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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| (Address of principal executive offices) | (Zip Code) |
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(Registrant’s telephone number, including area code)
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. ☒
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).☒
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 October 25, 2024, the Company had outstanding shares of common stock.
MARVION INC.
QUARTERLY REPORT
FOR THE QUARTER ENDED SEPTEMBER 30, 2024
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 Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 16, 2024 (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,” “MVNC,” “we,” “us” and “our” refer to Marvion Inc., 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. 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 Form 10-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 Quarterly Report on Form 10-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 Quarterly Report on Form 10-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. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Currency expressed in United States Dollars (“US$”), except for number of shares)
September 30, 2024 | December 31, 2023 | |||||||
| (Restated) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Account receivables | $ | $ | ||||||
| Cash and cash equivalents | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Construction in progress | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Account payables | $ | $ | ||||||
| Accrued liabilities and other payables | ||||||||
| Amounts due to directors | ||||||||
| Construction payable | ||||||||
| Convertible note payable | ||||||||
| Promissory notes | ||||||||
| Lease liabilities | ||||||||
| Promissory note payable | ||||||||
| Tax payable | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Lease liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders’ deficit: | ||||||||
| Preferred stock, par value $, shares authorized, and shares undesignated as of September 30, 2024 and December 31, 2023, respectively | ||||||||
| Preferred stock, Series A, par value $, shares designated, and shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | ||||||||
| Preferred stock, Series B, par value $, shares designated, and shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | ||||||||
| Preferred stock, Series C, par value $, share designated, and share issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | ||||||||
| Common stock, par value $, shares authorized, and shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated losses | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
| 10 |
MARVION INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME
(Currency expressed in United States Dollars (“US$”), except for number of shares)
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (Loss) income from operations | ( | ) | ( | ) | ||||||||||||
| Other income: | ||||||||||||||||
| Interest income | ||||||||||||||||
| Total other income | ||||||||||||||||
| (Loss) income before income taxes | ( | ) | ( | ) | ||||||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) income | ( | ) | ( | ) | ||||||||||||
| Other comprehensive income: | ||||||||||||||||
| Foreign currency adjustment (loss) gain | ( | ) | ||||||||||||||
| Comprehensive (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Net (loss) income 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. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| Preferred stock | Common stock | Additional | Accumulated other comprehensive | (Accumulated deficit) | Total shareholders’ | |||||||||||||||||||||||||||
| No. of shares | Amount | No. of shares | Amount | paid-in capital | income (loss) | Retained earnings | (deficit) equity | |||||||||||||||||||||||||
| For the Three and Nine Months Ended September 30, 2024 | ||||||||||||||||||||||||||||||||
| Balance as of January 1, 2024 (restated) | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Foreign translation adjustment | – | – | ||||||||||||||||||||||||||||||
| Net income for the period | – | – | ||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Foreign translation adjustment | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income for the period | – | – | ||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | ||||||||||||||||||||||||||||||||
| Share issued for acquisition of legal acquirer | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Recapitalization of legal acquirer | – | – | ( | ) | ||||||||||||||||||||||||||||
| Foreign translation adjustment | – | – | ||||||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of September 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| For the Three and Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||
| Balance as of January 1, 2023 (restated) | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Foreign translation adjustment | – | – | ||||||||||||||||||||||||||||||
| Net income for the period | – | – | ||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Foreign translation adjustment | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income for the period | – | – | ||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Foreign translation adjustment | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income for the period | – | – | ||||||||||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
| 12 |
MARVION INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Currency expressed in United States Dollars (“US$”))
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation of property and equipment | ||||||||
| Amortization of right-of use assets | ||||||||
| Interest expenses on lease liabilities | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Account receivables | ( | ) | ( | ) | ||||
| Account payables | ( | ) | ||||||
| Construction payable | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accrued liabilities and other payable | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Income tax payable | ||||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Advance from a director | ||||||||
| 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: | ||||||||
| Issuance of promissory notes for earnout liabilities through Share Exchange Transaction | $ | $ | ||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
| 13 |
MARVION INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
1. 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, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024. 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, 2023, filed with the SEC on April 16, 2024.
2. ORGANIZATION AND BUSINESS BACKGROUND
Marvion Inc. was incorporated in the State of Nevada on March 6, 2008. The Company and its subsidiaries are hereinafter referred to as (the “Company”).
On August 15, 2024, the Company and United Warehouse Management Corp., a British Virgin Island corporation (“UWMC”) and eleven shareholders of UWMC entered into a Share Exchange Agreement (the “SEA”) pursuant to which the shareholders of UWMC agreed to transfer to the Company shares of UWMC, constituting all of the issued and outstanding securities of UWMC, in exchange for shares of common stock of the Company, par value $ per share (the “share exchange transaction”).
In connection with the share exchange transaction, all prior officers and directors of the Company resigned and new officers and directors were appointed as officers and directors of the Company. Such share exchange transaction has been accounted for as a reverse merger and recapitalization of the Company, whereby UWMC is deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal acquirer). Accordingly, the consolidated assets, liabilities and results of operations of the Company will become the historical financial statements of UWMC, and the Company’s assets, liabilities and results of operations will be consolidated with UWMC beginning on the date of the share exchange transaction. No goodwill is recognized in this transaction. The historical financial statements prior to the share exchange transaction are those of the accounting acquirer (UWMC). Historical stockholders’ equity of the accounting acquirer prior to the reverse merger are retroactively restated (a recapitalization) for the equivalent number of shares received in the merger. Operations prior to the merger are those of the acquirer. After completion of the share exchange transaction, the Company’s accompanying unaudited condensed consolidated financial statements for the nine months ended September 30, 2024 and 2023 have been restated for all periods presented accordingly.
In addition to the share exchange transaction, the Company agreed to make earnout payments in the aggregate amount of $ (collectively, the “Earn Out Payments”) upon UWMC’s achievement of certain net income performance milestones during each six month period ending June 30 and December 31 (each, a “Performance Period”) for a total of nine Performance Periods. The Earn Out Payments will be payable in the form of interest free promissory notes and shared equally among the shareholders of UWMC.
| 14 |
Currently, the Company is principally engaged in the logistic services, warehousing service and financial consulting services in 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 | ||||
| United Warehouse Management Corp. (“UWMC”) | ||||||||
| KSK Logistics Limited (“KSK”) | ||||||||
| Propose Enterprise Limited (“PEL”) | ||||||||
| United Warehouse Management Limited (“UWML”) |
The Company and its subsidiaries are hereinafter referred to as (the “Company”).
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying unaudited condensed consolidated financial statements and notes.
Basis of consolidation
The unaudited condensed consolidated financial statements include the accounts of MVNC and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
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.
| 15 |
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.
Accounts receivable
Accounts receivable are recorded at the gross billing amounts due from customers, less an allowance for expected credit losses. Accounts receivable do not bear interest and are considered overdue after 30 days from the date of invoices. The Company regularly assesses the expected credit losses for accounts receivable based on assessments of the recoverability of the accounts receivable and individual account analysis, including the current creditworthiness and the past collection history of each customer and current economic industry trends. Impairments arise when there is objective evidence indicating that the balances may not be collectible. The identification of bad and doubtful debts, in particular of a loss event, requires the use of judgment and estimates, which involve the estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Based on analysis of customers’ credit and ongoing relationship, management makes conclusions about whether any balances outstanding at the end of the period will be deemed non-collectible on an individual basis and on aging analysis basis. The allowance for expected credit losses is recorded against accounts receivables balances, with a corresponding charge recorded in the statements of operations. Delinquent account balances are written off against the allowance for expected credit losses after management has determined that the likelihood of collection is not probable.
As of September 30, 2024
and December 31, 2023,
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
| Expected useful life | ||
| Warehouse facilities | ||
| Equipment | ||
| Motor vehicle |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterment which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized as other income or expense in the statements of operations.
Construction in progress
Construction-in-progress primarily consists of the construction of warehouse facilities that have not yet been placed into service for their intended use. No depreciation is provided for construction in progress until the assets are completed and are placed into service.
| 16 |
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 property, plant and equipment and construction
in progress owned and held 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 was
Leases
The Company adopts the FASB Accounting Standards Update (“ASU”) 2016-02 “Leases (Topic 842)” for all periods presented. This standard requires lessees to recognize lease assets (“right-of-use”) and related lease obligations (“lease liabilities”) on the unaudited condensed consolidated balance sheet for leases with terms in excess of twelve months. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities.
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the unaudited condensed consolidated balance sheets. Finance leases are included in finance lease ROU assets and finance lease liabilities in the unaudited condensed consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease and finance lease ROU assets and liabilities are recognized, based on the present value of lease payments over the lease term discounted using the rate implicit in the lease. In cases where the implicit rate is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term. The Company depreciated the ROU assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the ROU assets or the end of the lease term. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
All of the Company’s real estate leases are classified as operating leases and there was no lease with a duration of twelve months or less.
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. |
| 17 |
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, and such fees are billed to the customer when the performance obligation is satisfied. The Company recognizes such revenue in the period when the amounts are determined to be fixed and the performance obligation is satisfied as the Company completes the obligations.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales taxes and other taxes are excluded from revenues.
Upon the development of new warehouse building in October 2023, the Company focuses on the provision of logistic and warehousing services to the customers through the storage of merchandise in its warehouse facilities, as well as packaging and delivery and transportation services from its warehouse to domestic destinations designated by the customers.
Logistic services
Revenues from logistic solution services to the customers, in which such local transportation, delivery and packaging services are recognized at the time the merchandise is packed and shipped by the Company to domestic destinations designed by the customers. Generally, the Company bills the invoices monthly and collects the receivable in a credit term of 30 days.
Warehousing services
Revenues generating from storage services are recognized ratably over the term of the contract or arrangement, as the Company performs contractual obligations through continuous transfer of control to the customers, and they could simultaneously receive and consume the benefits of the Company’s performance as it occurs. The Company generally invoices customers monthly at the end of each month in arrear for services performed during the month. The performance obligation is satisfied when the services are performed. Warehousing contracts typically consist of ongoing storage service in a term of 1-6 years, subject to renewal option.
Financial consulting services
The Company also provides financial consulting services to the customers, and generally invoices customers when the performance obligation is satisfied. The duration of the service period is short, usually within 3 months. Transaction prices of financial consulting services to be rendered are typically based on contracted rates. The Company earns the fee arising from the facilitation of the placement of financing solutions with different credit institutions, which is recognized at a point in time when the service is completed and delivered to the customer.
The Company is acting as a principal in providing aforementioned services and accordingly recognizes revenue on a gross basis as the Company determines the price and selects carriers or service providers at its own discretion.
| 18 |
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 unaudited condensed consolidated 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 unaudited condensed consolidated balance sheets and provides valuation allowances as management deems necessary.
Segment reporting
Accounting Standard 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 in two business segments in Hong Kong.
Commitments and contingencies
The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the unaudited condensed consolidated 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.
Uncertain tax positions
The Company did
| 19 |
The Company calculates net income (loss) per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per share is computed similar to basic income (loss) 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 unaudited 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 maintains its books and record in its local currencies, Hong Kong Dollars (“HKD”), 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$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the unaudited condensed consolidated statements of changes in shareholders’ deficit.
Translation of amounts from HKD into US$ has been made at the following exchange rates for the period ended September 30, 2024 and 2023:
| September 30, 2024 | September 30, 2023 | |||||||
| Period-end HKD:US$ exchange rate | ||||||||
| Period average HKD:US$ exchange rate | ||||||||
Comprehensive income (loss)
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income (loss) 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’ deficit, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income (loss) is not included in the computation of income tax expense or benefit.
| 20 |
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.
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 unaudited condensed consolidated 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.
| 21 |
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.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, amounts due from related parties, prepaid expenses and other current assets, accounts payable, accrued liabilities and other payable, amounts due to directors, construction payable and income tax payable approximate their fair values because of the short maturity of these instruments.
Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments — Credit Losses (Topic 326). The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) — Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company believes the adoption will modify the way the Company analyses financial instruments, but it does not anticipate a material impact on the results of operations.
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In June 2023, the FASB issued Accounting Standards Update (ASU) No. 2022-03 Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. These amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This guidance is effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after October 15, 2023. Early adoption is permitted. The Company has assessed ASU 2023-03 and early adopted the guidance during the second quarter of 2023. The adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In March 2023, the FASB issued ASU No. 2023-01, Leases (Topic 842) – Common-Control Arrangements. This guidance amends the accounting for leasehold improvements in common-control arrangements by requiring a lessee in a common-control arrangement to amortize leasehold improvements that it owns over the improvements’ useful life to the common-control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease. The new standard will become effective for the Company beginning in fiscal year 2025. The Company is currently evaluating the impact of this standard on its unaudited condensed consolidated financial statements and disclosures.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification. This update will improve disclosure and presentation requirements of a variety of topics and align the requirements in the FASB codification with the SEC’s regulations. The Company is currently evaluating the potential effect of this ASU on its unaudited condensed consolidated financial statements, but does not expect the impact to be material.
In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The purpose of the update was to improve financial reporting by requiring disclosures of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective application to all periods presented in the unaudited condensed consolidated financial statements. Management is evaluating the impact on the Company’s unaudited condensed consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its unaudited condensed consolidated financial statements and disclosures.
In March 2024, the FASB issued ASU 2024-02, which removes references to the Board’s concepts statements from the FASB Accounting Standards Codification (the “Codification” or ASC). The ASU is part of the Board’s standing project to make “Codification updates for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or the structure of guidance, and other minor improvements.” The Company’s management does not believe the adoption of ASU 2024-02 will have a material impact on its unaudited condensed consolidated financial statements and disclosures.
Except for the above-mentioned pronouncements, there are no new recently issued accounting standards that will have a material impact on the unaudited condensed consolidated balance sheets, statements of operations and cash flows.
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4. 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 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.
5. 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, | |||||||||||||||||
| Type of revenue | Point of recognition | 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Financial consulting income | Point-in-time | $ | $ | $ | $ | |||||||||||||
| Logistic service income | Point-in-time | |||||||||||||||||
| Warehousing service income | Over time | |||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||||
6. CONSTRUCTION IN PROGRESS
The development costs of
$
This warehouse building is structurally completed in October 2024.
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7. LEASES
The Company has entered into
commercial operating leases with various third parties for the use of leasehold land in Hong Kong. These leases have original terms ranging
from
Supplemental balance sheet information related to operating leases was as follows:
| As of | ||||||||
| September 30, 2024 | December 31, 2023 | |||||||
| Operating lease: | ||||||||
| Right-of-use asset, net | $ | $ | ||||||
| Lease liabilities: | ||||||||
| Current lease liabilities | $ | $ | ||||||
| Non-current lease liabilities | ||||||||
| Total lease liabilities | $ | $ | ||||||
Operating lease expense for the three months ended
September 30, 2024 and 2023 was $
Operating lease expense for the nine months ended
September 30, 2024 and 2023 was $
Other supplemental information about the Company’s operating lease as of:
| As of | ||||||||
| September 30, 2024 | December 31, 2023 | |||||||
| Weighted average discount rate | ||||||||
| Weighted average remaining lease term (years) | ||||||||
Operating lease commitments:
The following table summarizes the future minimum lease payments due under the Company’s operating leases in the next five years, as of September 30, 2024:
| Year ending December 31, | ||||
| 2024 (remaining three months) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total minimum finance lease liabilities payment | ||||
| Less: imputed interest | ( | ) | ||
| Future minimum lease liabilities | $ | |||
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8. AMOUNTS DUE TO DIRECTORS
As of September 30, 2024
and December 31, 2023, the amounts represented temporary advances made by a director, Mr. Chan to the Company for capital expenditure
and working capital purpose, which was unsecured, interest-free and repayable on demand. The balance was $
9. SHAREHOLDERS’ DEFICIT
Preferred stock
As of September 30, 2024 and December 31, 2023, the Company’s authorized shares were shares of preferred stock, with a par value of $0.0001.
As of September 30, 2024 and December 31, 2023, the Company had and shares of Series A Preferred Stock issued and outstanding, respectively.
As of September 30, 2024 and December 31, 2023, the Company had and shares of Series B Preferred Stock issued and outstanding, respectively.
As of September 30, 2024 and December 31, 2023, the Company had and share of Series C Preferred Stock issued and outstanding, respectively.
Common stock
As of September 30, 2024 and December 31, 2023, the Company’s authorized shares were shares of common stock, with a par value of $.
On March 11, 2024, the Company filed its Restated Articles of Incorporation with the Nevada Secretary of State (the “Articles of Incorporation”) to effect a 1-for-3000 reverse stock split of its issued and outstanding Common Stock (the “Reverse Stock Split”) which was approved by the Company’s stockholders at a special meeting in lieu of annual meeting held on February 29, 2023, and issue to all shareholders that directly as a result of the Reverse Stock Split would hold less than 100 shares of common stock of the Company (each, an “Affected Shareholder”) such number of additional shares of common stock so that each Affected Shareholder shall hold 100 shares of common stock of the Company after the Reverse Stock Split. On May 8, 2024, the Reverse Stock Split became effective upon the approval from FINRA. Accordingly, all common shares and per share amounts in these accompanying unaudited condensed consolidated financial statements have been adjusted retroactively to reflect the reverse stock split as if the split occurred at the beginning of the earliest period presented.
On August 15, 2024, the Company and United Warehouse Management Corp., a British Virgin Island corporation (“UWMC”) and eleven shareholders of UWMC entered into a Share Exchange Agreement (the “SEA”) pursuant to which the shareholders of UWMC agreed to transfer to the Company shares of UWMC, constituting all of the issued and outstanding securities of UWMC, in exchange for shares of common stock of the Company, par value $ per share.
As of September 30, 2024 and December 31, 2023, the Company had and shares of common stock issued and outstanding, respectively.
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The calculation of the basic and diluted net (loss) income per share attributable to common stockholders of the Company is based on the following data (in dollars, except share data):
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net (loss) income attributable to common stockholders | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Net loss per share: | ||||||||||||||||
| Basic # | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Diluted # | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| # | For net loss per share during the three and nine months ended September 30, 2024, common stock equivalents were included in the computation of diluted net income (loss) per share since such inclusion would have been anti-dilutive. For net income per share during the three and nine months ended September 30, 2023, basic and diluted net income per share was less than $0.01. |
The shares amounts are presented on a retroactive basis, after the effect of Reverse Stock Split (see Note 9).
11. INCOME TAX
For the nine months ended September 30, 2024 and 2023, the local (“United States of America”) and foreign tax regime incurred loss before income taxes, which comprised of the following:
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Tax jurisdiction from: | ||||||||
| - Local | $ | ( | ) | $ | ||||
| - Foreign, including | ||||||||
| British Virgin Islands | ( | ) | ||||||
| Hong Kong | ||||||||
| (Loss) income before income taxes | $ | ( | ) | $ | ||||
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The provision for income taxes consisted of the following:
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| 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 that are subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
MVNC 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 three and nine months ended September 30, 2024 and 2023, there were no operating incomes.
BVI
Under the current BVI law, the Company is not subject to tax on income.
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Hong Kong
The Company and 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 year, after deducting a tax concession for the tax year. The reconciliation of income tax expense to income at applicable tax rates for the nine months ended September 30, 2024 and 2023 is as follows:
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Income before income taxes | $ | $ | ||||||
| Statutory income tax rate | $ | |||||||
| Income tax expense at statutory rate | ||||||||
| Tax effect of non-taxable items | ( | ) | ( | ) | ||||
| Tax effect of non-deductible items | ||||||||
| Income tax expense | $ | $ | ||||||
The following table sets forth the significant components of the deferred tax assets of the Company as of September 30, 2024 and December 31, 2023:
| As of | ||||||||
| September 30, 2024 | December 31, 2023 | |||||||
| Deferred tax assets: | ||||||||
| NOL – US tax regime | $ | $ | ||||||
| NOL – British Virgin Islands regime | ||||||||
| NOL – Hong Kong tax regime | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
As of September 30, 2024 and December 31, 2023, 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.
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12. RELATED PARTY TRANSACTIONS
From time to time, the directors of the Company advanced funds to the Company for capital expenditures and working capital purpose. Those temporary advances are unsecured, non-interest bearing and have no fixed terms of repayment.
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.
13. CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
| (a) | Major customers |
For the nine months ended September 30, 2024 and 2023, the individual customers who accounted for 10% or more of the Company’s revenues and its outstanding receivable balances at period-end dates, are presented as follows:
| Nine months ended September 30, 2024 | September 30, 2024 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | $ | ||||||||||
| Customer B | $ | $ | ||||||||||
| Nine months ended September 30, 2023 | September 30, 2023 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer C | $ | $ | ||||||||||
| Customer D | $ | $ | ||||||||||
| Customer E | $ | $ | ||||||||||
For the three months ended September 30, 2024 and 2023, the individual customers who accounted for 10% or more of the Company’s revenues and its outstanding receivable balances at period-end dates, are presented as follows:
| Three months ended September 30, 2024 | September 30, 2024 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | $ | ||||||||||
| Customer B | $ | $ | ||||||||||
| Three months ended September 30, 2023 | September 30, 2023 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer B | $ | $ | ||||||||||
| Customer C | $ | $ | ||||||||||
| Customer D | $ | $ | ||||||||||
| Customer F | $ | $ | ||||||||||
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These customers are located in Hong Kong.
| (b) | Major vendors |
For the nine months ended September 30, 2024 and 2023, the individual vendors who accounted for 10% or more of the Company’s direct operating cost and its outstanding payable balances at period-end dates, are presented as follows:
| Nine months ended September 30, 2024 | September 30, 2024 | |||||||||||
| Vendor | Cost of revenues | Percentage cost of revenues | Accounts payable | |||||||||
| Vendor D | $ | $ | ||||||||||
| Vendor E | $ | $ | ||||||||||
| Nine months ended September 30, 2023 | September 30, 2023 | |||||||||||
| Vendor | Cost of revenues | Percentage cost of revenues | Accounts payable | |||||||||
| Vendor A | $ | $ | ||||||||||
| Vendor B | $ | $ | ||||||||||
| Vendor C | $ | $ | ||||||||||
For the three months ended September 30, 2024 and 2023, the individual vendors who accounted for 10% or more of the Company’s direct operating cost and its outstanding payable balances at period-end dates, are presented as follows:
| Three months ended September 30, 2024 | September 30, 2024 | |||||||||||
| Vendor | Cost of revenues | Percentage cost of revenues | Accounts payable | |||||||||
| Vendor F | $ | $ | ||||||||||
| Vendor D | $ | $ | ||||||||||
| Vendor E | $ | $ | ||||||||||
| Three months ended September 30, 2023 | September 30, 2023 | |||||||||||
| Vendor | Cost of revenues | Percentage cost of revenues | Accounts payable | |||||||||
| Vendor E | $ | $ | ||||||||||
| Vendor A | $ | $ | ||||||||||
| Vendor C | $ | $ | ||||||||||
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These vendors are located in Hong Kong and China.
| (c) | Credit risk |
Financial instruments that
potentially subject the Company to credit risk consist of cash and cash equivalents and accounts receivable. Cash equivalents are maintained
with high credit quality institutions in Hong Kong, the composition and maturities of which are regularly monitored by the management.
| (d) | Economic and political risk |
The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.
| (e) | Exchange rate risk |
The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that 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 converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
| (f) | 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.
14. COMMITMENTS AND CONTINGENCIES
Commitments
As of September 30, 2024, the Company had no material commitments or contingencies.
15. 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 the unaudited condensed consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after September 30, 2024, up through the date the Company issued the unaudited condensed consolidated financial statements. The Company had no material recognizable subsequent events since September 30, 2024.
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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 9.
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 Form 10-Q, we refer to Marvion Inc. 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. was incorporated in the State of Nevada on March 6, 2008. The Company and its subsidiaries are hereinafter referred to as (the “Company”).
On August 15, 2024, the Company and United Warehouse Management Corp., a British Virgin Island corporation (“UWMC”) and eleven shareholders of UWMC entered into a Share Exchange Agreement (the “SEA”) pursuant to which the shareholders of UWMC agreed to transfer to the Company 4,000 shares of UWMC, constituting all of the issued and outstanding securities of UWMC, in exchange for 148,148,150 shares of common stock of the Company, par value $0.0001 per share (the “share exchange transaction”).
In addition to the Acquisition Shares, the Company agreed to make earnout payments in the aggregate amount of $5.5 million (collectively, the “Earn Out Payments”) upon UWMC’s achievement of certain net income performance milestones during each six month period ending June 30 and December 31 (each, a “Performance Period”) for a total of nine Performance Periods. The Earn Out Payments will be payable in the form of interest free promissory notes and shared equally among Chan Sze Yu, Fong Hiu Ching and Young Chi Kin Eric who are also shareholders of UWMC. The Acquisition transactions contemplated by the SEA were consummated on September 12, 2024.
As a result of the Acquisition, Marvion became engaged in the business of logistics and warehousing services. Concurrently with the acquisition of UWMC, the Company also divested its ownership of Marvion Holdings Limited and all of its subsidiaries and ceased its the lifestyle, media and entertainment creation and distribution, and technology businesses.
Chan Sze Yu is our Chief Executive Officer, Chief Financial Officer, Secretary and Director. Young Chi Kin Eric holds 10,000,000 shares of the Company’s Series A Preferred Stock which entitles him to vote on all matters submitted to a vote of the shareholders together with the Common Stock holders with each one share of Series A Preferred Stock having 200 votes.
The foregoing descriptions of the SEA and the Promissory Notes are qualified in their entirety by reference to the SEA and the Promissory Notes, which are filed as Exhibits 10.1 through and including 10.4 and incorporated herein by reference.
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The share exchange transaction has been accounted for as a reverse merger and recapitalization of the Company, whereby UWMC is deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal acquirer). Accordingly, the consolidated assets, liabilities and results of operations of the Company will become the historical financial statements of UWMC, and the Company’s assets, liabilities and results of operations will be consolidated with UWMC beginning on the date of the share exchange transaction. No goodwill is recognized in this transaction. The historical financial statements prior to the share exchange transaction are those of the accounting acquirer (UWMC). Historical stockholders’ equity of the accounting acquirer prior to the reverse merger are retroactively restated (a recapitalization) for the equivalent number of shares received in the merger. Operations prior to the merger are those of the acquirer. After completion of the share exchange transaction, the Company’s accompanying unaudited condensed consolidated financial statements have been restated for all periods presented accordingly.
The Company, through its subsidiary UWMC, is principally engaged in the logistic services, warehousing service and financial consulting services in Hong Kong. UWMC’s businesses are operated through three subsidiaries organized in Hong Kong: KSK Logistic Limited (“KSK”), United Warehouse Management Limited (“UWML”) and Propose Enterprise Limited (“PEL”), which provide the following services:
| · | KSK: Last mile deliveries for retail and business customers; | |
| · | UWML: Provides warehousing and distribution services; and | |
| · | PEL: Provides business advisory solutions to customers which may provide a lead to our logistic and warehousing services. |
We are seeking to build our own furniture online store, providing a one-stop shopping experience to the Hong Kong furniture buyers. We may partner with some of our existing customers who are already in furniture retailing, since they already have connections with many of the furniture manufacturers in China. By listing out the catalogs of the partnered manufacturers, a lot more options will be available to the consumers to choose from. Once orders are made, our logistics arm KSK will be able to handle the delivery of the furniture to the door of the consumers. We will then build up our skillful furniture assemble team who will complete the assembly of the furniture at the time of delivery. In the long run, as we see a good local demand on certain furniture products, we can work with the manufacturers to stock up some products at our own UWML warehouses, this will further shorten the time between consumer placing the order online and the time when the furniture is delivered and assembled at their home.
Our corporate structure is described below:
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We are authorized to issue up to 270,000,000,000 shares of our common stock, par value $0.0001. Our Board has also designated the following classes of preferred stock: (i) the Series A Preferred Stock,” par value $0.0001, with 10,000,000 authorized shares, all of which are issued and outstanding; (ii) “Series B Preferred Stock,” par value $0.0001, with 1,000,000 authorized shares, 366,346 of which are issued and outstanding; and (iii) the “Series C Convertible Preferred Stock,” par value $0.001, with 1 authorized share, all of which are issued and outstanding. The voting and conversion rights of each series of preferred stock and the beneficial ownership of such securities by insiders are summarized below:
| Stock | Voting Rights | Ownership |
| Common Stock | One vote per share |
7.16% held by Lee Ying Chiu Herbert. 8.78% held by Young Chi Kin Eric. 8.78% held by Chan Sze Yu. |
| Series A Preferred Stock | Holders of Series A Preferred Stock are entitled to vote on matters submitted to a vote of the shareholders with each one share having 200 votes. Series A Preferred Stock do not convert into Common Stock. | 100% held by Young Chi Kin Eric. |
| Series B Preferred Stock | Holders of Series B Preferred Stock have no voting rights, and Series B Preferred Stock do not convert into Common Stock. | Approximately 92% held by Lee Ying Chiu Herbert. |
| Series C Convertible Preferred Stock |
Holders of Series C Convertible Preferred Stock are generally not allowed to vote on an “as converted” basis on matters submitted to holders of the common stock, or any class thereof.
Each one share of Series C Convertible Preferred Stock converts into 9.99% of the outstanding shares of common stock less the number of shares of common stock held by the holder; provided that any such optional conversion must involve the conversion of all of the holder’s shares of Series C Convertible Preferred Stock. |
100% held by Lee Ying Chiu Herbert. |
Current Revenue Generating Operation
BUSINESS SEGMENT INFORMATION
The following table summarizes revenue from contracts with customers, disaggregated by revenue source and the related segments, for the nine months ended September 30, 2024 and 2023:
| Nine Months ended September 30, | ||||||||
| Types of segments/revenue sources | 2024 | 2023 | ||||||
| Supply chain segment: | ||||||||
| Logistic services | $ | 468,142 | $ | 34,541 | ||||
| Warehousing services | 403,229 | – | ||||||
| 871,371 | 34,541 | |||||||
| Financial segment: | ||||||||
| Financial consulting services | 148,222 | 372,066 | ||||||
| $ | 1,019,593 | $ | 406,607 | |||||
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Revenue Generating Operation in the Near Future (Next 12 Months).
Over the next 12 months, we intend to continue to expand our logistics and warehousing businesses through more Business to Business (B2B) opportunities. We seek to provide business customers with a one-stop solution for their warehousing and distribution needs. While our current customers include key furniture retailers, we hope to expand our customer base both vertically and horizontally to other industries. We are in discussions with major cross-regional logistics companies to fill in their local distribution needs and potential clients who may need a additional warehousing space. We began construction of our third warehouse in Yuen Long, Hong Kong, and expect to finish sometime in the first quarter of 2025.
On October 2, 2024, our subsidiary United Warehouse Limited signed a Service Agreement with Starwarehouse Engineering Limited to install solar PV systems on the rooftops of our warehouses (the “Service Agreement”). The generated power will be sold to China Light and Power (CLP) at the defined tariff scheme rate, creating an additional long term stable revenue stream to the group, at the same time reducing our carbon footprint in the society. The partnership is expected to begin in early 2025 and continue until December 31, 2033. The foregoing description of the Service Agreement is qualified in its entirety by reference to the English translation of the Service Agreement, which is filed as Exhibit 10.10 and incorporated herein by reference.
Revenue Generating Operation in the Farther Future (Beyond the Next 12 Months)
In the future, we are looking into expanding more into the Business to Consumer (B2C) business opportunities.
Based on the market expertise of our management team in the furniture industry, and the cross-border ecommerce growth from China to Hong Kong, we are seeking to develop a furniture online ecommerce platform which can provide a one-stop furniture shopping experience for consumers. According to Statista, Hong Kong consumers prefer online shopping and the percentage of consumers choosing to shop online will reach 84.1% by 2027. China has a mature online furniture ecommerce market, with 50% of consumers in China already purchasing their furniture online. We plan to provide a rich selection of furniture from the already mature China ecommerce market to the consumers in Hong Kong, with integrated logistics, delivery and furniture assembly services with a simple press of a button on our future furniture ecommerce platform.
We are also looking into developing a one-stop ecommerce platform for Hong Kong consumers, providing them with niche products from big brands around the world that are not being offered locally in Hong Kong. By building up and utilizing logistic and warehousing partners in different countries, we seek to provide group shipping across different regions to Hong Kong to deliver products to Hong Kong using the most cost effective channels.
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Results of Operations.
Three Months Ended September 30, 2024, as compared to Three Months Ended September 30, 2023
The following table sets forth selected financial information from our statements of comprehensive income for the three months ended September 30, 2024 and 2023:
| Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | 390,275 | $ | 212,502 | ||||
| Cost of revenues | (193,891 | ) | (88,893 | ) | ||||
| Gross profit | 196,384 | 123,609 | ||||||
| Operating expenses: | ||||||||
| General and administrative expenses | (573,438 | ) | (53,737 | ) | ||||
| Total operating expenses | (573,438 | ) | (53,737 | ) | ||||
| (Loss) income from operations | (377,054 | ) | 65,872 | |||||
| Other income | 612 | 108 | ||||||
| (Loss) income before income taxes | (376,442 | ) | 65,980 | |||||
| Income tax expense | (2,531 | ) | (19,887 | ) | ||||
| Net (loss) income | $ | (378,973 | ) | $ | 46,093 | |||
Revenues
The Company currently earns three types of income sources:
| Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Logistic service income | $ | 204,333 | $ | 34,541 | ||||
| Warehousing service income | 134,638 | – | ||||||
| Financial consulting income | 51,204 | 177,961 | ||||||
| $ | 390,275 | $ | 212,502 | |||||
Revenues from logistic solution services to the customers, in which such local transportation, delivery and packaging services are recognized at the time the merchandise is packed and shipped by the Company to domestic destinations designed by the customers. Generally, the Company bills the invoices monthly and collects the receivable in a credit term of 30 days.
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Revenues generating from storage services are recognized ratably over the term of the contract or arrangement, as the Company performs contractual obligations through continuous transfer of control to the customers, and they could simultaneously receive and consume the benefits of the Company’s performance as it occurs. The Company generally invoices customers monthly at the end of each month in arrear for services performed during the month. The performance obligation is satisfied when the services are performed. Warehousing contracts typically consist of ongoing storage service in a term of 1-6 years, subject to renewal option.
The Company also provides financial consulting services to the customers, and generally invoices customers when the performance obligation is satisfied. The duration of the service period is short, usually within 3 months. Transaction prices of financial consulting services to be rendered are typically based on contracted rates. The Company earns the fee arising from the facilitation of the placement of financing solutions among different credit institutions, which is recognized at a point in time when the service is completed and delivered to the customer.
Revenues of $390,275 for the three months ended September 30, 2024, increased by $177,773 or 83.66% from $212,502 in the same period of 2023, which was mainly due to introduction of new business in rendering logistics and warehousing services. Revenues of $212,502 for the three months ended September 30, 2023 consisted primarily financial consulting service.
For the three months ended September 30, 2024 and 2023, the individual customers who accounted for 10% or more of the Company’s revenues and its outstanding receivable balances at period-end dates, are presented as follows:
| Three months ended September 30, 2024 | September 30, 2024 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Pro King International Warehouse Limited | $ | 134,638 | 34.50% | $ | 45,045 | |||||||
| Furniture Station Limited | $ | 138,982 | 35.61% | $ | 91,501 | |||||||
| Three months ended September 30, 2023 | September 30, 2023 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Furniture Station Limited | $ | 31,069 | 14.62% | $ | 31,074 | |||||||
| Time Credit Limited | $ | 38,465 | 18.10% | $ | 4,991 | |||||||
| Easy Funding Limited | $ | 78,620 | 37.00% | $ | 32,529 | |||||||
| Golden Fields Finance Limited | $ | 27,444 | 12.91% | $ | 7,532 | |||||||
These customers are located in Hong Kong.
Cost of Revenues
Cost of revenues of $193,891 for the three months ended September 30, 2024 consisted primarily of the direct wages, telemarketing service charges, depreciation and amortization of right-of-use assets. Cost of revenues increased by $104,998 from $88,893 in the same period of 2023 which was mainly due to the increase in direct operating cost in connection with logistics and warehousing services. Cost of revenues of $88,893 for the three months ended September 30, 2023 consisted primarily of the associated costs in rendering the financial consulting service and depreciation and amortization of right-of-use assets.
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For the three months ended September 30, 2024 and 2023, the individual vendors who accounted for 10% or more of the Company’s direct operating cost and its outstanding payable balances at period-end dates, are presented as follows:
| Three months ended September 30, 2024 | September 30, 2024 | |||||||||||
| Vendor | Cost of revenues | Percentage cost of revenues | Accounts payable | |||||||||
| Ten Month Limited | $ | 25,922 | 13.37% | $ | – | |||||||
| Ip Ming | $ | 22,667 | 11.69% | $ | – | |||||||
| Giant Winner Limited | $ | 44,726 | 23.07% | $ | – | |||||||
| Three months ended September 30, 2023 | September 30, 2023 | |||||||||||
| Vendor | Cost of revenues | Percentage cost of revenues | Accounts payable | |||||||||
| Giant Winner Limited | $ | 25,840 | 29.07% | $ | – | |||||||
| 廣州萬基斯投資顧問有限公司 (Guangzhou MKS Investment Consulting Co., Limited*) | $ | 17,251 | 19.41% | $ | – | |||||||
| Wong Ka Che | $ | 10,228 | 11.51% | $ | – | |||||||
* for identification purpose only
These vendors are located in Hong Kong and China.
Gross Profit
We achieved a gross profit of $196,384 and $123,609 for the three months ended September 30, 2024 and 2023, respectively. The increase in gross profit is attributable to an increase in new business in rendering logistics and warehousing services.
Operating Expenses:
General and Administrative Expenses (“G&A”): General and administrative expenses of $573,438 and $57,737 for the three months ended September 30, 2024, and 2023, respectively. These expenses primarily include payroll, office operating cost, as well as professional fees.
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Nine Months Ended September 30, 2024 compared to Nine Months Ended September 30, 2023
The following table sets forth selected financial information from our statements of comprehensive income for the nine months ended September 30, 2024 and 2023:
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | 1,019,593 | $ | 406,607 | ||||
| Cost of revenues | (517,252 | ) | (181,675 | ) | ||||
| Gross profit | 502,341 | 224,932 | ||||||
| Operating expenses: | ||||||||
| General and administrative expenses | (732,377 | ) | (144,610 | ) | ||||
| Total operating expenses | (732,377 | ) | (144,610 | ) | ||||
| (Loss) income from operations | (230,036 | ) | 80,322 | |||||
| Other income | 1,597 | 420 | ||||||
| (Loss) income before income taxes | (228,439 | ) | 80,742 | |||||
| Income tax expense | (36,045 | ) | (19,887 | ) | ||||
| Net (loss) income | $ | (264,484 | ) | $ | 60,855 | |||
Revenues
The Company currently earns three types of income sources:
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Logistic service income | $ | 468,142 | $ | 34,541 | ||||
| Warehousing service income | 403,229 | – | ||||||
| Financial consulting income | 148,222 | 372,066 | ||||||
| $ | 1,019,593 | $ | 406,607 | |||||
Revenues from logistic solution services to the customers, in which such local transportation, delivery and packaging services are recognized at the time the merchandise is packed and shipped by the Company to domestic destinations designed by the customers. Generally, the Company bills the invoices monthly and collects the receivable in a credit term of 30 days.
Revenues generating from storage services are recognized ratably over the term of the contract or arrangement, as the Company performs contractual obligations through continuous transfer of control to the customers, and they could simultaneously receive and consume the benefits of the Company’s performance as it occurs. The Company generally invoices customers monthly at the end of each month in arrear for services performed during the month. The performance obligation is satisfied when the services are performed. Warehousing contracts typically consist of ongoing storage service in a term of 1-6 years, subject to renewal option.
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The Company also provides financial consulting services to the customers, and generally invoices customers when the performance obligation is satisfied. The duration of the service period is short, usually within 3 months. Transaction prices of financial consulting services to be rendered are typically based on contracted rates. The Company earns the fee arising from the facilitation of the placement of financing solutions among different credit institutions, which is recognized at a point in time when the service is completed and delivered to the customer.
Revenues of $1,019,593 for the nine months ended September 30, 2024, increased by $612,986 or 151% from $406,607 in the same period of 2023, which was mainly due to introduction of new business in rendering logistics and warehousing services. Revenues of $406,607 for the nine months ended September 30, 2023 consisted primarily financial consulting service.
For the nine months ended September 30, 2024 and 2023, the individual customers who accounted for 10% or more of the Company’s revenues and its outstanding receivable balances at period-end dates, are presented as follows:
| Nine months ended September 30, 2024 | September 30, 2024 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Pro King International Warehouse Limited | $ | 403,229 | 39.55% | $ | 45,045 | |||||||
| Furniture Station Limited | $ | 348,898 | 34.22% | $ | 91,501 | |||||||
| Nine months ended September 30, 2023 | September 30, 2023 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Time Credit Limited | $ | 101,935 | 25.07% | $ | 4,991 | |||||||
| Easy Funding Limited | $ | 172,911 | 42.53% | $ | 32,529 | |||||||
| Wings Finance Limited | $ | 46,898 | 11.53% | $ | 3,192 | |||||||
These customers are located in Hong Kong.
Cost of Revenues
Cost of revenues of $517,252 for the nine months ended September 30, 2024 consisted primarily of the direct wages, telemarketing service charges, depreciation and amortization of right of use assets. Cost of revenues increased by $335,577 from $181,675 in the same period of 2023 which was mainly due to the increase in direct operating cost in connection with logistics and warehousing services. Cost of revenues of $181,675 for the nine months ended September 30, 2023 consisted primarily of the associated costs in rendering the financial consulting service, such as, direct marketing costs.
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For the nine months ended September 30, 2024 and 2023, the individual vendors who accounted for 10% or more of the Company’s direct operating cost and its outstanding payable balances at period-end dates, are presented as follows:
| Nine months ended September 30, 2024 | September 30, 2024 | |||||||||||
| Vendor | Cost of revenues | Percentage cost of revenues | Accounts payable | |||||||||
| Ip Ming | $ | 57,909 | 11.20% | $ | – | |||||||
| Giant Winner Limited | $ | 134,793 | 26.06% | $ | – | |||||||
| Nine months ended September 30, 2023 | September 30, 2023 | |||||||||||
| Vendor | Cost of revenues | Percentage cost of revenues | Accounts payable | |||||||||
| 廣州萬基斯投資顧問有限公司 (Guangzhou MKS Investment Consulting Co., Limited*) | $ | 50,528 | 27.81% | $ | – | |||||||
| Wong Ka Che | $ | 38,933 | 21.43% | $ | – | |||||||
| My Sweetheart Company Limited | $ | 27,242 | 14.99% | $ | 27,245 | |||||||
* for identification purpose only
These vendors are located in Hong Kong and China.
Gross Profit
We achieved a gross profit of $502,341 and $224,932 for the nine months ended September 30, 2024 and 2023, respectively. The increase in gross profit is attributable to an increase in new business in rendering logistics and warehousing services.
Operating Expenses:
General and administrative expenses of $732,377 for the nine months ended September 30, 2024, increased by $587,767 or 406% from $144,610 in the same period of 2023, due to increase in consultancy fees and legal and professional fee related to the reverse merger transaction for the nine months ended September 30, 2024.
General and administrative expenses of $144,610 for the nine months ended September 30, 2023. These expenses primarily include payroll, office operating cost, as well as professional fees.
Income Tax Expense
We incurred income tax expense of $36,045 and $19,887 under Hong Kong tax regime during the nine months ended September 30, 2024 and 2023, respectively.
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Liquidity and Capital Resources
Working Capital
As of September 30, 2024, we had cash and cash equivalents of $159,992, account receivables of $210,761 and prepaid expenses and other current assets of $17,125.
As of December 31, 2023, we had cash and cash equivalents of $120,319, accounts receivable of $74,263 and prepaid expenses and other current assets of $1,537.
As of September 30, 2024 and December 31, 2023, we had working capital deficit of $8,235,536 and $1,748,299, respectively.
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 believe that our current cash and other sources of liquidity discussed below are adequate to support operations for at least the next 12 months.
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 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.
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.
Cash Flows
The following summarizes the key component of our cash flows for the nine months ended September 30, 2024 and 2023:
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash (used in) provided by operating activities | $ | (142,953 | ) | $ | 43,890 | |||
| Net cash used in investing activities | $ | (446,497 | ) | $ | (675,299 | ) | ||
| Net cash provided by financing activities | $ | 631,145 | $ | 609,824 | ||||
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Net Cash Used In Operating Activities
For the nine months ended September 30, 2024, net cash used in operating activities was $142,953, which consisted primarily of a net loss of $264,484, an increase of account receivables of $136,498, a decrease in account payables of $54,025, a decrease in construction payable of $261,372, an increase in prepaid expenses and other current assets of $13,597 and a decrease of lease liabilities of $125,961 offset by an increase in accrued liabilities and other payables of $471,225 , an increase in income tax payables of $36,045, and adjusted for non-cash items of depreciation for property and equipment of $55,658, amortization of right-of-use assets of $89,408 and interest expenses on lease liabilities of $60,648.
For the nine months ended September 30, 2023, net cash generated from operating activities was $43,890, which consisted primarily of a net income of $60,855, an increase in account payables of $27,245, an increase in accrued liabilities and other payables of $5,894 and an increase in income tax payable of $19,887 offset by an increase in account receivables of $100,150, an increase in prepaid expenses and other current assets of $1,532 and a decrease in lease liabilities of $3,064, and adjusted for non-cash items of depreciation for property and equipment of $5,442, amortization of right-of-use assets of $28,426 and interest expenses on lease liabilities of $887.
Net Cash Used In Investing Activities
Net cash used in investing activities of $446,497 and $674,412 for the nine months ended September 30, 2024 and 2023, respectively, represent the purchase of property and equipment during the period.
Net Cash Provided by Financing Activities
Net cash provided by financing activities of $631,145 and $609,824 for the nine months ended September 30, 2024 and 2023, respectively, represent the amount advance from the Company’s director.
All advances are repayable on demand and interest-free.
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, 2024.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates have not changed since December 31, 2023. 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 2023 Annual Report on Form 10-K.
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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.
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, 2024.
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 period ended September 30, 2024 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
During the period ended September
30, 2024, no director or officer
| 46 |
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 the Exhibits to the Registration Statement on Form 10 filed with the Securities and Exchange Commission on December 14, 2021. |
| (3) | Incorporated by reference to the Exhibits to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2024. |
| (4) | Incorporated by reference to the Exhibits to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 13, 2024. |
| (5) | Incorporated by reference to the Exhibits to the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 15, 2024. |
| (6) | Incorporated by reference to the Exhibit 99.1 to the Registration Statement on Form S-8 filed with the Securities and Exchange Commission on September 21, 2023. |
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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 12, 2024 | By: | /s/ Chan Sze Yu |
| Name: Chan Sze Yu | ||
| Title: Chief Executive Officer and Chief Financial Officer | ||
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