VIVC 10-Q
Vivic Corp. (VIVC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM
(Mark one)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission
file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities Registered Pursuant to Section 12(g) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each Exchange on which Registered | ||
| OTCQB |
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
| 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 7(a)(2)(B) ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: As of November 13, 2023, there were shares of the registrant’s common stock outstanding.
VIVIC CORP.
FORM 10-Q
September 30, 2023
INDEX
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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This report contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on forward-looking statements. Forward-looking statements include, among other things, statements relating to:
| ● | our goals and strategies; | |
| ● | our future business development, financial condition and results of operations; | |
| ● | our expectations regarding demand for, and market acceptance of, our products; | |
| ● | our expectations regarding keeping and strengthening our relationships with merchants, manufacturers and end-users; and | |
| ● | general economic and business conditions in the regions where we provide our services. |
Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report and the documents that we reference and filed as exhibits to the report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
Use of Certain Defined Terms
Except where the context otherwise requires and for the purposes of this report only:
the “Company,” “we,” “us,” and “our” refer to Vivic Corp. (“Vivic”) and its subsidiaries.
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
“Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;
“PRC,” “China,” and “Chinese,” refer to the People’s Republic of China (excluding Hong Kong and Taiwan);
“Renminbi” and “RMB” refer to the legal currency of China;
“Securities Act” refers to the Securities Act of 1933, as amended; and
“US dollars,” “dollars” and “$” refer to the legal currency of the United States.
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PART I - FINANCIAL INFORMATION
VIVIC CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Deposit and prepayments | ||||||||
| Inventory | ||||||||
| Due from related party | ||||||||
| Other receivables | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Total non-current assets | ||||||||
| Assets classified as held for sale | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities | ||||||||
| Accrued liabilities and other payables | $ | |||||||
| Deferred revenue | ||||||||
| Due to related parties | ||||||||
| Total current liabilities | ||||||||
| Non-Current liabilities | ||||||||
| SBA loan payable | ||||||||
| Long term loan | ||||||||
| Total non-current liabilities | ||||||||
| Liabilities directly associated with assets classified as held for sale | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, $ par value; shares authorized; shares issued and outstanding as of September 30, 2023 and December 31, 2022 | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
| - | - | |||||||
See accompanying notes to unaudited condensed consolidated financial statements
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VIVIC CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue, net | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on loan settlement | ( | ) | ||||||||||||||
| Total other income (expenses), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax provision | ||||||||||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net income (loss) for the period | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net loss attributable to noncontrolling interest arise from | ||||||||||||||||
| Continuing operations | ||||||||||||||||
| Discontinued operations | ( | ) | ( | ) | ||||||||||||
| Total net loss attributable to noncontrolling interest | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net income (loss) attributable to Vivic Corp. arising from | ||||||||||||||||
| Continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Discontinued operations | ( | ) | ( | ) | ||||||||||||
| Total net income (loss) attributable to Vivic Corp. | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Other comprehensive item | ||||||||||||||||
| Foreign currency translation gain (loss) | ( | ) | ( | ) | ||||||||||||
| COMPREHENSIVE INCOME (LOSS) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average common stock outstanding | ||||||||||||||||
| Basic and Diluted | ||||||||||||||||
| Net income (loss) from per share of common stock – Basic and Diluted | ) | ) | ||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements
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VIVIC CORP.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
(UNAUDITED)
| Preferred stock | Common stock | Additional | Accumulated other | Total stockholders’ | ||||||||||||||||||||||||||||
| No. of shares | Amount | No. of shares | Amount | paid-in capital | comprehensive income (loss) | Accumulated loss | equity (deficit) | |||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss for the period | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of March 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Shares issued for loan settlement | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | ||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income for the period | - | - | ||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
| Equity attributable to VIVIC Corp. stockholders | ||||||||||||||||||||||||||||||||||||
| Preferred stock | Common stock | Additional | Accumulated other | Total stockholders’ | ||||||||||||||||||||||||||||||||
| No. of shares | Amount | No. of shares | Amount | paid-in capital | comprehensive income (loss) | Accumulated loss | Noncontrolling interests | equity (deficit) | ||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Cancellation of shares | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Shares issued for loan settlement | - | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Acquisition of minority equity of a subsidiary | - | - | ( | ) | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements
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VIVIC CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expenses | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Deposit and prepayments | ( | ) | ( | ) | ||||
| Other receivables | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Deferred revenue | ||||||||
| Accrued liabilities and other payables | ( | ) | ||||||
| Net cash used in continuing operations | ( | ) | ( | ) | ||||
| Net cash (used in) provided by discontinued operations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of intangible assets | ( | ) | ||||||
| Cash from discontinued operation | ||||||||
| Net cash used in continuing operations | ( | ) | ||||||
| Net cash (used in) provided by discontinued operations | ( | ) | ||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of common and preferred stocks | ||||||||
| Due from / (to) related parties | ( | ) | ||||||
| Proceeds from loans | ||||||||
| Net cash provided by continuing operations | ||||||||
| Net cash provided by (used in) discontinued operations | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange gain (loss) on cash and cash equivalents | ( | ) | ||||||
| NET DECREASE IN CASH & CASH EQUIVALENTS | ( | ) | ( | ) | ||||
| CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD | ||||||||
| CASH & CASH EQUIVALENTS, END OF PERIOD | $ | $ | ||||||
| ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS: | ||||||||
| Cash and cash equivalents | ||||||||
| Cash and cash equivalents included in assets classified as held for sale | ||||||||
| $ | $ | |||||||
| Supplemental Cash Flows Information: | ||||||||
| Continuing operations: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| Discontinued operations: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Flows Information: | ||||||||
| Continuing operations: | ||||||||
| Common stock issued for loan settlement | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements
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VIVIC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE－ 1 ORGANIZATION AND BUSINESS BACKGROUND
VIVIC CORP. (the “Company” or “VIVC”) was established under the corporate laws of the State of Nevada on February 16, 2017. In December 2018, the Company expanded its business operations to include marine tourism. In addition, the Company entered into the businesses of constructing marinas and constructing yachts in mainland China under the brand “Monte Fino”. Monte Fino is a well-known brand owned by Taiwan Kha Shing Yacht Company, one of the leading yacht manufacturers in the world.
The Company also operates “Joy Wave”(享浪)，an online yacht rental and leisure service business in Guangzhou, China. In mainland China and Taiwan, primarily through the Internet, the Company provides third-party yacht and marine tourism services. This marine tourism involves visits to high quality coastal tourist attractions in Taiwan and China including Hainan, Guangdong, Xiamen, and Quanzhou. The field of marine tourism has expanded in recent years as the number of yachts that can be rented has been increased through yacht-sharing programs which make such opportunities available to more customers, though for limited time periods.
The Company also seeks to develop energy-saving yacht engines. It believes it has advanced technologies, that can enable it to produce engines that are 50% more efficient than those currently available. This energy-saving and innovative technology may be applied to new energy-saving engines for yachts. This innovative technology may bring favorable changes to the yachting industry and promote low-carbon tourism for global environmental protection.
On
January 3, 2021, the Company entered into a Joint Venture and Cooperation Agreement to invest in Shenzhen Ocean Way Yachts Services Co.,
Ltd and its subsidiaries. On March 22, 2022, the Company sold its shares of Ocean Way and its subsidiaries to a third-party for $
On July 26, 2022, Khashing Yachts Industry (Guangdong) Limited changed its name to Guangdong Weiguan Ship Tech Co., Ltd (“Weiguan Ship”).
On July 6, 2022, Zhejiang Jiaxu Yacht Company Limited changed its name to Wenzhou Jiaxu Yacht Company Limited (“Jiaxu”).
On
August 10, 2022, the noncontrolling shareholder surrendered its
The Company also has a branch in the Republic of China (“ROC” or “Taiwan”), Vivic Corp. Taiwan Branch (“Vivic Taiwan”). It is mainly engaged in yacht procurement, sales, and leasing services in Taiwan and other countries.
| 8 |
On
July 12, 2023, Vivic Corporation (Hong Kong) Co. Limited (“Vivic Hong Kong”), a wholly-owned subsidiary of the Company, entered
into a Stock Purchase Agreement with Yun-Kuang Kung (Mr. “Kung”, son of Shang-Chiai Kung, the Company’s principal shareholder,
President and Chief Executive Officer), pursuant to which Mr. Kung acquired all of the shares of Weiguan Ship. In consideration for its
interest in Weiguan Ship, the Company received RMB
Description of subsidiaries as of September 30, 2023
| Name | Place of incorporation and kind of legal entity | Principal activities and place of operation | Particulars of issued/ registered share capital | Effective interest held | ||||
| Vivic Corporation (Hong Kong) Co., Limited |
ordinary shares for HK$ |
|||||||
| Vivic Corp. Taiwan Branch | Registered:
TWD |
VIVC and its subsidiaries are hereinafter referred to as (the “Company”).
NOTE－ 2 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 presentation
These accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments, unless otherwise indicated) considered necessary for a fair presentation of the Company’s financial position at such date and the operating results and cash flows for such periods. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period. The interim unaudited condensed consolidated financial information should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, previously filed with the SEC on March 30, 2023.
● Use of estimates
Preparing these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods reported. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Such estimates may be subject to change as more current information becomes available. Actual results may differ from these estimates.
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● Principles of consolidation
The unaudited condensed consolidated financial statements include the financial statements of VIVC and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
● Cash and cash equivalents
Cash and cash equivalents consist primarily of cash in readily available checking and saving accounts. Cash equivalents consist of highly liquid investments that are readily convertible to cash and that mature within three months or less from the date of purchase. The carrying amounts approximate fair value due to the short maturities of these instruments.
● Accounts receivable
Accounts
receivable are recorded at the invoiced amount and do not bear interest and are due within contractual payment terms, generally 30 to
90 days from completion of service. Credit is extended based on evaluation of a customer’s financial condition, the customer’s
credit-worthiness and payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past
due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. Under the current expected
credit loss model, at the end of each period, the Company specifically evaluates each individual customer’s financial condition,
credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company considers
the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments.
For receivables that are past due or not being paid according to payment terms, appropriate actions are taken to collect the amounts
due, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all reasonable
means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet
credit exposure related to its customers. As of September 30, 2023 and December 31, 2022, the Company had
● Property, plant, and equipment
Property, plant, and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on a straight-line basis over the following expected useful lives from the date on which assets become fully operational and after taking into account their estimated residual values:
| Expected useful life | ||
| Service yacht | ||
| Motor vehicle | ||
| Office equipment |
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
● Intangible assets, net
Intangible
assets are stated at cost less accumulated amortization. Intangible assets represent the trademark registered in the PRC and purchased
software which are amortized on a straight-line basis over a useful life of
The
Company follows ASC Topic 350 in accounting for intangible assets, which requires impairment losses to be recorded when indicators of
impairment are present and the undiscounted cash flows estimated to be generated by the assets are less than the assets’ carrying
amounts. During the three and nine months ended September 30, 2023 and 2022 there were
| 10 |
● Deferred revenue
Deferred revenue represents advance payments made by a customer for goods and services the company will provide in the future. Due to its short-term nature, deferred revenue is usually satisfied within the 12 months.
● Revenue recognition
In accordance with Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”, the Company recognizes revenues when goods or services are transferred to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. In determining when and how revenues are recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contract with customer; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations, and (v) recognition of revenues when (or as) the Company satisfies each performance obligation. The Company derives revenues from processing, distribution, and sales of its products.
● Comprehensive income/(loss)
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display comprehensive income, its components, and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of stockholders’ equity 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.
● Income taxes
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
The Company is subject to tax in local and foreign jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by the relevant tax authorities.
● 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 statements of operations.
| 11 |
The reporting currency of the Company is the United States Dollar (“US$”) and the accompanying unaudited condensed consolidated financial statements have been expressed in US$. In addition, the Company and its subsidiaries operating in PRC, Taiwan and Hong Kong maintain their books and record in their local currency, Renminbi (“RMB”), New Taiwan Dollar (“TWD”) and Hong Kong dollars (“HK$”), each of which is a functional currency, being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets, and liabilities of the Company’s subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the year. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the unaudited condensed consolidated statements of changes in stockholder’s equity deficit.
Translation of amounts from RMB, TWD and HK$ into US$ has been made at the following exchange rates as of September 30, 2023 and December 31, 2022 and for the nine months ended September 30, 2023 and 2022.
| September 30, 2023 | September 30, 2022 | December 31, 2022 | ||||||||||
| Period/year-end RMB:US$ exchange rate | ||||||||||||
| Period/annual average RMB:US$ exchange rate | ||||||||||||
| Period/year-end HK$:US$ exchange rate | ||||||||||||
| Period/annual average HK$:US$ exchange rate | ||||||||||||
| Period/year-end TWD:US$ exchange rate | ||||||||||||
| Period/annual average TWD:US$ exchange rate | ||||||||||||
● Lease
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
The Company made the policy election to not separate lease and non-lease components. Each lease component and the related non-lease components are accounted for together as a single component.
● Noncontrolling interest
The Company accounts for noncontrolling interest in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total stockholders’ deficit on the condensed consolidated balance sheets and the net loss attributable to its noncontrolling interest be clearly identified and presented on the face of the unaudited condensed consolidated statements of operations and comprehensive loss.
The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average number of shares of common stock outstanding during the periods. Diluted loss per share of common stock is computed similar to basic loss per share of common stock except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock equivalents had been issued and if the additional common stock were dilutive.
| 12 |
● Related parties
Parties, which can be an entity or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
● Concentrations and credit risk
The Company’s principal financial instruments subject to potential concentration of credit risk are cash and cash equivalents, including amounts held in money market accounts. The Company places cash deposits with a federally insured financial institution. The Company maintains its cash at banks and financial institutions it considers to be of high credit quality; however, the Company’s domestic cash deposits may at times exceed the insured limit. Balances in excess of insured limitations may not be insured. The Company has not experienced losses on these accounts, and management believes that the Company is not exposed to significant risks on such accounts.
● Fair value of financial instruments
The carrying value of the Company’s financial instruments (excluding short-term bank borrowing and note payable): cash and cash equivalents, accounts receivable, prepayments and other receivables, accounts payable, income tax payable, amount due to a related party, other payables and accrued liabilities approximate at their fair values because of the short-term nature of these financial instruments.
Management believes, based on the current market prices or interest rates for similar debt instruments, the fair value of note payable approximate the carrying amount.
The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
| ● Level 1 : Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets; |
| ● Level 2 : Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and |
| ● Level 3 : Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. |
Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
● Value-Added Tax
Enterprises
or individuals who sell commodities, engage in repair and consultation services in the PRC are subject to a value added tax in accordance
with PRC Laws. The VAT standard rate had been
| 13 |
● Reclassification
Certain prior period accounts have been reclassified in conformity with current period’s presentation including reclassification of due to related party from other payables. These reclassifications had no impact on the reported results of operations and cash flows.
● Recent accounting pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by Accounting Standards Update 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Accounting Standards Update 2019-04 Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and Accounting Standards Update 2019-05, Targeted Transition Relief. For public entities, ASU 2016-13 and its amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company adopted this guidance effective January 1, 2023. The adoption did not have significant impact on the Company’s unaudited condensed consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The Company is currently evaluating the impact that ASU 2020-06 may have on its unaudited condensed consolidated financial statements and related disclosures.
NOTE － 3 DISCONTINUED OPERATIONS
On
July 12, 2023, Vivic Hong Kong, a wholly-owned subsidiary of the Company, entered into a Stock Purchase Agreement with Yun-Kuang Kung
(Mr. “Kung”) pursuant to which Mr. Kung acquired all of the shares of Weiguan Ship for RMB
| 14 |
There
were no material transactions for disposed group for the period from July 1, 2023 through July 12, 2023, and for the purpose of complying
with the Company’s monthly accounting cut-off date, the Company used June 30, 2023 as the date of disposal. The following table
summarizes the carrying value of the assets and liabilities of the disposed group at the closing date of disposal. The Company recorded
$
| As of June 30, 2023 | ||||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | |||
| Deposit and prepayments | ||||
| Inventory | ||||
| Other receivables | ||||
| Due from related parties | ||||
| Total current assets | ||||
| Non-current assets | ||||
| Property and equipment, net | ||||
| Construction in progress | ||||
| Operating lease right-of-use assets | ||||
| Total non-current assets | ||||
| Total assets | $ | |||
| LIABILITIES | ||||
| Current liabilities | ||||
| Accounts payable | $ | |||
| Other payables and accrued liabilities | ||||
| Deferred revenue | ||||
| Due to related parties including selling shareholders | ||||
| Income tax payable | ||||
| Operating lease liabilities-current | ||||
| Total current liabilities | ||||
| Operating lease liabilities-noncurrent | ||||
| Total non-current liabilities | ||||
| Total liabilities | $ | |||
The operations of Weiguan Ship and its subsidiaries are accounted for as discontinued operations in the accompanying consolidated financial statements for all periods presented. The following table presents the components of discontinued operations reported in the consolidated statements of operations:
For the three months, ended September 30, | For the nine months, ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue, Net | $ | $ | $ | $ | ||||||||||||
| Cost of Sales | ||||||||||||||||
| Gross Profit | ( | ) | ( | ) | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Other Income (Expense) | ||||||||||||||||
| Investment gain (loss) | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Interest income | ||||||||||||||||
| Other income (expenses) | ( | ) | ||||||||||||||
| Total Other Income (Expenses) | ( | ) | ||||||||||||||
| Loss Before Income Taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income Tax Expense | ||||||||||||||||
| Net Loss from Discontinued Operations | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| 15 |
NOTE－ 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 had $
The continuation of the Company as a going concern through the one year period from the date on which this report is filed is dependent upon continued financial support from its related parties or loans or investments by third parties. The Company is actively pursuing additional financing for its operations via potential loans and equity issuances. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain its operations.
Management has determined that the above conditions indicate that it may be probable that the Company would not be able to meet its obligations within one year after the date that this report is issued. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements contained in this report do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result if the Company is unable to continue as a going concern.
NOTE－5 DEPOSIT AND PREPAYMENTS
Deposit and prepayments consisted of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Prepayments | $ | $ | ||||||
| Prepaid service fee | ||||||||
| Total deposit and prepayments | $ | $ | ||||||
Prepayments mainly consisted of prepaid expenses to vendors. Prepaid service fee consisted of prepaid OTC listing fee and annual filling fee.
NOTE－ 6 PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Office equipment | $ | $ | ||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
| 16 |
Depreciation
expense for the three months ended September 30, 2023 and 2022 was $
Depreciation
expense for the nine months ended September 30, 2023 and 2022 was $
NOTE－ 7 INTANGIBLE ASSETS
Intangible assets consisted of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Software | $ | $ | ||||||
| Total intangible assets | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
Amortization
expense for the three months ended September 30, 2023 and 2022 was $
Amortization
expense for the nine months ended September 30, 2023 and 2022 was $
NOTE－ 8 INVENTORY
Inventory consisted of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Finished goods | $ | $ | ||||||
| Total inventory | ||||||||
| Less: inventory impairment | ||||||||
| Inventory, net | $ | $ | ||||||
NOTE－ 9 ACCRUED LIABILITIES AND OTHER PAYABLES
Accrued liabilities and other payables consisted of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Accrued penalty | $ | $ | ||||||
| Accrued salaries | ||||||||
| Accrued consulting fee | ||||||||
| Other payables | ||||||||
| Total accrued liabilities and other payable | $ | $ | ||||||
On
August 22, 2023, the Company was charged by the Securities and Exchange Commission with violating Rule 12b-25 by filing a Form 12b-25
“Notification of Late Filing” with respect to its Report on Form 10-Q for the quarter ended March 31, 2022, without including
sufficient detail under the circumstances presented as to why the Form 10-Q could not be timely filed. More specifically, the SEC alleged
that the delay was the result of an anticipated restatement of financial statements. Further, the Company failed to acknowledge in the
Form 12b-25 anticipated significant changes in its results of operations for the first quarter of 2022 as compared to the first quarter
of 2021 and to provide an explanation of the changes. Without admitting or denying the findings of the SEC, the Company agreed to a cease-and-desist
order that found that the Company filed one deficient Form NT and one untimely Form 8-K. In addition, the Company agreed to pay a fine
of $
| 17 |
The
Company recorded the $
Accrued liabilities and other payables are the expenses that will be settled in next twelve months.
NOTE－ 10 LOAN PAYABLE
On
March 13, 2023, Vivic Taiwan entered a loan agreement with a third-party individual. Vivic Taiwan borrowed TWD
On
May 18, 2023, Vivic Taiwan entered a loan agreement with Taiwan Hua Nan Bank. Vivic Taiwan borrowed TWD
NOTE－ 11 SBA LOAN PAYABLE
On
June 23, 2020, Vivic Corp. received an $
As of September 30, 2023, the future minimum EIDL loan payments for the Company to be paid by year are as follows:
| Year Ending September 30, | Amount | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
| 18 |
NOTE－ 12 STOCKHOLDERS’ DEFICIT
Authorized Shares
The Company is authorized to issue shares of preferred stock and shares of common stock each with a par value of $ per share.
Preferred Stock
As of September 30, 2023 and December 31, 2022, the Company had shares of its preferred stock issued and outstanding.
Common Stock
On
February 15, 2022, the Company issued shares of common stock to settle a debt in the amount of $
On March 22, 2022, the Company cancelled shares of common stock previously issued to its former CFO due to termination of employment.
On
May 26, 2023, the Company issued shares of common stock to settle a debt due to Yun-Kuang Kung in the amount of $
As of September 30, 2023 and December 31, 2022, the Company had and shares of its common stock issued and outstanding, respectively.
Basic net (loss) income per share is computed using the weighted average number of shares of common stock outstanding during the periods. The dilutive effect of potential common stock outstanding is included in diluted net (loss) income per share of common stock. The following table sets forth the computation of basic and diluted net loss per share for the three and nine months ended September 30, 2023 and 2022:
| Three months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net loss for basic and diluted attributable to Vivic Corp-continuing operations. | $ | ( | ) | $ | ( | ) | ||
| Net income (loss) for basic and diluted attributable to Vivic Corp-discontinued operations. | ( | ) | ||||||
| Weighted average common stock outstanding – Basic and Diluted | ||||||||
| Net loss per share of common stock – basic and diluted-continuing operations | ) | ) | ||||||
| Net income (loss) per share of common stock – basic and diluted-discontinued operations | $ | $ | ) | |||||
| Nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net loss for basic and diluted attributable to Vivic Corp.-continuing operations | $ | ( | ) | $ | ( | ) | ||
| Net income (loss) for basic and diluted attributable to Vivic Corp-discontinued operations | ( | ) | ||||||
| Weighted average common stock outstanding – Basic and Diluted | ||||||||
| Net loss per share of common stock – basic and diluted-continuing operations | ) | ) | ||||||
| Net income (loss) per share of common stock – basic and diluted-discontinued operations | $ | $ | ) | |||||
| 19 |
NOTE－ 14 RELATED PARTY TRANSACTIONS
a. Related parties
| Name of Related Party | Relationship to the Company | |
| Yun-Kuang Kung | Son of Shang-Chiai Kung CEO of Vivic Corp. | |
| Kung Huang Liu Shiang spouse | Spouse of Shang-Chiai Kung CEO of Vivic Corp. | |
| Yufei Zeng | Stockholder of Vivic Corp. | |
| Shang-Chiai Kung | CEO of Vivic Corp. | |
| Kun-Teng Liao | Secretary and Board Member | |
| Guangdong Weiguan Ship | Yun-Kuang Kung acquired 100% ownership of this entity from Vivic |
b. Due from related parties, net
Due from related parties consisted of the following:
| Name | September 30, 2023 | December 31, 2022 | ||||||
| Yun-Kuang Kung | $ | $ | ||||||
| Guangdong Weiguan Ship | ||||||||
| Total | $ | $ | ||||||
c. Due to related parties, net
Due to related parties consisted of the following:
| Name | September 30, 2023 | December 31, 2022 | ||||||
| Yun-Kuang Kung | $ | $ | ||||||
| Kung Huang Liu Shiang spouse | ||||||||
| Shang-Chiai Kung | ||||||||
| Kun-Teng Liao | ||||||||
| Total | $ | $ | ||||||
In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by officers, directors, or stockholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.
Due to related parties represented temporary advances to the Company by the stockholders or senior management of the Company, which were unsecured, interest-free and had no fixed terms of repayments. Imputed interests from related parties’ loan are not significant.
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.
NOTE－ 15 COMMITMENTS AND CONTINGENCIES
As
of September 30, 2023 and December 31, 2022, the Company has
NOTE－ 16 SUBSEQUENT EVENTS
The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the unaudited financial statements were issued and determined the Company had no major subsequent event need to be disclosed.
| 20 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited financial statements and the notes to those statements included elsewhere in this Form 10-Q and with the audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s commercially reasonable judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events. You should specifically consider the various risk factors identified in our 2022 Form 10-K, that could cause actual results to differ materially from those anticipated in these forward-looking statements.
Overview
VIVIC CORP. (“VIVC”) was incorporated in the State of Nevada on February 16, 2017. In December 2018, we expanded our business operations to include marine tourism. In addition, we started making efforts to enter the businesses of constructing marinas and constructing yachts in mainland China under the brand “Monte Fino”. Monte Fino is a famous yacht brand owned by Taiwan Kha Shing Yacht Company, one of the leading yacht manufacturers in the world.
We also developed and operate “Joy Wave”, an online yacht rental and leisure service business in Guangzhou, China. We provide third-party yacht and marine tourism services in mainland China and Taiwan primarily offering our services through the Internet. The tourism packages we provide are focused on providing high quality coastal voyages to leading vacation and tourism destinations in Taiwan and China including Hainan, Guangdong, Xiamen, and Quanzhou. In the field of marine tourism, the number of yachts that can be rented has been increased through yacht-sharing programs which make yachts available to more customers though for limited time periods.
We also initiated efforts to develop energy-saving yacht engines. We believe that our advanced technologies will enable us to produce engines that are 50% more energy efficient than those generally available today. This energy-saving and innovative technology may be applied to new energy-saving engines for yachts. This innovative technology may bring favorable changes to the yachting industry and promote low-carbon tourism for global environmental protection.
Results of Operations
On July 12, 2023, our subsidiary, Vivic Corporation (Hong Kong) Co. Limited (“Vivic Hong Kong”), entered into a Stock Purchase Agreement with Yun-Kuang Kung (Mr. “Kung”) pursuant to which Mr. Kung acquired all of the shares of our indirectly wholly-owned subsidiary, Guangdong Weiguan Ship Tech Co., Ltd. (“Weiguan Ship”). In consideration for our interest in Weiguan Ship, we received RMB 1,000 ($137) and the agreement of Mr. Kung to indemnify the Company and its affiliates and hold them harmless from, against and in respect of any and all claims arising out of or related to the business of Weiguan Ship whether arising before or after the date of the Stock Purchase Agreement, whether currently known or unknown, including, without limitation any claims for taxes. The divestiture of Weiguan Ship is part of our plan to concentrate primarily on our business in Taiwan.
Our unaudited condensed consolidated financial statements contained in this report have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
As a result of the sale of our interest in Weiguan Ship and its subsidiaries, the assets and related liabilities and the results of operations of such entities are included in the financial statements included in this report as discontinued operations. The following table sets forth the results of our operations for the periods indicated as a percentage of net sales. Certain columns may not add due to rounding.
| 21 |
Comparison of continuing operations for the three months ended September 30, 2023 and 2022
| Dollar | Percent | |||||||||||||||||||||||
| 2023 | % of sales | 2022 | % of sales | Increase (Decrease) | Increase (Decrease) | |||||||||||||||||||
| Revenue, net | $ | 791,043 | 100.00 | % | $ | - | - | % | $ | 791,043 | - | % | ||||||||||||
| Cost of revenue | 699,217 | 88.39 | % | - | - | % | 699,217 | - | % | |||||||||||||||
| Gross profit | 91,826 | 11.61 | % | - | - | % | 91,826 | - | % | |||||||||||||||
| General and administrative expenses | 105,234 | 13.30 | % | 51,092 | - | % | 54,142 | 105.97 | % | |||||||||||||||
| Total operating expenses | 105,234 | 13.30 | % | 51,092 | - | % | 54,142 | 105.97 | % | |||||||||||||||
| Loss from operations | (13,408 | ) | (1.69 | )% | (51,092 | ) | - | % | (37,684 | ) | (73.76 | )% | ||||||||||||
| Other expenses, net | (6,652 | ) | (0.84 | )% | (582 | ) | - | % | 6,070 | 1,042.96 | % | |||||||||||||
| Loss before income taxes | (20,060 | ) | (2.54 | )% | (51,674 | ) | - | % | (31,614 | ) | (61.18 | )% | ||||||||||||
| Income tax expense | - | - | % | - | - | % | - | - | % | |||||||||||||||
| Net loss from continuing operations | (20,060 | ) | (2.54 | )% | (51,674 | ) | - | % | (31,614 | ) | (61.18 | )% | ||||||||||||
| Net income (loss) from discontinued operations | 1,859,207 | 235.03 | % | (236,639 | ) | - | % | 2,095,846 | 885.67 | % | ||||||||||||||
| Net income (loss) for the period | 1,839,147 | 232.50 | % | (288,313 | ) | - | % | 2,127,460 | 737.90 | % | ||||||||||||||
| Net loss attributable to noncontrolling interest arising from | ||||||||||||||||||||||||
| Continuing operations | - | - | % | - | - | % | - | - | % | |||||||||||||||
| Discontinued operations | - | - | % | (3,312 | ) | - | % | 3,312 | (100.00 | )% | ||||||||||||||
| Net income (loss) attributable to Vivic Corp. arising from | ||||||||||||||||||||||||
| Continuing operations | (20,060 | ) | (2.54 | )% | (51,674 | ) | - | % | (31,614 | ) | (61.18 | )% | ||||||||||||
| Discontinued operations | 1,859,207 | 235.03 | % | (233,327 | ) | - | % | 2,092,534 | 896.82 | % | ||||||||||||||
| Total net income (loss) attributable to Vivic Corp. | $ | 1,839,147 | 232.50 | % | $ | (285,001 | ) | - | % | $ | 2,124,148 | 745.31 | % | |||||||||||
Revenue
Revenue from continuing operations was $791,043 for the three months ended September 30, 2023, representing an increase of $791,043 from the three months ended September 30, 2022, in which there was no revenue. The increase was mainly due to the inception of sales in our Taiwan branch, reflecting our plan to concentrate primarily on our business in Taiwan.
Cost of revenue
Cost of revenue from continuing operations was $699,217 for the three months ended September 30, 2023, an increase of $699,217, from the three months ended September 30, 2022, in which there were no revenues or cost of revenues. The increase was mainly due to the inception of sales in our Taiwan branch.
Gross profit
Gross profit from continuing operations was $91,826 for the three months ended September 30, 2023, an increase of $91,826, from gross profit in the three months ended September 30, 2022, when there were no sales. The increase was mainly due to the inception of sales that are generated in our Taiwan branch.
Operating expenses
General and administrative expenses from continuing operations were $105,234 for the three months ended September 30, 2023, compared to $51,092 for the three months ended September 30, 2022, an increase of $54,142 or 105.97%. The increase was mainly due to an increase in management service fees of $15,000, an increase in staffing fees of $36,046, an increase in professional fee of $42,978 and increase in other expense of $32,562 which was partly offset by decreased consulting expenses of $67,000 decreased social security insurance expenses of $3,801 and decreased subscription fee of $3,554.
Other expenses, net
Net other expense from continuing operations was $6,652 for the three months ended September 30, 2023, and net other expense from continuing operations was $582 for the three months ended September 30, 2022, respectively. For the three months ended September 30, 2023, the net other expense mainly consisted of interest expense of $6,271, and other expense of $381. For the three months ended September 30, 2022, the net other income mainly consisted of interest expense of $444, and other expense of $138.
Net income (loss) from discontinued operations
We had net income from discontinued operations of $1,859,207 for the three months ended September 30, 2023, compared to a net loss of $233,327 for the three months ended September 30, 2022, the net income from discontinued operations was mainly the gain on disposal of Weiguan Ship.
Net loss from continuing operations
We had a net loss from continuing operations of $20,060 for the three months ended September 30, 2023, compared to a net loss of $51,674 for the three months ended September 30, 2022, a decrease of $31,614 or 61.18%, for the reasons explained above.
| 22 |
Comparison of continuing operations for the nine months ended September 30, 2023 and 2022
| Dollar | Percent | |||||||||||||||||||||||
| 2023 | % of sales | 2022 | % of sales | Increase (Decrease) | Increase (Decrease) | |||||||||||||||||||
| Revenue, net | $ | 791,043 | 100.00 | % | $ | - | - | % | $ | 791,043 | - | % | ||||||||||||
| Cost of revenue | 699,217 | 88.39 | % | - | - | % | 699,217 | - | % | |||||||||||||||
| Gross profit | 91,826 | 11.61 | % | - | - | % | 91,826 | - | % | |||||||||||||||
| General and administrative expenses | 257,668 | 32.57 | % | 107,689 | - | % | 149,979 | 139.27 | % | |||||||||||||||
| Total operating expenses | 257,668 | 32.57 | % | 107,689 | - | % | 149,979 | 139.27 | % | |||||||||||||||
| Loss from operations | (165,842 | ) | (20.96 | )% | (107,689 | ) | - | % | 58,153 | 54 | % | |||||||||||||
| Other expenses, net | (42,499 | ) | (5.37 | )% | (9,380 | ) | - | % | 33,119 | 353.08 | % | |||||||||||||
| Loss before income taxes | (208,341 | ) | (26.34 | )% | (117,069 | ) | - | % | 91,272 | 77.96 | % | |||||||||||||
| Income tax expense | - | % | 9 | - | % | (9 | ) | (100.00 | )% | |||||||||||||||
| Net loss from continuing operations | (208,341 | ) | (26.34 | )% | (117,078 | ) | - | % | 91,263 | 77.95 | % | |||||||||||||
| Net income (loss) from discontinued operations | 1,746,302 | 220.76 | % | (679,380 | ) | - | % | 2,425,682 | (357.04 | )% | ||||||||||||||
| Net income (loss) for the period | 1,537,961 | 194.42 | % | (796,458 | ) | - | % | 2,334,419 | 293.10 | % | ||||||||||||||
| Net loss attributable to noncontrolling interest arise from | ||||||||||||||||||||||||
| Continuing operations | - | - | % | - | - | % | - | - | % | |||||||||||||||
| Discontinued operations | - | - | % | (37,870 | ) | - | % | (37,870 | ) | (100.00 | )% | |||||||||||||
| Net income (loss) attributable to Vivic Corp. arise from | - | 0.00 | % | (37,870 | ) | - | % | (37,870 | ) | (100.00 | )% | |||||||||||||
| Continuing operations | (208,341 | ) | (26.34 | )% | (117,078 | ) | - | % | 91,263 | 77.95 | % | |||||||||||||
| Discontinued operations | 1,746,302 | 220.76 | % | (641,510 | ) | - | % | 2,387,812 | 372.22 | % | ||||||||||||||
| Total net income (loss) attributable to Vivic Corp. | 1,537,961 | 194.42 | % | (758,588 | ) | - | % | 2,296,549 | 302.74 | % | ||||||||||||||
Revenue
Revenue from continuing operations was $791,043 for the nine months ended September 30, 2023, representing an increase of $791,043 from the nine months ended September 30, 2022, in which there was no revenue. The increase was mainly due to the inception of sales in our Taiwan branch.
Cost of revenue
Cost of revenue from continuing operations was $699,217 for the nine months ended September 30, 2023, an increase of $699,217 from the nine months ended September 30, 2022, in which there were no revenues or cost of revenues. The increase was mainly due to the inception of sales in our Taiwan branch.
Gross profit
Gross profit from continuing operations was $91,826 for the nine months ended September 30, 2023, an increase of $91,826, from gross profit in the nine months ended September 30, 2022, when there were no sales. The increase was mainly due to the inception of sales in our Taiwan branch.
Operating expenses
General and administrative expenses from continuing operations were $257,668 for the nine months ended September 30, 2023, compared to $107,689 for the nine months ended September 30, 2022, an increase of $149,979 or 139.27%. The increase was mainly due to an increase in staffing fees of $114,311, an increase in professional expenses of $65,227, increased management service fees of $45,000, increased travel expense of $2,664 and increased other expenses of $32,224, which were partly offset by decreased consulting expenses of $83,300, decreased subscription fee of $12,590, and decreased payroll expense of $14,349.
Other expenses, net
Net other expense from continuing operations was $42,499 for the nine months ended September 30, 2023, and net other expenses from continuing operations was $9,380 for the nine months ended September 30, 2022, respectively. For the nine months ended September 30, 2023, the net other expense mainly consisted of interest expense of $13,197, and other expenses of $29,302. For the nine months ended September 30, 2022, the net other expense mainly consisted of interest expense of $7,007, and other expense of $2,373.
Net income (loss) from discontinued operations
We had net income from discontinued operations of $1,746,302 for the nine months ended September 30, 2023, compared to net loss of 679,380 for the nine months ended September 30, 2022. For the nine months ended September 30, 2023, we had a gain on disposal of Weiguan Ship of $1,859,207, and a loss from the operations of Weiguan Ship, up to the date of disposal.
Net loss from continuing operations
We had a net loss from continuing operations of $208,341 for the nine months ended September 30, 2023, compared to $117,078 for the nine months ended September 30, 2022, an increase of $91,263 or 77.95%, for the reasons explained above.
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LIQUIDITY AND GOING CONCERN
We had $71,583 of cash and cash equivalents and working capital of $2,211,296 as of September 30, 2023, and incurred a net loss from continuing operations of $20,060 and $208,341 during the three and nine months ended September 30, 2023, respectively. The following is a summary of cash provided by or used in each of the indicated types of activities during the nine months ended September 30, 2023, and 2022.
| 2023 | 2022 | |||||||
| Net cash used in operating activities for continuing operations | $ | (134,315 | ) | $ | (154,957 | ) | ||
| Net cash (used in) provided by operating activities for discontinued operations | (235,558 | ) | 82,318 | |||||
| Net cash provided by (used in) operating activities | (369,873 | ) | (72,639 | ) | ||||
| Net cash used in investing activities for continuing operations | 32,185 | (7,236 | ) | |||||
| Net cash (used in) provided by investing activities for discontinued operations | (75,967 | ) | 65,759 | |||||
| Net cash (used in) provided by investing activities | (43,782 | ) | 58,523 | |||||
| Net cash provided by financing activities for continuing operations | 134,598 | 100,585 | ||||||
| Net cash provided by (used in) financing activities for discontinued operations | 282,419 | (161,813 | ) | |||||
| Net cash used in financing activities | $ | 417,017 | $ | (61,228 | ) | |||
Net cash from continuing operations used in or provided by operating activities
The net cash used in operating activities from continuing operations was $134,135 for the nine months ended September 30, 2023, compared to net cash used in operating activities from continuing operations of $154,957 for the nine months ended September 30, 2022. The decrease in cash outflow from operating activities for the nine months ended September 30, 2023 was principally attributable to an increase in cash inflow from deferred revenue of $997,298, which was mainly customer deposits for sales orders received in our Taiwan branch, which was partly offset by increased cash outflows from deposits and prepayments of $738,475, increased cash outflows from inventory of $129,201, and increased cash outflows from other receivables of $104,788.
Net cash from continuing operations used in or provided by investing activities
Net cash provided by investing activities for continuing operations was $32,185 for the nine months ended September 30, 2023, compared to net cash used in investing activities for continuing operations of $7,236 for the nine months ended September 30, 2022. The net cash provided by investing activities for continuing operations for the nine months ended September 30, 2023, consisted of cash from discontinued operations of $32,185. The net cash used in investing activities for continuing operations for the nine months ended September 30, 2022, consisted of the purchase of office equipment for $7,236.
Net cash from continuing operations provided by or used in financing activities
The net cash provided by financing activities from continuing operations was $134,598 for the nine months ended September 30, 2023, compared to net cash provided by financing activities from continuing operations of $100,585 for nine months ended September 30, 2022. The net cash provided by financing activities from continuing operations for the nine months ended September 30, 2023, consisted of proceeds from loans of $549,100, partly offset by changes in amounts due to related parties of $414,502. The net cash provided by financing activities from continuing operations for the nine months ended September 30, 2022, consisted of proceeds from issuance of shares of $50,000 and proceeds from changes in amounts due related parties of $50,585.
Going Concern
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 had $71,583 cash and cash equivalents available for the Company’s continuing operations and working capital of $2,211,296 as of September 30, 2023 and incurred a net loss of $208,341 from continuing operations during the nine months ended September 30, 2023.
The continuation of the Company as a going concern through the one-year anniversary of the date of this filing is dependent upon the continued financial support from its related parties and loans or investments from third parties. The Company is actively pursuing additional financing for its operations through loans and the sale of equity. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain its operations.
Management has determined that the above conditions indicate that it may be probable that the Company would not be able to meet its obligations within one year after the date of issuance of this report. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements included in this report 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.
PLAN OF OPERATION AND FUNDING
We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities to our principal shareholders. Our working capital requirements are expected to increase in line with the growth of our business.
Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. We have no lines of credit or other bank financing arrangements apart from amounts outstanding under our SBA Loan and our loan with Taiwan Hua Nan Bank. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments to our principal shareholders. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with our business and (ii) marketing expenses. We intend to finance these expenses with further issuances of equity securities and debt instruments. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current stockholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
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MATERIAL COMMITMENTS
As of the date of this report, we do not have any material commitments.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Annual Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
SIGNIFICANT ACCOUNTING POLICIES
Our unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions which affect the reported the amounts of assets, liabilities, revenue, costs and expenses and related disclosures. Accounting policies are critical and necessary to account for the material estimates and assumptions on our unaudited condensed consolidated financial statements. For further information on all of our significant accounting policies, see the “Notes to Unaudited Condensed Consolidated Financial Statements” of this Annual Report.
● Revenue recognition
In accordance with ASC Topic 606, “Revenue from Contracts with Customers”, the Company recognizes revenues when goods or services are transferred to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. In determining when and how revenues are recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contract with customer; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations, and (v) recognition of revenues when (or as) the Company satisfies each performance obligation. The Company derives revenues from the processing, distribution, and sale of its products.
● Net loss per share
The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
● Recent accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The Company is currently evaluating the impact that ASU 2020-06 may have on its CFS and related disclosures.
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Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Management of our Company is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.
At September 30, 2023, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act was carried out under the supervision and with the participation of our Chief Executive Officer who is also our Chief Financial Officer. Based on his evaluation of our disclosure controls and procedures, he concluded that at September 30, 2023, such disclosure controls and procedures were not effective. This was due to our limited resources, including the absence of a financial staff with accounting and financial expertise and deficiencies in the design or operation of our internal control over financial reporting that adversely affected our disclosure controls and that may be considered to be “material weaknesses.”
We plan as our business develops, to designate individuals responsible for identifying reportable developments and to implement procedures designed to remediate the material weakness by focusing additional attention and resources in our internal accounting functions. However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter which is the subject of this report 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
On August 22, 2023, the Company was charged by the Securities and Exchange Commission with violating Rule 12b-25 by filing a Form 12b-25 “Notification of Late Filing” with respect to its Report on Form 10-Q for the quarter ended March 31, 2022, for not including sufficient detail under the circumstances presented as to why the Form 10-Q could not be timely filed. More specifically, the SEC alleged that the delay was the result of an anticipated restatement of financial statements. Further, the Company failed to acknowledge in the Form 12b-25 anticipated significant changes in its results of operations for the first quarter of 2022 as compared to the first quarter of 2021 and to provide an explanation of the changes.
Without admitting or denying the findings of the SEC, the Company agreed to a cease-and-desist order that found that the Company filed one deficient Form NT and one untimely Form 8-K. In addition, the Company agreed to pay a fine of $60,000.
Item 1A. Risk Factors
Reference is made to the risks and uncertainties disclosed in Item 1A (“Risk Factors”) of our 2022 Form 10-K, which are incorporated by reference into this report. Prospective investors are encouraged to consider the risks described in the 2022 Form 10-K, Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report and other information publicly disclosed or contained in documents we file with the Securities and Exchange Commission before purchasing our securities.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter ended September 30, 2023, we did not have any sales of equity securities in transactions that were not registered under the Securities Act of 1933, as amended, that have not been previously reported in a report filed pursuant to the Exchange Act.
Item 3. Defaults Upon Senior Securities
None.
Item 5. Other Information
None
Item 6. Exhibits
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SIGNATURES
Pursuant to the requirements of section 13 or 15(d) 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.
| VIVIC CORP. | ||
| Dated: November 14, 2023 | By: | /s/ Shang-Chiai Kung |
| Shang-Chiai Kung | ||
| President and Chief Executive Officer | ||
(Principal Executive Officer and Principal Accounting Officer) | ||
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