10-Q/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

[   ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to __________

Commission file number: 000-53537

Value Exchange International, Inc.

(Exact name of registrant as specified in its charter)

Nevada	26-3767331
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Unit 602, Block B, 6 Floor,

Shatin Industrial Centre, 5-7 Yuen Shun Circuit,

Shatin, N.T., Hong Kong

(Address of principal executive offices) (Zip Code)

(852) 29504288

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class	Trading Symbol	Name of Each Exchange on Which Registered
None	N/A	N/A

Indicate by check mark whether the registrant (1) has filed reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes [X] No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, Emerging Growth Company or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

[   ]	Large accelerated filer	[   ]	Accelerated filer
[   ]	Non-accelerated filer (Do not check if a smaller reporting company)	[X]	Smaller reporting company
[   ]	Emerging Growth Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [   ] No [X].

As of May 8, 2021, there were 36,156,130 shares of common stock issued and outstanding. The registrant’s common stock is quoted on the OTCQB Venture Market of The OTC Markets Group, Inc. under the trading symbol “VEII.”

1

EXPLANATORY NOTE

The purpose of this Amendment No. 1 (this “Amendment”) to our Quarterly Report on Form 10-Q for the period ended March 31, 2021 (the “Form 10-Q”), as filed with the Securities and Exchange Commission (the “SEC”) on May 17, 2021, is solely to furnish Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. Exhibit 101 to this report provides the consolidated financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).

In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications of our principal executive officer and principal financial officer are filed as exhibits to this Amendment.

This Amendment makes no other changes to the Form 10-Q as filed with the SEC on May 17, 2021, and no attempt has been made in this Amendment to modify or update the other disclosures presented in the Form 10-Q. This Amendment does not reflect subsequent events occurring after the original filing of the Form 10-Q (i.e., those events occurring after May 17, 2021) or modify or update in any way those disclosures that may be affected by subsequent events. Accordingly, this Amendment should be read in conjunction with the Form 10-Q and our other filings with the SEC.

2

FORM 10-Q

Value Exchange International, Inc.

INDEX

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk	33
Item 4. Controls and Procedures	33
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	34
Item 1A. Risk Factors	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3. Defaults Upon Senior Securities	34
Item 4. Mine Safety Disclosures	34
Item 5. Other Information	34
Item 6. Exhibits	35
Signatures	36

3

ITEM 1. FINANCIAL STATEMENTS

VALUE EXCHANGE INTERNATIONAL, INC.

Financial Statements

	Page
Consolidated Balance Sheets (unaudited)	5
Consolidated Statements of Operations and Comprehensive Income (unaudited)	6
Consolidated Statements of Shareholders’ Equity (unaudited)	7
Consolidated Statements of Cash Flows (unaudited)	8
Notes to the Consolidated Financial Statements (unaudited)	9

4

VALUE EXCHANGE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

	March 31,	December 20,
	2021	2020
	US$	US$
ASSETS	(unaudited)
CURRENT ASSETS
Cash	253,533	523,337
Accounts receivable, less allowance for doubtful accounts	1,285,191	599,436
Amounts due from a related party	1,254,587	1,343,466
Other receivables and prepayments	412,357	414,342
Inventories	244,547	238,147
Total current assets	3,450,215	3,118,728
NON-CURRENT ASSETS
Plant and equipment, net	318,250	357,021
Deferred tax assets	52,033	71,681
Goodwill	206,812	206,812
Operating lease right-of-use assets, net	550,846	585,057
Total non-current assets	1,127,941	1,220,571
Total assets	4,578,156	4,339,299
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	572,788	1,038,518
Other payables and accrued liabilities	680,117	831,817
Deferred income	815,532	254,937
Amounts due to related parties	215,893	263,063
Operating lease liabilities, current	301,611	303,687
Short term bank loan	39,342	38,874
Total current liabilities	2,625,283	2,730,896
NON-CURRENT LIABILITIES
Long term bank loan	52,613	62,949
Operating lease liabilities, non-current	242,491	277,111
Total non-current liabilities	295,104	340,060
Total liabilities	2,920,387	3,070,956
SHAREHOLDERS’ EQUITY
Preferred stock, 100,000,000 shares authorized, $0.00001 par value; no shares issued and outstanding	-	-
Common stock, 100,000,000 shares authorized, $0.00001 par value; 29,656,130 and 29,656,130 shares issued and outstanding, respectively	297	297
Additional paid-in capital	690,589	690,589
Statutory reserves	11,835	11,835
Retained earnings	790,078	414,225
Accumulated other comprehensive losses	92,509	97,944
Total shareholders’ equity	1,585,308	1,214,890
Non-controlling interest	72,461	53,453
	1,657,769	1,268,343
Total liabilities and shareholders’ equity	4,578,156	4,339,299

The accompanying notes are an integral part of these consolidated financial statements.

5

VALUE EXCHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

	Three Months Ended March 31, 2021	Three Months Ended March 31, 2020
	US$	US$
	(unaudited)	(unaudited)
NET REVENUES
Service income	2,203,772	8,202,911
COST OF SERVICES
Cost of service income	(1,466,232)	(7,714,755)
GROSS PROFIT	737,540	488,156
OPERATING EXPENSES:
General and administrative expenses	(434,878)	(438,891)
Foreign exchange loss	2,719	4,221
TOTAL OPERATING EXPENSES	(432,159)	(434,670)
PROFIT FROM OPERATIONS	305,381	53,486
OTHER INCOME (EXPENSES):
Interest income	165	115
Finance cost	(4,308)	(3,505)
VAT refund	2,213	43,942
Management fee income	46,326	7,547
Others	30,731	28,745
Total other income (expenses), net	75,127	76,844
PROFIT BEFORE PROVISION FOR INCOME TAXES	380,508	130,330
INCOME TAXES (EXPENSES) CREDIT	(3,897)	6,138
NET PROFIT	376,611	136,468
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment	(5,435)	(14,755)
COMPREHENSIVE INCOME	371,176	121,713
ATTRIBUTABLE TO:
Equity holders of the Company	370,418	125,512
Non-controlling interests	758	(3,799)
	371,176	121,713
Earnings per share, basic and diluted	0.01	0.00
Weighted average number of shares outstanding	29,656,130	29,656,130

The accompanying notes are an integral part of these consolidated financial statements.

6

VALUE EXCHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

				Retained			Accumulated
			Additional	earnings			other
	Common stock		paid-in	(accumulated	Statutory	Noncontrolling	comprehensive
	Share	Amount	capital	deficit)	reserves	Interest	income	Total
January 1, 2020	29,656,130	297	690,589	308,813	11,925	11,413	60,742	1,083,779
Net income	-	-	-	140,267	-	(3,799)	-	136,468
Transfer to statutory reserves	-	-	-	-	-	-	-	-
Change in noncontrolling interests	-	-	-	-	-	7,012	-	7,012
Foreign currency translation adjustment	-	-	-	-	(221)	(347)	(14,755)	(15,323)
March 31, 2020	29,656,130	297	690,589	449,080	11,704	14,279	45,987	1,211,936

				Retained			Accumulated
			Additional	earnings			other
	Common stock		paid-in	(accumulated	Statutory	Noncontrolling	comprehensive
	Share	Amount	capital	deficit)	reserves	Interest	income	Total
January 1, 2021	29,656,130	297	690,589	414,225	11,835	53,453	97,944	1,268,343
Net income	-	-	-	375,853	-	758	-	376,611
Transfer to statutory reserves	-	-	-	-	-	-	-	-
Change in noncontrolling interests	-	-	-	-	-	18,600	-	18,600
Foreign currency translation adjustment	-	-	-	-	-	(350)	(5,435)	(5,785)
March 31, 2021	29,656,130	297	690,589	790,078	11,835	72,461	92,509	1,657,769

7

VALUE EXCHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31, 2021	Three Months Ended March 31, 2020
	US$	US$
	(unaudited)	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit	376,611	136,468
Adjustments to reconcile net profit to cash (used in) provided by operating activities:
Depreciation	33,663	38,770
Amortization	90,515	99,613
Interest income	(165)	(115)
Finance costs on Right-of-use assets	4,308	-
Deferred income taxes	19,648	2,136
Changes in operating assets and liabilities
Accounts receivable	(685,755)	206,673
Other receivables and prepayments	1,985	16,225
Amounts due from related parties	88,879	(894,440)
Inventories	(6,400)	(2,524)
Accounts payable	(465,730)	830,190
Other payables and accrued liabilities	(151,700)	(62,616)
Deferred income	560,595	(9,150)
Amounts due to related parties	(47,170)	-
Net cash (used in) provided by operating activities	(180,716)	361,230
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment	(2,916)	(1,824)
Interest received	165	115
Net cash used in investing activities	(2,751)	(1,709)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from non-controlling interests	18,600	7,012
Principal payments on operating leases	(89,368)	(3,505)
Repayment of bank loan	(9,544)	-
Net cash (used in) provided by financing activities	(80,312)	3,507
EFFECT OF EXCHANGE RATE ON CASH	(6,025)	(116,256)
(DECREASE) INCREASE IN CASH	(269,804)	246,772
CASH, beginning of period	523,337	234,089
CASH, end of period	253,533	480,861
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash (paid) refund for income taxes	(3,897)	6,138

The accompanying notes are an integral part of these consolidated financial statements.

8

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Operations and Continuance of Business 

Value Exchange International, Inc. (“VEII”, “Company”, “we” or “us”) was incorporated in the State of Nevada on June 26, 2007 under the name “China Soaring, Inc.”. The Company’s principal business, conducted through its operating subsidiaries, is to provide customer-centric solutions for the retail industry in China, Hong Kong SAR and Manila, Philippines. By integrating market-leading Point-of-Sale/Point-of-Interaction (“POS/POI”), Merchandising, Customer Relations Management or “CRM” and related rewards, Locational Based (Global Positing System (“GPS”) and Indoor Positioning System (“IPS”)) Marketing, Customer Analytics and Business Intelligence solutions, VEII provides retailers with the capability to offer a consistent shopping experience across all marketing and sales channels, enabling them to easily and effectively manage the customer lifecycle on a one-to-one basis. VEII promotes itself as a single information technology (“IT”) source for retailers who want to extend existing traditional transaction processing to multiple points of interaction, including the Internet, kiosks and wireless devices. VEII services are focused on helping retailers realize the full benefits of Customer Chain Management with its suite of solutions that focus on the customer, on employees, and the infrastructure that supports the selling channel. VEII’s retail solutions are installed in an estimated 30%-40% of POS/POI-suitable retailers in Hong Kong and Manila, Philippines, processing tens of millions of transactions a year. Company is headquartered in Hong Kong and with offices in Shenzhen, Guangzhou, Shanghai, Beijing, China; Manila, Philippines; and Kuala Lumpur, Malaysia.

On January 1, 2014, VEII received 100% of the issued and outstanding shares of in Value Exchange Int’l (China) Limited (“VEI CHN”) in exchange for i) newly issued 12,000,000 shares of VEII’s common stock to the majority stockholder of VEI CHN; and ii) 166,667 shares of our common stock held by VEI CHN to be transferred to the majority stockholder of VEI CHN (“Share Exchange”). This transaction resulted in the owners of VEI CHN obtaining a majority voting interest in VEII. The merger of VEI CHN into VEII, which has nominal net assets, resulted in VEI CHN having control of the combined entities.

For financial reporting purposes, the transaction represents a "reverse merger" rather than a business combination and VEII is deemed to be the accounting acquiree in the transaction. The transaction is being accounted for as a reverse merger and recapitalization. VEII is the legal acquirer but accounting acquiree for financial reporting purposes and VEI CHN is the acquired company but accounting acquirer. Consequently, the assets and liabilities and the operations that will be reflected in the historical financial statements prior to the transaction will be those of VEI CHN and will be recorded at the historical cost basis of VEI CHN, and no goodwill was recognized in this transaction. The consolidated financial statements after completion of the transaction includes the assets and liabilities of VEI CHN and VEII, and the historical operations of VEII and the combined operations of VEI CHN from the initial closing date of the transaction.

The Company provides IT Business’ services and solutions to the retail sector through three operating subsidiaries located in Hong Kong SAR and People’s Republic of China (“PRC”).

On September 2, 2008 VEI CHN established its first operating subsidiary, Value Exchange Int’l (Shanghai) Limited (“VEI SHG”) in Shanghai, PRC, under the laws of the PRC. VEI SHG engages in software development, trading and servicing of computer hardware and software activities.

On September 25, 2008, VEI CHN acquired its second operating subsidiary, TAP Services (HK) Limited in Hong Kong which subsequently changed its name to Value Exchange Int’l (Hong Kong) Limited (“VEI HKG”) on May 14, 2013. VEI HKG engages in software development, trading and servicing of computer hardware and software activities.

On May 14, 2013, VEI CHN further established another operating subsidiary, Ke Dao Solutions Limited in Hong Kong, which subsequently changed its name to Cumberbuy.com Limited (“CUMBERBUY”) on May 26, 2017. CUMBERBUY conducts consultancy services for IT Services and Solutions activities.

In January 2017, VEI CHN acquired 100% of the capital stock of TapServices, Inc., a corporation organized under the laws of the Republic of the Philippines (the “TSI”). TSI engages in software development, trading and servicing of computer hardware and software activities in Philippines. TSI is operated as a subsidiary of VEI CHN. Prior to and continuing after the acquisition, TSI relied on VEI CHN for provision of IT services.

In January 2019, VEI SHG established an operating subsidiary, Value Exchange Int’l (Hunan) Limited (“VEI HN”) in Hunan, PRC, under the laws of the PRC. VEI HN engages in IT service call-center activities.

In February 2020, VEI SHG established an operating subsidiary, Shanghai Zhaonan Hengan Information Technology Co., Limited (“SZH”) n Shanghai, PRC, under the laws of the PRC. SZH engages in IT services.

9

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Operations and Continuance of Business (Continued) 

As of March 31, 2021, the Company held four wholly-owned subsidiaries, and two subsidiaries with 51% ownership.

2. Summary of Significant Accounting Policies 

a)Basis of Presentation 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and include the financial statements of the Company and all its wholly-owned subsidiaries that require consolidation. All material intercompany transactions and balances have been eliminated in the consolidation. The Company’s fiscal year end is December 31st. The following entities were consolidated as of March 31, 2021:

	Place of incorporation	Ownership percentage
Value Exchange International, Inc.	USA	Parent Company
Value Exchange Int’l (China) Limited	Hong Kong	100%
Value Exchange Int’l (Shanghai) Limited	PRC	100%
Value Exchange Int’l (Hong Kong) Limited	Hong Kong	100%
TapServices, Inc.	Philippines	100%
Value Exchange Int’l (Hunan) Limited	PRC	51%
Shanghai Zhaonan Hengan Information
Technology Co., Ltd.	PRC	51%

b)Use of Estimates 

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

c)Cash and Cash Equivalents 

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash includes cash on hand and demand deposits in accounts maintained with financial institutions or state-owned banks within the PRC and Hong Kong.

d)Interim Financial Statements 

These interim unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

10

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (Continued) 

e)Accounts receivable and other receivables 

Receivables include trade accounts due from customers and other receivables such as cash advances to employees, utility deposits paid and advances to suppliers. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentration, customer credit worthiness, current economic trends and changes in customer payment patterns to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Delinquent account balances are written-off after management has determined that the likelihood of collection is not probable and known bad debts are written off against the allowance for doubtful accounts when identified. As of March 31, 2021 and December 31, 2020, there was allowance amount to Nil and $4,235 for uncollectible accounts receivable. Management believes that the remaining accounts receivable are collectable.

f)Inventories  

Inventories are valued at the lower of cost and net realizable value. Cost for inventories is determined using the “first-in, first-out” method.

Management reviews inventories for obsolescence or cost in excess of net realizable value periodically. The obsolescence, if any, is recorded as a provision against the inventory. The cost in excess of market value is written off and recorded as additional cost of sales.

g)Plant and equipment 

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

	Estimated Useful Life
Leasehold improvements	Lesser of lease term or the estimated useful lives of
	5 years
Computer equipment	5 years
Computer software	5 years
Office furniture and equipment	5 years
Motor Vehicle	3 years
Building	5 years

h)Goodwill and intangibles 

Intangibles with a definite life, including customer relationships and goodwill were recorded in connection with the acquisition of TSI. Intangible assets are amortized based on their estimated economic lives using the straight-line method with estimated lives as follows:

	Estimated Economic Life
Customer relationship	3 years

Goodwill represents the excess of the cost of acquisition over the fair value of net assets acquired. Goodwill is not amortized, but is instead tested for impairment annually.

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VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (Continued) 

i)Impairment of long-lived assets 

Property, Plant, and Equipment

The Company evaluates long-lived assets, including equipment, for impairment at least once per year and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired and an impairment loss equal to an amount by which the carrying value exceeds the fair value of the asset is recognized.

Impairment of Goodwill

The carrying value of goodwill is evaluated annually or more frequently if events or circumstances indicate that an impairment loss may have occurred. Such circumstances could include, but are not limited to, a significant adverse change in business climate, increased competition or other economic conditions. Under FASB Accounting Standard Codification (ASC) Topic 350 “Intangibles - Goodwill and Other”, goodwill is tested at a reporting unit level. The impairment test involves a two-step process. The first step involves comparing the fair value of the reporting unit to which the goodwill is assigned to its carrying amount. If this comparison indicates that a reporting unit’s estimated fair value is less than its carrying value, a second step is required. If applicable, the second step requires us to allocate the estimated fair value of the reporting unit to the estimated fair value of the reporting unit’s net assets, with any fair value in excess of amounts allocated to such net assets representing the implied fair value of goodwill for that reporting unit. If the carrying value of the goodwill exceeds its fair value, the carrying value is written down by an amount equal to such excess.

The goodwill impairment testing process involves the use of significant assumptions, estimates and judgments, and is subject to inherent uncertainties and subjectivity. Estimating a reporting unit’s discounted cash flows involves the use of significant assumptions, estimates and judgments with respect to a variety of factors, including sales, gross margin and selling, general and administrative rates, capital expenditures, cash flows and the selection of an appropriate discount rate. Projected sales, gross margin and selling, general and administrative expense rate assumptions and capital expenditures are based on our annual business plans and other forecasted results. Discount rates reflect market-based estimates of the risks associated with the projected cash flows of the reporting unit directly resulting from the use of its assets in its operations. These estimates are based on the best information available to us as of the date of the impairment assessment.

j)Fair value of financial instruments 

The Company values its financial instruments as required by FASB ASC 320-12-65. The estimated fair value amounts have been determined by the Company, using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level one —Quoted market prices in active markets for identical assets or liabilities; 

Level two —Inputs other than level one inputs that are either directly or indirectly observable; and 

Level three —Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use. 

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VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (Continued) 

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The carrying values of the Company’s financial instruments; consisting of cash and cash equivalents, accounts receivable, accounts payable, other receivables and prepayments, other payables and accrued liabilities, balances with a related party, balances with related companies and amounts due to director approximate their fair values due to the short maturities of these instruments.

There was no asset or liability measured at fair value on a non-recurring basis as of March 31, 2021 and December 31, 2020.

k)Comprehensive income 

U.S. GAAP generally requires that recognized revenue, expenses, gains and losses be included in net income or loss. Although certain changes in assets and liabilities are reported as separate components of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income or loss. The components of other comprehensive income or loss consist of foreign currency translation adjustments.

l)Earnings per share 

The Company reports earnings per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

m)Revenue recognition 

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

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

Multiple-deliverable arrangements

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

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

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

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

13

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (Continued) 

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

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

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

Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the three months period ended March 31, 2021 and 2020.

	Three Months Ended March 31, 2021	Three Months Ended March 31, 2020
	US$	US$
	(unaudited)	(unaudited)
NET REVENUES
Service income
- systems development and integration	34,077	6,210,065
- systems maintenance	1,608,466	1,495,110
- sales of hardware and consumables	561,229	497,736
	2,203,772	8,202,911

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

n)Income taxes 

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

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

14

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (Continued) 

o)Operating leases 

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases are charged to the statements of income on a straight-line basis over the lease periods.

p)Advertising costs 

The Company expenses the cost of advertising as incurred in the period in which the advertisements and marketing activities are first run or over the life of the endorsement contract. Advertising and marketing expense for the three months ended March 31, 2021 and 2020 were insignificant.

q)Shipping and handling 

Shipping and handling cost incurred to ship computer products to customers are included in selling expenses. Shipping and handling expenses for the three months ended March 31, 2021 and 2020 were insignificant.

r)Research and development costs 

Research and development costs are expensed as incurred and are included in general and administrative expenses. Research and development costs for the three months ended March 31, 2021 and 2020 were insignificant.

s)Foreign currency translation 

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

Quarter ended	March 31, 2021	March 31, 2020
RMB : USD exchange rate	6.5152	7.0131
average period ended
HKD : USD exchange rate	7.800	7.800
average period ended
PESO : USD exchange rate	47.7064	50.3182
average period ended
Quarter ended	March 31, 2021	December 31, 2020
RMB : USD exchange rate	6.5864	6.5442
HKD : USD exchange rate	7.800	7.800
PESO : USD exchange rate	47.7064	47.7064

t)Stock-based Compensation 

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

15

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (Continued) 

u)Commitments and contingencies 

The Company follows FASB ASC Subtopic 450-20, “Loss Contingencies” in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

v)Segment Reporting 

The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operating results solely by monthly revenue from software development and maintenance services (but not by sub-services/product type or geographic area) and operating results of the Company and, as such, the Company has determined that the Company has one operating segment as defined by ASC Topic 280 “Segment Reporting”.

w)Recent accounting pronouncements 

In June 2016, FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective on January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a group is required to recognize an allowance based on its estimate of expected credit loss. We are currently evaluating the impact of this new guidance on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company currently intends to adopt this guidance for the fiscal year beginning January 1, 2020, and does not anticipate that the adoption of this guidance will have a material impact on its financial statements or disclosures because the Company does not currently have any recorded goodwill.

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In January 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

16

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Accounts receivable 

Accounts receivable consisted of the following as of March 31, 2021 and December 31, 2020: 

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Accounts receivable	1,285,191	603,689
Allowance for doubtful accounts	-	(4,253)
	1,285,191	599,436

All of the Company’s customers are located in the PRC, Hong Kong and Manila, Philippines. The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. 

4. Other receivables and prepayments 

Other receivables and prepayments consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Deposits and prepaid expense	332,606	299,790
Others	79,751	114,552
	412,357	414,342

5. Inventories 

Inventories as of March 31, 2021 and December 31, 2020 consisted of the following:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Finished goods	244,547	238,147

17

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Plant and equipment, net 

Plant and equipment consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Leasehold improvements	77,749	78,224
Office furniture and equipment	251,569	254,681
Computer equipment	334,061	334,237
Computer software	43,043	43,319
Motor Vehicle	119,806	119,806
Building	68,904	68,904
Total	895,132	899,171
Less: accumulated depreciation	(576,882)	(542,150)
Plant and equipment, net	318,250	357,021

Depreciation expense for the three months period ended March 31, 2021 and 2020 amounted to $33,663 and $38,770, respectively. For the three months period ended March 31, 2021 and 2020, no interest expense was capitalized into plant and equipment.

7. Goodwill 

Goodwill consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Goodwill arising from acquisition of TSI	206,812	206,812

8. Leases 

We have entered into various non-cancelable operating lease agreements for certain of our offices. Our leases have original lease periods expiring between the remainder of 2020 and 2024. Many leases include option to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Operating lease right-of-use assets, net	544,102	580,798

The components of operating lease liabilities are as follows:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Lease liabilities, current	301,611	303,687
Lease liabilities, non-current	242,491	277,111
Present value of lease liabilities	544,102	580,798

18

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Leases (Continued) 

Total operating lease cost for the three months period ended March 31, 2021 and 2020 amounted to $89,368 and 3,505, respectively. Weighted-average remaining lease term is 1.64 years, and weighted-average discount rate is 3%.

The following is a schedule, by years, of maturities of lease liabilities as of December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Year one	313,553	316,880
Year two	167,011	187,971
Year three	81,064	95,772
Year four	-	-
Thereafter	-	-
Total undiscounted cash flows	561,628	600,623
Less: Imputed interest	(17,526)	(19,826)
Present value of lease liabilities	544,102	580,798

9.Bank loan  

Bank loan and accruals consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Long term bank loan	91,955	101,823
Less: Current portion of long term bank loan	(39,342)	(38,874)
	52,613	62,949
Current portion of long term bank loan	39,342	38,874

As of March 31, 2021 and December 31, 2020, the above bank loan secured by property and equipment with net carrying amount of $38,959 and $44,533 respectively.

10. Other payables and accrued liabilities 

Other payables and accruals consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Accrual	651,421	737,142
Income taxes payable	28,696	94,675
	680,117	831,817

Accrual mainly represents salary payables and fringe and social security accruals. According to the prevailing laws and regulations of the PRC, all eligible employees of the Company’s subsidiary are entitled to staff welfare benefits including medical care, welfare subsidies, unemployment insurance and pension benefits through a PRC government-mandated multi-employer defined contribution plan. The Company’s subsidiaries are required to accrue for these benefits based on certain percentages of the qualified employees’ salaries. The Company’s subsidiary is required to make contributions to the plans out of the amounts accrued.

19

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Other payables and accrued liabilities (Continued) 

The Company’s subsidiaries incorporated in Hong Kong manage a defined contribution Mandatory Provident Fund (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for all of its employees in Hong Kong. The Company is required to contribute 5% of the monthly salaries for all Hong Kong based employees to the MPF Scheme up to a maximum statutory limit.

11. Deferred income 

Deferred income consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Service fees received in advance	815,532	254,937

12. Statutory reserves 

Statutory reserves

The laws and regulations of the PRC require that before an enterprise distributes profits to its owners, it must first satisfy all tax liabilities, provide for losses in previous years, and make allocations in proportions determined at the discretion of the Board of Directors after the statutory reserves.

As stipulated by the Company Law of the PRC, as applicable to Chinese companies with foreign ownership, net income after taxation can only be distributed as dividends after appropriation has been made for the following:

1.Making up cumulative prior years’ losses, if any; 

2.Allocations to the “Statutory surplus reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the company’s registered capital; and; 

3.Allocations to the discretionary surplus reserve, if approved in the shareholders’ general meeting. 

The statutory reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any. It may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital.

20

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Related party and shareholder transactions 

Other than disclosed elsewhere in these financial statements, the Company also had the following related party balances and transactions:

Related party balances

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Due from related parties
Value Exchange International Limited (i)	1,154,587	1,269,620
Cucumbuy.com Limited (ii)	38,462	30,769
SmartMyWays Co., Limited (iii)	38,462	30,769
Retail Intelligent Unit Limited (iv)	15,384	12,308
TAP Technology (HK) Limited (v)	7,692	-
	1,254,587	1,343,466
Due to related parties
AppMyWays Co., Limited (vi)	213,393	253,063
Mr. Johan Pehrson (vii)	2,500	10,000
	215,893	263,063

Related party transactions:

	Three Months	Three Months
	Ended	Ended
	March 31,	March 31,
	2020	2020
	US$	US$
	(unaudited)	(unaudited)
Service income received from	24,910	-
AppMyWays Co., Limited (vi)
ValueX International Pte. Ltd. (viii)	-	145,708
Smartmyways Co., Limited (iii)	-	23,204
Subcontracting fees paid to	(16,747)	-
Value E Consultant International (M) Sdn. Bhd (ix)
Management fees received from
Value Exchange International Limited (i)	20,172	7,547
Cucumbuy.com Limited (ii)	7,692	-
SmartMyWays Co., Limited (iii)	7,692	-
Retail Intelligent Unit Limited (iv)	3,077	-
TAP Technology (HK) Limited (v)	7,692	-

21

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Related party and shareholder transactions (Continued) 

(i)Mr. Kenneth Tan and Ms. Bella Tsang, directors of the Company, are shareholders and a directors of Value Exchange International Limited, a company incorporated in Hong Kong. The balance is unsecured, interest free and repayable on demand. 

(ii)Ms. Bella Tsang, a director of the Company, is a shareholder and a director of Cucumbuy.com Limited, a company incorporated in Hong Kong. The balance is unsecured, interest free and repayable on demand. 

(iii)Ms. Bella Tsang, a director of the Company, is a shareholder and a director of SmartMyWays Co., Limited, a company incorporated in Hong Kong. Mr. Kenneth Tan, a director of the Company, is a director of SmartMyWays Co., Limited. The balance is unsecured, interest free and repayable on demand. 

(iv)Ms. Bella Tsang, a director of the Company, is a shareholder and a director of Retail Intelligent Unit Limited, a company incorporated in Hong Kong. Mr. Kenneth Tan, a director of the Company, is a director of Retail Intelligent Unit Limited. The balance is unsecured, interest free and repayable on demand. 

(v)Ms. Bella Tsang, a director of the Company, is a shareholder and a director of TAP Technology (HK) Limited, a company incorporated in Hong Kong. The balance is unsecured, interest free and repayable on demand. 

(vi)Ms. Bella Tsang, a director of the Company, is a shareholder and a director of AppMyWays Co., Limited, a company incorporated in Hong Kong. The balance is unsecured, interest free and repayable on demand. 

(vii)Mr. Johan Pehrson is a director of the Company. The balance is unsecured, interest free and repayable on demand. 

(viii)Ms. Bella Tsang, a director of the Company, is a shareholder and a director of ValueX International Pte. Ltd., a company incorporated in Singapore. The balance is unsecured, interest free and repayable on demand. 

(ix)Ms. Bella Tsang, a director of the Company, is a shareholder of Value E Consultant International (M) Sdn. Bhd, a company incorporated in Malaysia. The balance is unsecured, interest free and repayable on demand. 

22

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This report contains “forward-looking statements”. These forward-looking statements include, without limitation, statements containing the words “believes,” “anticipates,” “expects,” “intends,” “projects,” “will,” “should,” “may,” “hopes” and other words of similar import or the negative of those terms or expressions. Forward-looking statements in this report include, but are not limited to, expectations of future levels of business development spending, general and administrative spending, levels of capital expenditures and operating results, sufficiency of our capital resources, our intention to pursue and consummate strategic opportunities available to us and effects as well as our ability to fund, and integrate and grow acquired business lines. Forward-looking statements are subject to certain known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to those described in “Risk Factors” contained in the Company’s reports filed with the U.S. Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Certain Terms

Except as otherwise indicated by the context, references in this report to:

·“Company,” “we,” “us” and “our” are to the combined business of Value Exchange International, Inc., a Nevada corporation, and its consolidated subsidiaries;  

·“China,” “Chinese” and “PRC,” refer to the People’s Republic of China;  

·“Renminbi” and “RMB” refer to the legal currency of China;  

·“U.S. dollars,” “dollars” and “$” refer to the legal currency of the United States;  

·“SEC” or “Commission” refers to the United States Securities and Exchange Commission;  

·“Securities Act” refers to the Securities Act of 1933, as amended; and 

·“Exchange Act” refers to the Securities Exchange Act of 1934, as amended.  

CORPORATE OVERVIEW

History of Value Exchange International, Inc.

Organization.

We were incorporated in the State of Nevada on June 26, 2007 under the name “China Soaring Inc.” We changed the Company's name to “Sino Payments, Inc.” on November 26, 2008 and then further changed to the current name as “Value Exchange International, Inc.” in October 2016. Our Common Stock’s trading symbol changed at the same time from “SNPY” to “VEII.” Our common stock is quoted on the OTCQB Venture Market.

Current Business Focus.

We are a provider of customer-centric solutions for the retail industry in China, Hong Kong SAR and Philippines. We intend to seek expansion of that territory to other parts of Southeast Asia. By integrating market-leading Point-of-Sale/Point-of-Interaction (“POS/POI”), Merchandising, Customer Relations Management or “CRM” and related rewards, Locational Based (Global Positioning System (“GPS”) and Indoor Positioning System (“IPS”)) Marketing, Customer Analytics, Business Intelligence solutions, our products and services are intended to provide retailers with provide retailers with the capability to offer a consistent shopping experience across all channels, enabling them to easily and effectively manage the customer lifecycle on a one-to-one basis. We promote ourselves as a single information technology (“IT”) source for retailers who wanted to extend existing traditional transaction processing to multiple points of interaction, including the Internet, kiosks and wireless devices. Our products and services are focused on helping retailers realize the full benefits of Customer Chain Management with its suite of solutions that focus on the customer, on employees, and the infrastructure that supports the selling channel. Our retail solutions are installed in an estimated 30%-40% of POS/POI-suitable retailers in Hong Kong and Manila, Philippines, processing tens of millions of transactions a year. Company is headquartered in Hong Kong and with offices in Shenzhen, Guangzhou, Shanghai, Beijing, China; Manila, Manila, Philippines; and Kuala Lumpur, Malaysia. The foregoing is referred to as “IT Business”, which is our core business.

23

We intend to seek expansion of our current geographical markets to other parts of Southeast Asia by seeking new businesses and by possible acquisitions of existing businesses. Seeking new business and expanding our markets will require adequate and affordable funding or working capital and beating competition for the new business. We may in the future, and we have historically been unable to, obtain necessary funding for acquisitions or expansion of business. Acquisitions will require finding suitable acquisitions that will agree to terms and conditions acceptable to us and the successful integration of new businesses into our operations. We may be unable to win new business or acquire any new businesses and, consequently, we may be unable to expand our geographical markets. We have not expanded into any new markets by acquisition or otherwise during the fiscal quarter ended March 31, 2021.

The Company, through its operating subsidiaries, is focusing and will focus on its IT Business, and seek to expand its IT Business services to commercial customers in PRC and Asia Pacific Region. This strategy is based upon our subjective business judgment that the IT Business presents more opportunities for potential customer order in our core markets of Hong Kong SAR and China than the “IP Business” (as defined below) and presents an industry segment that better suits our current technical capabilities, marketing capabilities and financial resources.

Initial Business Focus.

Our initial intended, primary business was to operate a credit card processing and merchant-acquiring services company that provided credit card clearing services to merchants and financial institutions in PRC. Since inception, we strived to implement our business plan, including the key step of creating our Global Processing Platform (“SinoPay GPP”). Specifically, the Company’s proposed IP business was to be a provider of Internet Protocol (“IP”) processing services in Asia to bank card-accepting merchants (“IP Business”). We marketed our services to local merchants with regional retail locations across Asia Pacific as potential customers of their IP and related credit card and debit card processing systems. We offered interoperability through what is envisioned as a highly efficient infrastructure and perceived exceptional knowledge of the IP processing market through our SinoPay GPP platform concept. The SinoPay GPP platform never became a viable revenue generating operation and we have focused on the IT Business since the 2014 acquisition of VEI CHN.

Smart Baggage Tag. Through a cooperative effort with another company, Company has the ability to market a smart baggage tag that allows consumers to track the location of their baggage through a smart phone or device using the smart baggage tag and related application. Efforts to promote the smart baggage tag were suspended in 2020 due to impact of COVID-19 pandemic on air travel. Company will re-evaluate promotion of the smart baggage tag to airports when air travel returns to pre-COVID-19 pandemic levels, if ever.

The prospects of the Smart Tag business as of the date of this Form 10-Q report are uncertain. The Company will have to determine if an expanded or sustained marketing effort for the Smart Tag is possible based on available resources and business priorities. The IT Business remains the focus of our business and funding.

Industry Trends and Economic Conditions.

The IT Business in Hong Kong and China is large and fragmented, comprised of thousands of competitors as well as being a highly competitive industry. A general trend affecting our IT Business is the trend of increasing competition for skilled labor. With a global economy and foreign competitors seeking to penetrate Hong Kong and China as markets as well as to tap into new pools of skilled workers in IT Business, we will undoubtedly face increasing competition for skilled workers in IT Business in the Hong Kong and China markets. We may be unable to afford or effectively compete for necessary skilled workers in Hong Kong, Philippines and China and, if we are unable to afford or effectively compete for necessary skilled workers, our growth and ability to attain and sustain profit operations in the IT Business may fail. We have not experienced any significant problems in recruiting necessary skilled workers in fiscal years 2020 or 2021 to date.

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

24

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

The IT Business is global and, with the growth of cloud computing, there is a growing capability and infrastructure for companies in a foreign nation to provide IT Business to customers around the globe as a complement to cloud computing. We have not seen any significant impact of cloud computing on our IT Business in fiscal years 2020 or fiscal year 2021 to date, but we perceive that the expansion of cloud computing coupled with IT services and products could allow foreign companies to provide IT Business products and services to its cloud computing customers in our Hong Kong and China core markets as well as in the Philippines. We may find it more difficult to compete for IT Business in Hong Kong and China, and perhaps the Philippines, if customers of IT Business elect to have cloud computing companies manage, repair and enhance IT Business products, software and systems. The growth of cloud computing coupled with IT Business products and services as an ancillary component of the cloud computing menu of products and services could adversely impact our IT Business in Hong Kong and China markets as well as the Philippines.

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

In order for us to attain sustained success in the near term, we must continue to maintain and grow our customer base, provide high-quality service and satisfy our existing clients, and take advantage of cross-selling opportunities between the IT Business and IP Business. In the current economic environment, we must provide our customers with service offerings that are appropriately priced, satisfy their needs, and provide them with measurable business benefits. While we have recently experienced more demand for our IT Business products and services, we believe that it is too early to determine if developments will translate into sustainable improvements in our pricing or margins in fiscal year 2021 or over the longer term.

The increasing need for cybersecurity products and technologies may be a future weakness of our business plan. We do not have a current cybersecurity product and service line beyond consultants engaged to provide cybersecurity services to customers and we have not current plans to develop a cybersecurity business line. Cybersecurity companies may have an advantage over our business model in the future in that cybersecurity companies could leverage their cybersecurity offerings to also sell IT Business services and products that compete with our IT Business products and services.

We also face a possible competitive threat from Cloud computing services, which we do not provide to customers (except through third party providers). Cloud computing services can and do offer additional services to customers, which services can include the same IT Business services as our company. Cloud computing companies could leverage their relationship with customers to persuade them to use the Cloud computing service for IT Business needs. This leverage could pose a competitive threat to our IT Business. We lack the current financial and technical resources to compete in the Cloud computing business.

Covid 19 Pandemic. Since the beginning of 2020, the worldwide spread of the novel coronavirus (“Covid 19”) has been rapid and unprecedented. On March 11, 2020, the World Health Organization declared Covid 19 a global pandemic. Efforts to control the spread of Covid 19 have led governments and other authorities to impose restrictions which have resulted in business closures and disrupted global supply chains. In addition to reductions in business levels, the altered marketplace environment has negatively impacted our freight mix and shipment profile. The extent of the long term adverse effect of the COVID-19 pandemic on our business results is unknown and depends on future developments, including the severity and duration of the pandemic.

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Covid 19 pandemic affected our primary operations in Hong Kong SAR and Manila, Philippines in first fiscal quarter of 2020 by forcing limited business travel, remote work arrangements by personnel, customers suspending or reducing operations and use of third party services and suspension or cancellations of normal business activities by us and customers. While there has been a degree of easing restrictions on businesses, there are still restrictions on our and customers’ business activities. Further, the Covid 19 pandemic may have a second wave of infections in the fall of 2020, which would probably impose a continuation or increase in restrictions of business activities. The full impact of. Covid 19 pandemic on our business may not be fully understood until the end of fiscal year or later due to the risk of new variants of Covid 19 emerging that is vaccine resistant and, as such, capable of significant disruption of the ecomonmies in our primary markets.

Covid 19 pandemic may make funding of new and existing business from third party sources more difficult due to obtain as a result of increased lending and funding demands by businesses that suspended or closed operations and had to rely on funding to cover operating overhead.

Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020. Company has not sought and does not intend to seek any assistance under the CARES Act as of the date of this Form 10-Q report. Our operations and personnel are not based in the U.S.

History of Value Exchange Int’l. (China) Limited

VEI CHN was first established on November 16, 2001 in Hong Kong SAR with limited liability under the name of “Triversity Hong Kong Limited” and subsequently changed its name to “Triversity (Asia Pacific) Limited” on April 24, 2002 and then further changed its name to “TAP Investments Group Limited” on November 16, 2007. TAP Investments Group Limited changed to its current name as “Value Exchange Int’l (China) Limited” on May 13, 2013.

VEI CHN is an investment holding company with two subsidiaries established in Hong Kong SAR, namely TAP Services (HK) Limited which was incorporated on August 25, 2003 and acquired by VEI CHN on September 25, 2008, and subsequently changed to its current name as Value Exchange Int’l (Hong Kong) Limited (“VEI HKG”) on May 13, 2013. VEI CHN set up a wholly-owned Foreign Enterprise (WOFE) in Shanghai, PRC, in September 2, 2008 in the name of Value Exchange Int’l (Shanghai) Limited (“VEI SHG”). In January 2019, VEI SHG set up a 51% subsidiary in Hunan, PRC, in the name of Value Exchange Int’l (Hunan) Limited (“VEI HN”). In February 2020, VEI SHG set up a 51% subsidiary in Shanghai, PRC, in the name of Shanghai Zhaonan Hengan Information Technology Co., Limited (“SZH”).

Principal business

Company’s primary operating subsidiary is VEI CHN. The principal business of VEI CHN for more than 15 years is to provide the Information Technology Services and Solutions (consisting of select services and solutions in computer software programming and integration, and computer systems, Internet and information technology systems engineering, consulting, administration and maintenance, including e-commerce and payment processing) to the Retail Sector, primarily to leading retailers in Hong Kong SAR, Macau SAR and PRC and as more fully described below. As is customary in the industry, such services and solutions are provided by both company employees, contractors and consultants. The primary services and products of the IT Business are:

a)Systems maintenance and related service 

VEI CHN Group provides development, customization of software and hardware, enhancements thereto and maintenance services for installed POS system. VEI CHN Group markets, sells and maintains its own brand POS software – edgePOS as well as third party brands (e.g. NCR / Retalix), which is one of the leading POS software programs in the market. These software enhancements and programming can integrate with different IP systems.

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

Other services include system installation and implementation, including i) project planning; ii) analysis of customer information and business needs from a IT perspective (“System Analysis”); iii) design of the entire system; iv) hardware and consumables selection advice and sales; and v) system hardware maintenance. These services typically consist of customer projects for New Store Opening (“NSO”) and Install, Move, Add and Change (“IMAC”) for retail, and ad-hoc custom system projects for other business sectors. Our primary focus is the retail sector in Hong Kong SAR, PRC and Manila, Philippines.

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b)Systems development and integration  

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

Financial Performance Highlights

The following are some financial highlights for the first quarter of 2021:

·Net revenue: Our net revenues were $2,203,772 for the three months ended March 31, 2021, as compared to $8,202,911 for the same period in 2020, a decrease of $5,999,139 or 73.1%. 

·Gross profit: Gross profit for the three months ended March 31, 2021 was $737,540 or 33.5% of net revenues, as compared to $488,156 or 6.0% of net revenues for the same period in 2020, an increase of $249,384 or 51.1%. 

·Income from operations: Our income from operations totaled $305,381 for the three months ended March 31, 2021, as compared to $53,486 for the same period in 2020, an increase of $251,895 or 471.0%. 

·Net income: We had a net income of $376,611 for the three months ended March 31, 2021, compared to $136,468 for the same period in 2020, an increase of $240,143 or 176.0%. 

·Basic and diluted net income per share was $0.01 for the three months ended March 31, 2021. 

RESULTS OF OPERATIONS

Comparison of Three Months Ended March 31, 2021 and 2020

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

(All amounts, other than percentages, in U.S. dollars)

	Three months ended March 31,		Change
	2021	2020
	US$	US$	US$	%
NET REVENUES
Service income	2,203,772	8,202,911	(5,999,139)	(73.1%)
COST OF SERVICES
Cost of service income	(1,466,232)	(7,714,755)	6,248,523	(81.0%)
GROSS PROFIT	737,540	488,156	249,384	51.1%
Operating expenses:
General and administrative expenses	(434,878)	(438,891)	4,013	(0.9%)
Foreign exchange gain (loss)	2,719	4,221	(1,502)	(35.6%)
INCOME FROM OPERATIONS	305,381	53,486	251,895	471.0%
OTHER INCOME (EXPENSES)	75,127	76,844	(1,717)	(2.2%)
INCOME BEFORE PROVISION FOR INCOME TAXES	380,508	130,330	250,178	192.0%
INCOME TAXES (EXPENSES) CREDIT	(3,897)	6,138	(10,035)	(163.5%)
NET INCOME	376,611	136,468	240,143	176.0%

Net revenues. Net revenues were $2,203,772 for the three months ended March 31, 2021, as compared to $8,202,911 for the same period in 2020, a decrease of $5,999,139 or 73.1%. The decrease was primarily attributable to the decrease in our revenue from i) systems development and integration with revenue decreasing from $6,210,065 for the three months ended March 31, 2020 to $34,077 for the three months ended March 31, 2021; offset by ii) systems maintenance with revenue increasing from $1,495,110 for the three months ended March 31, 2020 to $1,608,466 for the three months ended March 31, 2021; and iii) sales of hardware and consumables with revenue increasing from $497,736 for the three months ended March 31, 2020 to $561,229 for the three months ended March 31, 2021.

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Cost of services. Our cost of services is primarily comprised of our costs of technical staff, contracting fees to suppliers and overhead. Our cost of services decreased to $1,466,232 or 65.2% of net revenues, for the three months ended March 31, 2021, as compared to $7,714,755 or 94.0% of net revenues, for the same period in 2020, a decrease of $6,248,523 or 81.0%. The decrease in cost of services was mainly attributable to the decrease in our cost of technical staff and contracting fees to suppliers.

Gross profit. Gross profit for the three months ended March 31, 2021 was $737,540 or 33.5% of net revenues, as compared to $488,156 or 6.0% of net revenues, for the same period in 2020, an increase of $249,384 or 51.1%. The increase of gross profit was largely due to the decrease in cost of services, offset by the decrease in net revenues compare to the same period of 2020.

General and administrative expenses. General and administrative expenses include the costs associated with staff and support personnel who manage our business activities, office rental expenses, depreciation charge for fixed assets, and professional fees paid to third parties. General and administrative expenses decreased to $434,878 or 19.3% of net revenues, for the three months ended March 31, 2021, as compared to $438,891 or 5.4% of net revenues, for the same period in 2020, a decrease of $4,013 or 0.9%. The primary reason for the decrease was attributable to a decrease in consultancy and professional fee.

Profit from operations. As a result of the above, our profit from operations totaled $305,381 for the three months ended March 31, 2021, as compared to $53,486 for the same period in 2020, an increase of $251,895 or 471.0%.

Income taxes (expenses) credit. Income taxes expenses totaled $3,897 or 0.2% of net revenues for the three months ended March 31, 2021, as compared to income taxes credit totaled $6,138 or 0.1% for the same period in 2020, a change of $10,035. The change was primarily attributable to the movement in profit tax paid for the three months ended March 31, 2021.

Net income. As a result of the foregoing, we had a net income of $376,611 for the three months ended March 31, 2021, compared to $136,468 for the same period in 2020, an increase of $240,143 or 176.0%, as a result of the factors described above.

Liquidity and Capital Resources

As of March 31, 2021, we had cash and cash equivalents of $253,533. The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.

Cash Flows

(All amounts in U.S. dollars)

	Three Months Ended
	March 31,
	2021	2020
	US$	US$
Net cash (used in) provided by operating activities	(180,716)	361,230
Net cash used in investing activities	(2,751)	(1,709)
Net cash (used in) provided by financing activities	(80,312)	3,507
Effect of exchange rate changes on cash and cash equivalents	(6,025)	(116,256)
Net (decrease) increase in cash and cash equivalents	(269,804)	246,772
Cash and cash equivalents at the beginning of period	523,337	234,089
Cash and cash equivalents at the end of period	253,533	480,861

Operating Activities

Net cash used in operating activities was $180,716 for the three months ended March 31, 2021, which was a change of $541,946 from net cash provided by operating activities $361,230 for the same period of 2020. The change in net cash used in operating activities was mainly attributable to the following:

1)A change of Accounts receivable, and Accounts payable decreased our operating cash balances by $892,428 and $1,295,920 respectively; offset by  

2)Net income of $376,611 for the three months ended March 31, 2021, compared to $136,468 for the same period in 2020; and  

3)A change of Amounts due from related parties, and Deferred income increased our operating cash balances by $983,319 and $569,745. 

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Investing Activities

Net cash used in investing activities was $2,751 for the three months ended March 31, 2021, which was an increase of $1,042 or 61.0% from $1,709 in the same period in 2020. The increase in net cash used in investing activities was attributable to cash used in the purchase of plant and equipment by $2,916; offset by interest received by $165, during the three months ended March 31, 2021.

Financing Activities

Net cash used in financing activities was $80,312 for the three months ended March 31, 2021, which was a change of $83,819 from net cash provided by financing activities $3,507 in the same period in 2020. The change in net cash used in financing activities was attributable to the proceeds from non-controlling interests by $18,600; offset by Principal payments on operating leases by $89,368, and Repayment of bank loan by $9,544, during the three months ended March 31, 2021.

Future Financings

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

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

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

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

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Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and include the financial statements of the Company and all its subsidiaries that require consolidation. All material intercompany transactions and balances have been eliminated in the consolidation. The Company’s fiscal year end is December 31st. The following entities were consolidated as of March 31, 2021:

	Place of incorporation	Ownership percentage
Value Exchange International, Inc.	USA	Parent Company
Value Exchange Int’l (China) Limited	Hong Kong	100%
Value Exchange Int’l (Shanghai) Limited	PRC	100%
Value Exchange Int’l (Hong Kong) Limited	Hong Kong	100%
TapServices, Inc.	Philippines	100%
Value Exchange Int’l (Hunan) Limited	PRC	51%
Shanghai Zhaonan Hengan Information
Technology Co., Ltd.	PRC	51%

Use of Estimates

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

Plant and equipment

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

	Estimated Useful Life
Leasehold improvements	Lesser of lease term or the estimated useful lives of
	5 years
Computer equipment	5 years
Computer software	5 years
Office furniture and equipment	5 years
Motor Vehicle	3 years
Building	5 years

Revenue recognition

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

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

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Multiple-deliverable arrangements

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

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

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

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

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

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

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

Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the three months period ended March 31, 2021 and 2020.

	Three Months Ended March 31, 2021	Three Months Ended March 31, 2020
	US$	US$
	(unaudited)	(unaudited)
NET REVENUES
Service income
- systems development and integration	34,077	6,210,065
- systems maintenance	1,608,466	1,495,110
- sales of hardware and consumables	561,229	497,736
	2,203,772	8,202,911

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

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Income taxes

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

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

Foreign currency translation

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

Quarter ended	March 31, 2021	March 31, 2020
RMB : USD exchange rate	6.5152	7.0131
average period ended
HKD : USD exchange rate	7.800	7.800
average period ended
PESO : USD exchange rate	47.7064	50.3182
average period ended
Quarter ended	March 31, 2021	December 31, 2020
RMB : USD exchange rate	6.5864	6.5442
HKD : USD exchange rate	7.800	7.800
PESO : USD exchange rate	47.7064	47.7064

Stock-based Compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure Controls and Procedures.

The Company's management, under the direction of Kenneth Tan, the Company’s Chief Executive Officer and Channing Au, the Company’s Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Company’s disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in Company’s reports filed with the Commission is recorded, processed, summarized and reported within the time periods specified by the Commission’s rules and forms, and is accumulated and communicated to management, including Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer determined that the Company's disclosure controls and procedures were deemed to be effective as of March 31, 2021.

Changes in Internal Control over Financial Reporting

We have not experienced any material impact to our internal control over financial reporting during the COVID-19 pandemic. Our employees worked mostly remotely during the period in which we prepared these financial statements due to the impact of Covid-19. We have extensively relied on on-line video communications by Company personnel and in communications with Company public auditors to conduct many Company internal accounting and financial operations. We have not altered or compromised our disclosure controls and procedures as of March 31, 2021, but we are monitoring and assessing the need to modify or enhance our disclosure controls and procedures to ensure disclosure controls and procedures continue to be effective.

The inability to predict the duration, scope and severity if the Covid-19 pandemic, and the possibility of its reoccurrence or surging in future waves, as well as the lack of an effective, widely available vaccine against any mutations of Covid 19, creates the possibility of Covid-19 pandemic requiring a re-examination and possible adjustment of internal controls and systems.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

Item 1A. Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. Risk factors for our company are set forth in our Annual Report on Form 10-K for the fiscal year end December 31, 2020 (“2020 Form 10-K) and other filings with the Commission. The risks described in Part I, Item 1A, "Risk Factors" in our 2020 Form 10-K could materially and adversely affect our business, financial condition and results of operations, and the trading price of our common stock could decline. These risk factors do not identify all risks that we face; our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. The “Risk Factors” section of the 2020 Form 10-K remains current in all material respects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Sale of Stock. As previously reported on a Current Report on Form 8-K filed with the Commission on April 13, 2021, on April 8, 2021, the Company and GigWorld, Inc., a Delaware corporation, (“GIG”) entered into a Securities Purchase Agreement (“SPA”) whereby GIG purchased 6.5 million “restricted” shares (“Shares”) of Company Common Stock from Company for an aggregate purchase price of $650,000 (“”Purchase Price”). The closing of the transaction occurred on April 12, 2021. The Shares were purchased for investment purposes for GIG’s own account. Company intends to use the net proceeds from the sale of the Shares for general working capital. The Shares were issued in a private sale exempt from registration under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act.

GIG is a Delaware corporation and a reporting company under the Exchange Act and its proposed business is to develop technologies to enable and support the “gig” economy. “Gig economy” refers to the industry of consultants, freelancers and independent contractors (collectively, “gig workers”) making a living by performing short term jobs or projects for companies. The Internet and related technologies enable companies to link gig workers with temporary assignments for companies in a variety of industries. GIG has no revenues or revenue producing operations as of the date of the filing of this Report.

Appointment of GIG Nominee to VEII Board of Directors. The SPA obligates Company to appoint one nominee of GIG to the Company Board of Directors within 10 calendar days after the closing of the SPA. The Company has offered a board seat to Mr. Lum and expects Mr. Lum to join the Board of Directors in May 2021.

No Registration Rights; No Lock-Up. The Shares are “restricted securities” under Rule 144 of the Securities Act and may not be sold, transferred, assigned or otherwise disposed without registration under the Securities Act or an exemption from registration. The SPA does not grant registration rights for the Shares and there is no lock-up restriction on the Shares. The Shares are subject to minimum six month hold period under Rule 144. GIG is deemed an “affiliate” under Commission rules of the Company due to owning more than 10% of Company’s issued shares of Common Stock.

34

The SPA contains customary representations, warranties and covenants made by the Company. The representations, warranties and covenants contained in the SPA were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to the SPA, and may be subject to limitations agreed upon by the contracting parties. Accordingly, the SPA is incorporated herein by reference only to provide investors with information regarding the terms of the SPA, and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company's periodic reports and other filings with the SEC.

The foregoing is a summary only and does not purport to be a complete description of all of the terms, provisions, covenants, and agreements contained in the SPA, and is subject to and qualified in its entirety by reference to the full text of the SPA, which is filed herewith as Exhibit 10.1 to the Current Report on Form 8-K as filed with the Commission on April 13, 2021.

Item 6. Exhibits

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

Exhibit No.	Title of Document
10.1	Securities Purchase Agreement, dated April 5, 2021, by Value Exchange International, Inc. and GigWorld, Inc. (1)
31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Principal Financial and Accounting Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.LAB	XBRL Label Linkbase Document
101.PRE	XBRL Presentation Linkbase Document
101.DEF	XBRL Definition Linkbase Document

(1) Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Company with the Commission on April 13, 2021. 

35

SIGNATURES

In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Value Exchange International, Inc.
May 21, 2021	/s/	Kenneth Tan
	By:	Kenneth Tan
	Its:	President and Director
		(Principal Executive Officer)
May 21, 2021	/s/	Channing Au
	By:	Channing Au
	Its:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

36

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Kenneth Tan, certify that:

1.I have reviewed this quarterly report on Form 10-Q/A Amendment No. 1 of Value Exchange International, Inc. for the three months ended March 31, 2021. 

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 interim 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 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 controls 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 interim 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;  

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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;  

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): 

a.all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and 

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. 

Dated: May 21, 2021

/s/ Kenneth Tan

Kenneth Tan

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Channing Au, certify that:

1.I have reviewed this quarterly report on Form 10-Q/A Amendment No. 1 of Value Exchange International, Inc. for the three months ended March 31, 2021. 

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 interim 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 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 controls 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 interim 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;  

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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;  

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): 

a.all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and 

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. 

Dated: May 21, 2021

/s/ Channing Au

Channing Au

Chief Financial Officer

(Principal financial and accounting officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION 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 Value Exchange International, Inc. (the “Company”) on Form 10-Q/A Amendment No. 1 for the quarter ended March 31, 2021, as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Kenneth Tan, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(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. 

Dated: May 21, 2021

/s/ Kenneth Tan

Kenneth Tan

President and Chief Executive Officer

(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION 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 Value Exchange International, Inc. (the “Company”) on Form 10-Q/A Amendment No. 1 for the quarter ended March 31, 2021, as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Channing Au, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(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. 

Dated: May 21, 2021

/s/ Channing Au

Channing Au

Chief Financial Officer

(Principal financial and accounting officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2021	May 08, 2021
Details
Registrant CIK	0001417664
Fiscal Year End	--12-31
Document Type	10-Q/A
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
Document Transition Report	false
Entity File Number	000-53537
Entity Registrant Name	Value Exchange International, Inc.
Entity Incorporation, State or Country Code	NV
Entity Tax Identification Number	26-3767331
Entity Address, Address Line One	Unit 602, Block B, 6 Floor
Entity Address, Address Line Two	Shatin Industrial Centre
Entity Address, Address Line Three	5-7 Yuen Shun Circuit
Entity Address, City or Town	Shatin
Entity Address, Postal Zip Code	N.T.
Entity Address, Country	HK
Entity Address, Address Description	Address of principal executive offices
Country Region	852
City Area Code	295
Local Phone Number	04288
Phone Fax Number Description	Registrant’s telephone number, including area code
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		36,156,130
Amendment Flag	false
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1

XML

CONSOLIDATED BALANCE SHEETS (March 31, 2021 Unaudited) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
CURRENT ASSETS
Cash	$ 253,533	$ 523,337
Accounts receivable, less allowance for doubtful accounts	1,285,191	599,436
Amounts due from a related party	1,254,587	1,343,466
Other receivables and prepayments	412,357	414,342
Inventories	244,547	238,147
Total current assets	3,450,215	3,118,728
NON-CURRENT ASSETS
Plant and equipment, net	318,250	357,021
Deferred tax assets	52,033	71,681
Goodwill	206,812	206,812
Operating lease right-of-use assets, net	550,846	585,057
Total non-current assets	1,127,941	1,220,571
Total assets	4,578,156	4,339,299
CURRENT LIABILITIES
Accounts payable	572,788	1,038,518
Other payables and accrued liabilities	680,117	831,817
Deferred income	815,532	254,937
Amounts due to related parties	215,893	263,063
Operating lease liabilities, current	301,611	303,687
Short term bank loan	39,342	38,874
Total current liabilities	2,625,283	2,730,896
NON-CURRENT LIABILITIES
Long term bank loan	52,613	62,949
Operating lease liabilities, non-current	242,491	277,111
Total non-current liabilities	295,104	340,060
Total liabilities	2,920,387	3,070,956
SHAREHOLDERS' EQUITY
Preferred Stock, Value	0	0
Common Stock, Value	297	297
Additional paid-in capital	690,589	690,589
Statutory reserves	11,835	11,835
Retained earnings	790,078	414,225
Accumulated other comprehensive losses	92,509	97,944
Total shareholders' equity	1,585,308	1,214,890
Non-controlling interest	72,461	53,453
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	1,657,769	1,268,343
Total liabilities and shareholders' equity	$ 4,578,156	$ 4,339,299

XML

CONSOLIDATED BALANCE SHEETS (March 31, 2021 Unaudited) - Parenthetical - $ / shares	Mar. 31, 2021	Dec. 31, 2020
Details
Preferred Stock, Shares Authorized	100,000,000	100,000,000
Preferred Stock, Par or Stated Value Per Share	$ 0.00001	$ 0.00001
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Shares Authorized	100,000,000	100,000,000
Common Stock, Par or Stated Value Per Share	$ 0.00001	$ 0.00001
Common Stock, Shares, Issued	29,656,130	29,656,130
Common Stock, Shares, Outstanding	29,656,130	29,656,130

XML

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
NET REVENUES
Service income	$ 2,203,772	$ 8,202,911
COST OF SERVICES
Cost of service income	(1,466,232)	(7,714,755)
GROSS PROFIT	737,540	488,156
OPERATING EXPENSES:
General and administrative expenses	(434,878)	(438,891)
Foreign exchange loss	2,719	4,221
PROFIT FROM OPERATIONS	305,381	53,486
OTHER INCOME (EXPENSES):
Interest income	165	115
Finance cost	(4,308)	(3,505)
VAT refund	2,213	43,942
Management fee income	46,326	7,547
Others	30,731	28,745
Total other income (expenses), net	75,127	76,844
PROFIT BEFORE PROVISION FOR INCOME TAXES	380,508	130,330
INCOME TAXES (EXPENSES) CREDIT	(3,897)	6,138
NET PROFIT	376,611	136,468
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment	(5,435)	(14,755)
COMPREHENSIVE INCOME	371,176	121,713
Equity holders of the Company	370,418	125,512
Non-controlling interests	$ 758	$ (3,799)
Earnings per share, basic and diluted	$ 0.01	$ 0.00
Weighted average number of shares outstanding	29,656,130	29,656,130

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($)	Common Stock	Additional Paid-in Capital	Retained Earnings	Statutory reserves	Noncontrolling Interest	income	Total
Equity Balance, Starting at Dec. 31, 2019	$ 297	$ 690,589	$ 308,813	$ 11,925	$ 11,413	$ 60,742	$ 1,083,779
Shares Outstanding, Starting at Dec. 31, 2019	29,656,130
Transfer to statutory reserves	$ 0	0	0	0	0	0	0
Change in noncontrolling interests	0	0	0	0	7,012	0	7,012
Foreign currency translation adjustment	0	0	0	(221)	(347)	(14,755)	(15,323)
Net Income (Loss)	$ 0	0	140,267	0	(3,799)	0	136,468
Shares Outstanding, Ending at Mar. 31, 2020	29,656,130
Equity Balance, Ending at Mar. 31, 2020	$ 297	690,589	449,080	11,704	14,279	45,987	1,211,936
Equity Balance, Starting at Dec. 31, 2020	$ 297	690,589	414,225	11,835	53,453	97,944	1,268,343
Shares Outstanding, Starting at Dec. 31, 2020	29,656,130
Transfer to statutory reserves	$ 0	0	0	0	0	0	0
Change in noncontrolling interests	0	0	0	0	18,600	0	18,600
Foreign currency translation adjustment	0	0	0	0	(350)	(5,435)	(5,785)
Net Income (Loss)	$ 0	0	375,853	0	758	0	376,611
Shares Outstanding, Ending at Mar. 31, 2021	29,656,130
Equity Balance, Ending at Mar. 31, 2021	$ 297	$ 690,589	$ 790,078	$ 11,835	$ 72,461	$ 92,509	$ 1,657,769

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit	$ 376,611	$ 136,468
Adjustments to reconcile net profit to cash (used in) provided by operating activities:
Depreciation	33,663	38,770
Amortization	90,515	99,613
Interest income	(165)	(115)
Finance costs on Right-of-use assets	4,308	0
Deferred income taxes	19,648	2,136
Changes in operating assets and liabilities
Accounts receivable	(685,755)	206,673
Other receivables and prepayments	1,985	16,225
Amounts due from related parties	88,879	(894,440)
Inventories	(6,400)	(2,524)
Accounts payable	(465,730)	830,190
Other payables and accrued liabilities	(151,700)	(62,616)
Deferred income	560,595	(9,150)
Amounts due to related parties	(47,170)	0
Net cash (used in) provided by operating activities	(180,716)	361,230
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment	(2,916)	(1,824)
Interest received	165	115
Net cash used in investing activities	(2,751)	(1,709)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from non-controlling interests	18,600	7,012
Principal payments on operating leases	(89,368)	(3,505)
Repayment of bank loan	(9,544)	0
Net cash (used in) provided by financing activities	(80,312)	3,507
EFFECT OF EXCHANGE RATE ON CASH	(6,025)	(116,256)
(DECREASE) INCREASE IN CASH	(269,804)	246,772
Cash and Cash Equivalents, at Carrying Value, Beginning Balance	523,337	234,089
Cash and Cash Equivalents, at Carrying Value, Ending Balance	253,533	480,861
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash (paid) refund for income taxes	$ (3,897)	$ 6,138

XML

1. Nature of Operations and Continuance of Business

3 Months Ended

Mar. 31, 2021

Notes

1. Nature of Operations and Continuance of Business

1. Nature of Operations and Continuance of Business 

Value Exchange International, Inc. (“VEII”, “Company”, “we” or “us”) was incorporated in the State of Nevada on June 26, 2007 under the name “China Soaring, Inc.”. The Company’s principal business, conducted through its operating subsidiaries, is to provide customer-centric solutions for the retail industry in China, Hong Kong SAR and Manila, Philippines. By integrating market-leading Point-of-Sale/Point-of-Interaction (“POS/POI”), Merchandising, Customer Relations Management or “CRM” and related rewards, Locational Based (Global Positing System (“GPS”) and Indoor Positioning System (“IPS”)) Marketing, Customer Analytics and Business Intelligence solutions, VEII provides retailers with the capability to offer a consistent shopping experience across all marketing and sales channels, enabling them to easily and effectively manage the customer lifecycle on a one-to-one basis. VEII promotes itself as a single information technology (“IT”) source for retailers who want to extend existing traditional transaction processing to multiple points of interaction, including the Internet, kiosks and wireless devices. VEII services are focused on helping retailers realize the full benefits of Customer Chain Management with its suite of solutions that focus on the customer, on employees, and the infrastructure that supports the selling channel. VEII’s retail solutions are installed in an estimated 30%-40% of POS/POI-suitable retailers in Hong Kong and Manila, Philippines, processing tens of millions of transactions a year. Company is headquartered in Hong Kong and with offices in Shenzhen, Guangzhou, Shanghai, Beijing, China; Manila, Philippines; and Kuala Lumpur, Malaysia.

On January 1, 2014, VEII received 100% of the issued and outstanding shares of in Value Exchange Int’l (China) Limited (“VEI CHN”) in exchange for i) newly issued 12,000,000 shares of VEII’s common stock to the majority stockholder of VEI CHN; and ii) 166,667 shares of our common stock held by VEI CHN to be transferred to the majority stockholder of VEI CHN (“Share Exchange”). This transaction resulted in the owners of VEI CHN obtaining a majority voting interest in VEII. The merger of VEI CHN into VEII, which has nominal net assets, resulted in VEI CHN having control of the combined entities.

For financial reporting purposes, the transaction represents a "reverse merger" rather than a business combination and VEII is deemed to be the accounting acquiree in the transaction. The transaction is being accounted for as a reverse merger and recapitalization. VEII is the legal acquirer but accounting acquiree for financial reporting purposes and VEI CHN is the acquired company but accounting acquirer. Consequently, the assets and liabilities and the operations that will be reflected in the historical financial statements prior to the transaction will be those of VEI CHN and will be recorded at the historical cost basis of VEI CHN, and no goodwill was recognized in this transaction. The consolidated financial statements after completion of the transaction includes the assets and liabilities of VEI CHN and VEII, and the historical operations of VEII and the combined operations of VEI CHN from the initial closing date of the transaction.

The Company provides IT Business’ services and solutions to the retail sector through three operating subsidiaries located in Hong Kong SAR and People’s Republic of China (“PRC”).

On September 2, 2008 VEI CHN established its first operating subsidiary, Value Exchange Int’l (Shanghai) Limited (“VEI SHG”) in Shanghai, PRC, under the laws of the PRC. VEI SHG engages in software development, trading and servicing of computer hardware and software activities.

On September 25, 2008, VEI CHN acquired its second operating subsidiary, TAP Services (HK) Limited in Hong Kong which subsequently changed its name to Value Exchange Int’l (Hong Kong) Limited (“VEI HKG”) on May 14, 2013. VEI HKG engages in software development, trading and servicing of computer hardware and software activities.

On May 14, 2013, VEI CHN further established another operating subsidiary, Ke Dao Solutions Limited in Hong Kong, which subsequently changed its name to Cumberbuy.com Limited (“CUMBERBUY”) on May 26, 2017. CUMBERBUY conducts consultancy services for IT Services and Solutions activities.

In January 2017, VEI CHN acquired 100% of the capital stock of TapServices, Inc., a corporation organized under the laws of the Republic of the Philippines (the “TSI”). TSI engages in software development, trading and servicing of computer hardware and software activities in Philippines. TSI is operated as a subsidiary of VEI CHN. Prior to and continuing after the acquisition, TSI relied on VEI CHN for provision of IT services.

In January 2019, VEI SHG established an operating subsidiary, Value Exchange Int’l (Hunan) Limited (“VEI HN”) in Hunan, PRC, under the laws of the PRC. VEI HN engages in IT service call-center activities.

In February 2020, VEI SHG established an operating subsidiary, Shanghai Zhaonan Hengan Information Technology Co., Limited (“SZH”) n Shanghai, PRC, under the laws of the PRC. SZH engages in IT services.

As of March 31, 2021, the Company held four wholly-owned subsidiaries, and two subsidiaries with 51% ownership.

XML

2. Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2021

Notes

2. Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies 

a)Basis of Presentation 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and include the financial statements of the Company and all its wholly-owned subsidiaries that require consolidation. All material intercompany transactions and balances have been eliminated in the consolidation. The Company’s fiscal year end is December 31st. The following entities were consolidated as of March 31, 2021:

	Place of incorporation	Ownership percentage
Value Exchange International, Inc.	USA	Parent Company
Value Exchange Int’l (China) Limited	Hong Kong	100%
Value Exchange Int’l (Shanghai) Limited	PRC	100%
Value Exchange Int’l (Hong Kong) Limited	Hong Kong	100%
TapServices, Inc.	Philippines	100%
Value Exchange Int’l (Hunan) Limited	PRC	51%
Shanghai Zhaonan Hengan Information
Technology Co., Ltd.	PRC	51%

b)Use of Estimates 

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

c)Cash and Cash Equivalents 

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash includes cash on hand and demand deposits in accounts maintained with financial institutions or state-owned banks within the PRC and Hong Kong.

d)Interim Financial Statements 

These interim unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

e)Accounts receivable and other receivables 

Receivables include trade accounts due from customers and other receivables such as cash advances to employees, utility deposits paid and advances to suppliers. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentration, customer credit worthiness, current economic trends and changes in customer payment patterns to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Delinquent account balances are written-off after management has determined that the likelihood of collection is not probable and known bad debts are written off against the allowance for doubtful accounts when identified. As of March 31, 2021 and December 31, 2020, there was allowance amount to Nil and $4,235 for uncollectible accounts receivable. Management believes that the remaining accounts receivable are collectable.

f)Inventories  

Inventories are valued at the lower of cost and net realizable value. Cost for inventories is determined using the “first-in, first-out” method.

Management reviews inventories for obsolescence or cost in excess of net realizable value periodically. The obsolescence, if any, is recorded as a provision against the inventory. The cost in excess of market value is written off and recorded as additional cost of sales.

g)Plant and equipment 

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

	Estimated Useful Life
Leasehold improvements	Lesser of lease term or the estimated useful lives of
	5 years
Computer equipment	5 years
Computer software	5 years
Office furniture and equipment	5 years
Motor Vehicle	3 years
Building	5 years

h)Goodwill and intangibles 

Intangibles with a definite life, including customer relationships and goodwill were recorded in connection with the acquisition of TSI. Intangible assets are amortized based on their estimated economic lives using the straight-line method with estimated lives as follows:

	Estimated Economic Life
Customer relationship	3 years

Goodwill represents the excess of the cost of acquisition over the fair value of net assets acquired. Goodwill is not amortized, but is instead tested for impairment annually.

i)Impairment of long-lived assets 

Property, Plant, and Equipment

The Company evaluates long-lived assets, including equipment, for impairment at least once per year and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired and an impairment loss equal to an amount by which the carrying value exceeds the fair value of the asset is recognized.

Impairment of Goodwill

The carrying value of goodwill is evaluated annually or more frequently if events or circumstances indicate that an impairment loss may have occurred. Such circumstances could include, but are not limited to, a significant adverse change in business climate, increased competition or other economic conditions. Under FASB Accounting Standard Codification (ASC) Topic 350 “Intangibles - Goodwill and Other”, goodwill is tested at a reporting unit level. The impairment test involves a two-step process. The first step involves comparing the fair value of the reporting unit to which the goodwill is assigned to its carrying amount. If this comparison indicates that a reporting unit’s estimated fair value is less than its carrying value, a second step is required. If applicable, the second step requires us to allocate the estimated fair value of the reporting unit to the estimated fair value of the reporting unit’s net assets, with any fair value in excess of amounts allocated to such net assets representing the implied fair value of goodwill for that reporting unit. If the carrying value of the goodwill exceeds its fair value, the carrying value is written down by an amount equal to such excess.

The goodwill impairment testing process involves the use of significant assumptions, estimates and judgments, and is subject to inherent uncertainties and subjectivity. Estimating a reporting unit’s discounted cash flows involves the use of significant assumptions, estimates and judgments with respect to a variety of factors, including sales, gross margin and selling, general and administrative rates, capital expenditures, cash flows and the selection of an appropriate discount rate. Projected sales, gross margin and selling, general and administrative expense rate assumptions and capital expenditures are based on our annual business plans and other forecasted results. Discount rates reflect market-based estimates of the risks associated with the projected cash flows of the reporting unit directly resulting from the use of its assets in its operations. These estimates are based on the best information available to us as of the date of the impairment assessment.

j)Fair value of financial instruments 

The Company values its financial instruments as required by FASB ASC 320-12-65. The estimated fair value amounts have been determined by the Company, using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level one —Quoted market prices in active markets for identical assets or liabilities; 

Level two —Inputs other than level one inputs that are either directly or indirectly observable; and 

Level three —Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use. 

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The carrying values of the Company’s financial instruments; consisting of cash and cash equivalents, accounts receivable, accounts payable, other receivables and prepayments, other payables and accrued liabilities, balances with a related party, balances with related companies and amounts due to director approximate their fair values due to the short maturities of these instruments.

There was no asset or liability measured at fair value on a non-recurring basis as of March 31, 2021 and December 31, 2020.

k)Comprehensive income 

U.S. GAAP generally requires that recognized revenue, expenses, gains and losses be included in net income or loss. Although certain changes in assets and liabilities are reported as separate components of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income or loss. The components of other comprehensive income or loss consist of foreign currency translation adjustments.

l)Earnings per share 

The Company reports earnings per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

m)Revenue recognition 

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

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

Multiple-deliverable arrangements

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

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

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

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

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

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

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

Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the three months period ended March 31, 2021 and 2020.

	Three Months Ended March 31, 2021	Three Months Ended March 31, 2020
	US$	US$
	(unaudited)	(unaudited)
NET REVENUES
Service income
- systems development and integration	34,077	6,210,065
- systems maintenance	1,608,466	1,495,110
- sales of hardware and consumables	561,229	497,736
	2,203,772	8,202,911

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

n)Income taxes 

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

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

o)Operating leases 

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases are charged to the statements of income on a straight-line basis over the lease periods.

p)Advertising costs 

The Company expenses the cost of advertising as incurred in the period in which the advertisements and marketing activities are first run or over the life of the endorsement contract. Advertising and marketing expense for the three months ended March 31, 2021 and 2020 were insignificant.

q)Shipping and handling 

Shipping and handling cost incurred to ship computer products to customers are included in selling expenses. Shipping and handling expenses for the three months ended March 31, 2021 and 2020 were insignificant.

r)Research and development costs 

Research and development costs are expensed as incurred and are included in general and administrative expenses. Research and development costs for the three months ended March 31, 2021 and 2020 were insignificant.

s)Foreign currency translation 

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

Quarter ended	March 31, 2021	March 31, 2020
RMB : USD exchange rate	6.5152	7.0131
average period ended
HKD : USD exchange rate	7.800	7.800
average period ended
PESO : USD exchange rate	47.7064	50.3182
average period ended
Quarter ended	March 31, 2021	December 31, 2020
RMB : USD exchange rate	6.5864	6.5442
HKD : USD exchange rate	7.800	7.800
PESO : USD exchange rate	47.7064	47.7064

t)Stock-based Compensation 

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

u)Commitments and contingencies 

The Company follows FASB ASC Subtopic 450-20, “Loss Contingencies” in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

v)Segment Reporting 

The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operating results solely by monthly revenue from software development and maintenance services (but not by sub-services/product type or geographic area) and operating results of the Company and, as such, the Company has determined that the Company has one operating segment as defined by ASC Topic 280 “Segment Reporting”.

w)Recent accounting pronouncements 

In June 2016, FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective on January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a group is required to recognize an allowance based on its estimate of expected credit loss. We are currently evaluating the impact of this new guidance on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company currently intends to adopt this guidance for the fiscal year beginning January 1, 2020, and does not anticipate that the adoption of this guidance will have a material impact on its financial statements or disclosures because the Company does not currently have any recorded goodwill.

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In January 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

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3. Accounts receivable

3 Months Ended

Mar. 31, 2021

Notes

3. Accounts receivable

3. Accounts receivable 

Accounts receivable consisted of the following as of March 31, 2021 and December 31, 2020: 

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Accounts receivable	1,285,191	603,689
Allowance for doubtful accounts	-	(4,253)
	1,285,191	599,436

All of the Company’s customers are located in the PRC, Hong Kong and Manila, Philippines. The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. 

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4. Other receivables and prepayments

3 Months Ended

Mar. 31, 2021

Notes

4. Other receivables and prepayments

4. Other receivables and prepayments 

Other receivables and prepayments consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Deposits and prepaid expense	332,606	299,790
Others	79,751	114,552
	412,357	414,342

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5. Inventories

3 Months Ended

Mar. 31, 2021

Notes

5. Inventories

5. Inventories 

Inventories as of March 31, 2021 and December 31, 2020 consisted of the following:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Finished goods	244,547	238,147

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6. Plant and equipment, net

3 Months Ended

Mar. 31, 2021

Notes

6. Plant and equipment, net

6. Plant and equipment, net 

Plant and equipment consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Leasehold improvements	77,749	78,224
Office furniture and equipment	251,569	254,681
Computer equipment	334,061	334,237
Computer software	43,043	43,319
Motor Vehicle	119,806	119,806
Building	68,904	68,904
Total	895,132	899,171
Less: accumulated depreciation	(576,882)	(542,150)
Plant and equipment, net	318,250	357,021

Depreciation expense for the three months period ended March 31, 2021 and 2020 amounted to $33,663 and $38,770, respectively. For the three months period ended March 31, 2021 and 2020, no interest expense was capitalized into plant and equipment.

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7. Goodwill

3 Months Ended

Mar. 31, 2021

Notes

7. Goodwill

7. Goodwill 

Goodwill consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Goodwill arising from acquisition of TSI	206,812	206,812

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8. Leases

3 Months Ended

Mar. 31, 2021

Notes

8. Leases

8. Leases 

We have entered into various non-cancelable operating lease agreements for certain of our offices. Our leases have original lease periods expiring between the remainder of 2020 and 2024. Many leases include option to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Operating lease right-of-use assets, net	544,102	580,798

The components of operating lease liabilities are as follows:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Lease liabilities, current	301,611	303,687
Lease liabilities, non-current	242,491	277,111
Present value of lease liabilities	544,102	580,798

Total operating lease cost for the three months period ended March 31, 2021 and 2020 amounted to $89,368 and 3,505, respectively. Weighted-average remaining lease term is 1.64 years, and weighted-average discount rate is 3%.

The following is a schedule, by years, of maturities of lease liabilities as of December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Year one	313,553	316,880
Year two	167,011	187,971
Year three	81,064	95,772
Year four	-	-
Thereafter	-	-
Total undiscounted cash flows	561,628	600,623
Less: Imputed interest	(17,526)	(19,826)
Present value of lease liabilities	544,102	580,798

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9. Bank loan

3 Months Ended

Mar. 31, 2021

Notes

9. Bank loan

9.Bank loan  

Bank loan and accruals consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Long term bank loan	91,955	101,823
Less: Current portion of long term bank loan	(39,342)	(38,874)
	52,613	62,949
Current portion of long term bank loan	39,342	38,874

As of March 31, 2021 and December 31, 2020, the above bank loan secured by property and equipment with net carrying amount of $38,959 and $44,533 respectively.

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10. Other payables and accrued liabilities

3 Months Ended

Mar. 31, 2021

Notes

10. Other payables and accrued liabilities

10. Other payables and accrued liabilities 

Other payables and accruals consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Accrual	651,421	737,142
Income taxes payable	28,696	94,675
	680,117	831,817

Accrual mainly represents salary payables and fringe and social security accruals. According to the prevailing laws and regulations of the PRC, all eligible employees of the Company’s subsidiary are entitled to staff welfare benefits including medical care, welfare subsidies, unemployment insurance and pension benefits through a PRC government-mandated multi-employer defined contribution plan. The Company’s subsidiaries are required to accrue for these benefits based on certain percentages of the qualified employees’ salaries. The Company’s subsidiary is required to make contributions to the plans out of the amounts accrued.

The Company’s subsidiaries incorporated in Hong Kong manage a defined contribution Mandatory Provident Fund (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for all of its employees in Hong Kong. The Company is required to contribute 5% of the monthly salaries for all Hong Kong based employees to the MPF Scheme up to a maximum statutory limit.

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11. Deferred income

3 Months Ended

Mar. 31, 2021

Notes

11. Deferred income

11. Deferred income 

Deferred income consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Service fees received in advance	815,532	254,937

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12. Statutory reserves

3 Months Ended

Mar. 31, 2021

Notes

12. Statutory reserves

12. Statutory reserves 

Statutory reserves

The laws and regulations of the PRC require that before an enterprise distributes profits to its owners, it must first satisfy all tax liabilities, provide for losses in previous years, and make allocations in proportions determined at the discretion of the Board of Directors after the statutory reserves.

As stipulated by the Company Law of the PRC, as applicable to Chinese companies with foreign ownership, net income after taxation can only be distributed as dividends after appropriation has been made for the following:

1.Making up cumulative prior years’ losses, if any; 

2.Allocations to the “Statutory surplus reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the company’s registered capital; and; 

3.Allocations to the discretionary surplus reserve, if approved in the shareholders’ general meeting. 

The statutory reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any. It may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital.

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13. Related party and shareholder transactions

3 Months Ended

Mar. 31, 2021

Notes

13. Related party and shareholder transactions

13. Related party and shareholder transactions 

Other than disclosed elsewhere in these financial statements, the Company also had the following related party balances and transactions:

Related party balances

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Due from related parties
Value Exchange International Limited (i)	1,154,587	1,269,620
Cucumbuy.com Limited (ii)	38,462	30,769
SmartMyWays Co., Limited (iii)	38,462	30,769
Retail Intelligent Unit Limited (iv)	15,384	12,308
TAP Technology (HK) Limited (v)	7,692	-
	1,254,587	1,343,466
Due to related parties
AppMyWays Co., Limited (vi)	213,393	253,063
Mr. Johan Pehrson (vii)	2,500	10,000
	215,893	263,063

Related party transactions:

	Three Months	Three Months
	Ended	Ended
	March 31,	March 31,
	2020	2020
	US$	US$
	(unaudited)	(unaudited)
Service income received from	24,910	-
AppMyWays Co., Limited (vi)
ValueX International Pte. Ltd. (viii)	-	145,708
Smartmyways Co., Limited (iii)	-	23,204
Subcontracting fees paid to	(16,747)	-
Value E Consultant International (M) Sdn. Bhd (ix)
Management fees received from
Value Exchange International Limited (i)	20,172	7,547
Cucumbuy.com Limited (ii)	7,692	-
SmartMyWays Co., Limited (iii)	7,692	-
Retail Intelligent Unit Limited (iv)	3,077	-
TAP Technology (HK) Limited (v)	7,692	-

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2. Summary of Significant Accounting Policies: a) Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2021

Policies

a) Basis of Presentation

a)Basis of Presentation 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and include the financial statements of the Company and all its wholly-owned subsidiaries that require consolidation. All material intercompany transactions and balances have been eliminated in the consolidation. The Company’s fiscal year end is December 31st. The following entities were consolidated as of March 31, 2021:

	Place of incorporation	Ownership percentage
Value Exchange International, Inc.	USA	Parent Company
Value Exchange Int’l (China) Limited	Hong Kong	100%
Value Exchange Int’l (Shanghai) Limited	PRC	100%
Value Exchange Int’l (Hong Kong) Limited	Hong Kong	100%
TapServices, Inc.	Philippines	100%
Value Exchange Int’l (Hunan) Limited	PRC	51%
Shanghai Zhaonan Hengan Information
Technology Co., Ltd.	PRC	51%

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2. Summary of Significant Accounting Policies: b) Use of Estimates (Policies)

3 Months Ended

Mar. 31, 2021

Policies

b) Use of Estimates

b)Use of Estimates 

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

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2. Summary of Significant Accounting Policies: c) Cash and Cash Equivalents (Policies)

3 Months Ended

Mar. 31, 2021

Policies

c) Cash and Cash Equivalents

c)Cash and Cash Equivalents 

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash includes cash on hand and demand deposits in accounts maintained with financial institutions or state-owned banks within the PRC and Hong Kong.

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2. Summary of Significant Accounting Policies: d) Interim Financial Statements (Policies)

3 Months Ended

Mar. 31, 2021

Policies

d) Interim Financial Statements

d)Interim Financial Statements 

These interim unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

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2. Summary of Significant Accounting Policies: e) Accounts receivable and other receivables (Policies)

3 Months Ended

Mar. 31, 2021

Policies

e) Accounts receivable and other receivables

e)Accounts receivable and other receivables 

Receivables include trade accounts due from customers and other receivables such as cash advances to employees, utility deposits paid and advances to suppliers. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentration, customer credit worthiness, current economic trends and changes in customer payment patterns to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Delinquent account balances are written-off after management has determined that the likelihood of collection is not probable and known bad debts are written off against the allowance for doubtful accounts when identified. As of March 31, 2021 and December 31, 2020, there was allowance amount to Nil and $4,235 for uncollectible accounts receivable. Management believes that the remaining accounts receivable are collectable.

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2. Summary of Significant Accounting Policies: f) Inventories (Policies)

3 Months Ended

Mar. 31, 2021

Policies

f) Inventories

f)Inventories  

Inventories are valued at the lower of cost and net realizable value. Cost for inventories is determined using the “first-in, first-out” method.

Management reviews inventories for obsolescence or cost in excess of net realizable value periodically. The obsolescence, if any, is recorded as a provision against the inventory. The cost in excess of market value is written off and recorded as additional cost of sales.

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2. Summary of Significant Accounting Policies: g) Plant and equipment (Policies)

3 Months Ended

Mar. 31, 2021

Policies

g) Plant and equipment

g)Plant and equipment 

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

	Estimated Useful Life
Leasehold improvements	Lesser of lease term or the estimated useful lives of
	5 years
Computer equipment	5 years
Computer software	5 years
Office furniture and equipment	5 years
Motor Vehicle	3 years
Building	5 years

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2. Summary of Significant Accounting Policies: h) Goodwill and intangibles (Policies)

3 Months Ended

Mar. 31, 2021

Policies

h) Goodwill and intangibles

h)Goodwill and intangibles 

Intangibles with a definite life, including customer relationships and goodwill were recorded in connection with the acquisition of TSI. Intangible assets are amortized based on their estimated economic lives using the straight-line method with estimated lives as follows:

	Estimated Economic Life
Customer relationship	3 years

Goodwill represents the excess of the cost of acquisition over the fair value of net assets acquired. Goodwill is not amortized, but is instead tested for impairment annually.

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2. Summary of Significant Accounting Policies: i) Impairment of long-lived assets (Policies)

3 Months Ended

Mar. 31, 2021

Policies

i) Impairment of long-lived assets

i)Impairment of long-lived assets 

Property, Plant, and Equipment

The Company evaluates long-lived assets, including equipment, for impairment at least once per year and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired and an impairment loss equal to an amount by which the carrying value exceeds the fair value of the asset is recognized.

Impairment of Goodwill

The carrying value of goodwill is evaluated annually or more frequently if events or circumstances indicate that an impairment loss may have occurred. Such circumstances could include, but are not limited to, a significant adverse change in business climate, increased competition or other economic conditions. Under FASB Accounting Standard Codification (ASC) Topic 350 “Intangibles - Goodwill and Other”, goodwill is tested at a reporting unit level. The impairment test involves a two-step process. The first step involves comparing the fair value of the reporting unit to which the goodwill is assigned to its carrying amount. If this comparison indicates that a reporting unit’s estimated fair value is less than its carrying value, a second step is required. If applicable, the second step requires us to allocate the estimated fair value of the reporting unit to the estimated fair value of the reporting unit’s net assets, with any fair value in excess of amounts allocated to such net assets representing the implied fair value of goodwill for that reporting unit. If the carrying value of the goodwill exceeds its fair value, the carrying value is written down by an amount equal to such excess.

The goodwill impairment testing process involves the use of significant assumptions, estimates and judgments, and is subject to inherent uncertainties and subjectivity. Estimating a reporting unit’s discounted cash flows involves the use of significant assumptions, estimates and judgments with respect to a variety of factors, including sales, gross margin and selling, general and administrative rates, capital expenditures, cash flows and the selection of an appropriate discount rate. Projected sales, gross margin and selling, general and administrative expense rate assumptions and capital expenditures are based on our annual business plans and other forecasted results. Discount rates reflect market-based estimates of the risks associated with the projected cash flows of the reporting unit directly resulting from the use of its assets in its operations. These estimates are based on the best information available to us as of the date of the impairment assessment.

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2. Summary of Significant Accounting Policies: j) Fair value of financial instruments (Policies)

3 Months Ended

Mar. 31, 2021

Policies

j) Fair value of financial instruments

j)Fair value of financial instruments 

The Company values its financial instruments as required by FASB ASC 320-12-65. The estimated fair value amounts have been determined by the Company, using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level one —Quoted market prices in active markets for identical assets or liabilities; 

Level two —Inputs other than level one inputs that are either directly or indirectly observable; and 

Level three —Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use. 

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The carrying values of the Company’s financial instruments; consisting of cash and cash equivalents, accounts receivable, accounts payable, other receivables and prepayments, other payables and accrued liabilities, balances with a related party, balances with related companies and amounts due to director approximate their fair values due to the short maturities of these instruments.

There was no asset or liability measured at fair value on a non-recurring basis as of March 31, 2021 and December 31, 2020.

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2. Summary of Significant Accounting Policies: k) Comprehensive income (Policies)

3 Months Ended

Mar. 31, 2021

Policies

k) Comprehensive income

k)Comprehensive income 

U.S. GAAP generally requires that recognized revenue, expenses, gains and losses be included in net income or loss. Although certain changes in assets and liabilities are reported as separate components of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income or loss. The components of other comprehensive income or loss consist of foreign currency translation adjustments.

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2. Summary of Significant Accounting Policies: l) Earnings per share (Policies)

3 Months Ended

Mar. 31, 2021

Policies

l) Earnings per share

l)Earnings per share 

The Company reports earnings per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

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2. Summary of Significant Accounting Policies: m) Revenue recognition (Policies)

3 Months Ended

Mar. 31, 2021

Policies

m) Revenue recognition

m)Revenue recognition 

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

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

Multiple-deliverable arrangements

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

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

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

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

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

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

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

Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the three months period ended March 31, 2021 and 2020.

	Three Months Ended March 31, 2021	Three Months Ended March 31, 2020
	US$	US$
	(unaudited)	(unaudited)
NET REVENUES
Service income
- systems development and integration	34,077	6,210,065
- systems maintenance	1,608,466	1,495,110
- sales of hardware and consumables	561,229	497,736
	2,203,772	8,202,911

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

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2. Summary of Significant Accounting Policies: n) Income taxes (Policies)

3 Months Ended

Mar. 31, 2021

Policies

n) Income taxes

n)Income taxes 

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

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

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2. Summary of Significant Accounting Policies: o) Operating leases (Policies)

3 Months Ended

Mar. 31, 2021

Policies

o) Operating leases

o)Operating leases 

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases are charged to the statements of income on a straight-line basis over the lease periods.

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2. Summary of Significant Accounting Policies: p) Advertising costs (Policies)

3 Months Ended

Mar. 31, 2021

Policies

p) Advertising costs

p)Advertising costs 

The Company expenses the cost of advertising as incurred in the period in which the advertisements and marketing activities are first run or over the life of the endorsement contract. Advertising and marketing expense for the three months ended March 31, 2021 and 2020 were insignificant.

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2. Summary of Significant Accounting Policies: q) Shipping and handling (Policies)

3 Months Ended

Mar. 31, 2021

Policies

q) Shipping and handling

q)Shipping and handling 

Shipping and handling cost incurred to ship computer products to customers are included in selling expenses. Shipping and handling expenses for the three months ended March 31, 2021 and 2020 were insignificant.

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2. Summary of Significant Accounting Policies: r) Research and development costs (Policies)

3 Months Ended

Mar. 31, 2021

Policies

r) Research and development costs

r)Research and development costs 

Research and development costs are expensed as incurred and are included in general and administrative expenses. Research and development costs for the three months ended March 31, 2021 and 2020 were insignificant.

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2. Summary of Significant Accounting Policies: s) Foreign currency translation (Policies)

3 Months Ended

Mar. 31, 2021

Policies

s) Foreign currency translation

s)Foreign currency translation 

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

Quarter ended	March 31, 2021	March 31, 2020
RMB : USD exchange rate	6.5152	7.0131
average period ended
HKD : USD exchange rate	7.800	7.800
average period ended
PESO : USD exchange rate	47.7064	50.3182
average period ended
Quarter ended	March 31, 2021	December 31, 2020
RMB : USD exchange rate	6.5864	6.5442
HKD : USD exchange rate	7.800	7.800
PESO : USD exchange rate	47.7064	47.7064

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2. Summary of Significant Accounting Policies: t) Stock-based Compensation (Policies)

3 Months Ended

Mar. 31, 2021

Policies

t) Stock-based Compensation

t)Stock-based Compensation 

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

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2. Summary of Significant Accounting Policies: u) Commitments and contingencies (Policies)

3 Months Ended

Mar. 31, 2021

Policies

u) Commitments and contingencies

u)Commitments and contingencies 

The Company follows FASB ASC Subtopic 450-20, “Loss Contingencies” in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

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2. Summary of Significant Accounting Policies: v) Segment Reporting (Policies)

3 Months Ended

Mar. 31, 2021

Policies

v) Segment Reporting

v)Segment Reporting 

The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operating results solely by monthly revenue from software development and maintenance services (but not by sub-services/product type or geographic area) and operating results of the Company and, as such, the Company has determined that the Company has one operating segment as defined by ASC Topic 280 “Segment Reporting”.

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2. Summary of Significant Accounting Policies: w) Recent accounting pronouncements (Policies)

3 Months Ended

Mar. 31, 2021

Policies

w) Recent accounting pronouncements

w)Recent accounting pronouncements 

In June 2016, FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective on January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a group is required to recognize an allowance based on its estimate of expected credit loss. We are currently evaluating the impact of this new guidance on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company currently intends to adopt this guidance for the fiscal year beginning January 1, 2020, and does not anticipate that the adoption of this guidance will have a material impact on its financial statements or disclosures because the Company does not currently have any recorded goodwill.

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In January 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

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2. Summary of Significant Accounting Policies: a) Basis of Presentation: Schedule of Consolidated Entities (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Consolidated Entities

	Place of incorporation	Ownership percentage
Value Exchange International, Inc.	USA	Parent Company
Value Exchange Int’l (China) Limited	Hong Kong	100%
Value Exchange Int’l (Shanghai) Limited	PRC	100%
Value Exchange Int’l (Hong Kong) Limited	Hong Kong	100%
TapServices, Inc.	Philippines	100%
Value Exchange Int’l (Hunan) Limited	PRC	51%
Shanghai Zhaonan Hengan Information
Technology Co., Ltd.	PRC	51%

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2. Summary of Significant Accounting Policies: g) Plant and equipment: Schedule of Estimated Useful Life (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Estimated Useful Life

	Estimated Useful Life
Leasehold improvements	Lesser of lease term or the estimated useful lives of
	5 years
Computer equipment	5 years
Computer software	5 years
Office furniture and equipment	5 years
Motor Vehicle	3 years
Building	5 years

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2. Summary of Significant Accounting Policies: h) Goodwill and intangibles: Schedule of Estimated Economic Life of Goodwill and Intangibles (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Estimated Economic Life of Goodwill and Intangibles

	Estimated Economic Life
Customer relationship	3 years

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2. Summary of Significant Accounting Policies: m) Revenue recognition: Schedule of Revenues (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Revenues

	Three Months Ended March 31, 2021	Three Months Ended March 31, 2020
	US$	US$
	(unaudited)	(unaudited)
NET REVENUES
Service income
- systems development and integration	34,077	6,210,065
- systems maintenance	1,608,466	1,495,110
- sales of hardware and consumables	561,229	497,736
	2,203,772	8,202,911

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3. Accounts receivable: Schedule of Accounts Receivable (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Accounts Receivable

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Accounts receivable	1,285,191	603,689
Allowance for doubtful accounts	-	(4,253)
	1,285,191	599,436

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4. Other receivables and prepayments: Schedule of Other Receivables and Prepayments (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Other Receivables and Prepayments

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Deposits and prepaid expense	332,606	299,790
Others	79,751	114,552
	412,357	414,342

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5. Inventories: Schedule of Inventories (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Inventories

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Finished goods	244,547	238,147

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6. Plant and equipment, net: Schedule of Property, Plant, and Equipment (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Property, Plant, and Equipment

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Leasehold improvements	77,749	78,224
Office furniture and equipment	251,569	254,681
Computer equipment	334,061	334,237
Computer software	43,043	43,319
Motor Vehicle	119,806	119,806
Building	68,904	68,904
Total	895,132	899,171
Less: accumulated depreciation	(576,882)	(542,150)
Plant and equipment, net	318,250	357,021

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7. Goodwill: Schedule of Goodwill (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Goodwill

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Goodwill arising from acquisition of TSI	206,812	206,812

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8. Leases: Schedule of Operating lease right-of-use assets (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Operating lease right-of-use assets

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Operating lease right-of-use assets, net	544,102	580,798

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8. Leases: Schedule of components of lease liabilities (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of components of lease liabilities

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Lease liabilities, current	301,611	303,687
Lease liabilities, non-current	242,491	277,111
Present value of lease liabilities	544,102	580,798

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8. Leases: Schedule of Future Minimum Rental Payments for Operating Leases (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Future Minimum Rental Payments for Operating Leases

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Year one	313,553	316,880
Year two	167,011	187,971
Year three	81,064	95,772
Year four	-	-
Thereafter	-	-
Total undiscounted cash flows	561,628	600,623
Less: Imputed interest	(17,526)	(19,826)
Present value of lease liabilities	544,102	580,798

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9. Bank loan: Schedule of Bank Loan (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Bank Loan

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Long term bank loan	91,955	101,823
Less: Current portion of long term bank loan	(39,342)	(38,874)
	52,613	62,949
Current portion of long term bank loan	39,342	38,874

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10. Other payables and accrued liabilities: Schedule of Other Payables and Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Other Payables and Accrued Liabilities

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Accrual	651,421	737,142
Income taxes payable	28,696	94,675
	680,117	831,817

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11. Deferred income: Schedule of Deferred Income (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Deferred Income

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Service fees received in advance	815,532	254,937

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13. Related party and shareholder transactions: Schedule of Balances due from Related Parties (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Balances due from Related Parties

	March 31,	December 31,
	2021	2020
	US$	US$
	(unaudited)
Due from related parties
Value Exchange International Limited (i)	1,154,587	1,269,620
Cucumbuy.com Limited (ii)	38,462	30,769
SmartMyWays Co., Limited (iii)	38,462	30,769
Retail Intelligent Unit Limited (iv)	15,384	12,308
TAP Technology (HK) Limited (v)	7,692	-
	1,254,587	1,343,466
Due to related parties
AppMyWays Co., Limited (vi)	213,393	253,063
Mr. Johan Pehrson (vii)	2,500	10,000
	215,893	263,063

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13. Related party and shareholder transactions: Schedule of Related Party Transactions (Tables)

3 Months Ended

Mar. 31, 2021

Tables/Schedules

Schedule of Related Party Transactions

	Three Months	Three Months
	Ended	Ended
	March 31,	March 31,
	2020	2020
	US$	US$
	(unaudited)	(unaudited)
Service income received from	24,910	-
AppMyWays Co., Limited (vi)
ValueX International Pte. Ltd. (viii)	-	145,708
Smartmyways Co., Limited (iii)	-	23,204
Subcontracting fees paid to	(16,747)	-
Value E Consultant International (M) Sdn. Bhd (ix)
Management fees received from
Value Exchange International Limited (i)	20,172	7,547
Cucumbuy.com Limited (ii)	7,692	-
SmartMyWays Co., Limited (iii)	7,692	-
Retail Intelligent Unit Limited (iv)	3,077	-
TAP Technology (HK) Limited (v)	7,692	-

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1. Nature of Operations and Continuance of Business (Details)	3 Months Ended
	Mar. 31, 2021
Details
Entity Incorporation, State or Country Code	NV
Entity Incorporation, Date of Incorporation	Jun. 26, 2007

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2. Summary of Significant Accounting Policies: m) Revenue recognition: Schedule of Revenues (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenues	$ 2,203,772	$ 8,202,911
Systems development and integration
Revenues	34,077	6,210,065
Systems maintenance
Revenues	1,608,466	1,495,110
Sales of hardware and consumables
Revenues	$ 561,229	$ 497,736

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3. Accounts receivable: Schedule of Accounts Receivable (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Details
Accounts receivable	$ 1,285,191	$ 603,689
Allowance for doubtful accounts	0	(4,253)
Accounts receivable, less allowance for doubtful accounts	$ 1,285,191	$ 599,436

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4. Other receivables and prepayments: Schedule of Other Receivables and Prepayments (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Details
Deposits and prepaid expense	$ 332,606	$ 299,790
Others	79,751	114,552
Other receivables and prepayments	$ 412,357	$ 414,342

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5. Inventories: Schedule of Inventories (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Details
Inventory - Finished Goods	$ 244,547	$ 238,147

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6. Plant and equipment, net: Schedule of Property, Plant, and Equipment (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Property, Plant and Equipment, Gross	$ 895,132	$ 899,171
Less: accumulated depreciation	(576,882)	(542,150)
Plant and equipment, net	318,250	357,021
Leasehold improvements
Property, Plant and Equipment, Gross	77,749	78,224
Office furniture and equipment
Property, Plant and Equipment, Gross	251,569	254,681
Computer equipment
Property, Plant and Equipment, Gross	334,061	334,237
Computer software
Property, Plant and Equipment, Gross	43,043	43,319
Motor Vehicle
Property, Plant and Equipment, Gross	119,806	119,806
Building
Property, Plant and Equipment, Gross	$ 68,904	$ 68,904

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7. Goodwill: Schedule of Goodwill (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Details
Goodwill arising from acquisition of TSI	$ 206,812	$ 206,812

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8. Leases: Schedule of Operating lease right-of-use assets (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Details
Operating lease right-of-use assets, net	$ 544,102	$ 580,798

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8. Leases: Schedule of components of lease liabilities (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Details
Lease liabilities, current	$ 301,611	$ 303,687
Operating lease liabilities, non-current	242,491	277,111
Present value of lease liabilities	$ 544,102	$ 580,798

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8. Leases: Schedule of Future Minimum Rental Payments for Operating Leases (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Details
Year one	$ 313,553	$ 316,880
Year two	167,011	187,971
Year three	81,064	95,772
Year four	0	0
Thereafter	0	0
Total undiscounted cash flows	561,628	600,623
Less: Imputed interest	(17,526)	(19,826)
Present value of lease liabilities	$ 544,102	$ 580,798

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10. Other payables and accrued liabilities: Schedule of Other Payables and Accrued Liabilities (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Details
Accrual	$ 651,421	$ 737,142
Income taxes payable	28,696	94,675
Accrued Liabilities, Current	$ 680,117	$ 831,817

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11. Deferred income: Schedule of Deferred Income (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Details
Service fees received in advance	$ 815,532	$ 254,937

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13. Related party and shareholder transactions: Schedule of Balances due from Related Parties (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Amounts due from a related party	$ 1,254,587	$ 1,343,466
Due to Related Parties	215,893	263,063
Value Exchange International Limited (i)
Amounts due from a related party	1,154,587	1,269,620
Cucumbuy.com Limited (ii)
Amounts due from a related party	38,462	30,769
SmartMyWays Co., Limited (iii)
Amounts due from a related party	38,462	30,769
Retail Intelligent Unit Limited (iv)
Amounts due from a related party	15,384	12,308
TAP Technology (HK) Limited (v)
Amounts due from a related party	7,692	0
AppMyWays Co., Limited (vi)
Due to Related Parties	213,393	253,063
Mr. Johan Pehrson (vii)
Due to Related Parties	$ 2,500	$ 10,000

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13. Related party and shareholder transactions: Schedule of Related Party Transactions (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
ValueX International Pte. Ltd. (viii)
Service income received	$ 0	$ 145,708
Smartmyways Co., Limited (iii)
Service income received	0	23,204
Management fees received	7,692	0
Value Exchange International Limited (i)
Management fees received	20,172	7,547
Cucumbuy.com Limited (ii)
Management fees received	7,692	0
Retail Intelligent Unit Limited (iv)
Management fees received	3,077	0
TAP Technology (HK) Limited (v)
Management fees received	$ 7,692	$ 0