UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from ___________ to _____________
Commission
File Number
(Exact name of registrant as specified in its charter)
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| of incorporation or organization) | Identification No.) | |
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $0.00001 PAR VALUE
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
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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
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Indicate
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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 | ||
| (Do not check if 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
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As of June 30, 2023, there were shares of the registrant’s common stock, $0.001 par value per share, issued and outstanding.
VIDEO RIVER NETWORKS, INC.
TABLE OF CONTENTS
| 2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
| 3 |
VIDEO RIVER NETWORKS INC
CONSOLIDATED BALANCE SHEETS
| June 30, 2023 | December 31, 2022 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investments - trading securities | ||||||||
| Total Current Assets | ||||||||
| Accrued Interest Receivable | $ | $ | ||||||
| Investments - unrelated parties | ||||||||
| Fixed assets - net | ||||||||
| Notes Receivable Entrepreneurship Development | ||||||||
| Long term Notes Receivable - related parties | ||||||||
| Long term Investments - related parties | ||||||||
| Total assets | $ | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accrued expenses | $ | |||||||
| Total Current Liabilities | $ | $ | ||||||
| Long-Term Liabilities: | ||||||||
| Notes payable - net of current portion | $ | $ | ||||||
| Total Long-Term Liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, $ par value, shares authorized, issued and outstanding as at June 30, 2023 and December 31, 2022 respectively. | $ | $ | ||||||
| Common Stock, $ par value, shares authorized, issued and outstanding as at June 30, 2023 and December 31, 2022 respectively. | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | $ | $ | ||||||
| Total Liabilities and Stockholders’ Equity | ||||||||
The accompanying notes to unaudited condensed consolidated financial statements
| 4 |
VIDEO RIVER NETWORKS INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue: | ||||||||||||||||
| EDI Interest Income | $ | |||||||||||||||
| Entrepreneurship Development Initiative | $ | |||||||||||||||
| Sales of investment under property | ||||||||||||||||
| Principal transations - Net | ( | ) | $ | ( | ) | ( | ) | ( | ) | |||||||
| Total Revenue | $ | |||||||||||||||
| Cost of goods sold: | ||||||||||||||||
| Entrepreneurship Development | ||||||||||||||||
| Total cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Advertising and promotions | ||||||||||||||||
| Business Licenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ||||||||||||||||
| Other Income | ||||||||||||||||
| Dividends | ||||||||||||||||
| Unrealized gain (loss) | ||||||||||||||||
| Net Income | ||||||||||||||||
| Earnings (loss) per Share: Basic and Diluted | $ | $ | $ | $ | ||||||||||||
| Weighted Average Common Shares Outstanding: Basic and Diluted | ||||||||||||||||
The accompanying notes to unaudited condensed consolidated financial statements
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VIDEO RIVER NETWORKS INC
STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
Period Ended June 30, 2023
(Unaudited)
| Additional | ||||||||||||||||||||
| Common | Paid-In | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance at December 31, 2006 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance at December 31, 2018 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of common stock to employee | ||||||||||||||||||||
| Cumulative Restructuring adjustment | - | ( | ) | ( | ) | |||||||||||||||
| Net income for the period | ||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Issuance of common stock | ||||||||||||||||||||
| Acquisition of business | - | ( | ) | |||||||||||||||||
| Net income for the period | ( | ) | ( | ) | ||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| - | - | - | - | |||||||||||||||||
| Acquisition & Dispositions | - | |||||||||||||||||||
| Net income for the period | ||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of common stock | ( | ) | ||||||||||||||||||
| Acquisition & Dispositions | - | ( | ) | ( | ) | |||||||||||||||
| Net income for the period | ||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income for the period | ||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes to unaudited condensed consolidated financial statements
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VIDEO RIVER NETWORKS INC
STATEMENTS OF CASHFLOWS
(Unaudited)
| Period Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Income (Loss) | $ | $ | ||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Inventory Asset:Trading Securities | ||||||||
| Other Accrued Liabilites | ( | ) | ( | ) | ||||
| Depreciation | ||||||||
| Net cash provided by (used in) operating activities | ||||||||
| Net Cash Flows from Investing Activities: | ||||||||
| Crypto and Digital Assets | ( | ) | ||||||
| Long term Investments | ( | ) | ||||||
| Entrepreneurship Development | ||||||||
| Net cash provided by (used in) investing activities | ||||||||
| Net Cash Flows from Financing Activities | ||||||||
| Borrowing from brokerage loan - margin loan | ||||||||
| Notes payable - related party | ||||||||
| Notes payable - Entrepreneurship Development | ( | ) | ( | ) | ||||
| Mortgage payable/receivable | ( | ) | ||||||
| Notes payable - Long Term | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash: | ( | ) | ( | ) | ||||
| Cash at the beginning of the period: | ||||||||
| Cash at the end of the period: | $ | $ | ||||||
| Supplemental disclosures of cash flow information Cash paid during the period for: | ||||||||
| Cash paid for interest, tax, others. | $ | $ | ||||||
The accompanying notes to unaudited condensed consolidated financial statements
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VIDEO RIVER NETWORKS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1. NATURE OF OPERATIONS
The Company and Nature of Business
Video River Networks, Inc. (the “Company”) is a technology firm that operates and manages a portfolio of Electric Vehicles, Artificial Intelligence, Machine Learning and Robotics (“EV-AI-ML-R”) assets, businesses and operations in North America. The Company’s current and target portfolio businesses and assets include operations that design, develop, manufacture and sell high-performance fully electric vehicles and design, manufacture, install and sell Power Controls, Battery Technology, Wireless Technology, and Residential utility meters and remote, mission-critical devices mostly engineered through Artificial Intelligence, Machine Learning and Robotic technologies.
Our current technology-focused business model was a result of our board resolution on September 15, 2020 to spin-in our specialty real estate holding business to an operating subsidiary and then pivot back to being a technology company. The Company has now returned back to its original technology-focused businesses of Power Controls, Battery Technology, Wireless Technology, and Residential utility meters and remote, mission-critical devices. In addition to above list, the Company intends to spread its wings into the Electric Vehicles, Artificial Intelligence, Machine Learning and Robotics (“EV-AI-ML-R”) businesses/markets, targeting acquisition, ownership and operation of acquired EV-AI-ML-R businesses or portfolio of EV-AI-ML-R businesses.
Video River Networks, Inc., prior to September 15, 2020, used to be a specialty real estate holding company, focuses on the acquisition, ownership, and management of specialized industrial properties. Prior to its real estate business model, the Company’s Power Controls Division has used wireless technology to control both residential utility meters and remote, mission-critical devices since 2002.
The
current management of the Company resulted from a purchase of voting control of the Company by Community Economic Development Capital
LLC, (“CED Capital”) a California limited liability company. After the change of control transaction, CED Capital spun out
the control-stock to its sole unitholder before being sold to the Company for $
As
previously disclosed on our Form 8-K filed with the Securities and Exchange Commission, on December 8, 2019,
On
September 15, 2020, Video River Networks, Inc. (the “Company”) entered into a stock purchase agreement with Kid Castle Educational
Corporation (“Kid Castle”), an entity related to, and controlled by our President and CEO with respect to the purchase through
private placement, of shares of its preferred stock at a purchase price of $
On
April 21, 2021, the Company sold Cannabinoid Biosciences, Inc. (“CBDX”), a California corporation, to Premier Information
Management, Inc. for $
On
December 30, 2021,
| 8 |
The consolidated financial statements of the Company therefore include Video River Networks, Inc. and subsidiaries of its subsidiary, Alpharidge Capital, LLC (“Alpharidge”), and subsidiaries, in which it has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”), after elimination of intercompany transactions and accounts.
Following the completion of the transaction with Kid Castle, the Company having been partly freed of the internally-managed real estate holding business that focused on the acquisition, ownership and management of specialized industrial properties, affordable housing and opportunity zone real estate properties and businesses, has decided to return back to its original technology-focused businesses of Power Controls, Battery Technology, Wireless Technology, and Residential utility meters and remote, mission-critical devices. In addition to above list, the Company is spreading its wings into the Electric Vehicles, Artificial Intelligence, Machine Learning and Robotics (“EV-AI-ML-R”) businesses/markets, targeting acquisition, ownership, and operation of acquired EV-AI-ML-R businesses or portfolio of EV-AI-ML-R businesses.
The consolidated financial statements of the Company therefore include Video River Networks, Inc., whose main operating subsidiary Alpharidge Capital, LLC (“Alpharidge”), and subsidiaries, in which the Company has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”), after elimination of intercompany transactions and accounts.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries, in which the Company has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”). Inter-company balances and transactions have been eliminated upon consolidation.
ASC 810 requires that the investor with the controlling financial interest should consolidate the investee/affiliate. ASC 810-10 requires that an equity interest investor consolidates a VIE when it retains an investment in the entity, is considered a variable interest investor in the entity, and is the primary beneficiary of the entity. An investor in a VIE is a “variable interest beneficiary” when, per an arrangement’s governing documents, the investor will absorb a portion of the VIE’s expected losses or will receive a portion of the entity’s “residual returns.” The variable interest beneficiary retaining a controlling financial interest in the VIE is designated as its “primary beneficiary” and must consolidate the VIE. A variable interest beneficiary retains a “controlling financial interest” in a VIE when that beneficiary retains the power to direct the activities of the VIE that have the greatest influence over the VIE’s economic performance and retains an obligation to absorb the VIE’s significant losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the ASC 810 test above, Video River Networks Inc. is the primary beneficiary of Video River Networks, Inc. (the “VIE”) because Video River Networks retained a controlling financial interest in the VIE and has the power to direct the activities of the VIE, having the greatest influence over the VIE’s economic performance and retains an obligation to absorb the VIE’s significant losses and the right to determine and receive benefits from the VIE.
| 9 |
NOTE 2. GOING CONCERN
Our
financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. For the period
ended June 30, 2023, we reported revenue of $
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
A summary of significant accounting policies is presented to assist in the understanding of the financial statements. These policies conform to accounting principles generally accepted in the United States of America and have been consistently applied. The Company has elected a calendar year of December 31 year-end.
Principles of Consolidation
The
consolidated financial statements include the accounts of the Company, its subsidiaries, in which the Company has a controlling voting
interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation”
(“ASC 810”). The consolidated financial statements include the Company and Video River Networks, Inc., and all its controlled
subsidiary companies. All significant intercompany accounts and transactions have been eliminated. Investments in business entities in
which we do not have control, but we could exercise significant influence over operating and financial policies (generally 20% to 50%
ownership) are accounted for using the equity method of accounting. Operating results of acquired businesses are included in the Consolidated
Statements of Income from the date of acquisition.
COVID-19 Risks, Impacts and Uncertainties
COVID-19 Risks, Impacts and Uncertainties — We are subject to the risks arising from COVID-19’s impact on the residential real estate industry. Our management believes that these impacts, which include but are not limited to the following, could have a significant negative effect on our future financial position, results of operations, and cash flows: (i) prohibitions or limitations on in-person activities associated with residential real estate transactions; (ii) lack of consumer desire for in-person interactions and physical home tours; and (iii) deteriorating economic conditions, such as increased unemployment rates, recessionary conditions, lower yields on individuals’ investment portfolios, and more stringent mortgage financing conditions. In addition, we have considered the impacts and uncertainties of COVID-19 in our use of estimates in preparation of our consolidated financial statements. These estimates include, but are not limited to, likelihood of achieving performance conditions under performance-based equity awards, net realizable value of inventory, and the fair value of reporting units and goodwill for impairment.
| 10 |
From April 2020, following the government lockdown order, we asked all employees to begin to work from their homes and we also reduced the number of hours available to each of our employees by approximately by approximately 75%. These actions taken in response to the economic impact of COVID-19 on our business resulted in a reduction of productivity for the period ended June 30, 2023 and subsequent quarterly periods. All costs related to these actions are included in general and administrative expenses, as these costs were determined to be direct and incremental.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
We
maintain cash balances in a non-interest-bearing account that currently does not exceed federally insured limits. For the statements
of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. as of June
30, 2023 and December 31, 2022 we did maintain $
Financial Instruments
The estimated fair values for financial instruments were determined at discrete points in time based on relevant market information. These estimates involved uncertainties and could not be determined with precision. The carrying amount of our accounts payable and accruals, our accruals- related parties and loans – related parties approximate their fair values because of the short-term maturities of these instruments.
Fair Value Measurements:
ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.
Level 2 – Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.
Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.
| 11 |
Our financial instruments consist of accounts payable and accruals and our accruals- related parties. The carrying amount of the out accounts payable and accruals, accruals- related parties and loans – related parties approximates their fair values because of the short-term maturities of these instruments.
The table below describes the Company’s valuation of financial instruments using guidance from ASC 820-10:
| Description | Level 1 | Level 2 | Level 3 | |||||||||
| Investments – trading securities – June 30, 2023 | $ | $ | $ | |||||||||
| Investments – trading securities – December 31, 2022 | $ | $ | $ | |||||||||
Investment – Trading Securities
All
investment securities are classified as trading securities and are carried at fair value in accordance with ASC 320 Investments —
Debt and Equity Securities. Investment transactions are recorded on a trade date basis. Realized gains or losses on sales of investments
are based on the first-in, first-out or the specific identification method. Realized and unrealized gains or losses on investments are
recorded in the statements of operations as realized and unrealized gains or losses as net revenue. All investment securities are held
and transacted by the Company’s broker firm.
All investments that are listed on a securities exchange are valued at their last sales price on the primary securities exchange on which such securities are traded on such date. Securities that are not listed on any exchange but are traded over-the-counter are valued at the mean between the last “bid” and “ask” price for such security on such date. The Company does not have any investment securities for which market quotes are not readily available.
The Company’s trading securities are held by a third-party brokerage firm, and composed of publicly traded companies with readily available fair value which are quoted prices in active markets.
Investments
The Company makes certain strategic investments related to its business which are included in other assets in the condensed consolidated statements of financial condition. The Company accounts for these investments as follows:
| ● | Under the equity method of accounting as required under FASB ASC Topic 323, “Investments – Equity Method and Joint Ventures.” These investments, including where the investee is a limited partnership or limited liability company, are recorded at the fair value amount of the Company’s initial investment and are adjusted each period for the Company’s share of the investee’s income or loss. Contributions paid to and distributions received from equity method investees are recorded as additions or reductions, respectively, to the respective investment balance. | |
| ● | At fair value, if the investment in equity securities has a readily determinable fair value. | |
| ● | At adjusted cost, if the investment does not have a readily determinable fair value. Adjusted cost represents the historical cost, less impairment if any. If the Company identifies observable price changes in orderly transactions for the identical or a similar investment of the same issuer, the Company measures the equity security at fair value as of the date that the observable transaction occurred in accordance with FASB ASC Topic 321, “Investments in Equity Securities.” |
| 12 |
A
judgmental aspect of accounting for investments is evaluating whether a decline in the value of an investment has occurred. The evaluation
of impairment is dependent on specific quantitative and qualitative factors and circumstances surrounding an investment, including recurring
operating losses, credit defaults and subsequent rounds of financing. Most of the Company’s equity investments do not have readily
determinable market values. All investments are reviewed for changes in circumstances or occurrence of events that suggest the Company’s
investment may not be recoverable. An impairment loss, if any, is recognized in the period the determination is made. For the year ended
December 31, 2022, the Company carried on its balance sheet, Investments in the total amount of $
Significant Transaction
Significant Transaction, also known as common control transactions occur frequently, particularly in the context of reorganizations, spinoffs, and initial public offerings. Common control transactions are generally accounted for by the receiving entity based on the nature of the transactions. For example, transactions involving the transfer of an asset (such as an unoccupied building) are accounted for by the receiving entity at the carrying value of the asset transferred on a prospective basis. Conversely, transactions involving the transfer of a business ordinarily will result in a change in reporting entity for the receiving entity and require retrospective combination of the entities for all periods presented using the historical cost basis of the parent.
ASC 850 covers transactions and relationships with related parties. It applies to all reporting entities, including the separate financial statements of a subsidiary, as discussed in ASC 850-10-15-2. Identifying related party relationships and transactions requires a reporting entity to first determine whether a party meets the definition of a “related party.”
ASC 850-10-20 described related parties to include:
| a. | Affiliates of the entity | |
| 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 profit-sharing trusts that are managed by or under the trusteeship of management | |
| d. | Principal owners of the entity and members of their immediate families | |
| e. | Management of the entity and members of their immediate families | |
| f. | Other parties with which the entity 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 | |
| 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 |
| 13 |
The following definitions applies under ASC 850-10-20
Affiliate: A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity.
Control: The possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity through ownership, by contract, or otherwise.
Immediate family: Family members who might control or influence a principal owner or a member of management, or who might be controlled or influenced by a principal owner or a member of management, because of the family relationship.
Management: Persons who are responsible for achieving the objectives of the entity and who have the authority to establish policies and make decisions by which those objectives are to be pursued. Management normally includes members of the board of directors, the chief executive officer, chief operating officer, vice presidents in charge of principal business functions (such as sales, administration, or finance), and other persons who perform similar policy making functions. Persons without formal titles also may be members of management.
Principal owners: Owners of record or known beneficial owners of more than 10% of the voting interests of the entity.
FASB Statement No. 141 (EITF 02-5), in conjunction with SEC staff’s conclusions in EITF 02-5 stated that common control exists between (or among) separate entities in the following situations:
| ● | An individual or enterprise holds more than 50% of the voting ownership interest of each entity. | |
| ● | A group of shareholders holds more than 50% of the voting ownership interest of each entity, and contemporaneous written evidence of an agreement to vote a majority of the entities’ shares in concert exists. | |
| ● | Immediate family members (married couples and their children, but not their grandchildren) hold more than 50% of the voting ownership interest of each entity (with no evidence that those family members will vote their shares in any way other than in concert). Entities may be owned in varying combinations among living siblings and their children. Those situations require careful consideration regarding the substance of the ownership and voting relationships. |
During the year ended December 31, 2022, the Company recorded several significant transactions including loans from our officers, directors, and entities under the control or influence of our officers and directors.
| 14 |
Related Party Transactions:
A
related party is generally defined as (i)
Revenue, Assets and Liabilities of Consolidated Subsidiary and Financial Statement Relationship
As
at June 30, 2023 Video River Networks, Inc. has a
Leases:
In February 2016, the FASB issued ASU 2016-02, “Leases” that requires for leases longer than one year, a lessee to recognize in the statement of financial condition a right-of-use asset, representing the right to use the underlying asset for the lease term, and a lease liability, representing the liability to make lease payments. The accounting update also requires that for finance leases, a lessee recognize interest expense on the lease liability, separately from the amortization of the right-of-use asset in the statements of earnings, while for operating leases, such amounts should be recognized as a combined expense. In addition, this accounting update requires expanded disclosures about the nature and terms of lease agreements. The Company has reviewed the new standard and does not expect it to have a material impact to the statement of financial condition or its net capital.
Prior to January 1, 2019, the Company accounted for leases under Accounting Standards Codification (ASC) 840, Accounting for Leases. Effective from January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. On February 25, 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. ASC 842 requires that lessees recognize right of use assets and lease liabilities calculated based on the present value of lease payments for all lease agreements with terms that are greater than twelve months. It requires for leases longer than one year, a lessee to recognize in the statement of financial condition a right·of·use asset, representing the right to use the underlying asset for the lease term, and a lease liability, representing the liability to make lease payments. ASC 842 distinguishes leases as either a finance lease or an operating lease that affects how the leases are measured and presented in the statement of operations and statement of cash flows. ASC 842 supersedes nearly all existing lease accounting guidance under GAAP issued by the Financial Accounting Standards Board (“FASB”) including ASC Topic 840, Leases.
The accounting update also requires that for finance leases, a lessee recognize interest expense on the lease liability, separately from the amortization of the right-of-use asset in the statements of earnings, while for operating leases, such amounts should be recognized as a combined expense. In addition, this accounting update requires expanded disclosures about the nature and terms of lease agreements.
| 15 |
The Company does not have operating and financing leases as of June 30, 2023. The adoption of ASC 842 did not materially impact our results of operations, cash flows, or presentation thereof. The Company has reviewed the new standard and does not expect it to have a material impact to the statement of financial condition or its net capital.
Income Taxes:
Under the asset and liability method prescribed within ASC 740, Income Taxes, the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The realizability of deferred tax assets is assessed throughout the year and a valuation allowance is recorded if necessary, to reduce net deferred tax assets to the amount more likely than not to be realized. Certain prior period deferred tax disclosures were reclassified to conform with current period presentation.
ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. ASC 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
The Company’s practice is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in selling and administrative expense. as of June 30, 2023, the Company had no accrued interest or penalties on unrecognized tax benefits.
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Uncertain Tax Positions:
We evaluate tax positions in a two-step process. We first determine whether it is more likely than not that a tax position will be sustained upon examination, based on the technical merits of the position. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We classify gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as long term liabilities in the financial statements.
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Revenue Recognition:
The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criteria standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustment was recorded.
The Company generates revenue primarily from: (1) the sale of homes/properties, (2) commissions and fees charged on each real estate services transaction closed by our lead agents or partner agents, (3) entrepreneurship development revenue, and (4) principal transaction sales of trading securities using its broker firm, less original purchase cost. Net trading revenues primarily consist of revenues from trading securities earned upon completion of trade, net of any trading fees. A trading is completed when earned and recognized at a point in time, on a trade-date basis, as the Company executes trades. The Company records trading revenue on a net basis, trading sales less original purchase cost. Net realized gains and losses from securities transactions are determined for federal income tax and financial reporting purposes on the first-in, first-out method and represent proceeds on disposition of investments less the cost basis of investments. Sale of real estate properties are recognized at the sales price/amount and the total cost (including cost of rehabilitation) associated with the property acquisition and rehabilitation are classified in Cost of Goods Sold (COGS).
Revenue Recognition – Sale of homes/properties,
This business segment produced zero revenue during the period ended June 30, 2023.
Revenue Recognition – Principal (securities) transactions
The Company records securities transactions and related revenue and expenses on a trade-date basis. Other income is recognized when earned.
Interest Income and Expense
The Company earns interest income and incurs interest expense primarily in connection with its electronic brokerage customer business and its securities lending activities, which are recorded on an accrual basis and are included in interest income and interest expense, respectively, in the condensed consolidated statements of comprehensive income.
During
the period ended June 30, 2023, the Company did recognized revenue of $
Principal Transactions
Principal transactions include gains and losses as a result of changes in the fair value of financial instruments owned, at fair value, financial instruments sold, but not yet purchased, at fair value, and other investments measured at fair value (i.e., unrealized gains and losses) and realized gains and losses related to the Company’s principal transactions. Included are net gains and losses on stocks, options, U.S. and foreign government securities, municipal securities, futures, foreign exchange, precious metals and other derivative instruments, which are reported on a net basis in other income in the condensed consolidated statements of comprehensive income. Dividends are integral to the valuation of stocks. Accordingly, dividend income and expense attributable to financial instruments owned, at fair value and financial instruments sold, but not yet purchased, at fair value, are reported on a net basis in other income in the condensed consolidated statements of comprehensive income.
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During
the period ended June 30, 2023, the Company did recognized net revenue $(
Contract balances
Substantially all receivables from contracts with customers within the scope of Accounting Standards Codification (ASC) 606 Revenue From Contracts With Customers (ASC 606), are included in other assets on the condensed consolidated balance sheets.
Unsatisfied performance obligations
We do not have any unsatisfied performance obligations other than those that are subject to an elective practical expedient under ASC 606. The practical expedient applies to and is elected for contracts where we recognize revenue at the amount to which we have the right to invoice for services performed.
During the period ended June 30, 2023, the Company did not have any unsatisfied performance obligations (other than those that are subject to an elective practical expedient under ASC 606).
Revenue Recognition – Entrepreneurship Development
Under ASC 606, an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. FASB ASC 606-10-05-3 through 05-4 and 606-10-10-2 through 10-4. To achieve the core principle of ASC 606, an entity should take the following actions: Step 1: Identify the contract with a customer; Step 2: Identify the performance obligations in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price; and Step 5: Recognize revenue when or as the entity satisfies a performance obligation.
Revenue is recognized when a company satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). An entity should consider the terms of the contract and all relevant facts and circumstances when applying the revenue recognition standard. An entity should apply the revenue recognition standard, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances.
As of June 30, 2023, our Entrepreneurship Development Revenue was derived from the sale of asset (control in pubco) to the buyer who assumes control of the pubco at the close of the sales transaction. A sale transaction could involve cash-only, cash and note, or note-only. For the contract that includes financing or convertible note, the seller evaluated the collectibility of the transaction price, and the probability that the seller will collect the consideration. Seller addressed the risk of collectability by using a convertible note with very favorable conversion.
Determining whether a sale is to a customer: Per ASC 610-20-15-4(a), if the counterparty in the transaction is a customer and the assets being transferred are an output of the reporting entity’s ordinary activities, the transaction is within the scope of ASC 606. As stated in ASC 606, a customer is a party that has contracted with an entity to obtain goods or services that are an output of the reporting entity’s ordinary activities in exchange for consideration (e.g., a car manufacturer sells a car that it produced to a customer, a homebuilder sells a home that it developed to a customer).
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Step 1: A sales contract/agreement (SPA) is used to consummate the sale. Buyer and seller signed the SPA and other collateral documents including the Notes and other documents designed to ensure collectability if the sale is cash-and-note or note-only. Where the sale was not an all-cash transaction, seller evaluated the collectibility of the transaction price, or the probability that the seller will collect the consideration.
Step 2: Identify the performance obligations in the contract. All performance obligations under the SPA must be completed prior to the close of the transaction. Our Entrepreneurship Development revenue was only recognized after all performance obligations has been performed or completed.
Step 3: Determine the transaction price. The transaction price for each sale recognized as EDI revenue was listed on the face of the contract.
Step 4: Allocate the transaction price. The transaction price is allocated based on the relative standalone selling price of each specific good or service promised to the customer. Since EDI revenue did not involve bundled services, rather EDI assets are accounted for as a standalone transaction, the total sale price is recognized immediately.
Step 5: Recognize revenue. Revenue is recognized as the seller satisfies a performance obligation by transferring control of the promised good or service to the customer. As of June 30, 2023, we recognized all EDI sales completed in the period because we satisfied the performance obligation by transferring control of the pubco to the customer and made adequate provision for the collectability of the convertible notes.
Entrepreneurship Development revenues: Revenues and cost of revenues from pubco-control sales are recognized at the time each pubco-control is delivered and title and possession are transferred to the buyer. For the majority of our pubco-control closings, our performance obligation to deliver a control of the pubco is satisfied in less than one month from the date a binding sale agreement is signed. In certain circumstances where we have not completed the cleaning process to rid the pubco of legacy liabilities, we are not able to complete the sale under one month, and the sale may drag for up to 24 months to allow buyer and seller sufficient time to diligently complete the cleanup work. To the extent these separate performance obligations are not complete upon the home closing, we defer a portion of the pubco-control sales revenues related to these obligations and subsequently recognize the revenue upon completion of such obligations. As of June 30, 2023, the pubco-control sales revenues and related costs we deferred related to these obligations were immaterial. Our contract liabilities, consist of deposits received from customers for sold but undelivered pubco-control.
Sales Incentives: In order to promote sales of our pubco-control, we may offer buyers’ agent sales incentives. These incentives vary by type of incentive and by amount on cash component of the transaction and on a pubco-by-pubco basis. Incentives are reflected as a reduction in pubco-control sales revenues. Incentives are recognized at the time the pubco-control is delivered to the buyer and we receive the sales proceeds in either cash or notes.
During
the six months ended June 30, 2023, the Company did recognized revenue of $
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Advertising Costs:
We
expense advertising costs when advertisements occur. During
the six months ended June 30, 2023, the Company did recognized advertising costs of $
Concentrations of Credit Risk
The
Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents.
The Company places its cash and cash equivalents with financial institutions of high credit worthiness. The Company maintains cash balances
at financial institutions within the United States which are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to limits of approximately $
The cost of equity instruments issued to non-employees in return in accordance with ASC 505-50 “Equity-Based Payments to Non-Employees” for goods and services is measured by the fair value of the goods or services received or the measurement date fair value of the equity instruments issued, whichever is the more readily determinable. Measurement date for non-employees is the earlier of performance commitment date or the completion of services. The cost of employee services received in exchange for equity instruments is based on the grant date fair value of the equity instruments issued in accordance with ASC 718 “Compensation - Stock Compensation.”
NOTE 4. COMMITMENTS & CONTINGENCIES
Legal Proceedings
We were not subject to any legal proceedings as of June 30, 2023 and to the best of our knowledge, no legal proceedings are pending or threatened.
The Company’s principal executive office is located at 370 Amapola Ave., Suite 200A, Torrance, CA 90501. The space is a shared office space, which at the current time is suitable for the conduct of our business. The Company has no real property and do not presently owned any interests in real estate.
From time to time, the Company may be involved in certain legal actions and claims arising in the normal course of business. Management is of the opinion that such matters will be resolved without material effect on the Company’s financial condition or results of operations.
Contractual Obligations
We were not subject to any contractual obligations as at June 30, 2023.
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NOTE 5. NET PRINCIPAL TRANSACTIONS INCOME
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The Company’s net income from principal transactions primarily consists of revenues from sales of trading securities less original purchase cost (cost of sales). Net principal transactions income primarily consists of income from trading securities earned upon completion of trade, net of any trading fees. A trading is completed when earned and recognized at a point in time, on a trade-date basis, as the Company executes trades.
Net trading revenue consisted of the following:
| January 1, 2023 to June 30, 2023 | Total | |||
| Net Revenue from sales of securities | $ | ( | ) | |
| Net income from trading securities | $ | ( | ) | |
NOTE 6. SALES – INVESTMENT PROPERTY
Due to the uncertainty related to the Real Estate Industry due to the ongoing Rate Hike by the US Fed Reserve, the company is holding off on its real estate acquisitions and dispositions program until more clarity is seen in the industry.
NOTE 7. LINE OF CREDIT / LOANS - RELATED PARTIES
The Company considers its founders, managing directors, employees, significant shareholders, and the portfolio Companies to be affiliates. In addition, companies controlled by any of the above named is also classified as affiliates.
Line of credit from related party consisted of the following:
| June 30, 2023 | December 31, 2022 | |||||||
| May 20, 2020 (line of credit) Line of credit with maturity
date of | ||||||||
| Total Line of credit - related party | ||||||||
| Less: current portion | ||||||||
| Total Long-term Line of credit - related party | $ | $ | ||||||
Los Angeles Community Capital - $1,500,000 line of credit
On
May 5, 2020, the Company amended its line of credit agreement to increase it to the amount of $
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Net Loss per Share Calculation:
Basic net loss per common share (“EPS”) is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding for the period. Dilutive earnings per share include the effect of any potentially dilutive debt or equity under the treasury stock method, if including such instruments is dilutive, assuming all dilutive potential common shares were issued. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. The Company’s diluted earnings per share is the same as the basic earnings per share for the period January 1, 2023 to June 30, 2023, as there are no potential shares outstanding that would have a dilutive effect.
Period ended June 30, 2023 | Year ended December 31, 2022 | |||||||
| Net income | $ | |||||||
| Dividends | ||||||||
| Adjusted Net income attribution to stockholders | $ | |||||||
| Weighted-average shares of common stock outstanding | ||||||||
| Basic and Diluted | ||||||||
| Net income per share | ||||||||
| Basic and Diluted | $ | |||||||
NOTE 9. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A full valuation allowance is established against all net deferred tax assets as of June 30, 2023 and December 31, 2022 based on estimates of recoverability. While the Company has optimistic plans for its business strategy, it determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to its ability to generate sufficient profits from its business model.
We did not provide any current or deferred US federal income tax provision or benefit for any of the periods presented in these financial statements because we have accumulated substantial operating losses over the years. When it is more likely than not, that a tax asset cannot be realized through future income, we must record an allowance against any future potential future tax benefit. We have provided a full valuation allowance against the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward periods.
The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements as of June 30, 2023 and December 31, 2022 as defined under ASC 740, “Accounting for Income Taxes.” We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of the accumulated deficit on the balance sheet.
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A reconciliation of the differences between the effective and statutory income tax rates for the period ended June 30, 2023 and December 31, 2022:
| Percent | 30-Jun-23 | 31-Dec-22 | ||||||||||
| Federal statutory rates | % | $ | ( | ) | $ | ( | ) | |||||
| State income taxes | % | ( | ) | ( | ) | |||||||
| Permanent differences | - | % | ||||||||||
| Valuation allowance against net deferred tax assets | - | % | ||||||||||
| Effective rate | % | $ | $ | |||||||||
At June 30, 2023 and December 31, 2022, the significant components of the deferred tax assets are summarized below:
| 30-Jun-23 | 31-Dec-22 | |||||||
| Deferred income tax asset | ||||||||
| Net operation loss carryforwards | ||||||||
| Total deferred income tax asset | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Total deferred income tax asset | $ | $ | ||||||
The
Company has recorded as of June 30, 2023 and December 31, 2022, a valuation allowance of $
The
valuation allowance $
The Company conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of June 30, 2023 and December 31, 2022.
The
Company has net operating loss carry-forwards of approximately $
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NOTE 10. RECENTLY ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Standards
ASU 2019-12 — In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019- 12, Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) Topic 740, Income Taxes. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 will be effective for the Company’s fiscal year beginning October 1, 2021, with early adoption permitted. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. The Company does not expect this ASU to have a material impact on its condensed consolidated financial statements.
ASU 2016-13 — In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which amends FASB ASC Topic 326, Financial Instruments - Credit Losses. In addition, in May 2019, the FASB issued ASU 2019-05, Targeted Transition Relief, which updates FASB ASU 2016-13. These ASU’s require financial assets measured at amortized cost to be presented at the net amount to be collected and broadens the information, including forecasted information incorporating more timely information, that an entity must consider in developing its expected credit loss estimate for assets measured. These ASU’s are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted for fiscal years beginning after December 15, 2018. Most of our financial assets are excluded from the requirements of this standard as they are measured at fair value or are subject to other accounting standards. In addition, certain of our other financial assets are short-term in nature and therefore are not likely to be subject to significant credit losses beyond what is already recorded under current accounting standards. As a result, we currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurements, which amends FASB ASC Topic 820, Fair Value Measurements. This ASU eliminates, modifies and adds various disclosure requirements for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain disclosures are required to be applied using a retrospective approach and others using a prospective approach. Early adoption is permitted. The various disclosure requirements being eliminated, modified or added are not significant to us. As a result, we currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which amends FASB ASC Subtopic 350-40, Intangibles-Goodwill and Other-Internal-Use Software. This ASU adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this ASU should be applied either using a retrospective or prospective approach. Early adoption is permitted. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
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In August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this update provide such guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In January 2013, the FASB issued ASU No. 2013-01, “Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” This ASU clarifies that the scope of ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In February 2013, the FASB issued ASU No. 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The ASU adds new disclosure requirements for items reclassified out of accumulated other comprehensive income by component and their corresponding effect on net income. The ASU is effective for public entities for fiscal years beginning after December 15, 2013. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In February 2013, the Financial Accounting Standards Board, or FASB, issued ASU No. 2013-04, “Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date.” This ASU addresses the recognition, measurement, and disclosure of certain obligations resulting from joint and several arrangements including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2013. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
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In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This ASU addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should be released into net income and is intended by FASB to eliminate some disparity in current accounting practice. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In March 2013, the FASB issued ASU 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting.” The amendments require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments require financial statements prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The entity should include in its presentation of assets any items it had not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities (for example, trademarks). The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
We have reviewed all the recently issued, but not yet effective, accounting pronouncements. Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
NOTE 11. INVESTMENT SECURITIES (TRADING)
The Company applied the fair value accounting treatment for trading securities per ASC 320, with unrealized gains and losses recorded in net income each period. Debt securities classified as trading should be measured at fair value in the currency in which the debt securities are denominated and remeasured into the investor’s functional currency using the spot exchange rate at the balance sheet date.
Trading securities are treated using the fair value method, whereby the value of the securities on the company’s balance sheet is equivalent to their current market value. These securities will be recorded in the current assets section under the Investment Securities account and will be offset in the shareholder’s equity section under the unrealized proceeds from sale of short-term investments” account. The Short Term Investments account amount represents the current market value of the securities, and the “Unrealized Proceeds From Sale of Short Term Investments” account represents the cash proceeds that the company would receive if it were to sell the investments at the end of the specified accounting period.
NOTE 12. REAL ESTATE INVESTMENTS
Current Holdings of Real Estate Investments (Inventory):
As
of June 30, 2023, the Company has $
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NOTE 13. MARGINAL LOAN PAYABLE
As
of June 30, 2023, the Company has $
NOTE 14. RELATED PARTY TRANSACTIONS
The managing member, CEO and director of the Company is involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, he may face a conflict in selecting between the Company and his other business interests. The Company is formulating a policy for the resolution of such conflicts.
The Company had the following related party payable transactions:
| ● | Line
of credit - On May 5, 2020, the Company entered into a line of credit agreement in the amount
of $ |
On
December 30, 2022, the Company sold nine of its EDI Notes and one Mortgage Note to Los Angeles Community Capital (LA Community Capital),
a Company controlled by our President and CEO, in exchange for long-term debt owed to LA Community Capital and its affiliates. The EDI
Notes were sold at their face (stated) amount without discount and the Mortgage Note was sold at face (stated) amount plus accrued interest.
The EDI Notes has a total face amount of $
The Company had the following related party investment transactions:
| ● | Long
term Investment – related parties: At numerous times during the year 2021, the
Company acquired long-term equity positions in various companies for which its subsidiary,
Alpharidge Capital, LLC also acts or acted as court-appointed custodian. These equities consist
of free-trading shares, and were capitalized at cost plus transaction cost, finance fees
and other acquisition costs. As at June 30, 2023, the Company has $ |
The
Company does not own any property. It currently shares a leased office with two other organizations that are affiliated to its principal
shareholder at 370 Amapola Ave., Suite 200A, Torrance, California 90501. Its principal shareholder and seasonal staff use this location.
The approximate cost of the shared office space varies between $
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NOTE 15. MERGERS AND ACQUISITIONS
On
September 15, 2020, Video River Networks, Inc. (the “Company”) entered into a stock purchase agreement with certain corporation
related to our President and CEO with respect to the private placement of shares of its preferred stock at a purchase price of
$
Similarly,
on September 16, 2020, as part of its purchase of unregistered securities from certain corporation related to our President and CEO,
the Company, received $
On
April 21, 2021, the Company sold Cannabinoid Biosciences, Inc. (“CBDX”), a California corporation, to Premier Information
Management, Inc. for $
On
December 30, 2021, GMPW repurchased back from KDCE, the GMPW preferred share, which controls
NOTE 16. SHAREHOLDERS’ EQUITY
Preferred Stock
As
of June 30, 2023 and December 31, 2022, we were authorized to issue shares, and we have issued share of preferred stock with
a par value of $
The Company has and shares of preferred stock were issued and outstanding as at June 30, 2023 and December 31, 2022.
Common Stock
The Company is authorized to issue shares of common stock with a par value of $ As at June 30, 2023 and December 31, 2022.
Twelve Months ended December 31, 2022
The Company has issued shares of our common stock to Professional service providers as payment for their services. As at June 30, 2023, the Company has as common stock issued and outstanding, held by more than 169 shareholders.
Warrants
Stock Options
The Company has never adopted a stock option plan and has never issued any stock options.
NOTE 17. SUBSEQUENT EVENTS
Pursuant to ASC 855-10, the Company evaluated subsequent events after June 30, 2023 through August 18, 2023, the date these financial statements were issued and has determined there have been no subsequent events for which disclosure is required. The Company did not have any material recognizable subsequent events that required disclosure in these financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements. The Securities and Exchange Commission (the “SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,”“estimate,”“expect,”“project,”“intend,”“plan,”“believe,”“will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results.
We caution that the factors described herein, and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
General
Video River Networks, Inc. (“NIHK,” “PubCo” or “Company”), previously known as Nighthawk Systems Inc., a Nevada corporation, used to be a provider of wireless and IP-based control solutions for the utility and hospitality industries. On October 29, 2019, Video River Networks, Inc. sold one (1) Special 2019 series A preferred share (one preferred share is convertible 150,000,000 share of common stocks) of the company for an agreed upon purchase price to Community Economic Development Capital LLC, (“CED Capital”) a California limited liability company CED. The Special preferred share controls 60% of the company’s total voting rights and thus, gave CED Capital the controlling vote power to control and dominate the affairs of the company theretofor. Upon the closing of the transaction, the business of CED Capital was merged into the Company and CED Capital became a wholly owned subsidiary of the Company.
Following the completion of above-mentioned transactions, the Company added real estate operations to its business model and started devoting capital to real estate holding operations for specialized assets including, affordable housing, opportunity zones properties, medical real estate investments, industrial and commercial real estate, and other real estate related services.
On June 10, 2020, the Company filed Form 10-12g, General Form for Registration of Securities, which became effective on August 10, 2020, and as a result, the Company is required to file all required SEC forms since August 10, 2020.
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Environmental, Social and Governance (“ESG”)
We endeavor to provide a richly diverse work environment that employs the highest performers, cultivates the best ideas and creates the widest possible platform for success. We are committed to elevating and supporting the core values of diversity and inclusion, “Total Well-Being” (which brings together physical, financial, career, social and community well-being into a cohesive whole), and environmental, social and governance (“ESG”), which includes sustainability and social responsibility, by actively engaging in these areas. Each member of the executive team maintains an annual goal related to these core values, which is evaluated by the Company’s Board of Trustees. Our goal is to create and sustain an inclusive environment where diversity will thrive, employees will want to work and tenants will want. We are committed to providing our employees with encouragement, guidance, time and resources to learn and apply the skills required to succeed in their jobs. We provide many classroom and on-line training courses to assist our employees in interacting with prospects and tenants as well as extensive training for our customer service specialists in maintaining our properties and improvements, equipment and appliances. We actively promote from within and many senior corporate and property leaders have risen from entry level or junior positions. We monitor our employees’ engagement by surveying them annually and find most employees say they are proud to work at the Company, value one another as colleagues, believe in our mission and values and feel their skills meet their job requirements.
We have a commitment to sustainability and consider the environmental impacts of our business activities. Sustainability and social responsibility are key drivers of our focus on creating the best properties for tenants operate, work and play. We have a dedicated in-house team that initiates and applies sustainable practices in all aspects of our business, including investment activities, development, property operations and property management activities. With its high density, multifamily housing is, by its nature, an environmentally friendly property type. Our recent acquisition and development activities have been primarily concentrated in pedestrian-friendly urban and close-in suburban locations near public transportation. When developing and renovating our properties, we strive to reduce energy and water consumption by investing in energy saving technology while positively impacting the experience of our tenants and the value of our assets. We continue to implement a combination of irrigation, lighting, HVAC and renewable energy improvements at our properties that will reduce energy and water consumption. For 2020, we continue to have an express company-wide goal for Total Well-Being, which includes enhanced ESG efforts. Employees, including our executives, will have their performance against our various Total Well - Being goals evaluated as part of our annual performance review process.
On September 15, 2020, the Company spun-off its specialty real estate holding business to an operating subsidiary and then pivot back to being a technology company.
Subsequent to the above spinoff, the Company has now returned back to its original technology-focused businesses of Power Controls, Battery Technology, Wireless Technology, and Residential utility meters and remote, mission-critical devices in addition to a primary focus of building a portfolio businesses and assets and operations that source, design, develop, manufacture and distribute affordable, high-performance fully electric vehicles in North America.
On April 21, 2021, Cannabinoid Biosciences, Inc. (“CBDX”), a California corporation, was sold to Premier Information Management, Inc. for $1 in cash. As further consideration pursuant to the stated sales, CBDX returned Kid Castle Educational Inc., the parent Company of GMPW, the 100,000 shares of KDCE preferred stock and 900,000,000 shares of KDCE common stock that CBDX bought in October of 2019. Pursuant to the April 21, 2021 transaction, CBDX ceased from being a subsidiary of GMPW, effective April 1, 2021.
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On December 30, 2021, in exchange for the 87% control block held by Kid Castle Educational Corporation, a subsidiary of Video River Networks, Inc. both of which are publicly traded companies with ticker symbols KDCE and NIHK respectively, GiveMePower sold Alpharidge Capital LLC to KDCE.
Going forward, the Company intends to focus its business model to operate and manage a portfolio of Electric Vehicles, Artificial Intelligence, Machine Learning and Robotics (“EV-AI-ML-R”) assets, businesses and operations in addition to its Power Controls, Battery Technology, Wireless Technology, and Residential utility meters and remote, mission-critical devices businesses in North America.
Basis of Presentation
The unaudited financial statements for the three months ended June 30, 2023 and 2022 include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these audited financial statements. All such adjustments are of a normal recurring nature.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries, in which the Company has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”). Inter-company balances and transactions have been eliminated upon consolidation.
ASC 810 requires that the investor with the controlling financial interest should consolidate the investee/affiliate. ASC 810-10 requires that an equity interest investor consolidates a VIE when it retains an investment in the entity, is considered a variable interest investor in the entity, and is the primary beneficiary of the entity. An investor in a VIE is a “variable interest beneficiary” when, per an arrangement’s governing documents, the investor will absorb a portion of the VIE’s expected losses or will receive a portion of the entity’s “residual returns.” The variable interest beneficiary retaining a controlling financial interest in the VIE is designated as its “primary beneficiary” and must consolidate the VIE. A variable interest beneficiary retains a “controlling financial interest” in a VIE when that beneficiary retains the power to direct the activities of the VIE that have the greatest influence over the VIE’s economic performance and retains an obligation to absorb the VIE’s significant losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the ASC 810 test above, Video River Network, Inc. is the primary beneficiary of Kid Castle Educational Corporation (“VIE-2”), Kid Castle Educational Corporation is the primary beneficiary of GiveMePower Corporation (the “VIE-1”) because Video River retained a controlling financial interest in the VIE-2 and has the power to direct the activities of the VIE-2, having the greatest influence over the VIE-2’s economic performance and retains an obligation to absorb the VIE-2’s significant losses and the right to determine and receive benefits from the VIE-2. Similarly, Kid Castle Educational Corporation is the primary beneficiary of GiveMePower Corporation (the “VIE-1”). Kid Castle retained a controlling financial interest in the VIE-1 and has the power to direct the activities of the VIE-1, having the greatest influence over the VIE-1’s economic performance and retains an obligation to absorb the VIE-1’s significant losses and the right to determine and receive benefits from the VIE-1.
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The consolidated financial statements of the Company therefore include the 3 months operating results of the all wholly owned subsidiaries and the balance sheet represent the financial position as at June 30, 2023, of the Company includes Alpharidge Capital LLC and Others subsidiaries in which Video River Networks has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”), after elimination of intercompany transactions and accounts.
Overview
General – Electric Vehicles (EV) Business
The Company’s Electric Vehicles (EV) business model is a newly created business model created in the 3rd quarter of 2020, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business acquisition with one or more EV manufacturers and related businesses, which we refer to throughout this prospectus as our EV Business acquisition plan. We have not selected any specific EV Business acquisition target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any EV Business acquisition target. We have generated no revenues to date and we do not expect that we will generate operating revenues at the earliest until we consummate our initial EV Business acquisition. While we may pursue an acquisition opportunity in the Electric Vehicles, Artificial Intelligence, Machine Learning and Robotics (“EV-AI-ML-R”) industry or sector, we intend to focus on: (1) businesses that source, design, develop, manufacture and distribute high-performance, affordable and fully electric vehicles; and (2) businesses that design, manufacture, install and sell Power Controls, Battery Technology, Wireless Technology, and Residential utility meters and remote, mission-critical devices mostly engineered using Artificial Intelligence, Machine Learning and Robotic technologies.
Our management team is comprised of two business professionals that have a broad range of experience in executive leadership, strategy development and implementation, operations management, financial policy and corporate transactions. Our management team members have worked together in the past, at Goldstein Franklin, Inc. and other firms as executive leaders and senior managers spearheading turnarounds, rollups and industry-focused consolidation while generating shareholder value for many for investors and stakeholders.
We believe that our management team is well positioned to identify acquisition opportunities in the marketplace. Our management team’s industry expertise, principal investing transaction experience and business acumen will make us an attractive partner and enhance our ability to complete a successful Business acquisition. Our management believes that its ability to identify and implement value creation initiatives has been an essential driver of past performance and will remain central to its differentiated acquisition strategy.
Although our management team is well positioned and have experience to identify acquisition opportunities in the marketplace, past performance of our management team is not a guarantee either (i) of success with respect to any EV Business acquisition we may consummate or (ii) that we will be able to identify a suitable candidate for our initial EV Business acquisition. You should not rely on the historical performance record of our management team as indicative of our future performance. Additionally, in the course of their respective careers, members of our management team have been involved in businesses and deals that were unsuccessful. Our officers and directors have not had management experience with EV companies in the past.
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General – Real Estate Business
Our real estate operations has two lines of business: (1) promote and preserve affordable housing and economic development across urban neighborhoods in the United States; and (2) acquire, hold and manage specialized assets. To achieve our objectives, we plan to acquire, own, renovate, develop, redevelop, operate, dispose of, and manage specialized assets including industrial and commercial real estate, affordable housing and rental property and multi-family properties both on our own and through our investment management platform. We focus primarily on commercial and multifamily properties located in urban and high-density suburban markets throughout the United States. Our real estate platform is internally managed with primarily focused on: (1) the acquisition, ownership and management of specialized industrial properties; and (2) ownership, operation and development of multi-family affordable housing properties.
Our Business Plan
Returning back to its foremost business model of technology focused operations, Video River Networks, Inc. (the “Company”), a technology firm intends to operate and manage a portfolio of Electric Vehicles, Artificial Intelligence, Machine Learning and Robotics (“EV-AI-ML-R”) assets, businesses and operations in North America. The Company’s current targeted portfolio businesses include those that source, design, develop, manufacture and distribute high-performance, affordable and fully electric vehicles; and design, manufacture, install and sell Power Controls, Battery Technology, Wireless Technology, and Residential utility meters and remote, mission-critical devices mostly engineered using Artificial Intelligence, Machine Learning and Robotic technologies.
Our current technology-focused business model was a result of our board resolution on September 15, 2020 to spin-in our specialty real estate holding business to an operating subsidiary and then pivot back to being a technology company. The Company has now returned to its original technology-focused businesses of Power Controls, Battery Technology, Wireless Technology, and Residential utility meters and remote, mission-critical devices. In addition to above list, the Company intends to spread its wings into the Electric Vehicles, Artificial Intelligence, Machine Learning and Robotics (“EV-AI-ML-R”) businesses/markets, targeting acquisition, ownership, and operation of acquired EV-AI-ML-R businesses or portfolio of EV-AI-ML-R businesses.
Video River Networks, Inc., prior to September 15, 2020, used to be a specialty real estate holding company, focusing on the acquisition, ownership, and management of specialized industrial properties. The Company’s real estate business objective is to maximize stockholder returns through a combination of (1) distributions to our stockholders, (2) sustainable long-term growth in cash flows from increased rents, which we hope to pass on to stockholders in the form of increased distributions, and (3) potential long-term appreciation in the value of our properties from capital gains upon future sale. As a real estate holding company, the Company is engaged primarily in the ownership, operation, management, acquisition, development and redevelopment of predominantly multifamily housing and specialized industrial properties in the United States.
Having partially freed itself from the day-to-day operation of the real estate operations, the Company now returns to its technology root with a primary purpose of acquiring Electric Vehicles manufacturer or doing a joint venture (JV) with Electric Vehicles businesses that source, design, develop, manufacture and distribute high-performance, affordable and fully electric vehicles; and design, manufacture, install and sell Power Controls, Battery Technology, Wireless Technology, and Residential utility meters and remote, mission-critical devices mostly engineered using Artificial Intelligence, Machine Learning and Robotic technologies.
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Business Strategy and Deal Origination
We have not finalized an acquisition target yet, but are making progress in identifying several potential candidates from which we intend to pick those that meet our criteria for acquisition. Our acquisition and value creation strategy will be to identify, acquire and, after our initial EV Business acquisition, build an EV company that source, design, develop, manufacture and distribute high-performance, affordable and fully electric vehicles that suit the experience of our management team and can benefit from their operational expertise. Our Business acquisition strategy will leverage our management team’s network of potential transaction sources, where we believe a combination of our relationships, knowledge and experience could effect a positive transformation or augmentation of existing businesses to improve their overall value proposition.
Our management team’s objective is to generate attractive returns and create value for our shareholders by applying our disciplined strategy of underwriting intrinsic worth and implementing changes after making an acquisition to unlock value. While our approach is focused on the EV-AI-ML-R industries where we have differentiated insights, we also have successfully driven change through a comprehensive value creation plan framework. We favor opportunities where we can accelerate the target’s growth initiatives. As a management team we have successfully applied this approach over approximately 16 years and have deployed capital successfully in a range of market cycles.
We plan to utilize the network and Finance industry experience of our Chief Executive Officer and our management team in seeking an initial EV Business acquisition and employing our Business acquisition strategy described below. Our CEO is a top financial professional with designations that include, CPA, CMA, and CFM. He’s very knowledgeable in the fields of corporate law, real estate, lending, turnarounds and restructuring. Over the course of their careers, the members of our management team have developed a broad network of contacts and corporate relationships that we believe will serve as a useful source of EV acquisition opportunities. This network has been developed through our management team’s extensive experience:
| ● | investing in and operating a wide range of businesses; | |
| ● | growing brands through repositioning, increasing household penetration and geographic expansion; expanding into new distribution channels, such as e-Commerce, in an increasingly omni-channel world; | |
| ● | identifying lessons learned and applying solutions across product portfolios and channels; | |
| ● | sourcing, structuring, acquiring, operating, developing, growing, financing and selling businesses; | |
| ● | developing relationships with sellers, financing providers, advisors, and target management teams; and | |
| ● | executing transformational transactions in a wide range of businesses under varying economic and financial market conditions. |
In addition, drawing on their extensive investing and operating experience, our management team anticipates tapping four major sources of deal flow:
| ● | directly identifying potentially attractive undervalued situations through primary research into EV industries and companies; | |
| ● | receiving information from our management team’s global contacts about a potentially attractive situation; | |
| ● | leads from investment bankers and advisors regarding businesses seeking a combination or added value that matches our strengths; and | |
| ● | inbound opportunities from a company or existing stakeholders seeking a combination, including corporate divestitures. |
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We expect this network will provide our management team with a robust flow of EV acquisition opportunities. In addition, we anticipate that target EV Business candidates will be brought to our attention by various unaffiliated sources, which may include investment market participants, private equity groups, investment banking firms, consultants, accounting firms and large business enterprises. Upon completion of this offering, members of our management team will communicate with their network of relationships to articulate the parameters for our search for a target company and a potential Business acquisition and begin the process of pursuing and reviewing potential leads.
Acquisition/Business acquisition Criteria
Consistent with this strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target EV businesses. We will use these criteria and guidelines in evaluating acquisition opportunities. While we intend to acquire EV companies that we believe exhibit one or more of the following characteristics, we may decide to enter into our initial EV Business acquisition with a target EV business that does not meet these criteria and guidelines. We intend to acquire EV companies that source, design, develop, manufacture and distribute high-performance, affordable and fully electric vehicles:
| ● | have potential for significant growth, or can act as an attractive EV acquisition platform, following our initial EV Business acquisition; | |
| ● | have demonstrated market segment, category and/or cost leadership and would benefit from our extensive network and insights; | |
| ● | provide operational platform and/or infrastructure for variety of EV models and/or services, with the potential for revenue, market share, footprint and/or distribution improvements; | |
| ● | are at the forefront of EV evolution around changing consumer trends; | |
| ● | offer marketing, pricing and product mix optimization opportunities across distribution channels; | |
| ● | are fundamentally sound companies that could be underperforming their potential and/or offer compelling value; | |
| ● | offer the opportunity for our management team to partner with established target management teams or business owners to achieve long-term strategic and operational excellence, or, in some cases, where our access to accomplished executives and the skills of the management of identified targets warrants replacing or supplementing existing management; | |
| ● | exhibit unrecognized value or other characteristics, desirable returns on capital and a need for capital to achieve the company’s growth strategy, that we believe have been misevaluated by the marketplace based on our analysis and due diligence review; and | |
| ● | will offer an attractive risk-adjusted return for our shareholders. |
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial EV Business acquisition may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. If we decide to enter into our initial EV Business acquisition with a target EV Business that does not meet the above criteria and guidelines, we will disclose that the target EV Business does not meet the above criteria in our shareholder communications related to our initial EV Business acquisition.
Acquisition/Business acquisition Process
In evaluating a prospective target EV business, we expect to conduct a thorough due diligence review that will encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of EV manufacturing facilities, as well as a review of financial and other information. We will also utilize our operational and capital allocation experience.
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In order to execute our business strategy, we intend to:
Assemble a team of EV industry and financial experts: For each potential transaction, we intend to assemble a team of EV industry and financial experts to supplement our management’s efforts to identify and resolve key issues facing a target EV Business. We intend to construct an operating and financial plan that optimizes the potential to increase shareholder value. With extensive experience investing in both healthy and underperforming businesses, we expect that our management will be able to demonstrate to the target EV business and its stakeholders that we have the resources and expertise to lead the combined company through complex and potentially turbulent market conditions and provide the strategic and operational direction necessary to grow the business in order to maximize cash flows and improve the overall strategic prospects for the company.
Conduct rigorous research and analysis: Performing disciplined, fundamental research and analysis is core to our strategy, and we intend to conduct extensive due diligence to evaluate the impact that a transaction may have on a target EV Business.
Business acquisition driven by trend analysis: We intend to understand the underlying purchase and industry behaviors that would enhance a potential transaction’s attractiveness. We have extensive experience in identifying and analyzing evolving industry and consumer trends, and we expect to perform macro as well as bottoms-up analysis on consumer and industry trends.
Acquire the target company at an attractive price relative to our view of intrinsic value: Combining rigorous analysis as well as input from industry and financial experts, our management team intends to develop its view of the intrinsic value of a potential Business acquisition. In doing so, our management team will evaluate future cash flow potential, relative industry valuation metrics and precedent transactions to inform its view of intrinsic value, with the intention of creating a business acquisition at an attractive price relative to its view of intrinsic value.
Implement operational and financial structuring opportunities: Our management team has the ability to structure and execute a business acquisition that will establish a capital structure that will support the growth in shareholder value and give it the flexibility to grow organically and/or through strategic acquisitions. We intend to also develop and implement strategies and initiatives to improve the business’ operational and financial performance and create a platform for growth.
Seek strategic acquisitions and divestitures to further grow shareholder value: Our management team intends to analyze the strategic direction of the company, including evaluating potential non-core asset sales to create financial and/or operational flexibility for the company to engage in organic and/or inorganic growth. Our management team intends to evaluate strategic opportunities and chart a clear path to take the EV business to the next level after the Business acquisition.
After the initial EV Business acquisition, our management team intends to apply a rigorous approach to enhancing shareholder value, including evaluating the experience and expertise of incumbent management and making changes where appropriate, examining opportunities for revenue enhancement, cost savings, operating efficiencies and strategic acquisitions and divestitures and developing and implementing corporate strategies and initiatives to improve profitability and long-term value. In doing so, our management team anticipates evaluating corporate governance, opportunistically accessing capital markets and other opportunities to enhance liquidity, identifying acquisition and divestiture opportunities, and properly aligning management and board incentives with growing shareholder value. Our management team intends to pursue post-merger initiatives through participation on the board of directors, through direct involvement with company operations and/or calling upon a stable of former managers and advisors when necessary.
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Strategic Approach to Management. We intend to approach the management of a company as strategy consultants would. This means that we approach business with performance-based metrics based on strategic and operational goals, both at the overall company level and for specific divisions and functions.
Corporate Governance and Oversight. Active participation as board members can include many activities ranging from conducting monthly or quarterly board meetings to chairing standing (compensation, audit or investment committees) or special committees, replacing or supplementing company management teams when necessary, adding outside directors with industry expertise which may or may not include members of our own board of directors, providing guidance on strategic and operational issues including revenue enhancement opportunities, cost savings, brand repositioning, operating efficiencies, reviewing and testing annual budgets, reviewing acquisitions and divestitures and assisting in the accessing of capital markets to further optimize financing costs and fund expansion.
Direct Operational Involvement. Our management team members, through ongoing board service, intend to actively engage with company management. These activities may include: (i) establishing an agenda for management and instilling a sense of accountability and urgency; (ii) aligning the interest of management with growing shareholder value; (iii) providing strategic planning and management consulting assistance, particularly in regards to re-invested capital and growth capital in order to grow revenues, achieve more optimal operating scale or eliminate costs; (iv) establishing measurable key performance metrics; and (v) complementing product lines and brands while growing market share in attractive market categories. These skill sets will be integral to shareholder value creation.
M&A Expertise and Add-On Acquisitions. Our management team has expertise in identifying, acquiring, and integrating synergistic, margin-enhancing and transformational businesses. We intend to, wherever possible, utilize M&A as a strategic tool to strengthen the financial profile of an EV business we acquire, as well as its competitive positioning. We would seek to enter accretive Business acquisitions where our management team or an acquired company’s management team can seamlessly transition to working together as one organization and team.
Access to Portfolio Company Managers and Advisors. Through their combined 32+ year history of investing in and controlling businesses, our management team members have developed strong professional relationships with former company managers and advisors. When appropriate, we intend to bring in outside directors, managers, or consultants to assist in corporate governance and operational turnaround activities. The use of supplemental advisors should provide additional resources to management to address time intensive issues that may delay an organization from realizing its full potential shareholder returns.
Our acquisition criteria, due diligence processes and value creation methods are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial EV Business acquisition may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the event that we decide to enter into our initial EV Business acquisition with a target EV Business that does not meet the above criteria and guidelines, we will disclose that the target EV Business does not meet the above criteria in our shareholder communications related to our initial EV Business acquisition, which, as discussed in this prospectus, would be in the form of tender offer documents or proxy solicitation materials that we would file with the SEC.
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Sourcing of Potential Business acquisition Targets
We believe that the operational and transactional experience of our management team and their respective affiliates, and the relationships they have developed as a result of such experience, will provide us with a substantial number of potential Business acquisition targets. These individuals and entities have developed a broad network of contacts and corporate relationships around the world. This network has grown through sourcing, acquiring and financing businesses and maintaining relationships with sellers, financing sources and target management teams. Our management team members have significant experience in executing transactions under varying economic and financial market conditions. We believe that these networks of contacts and relationships and this experience will provide us with important sources of investment opportunities. In addition, we anticipate that target EV Business candidates may be brought to our attention from various unaffiliated sources, including investment market participants, private equity funds and large business enterprises seeking to divest noncore assets or divisions.
Other Acquisition Considerations
We are not prohibited from pursuing an initial EV Business acquisition with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial EV Business acquisition with a company that is affiliated with our officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm or another independent firm that commonly renders valuation opinions for the type of company we are seeking to acquire or an independent accounting firm that our initial EV Business acquisition is fair to our company from a financial point of view.
Unless we complete our initial EV Business acquisition with an affiliated entity, or our Board of Directors cannot independently determine the fair market value of the target EV Business or businesses, we are not required to obtain an opinion from an independent investment banking firm, another independent firm that commonly renders valuation opinions for the type of company we are seeking to acquire or from an independent accounting firm that the price we are paying for a target is fair to our company from a financial point of view. If no opinion is obtained, our shareholders will be relying on the business judgment of our Board of Directors, which will have significant discretion in choosing the standard used to establish the fair market value of the target or targets, and different methods of valuation may vary greatly in outcome from one another. Such standards used will be disclosed in our tender offer documents or proxy solicitation materials, as applicable, related to our initial EV Business acquisition.
Members of our management team may directly or indirectly own our ordinary shares and/or private placement warrants following this offering, and, accordingly, may have a conflict of interest in determining whether a particular target EV Business is an appropriate business with which to effectuate our initial EV Business acquisition. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular Business acquisition if the retention or resignation of any such officers and directors was included by a target EV Business as a condition to any agreement with respect to our initial EV Business acquisition.
In the future any of our directors and our officers may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present acquisition opportunities to such entity. Accordingly, subject to his or her fiduciary duties, if any of our officers or directors becomes aware of an acquisition opportunity which is suitable for an entity to which he or she has then current fiduciary or contractual obligations, he or she will need to honor his or her fiduciary or contractual obligations to present such acquisition opportunity to such entity, and only present it to us if such entity rejects the opportunity. We do not believe, however, that any fiduciary duties or contractual obligations of our directors or officers would materially undermine our ability to complete our Business acquisition.
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Plan of Operations for the Next Twelve Months
While our major focus is to find, acquire and manage an EV business, our real estate portfolio is still alive and must figure in our plan of operation. In the next twelve months, we plan on buying rehabilitating and selling up to six properties and adding the net proceeds obtained from the sales to finance our acquisition business plan.
The Company will continue to evaluate its projected expenditures relative to its available cash and to seek additional means of financing in order to satisfy the Company’s working capital and other cash requirements.
Upon completion of the acquisition of an Electric Vehicles manufacturer or doing a joint venture (JV) with Electric Vehicles businesses that source, design, develop, manufacture and distribute high-performance, affordable and fully electric vehicles, our strategy will subsequently include distribution of the electric vehicles and related product lines to retailers and consumers across North America.
We intend to implement the following tasks within the next twelve months:
| 1. | Month 1-3: Phase 1 (1-3 months in duration; $600,000 to $1 million in estimated fund receipt) |
| a. | Hire 2 business development manager and officer manager to implement our business plan. | |
| b. | Acquire and consolidate stakes in the operations of at least two select Ai, Machine Learning, Robotics, and digital assets and biopharma businesses. |
| 2. | Month 3-6 Phase 2 (1-3 months in duration; cost control, process improvements, admin & management.). |
| a. | Integrate acquired business into the Company’s model – consolidate the operations of the businesses including integration of their accounting and finance systems, synchronization of their operating systems, and harmonization of their human resources functions. | |
| b. | Complete and file quarterly reports and other required filings for the quarter |
| 3. | Month 6-9: Phase 3 (1-3 months in duration; $600,000 to $900,000 in estimated fund receipt) |
| a. | Identify and acquire complementary/similar businesses or assets in the target market |
| 4. | Month 9-12: Phase 4 (1-3 months duration; use acquired businesses’ free cash flow for more acquisitions) |
| a. | Run the businesses efficiently, giving employees a conducive and friendly workplace and add value to investors and shareholders by identifying and reducing excesses and also identifying and executing growth strategies | |
| b. | Acquire more businesses that are below their book-value or undervalued businesses, restructure the businesses, and sell the businesses for profit or hold them for cash flow. |
| 5. | Operating expenses during the twelve months would be as follows: |
| a. | For the six months through February 28, 2023, we anticipate to incur general and other operating expenses of $388,000. | |
| b. | For the six months through August 31, 2024 we anticipate to incur additional general and other operating expenses of $378,000. |
The execution of our current plan of operations requires us to raise significant additional capital immediately. If we are successful in raising capital through the sale of shares or borrowing, we believe that the Company will have sufficient cash resources to fund its plan of operations for the next twelve months.
If we are unable to do so, our ability to continue as a going concern will be in jeopardy, likely causing us to curtail and possibly cease operations.
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We continually evaluate our plan of operations discussed above to determine the manner in which we can most effectively utilize our limited cash resources. The timing of completion of any aspect of our plan of operations is highly dependent upon the availability of cash to implement that aspect of the plan and other factors beyond our control. There is no assurance that we will successfully obtain the required capital or revenues, or, if obtained, that the amounts will be sufficient to fund our ongoing operations. The inability to secure additional capital would have a material adverse effect on us, including the possibility that we would have to sell or forego a portion or all of our assets or cease operations. If we discontinue our operations, we will not have sufficient funds to pay any amounts to our stockholders.
Even if we raise additional capital in the near future, if our current business plan is not successfully executed, our ability to fund our business research and development, or our financial product deployment and services efforts would likely be seriously impaired. The ability of a business research and development business and continuing operations is conditioned upon moving the development of products and services toward commercialization. If in the future we are not able to demonstrate adequate progress in the development and commercialization of our product, we will not be able to raise the capital we need to continue our business operations and business activities, and we will likely not have sufficient liquidity or cash resources to continue operating.
Because our working capital requirements depend upon numerous factors there can be no assurance that our current cash resources will be sufficient to fund our operations. At present, we have no committed external sources of capital, and do not expect any significant product revenues for the foreseeable future. Thus, we will require immediate additional financing to fund future operations. There can be no assurance, however, that we will be able to obtain funds on acceptable terms, if at all.
MERGERS AND ACQUISITION
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries, in which the Company has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”). Inter-company balances and transactions have been eliminated upon consolidation.
We used the acquisition method of accounting (also known as business combination accounting) for acquisition of subsidiaries by the Group method to account for the purchase of businesses. The cost of the acquisition was measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Competition
Our business is highly competitive. We are in direct competition with more established companies, private equity firms, private investors, and management companies. Many management companies offer similar products and services for business rollups and consolidations. We may be at a substantial disadvantage to our competitors who have more capital than we do to carry out acquisition, operations, and restructuring efforts. These competitors may have competitive advantages, such as greater name recognition, larger capital-base, marketing, research and acquisition resources, access to larger customer bases and channel partners, a longer operating history and lower labor and development costs, which may enable them to respond more quickly to new or emerging opportunities and changes in customer requirements or devote greater resources to the development, acquisition, and promotion.
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Increased competition could result in us failing to attract significant capital or maintaining them. If we are unable to compete successfully against current and future competitors, our business and financial condition may be harmed.
We hope to maintain our competitive advantage by keeping abreast of market dynamism that is face by our industry, and by utilizing the experience, knowledge, and expertise of our management team. Moreover, we believe that we distinguish ourselves in the ways our model envisaged transformation of businesses.
Government Regulation
Our activities currently are subject to no particular regulation by governmental agencies other than that routinely imposed on corporate businesses. However, we may be subject to the rules governing acquisition and disposition of businesses, real estates and personal properties in each of the state where we have our operations. We may also be subject to various state laws designed to protect buyers and sellers of businesses. We cannot predict the impact of future regulations on either us or our business model. Once we commence our biopharmaceutical operations, we would be subject to many regulations that apply to pharmaceutical and medical industry participants.
Intellectual Property
We currently have no patents, trademarks or other registered intellectual property. We do not consider the grant of patents, trademarks or other registered intellectual property essential to the success of our business.
Employees
We do not have a W-2 employee at the present. Frank Ikechukwu Igwealor, our President, Chief Executive Officer and Chief Financial Officer, is our only full-time staff As of June 30, 2023, pending when we could formalize an employment contract for him. In addition to Mr. Igwealor, we have three part-time unpaid staff who helps with bookkeeping and administrative chores. Most of our part-time staff, officers, and directors will devote their time as needed to our business and are expect to devote at least 15 hours per week to our business operations. We plan on formalizing employment contract for those staff currently helping us without pay. Furthermore, in the immediate future, we intend to use independent contractors and consultants to assist in many aspects of our business on an as needed basis pending financial resources being available. We may use independent contractors and consultants once we receive sufficient funding to hire additional employees. Even then, we will principally rely on independent contractors for substantially all our technical and marketing needs.
The Company has no written employment contract or agreement with any person. Currently, we are not actively seeking additional employees or engaging any consultants through a formal written agreement or contract. Services are provided on an as-needed basis to date. This may change if we are able to secure financing through equity or loans to the Company. As our company grows, we expect to hire more full-time employees.
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Results of Operations
Three months ended June 30, 2023, as Compared to Three Months Ended June 30, 2022
Revenues — The Company recorded $773,438 in revenue for the three months ended June 30, 2023 as compared to $1,417,571 for the same period of June 30, 2022. The decline in revenue was due to our decision to skip transactions in Real Estates “purchase-rehab-resell” program until a more conducive lending environment emerges in the near future.
Operating Expenses — Total operating expenses for the three months ended June 30, 2023 was $121,444 as compared to $114,137 in the same period in, 2022, due to increased accounting and audit expense compared to previous period ended June 30, 2022.
Net Income — Net income for three months ended June 30, 2023 was $453,422 as compared to Net Income of $973,924 for the three months ended June 30, 2022.
Six months ended June 30, 2023, as Compared to Six Months Ended June 30, 2022
Revenues — The Company recorded $1,154,370 in revenue for the six months ended June 30, 2023 as compared to $2,456,521 for the same period of June 30, 2022.
Operating Expenses — Total operating expenses for the six months ended June 30, 2023 was $ 160,365 as compared to $249,153 in the same period in, 2022, due to decreased operating activities, namely, the halt in our real estate operations, no consultants fees, during the period ended June 30, 2022.
Net Income — Net income for six months ended June 30, 2023 was $735,334 as compared to Net Income of $1,569,490 for the six months ended June 30, 2022.
OCI - Unrealized Gain or Other Comprehensive Income for six months ended June 30, 2023 was $0, as compared to Unrealized gain of $3,700, for the six months ended June 30, 2022, which was a result of mark-to-market/fair value adjustment to Trading Securities for the period.
Financial Condition, Liquidity and Capital Resources
As of June 30, 2023, the Company had a working capital of $60255, consisting of $7,948 in cash, $54,707 in Trading Securities, and $2,400 in short-term liabilities.
For the six months period ended June 30, 2023, the Company generated $828,513 from operating activities, generated cash of $464,904 from investing activities, and used cash of $1,350,048 on financing activities, resulting in an decrease in total cash of $56,631 and a cash balance of $7,948 for the period. Compared to the six months period ended June 30, 2022, the Company generated $1,612,865 from operating activities, generated cash of $264,190 on investing activities, and used cash of $2,500,369 on financing activities, resulting in an increase in total cash of $623,314 and a cash balance of $76,076 for the period.
As of June 30, 2023, total stockholders’ equity increased to $3,729,922 from $2,994,588 as of December 31, 2022, accounting for the $735,334 net income for the period ended June 30, 2023.
As of June 30, 2023, the Company had a cash balance of $7,948 (i.e. cash is used to fund operations). The Company does believe our current cash balances will be sufficient to allow us to fund our operating plan for the next twelve months. However, our ability to continue as a going concern is still dependent on us obtaining adequate capital to fund operation or maintaining consecutive quarterly profitability. If we are unable to obtain adequate capital, or maintaining consecutive quarterly profitability, we could be forced to cease operations or substantially curtail its drug development activities. These conditions could raise substantial doubt as to our ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should we be unable to continue as a going concern.
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Our principal sources of liquidity are: (1) Crypto Currency Mining, (2) Real Estate Sales, (3) Trading Securities, and (4) Entrepreneurship Development Initiative. In the past, we have been generating cash from loans to us by our major shareholder. In order to be able to achieve our strategic goals, we need to further expand our business and implement our business plan. To continue to develop our business plan and generate sales, significant capital has been and will continue to be required. Management intends to fund future operations through private or public equity and/or debt offerings. We continue to engage in preliminary discussions with potential investors and broker-dealers, but no terms have been agreed upon. There can be no assurances, however, that additional funding will be available on terms acceptable to us, or at all. Any equity financing may be dilutive to existing shareholders. We do not currently have any contractual restrictions on our ability to incur debt and, accordingly we could incur significant amounts of indebtedness to finance operations. Any such indebtedness could contain covenants which would restrict our operations.
Off-Balance Sheet Arrangements
As of June 30, 2023, we did not engage in any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the SEC under the Securities Exchange Act of 1934. The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often because of the need to make estimates of matters that are inherently uncertain.
Based on this definition, we have identified the critical accounting policies and judgments addressed which are described in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required for smaller reporting companies.
We are exposed to market risk, including changes in certain interest rates. All these market risks arise in the normal course of business, as we do not engage in speculative trading activities. We have not entered derivative or hedging transactions to manage risk in connection with such fluctuations.
This analysis does not take into consideration the effect of changes in the level of overall economic activity on interest rate fluctuations.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rule 13a-15(b), we have carried out an evaluation (the “Evaluation”), under the supervision and with the participation of our management, including our Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of the design and operation of our management, and the design and operation of our disclosure controls and procedures As of June 30, 2023. Based upon an evaluation of the effectiveness of disclosure controls and procedures, our Chief Executive Officer and Interim Chief Financial Officer has concluded that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were not effective because of the material weaknesses described below, in order to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the SEC and is accumulated and communicated to management, including the Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure (see below for further discussion).We had neither the resources, nor the personnel, to provide an adequate control environment.
Due to our limited resources, the following material weaknesses in our internal control over financial reporting continued to exist at June 30, 2023:
| ● | We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); | |
| ● | we do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our limited size and early-stage nature of operations, segregation of all conflicting duties may not always be possible and may not be economically feasible; however, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals; | |
| ● | we do not have an independent audit committee of our Board of Directors; | |
| ● | insufficient monitoring and review controls over the financial reporting closing process, including the lack of individuals with current knowledge of GAAP that led to the restatement of our previously issued financial statements; and | |
| ● | we continue to outsource the functions of controller on an interim basis to assist us in implementing the necessary financial controls over the financial reporting and the utilization of internal management and staff to effectuate these controls. |
We believe that these material weaknesses primarily related, in part, to our lack of sufficient staff with appropriate training in GAAP and SEC rules and regulations with respect to financial reporting functions, and the lack of robust accounting systems, as well as the lack of sufficient resources to hire such staff and implement these accounting systems.
If and when our financial resources allow, we plan to take a number of actions to correct these material weaknesses including, but not limited to, establishing an audit committee of our Board of Directors comprised of three independent directors, hiring a full-time Chief Financial Officer, adding experienced accounting and financial personnel and retaining third-party consultants to review our internal controls and recommend improvements.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
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Changes in Internal Control Over Financial Reporting
There were no material changes in our internal control over financial reporting (as defined in Rule 13a- 15(f) under the Exchange Act) that occurred As of June 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
CEO and CFO Certifications
Exhibits 31.1 and 31.2 to this Quarterly Report are the Certifications of the Chief Executive Officer and the Interim Chief Financial Officer, respectively. These Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act (the “Section 302 Certifications”). This Item 4 of this Quarterly Report, which you are currently reading, is the information concerning the Evaluation referred to above and in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
There are no legal proceedings that have occurred within the past ten years concerning our directors or officers which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one’s participation in the securities or banking industries, or a finding of securities or commodities law violations.
From time to time we may be involved in litigation relating to claims arising out of the operation of our business in the normal course of business. Other than as described below, as of the date of this Registration Statement we are not aware of potential dispute or pending litigation and are not currently involved in a litigation proceeding or governmental actions the outcome of which in management’s opinion would be material to our financial condition or results of operations. An adverse result in these or other matters may have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
As of April 28, the date of this report, there was no material proceeding to which any of our directors, officers, affiliates or stockholders is a party adverse to us. During the past ten years, no present director, executive officer or person nominated to become a director or an executive officer of us:
(1) had a petition under the federal bankruptcy laws or any state insolvency law filed by or against, or a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within ten years before the time of such filing;
(2) was convicted in a criminal proceeding or subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any of the following activities:
i. acting as a futures commission merchant, introducing broker, commodity trading advisor commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
ii. engaging in any type of business practice; or
iii. engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws; or
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(4) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of an federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (3) (i), above, or to be associated with persons engaged in any such activity; or
(5) was found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and for which the judgment has not been reversed, suspended, or vacated.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
During the three months ended June 30, 2023, the Company issued 0 shares of its common stock.
Use of Proceeds of Registered Securities
Not applicable.
Purchases of Equity Securities by Us and Affiliated Purchasers
During the three months ended June 30, 2023, the Company has not purchased any equity securities nor have any officers or directors of the Company.
ITEM 3. Defaults Upon Senior Securities
The Company is not aware of any defaults upon its senior securities.
ITEM 4. Mine Safety Disclosures
Not applicable.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits
| Exhibit | ||
| Number | Description | |
| 31.1* | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. | |
| 31.2* | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. | |
| 32.1** | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed herewith. |
| ** | Furnished herewith. |
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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.
| VIDEO RIVER NETWORKS, INC. | ||
Date: August 21, 2023 |
By: | /s/ Frank I Igwealor |
| Frank I Igwealor | ||
| President, Chief Executive Officer and Interim Chief Financial Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | ||
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Exhibit 31.1
CERTIFICATION OF CEO PURSUANT TO RULE 13a-14(a) OR 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Frank I Igwealor, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of VIDEO RIVER NETWORKS, INC.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Frank I Igwealor | |
| Frank I Igwealor | |
| President and Chief Executive Officer | |
| Date: August 21, 2023 |
Exhibit 31.2
CERTIFICATION OF CFO PURSUANT TO RULE 13a-14(a) OR 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Frank I Igwealor, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of VIDEO RIVER NETWORKS, INC.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Frank I Igwealor | |
| Frank I Igwealor | |
| Chief Financial Officer | |
| Date: August 21, 2023 |
Exhibit 32.1
CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of VIDEO RIVER NETWORKS, INC. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frank I Igwealor, the Chief Executive Officer and Interim Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Frank I Igwealor | |
| Frank I Igwealor | |
|
President, Chief Executive Officer and Chief Financial Officer |
|
| Date: August 21, 2023 |
This Certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
| Preferred stock, shares issued | 1 | 1 |
| Preferred stock, shares outstanding | 1 | 1 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 200,000,000 | 200,000,000 |
| Common stock, shares issued | 182,370,497 | 182,370,497 |
| Common stock, shares outstanding | 182,370,497 | 182,370,497 |
Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Revenue: | ||||
| Total Revenue | $ 773,438 | $ 1,417,571 | $ 1,154,370 | $ 2,456,521 |
| Cost of goods sold: | ||||
| Total cost of goods sold | 198,572 | 329,510 | 258,671 | 637,878 |
| Gross profit | 574,866 | 1,088,061 | 895,699 | 1,818,643 |
| Operating expenses: | ||||
| General and administrative | 39,775 | 62,142 | 63,026 | 137,397 |
| Professional fees | 79,065 | 51,730 | 91,878 | 107,655 |
| Advertising and promotions | 354 | 265 | 468 | 4,063 |
| Business Licenses | 2,250 | 4,993 | 38 | |
| Total operating expenses | 121,444 | 114,137 | 160,365 | 249,153 |
| Income (loss) from operations | 453,422 | 973,924 | 735,334 | 1,569,490 |
| Other Income | ||||
| Dividends | ||||
| Unrealized gain (loss) | 3,700 | |||
| Net Income | $ 453,422 | $ 973,925 | $ 735,334 | $ 1,573,191 |
| Earnings (loss) per Share: Basic | $ 0.0025 | $ 0.0053 | $ 0.0040 | $ 0.0086 |
| Earnings (loss) per Share:Diluted | $ 0.0025 | $ 0.0053 | $ 0.0040 | $ 0.0086 |
| Weighted Average Common Shares Outstanding: Basic | 182,370,497 | 182,370,497 | 182,370,497 | 182,370,497 |
| Weighted Average Common Shares Outstanding: Diluted | 182,370,497 | 182,370,497 | 182,370,497 | 182,370,497 |
| EDI Interest Income [Member] | ||||
| Revenue: | ||||
| Total Revenue | $ 15,979 | $ 78,333 | $ 33,542 | $ 78,333 |
| Entrepreneurship Development [Member] | ||||
| Revenue: | ||||
| Total Revenue | 950,000 | 1,425,000 | 1,425,000 | 2,775,000 |
| Cost of goods sold: | ||||
| Total cost of goods sold | 198,572 | 329,510 | 258,671 | 637,878 |
| Investment Property Sales [Member] | ||||
| Revenue: | ||||
| Total Revenue | ||||
| Principal Transactions [Member] | ||||
| Revenue: | ||||
| Total Revenue | $ (192,541) | $ (85,762) | $ (304,172) | $ (396,812) |
NATURE OF OPERATIONS |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| NATURE OF OPERATIONS | NOTE 1. NATURE OF OPERATIONS
The Company and Nature of Business
Video River Networks, Inc. (the “Company”) is a technology firm that operates and manages a portfolio of Electric Vehicles, Artificial Intelligence, Machine Learning and Robotics (“EV-AI-ML-R”) assets, businesses and operations in North America. The Company’s current and target portfolio businesses and assets include operations that design, develop, manufacture and sell high-performance fully electric vehicles and design, manufacture, install and sell Power Controls, Battery Technology, Wireless Technology, and Residential utility meters and remote, mission-critical devices mostly engineered through Artificial Intelligence, Machine Learning and Robotic technologies.
Our current technology-focused business model was a result of our board resolution on September 15, 2020 to spin-in our specialty real estate holding business to an operating subsidiary and then pivot back to being a technology company. The Company has now returned back to its original technology-focused businesses of Power Controls, Battery Technology, Wireless Technology, and Residential utility meters and remote, mission-critical devices. In addition to above list, the Company intends to spread its wings into the Electric Vehicles, Artificial Intelligence, Machine Learning and Robotics (“EV-AI-ML-R”) businesses/markets, targeting acquisition, ownership and operation of acquired EV-AI-ML-R businesses or portfolio of EV-AI-ML-R businesses.
Video River Networks, Inc., prior to September 15, 2020, used to be a specialty real estate holding company, focuses on the acquisition, ownership, and management of specialized industrial properties. Prior to its real estate business model, the Company’s Power Controls Division has used wireless technology to control both residential utility meters and remote, mission-critical devices since 2002.
The current management of the Company resulted from a purchase of voting control of the Company by Community Economic Development Capital LLC, (“CED Capital”) a California limited liability company. After the change of control transaction, CED Capital spun out the control-stock to its sole unitholder before being sold to the Company for $1. Thereafter CED Capital became an operating subsidiary of the Company. We used the acquisition of method of accounting for acquisition of subsidiaries by the Group method to account for this transaction. The cost of the acquisition was measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange.
As previously disclosed on our Form 8-K filed with the Securities and Exchange Commission, on December 8, 2019, on October 29, 2019, the company sold one (1) Special 2019 series A preferred share (one preferred share is convertible share of common stocks) of the company for Fifty Thousand and 00/100 ($50,000/00) Dollars, to Community Economic Development Capital LLC, a California limited liability company. The Special preferred share controls 60% of the company’s total voting rights. The issuance of the preferred share to Community Economic Development Capital LLC gave to Community Economic Development Capital LLC, the controlling vote to control and dominate the affairs of the company theretofor.
On September 15, 2020, Video River Networks, Inc. (the “Company”) entered into a stock purchase agreement with Kid Castle Educational Corporation (“Kid Castle”), an entity related to, and controlled by our President and CEO with respect to the purchase through private placement, of shares of its preferred stock at a purchase price of $3 in cash and a transfer of 100% interest in, and control of Community Economic Development Capital, LLC (a California Limited Liability Company). The shares were issued to the investors without registration under the Securities Act of 1933 based upon exemptions from registration provided under Section 4(2) of the Act and Regulation D promulgated thereunder. The issuances did not involve any public offering; no general solicitation or general advertising was used in connection with the offering. As at the time of this transaction, all four businesses involved in the transaction were controlled by Mr. Frank I Igwealor. Because both the buyer and seller in the above acquisitions were under the control of the same person, the transaction was classified as “common control transaction and therefore fall under “Transactions Between Entities Under Common Control “subsections of ASC 805-50. Following the acquisition, the Company now has 55% (which has now grown to 97.58%) of the voting control of and 100% of the operating and financial control of Kid Castle.
On April 21, 2021, the Company sold Cannabinoid Biosciences, Inc. (“CBDX”), a California corporation, to Premier Information Management, Inc. for $1 in cash. As further consideration pursuant to the stated sales, CBDX returned Kid Castle Educational Inc., the parent Company of GMPW, the shares of KDCE preferred stock and shares of KDCE common stock that CBDX bought in October of 2019. Pursuant to the April 21, 2021 transaction, CBDX ceased from being a subsidiary of GMPW, effective April 1, 2021.
On December 30, 2021, in exchange for its 87% control block in GiveMePower Corporation, the Company received 100% stake in Alpharidge Capital LLC from GiveMePower, in a cashless transaction, resulting in each public company going its separate way and an independent company.
The consolidated financial statements of the Company therefore include Video River Networks, Inc. and subsidiaries of its subsidiary, Alpharidge Capital, LLC (“Alpharidge”), and subsidiaries, in which it has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”), after elimination of intercompany transactions and accounts.
Following the completion of the transaction with Kid Castle, the Company having been partly freed of the internally-managed real estate holding business that focused on the acquisition, ownership and management of specialized industrial properties, affordable housing and opportunity zone real estate properties and businesses, has decided to return back to its original technology-focused businesses of Power Controls, Battery Technology, Wireless Technology, and Residential utility meters and remote, mission-critical devices. In addition to above list, the Company is spreading its wings into the Electric Vehicles, Artificial Intelligence, Machine Learning and Robotics (“EV-AI-ML-R”) businesses/markets, targeting acquisition, ownership, and operation of acquired EV-AI-ML-R businesses or portfolio of EV-AI-ML-R businesses.
The consolidated financial statements of the Company therefore include Video River Networks, Inc., whose main operating subsidiary Alpharidge Capital, LLC (“Alpharidge”), and subsidiaries, in which the Company has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”), after elimination of intercompany transactions and accounts.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries, in which the Company has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”). Inter-company balances and transactions have been eliminated upon consolidation.
ASC 810 requires that the investor with the controlling financial interest should consolidate the investee/affiliate. ASC 810-10 requires that an equity interest investor consolidates a VIE when it retains an investment in the entity, is considered a variable interest investor in the entity, and is the primary beneficiary of the entity. An investor in a VIE is a “variable interest beneficiary” when, per an arrangement’s governing documents, the investor will absorb a portion of the VIE’s expected losses or will receive a portion of the entity’s “residual returns.” The variable interest beneficiary retaining a controlling financial interest in the VIE is designated as its “primary beneficiary” and must consolidate the VIE. A variable interest beneficiary retains a “controlling financial interest” in a VIE when that beneficiary retains the power to direct the activities of the VIE that have the greatest influence over the VIE’s economic performance and retains an obligation to absorb the VIE’s significant losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the ASC 810 test above, Video River Networks Inc. is the primary beneficiary of Video River Networks, Inc. (the “VIE”) because Video River Networks retained a controlling financial interest in the VIE and has the power to direct the activities of the VIE, having the greatest influence over the VIE’s economic performance and retains an obligation to absorb the VIE’s significant losses and the right to determine and receive benefits from the VIE.
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GOING CONCERN |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| GOING CONCERN | NOTE 2. GOING CONCERN
Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. For the period ended June 30, 2023, we reported revenue of $1,154,370 and an accumulated deficit of $15,659,075 as of June 30, 2023. These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties. Our ability to continue as a going concern is dependent upon our ability to raise debt or equity funding to meet our ongoing operating expenses and ultimately in merging with another entity with experienced management and profitable operations. No assurances can be given that we will be successful in achieving these objectives.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
A summary of significant accounting policies is presented to assist in the understanding of the financial statements. These policies conform to accounting principles generally accepted in the United States of America and have been consistently applied. The Company has elected a calendar year of December 31 year-end.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its subsidiaries, in which the Company has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”). The consolidated financial statements include the Company and Video River Networks, Inc., and all its controlled subsidiary companies. All significant intercompany accounts and transactions have been eliminated. Investments in business entities in which we do not have control, but we could exercise significant influence over operating and financial policies (generally 20% to 50% ownership) are accounted for using the equity method of accounting. Operating results of acquired businesses are included in the Consolidated Statements of Income from the date of acquisition. We consolidate variable interest entities if we have operational and financial control and are deemed to be the >50.1% beneficiary of the profit and loss of the entity. Operating results for variable interest entities in which we are determined to be the primary beneficiary are included in the Consolidated Statements of Income from the date such determination is made.
COVID-19 Risks, Impacts and Uncertainties
COVID-19 Risks, Impacts and Uncertainties — We are subject to the risks arising from COVID-19’s impact on the residential real estate industry. Our management believes that these impacts, which include but are not limited to the following, could have a significant negative effect on our future financial position, results of operations, and cash flows: (i) prohibitions or limitations on in-person activities associated with residential real estate transactions; (ii) lack of consumer desire for in-person interactions and physical home tours; and (iii) deteriorating economic conditions, such as increased unemployment rates, recessionary conditions, lower yields on individuals’ investment portfolios, and more stringent mortgage financing conditions. In addition, we have considered the impacts and uncertainties of COVID-19 in our use of estimates in preparation of our consolidated financial statements. These estimates include, but are not limited to, likelihood of achieving performance conditions under performance-based equity awards, net realizable value of inventory, and the fair value of reporting units and goodwill for impairment.
From April 2020, following the government lockdown order, we asked all employees to begin to work from their homes and we also reduced the number of hours available to each of our employees by approximately by approximately 75%. These actions taken in response to the economic impact of COVID-19 on our business resulted in a reduction of productivity for the period ended June 30, 2023 and subsequent quarterly periods. All costs related to these actions are included in general and administrative expenses, as these costs were determined to be direct and incremental.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
We maintain cash balances in a non-interest-bearing account that currently does not exceed federally insured limits. For the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. as of June 30, 2023 and December 31, 2022 we did maintain $7,948 and $64,579 balance of cash equivalents respectively.
Financial Instruments
The estimated fair values for financial instruments were determined at discrete points in time based on relevant market information. These estimates involved uncertainties and could not be determined with precision. The carrying amount of our accounts payable and accruals, our accruals- related parties and loans – related parties approximate their fair values because of the short-term maturities of these instruments.
Fair Value Measurements:
ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.
Level 2 – Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.
Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.
Our financial instruments consist of accounts payable and accruals and our accruals- related parties. The carrying amount of the out accounts payable and accruals, accruals- related parties and loans – related parties approximates their fair values because of the short-term maturities of these instruments.
The table below describes the Company’s valuation of financial instruments using guidance from ASC 820-10:
Investment – Trading Securities
All investment securities are classified as trading securities and are carried at fair value in accordance with ASC 320 Investments — Debt and Equity Securities. Investment transactions are recorded on a trade date basis. Realized gains or losses on sales of investments are based on the first-in, first-out or the specific identification method. Realized and unrealized gains or losses on investments are recorded in the statements of operations as realized and unrealized gains or losses as net revenue. All investment securities are held and transacted by the Company’s broker firm. The Company did not hold more than 4.9% of equity of the shares of any public companies as investments as of June 30, 2023.
All investments that are listed on a securities exchange are valued at their last sales price on the primary securities exchange on which such securities are traded on such date. Securities that are not listed on any exchange but are traded over-the-counter are valued at the mean between the last “bid” and “ask” price for such security on such date. The Company does not have any investment securities for which market quotes are not readily available.
The Company’s trading securities are held by a third-party brokerage firm, and composed of publicly traded companies with readily available fair value which are quoted prices in active markets.
Investments
The Company makes certain strategic investments related to its business which are included in other assets in the condensed consolidated statements of financial condition. The Company accounts for these investments as follows:
A judgmental aspect of accounting for investments is evaluating whether a decline in the value of an investment has occurred. The evaluation of impairment is dependent on specific quantitative and qualitative factors and circumstances surrounding an investment, including recurring operating losses, credit defaults and subsequent rounds of financing. Most of the Company’s equity investments do not have readily determinable market values. All investments are reviewed for changes in circumstances or occurrence of events that suggest the Company’s investment may not be recoverable. An impairment loss, if any, is recognized in the period the determination is made. For the year ended December 31, 2022, the Company carried on its balance sheet, Investments in the total amount of $1,869,748. Following the collapse of the Silicon Valley Bank, due to semi-permanent impairment of securities in its investment portfolio, the Company reviewed its Investment portfolio and concluded that some of the Company’s investment may not be recoverable. Using a mark-to-market approach, the Company wrote down and reserved $1,316,237 of its Investment portfolio, as impairment loss on it Investments portfolio. As at June 30, 2023, the balance of $1,548,703 in the portfolio for a net balance of $232,268.
Significant Transaction
Significant Transaction, also known as common control transactions occur frequently, particularly in the context of reorganizations, spinoffs, and initial public offerings. Common control transactions are generally accounted for by the receiving entity based on the nature of the transactions. For example, transactions involving the transfer of an asset (such as an unoccupied building) are accounted for by the receiving entity at the carrying value of the asset transferred on a prospective basis. Conversely, transactions involving the transfer of a business ordinarily will result in a change in reporting entity for the receiving entity and require retrospective combination of the entities for all periods presented using the historical cost basis of the parent.
ASC 850 covers transactions and relationships with related parties. It applies to all reporting entities, including the separate financial statements of a subsidiary, as discussed in ASC 850-10-15-2. Identifying related party relationships and transactions requires a reporting entity to first determine whether a party meets the definition of a “related party.”
ASC 850-10-20 described related parties to include:
The following definitions applies under ASC 850-10-20
Affiliate: A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity.
Control: The possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity through ownership, by contract, or otherwise.
Immediate family: Family members who might control or influence a principal owner or a member of management, or who might be controlled or influenced by a principal owner or a member of management, because of the family relationship.
Management: Persons who are responsible for achieving the objectives of the entity and who have the authority to establish policies and make decisions by which those objectives are to be pursued. Management normally includes members of the board of directors, the chief executive officer, chief operating officer, vice presidents in charge of principal business functions (such as sales, administration, or finance), and other persons who perform similar policy making functions. Persons without formal titles also may be members of management.
Principal owners: Owners of record or known beneficial owners of more than 10% of the voting interests of the entity.
FASB Statement No. 141 (EITF 02-5), in conjunction with SEC staff’s conclusions in EITF 02-5 stated that common control exists between (or among) separate entities in the following situations:
During the year ended December 31, 2022, the Company recorded several significant transactions including loans from our officers, directors, and entities under the control or influence of our officers and directors.
Related Party Transactions:
A related party is generally defined as (i) any person that holds 10% or more of our membership interests including such person’s immediate families, (ii) our management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with us, or (iv) anyone who can significantly influence our financial and operating decisions. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. During the period under review, the Company sold nine of its EDI Notes and one Mortgage Note to Los Angeles Community Capital (LA Community Capital), a Company controlled by our President and CEO, in exchange for long-term debt owned to LA Community Capital and its affiliates. The EDI Notes were sold at their face (stated) amount without discount and the Mortgage Note was sold at face (stated) amount plus accrued interest. The EDI Notes has a total face amount of $3.5 million while the Mortgage Notes has a face amount of $2.2 million and accrued interest total of $0.11 million as at December 30, 2022, the date of the sale/purchase transaction.
Revenue, Assets and Liabilities of Consolidated Subsidiary and Financial Statement Relationship
As at June 30, 2023 Video River Networks, Inc. has a 81.75% controlling stake in Kid Castle Educational Corporation. Because of the consolidated subsidiary relationship between these two companies, the singular Revenue, Assets and Liabilities recognized and disclosed on the financial statements of Kid Castle Educational Corporation are also recognized and disclosed on the financial statements of Video River Networks, Inc. pursuant to ASC 810.
Leases:
In February 2016, the FASB issued ASU 2016-02, “Leases” that requires for leases longer than one year, a lessee to recognize in the statement of financial condition a right-of-use asset, representing the right to use the underlying asset for the lease term, and a lease liability, representing the liability to make lease payments. The accounting update also requires that for finance leases, a lessee recognize interest expense on the lease liability, separately from the amortization of the right-of-use asset in the statements of earnings, while for operating leases, such amounts should be recognized as a combined expense. In addition, this accounting update requires expanded disclosures about the nature and terms of lease agreements. The Company has reviewed the new standard and does not expect it to have a material impact to the statement of financial condition or its net capital.
Prior to January 1, 2019, the Company accounted for leases under Accounting Standards Codification (ASC) 840, Accounting for Leases. Effective from January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. On February 25, 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. ASC 842 requires that lessees recognize right of use assets and lease liabilities calculated based on the present value of lease payments for all lease agreements with terms that are greater than twelve months. It requires for leases longer than one year, a lessee to recognize in the statement of financial condition a right·of·use asset, representing the right to use the underlying asset for the lease term, and a lease liability, representing the liability to make lease payments. ASC 842 distinguishes leases as either a finance lease or an operating lease that affects how the leases are measured and presented in the statement of operations and statement of cash flows. ASC 842 supersedes nearly all existing lease accounting guidance under GAAP issued by the Financial Accounting Standards Board (“FASB”) including ASC Topic 840, Leases.
The accounting update also requires that for finance leases, a lessee recognize interest expense on the lease liability, separately from the amortization of the right-of-use asset in the statements of earnings, while for operating leases, such amounts should be recognized as a combined expense. In addition, this accounting update requires expanded disclosures about the nature and terms of lease agreements.
The Company does not have operating and financing leases as of June 30, 2023. The adoption of ASC 842 did not materially impact our results of operations, cash flows, or presentation thereof. The Company has reviewed the new standard and does not expect it to have a material impact to the statement of financial condition or its net capital.
Income Taxes:
Under the asset and liability method prescribed within ASC 740, Income Taxes, the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The realizability of deferred tax assets is assessed throughout the year and a valuation allowance is recorded if necessary, to reduce net deferred tax assets to the amount more likely than not to be realized. Certain prior period deferred tax disclosures were reclassified to conform with current period presentation.
ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. ASC 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
The Company’s practice is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in selling and administrative expense. as of June 30, 2023, the Company had no accrued interest or penalties on unrecognized tax benefits.
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Uncertain Tax Positions:
We evaluate tax positions in a two-step process. We first determine whether it is more likely than not that a tax position will be sustained upon examination, based on the technical merits of the position. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We classify gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as long term liabilities in the financial statements.
Revenue Recognition:
The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criteria standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustment was recorded.
The Company generates revenue primarily from: (1) the sale of homes/properties, (2) commissions and fees charged on each real estate services transaction closed by our lead agents or partner agents, (3) entrepreneurship development revenue, and (4) principal transaction sales of trading securities using its broker firm, less original purchase cost. Net trading revenues primarily consist of revenues from trading securities earned upon completion of trade, net of any trading fees. A trading is completed when earned and recognized at a point in time, on a trade-date basis, as the Company executes trades. The Company records trading revenue on a net basis, trading sales less original purchase cost. Net realized gains and losses from securities transactions are determined for federal income tax and financial reporting purposes on the first-in, first-out method and represent proceeds on disposition of investments less the cost basis of investments. Sale of real estate properties are recognized at the sales price/amount and the total cost (including cost of rehabilitation) associated with the property acquisition and rehabilitation are classified in Cost of Goods Sold (COGS).
Revenue Recognition – Sale of homes/properties,
This business segment produced zero revenue during the period ended June 30, 2023.
Revenue Recognition – Principal (securities) transactions
The Company records securities transactions and related revenue and expenses on a trade-date basis. Other income is recognized when earned.
Interest Income and Expense
The Company earns interest income and incurs interest expense primarily in connection with its electronic brokerage customer business and its securities lending activities, which are recorded on an accrual basis and are included in interest income and interest expense, respectively, in the condensed consolidated statements of comprehensive income.
During the period ended June 30, 2023, the Company did recognized revenue of $33,542 in net interest income.
Principal Transactions
Principal transactions include gains and losses as a result of changes in the fair value of financial instruments owned, at fair value, financial instruments sold, but not yet purchased, at fair value, and other investments measured at fair value (i.e., unrealized gains and losses) and realized gains and losses related to the Company’s principal transactions. Included are net gains and losses on stocks, options, U.S. and foreign government securities, municipal securities, futures, foreign exchange, precious metals and other derivative instruments, which are reported on a net basis in other income in the condensed consolidated statements of comprehensive income. Dividends are integral to the valuation of stocks. Accordingly, dividend income and expense attributable to financial instruments owned, at fair value and financial instruments sold, but not yet purchased, at fair value, are reported on a net basis in other income in the condensed consolidated statements of comprehensive income.
During the period ended June 30, 2023, the Company did recognized net revenue $(304,172) from principal transaction.
Contract balances
Substantially all receivables from contracts with customers within the scope of Accounting Standards Codification (ASC) 606 Revenue From Contracts With Customers (ASC 606), are included in other assets on the condensed consolidated balance sheets.
Unsatisfied performance obligations
We do not have any unsatisfied performance obligations other than those that are subject to an elective practical expedient under ASC 606. The practical expedient applies to and is elected for contracts where we recognize revenue at the amount to which we have the right to invoice for services performed.
During the period ended June 30, 2023, the Company did not have any unsatisfied performance obligations (other than those that are subject to an elective practical expedient under ASC 606).
Revenue Recognition – Entrepreneurship Development
Under ASC 606, an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. FASB ASC 606-10-05-3 through 05-4 and 606-10-10-2 through 10-4. To achieve the core principle of ASC 606, an entity should take the following actions: Step 1: Identify the contract with a customer; Step 2: Identify the performance obligations in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price; and Step 5: Recognize revenue when or as the entity satisfies a performance obligation.
Revenue is recognized when a company satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). An entity should consider the terms of the contract and all relevant facts and circumstances when applying the revenue recognition standard. An entity should apply the revenue recognition standard, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances.
As of June 30, 2023, our Entrepreneurship Development Revenue was derived from the sale of asset (control in pubco) to the buyer who assumes control of the pubco at the close of the sales transaction. A sale transaction could involve cash-only, cash and note, or note-only. For the contract that includes financing or convertible note, the seller evaluated the collectibility of the transaction price, and the probability that the seller will collect the consideration. Seller addressed the risk of collectability by using a convertible note with very favorable conversion.
Determining whether a sale is to a customer: Per ASC 610-20-15-4(a), if the counterparty in the transaction is a customer and the assets being transferred are an output of the reporting entity’s ordinary activities, the transaction is within the scope of ASC 606. As stated in ASC 606, a customer is a party that has contracted with an entity to obtain goods or services that are an output of the reporting entity’s ordinary activities in exchange for consideration (e.g., a car manufacturer sells a car that it produced to a customer, a homebuilder sells a home that it developed to a customer).
Step 1: A sales contract/agreement (SPA) is used to consummate the sale. Buyer and seller signed the SPA and other collateral documents including the Notes and other documents designed to ensure collectability if the sale is cash-and-note or note-only. Where the sale was not an all-cash transaction, seller evaluated the collectibility of the transaction price, or the probability that the seller will collect the consideration.
Step 2: Identify the performance obligations in the contract. All performance obligations under the SPA must be completed prior to the close of the transaction. Our Entrepreneurship Development revenue was only recognized after all performance obligations has been performed or completed.
Step 3: Determine the transaction price. The transaction price for each sale recognized as EDI revenue was listed on the face of the contract.
Step 4: Allocate the transaction price. The transaction price is allocated based on the relative standalone selling price of each specific good or service promised to the customer. Since EDI revenue did not involve bundled services, rather EDI assets are accounted for as a standalone transaction, the total sale price is recognized immediately.
Step 5: Recognize revenue. Revenue is recognized as the seller satisfies a performance obligation by transferring control of the promised good or service to the customer. As of June 30, 2023, we recognized all EDI sales completed in the period because we satisfied the performance obligation by transferring control of the pubco to the customer and made adequate provision for the collectability of the convertible notes.
Entrepreneurship Development revenues: Revenues and cost of revenues from pubco-control sales are recognized at the time each pubco-control is delivered and title and possession are transferred to the buyer. For the majority of our pubco-control closings, our performance obligation to deliver a control of the pubco is satisfied in less than one month from the date a binding sale agreement is signed. In certain circumstances where we have not completed the cleaning process to rid the pubco of legacy liabilities, we are not able to complete the sale under one month, and the sale may drag for up to 24 months to allow buyer and seller sufficient time to diligently complete the cleanup work. To the extent these separate performance obligations are not complete upon the home closing, we defer a portion of the pubco-control sales revenues related to these obligations and subsequently recognize the revenue upon completion of such obligations. As of June 30, 2023, the pubco-control sales revenues and related costs we deferred related to these obligations were immaterial. Our contract liabilities, consist of deposits received from customers for sold but undelivered pubco-control.
Sales Incentives: In order to promote sales of our pubco-control, we may offer buyers’ agent sales incentives. These incentives vary by type of incentive and by amount on cash component of the transaction and on a pubco-by-pubco basis. Incentives are reflected as a reduction in pubco-control sales revenues. Incentives are recognized at the time the pubco-control is delivered to the buyer and we receive the sales proceeds in either cash or notes.
During the six months ended June 30, 2023, the Company did recognized revenue of $1,154,370 consisting $(304,172) net principal transaction, and $1,425,000 from the Entrepreneurship Development Initiative, and $33,542 in Interest income respectively.
Advertising Costs:
We expense advertising costs when advertisements occur. During the six months ended June 30, 2023, the Company did recognized advertising costs of $468 compared to $4,063 it spent in same period of 2022.
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. The Company maintains cash balances at financial institutions within the United States which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to limits of approximately $250,000. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts. It is possible that at times, the company’s cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. In such situation, the Company’s management would assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures would be addressed and mitigated.
The cost of equity instruments issued to non-employees in return in accordance with ASC 505-50 “Equity-Based Payments to Non-Employees” for goods and services is measured by the fair value of the goods or services received or the measurement date fair value of the equity instruments issued, whichever is the more readily determinable. Measurement date for non-employees is the earlier of performance commitment date or the completion of services. The cost of employee services received in exchange for equity instruments is based on the grant date fair value of the equity instruments issued in accordance with ASC 718 “Compensation - Stock Compensation.”
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COMMITMENTS & CONTINGENCIES |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS & CONTINGENCIES | NOTE 4. COMMITMENTS & CONTINGENCIES
Legal Proceedings
We were not subject to any legal proceedings as of June 30, 2023 and to the best of our knowledge, no legal proceedings are pending or threatened.
The Company’s principal executive office is located at 370 Amapola Ave., Suite 200A, Torrance, CA 90501. The space is a shared office space, which at the current time is suitable for the conduct of our business. The Company has no real property and do not presently owned any interests in real estate.
From time to time, the Company may be involved in certain legal actions and claims arising in the normal course of business. Management is of the opinion that such matters will be resolved without material effect on the Company’s financial condition or results of operations.
Contractual Obligations
We were not subject to any contractual obligations as at June 30, 2023.
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NET PRINCIPAL TRANSACTIONS INCOME |
6 Months Ended | ||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||
| Revenue: | |||||||||||||||||||||
| NET PRINCIPAL TRANSACTIONS INCOME | NOTE 5. NET PRINCIPAL TRANSACTIONS INCOME
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The Company’s net income from principal transactions primarily consists of revenues from sales of trading securities less original purchase cost (cost of sales). Net principal transactions income primarily consists of income from trading securities earned upon completion of trade, net of any trading fees. A trading is completed when earned and recognized at a point in time, on a trade-date basis, as the Company executes trades.
Net trading revenue consisted of the following:
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SALES – INVESTMENT PROPERTY |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Real Estate [Abstract] | |
| SALES – INVESTMENT PROPERTY | NOTE 6. SALES – INVESTMENT PROPERTY
Due to the uncertainty related to the Real Estate Industry due to the ongoing Rate Hike by the US Fed Reserve, the company is holding off on its real estate acquisitions and dispositions program until more clarity is seen in the industry.
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LINE OF CREDIT / LOANS - RELATED PARTIES |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| LINE OF CREDIT / LOANS - RELATED PARTIES | NOTE 7. LINE OF CREDIT / LOANS - RELATED PARTIES
The Company considers its founders, managing directors, employees, significant shareholders, and the portfolio Companies to be affiliates. In addition, companies controlled by any of the above named is also classified as affiliates.
Line of credit from related party consisted of the following:
Los Angeles Community Capital - $1,500,000 line of credit
On May 5, 2020, the Company amended its line of credit agreement to increase it to the amount of $1,500,000 with maturity date of May 4, 2025. The line of credit bears interest at 0% per annum and interest and unpaid principal balance is payable on the maturity date. The Company has used $508,331 from the line of credit of as of June 30, 2023.
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EARNINGS (LOSS) PER SHARE |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EARNINGS (LOSS) PER SHARE |
Net Loss per Share Calculation:
Basic net loss per common share (“EPS”) is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding for the period. Dilutive earnings per share include the effect of any potentially dilutive debt or equity under the treasury stock method, if including such instruments is dilutive, assuming all dilutive potential common shares were issued. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. The Company’s diluted earnings per share is the same as the basic earnings per share for the period January 1, 2023 to June 30, 2023, as there are no potential shares outstanding that would have a dilutive effect.
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INCOME TAXES |
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| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAXES | NOTE 9. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A full valuation allowance is established against all net deferred tax assets as of June 30, 2023 and December 31, 2022 based on estimates of recoverability. While the Company has optimistic plans for its business strategy, it determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to its ability to generate sufficient profits from its business model.
We did not provide any current or deferred US federal income tax provision or benefit for any of the periods presented in these financial statements because we have accumulated substantial operating losses over the years. When it is more likely than not, that a tax asset cannot be realized through future income, we must record an allowance against any future potential future tax benefit. We have provided a full valuation allowance against the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward periods.
The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements as of June 30, 2023 and December 31, 2022 as defined under ASC 740, “Accounting for Income Taxes.” We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of the accumulated deficit on the balance sheet.
A reconciliation of the differences between the effective and statutory income tax rates for the period ended June 30, 2023 and December 31, 2022:
At June 30, 2023 and December 31, 2022, the significant components of the deferred tax assets are summarized below:
The Company has recorded as of June 30, 2023 and December 31, 2022, a valuation allowance of $4,071,360 and $4,262,546 respectively, as it believes that it is more likely than not that the deferred tax assets will not be realized in future years. Management has based its assessment on the Company’s lack of profitable operating history.
The valuation allowance $4,071,360 as at June 30, 2023 decreased by $73,297 compared to December 31, 2022 of $4,262,546, as a result of the Company generating additional net operating income of $735,334 .
The Company conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of June 30, 2023 and December 31, 2022.
The Company has net operating loss carry-forwards of approximately $15,659,075. Such amounts are subject to IRS code section 382 limitations and expire in 2033.
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RECENTLY ACCOUNTING PRONOUNCEMENTS |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Accounting Changes and Error Corrections [Abstract] | |
| RECENTLY ACCOUNTING PRONOUNCEMENTS | NOTE 10. RECENTLY ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Standards
ASU 2019-12 — In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019- 12, Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) Topic 740, Income Taxes. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 will be effective for the Company’s fiscal year beginning October 1, 2021, with early adoption permitted. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. The Company does not expect this ASU to have a material impact on its condensed consolidated financial statements.
ASU 2016-13 — In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which amends FASB ASC Topic 326, Financial Instruments - Credit Losses. In addition, in May 2019, the FASB issued ASU 2019-05, Targeted Transition Relief, which updates FASB ASU 2016-13. These ASU’s require financial assets measured at amortized cost to be presented at the net amount to be collected and broadens the information, including forecasted information incorporating more timely information, that an entity must consider in developing its expected credit loss estimate for assets measured. These ASU’s are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted for fiscal years beginning after December 15, 2018. Most of our financial assets are excluded from the requirements of this standard as they are measured at fair value or are subject to other accounting standards. In addition, certain of our other financial assets are short-term in nature and therefore are not likely to be subject to significant credit losses beyond what is already recorded under current accounting standards. As a result, we currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurements, which amends FASB ASC Topic 820, Fair Value Measurements. This ASU eliminates, modifies and adds various disclosure requirements for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain disclosures are required to be applied using a retrospective approach and others using a prospective approach. Early adoption is permitted. The various disclosure requirements being eliminated, modified or added are not significant to us. As a result, we currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which amends FASB ASC Subtopic 350-40, Intangibles-Goodwill and Other-Internal-Use Software. This ASU adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this ASU should be applied either using a retrospective or prospective approach. Early adoption is permitted. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this update provide such guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In January 2013, the FASB issued ASU No. 2013-01, “Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” This ASU clarifies that the scope of ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In February 2013, the FASB issued ASU No. 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The ASU adds new disclosure requirements for items reclassified out of accumulated other comprehensive income by component and their corresponding effect on net income. The ASU is effective for public entities for fiscal years beginning after December 15, 2013. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In February 2013, the Financial Accounting Standards Board, or FASB, issued ASU No. 2013-04, “Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date.” This ASU addresses the recognition, measurement, and disclosure of certain obligations resulting from joint and several arrangements including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2013. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This ASU addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should be released into net income and is intended by FASB to eliminate some disparity in current accounting practice. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In March 2013, the FASB issued ASU 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting.” The amendments require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments require financial statements prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The entity should include in its presentation of assets any items it had not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities (for example, trademarks). The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
We have reviewed all the recently issued, but not yet effective, accounting pronouncements. Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
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INVESTMENT SECURITIES (TRADING) |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Investments, All Other Investments [Abstract] | |
| INVESTMENT SECURITIES (TRADING) | NOTE 11. INVESTMENT SECURITIES (TRADING)
The Company applied the fair value accounting treatment for trading securities per ASC 320, with unrealized gains and losses recorded in net income each period. Debt securities classified as trading should be measured at fair value in the currency in which the debt securities are denominated and remeasured into the investor’s functional currency using the spot exchange rate at the balance sheet date.
Trading securities are treated using the fair value method, whereby the value of the securities on the company’s balance sheet is equivalent to their current market value. These securities will be recorded in the current assets section under the Investment Securities account and will be offset in the shareholder’s equity section under the unrealized proceeds from sale of short-term investments” account. The Short Term Investments account amount represents the current market value of the securities, and the “Unrealized Proceeds From Sale of Short Term Investments” account represents the cash proceeds that the company would receive if it were to sell the investments at the end of the specified accounting period.
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REAL ESTATE INVESTMENTS |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Real Estate [Abstract] | |
| REAL ESTATE INVESTMENTS | NOTE 12. REAL ESTATE INVESTMENTS
Current Holdings of Real Estate Investments (Inventory):
As of June 30, 2023, the Company has $0.00 real estate investment holding inventory.
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MARGINAL LOAN PAYABLE |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Marginal Loan Payable | |
| MARGINAL LOAN PAYABLE | NOTE 13. MARGINAL LOAN PAYABLE
As of June 30, 2023, the Company has $0.00 marginal loan outstanding.
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RELATED PARTY TRANSACTIONS |
6 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | |||||||
| Related Party Transactions [Abstract] | |||||||
| RELATED PARTY TRANSACTIONS | NOTE 14. RELATED PARTY TRANSACTIONS
The managing member, CEO and director of the Company is involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, he may face a conflict in selecting between the Company and his other business interests. The Company is formulating a policy for the resolution of such conflicts.
The Company had the following related party payable transactions:
On December 30, 2022, the Company sold nine of its EDI Notes and one Mortgage Note to Los Angeles Community Capital (LA Community Capital), a Company controlled by our President and CEO, in exchange for long-term debt owed to LA Community Capital and its affiliates. The EDI Notes were sold at their face (stated) amount without discount and the Mortgage Note was sold at face (stated) amount plus accrued interest. The EDI Notes has a total face amount of $3.5 million while the Mortgage Notes has a face amount of $2.2 million and accrued interest total of $0.11 million as at December 30, 2022, the date of the sale/purchase transaction.
The Company had the following related party investment transactions:
The Company does not own any property. It currently shares a leased office with two other organizations that are affiliated to its principal shareholder at 370 Amapola Ave., Suite 200A, Torrance, California 90501. Its principal shareholder and seasonal staff use this location. The approximate cost of the shared office space varies between $650 and $850 per month.
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MERGERS AND ACQUISITIONS |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Business Combination and Asset Acquisition [Abstract] | |
| MERGERS AND ACQUISITIONS | NOTE 15. MERGERS AND ACQUISITIONS
On September 15, 2020, Video River Networks, Inc. (the “Company”) entered into a stock purchase agreement with certain corporation related to our President and CEO with respect to the private placement of shares of its preferred stock at a purchase price of $3 in cash and a transfer of 100% interest in, and control of Community Economic Development Capital, LLC (a California Limited Liability Company). The shares were issued to the investors without registration under the Securities Act of 1933 based upon exemptions from registration provided under Section 4(2) of the Act and Regulation D promulgated thereunder. The issuance did not involve any public offering; no general solicitation or general advertising was used in connection with the offering. Community Economic Development Capital, is a specialty real estate holding company for specialized assets including, affordable housing, opportunity zones properties, medical real estate investments, industrial and commercial real estate, and other real estate related services.
Similarly, on September 16, 2020, as part of its purchase of unregistered securities from certain corporation related to our President and CEO, the Company, received $3.00 in cash and shares of its preferred stock, and in exchange transferred 100% interest in, and control of Community Economic Development Capital, LLC (“CED Capital”), a California Limited Liability Company, and 97% of the issued and outstanding shares of Cannabinoid Biosciences, Inc. (“CBDX”), to GiveMePower Corporation, a Nevada corporation. This transaction gave the Company 88% of the voting control of GiveMePower. As at the time of this transaction, all four businesses involved in the transaction were controlled by Mr. Frank I Igwealor. Because both the buyer and seller in the above acquisitions were under the control of the same person, the transaction was classified as “common control transaction and therefore fall under “Transactions Between Entities Under Common Control” subsections of ASC 805-50. This transaction was therefore accounted for under the Consolidation Method using the variable interest entity (VIE) model wherein we consolidate all investees operating results if we expect to assume more than 50% of another entity’s expected losses or gains.
On April 21, 2021, the Company sold Cannabinoid Biosciences, Inc. (“CBDX”), a California corporation, to Premier Information Management, Inc. for $1 in cash. As further consideration pursuant to the stated sales, CBDX returned Kid Castle Educational Inc., the parent Company of GMPW, the shares of KDCE preferred stock and shares of KDCE common stock that CBDX bought in October of 2019. Pursuant to the April 21, 2021 transaction, CBDX ceased from being a subsidiary of GMPW, effective April 1, 2021.
On December 30, 2021, GMPW repurchased back from KDCE, the GMPW preferred share, which controls 87% voting block of GMPW, held by Kid Castle Educational Corporation, a subsidiary of Video River Networks, Inc. both of which are publicly traded companies with ticker symbols KDCE and NIHK respectively. In exchange, GMPW delivered 100% control of one of its subsidiaries, Alpharidge Capital LLC (“Alpharidge”) to KDCE. Alpharidge is now a direct subsidiary of KDCE, which is a direct subsidiary of Video River Networks, Inc.
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SHAREHOLDERS’ EQUITY |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Equity [Abstract] | |
| SHAREHOLDERS’ EQUITY | NOTE 16. SHAREHOLDERS’ EQUITY
Preferred Stock
As of June 30, 2023 and December 31, 2022, we were authorized to issue shares, and we have issued share of preferred stock with a par value of $0.001.
The Company has and shares of preferred stock were issued and outstanding as at June 30, 2023 and December 31, 2022.
Common Stock
The Company is authorized to issue shares of common stock with a par value of $ As at June 30, 2023 and December 31, 2022.
Twelve Months ended December 31, 2022
The Company has issued shares of our common stock to Professional service providers as payment for their services. As at June 30, 2023, the Company has as common stock issued and outstanding, held by more than 169 shareholders.
Warrants
No warrants were issued or outstanding as at June 30, 2023 and December 31, 2022.
Stock Options
The Company has never adopted a stock option plan and has never issued any stock options.
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SUBSEQUENT EVENTS |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 17. SUBSEQUENT EVENTS
Pursuant to ASC 855-10, the Company evaluated subsequent events after June 30, 2023 through August 18, 2023, the date these financial statements were issued and has determined there have been no subsequent events for which disclosure is required. The Company did not have any material recognizable subsequent events that required disclosure in these financial statements. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
A summary of significant accounting policies is presented to assist in the understanding of the financial statements. These policies conform to accounting principles generally accepted in the United States of America and have been consistently applied. The Company has elected a calendar year of December 31 year-end.
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| Principles of Consolidation | Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its subsidiaries, in which the Company has a controlling voting interest and entities consolidated under the variable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”). The consolidated financial statements include the Company and Video River Networks, Inc., and all its controlled subsidiary companies. All significant intercompany accounts and transactions have been eliminated. Investments in business entities in which we do not have control, but we could exercise significant influence over operating and financial policies (generally 20% to 50% ownership) are accounted for using the equity method of accounting. Operating results of acquired businesses are included in the Consolidated Statements of Income from the date of acquisition. We consolidate variable interest entities if we have operational and financial control and are deemed to be the >50.1% beneficiary of the profit and loss of the entity. Operating results for variable interest entities in which we are determined to be the primary beneficiary are included in the Consolidated Statements of Income from the date such determination is made.
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| COVID-19 Risks, Impacts and Uncertainties | COVID-19 Risks, Impacts and Uncertainties
COVID-19 Risks, Impacts and Uncertainties — We are subject to the risks arising from COVID-19’s impact on the residential real estate industry. Our management believes that these impacts, which include but are not limited to the following, could have a significant negative effect on our future financial position, results of operations, and cash flows: (i) prohibitions or limitations on in-person activities associated with residential real estate transactions; (ii) lack of consumer desire for in-person interactions and physical home tours; and (iii) deteriorating economic conditions, such as increased unemployment rates, recessionary conditions, lower yields on individuals’ investment portfolios, and more stringent mortgage financing conditions. In addition, we have considered the impacts and uncertainties of COVID-19 in our use of estimates in preparation of our consolidated financial statements. These estimates include, but are not limited to, likelihood of achieving performance conditions under performance-based equity awards, net realizable value of inventory, and the fair value of reporting units and goodwill for impairment.
From April 2020, following the government lockdown order, we asked all employees to begin to work from their homes and we also reduced the number of hours available to each of our employees by approximately by approximately 75%. These actions taken in response to the economic impact of COVID-19 on our business resulted in a reduction of productivity for the period ended June 30, 2023 and subsequent quarterly periods. All costs related to these actions are included in general and administrative expenses, as these costs were determined to be direct and incremental.
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| Use of Estimates and Assumptions | Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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| Cash and Cash Equivalents | Cash and Cash Equivalents
We maintain cash balances in a non-interest-bearing account that currently does not exceed federally insured limits. For the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. as of June 30, 2023 and December 31, 2022 we did maintain $7,948 and $64,579 balance of cash equivalents respectively.
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| Financial Instruments | Financial Instruments
The estimated fair values for financial instruments were determined at discrete points in time based on relevant market information. These estimates involved uncertainties and could not be determined with precision. The carrying amount of our accounts payable and accruals, our accruals- related parties and loans – related parties approximate their fair values because of the short-term maturities of these instruments.
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| Fair Value Measurements: | Fair Value Measurements:
ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.
Level 2 – Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.
Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.
Our financial instruments consist of accounts payable and accruals and our accruals- related parties. The carrying amount of the out accounts payable and accruals, accruals- related parties and loans – related parties approximates their fair values because of the short-term maturities of these instruments.
The table below describes the Company’s valuation of financial instruments using guidance from ASC 820-10:
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| Investment – Trading Securities | Investment – Trading Securities
All investment securities are classified as trading securities and are carried at fair value in accordance with ASC 320 Investments — Debt and Equity Securities. Investment transactions are recorded on a trade date basis. Realized gains or losses on sales of investments are based on the first-in, first-out or the specific identification method. Realized and unrealized gains or losses on investments are recorded in the statements of operations as realized and unrealized gains or losses as net revenue. All investment securities are held and transacted by the Company’s broker firm. The Company did not hold more than 4.9% of equity of the shares of any public companies as investments as of June 30, 2023.
All investments that are listed on a securities exchange are valued at their last sales price on the primary securities exchange on which such securities are traded on such date. Securities that are not listed on any exchange but are traded over-the-counter are valued at the mean between the last “bid” and “ask” price for such security on such date. The Company does not have any investment securities for which market quotes are not readily available.
The Company’s trading securities are held by a third-party brokerage firm, and composed of publicly traded companies with readily available fair value which are quoted prices in active markets.
Investments
The Company makes certain strategic investments related to its business which are included in other assets in the condensed consolidated statements of financial condition. The Company accounts for these investments as follows:
A judgmental aspect of accounting for investments is evaluating whether a decline in the value of an investment has occurred. The evaluation of impairment is dependent on specific quantitative and qualitative factors and circumstances surrounding an investment, including recurring operating losses, credit defaults and subsequent rounds of financing. Most of the Company’s equity investments do not have readily determinable market values. All investments are reviewed for changes in circumstances or occurrence of events that suggest the Company’s investment may not be recoverable. An impairment loss, if any, is recognized in the period the determination is made. For the year ended December 31, 2022, the Company carried on its balance sheet, Investments in the total amount of $1,869,748. Following the collapse of the Silicon Valley Bank, due to semi-permanent impairment of securities in its investment portfolio, the Company reviewed its Investment portfolio and concluded that some of the Company’s investment may not be recoverable. Using a mark-to-market approach, the Company wrote down and reserved $1,316,237 of its Investment portfolio, as impairment loss on it Investments portfolio. As at June 30, 2023, the balance of $1,548,703 in the portfolio for a net balance of $232,268.
Significant Transaction
Significant Transaction, also known as common control transactions occur frequently, particularly in the context of reorganizations, spinoffs, and initial public offerings. Common control transactions are generally accounted for by the receiving entity based on the nature of the transactions. For example, transactions involving the transfer of an asset (such as an unoccupied building) are accounted for by the receiving entity at the carrying value of the asset transferred on a prospective basis. Conversely, transactions involving the transfer of a business ordinarily will result in a change in reporting entity for the receiving entity and require retrospective combination of the entities for all periods presented using the historical cost basis of the parent.
ASC 850 covers transactions and relationships with related parties. It applies to all reporting entities, including the separate financial statements of a subsidiary, as discussed in ASC 850-10-15-2. Identifying related party relationships and transactions requires a reporting entity to first determine whether a party meets the definition of a “related party.”
ASC 850-10-20 described related parties to include:
The following definitions applies under ASC 850-10-20
Affiliate: A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity.
Control: The possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity through ownership, by contract, or otherwise.
Immediate family: Family members who might control or influence a principal owner or a member of management, or who might be controlled or influenced by a principal owner or a member of management, because of the family relationship.
Management: Persons who are responsible for achieving the objectives of the entity and who have the authority to establish policies and make decisions by which those objectives are to be pursued. Management normally includes members of the board of directors, the chief executive officer, chief operating officer, vice presidents in charge of principal business functions (such as sales, administration, or finance), and other persons who perform similar policy making functions. Persons without formal titles also may be members of management.
Principal owners: Owners of record or known beneficial owners of more than 10% of the voting interests of the entity.
FASB Statement No. 141 (EITF 02-5), in conjunction with SEC staff’s conclusions in EITF 02-5 stated that common control exists between (or among) separate entities in the following situations:
During the year ended December 31, 2022, the Company recorded several significant transactions including loans from our officers, directors, and entities under the control or influence of our officers and directors.
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| Related Party Transactions: | Related Party Transactions:
A related party is generally defined as (i) any person that holds 10% or more of our membership interests including such person’s immediate families, (ii) our management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with us, or (iv) anyone who can significantly influence our financial and operating decisions. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. During the period under review, the Company sold nine of its EDI Notes and one Mortgage Note to Los Angeles Community Capital (LA Community Capital), a Company controlled by our President and CEO, in exchange for long-term debt owned to LA Community Capital and its affiliates. The EDI Notes were sold at their face (stated) amount without discount and the Mortgage Note was sold at face (stated) amount plus accrued interest. The EDI Notes has a total face amount of $3.5 million while the Mortgage Notes has a face amount of $2.2 million and accrued interest total of $0.11 million as at December 30, 2022, the date of the sale/purchase transaction.
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| Revenue, Assets and Liabilities of Consolidated Subsidiary and Financial Statement Relationship | Revenue, Assets and Liabilities of Consolidated Subsidiary and Financial Statement Relationship
As at June 30, 2023 Video River Networks, Inc. has a 81.75% controlling stake in Kid Castle Educational Corporation. Because of the consolidated subsidiary relationship between these two companies, the singular Revenue, Assets and Liabilities recognized and disclosed on the financial statements of Kid Castle Educational Corporation are also recognized and disclosed on the financial statements of Video River Networks, Inc. pursuant to ASC 810.
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| Leases: | Leases:
In February 2016, the FASB issued ASU 2016-02, “Leases” that requires for leases longer than one year, a lessee to recognize in the statement of financial condition a right-of-use asset, representing the right to use the underlying asset for the lease term, and a lease liability, representing the liability to make lease payments. The accounting update also requires that for finance leases, a lessee recognize interest expense on the lease liability, separately from the amortization of the right-of-use asset in the statements of earnings, while for operating leases, such amounts should be recognized as a combined expense. In addition, this accounting update requires expanded disclosures about the nature and terms of lease agreements. The Company has reviewed the new standard and does not expect it to have a material impact to the statement of financial condition or its net capital.
Prior to January 1, 2019, the Company accounted for leases under Accounting Standards Codification (ASC) 840, Accounting for Leases. Effective from January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. On February 25, 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. ASC 842 requires that lessees recognize right of use assets and lease liabilities calculated based on the present value of lease payments for all lease agreements with terms that are greater than twelve months. It requires for leases longer than one year, a lessee to recognize in the statement of financial condition a right·of·use asset, representing the right to use the underlying asset for the lease term, and a lease liability, representing the liability to make lease payments. ASC 842 distinguishes leases as either a finance lease or an operating lease that affects how the leases are measured and presented in the statement of operations and statement of cash flows. ASC 842 supersedes nearly all existing lease accounting guidance under GAAP issued by the Financial Accounting Standards Board (“FASB”) including ASC Topic 840, Leases.
The accounting update also requires that for finance leases, a lessee recognize interest expense on the lease liability, separately from the amortization of the right-of-use asset in the statements of earnings, while for operating leases, such amounts should be recognized as a combined expense. In addition, this accounting update requires expanded disclosures about the nature and terms of lease agreements.
The Company does not have operating and financing leases as of June 30, 2023. The adoption of ASC 842 did not materially impact our results of operations, cash flows, or presentation thereof. The Company has reviewed the new standard and does not expect it to have a material impact to the statement of financial condition or its net capital.
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| Income Taxes: | Income Taxes:
Under the asset and liability method prescribed within ASC 740, Income Taxes, the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The realizability of deferred tax assets is assessed throughout the year and a valuation allowance is recorded if necessary, to reduce net deferred tax assets to the amount more likely than not to be realized. Certain prior period deferred tax disclosures were reclassified to conform with current period presentation.
ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. ASC 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
The Company’s practice is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in selling and administrative expense. as of June 30, 2023, the Company had no accrued interest or penalties on unrecognized tax benefits.
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
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| Uncertain Tax Positions: | Uncertain Tax Positions:
We evaluate tax positions in a two-step process. We first determine whether it is more likely than not that a tax position will be sustained upon examination, based on the technical merits of the position. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We classify gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as long term liabilities in the financial statements.
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| Revenue Recognition: | Revenue Recognition:
The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criteria standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustment was recorded.
The Company generates revenue primarily from: (1) the sale of homes/properties, (2) commissions and fees charged on each real estate services transaction closed by our lead agents or partner agents, (3) entrepreneurship development revenue, and (4) principal transaction sales of trading securities using its broker firm, less original purchase cost. Net trading revenues primarily consist of revenues from trading securities earned upon completion of trade, net of any trading fees. A trading is completed when earned and recognized at a point in time, on a trade-date basis, as the Company executes trades. The Company records trading revenue on a net basis, trading sales less original purchase cost. Net realized gains and losses from securities transactions are determined for federal income tax and financial reporting purposes on the first-in, first-out method and represent proceeds on disposition of investments less the cost basis of investments. Sale of real estate properties are recognized at the sales price/amount and the total cost (including cost of rehabilitation) associated with the property acquisition and rehabilitation are classified in Cost of Goods Sold (COGS).
Revenue Recognition – Sale of homes/properties,
This business segment produced zero revenue during the period ended June 30, 2023.
Revenue Recognition – Principal (securities) transactions
The Company records securities transactions and related revenue and expenses on a trade-date basis. Other income is recognized when earned.
Interest Income and Expense
The Company earns interest income and incurs interest expense primarily in connection with its electronic brokerage customer business and its securities lending activities, which are recorded on an accrual basis and are included in interest income and interest expense, respectively, in the condensed consolidated statements of comprehensive income.
During the period ended June 30, 2023, the Company did recognized revenue of $33,542 in net interest income.
Principal Transactions
Principal transactions include gains and losses as a result of changes in the fair value of financial instruments owned, at fair value, financial instruments sold, but not yet purchased, at fair value, and other investments measured at fair value (i.e., unrealized gains and losses) and realized gains and losses related to the Company’s principal transactions. Included are net gains and losses on stocks, options, U.S. and foreign government securities, municipal securities, futures, foreign exchange, precious metals and other derivative instruments, which are reported on a net basis in other income in the condensed consolidated statements of comprehensive income. Dividends are integral to the valuation of stocks. Accordingly, dividend income and expense attributable to financial instruments owned, at fair value and financial instruments sold, but not yet purchased, at fair value, are reported on a net basis in other income in the condensed consolidated statements of comprehensive income.
During the period ended June 30, 2023, the Company did recognized net revenue $(304,172) from principal transaction.
Contract balances
Substantially all receivables from contracts with customers within the scope of Accounting Standards Codification (ASC) 606 Revenue From Contracts With Customers (ASC 606), are included in other assets on the condensed consolidated balance sheets.
Unsatisfied performance obligations
We do not have any unsatisfied performance obligations other than those that are subject to an elective practical expedient under ASC 606. The practical expedient applies to and is elected for contracts where we recognize revenue at the amount to which we have the right to invoice for services performed.
During the period ended June 30, 2023, the Company did not have any unsatisfied performance obligations (other than those that are subject to an elective practical expedient under ASC 606).
Revenue Recognition – Entrepreneurship Development
Under ASC 606, an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. FASB ASC 606-10-05-3 through 05-4 and 606-10-10-2 through 10-4. To achieve the core principle of ASC 606, an entity should take the following actions: Step 1: Identify the contract with a customer; Step 2: Identify the performance obligations in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price; and Step 5: Recognize revenue when or as the entity satisfies a performance obligation.
Revenue is recognized when a company satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). An entity should consider the terms of the contract and all relevant facts and circumstances when applying the revenue recognition standard. An entity should apply the revenue recognition standard, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances.
As of June 30, 2023, our Entrepreneurship Development Revenue was derived from the sale of asset (control in pubco) to the buyer who assumes control of the pubco at the close of the sales transaction. A sale transaction could involve cash-only, cash and note, or note-only. For the contract that includes financing or convertible note, the seller evaluated the collectibility of the transaction price, and the probability that the seller will collect the consideration. Seller addressed the risk of collectability by using a convertible note with very favorable conversion.
Determining whether a sale is to a customer: Per ASC 610-20-15-4(a), if the counterparty in the transaction is a customer and the assets being transferred are an output of the reporting entity’s ordinary activities, the transaction is within the scope of ASC 606. As stated in ASC 606, a customer is a party that has contracted with an entity to obtain goods or services that are an output of the reporting entity’s ordinary activities in exchange for consideration (e.g., a car manufacturer sells a car that it produced to a customer, a homebuilder sells a home that it developed to a customer).
Step 1: A sales contract/agreement (SPA) is used to consummate the sale. Buyer and seller signed the SPA and other collateral documents including the Notes and other documents designed to ensure collectability if the sale is cash-and-note or note-only. Where the sale was not an all-cash transaction, seller evaluated the collectibility of the transaction price, or the probability that the seller will collect the consideration.
Step 2: Identify the performance obligations in the contract. All performance obligations under the SPA must be completed prior to the close of the transaction. Our Entrepreneurship Development revenue was only recognized after all performance obligations has been performed or completed.
Step 3: Determine the transaction price. The transaction price for each sale recognized as EDI revenue was listed on the face of the contract.
Step 4: Allocate the transaction price. The transaction price is allocated based on the relative standalone selling price of each specific good or service promised to the customer. Since EDI revenue did not involve bundled services, rather EDI assets are accounted for as a standalone transaction, the total sale price is recognized immediately.
Step 5: Recognize revenue. Revenue is recognized as the seller satisfies a performance obligation by transferring control of the promised good or service to the customer. As of June 30, 2023, we recognized all EDI sales completed in the period because we satisfied the performance obligation by transferring control of the pubco to the customer and made adequate provision for the collectability of the convertible notes.
Entrepreneurship Development revenues: Revenues and cost of revenues from pubco-control sales are recognized at the time each pubco-control is delivered and title and possession are transferred to the buyer. For the majority of our pubco-control closings, our performance obligation to deliver a control of the pubco is satisfied in less than one month from the date a binding sale agreement is signed. In certain circumstances where we have not completed the cleaning process to rid the pubco of legacy liabilities, we are not able to complete the sale under one month, and the sale may drag for up to 24 months to allow buyer and seller sufficient time to diligently complete the cleanup work. To the extent these separate performance obligations are not complete upon the home closing, we defer a portion of the pubco-control sales revenues related to these obligations and subsequently recognize the revenue upon completion of such obligations. As of June 30, 2023, the pubco-control sales revenues and related costs we deferred related to these obligations were immaterial. Our contract liabilities, consist of deposits received from customers for sold but undelivered pubco-control.
Sales Incentives: In order to promote sales of our pubco-control, we may offer buyers’ agent sales incentives. These incentives vary by type of incentive and by amount on cash component of the transaction and on a pubco-by-pubco basis. Incentives are reflected as a reduction in pubco-control sales revenues. Incentives are recognized at the time the pubco-control is delivered to the buyer and we receive the sales proceeds in either cash or notes.
During the six months ended June 30, 2023, the Company did recognized revenue of $1,154,370 consisting $(304,172) net principal transaction, and $1,425,000 from the Entrepreneurship Development Initiative, and $33,542 in Interest income respectively.
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| Advertising Costs: | Advertising Costs:
We expense advertising costs when advertisements occur. During the six months ended June 30, 2023, the Company did recognized advertising costs of $468 compared to $4,063 it spent in same period of 2022.
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| Concentrations of Credit Risk | Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. The Company maintains cash balances at financial institutions within the United States which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to limits of approximately $250,000. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts. It is possible that at times, the company’s cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. In such situation, the Company’s management would assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures would be addressed and mitigated.
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| Stock Based Compensation: |
The cost of equity instruments issued to non-employees in return in accordance with ASC 505-50 “Equity-Based Payments to Non-Employees” for goods and services is measured by the fair value of the goods or services received or the measurement date fair value of the equity instruments issued, whichever is the more readily determinable. Measurement date for non-employees is the earlier of performance commitment date or the completion of services. The cost of employee services received in exchange for equity instruments is based on the grant date fair value of the equity instruments issued in accordance with ASC 718 “Compensation - Stock Compensation.” |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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| SCHEDULE OF FINANCIAL INSTRUMENTS | The table below describes the Company’s valuation of financial instruments using guidance from ASC 820-10:
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NET PRINCIPAL TRANSACTIONS INCOME (Tables) |
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| SCHEDULE OF NET TRADING REVENUE | Net trading revenue consisted of the following:
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LINE OF CREDIT / LOANS - RELATED PARTIES (Tables) |
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| SCHEDULE OF LINE OF CREDIT FROM RELATED PARTY | Line of credit from related party consisted of the following:
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EARNINGS (LOSS) PER SHARE (Tables) |
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| SCHEDULE OF EARNINGS (LOSS) PER SHARE |
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INCOME TAXES (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION | A reconciliation of the differences between the effective and statutory income tax rates for the period ended June 30, 2023 and December 31, 2022:
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| SCHEDULE OF DEFERRED TAX ASSETS | At June 30, 2023 and December 31, 2022, the significant components of the deferred tax assets are summarized below:
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GOING CONCERN (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
| Revenue | $ 773,438 | $ 1,417,571 | $ 1,154,370 | $ 2,456,521 | |
| Accumulated deficit | $ 15,659,075 | $ 15,659,075 | $ 16,394,409 | ||
SCHEDULE OF FINANCIAL INSTRUMENTS (Details) - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Fair Value, Inputs, Level 1 [Member] | ||
| Platform Operator, Crypto-Asset [Line Items] | ||
| Investments, Fair Value | $ 54,708 | $ 143,198 |
| Fair Value, Inputs, Level 2 [Member] | ||
| Platform Operator, Crypto-Asset [Line Items] | ||
| Investments, Fair Value | ||
| Fair Value, Inputs, Level 3 [Member] | ||
| Platform Operator, Crypto-Asset [Line Items] | ||
| Investments, Fair Value |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|---|
Dec. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
| Product Information [Line Items] | ||||||
| Variable interest entity percentage description | We consolidate variable interest entities if we have operational and financial control and are deemed to be the >50.1% beneficiary of the profit and loss of the entity. Operating results for variable interest entities in which we are determined to be the primary beneficiary are included in the Consolidated Statements of Income from the date such determination is made | |||||
| Cash equivalents | $ 7,948 | $ 7,948 | $ 64,579 | |||
| Equity investment description | The Company did not hold more than 4.9% of equity of the shares of any public companies as investments as of June 30, 2023 | |||||
| Proceeds from impairment charge | $ (321,046) | $ 222,824 | 1,316,237 | |||
| Investment | 1,548,703 | $ 1,548,703 | ||||
| Related party transaction, description | any person that holds 10% or more of our membership interests including such person’s immediate families, (ii) our management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with us, or (iv) anyone who can significantly influence our financial and operating decisions. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties | |||||
| Interest income | $ 33,542 | |||||
| Net revenue | 773,438 | $ 1,417,571 | 1,154,370 | 2,456,521 | ||
| Advertising expense | 468 | 4,063 | ||||
| Cash, FDIC insured amount | 250,000 | 250,000 | ||||
| Principal Transactions [Member] | ||||||
| Product Information [Line Items] | ||||||
| Net revenue | $ (192,541) | $ (85,762) | (304,172) | $ (396,812) | ||
| Entrepreneurship Development Initiative [Member] | ||||||
| Product Information [Line Items] | ||||||
| Net revenue | $ 1,425,000 | |||||
| Kid Castle Educational Corporation [Member] | Parent Company [Member] | ||||||
| Product Information [Line Items] | ||||||
| Ownership percentage | 81.75% | 81.75% | ||||
| Line of Credit Agreement [Member] | ||||||
| Product Information [Line Items] | ||||||
| Debt instrument face amount | $ 3,500,000 | |||||
| Accrued interest | 110,000 | |||||
| Line of Credit Agreement [Member] | EDI [Member] | ||||||
| Product Information [Line Items] | ||||||
| Debt instrument face amount | $ 2,200,000 | |||||
| Related Party [Member] | ||||||
| Product Information [Line Items] | ||||||
| Long-Term Investments | $ 232,268 | $ 232,268 | 553,314 | |||
| Equity Method Investments [Member] | ||||||
| Product Information [Line Items] | ||||||
| Investments | $ 1,869,748 | |||||
SCHEDULE OF NET TRADING REVENUE (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Disaggregation of Revenue [Line Items] | ||||
| Total Revenue | $ 773,438 | $ 1,417,571 | $ 1,154,370 | $ 2,456,521 |
| Trading Securities [Member] | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Total Revenue | (304,172) | |||
| Net income from trading securities | $ (304,172) | |||
SCHEDULE OF LINE OF CREDIT FROM RELATED PARTY (Details) - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Short-Term Debt [Line Items] | ||
| Total Line of credit - related party | $ 508,331 | $ 419,979 |
| Less: current portion | ||
| Total Long-term Line of credit - related party | 508,331 | 419,979 |
| May 2020 [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total Line of credit - related party | $ 508,331 | $ 419,979 |
SCHEDULE OF LINE OF CREDIT FROM RELATED PARTY (Details) (Parenthetical) - May 2020 [Member] |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
| Line of Credit Facility [Line Items] | ||
| Line of credit, maturity date | May 04, 2025 | May 04, 2025 |
| Line of credit, interest rate | 0.00% | 0.00% |
LINE OF CREDIT / LOANS - RELATED PARTIES (Details Narrative) - USD ($) |
May 05, 2020 |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|---|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
| Line of credit | $ 508,331 | $ 419,979 | |
| Line of Credit Agreement [Member] | Los Angeles Community Capital [Member] | |||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
| Line of credit | $ 1,500,000 | ||
| Line of credit maturity date | May 04, 2025 | ||
| Line of credit interest rate | 0.00% | ||
| Unused line of credit | $ 508,331 |
SCHEDULE OF EARNINGS (LOSS) PER SHARE (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
| Earnings Per Share [Abstract] | |||||
| Net income | $ 735,334 | $ 767,120 | |||
| Dividends | 1 | ||||
| Adjusted Net income attribution to stockholders | $ 735,334 | $ 767,121 | |||
| Weighted-average shares of common stock outstanding | |||||
| Weighted Average Common Shares Outstanding, Basic | 182,370,497 | 182,370,497 | 182,370,497 | 182,370,497 | 182,370,497 |
| Weighted Average Common Shares Outstanding, Diluted | 182,370,497 | 182,370,497 | 182,370,497 | 182,370,497 | 182,370,497 |
| Net income per share | |||||
| Net income per share, Basic | $ 0.0025 | $ 0.0053 | $ 0.0040 | $ 0.0086 | $ 0.0086 |
| Net income per share, Diluted | $ 0.0025 | $ 0.0053 | $ 0.0040 | $ 0.0086 | $ 0.0086 |
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION (Details) - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
| Income Tax Disclosure [Abstract] | ||
| Federal statutory rates, percent | 21.00% | |
| Federal statutory rates | $ (3,288,406) | $ (3,442,826) |
| State income taxes, percent | 5.00% | |
| State income taxes | $ (782,954) | (819,720) |
| Permanent differences, percent | (0.50%) | |
| Permanent differences | $ 78,295 | 81,972 |
| Valuation allowance against net deferred tax assets, percent | (25.50%) | |
| Valuation allowance against net deferred tax assets | $ 3,993,064 | 4,180,574 |
| Effective rate, percent | 0.00% | |
| Effective rate |
SCHEDULE OF DEFERRED TAX ASSETS (Details) - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Income Tax Disclosure [Abstract] | ||
| Net operation loss carryforwards | $ 15,659,075 | $ 16,394,409 |
| Total deferred income tax asset | 4,071,360 | 4,262,546 |
| Less: valuation allowance | (4,071,360) | (4,262,546) |
| Total deferred income tax asset |
INCOME TAXES (Details Narrative) - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
| Income Tax Disclosure [Abstract] | ||
| Valuation allowance | $ 4,071,360 | $ 4,262,546 |
| Deferred tax assets | 4,071,360 | $ 4,262,546 |
| Valuation allowance deferred tax asset increase decrease amount | 73,297 | |
| Operating income loss | 735,334 | |
| Net operating loss carryforwards | $ 15,659,075 | |
| Operating loss carryforwards expire | 2033 |
REAL ESTATE INVESTMENTS (Details Narrative) |
Jun. 30, 2023
USD ($)
|
|---|---|
| Real Estate [Abstract] | |
| Real estate investment holding inventory | $ 0.00 |
MARGINAL LOAN PAYABLE (Details Narrative) |
Jun. 30, 2023
USD ($)
|
|---|---|
| Mortgages [Member] | |
| Debt Instrument [Line Items] | |
| Marginal loan payable | $ 0.00 |
SHAREHOLDERS’ EQUITY (Details Narrative) - $ / shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2022 |
Jun. 30, 2023 |
|
| Equity [Abstract] | ||
| Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
| Preferred stock, shares issued | 1 | 1 |
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares outstanding | 1 | 1 |
| Common stock, shares authorized | 200,000,000 | 200,000,000 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Number of shares issued for services | 4,448,061 | |
| Common stock, shares issued | 182,370,497 | 182,370,497 |
| Common stock, shares outstanding | 182,370,497 | 182,370,497 |
| Warrants issued | 0 | 0 |
| Warrants outstanding | 0 | 0 |
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