’s authorized capital from 2,000,000,000 to 300,000,000,000 shares, consisting of 270,000,000,000 shares of common stock, par value $0.0001, and 30,000,000,000 shares of preferred stock, par value $0.0001.
As of September 30, 2023 and December 31, 2022, the Company’s authorized shares were shares of common stock, with a par value of $.
On April 11, 2023, the Company issued shares of common stock to complete the share swap agreement with China Information Technology Development Limited (“CITD”), which is a listed company on Hong Kong Stock Exchange (HK:8178), in exchange of shares of CITD shares.
Concurrently, on April 11, 2023, the Company also issued shares of common stock at par value to consummate the Share Issuance under Share Exchange Agreement dated October 25, 2002.
On May 2, 2023, the Company issued shares of common stock as commitment shares under Equity Purchase Agreement with Williamsburg Venture Holdings, LLC.
On July 6, 2023, the Company issued and shares of common stock to Lee Ying Chiu Herbert and So Han Meng Julian respectively in connection with our acquisition of Marvion Holdings Limited.
On August 15, 2023, the Company issued shares of common stock to Bizhan Modarressi Tong for settlement of accrued consulting fee.
As of September 30, 2023 and December 31, 2022, the Company had and shares of common stock issued and outstanding, respectively.
Common stock to be issued
As of September 30, 2023 and December 31,
2022, the Company had and
For the nine months ended September 30, 2023, 140,794,298,026 shares of common stock are issued.
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As the Company has net losses for the three months and nine months ended September 30, 2022, all potential common shares were deemed to be anti-dilutive. The following table sets forth the computation of the basic and diluted net loss per share (in dollars, except share data):
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Net loss per share: | ||||||||||||||||
| Basic# | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted# | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
_____________
| # | Basic and diluted net loss per share was less than $0.01 |
The following table presents the computation of weighted average common shares outstanding is derived after having taken into account of common stock that is committed but yet to be issued as follows:
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Weighted average common shares outstanding – Basic and Diluted | ||||||||||||||||
| Common stock committed but yet to be issued (1) | ||||||||||||||||
| Weighted average common shares outstanding under if-converted method for Basic and Diluted | ||||||||||||||||
_________________
| (1) | The common stock committed but yet to be issued has been excluded from the computation of the diluted net loss per common stock for the three months and nine months ended September 30, 2023 and 2022, because including them would have been anti-dilutive. |
12. INCOME TAX
For the nine months ended September 30, 2023 and 2022, the local (“United States of America”) and foreign tax regime incurred profit (loss) before income taxes, which comprised of the following:
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Tax jurisdiction from: | ||||||||
| - Local | $ | ( | ) | $ | ( | ) | ||
| - Foreign, including | ||||||||
| British Virgin Islands | ( | ) | ||||||
| Singapore | ( | ) | ( | ) | ||||
| Hong Kong | ( | ) | ( | ) | ||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
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The provision for income taxes consisted of the following:
For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Current: | ||||||||
| - Local | $ | $ | ||||||
| - Foreign | ||||||||
| Deferred: | ||||||||
| - Local | ||||||||
| - Foreign | ||||||||
| Income tax expense | $ | $ | ||||||
The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company has operations in Hong Kong and Singapore that are subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
BONZ is registered in the State of Nevada and is subject to the tax laws of United States of America. The U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income tax provision. The Company has not accrued or paid interest or penalties which were not material to its results of operations for the periods presented. Deferred tax asset is not provided for as the tax losses may not be able to carry forward after a change in substantial ownership of the Company.
For the nine months ended September 30, 2023 and 2022, there were no operating income.
BVI
Under the current BVI law, the Company is not subject to tax on income.
Singapore
MPL registered in the Republic of Singapore is subject to the tax laws of Singapore. A subsidiary incorporated in BVI is registered as a branch in Singapore for operating purpose and is also subject to tax in the Republic of Singapore.
For the nine months ended September 30, 2023,
the operation in the Singapore generated an operating loss of $
Hong Kong
The Company’s subsidiaries operating in
Hong Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from 8.25% to 16.5% on the estimated assessable
profits arising in Hong Kong during the current period, after deducting a tax concession for the tax year. For the nine months ended September
30, 2023, the operation in Hong Kong generated an operating loss of $
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The following table sets forth the significant components of the deferred tax assets of the Company as of September 30, 2023 and December 31, 2022:
| September 30, 2023 | December 31, 2022 | |||||||
| Deferred tax assets: | ||||||||
| NOL – US tax regime | $ | $ | ||||||
| NOL – British Virgin Islands regime | ||||||||
| NOL – Hong Kong tax regime | ||||||||
| NOL – Singapore tax regime | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
As of September 30, 2023 and December 31, 2022, the Company had no unrecognized tax benefits. Interest and penalty charges, if any, related to income taxes would be classified as a component of the provision for income taxes in the consolidated statements of operations. The Company does not expect any significant change in its uncertain tax positions in the next twelve months.
The Company filed income tax returns in the United States federal tax jurisdiction and several state tax jurisdictions. Since the Company is in a loss carryforward position, it is generally subject to examination by federal and state tax authorities for all tax years in which a loss carryforward is available.
13. RELATED PARTY TRANSACTIONS
From time to time, the Company’s directors and companies which are controlled by a director of the Company advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and have no fixed terms of repayment.
During the three months ended September 30, 2023
and 2022, the Company paid the aggregate amount of $
During the three months ended September 30, 2023
and 2022, the Company paid the aggregate amount of $
During the three months ended September 30, 2023
and 2022, the Company paid the aggregate amount of $
On April 1, 2022, the Company entered into a Service
Agreement (the “Service agreement”) with a company controlled by its major shareholder, which agreed to provide staffing and
back-office services to the Company until the arrangement is terminated by the parties. During the nine months ended September 30, 2023
and 2022, the Company incurred the related management service fee of $
Apart from the transactions and balances detailed elsewhere in these accompanying unaudited condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.
| 26 |
14. CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
| (a) | Major customers |
For the three and nine months ended September 30, 2023, there was no single customer who accounted for 10% or more of the Company’s revenues.
For the three and nine months ended September 30, 2022, there was no single customer who accounted for 10% or more of the Company’s revenues.
| (b) | Economic and political risk |
The Company’s major operations are conducted in Hong Kong and Singapore. Accordingly, the political, economic, and legal environments, as well as the general state of economy in Hong Kong and Singapore may influence the Company’s business, financial condition, and results of operations.
| (c) | Exchange rate risk |
The Company cannot guarantee that the current exchange rate will remain steady; therefore, the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD and SGD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
| (d) | Market price risk of crypto (“digital”) assets |
The Company generated certain level of its revenue from the sale and distribution of licensed media token products on its platform by the means of crypto assets by the customers, while revenue from these products have not been significant to date, most of this revenue will also fluctuate based on the price of crypto assets. Accordingly, crypto asset price risk could adversely affect its operating results. In particular, the future profitability may depend upon the market price of BNB, ETH, as well as other crypto assets. Crypto asset prices, along with the operating results, have fluctuated significantly from quarter to quarter. There is no assurance that crypto asset prices will reflect historical trends. A decline in the market price of BTC, ETH and Other crypto assets could have a material and adverse effect on our earnings, the carrying value of the crypto assets, and the future cash flows. This may also affect the liquidity and the ability to meet our ongoing obligations. As of September 30, 2023, the Company recorded an impairment charge on the crypto assets held when crypto asset prices decrease below their carrying value of these crypto assets.
| (e) | Liquidity risk |
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s policy is to ensure that it has sufficient cash to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. A key risk in managing liquidity is the degree of uncertainty in the cash flow projections. If future cash flows are fairly uncertain, the liquidity risk increases.
15. COMMITMENTS AND CONTINGENCIES
Commitments
As of September 30, 2023, the Company is committed to the below contractual agreement.
Leases
As of September 30, 2023, the Company had a virtual office service agreement for its corporate office. The lease contains the renewal option and will expire on 24 September 2024.
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Other contractual commitments
| · | Williamsburg Venture Holdings, LLC |
On April 1, 2022, the Company
entered into an Equity Purchase Agreement with Williamsburg Venture Holdings, LLC (“Investor”), a Nevada limited liability
company, pursuant to which the Investor agreed to invest up to Twenty Million Dollars ($
Apart from these commitments, the Company has no other material commitments or contingencies, as of September 30, 2023.
16. 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 unaudited condensed consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after September 30, 2023, up through the date the Company issued the unaudited condensed consolidated financial statements.
The Company had no material recognizable subsequent events since September 30, 2023.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our Company’s financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in the report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors. See “Cautionary Note Concerning Forward-Looking Statements” on page 10.
Unless otherwise noted, all currency figures quoted as “U.S. dollars”, “dollars” or “$” refer to the legal currency of the United States. Throughout this report, assets and liabilities of the Company’s subsidiaries are translated into U.S. dollars using the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income (loss) within the unaudited condensed consolidated statements of changes in stockholders’ (deficit) equity.
Unless indicated otherwise, throughout this Quarterly Report on Annual Report-Q, we refer to Marvion Inc. f/k/a Bonanza Goldfields Corp. and its consolidated subsidiaries, as “MVNC,” “we,” “us” and “our.”
Numerical information in this report is presented on a rounded basis using actual amounts. Minor differences in totals and percentage calculations may exist due to rounding.
Description of Business
Marvion Inc. f/k/a Bonanza Goldfields Corp. is not a Hong Kong operating company but a Nevada holding company with operations conducted through our wholly owned subsidiaries based in Hong Kong and Singapore. Our investors hold shares of common stock in Marvion Inc., the Nevada holding company. Marvion Inc. is a Nevada holding company that through its subsidiaries are engaged in the lifestyle, media and entertainment creation and distribution, and technology businesses. Through the use of Web3 technologies (including blockchain and metaverse technologies), we seek to provide end-to-end one-stop solution for brands and content creators to preserve, unlock and enhance the value of their Intellectual Properties (“IPs”). Our mission is to lead the revolution and set the standards for responsible application of Web3 technologies, including our proprietary Digital Ownership Token (“DOT”).
Each DOT represents legally binding ownership over (1) assets (tangible or intangible), (2) intellectual property, copyright or other licenses, or (3) the specific legal rights described therein. Each DOT will have legally binding ownership documentation embedded in the metadata of the token and such metadata will be secured on a reliable blockchain. Separately, each DOT will be minted on the blockchain with smart contracts that will facilitate trust-less settlement of sale and purchase transactions, including payments of fees and commissions (if any). As our DOTs are powered by smart contracts, buyers of the DOTs will be able to confirm the ownership and/or licensing rights of the digital assets from the legal documents minted into the DOT. These are the gold standards we observe in an attempt to take the lead on the narrative regarding how blockchain technology should be responsibly adopted and implemented in the real world to improve our daily lives.
Although most lifestyle, media and entertainment content are digital in nature today, they exist in the real world as intangible assets, such as a physical product, intellectual property, licenses and contractual rights, with intrinsic value. Our proprietary technology allows us to disrupt and improve the existing industry or brands, and its current practices and in the process drive revenues. The traditional process of discovery and purchasing media content is a tedious process typically involving 4-5 months of manual effort through intermediaries. We believe that our technology, including our DOT, will enable us to simplify the process of digital asset management, digital rights management, and metadata management, and to allow prospective buyers such as distributors and sales agents to discover media content they want in a faster manner, thus reducing the time on sourcing process and the number of intermediaries.
Currently, most streaming contents are one-way oriented, and viewers are unable to interact with one another in an immersive fashion. We believe a Metaverse will allow fans and consumers to enjoy media and entertainment content with an immersive, social, interactive, personalized experience by bringing in characteristics of the real world. In addition to media and entertainment purposes, we believe the Metaverse will eventually become a second home and even a second work place with an economy that can encourage the establishment of businesses and provide jobs to its residents. Our vision is to see a healthy population of residents work and play in a Metaverse built by us.
| 29 |
Our business plan originally contemplated building a Metaverse to allow fans and consumers to enjoy the content on the Metaverse. However, due to adverse economic conditions, we have temporarily suspended Metaverse development efforts. We are actively monitoring this matter and hope to resume development when economic conditions improve.
Current Revenue Generating Operation
BUSINESS SEGMENT INFORMATION
Currently, the Company has two reportable business segments:
| (i) | Media & Entertainment Segment, which mainly operates an online platform to sell and distribute the licensed IP right and media products to end-users; and | |
| (ii) | Business Consulting Segment, which mainly provides financing, business development solutions and related professional services to the customers. |
Media and Entertainment Segment: We currently derive revenue from the sale of DOTs on our MetaStudio [https://www.marvion.media/], which is operated through our subsidiary, Marvion Group Limited. Our DOTs are part of our IP Remake License initiative, whereby consumers are able to purchase DOTs on our MetaStudio [https://www.marvion.media/] with the licence to remake movies sequels, series, digital games etc. For the nine months ended September 30, 2023, we generated $8,541,910 in revenue from this business segment. We intend to continue to focus on growing this business segment over the next 12 months. In this respect, we hope to become the largest global marketplace for such licenses thereby providing easy access for professionals and amateurs to exploit existing intellectual property.
Business Consulting Segment: We expect to provide business consulting services through Marvion Studio Limited (“Marvion Studio”). During the nine months ended September 30, 2023, we did not generate any revenue from this segment.
Revenue Generating Operation in the Near Future (Next 12 Months)
Over the next 12 months, we intend to encourage quality content creation all over the world by providing a diverse and innovative platform for creators to generate revenue through the use of DOTs, our Metaverse and other Web3 technologies. We believe that our platform will provide revenue generating opportunities, including through the sale of DOT embedded with memberships in comics club, movie club, and other similar societies. In addition, DOTs represent a new unique way in live experiences and access to limited edition collectibles.
We have suspended the development of our Metaverse in the Roblox environment due to the adverse market condition of Metaverse.
We expect to provide Web5 as a Service (“5aaS”) to all participants in the lifestyle, media and entertainment industry to facilitate their transition to Web5. We have also extended our DOT technologies into legal document security industry by encapsulating and delivering legal documents through a DOT. We anticipate that business partnerships between private entities and governmental agencies will increase in the future to further expand this area of development.
| 30 |
Revenue Generating Operation in the Farther Future (Beyond the Next 12 Months)
In the future, we hope to explore opportunities in the Metaverse. We believe that the demand for commercial and residential properties in our Metaverse in the form of purchase and lease will be high.
We believe that environmental, social and governance (“ESG”) issues form an important part of our business. For example, with respect to the environment and sustainability, we intend to choose the most carbon friendly blockchain that is suitable for our business needs. As our business matures, we intend to adopt internal policies and criteria that will enable us to provide better disclosure about our performance with respect to ESG issues.
In achieving our business objectives, we rely on third party blockchain platforms to complete our services. Because we are dependent on third party providers to support certain aspects of our business activities, any interruptions in services by these third parties may impair our ability to service our clients. Please see “Risk Factors- We rely on third-party service providers and partners for certain aspects of our operations, and any interruptions in services provided by these third parties may impair our ability to support our users.” set forth in the Form 10. Our solutions, however, are blockchain independent in that we do not rely specific on a single blockchain provider to complete our service solutions but may switch our media to different blockchain services on an as needed basis. We currently have no plans to develop or maintain our own blockchain and intend to focus on providing business solutions.
Other Events
On January 10, 2022, the board of directors of Marvion Inc. f/k/a Bonanza Goldfields Corp. and certain stockholders holding a majority of the voting rights of our common stock approved by written consent in lieu of a special meeting the taking of all steps necessary to effect the following actions (collectively, the “Corporate Actions”):
1. Amend the Company’s Articles of Incorporation filed with the Nevada Secretary of State (the “Articles of Incorporation”) to change the Company’s name to Marvion Inc.; and
2. Amend the Articles of Incorporation to increase the Company’s authorized capital from 2,000,000,000 to 300,000,000,000 shares, consisting of 270,000,000,000 shares of common stock, par value $0.0001, and 30,000,000,000 shares of preferred stock, par value $0.0001.
The Articles of Incorporation was amended on January 17, 2023, to effect the Corporate Actions.
On April 1, 2022, we entered into an Equity Purchase Agreement (the “Equity Purchase Agreement”) with Williamsburg Venture Holdings, LLC, a Nevada limited liability company (“Investor”), pursuant to which the Investor agreed to invest up to Twenty Million Dollars ($20,000,000) during the commitment period in accordance with the terms and conditions of that certain Equity Purchase Agreement. During the commitment period, the Company shall be entitled to put to the Investor, and the Investor shall be obligated to purchase, such number of shares of the Company’s common stock and at such price as are determined in accordance with the Equity Purchase Agreement. The per share purchase price for the Williamsburg Put Shares will be equal to 88% of the lowest traded price of the Common Stock on the principal market during the five (5) consecutive trading days immediately preceding the date which Williamsburg received the Williamsburg Put Shares as DWAC Shares, as defined in the Equity Purchase Agreement, in its brokerage account (as reported by Bloomberg Finance L.P., Quotestream, or other reputable source).
In connection with the Equity Purchase Agreement, the parties also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company agreed to register with the SEC the common stock issuable under the Equity Purchase Agreement, among other securities. We agreed to use our best efforts to file such registration statement with the SEC.
The foregoing descriptions of the Equity Purchase Agreement and the Registration Rights Agreement are qualified in their entirety by reference to the Investment Agreement and the Registration Rights Agreement, which are filed as Exhibits 10.3 and 10.4 to this quarterly report on Form 10-Q and incorporated herein by reference.
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On April 14, 2022, the Company, through its subsidiary, Marvion Private Limited, entered into an Intellectual Property Sale and Purchase Agreement (the “EA SPA”) with Euro Amazing Limited, a limited liability company organized under the laws of Hong Kong, pursuant to which the Company agreed to acquire a perpetual worldwide license for ten (10) categories of adaptation rights to twenty (20) movies in consideration of 2,325,581,395 shares of our common stock, at a valuation of $0.0043 per share, equivalent to total consideration price of $10,000,000. These shares were issued on April 11, 2023. On May 23, 2022, Marvion Private Limited and Euro Amazing Limited signed an addendum and agreed to replace certain movies in the EA SPA with other movies.
In July 2022, the Company’s wholly-owned subsidiary Marvion Group Limited entered into a technical knowhow license and servicing agreement (the “Servicing Agreement”) with Total Chase Limited (“Total Chase”), a company controlled by its major shareholder of the Company, pursuant to which the Company engaged Total Chase to develop the technical knowhow during a three-year term. Total Chase is the parent company of Marvel Digital AI Limited (“MDAI”) that own intellectual properties and provide technical development services to Total Chase. The technical knowhow consists of visual intelligence engine, speech recognition engine, text analytics engine, emotion recognition engine, motion recognition engine, AI agent creation engine, and metaverse development. Under the terms of the Servicing Agreement, the Company is required to pay to Total Chase an aggregate of $50 million for the development of technical knowhow. The consideration is payable in cash or cryptocurrencies. All MDAI’s proprietary items remained the sole and exclusive property of MDAI. Total Chase will grant the Company a perpetual, non-exclusive, paid-up license to use certain MDAI’s proprietary items. The foregoing description of the Servicing Agreement is qualified in its entirety by reference to such agreement which is filed as Exhibit 10.7 to this quarterly report on Form 10-Q and incorporated herein by reference.
The Company charged all related development costs to expenses as incurred and recognized as “Technology and development expenses” in the unaudited condensed consolidated statement of operations. During the nine months ended September 30, 2023, $10,490,290 development fee was incurred.
The Company entered into a Share Swap Agreement with China Information Technology Development Limited (Stock Code: 8178.HK), a company listed in the Stock Exchange of Hong Kong Limited (“CITD”), pursuant to which the Company agreed to acquire 26,520,386 Ordinary Shares of CITD, constituting approximately 5.15% of the issued share capital of CITD and approximately 4.9% of the enlarged issued share capital of CITD, in consideration of 218,574,609 shares of the Company’s common stock, constituting approximately 11.25% of the issued and outstanding common stock of the Company and approximately 0.153% of the Company’s issued and outstanding common stock and common stock committed to be issued, in accordance with the terms and conditions of the Share Swap Agreement, dated October 25, 2022, by and between the Company and CITD (the “Share Swap Agreement”). The share swap transaction contemplated in the Share Swap Agreement is anticipated to close 90 days from October 25, 2022, or such other later date as is necessary to comply with all applicable rules and regulations of the United States of America and Hong Kong in respect of the share swap transaction.
As of the date of this report, the Company issued 218,574,618 shares of common stock to CITD. The share swap transaction was completed.
The foregoing description of the Share Swap Agreement is qualified in its entirety by reference to such agreement which is filed as Exhibit 10.8 to this quarterly report on Form 10-Q and incorporated herein by
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Our corporate organization chart is below:
Results of Operations.
During the nine months ended September 30, 2023 and 2022, our strategic business and management advisory services segment generated revenue of $0 and $24,735, respectively, and our sale and distribution of the licensed IP right and media content products embedded with DOT solution business segment generated revenue of $8,541,910 and $6,490,552, respectively. The Company accepts payment for services in the form of select and liquid digital assets, but does not hold digital assets as an investment. Such digital assets should be converted into fiat currency or stable digital currency after receipt, subject to the factors include but not limited to currency fluctuations, government policies, exchange control regulations, and general economic market condition.
We are a development stage company and reported a net loss of $10,555,419 and $9,635,226 for the nine months ended September 30, 2023 and 2022, respectively. We had current assets of $16,767,020 and current liabilities of $28,521,941 as of September 30, 2023. As of December 31, 2022, our current assets were $4,554,319 and current liabilities were $6,823,919.
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We have prepared our unaudited condensed consolidated financial statements for the nine months ended September 30, 2023 and 2022 assuming that we will continue as a going concern. Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions and public offerings, capital leases and short-term and long-term debts.
Three Months Ended September 30, 2023 compared to Three Months Ended September 30, 2022
The following table sets forth selected financial information from our statements of comprehensive income for the three months ended September 30, 2023 and 2022:
For the Three Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenues: | $ | 2,984,200 | $ | 5,421,280 | ||||
| Cost of revenues: | (2,987,192 | ) | (3,993,787 | ) | ||||
| Gross (loss) profit | (2,992 | ) | 1,427,493 | |||||
| Operating expenses: | ||||||||
| Technology and development expenses | (2,703,422 | ) | (8,120,612 | ) | ||||
| Sales and marketing expenses | (13,338 | ) | (169,478 | ) | ||||
| Corporate development expenses | – | (71,923 | ) | |||||
| General and administrative expenses | (102,995 | ) | (726,748 | ) | ||||
| Impairment loss of digital assets | (334 | ) | (14 | ) | ||||
| Total operating expenses | (2,820,089 | ) | (9,088,775 | ) | ||||
| Loss from operations | (2,823,081 | ) | (7,661,282 | ) | ||||
| Other income, net | 169,404 | 10 | ||||||
| Loss before income taxes | (2,653,677 | ) | (7,661,272 | ) | ||||
| Income tax credit | – | – | ||||||
| Net loss | $ | (2,653,677 | ) | $ | (7,661,272 | ) | ||
Revenues
During the three months ended September 30, 2023, there was no customer accounted for 10% or more of our total net revenues.
During the three months ended September 30, 2022, there was no customer accounted for 10% or more of our total net revenues.
For the three months ended September 30, 2023, we generated $2,984,200 from media and entertainment business and decreased by $2,437,080, The decrease was primarily due to a decrease in revenue of sale of licensed IP right and media products.
Cost of Revenues
Cost of revenues of $2,987,192 for the three months ended September 30, 2023 consisted primarily of the cost of intellectual property licenses and amortization on licensed media content. The amortization cost incurred in relation to the licensed media content of Forensic Psychologist was $12,164.
Cost of revenues of $3,993,787 for the three months ended September 30, 2022, which consisted primarily of the cost of intellectual property licenses and amortization on licensed media content. The amortization cost incurred in relation to the licensed media content of Forensic Psychologist was $11,750. Cost of revenues increased by $3,990,159 from $3,628 in the same period of 2021 which was mainly due to the increase in sales of our movie remake license Digital Ownership Tokens.
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Gross Profit
We achieved a gross (loss) profit of $(2,992) and $1,427,493 for the three months ended September 30, 2023 and 2022, respectively. The decrease in gross profit is attributable to a decrease in revenue of sale of licensed IP right and media products.
Technology and Development Expenses
Technology and development expenses for the three months ended September 30, 2023, decreased by $5,417,190 and is primarily attributable to decrease in IT and metaverse development expenses.
Sales and Marketing Expenses
Sales and marketing expenses for the three months ended September 30, 2023, decreased by $156,140 as compared to the prior year period, due primarily to decrease in (i) non-cash consultancy expenses charged by consultants for marketing events for Media and Entertainment segment, and (iii) marketing expenses for social media marketing. Sales and marketing expenses of $169,478 for the three months ended September 30, 2022 primarily include costs related to public relations, advertising and marketing programs, and personnel-related expenses.
Corporate Development Expenses
Corporate development expenses of $0 and $71,923 for the three months ended September 30, 2023 and 2022 respectively primarily include personnel-related expenses incurred to support our corporate development.
General and Administrative Expenses (“G&A”)
General and administrative expenses of $102,995 and $726,748 for the three months ended September 30, 2023 and 2022 respectively primarily include (i) non-cash consultancy expenses charged by consultants for rendered in general and administrative function for Media and Entertainment segment, including legal, finance, executive and other support operations, and (ii) directors’ remuneration charged by the director and former director of the Company.
Nine Months Ended September 30, 2023 compared to Nine Months Ended September 30, 2022
The following table sets forth selected financial information from our statements of comprehensive income for the nine months ended September 30, 2023 and 2022:
For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenues: | ||||||||
| Media & entertainment segment | $ | 8,541,910 | $ | 6,490,552 | ||||
| Consulting business segment | – | 24,735 | ||||||
| Total revenues | 8,541,910 | 6,515,287 | ||||||
| Cost of revenues: | ||||||||
| Media & entertainment segment | (4,401,935 | ) | (4,829,421 | ) | ||||
| Consulting business segment | – | (25,533 | ) | |||||
| Total cost of revenues: | (4,401,935 | ) | (4,854,954 | ) | ||||
| Gross profit | 1,660,333 | |||||||
| Operating expenses: | ||||||||
| Technology and development expenses | (10,490,290 | ) | (8,727,704 | ) | ||||
| Sales and marketing expenses | (1,096,327 | ) | (358,854 | ) | ||||
| Corporate development expenses | (1,896,000 | ) | (204,793 | ) | ||||
| General and administrative expenses | (1,151,528 | ) | (1,985,409 | ) | ||||
| Impairment loss of digital assets | (357 | ) | (4,063 | ) | ||||
| Total operating expenses | (14,634,502 | ) | (11,280,823 | ) | ||||
| Loss from operations | (10,494,527 | ) | (9,620,490 | ) | ||||
| Other expense, net | (57,892 | ) | (18,556 | ) | ||||
| Loss before income taxes | (10,552,419 | ) | (9,639,046 | ) | ||||
| Income tax credit | – | 3,820 | ||||||
| Net loss | $ | (10,552,419 | ) | $ | (9,635,226 | ) | ||
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Revenues
During the nine months ended September 30, 2023, there was no customer accounted for 10% or more of our total net revenues.
During the nine months ended September 30, 2022, there was no customer accounted for 10% or more of our total net revenues.
For the nine months ended September 30, 2023, our revenue from media and entertainment segment increased by $2,051,358, The increase was primarily due to an increase in revenue of (i) movie remake license Digital Ownership Tokens, and (ii) Forensic Psychologist Hybrid Digital Ownership Tokens.
Cost of Revenues
Cost of revenues of $4,401,935 for the nine months ended September 30, 2023 consisted primarily of the cost of intellectual property licenses and amortization on licensed media content. The amortization cost incurred in relation to the licensed media content of Forensic Psychologist was $36,739.
Cost of revenues of $4,854,954 for the nine months ended September 30, 2022 consisted primarily of the cost of intellectual property licenses and amortization on licensed media content. The amortization cost incurred in relation to the licensed media content of Forensic Psychologist was $35,810.
Technology and Development Expenses
Technology and development expenses for the nine months ended September 30, 2023, increased by $1,762,586 and is primarily attributable to IT and metaverse development.
Technology and development expenses of $8,727,704 for the nine months ended September 30, 2022 is primarily attributable to (i) development costs for metaverse and artificial intelligence engine charged by a related company owned by the major shareholder of the Company, (ii) management service fee charged by a related company owned by the major shareholder of the Company, (iii) costs for the digital ownership token (“DOT”) development and improvement, and (iv) non-cash consultancy expenses charged by consultants for technology development for blockchain for Media and Entertainment segment.
Sales and Marketing Expenses
Sales and marketing expenses for the nine months ended September 30, 2023, increased by $737,473 as compared to the prior year period, due primarily to increase in (i) non-cash consultancy expenses charged by consultants for marketing events for Media and Entertainment segment, and (iii) marketing expenses for social media marketing.
Corporate Development Expenses
Corporate development expenses for the nine months ended September 30, 2023 increased by $1,691,207 and is primarily attributable to personnel-related expenses in connection to services rendered in strategic development and directives of the Company, and building up a portfolio of business partners, industry participants and specialists.
General and Administrative Expenses (“G&A”)
General and administrative expenses for the nine months ended September 30, 2023 decreased by $833,881 compared to the nine months ended September 30, 2022. The decrease was primarily due to decrease in service cost and personnel-related expenses in connection with our general and administrative functions.
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Liquidity and Capital Resources
Working Capital
As of September 30, 2023, we had cash and cash equivalents of $144,486, digital assets of $10,658, equity investment of $927,358, inventory of $12,025,000 and prepaid expenses and other current assets of $3,647,800.
As of December 31, 2022, we had cash and cash equivalents of $99,274, digital assets of $10,203, inventories of 1,387,500 and prepaid expenses and other current assets of $3,057,342.
As of September 30, 2023 and December 31, 2022, we had working capital deficit of $11,631,921 and $2,269,600, respectively.
We expect to incur significantly greater expenses in the near future as we expand our business or enter into strategic partnerships. We also expect our technology and development, sales and marketing expenses to increase as we enhance our e-commerce platform and spend more efforts in building up customers and community and incur additional costs in investors and partnerships relationship for long-term corporate development.
During the period, we did not pay dividends on our Common Stock. Our present policy is to apply cash to investments in product development, acquisitions or expansion; consequently, we do not expect to pay dividends on Common Stock in the foreseeable future.
Going Concern
Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital may include the sale of equity securities, which include common stock sold in private transactions, capital leases and short-term and long-term debts. While we believe that we will obtain external financing and the existing shareholders will continue to provide the additional cash to meet our obligations as they become due, there can be no assurance that we will be able to raise such additional capital resources on satisfactory terms.
We require additional funding to meet its ongoing obligations and to fund anticipated operating losses. Our auditor has expressed substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
We expect to incur marketing and professional and administrative expenses as well expenses associated with maintaining our filings with the Commission. We will require additional funds during this time and will seek to raise the necessary additional capital. If we are unable to obtain additional financing, we may be required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results. Additional funding may not be available on favorable terms, if at all. We intend to continue to fund its business by way of equity or debt financing and advances from related parties. Any inability to raise capital as needed would have a material adverse effect on our business, financial condition and results of operations.
If we cannot raise additional funds, we will have to cease business operations. As a result, our common stock investors would lose all of their investment.
The following summarizes the key component of our cash flows for the nine months ended September 30, 2023 and 2022.
For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash (used in) provided by operating activities | $ | (1,993,184 | ) | $ | 510 | |||
| Net cash used in investing activity | $ | – | $ | (1,886 | ) | |||
| Net cash provided by financing activities | $ | 2,039,424 | $ | – | ||||
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Net Cash Used In Operating Activities
For the nine months ended September 30, 2023, net cash used in operating activities was $1,993,184, which consisted primarily of a net loss of $10,552,419, an increase in accrued liabilities and other payables of $15,144,757 and an increase in accrued consulting and service fee of $4,557,522, offset by a increase of inventories of $10,637,500, an increase in prepaid expenses and other current assets of $595,073 and a decrease in income tax payable of $1,266, adjusted for non-cash items such as amortization of $36,739, amortization of deferred financing cost of $87,878, digital assets received as revenue of $8,205,000, impairment loss of digital assets of $357, fair value change of listed equity securities of $29,745, written off of intangible asset of $5,437 and inventories purchase in lieu of shares of $8,204,148.
For the nine months ended September 30, 2022, net cash provided by operating activities was $510, which consisted primarily of a net loss of $9,635,226, an increase in prepaid expenses and other current assets of $88,169, and a decrease in income tax payable of $3,820, offset by an increase in accrued liabilities and other payables of $57,825, an increase in accrued consulting and service fee of $1,979,760, and an increase in amounts due to related parties of $2,784,057, and adjusted for non-cash items such as amortization of $36,523, digital assets received as revenue of $6,490,552, digital assets paid for expense of $6,552,995, digital assets purchased / exchanged of $2, impairment loss of digital assets of $4,063, loss on sale, use or exchange of digital assets of $18,556, and shares issued in lieu of inventories purchased of $4,784,500.
Net Cash Used In Investing Activity
No investing activity incurred for the nine months ended September 30, 2023.
For the nine months September 30, 2022, net cash used in investing activity was $1,886, which consisted of purchase of intangible assets.
Net Cash Provided by Financing Activity
For the nine months ended September 30, 2023, net cash provided by financing activity was $2,039,424, which consisted of advance from related parties of $1,869,424 and proceeds from convertible note payable of $170,000.
For the nine months ended September 30, 2022, no financing activity incurred.
Off-Balance Sheet Arrangements
We are not party to any off-balance sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.
Contractual Obligations and Commercial Commitments
We had no contractual obligations and commercial commitments as of September 30, 2023.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates have not changed since December 31, 2022. For a detailed description of the critical accounting policies and estimates of the Company, please refer to “Critical Accounting Policies and Estimates” included in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report on Annual Report-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”, we are not required to provide the information required by this Item.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. Under the direction of our Chief Executive Officer and our Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that were effective as of September 30, 2023.
However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in litigation relating to claims arising out of its operations in the normal course of business. We are not involved in any pending legal proceeding or litigation, and to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on us.
Item 1A. Risk Factors
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
_______________________
| * | Filed Herewith. |
| (1) | Incorporated by reference to the Exhibits to the Registration Statement on Form 10 filed with the Securities and Exchange Commission on October 26, 2021. |
| (2) | Incorporated by reference to Item 11 of Amendment No. 7 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission on May 9, 2022. |
| (3) | Incorporated by reference to the Exhibits to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2022. |
| (4) | Incorporated by reference to the Exhibits to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 11, 2022. |
| (5) | Incorporated by reference to the Exhibits to the Registration Statement on Form 10 filed with the Securities and Exchange Commission on December 14, 2021. |
| (6) | Incorporated by reference to the Exhibits to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 11, 2022. |
| (7) | Incorporated by reference to the Exhibits to the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 28, 2022. |
| (8) | Incorporated by reference to the Exhibits to the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 25, 2022. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MARVION INC. | ||
| Date: November 20, 2023 | By: | /s/ Man Chung CHAN |
| Name: Man Chung CHAN | ||
| Title: Chief Executive Officer and Chief Financial Officer | ||
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