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Dynamic quotes 
OFFON

SHARING ECONOMY INTERNATIONAL INC.

(SEII)
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SHARING ECONOMY INTERNATIONAL : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-K)

04/16/2021 | 03:43pm EDT

Overview

The Company has turned fully into developing the sharing economy businesses in
2020. Unfortunately the COVID-19 situation has created adverse market conditions
to sharing economy due to the changes in consumer and business market behaviors.



Governments around the world has further commitment to the environmental
protections, so we still believe in the future development of sharing economy.
The company is in the process of changing the business models on our sharing
economy platforms so they fit to the changed market behaviors and be continued
to expand our markets.


The company plans to expand into the Asia and U.S. markets in 2021.



                                       21





Recent developments



Inspirit Studio



During the period, BuddiGo, the sharing economy mobile platform developed by
Inspirit Studio Limited ("Inspirit Studio"), continuously promoted its service
to the local market in Hong Kong. BuddiGo offers a wide range of errand
services. Currently, about 80 percent of the orders [to be updated] received are
for on-demand urgent delivery of items such as documents, flowers and cakes.
Food delivery services are also available. During 2018, over 1,200 individuals
have officially registered as sell-side buddies, who completed over 500 delivery
orders in 2018, majority orders were happened in the third quarter. In addition,
BuddiGo has signed up with a number of local business partners to provide
ongoing delivery services for these clients. BuddiGo's goal is to connect with
the community and deliver localized content featuring BuddiGo's core features
and advantages. BuddiGo is actively seeking strategic investors or collaborative
parties who are enthusiastic about its business model and can help achieve its
business targets and expand into different countries.



3D Discovery Co. Limited



3D Discovery, an IT service provider that develops virtual tours for the real
estate, hospitality and interior design industries. 3D Discovery's space
capturing and modeling technology is already used by some of Hong Kong's leading
property agencies to provide their clients with a truly immersive, first-hand
experience of a physical space while saving them time and money. According to
Goldman Sachs, the Real Estate virtual reality ("VR") industry is predicted to
reach US$2.6 billion in 2025, supported by a potential user base of over 1.4
million registered real estate agents in some of the world's largest markets.
Apart from its existing profitable operations, 3D Discovery is developing a
mobile app, Autocap, which allows users to create an interactive virtual tour of
a physical space by using a mobile phone camera.



3D Discovery successfully completed a number of projects during the year. First,
its "3D Virtual Tours in Hong Kong" generated about 1,371,000 impressions in
2018. In addition, 3D Discovery partnered with Midland Realty, one of the
largest real estate agencies in Hong Kong, to establish the "Creation 200 3D
Virtual Tours." This business unit generated HK$1.7 million in revenue in 2018.



                                       22





EC Advertising Limited


Following the acquisition of BuddiGo, AnyWorkspace and 3D Discovery by the
Company during the period between late 2017 and the first half year of 2018, EC
Advertising Limited ("EC Advertising") has been developing opportunities for
these three platforms to attract advertisers.



During the period, we established a wholly-owned subsidiary in Xiamen, Fujian
Province of Mainland China, which is intended to cover our advertising business
in this region. We started meeting with a number of potential clients there and
anticipate that this advertising company will confirm with them several
marketing campaigns. In order to maximize our exposure to the potential clients
in Mainland China, we are developing a strategic media plan which will cover
major cities in Mainland China such as Beijing, Shanghai, Guangzhou and
Shenzhen. Major banks, real estate developers and consumer products
manufacturers and retailers are our target clients. More importantly, our
presence in Mainland China can facilitate the rollout of franchise programs of
our business units, which is one of the revenue drivers for the Company.



ECrent Platform Business



Asia Region:


In 2018, our subsidiary SEIL entered into a license agreement with ECRENT,
regarding the grant of an exclusive and sublicensable license from ECRENT to
SEII to utilize certain software and trademarks in order to develop, launch,
operate, commercialize, and maintain an online website platform in Taiwan,
Thailand, India, Indonesia, Singapore, Malaysia, Philippines, Vietnam, Cambodia,
Japan, and Korea. According to the latest amendment, ECRENT will guarantee that
the operation of its related websites, mobile applications and business services
will contribute revenue of US$13,000,000 (increased from US$10,000,000 according
to the previously amended agreement) and gross profit of US$2,522,000 (up from
US$1,940,000 as stated on the previously amended agreement) from the closing
date of the License Agreement through December 31, 2019 (extended from June 30,
2019 per the previously amended agreement).



In August, SEIL has entered into a License Agreement with PTI Corporation
("PTI"), that sublicenses SEIL's exclusive license with ECRENT to utilize
certain software and trademarks in order to develop, launch, operate,
commercialize, and maintain an online website platform in South Korea. In
return, PTI shall pay to SEIL $230,000 ("Consideration"). The License Agreement
will be effective on September 1, 2018 through December 31, 2019. In addition,
if the aggregate revenue during the period exceeds the Consideration, SEIL shall
receive 30% of the difference between the aggregate revenue and the
Consideration. During the third quarter of 2018, PTI commenced prelaunch
activities to develop the platform.



Europe Region:



In August 2018, our subsidiary SEIL entered into a License Agreement with ECRENT
regarding the grant of an exclusive and sublicensable license from ECRENT to
SEII to utilize certain software and trademarks in order to develop, launch,
operate, commercialize, and maintain an online website platform in United
Kingdom, Germany, France, Poland, Switzerland, Netherlands, Denmark, Russia,
Italy, Spain, Portugal and Greece. In return, SEII shall issue to ECRENT 360,000
shares of restricted common stock. Closing of this transaction was conditioned
on various conditions, including receipt of all necessary regulatory approvals.
On October 9, 2018, the agreement was terminated by the parties, who have agreed
to forego their respective rights under the agreement.



Going forward, we will continue targeting the technology and global sharing economy markets, by developing online platforms and rental business partnerships that will drive the global development of sharing through economical rental business models.



                                       23




Critical Accounting Policies and Estimates




Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these consolidated financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. We continually evaluate our estimates, including those related
to bad debts, inventories, recovery of long-lived assets, income taxes, the fair
value of equity method investment, the fair value of assets held for sale and
the valuation of equity transactions.



We base our estimates on historical experience and on various other assumptions
that we believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Any future changes
to these estimates and assumptions could cause a material change to our reported
amounts of revenues, expenses, assets and liabilities. Actual results may differ
from these estimates under different assumptions or conditions. We believe the
following critical accounting policies affect our more significant judgments and
estimates used in the preparation of the consolidated financial statements.


Accounts Receivable


We have a policy of reserving for uncollectible accounts based on our best
estimate of the amount of probable credit losses in our existing accounts
receivable. We periodically review our accounts receivable to determine whether
an allowance is necessary based on an analysis of past due accounts and other
factors that may indicate that the realization of an account may be in doubt.
Account balances deemed to be uncollectible are charged to the allowance after
all means of collection have been exhausted and the potential for recovery
is
considered remote.



As a basis for estimating the likelihood of collection has been established, we
consider a number of factors when determining reserves for uncollectable
accounts. We believe that we use a reasonably reliable methodology to estimate
the collectability of our accounts receivable. We review our allowances for
doubtful accounts on at least a quarterly basis. We also consider whether the
historical economic conditions are comparable to current economic conditions. If
the financial condition of our customers or other parties that we have business
relations with were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required.



                                       24





Intangible Assets



In January 2018, in connection the acquisition of 3D Discovery and AnyWorkspace,
the Company acquired their technologies. The technology of 3D Discovery covers a
3D virtual tour solution for the property industry and the technology of
AnyWorkspace covers management software for an online, real-time marketplace
that connects workspace providers with clients who need temporary office and
meeting spaces.



Revenue Recognition



In May 2014, FASB issued an update Accounting Standards Update ("ASU") ("ASU
2014-09") establishing Accounting Standards Codification ("ASC") Topic 606,
Revenue from Contracts with Customers ("ASC 606"). ASU 2014-09, as amended by
subsequent ASUs on the topic, establishes a single comprehensive model for
entities to use in accounting for revenue arising from contracts with customers
and supersedes most of the existing revenue recognition guidance. This standard,
which is effective for interim and annual reporting periods in fiscal years that
begin after December 15, 2017, requires an entity to recognize revenue to depict
the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services and also requires certain additional
disclosures. We adopted this standard in 2018 using the modified retrospective
approach, which requires applying the new standard to all existing contracts not
yet completed as of the effective date and recording a cumulative-effect
adjustment to retained earnings as of the beginning of the fiscal year of
adoption. Based on an evaluation of the impact ASU 2014-09 will have on our
sources of revenue, we have concluded that ASU 2014-09 did not have a material
impact on the process for, timing of, and presentation and disclosure of revenue
recognition from customers.


We recognize revenues from the sale of equipment upon shipment and transfer of
title. The other elements may include installation and, generally, a one-year
warranty. Equipment installation revenue is valued based on estimated service
person hours to complete installation and is recognized when the labor has been
completed and the equipment has been accepted by the customer, which is
generally within a couple days of the delivery of the equipment. Warranty
revenue is valued based on estimated service person hours to complete a service
and generally is recognized over the contract period.



All other product sales with customer specific acceptance provisions are
recognized upon customer acceptance and the delivery of the parts or service.
Revenues related to spare part sales are recognized upon shipment or delivery
based on the trade terms.


We recognized revenue from the rental of batteries when earned.



Income Taxes


We are governed by the Income Tax Law of the PRC, Inland Revenue Ordinance of
Hong Kong and the U.S. Internal Revenue Code of 1986, as amended. We account for
income taxes using the asset/liability method prescribed by ASC 740, "Accounting
for Income Taxes." Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial reporting and tax bases
of assets and liabilities using enacted tax rates that will be in effect in the
period in which the differences are expected to reverse. The Company records a
valuation allowance to offset deferred tax assets if, based on the weight of
available evidence, it is more-likely-than-not that some portion, or all, of the
deferred tax assets will not be realized. The effect on deferred taxes of a
change in tax rates is recognized as income or loss in the period that includes
the enactment date.



                                       25





Deferred tax is accounted for using the balance sheet liability method in
respect of temporary differences arising from differences between the carrying
amount of assets and liabilities in the financial statements and the
corresponding tax basis used in the computation of assessable tax profit. In
principle, deferred tax liabilities are recognized for all taxable temporary
differences, and deferred tax assets are recognized to the extent that it is
probably that taxable profit will be available against which deductible
temporary differences can be utilized.



Deferred tax is calculated using tax rates that are expected to apply to the
period when the asset is realized or the liability is settled. Deferred tax is
charged or credited in the income statement, except when it is related to items
credited or charged directly to equity, in which case the deferred tax is
charged to equity. Deferred tax assets and liabilities are offset when they
related to income taxes levied by the same taxation authority and we intend to
settle its current tax assets and liabilities on a net basis.



On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act
(the "Act"), a tax reform bill which, among other items, reduces the current
federal income tax rate to 21% from 35%. The rate reduction is effective January
1, 2018, and is permanent.



The Act has caused the Company's deferred income taxes to be revalued. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through income tax expense. Pursuant to the guidance within SEC
Staff Accounting Bulletin No. 118 ("SAB 118"), as of December 31, 2017, the
Company recognized the provisional effects of the enactment of the Act for which
measurement could be reasonably estimated. Since the Company has provided a full
valuation allowance against its deferred tax assets, the revaluation of the
deferred tax assets did not have a material impact on any period presented. The
ultimate impact of the Act may differ from these estimates due to the Company's
continued analysis or further regulatory guidance that may be issued as a result
of the Act.



Stock-based Compensation


Stock-based compensation is accounted for based on the requirements of the
Share-Based Payment topic of ASC 718 which requires recognition in the financial
statements of the cost of employee and director services received in exchange
for an award of equity instruments over the vesting period or immediately if the
award is non-forfeitable. The Accounting Standards Codification also requires
measurement of the cost of employee and director services received in exchange
for an award based on the grant-date fair value of the award.



Additionally, effective January 1, 2017, the Company adopted the Accounting
Standards Update No. 2016-09 ("ASU 2016-09 "), Improvements to Employee
Share-Based Payment Accounting. ASU 2016-09 permits the election of an
accounting policy for forfeitures of share-based payment awards, either to
recognize forfeitures as they occur or estimate forfeitures over the vesting
period of the award. The Company has elected to recognize forfeitures as they
occur and the cumulative impact of this change did not have any effect on the
Company's consolidated financial statements and related disclosures.



Through September 30, 2018, pursuant to ASC 505-50 - "Equity-Based Payments to
Non-Employees", all share-based payments to non-employees, including grants of
stock options, were recognized in the consolidated financial statements as
compensation expense over the service period of the consulting arrangement or
until performance conditions are expected to be met. The Company periodically
reassessed the fair value of non-employee share based payments until service
conditions are met, which generally aligns with the vesting period of the equity
instrument, and the Company adjusts the expense recognized in the consolidated
financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07,
Improvements to Nonemployee Share-Based Payment Accounting, which simplifies
several aspects of the accounting for nonemployee share-based payment
transactions by expanding the scope of the stock-based compensation guidance in
ASC 718 to include share-based payment transactions for acquiring goods and
services from non-employees. ASU No. 2018-07 is effective for annual periods
beginning after December 15, 2018, including interim periods within those annual
periods. Early adoption is permitted, but entities may not adopt prior to
adopting the new revenue recognition guidance in ASC 606. The Company early
adopted ASU No. 2018-07 in the fourth quarter of 2018 and there was no
cumulative effect of adoption.



                                       26





Currency Exchange Rates


Our functional currency is the U.S. dollar, and the functional currency of our
operating subsidiaries is the RMB and Hong Kong Dollar. Substantially all of our
sales are denominated in RMB. As a result, changes in the relative values of
U.S. dollars and RMB affect our reported levels of revenues and profitability as
the results of our operations are translated into U.S. dollars for reporting
purposes. In particular, fluctuations in currency exchange rates could have a
significant impact on our financial stability due to a mismatch among various
foreign currency-denominated sales and costs. Fluctuations in exchange rates
between the U.S. dollar and RMB affect our gross and net profit margins and
could result in foreign exchange and operating losses.



Our exposure to foreign exchange risk primarily relates to currency gains or
losses resulting from timing differences between signing of sales contracts and
settling of these contracts. Furthermore, we translate monetary assets and
liabilities denominated in other currencies into RMB, the functional currency of
our operating subsidiary. Our results of operations and cash flow are translated
at average exchange rates during the period, and assets and liabilities are
translated at the unified exchange rate at the end of the period. Translation
adjustments resulting from this process are included in accumulated other
comprehensive income in our statement of shareholders' equity. We have not used
any forward contracts, currency options or borrowings to hedge our exposure to
foreign currency exchange risk. We cannot predict the impact of future exchange
rate fluctuations on our results of operations and may incur net foreign
currency losses in the future.



Our financial statements are expressed in U.S. dollars, which is the functional
currency of our parent company. The functional currency of our operating
subsidiaries and affiliates is RMB and the Hong Kong dollar. To the extent we
hold assets denominated in U.S. dollars, any appreciation of the RMB or HKD
against the U.S. dollar could result in a charge in our statement of operations
and a reduction in the value of our U.S. dollar denominated assets. On the other
hand, a decline in the value of RMB or HKD against the U.S. dollar could reduce
the U.S. dollar equivalent amounts of our financial results.



Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, " Leases (Topic 842) ". ASU
2016-02 sets out the principles for the recognition, measurement, presentation
and disclosure of leases for both parties to a contract (i.e., lessees and
lessors). The new standard requires lessees to apply a dual approach,
classifying leases as either finance or operating leases based on the principle
of whether or not the lease is effectively a financed purchase by the lessee.
This classification will determine whether lease expense is recognized based on
an effective interest method or on a straight-line basis over the term of the
lease. A lessee is also required to recognize a right-of-use asset and a lease
liability for all leases with a term of greater than 12 months regardless of
their classification. Leases with a term of 12 months or less will be accounted
for similar to existing guidance for operating leases today. The new standard
requires lessors to account for leases using an approach that is substantially
equivalent to existing guidance for sales-type leases, direct financing leases
and operating leases. The pronouncement requires a modified retrospective method
of adoption and is effective on January 1, 2019, with early adoption permitted.
The adoption of ASU 2016-02 is not expected to have an impact on the Company's
consolidated financial position, results of operations and cash flows.



In July 2017, the FASB issued ASU 2017-11, Accounting for Certain Financial
Instruments with Down Round Features , or ASU 2017-11, which updates the
guidance related to the classification analysis of certain equity-linked
financial instruments (or embedded features) with down round features. Under ASU
2017-11, a down round feature no longer precludes equity classification when
assessing whether the instrument is indexed to an entity's own stock. As a
result, a freestanding equity-linked financial instrument (or embedded
conversion option) no longer would be accounted for as a derivative liability at
fair value as a result of the existence of a down round feature. For
freestanding equity classified financial instruments, the amendments require
entities that present earnings per share (EPS) in accordance with Topic 260 to
recognize the effect of the down round feature when it is triggered. That effect
is treated as a dividend and as a reduction of income available to common
shareholders in basic EPS. ASU 2017-11 is effective for public entities for all
annual and interim periods beginning after December 15, 2019. Early adoption is
permitted. We are currently evaluating the impact that the adoption of ASU
2017-11 will have on our consolidated financial statements.



                                       27





On December 22, 2017 the SEC staff issued Staff Accounting Bulletin 118 (SAB
118), which provides guidance on accounting for the tax effects of the Tax Cuts
and Jobs Act (the TCJA). SAB 118 provides a measurement period that should not
extend beyond one year from the enactment date for companies to complete the
accounting under ASC 740. In accordance with SAB 118, a company must reflect the
income tax effects of those aspects of the TCJA for which the accounting under
ASC 740 is complete. To the extent that a company's accounting for certain
income tax effects of the TCJA is incomplete but for which they are able to
determine a reasonable estimate, it must record a provisional amount in the
financial statements. Provisional treatment is proper in light of anticipated
additional guidance from various taxing authorities, the SEC, the FASB, and even
the Joint Committee on Taxation. If a company cannot determine a provisional
amount to be included in the financial statements, it should continue to apply
ASC 740 on the basis of the provisions of the tax laws that were in effect
immediately before the enactment of the TCJA. We have applied this guidance
to
our financial statements.



In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) -
Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.
This standard amends Accounting Standards Codification 740, Income Taxes (ASC
740) to provide guidance on accounting for the tax effects of the Tax Cuts and
Jobs Act (the Tax Reform Act) pursuant to Staff Accounting Bulletin No. 118,
which allows companies to complete the accounting under ASC 740 within a
one-year measurement period from the Tax Act enactment date. This standard is
effective upon issuance. As described in the footnotes to the Annual Report on
Form 10-K, the Company's accounting for the tax effects of enactment of the Tax
Reform Act is being assessed; however, in certain cases, as described below, we
made a reasonable estimate of the effects on our existing deferred tax balances
and valuation allowance. The Company determined that the $5.4 million recorded
in connection with the re-measurement of certain deferred tax assets and
liabilities, and corresponding valuation allowance was a provisional amount and
a reasonable estimate at December 31, 2018.



In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation
(Topic 718): Improvements to Nonemployee Share-Based Payment. ASU 2018-07 aligns
the accounting for share based payments granted to non-employees with that of
share based payments granted to employees. We adopted this ASU on its effective
date of January 1, 2019. The adoption of this ASU did not have a material impact
on our financial position, results of operations, cash flows, or presentation
thereof.



In July 2018, the FASB issued ASU 2018-09, Codification Improvements. The
amendments in ASU 2018-09 affect a wide variety of Topics in the FASB
Codification and apply to all reporting entities within the scope of the
affected accounting guidance. The Company has evaluated ASU 2018-09 in its
entirety and determined that the amendments related to Topic 718-740,
Compensation-Stock Compensation-Income Taxes, are the only provisions that
currently apply to the Company. The amendments in ASU 2018-09 related to Topic
718-740, Compensation-Stock Compensation-Income Taxes, clarify that an entity
should recognize excess tax benefits related to stock compensation transactions
in the period in which the amount of the deduction is determined. The amendments
in ASU 2018-09 related to Topic 718-740 are effective for fiscal years beginning
after December 15, 2018, with early adoption permitted. The Company does not
expect the adoption of the new standard to have a material impact on the
Company's Consolidated Financial Statements.



In July 2018, the FASB issued ASU 2018-10 Leases (Topic 842), Codification
Improvements and ASU 2018-11 Leases (Topic 842), Targeted Improvements, to
provide additional guidance for the adoption of Topic 842. ASU 2018-10 clarifies
certain provisions and correct unintended applications of the guidance such as
the application of implicit rate, lessee reassessment of lease classification,
and certain transition adjustments that should be recognized to earnings rather
than to stockholders' equity. ASU 2018-11 provides an alternative transition
method and practical expedient for separating contract components for the
adoption of Topic 842. In February 2016, the FASB issued ASU 2016-02 Leases
(Topic 842) which requires an entity to recognize assets and liabilities arising
from a lease for both financing and operating leases with terms greater than 12
months. ASU 2018-11, ASU 2018-10, and ASU 2016-02 (collectively, "the new lease
standards") are effective for fiscal years beginning after December 15, 2018,
with early adoption permitted. The Company is currently evaluating the effect
the new lease standards will have on its Consolidated Financial Statements;
however, the Company anticipates recognizing assets and liabilities arising from
any leases that meet the requirements under the new lease standards on the
adoption date and including qualitative and quantitative disclosures in the
Company's Notes to the Consolidated Financial Statements.



                                       28




In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):
Disclosure Framework-Changes to the Disclosure Requirements for Fair Value
Measurement. ASU 2018-13 removes or modifies certain disclosures and in certain
instances requires additional disclosures. The standard is effective for fiscal
years beginning after December 15, 2019, including interim periods within those
fiscal years, with early adoption permitted. We will adopt this standard on its
effective date of January 1, 2020. We do not expect the adoption of this ASU to
have a material impact on our financial position, results of operations, cash
flows, or presentation thereof.



In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and
Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for
Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service
Contract. ASU 2018-15 aligns the requirements for capitalizing implementation
costs incurred in a hosting arrangement that is a service contract with the
requirements for capitalizing implementation costs incurred to develop or obtain
internal-use software. The standard is effective for fiscal years beginning
after December 15, 2019, including interim periods within those fiscal years,
with early adoption permitted. We will adopt this standard on its effective date
of January 1, 2020. We are currently evaluating the impact of this ASU on our
financial position, results of operations, cash flows, or presentation thereof.



In October 2018, the FASB issued ASU 2018-17, Targeted Improvements to Related
Party Guidance for Variable Interest Entities, that changes the guidance for
determining whether a decision-making fee paid to a decision makers and service
providers are variable interests. The guidance is effective for fiscal years
beginning after December 15, 2019 and interim periods within those fiscal years,
with early adoption permitted. We will adopt this standard on its effective date
of January 1, 2020. We do not expect the adoption of this ASU to have a material
impact on our consolidated financial position, results of operations, cash
flows, or presentation thereof.



In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842) Codification
Improvements, which provides clarification on implementation issues associated
with adopting ASU 2016-02. The implementation issues noted in ASU 2019-01
include determining the fair value of the underlying asset by lessors that are
not manufacturers or dealers, presentation on the statement of cash flows for
sales-type and direct financing leases, and transition disclosures related to
Topic 250, Accounting Changes and Error Corrections. We will apply the guidance,
if applicable, as of January 1, 2019, the date we adopted ASU 2016-02. The
adoption of this ASU did not have a material impact on our financial position,
results of operations, cash flows, or presentation thereof.



Other accounting standards that have been issued or proposed by FASB that do not
require adoption until a future date are not expected to have a material impact
on the consolidated financial statements upon adoption. We do not discuss recent
pronouncements that are not anticipated to have an impact on or are unrelated to
our consolidated financial condition, results of operations, cash flows or
disclosures.



RESULTS OF OPERATIONS


Discontinuance of PRC operations




On December 30, 2019, the Company's Board of Directors approved to enter into a
VIE Termination Agreement relating to the termination of the Consulting Services
Agreement, Operating Agreement, Equity Pledge Agreement, Option Agreement,
Voting Rights Proxy Agreement dated October 12, 2007 with Huayang Companies.
Upon the termination of these VIE agreements, the China business was previously
operated by VIEs or Huayang Companies was closed down and fully written-off at
December 31, 2019. The assets and liabilities of Huayang Companies have been
accounted for as discontinued operations in the Company's consolidated balance
sheets for all years presented. The operating results related to these lines of
business have been included in discontinued operations in the Company's
consolidated statements of operations for all years presented. Hence, the
Company allows more resources to focus on the operation of sharing economy
business.



Acquisition of ECRent Group


On December 27, 2019, the Company completed the Acquisition of Peak Equity International Limited and Subsidiaries (collectively "Peak Equity") (the "Acquisition") for its 100% equity interest. The consideration of the Acquisition totaled approximately 7,200,000,000 shares of the Company's common stock, at the price of $0.25, equal to $1,800,000,000.




This Acquisition is considered as related party transaction, whereas Ms. Deborah
Yuen (a spouse of Mr Chan Tin Chi), an affiliate of YSK 1860 Co., Limited, which
is a shareholder of the Company, previously controlled Peak Equity during 2017
and 2018.



The Acquisition will be accounted for in accordance with Financial Accounting
Standards Board ("FASB") Accounting Standards Codification Topic 805, Business
Combinations, using the reverse acquisition method whereas Peak Equity is
considered as the accounting acquirer and the Company as the acquired party. The
purchase price allocation is based on net recognized values of SEII's
(accounting acquire) identifiable assets and liabilities.



Disposal of AnyWork Space operations




On March 24, 2020, the Company sold its equity interest of 80% in AnyWorkspace
Limited. The assets and liabilities of AnyWorkspace Companies have been
accounted for as discontinued operations in the Company's consolidated balance
sheets for all periods presented. The operating results related to these lines
of business have been included in discontinued operations in the Company's and
consolidated statements of operations for all periods presented.



                                       29




Years Ended December 31, 2020 and 2019

The following table sets forth the results of our operations for the years ended December 31, 2020 and 2019 (dollars in thousands):



                                                                      Years Ended December 31,
                                                                        2020              2019
                                                                      Dollars           Dollars
Revenues                                                            $         52       $       30
Cost of revenues                                                               1               25
Gross profit                                                                  51                5
Operating expenses                                                         3,227            7,044
Loss from operations                                                      (3,176 )         (7,039 )
Other (expense) income, net                                               (3,613 )          4,483
Loss from continuing operations before provision for income taxes         (6,789 )         (2,556 )
Provision for income taxes                                                     -                -
Loss from continuing operations                                           (6,789 )         (2,556 )
Income (loss) from discontinued operations, net of income taxes                -          (24,951 )
Net loss                                                                  (6,789 )        (27,507 )
Other comprehensive loss:
Foreign currency translation adjustment                                    
 (55 )             22
Comprehensive loss                                                  $     (6,844 )     $  (27,485 )




                                       30





Revenues. During the year ended December 31, 2020, we recognized revenues from
our sharing economy business of approximately $52,000 compared to approximately
$30,000 for the year ended December 31, 2019.



Cost of revenues. Cost of revenues includes the domain and hosting charges. For
the year ended December 31, 2020, cost of revenues was approximately $1,000 as
compared to approximately $25,000 for the year ended December 31, 2019, a
decrease of approximately $24,000, or 96%.



Gross profit and gross margin. Our gross profit was approximately $51,000 for
the year ended December 31, 2020 as compared to gross profit of approximately
$4,900 for the year ended December 31, 2019, representing gross margins of 98.3%
and 16.3% respectively, an increase year over year. The increase in our gross
margin for 2020 was primarily attributed to the tight cost control. We expect
that our gross margin will remain at its current levels by increasing more
exposure to the market.



Operating expenses. For the year ended December 31, 2020 operating expenses were
approximately $3,227,000 as compared to approximately $7,044,000 for the year
ended December 31, 2019, a decrease of approximately $3,817,000, or 54,19%,
and
consisted of the following:



Loss from operations. As a result of the factors described above, for the year
ended December 31, 2020, loss from operations amounted to approximately
$3,176,000, as compared to approximately $7,039,000 for the year ended December
31, 2019.



Other income (expense), net. Other expense, net of other income, includes
interest income, interest expense, loss on foreign currency translation loss,
dividend income, impairment loss on intangible asset, impairment loss on other
receivables, impairment loss on marketable securities, gain on disposal of
marketable securities, gain from deconsolidation of VIEs, amounted to
approximately $3,613,000 for the year ended December 31, 2020. As compared to
the year ended December 31, 2019, total other income, net, amounted to
approximately $4,483,000, mainly consisted of interest income, interest expense,
loss on foreign currency translation, and gain from deconsolidation of VIEs.



Income tax provision. Income tax expense was $0 for the year ended December 31, 2020, as compared to $0 for the year ended December 31, 2019.

Loss from continuing operations.As a result of the foregoing, our loss from
continuing operations was approximately $6,789,000, or $(0.07) per share (basic
and diluted), for the year ended December 31, 2020, as compared with loss from
continuing operations of approximately $2,556,000, or $(0.01) per share (basic
and diluted), for the year ended December 31, 2019, a change of approximately
$4,233,000 or 165%.


Loss from discontinued operations, net of income taxes. Our income from discontinued operations was approximately $0, or $(0.00) per share (basic and diluted), for the year ended December 31, 2020, as compared with loss from discontinued operations of approximately $24,951,000, or $(0.13) per share (basic and diluted), for the year ended December 31, 2019, a change of approximately $25,023,000 or 100%.

The summarized operating result of discontinued operations included our consolidated statements of operations is as follows (dollars in thousands):



                                                                        Fiscal Years Ended
                                                                           December 31,
                                                                     2020               2019
Revenues                                                          $        -       $        6,661
Cost of revenues                                                           -              (11,683 )
Gross profit (loss)                                                        -               (5,022 )
Operating expenses:                                                        -              (19,697 )
Loss from operations                                                       -              (24,719 )
Other income (expense), net                                                -                 (232 )
Income (loss) from discontinued operations, before income taxes            -              (24,951 )
Income taxes                                                               -                    -

Income (loss) from discontinued operations, net of income taxes $ - $ (24,951 )





Net loss. As a result of the foregoing, our net loss was approximately
$6,788,000, or $(0.06) per share (basic and diluted), for the year ended
December 31, 2020, as compared with net loss of approximately $27,508,000, or
$(0.14) per share (basic and diluted), for the year ended December 31, 2019, a
change of approximately $20,720,000, or 75%.



                                       31





Foreign currency translation loss.The functional currency of our subsidiaries
and variable interest entities operating in the PRC is the Chinese Yuan or
Renminbi ("RMB"). The financial statements of our subsidiaries are translated to
U.S. dollars using period end rates of exchange for assets and liabilities, and
average rates of exchange (for the period) for revenues, costs, and expenses.
Net gains and losses resulting from foreign exchange transactions are included
in the consolidated statements of operations. As a result of foreign currency
translations, which are a non- cash adjustment, we reported a foreign currency
translation loss of $55,000 for the year ended December 31, 2020, as compared to
a foreign currency translation gain of $22,000 for the year ended December 31,
2019. This non-cash loss had the effect of increasing our reported comprehensive
loss.



Comprehensive loss. As a result of our foreign currency translation loss, we had
comprehensive loss for the year ended December 31, 2020 of approximately
$6,844,000, compared to comprehensive loss of approximately $27,485,000 for
the
year ended December 31, 2019.


Liquidity and Capital Resources




Liquidity is the ability of a company to generate funds to support its current
and future operations, satisfy its obligations and otherwise operate on an
ongoing basis. At December 31, 2020 and 2019, we had cash balances of $1,805,417
and $83,667, respectively. These funds are located in financial institutions
mainly located in Hong Kong and the PRC.



The following table sets forth a summary of changes in our working capital from December 31, 2019 to December 31, 2020 (dollars in thousands):




                                            December 31,       December 31,                     Percentage
                                                2020               2019           Change          Change
Working capital:
Total current assets                       $        3,967     $        5,636     $  (1,669 )             (30 )%
Total current liabilities                          11,707              8,683         3,024                35 %
Working capital deficit                    $       (7,740 )   $       (3,047 )   $  (4,693 )            (154 )%




Our working capital deficit increased by $4,693,000 to $7,740,000 at December
31, 2020 from $3,047,000 at December 31, 2019. This increase in working deficit
is primarily attributable to the new proceeds from bank loans.



Because the exchange rate conversion is different for the consolidated balance
sheets and the consolidated statements of cash flows, the changes in assets and
liabilities reflected on the consolidated statements of cash flows are not
necessarily identical with the comparable changes reflected on the consolidated
balance sheets.



                                                                         For the Years Ended
                                                                            December 31,
                                                                        2020             2019

Net Cash Used in Operating Activities                               $ (1,544,186 )   $ (6,304,868 )
Net Cash Provided by (Used in) Investing Activities                    1,332,707       (4,632,237 )
Net Cash Provided by Financing Activities                              1,962,194       10,245,031
Effect of Exchange Rate Changes in Cash and Cash Equivalents             (28,965 )        (73,776 )
Cash and Cash Equivalents at Beginning of Year                            83,667          883,462
Cash and Cash Equivalents at End of Year                               1,805,417          117,612
Less: Cash and cash equivalents from discontinued operations               

- (33,945 ) Cash and cash equivalents from continuing operations, end of Year $ 1,805,417 $ 83,667

Cash Flow in Operating Activities

For the year ended December 31, 2020, net cash used in operating activities was approximately $1,544,000, which consists of the net cash used in operating activities of approximately $1,544,000 from continuing operations and approximately $0 from discontinued operations.

For the year ended December 31, 2019, net cash used in operating activities was approximately $6,305,000, which consists of the net cash used in operating activities of approximately $1,026,000 from continuing operations and approximately $5,279,000 from discontinued operations.

Cash Flow in Investing Activities

For the year ended December 31, 2020, we had net cash provided by investing
activities of approximately $1,333,000 from continuing operations and
approximately $0 from discontinued operations. The total net cash provided by
investing activities primarily mainly related to the disposal of investment in
marketable securities and proceeds from disposal of a subsidiary.



For the year ended December 31, 2019, we had net cash used in investing activities of approximately $4,632,000 from continuing operations and $0 from discontinued operations. The total net cash used in investing activities primarily mainly related to the purchases of property and equipment and the investment in marketable securities.



                                       32




Cash Flow in Financing Activities

For the year ended December 31, 2020, we had net cash provided by financing
activities of approximately $1,962,000 from continuing operations and $0 from
discontinued operations. We received advances from related party of
approximately $103,000, received net proceeds from issuance of note payable of
approximately $183,000, and received net proceeds from bank loans of
approximately $1,735,000, offset by, repayment of bank loan of approximately
$59,000.


For the year ended December 31, 2019, we had net cash provided by financing
activities of approximately $11,351,000 from continuing operations, offset by
net cash used in of $1,106,000 from discontinued operations. We received
advances from related party of approximately $820,000, received net proceeds
from bank loans of approximately $9,658,000, and received proceeds from sale of
common stock of approximately $905,000, offset by, repayment of related party
advances of approximately $32,000.



We have historically funded our capital expenditures through cash flow provided
by operations and bank loans. We intend to fund the cost with cash flow from our
operations and by obtaining financing mainly from local banking institutions
with which we have done business in the past. We believe that the relationships
with local banks are in good standing and we have not encountered difficulties
in obtaining needed borrowings from local banks.



Contractual Obligations and Off-Balance Sheet Arrangements



Contractual Obligations


We have certain fixed contractual obligations and commitments that include
future estimated payments. Changes in our business needs, cancellation
provisions, changing interest rates, and other factors may result in actual
payments differing from the estimates. We cannot provide certainty regarding the
timing and amounts of payments. We have presented below a summary of the most
significant assumptions used in our determination of amounts presented in the
tables, in order to assist in the review of this information within the context
of our consolidated financial position, results of operations, and cash flows.
The following tables summarize our contractual obligations as of December 31,
2020 (dollars in thousands), and the effect these obligations are expected to
have on our liquidity and cash flows in future periods.



                                                            Payments Due by Period
                                                    Less than
Contractual obligations:             Total           1 year        1-3 years      3-5 years       5 + years
Bank loans (1)                    $ 11,386,559     $ 6,446,139     $  381,377     $  390,304     $ 4,168,739
Convertible note payable (2)           595,750         595,750             
-              -               -
Total                             $ 11,982,309     $ 7,041,889     $  381,377     $  390,304     $ 4,168,739



(1) Bank loans consisted of short term and long-term bank loans. (2) $94,167 will be converted into common shares in 2021.

Off-balance Sheet Arrangements




Except as discussed below, we have not entered into any other financial
guarantees or other commitments to guarantee the payment obligations of any
third parties. We have not entered into any derivative contracts that are
indexed to our shares and classified as shareholder's equity or that are not
reflected in our consolidated financial statements. Furthermore, we do not have
any retained or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to such entity.
We do not have any variable interest in any unconsolidated entity that provides
financing, liquidity, market risk or credit support to us or engages in leasing,
hedging or research and development services with us.



Foreign Currency Exchange Rate Risk

We produce and sell almost all of our products in China. Thus, most of our
revenues and operating results may be impacted by exchange rate fluctuations
between RMB and US dollars. For the years ended December 31, 2020 and 2019, we
had unrealized foreign currency translation loss of approximately $56,000 and
unrealized foreign currency translation gain of approximately $22,000,
respectively, because of changes in the exchange rate.



Inflation


The effect of inflation on our revenue and operating results was not significant.

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Financials (USD)
Sales 2020 0,05 M - -
Net income 2020 -6,72 M - -
Net Debt 2020 10,7 M - -
P/E ratio 2020 -0,52x
Yield 2020 -
Capitalization 7,72 M 7,72 M -
EV / Sales 2019 1 630x
EV / Sales 2020 301x
Nbr of Employees -
Free-Float 79,7%
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Managers and Directors
NameTitle
Chung Chan Che Chairman & Chief Executive Officer
Lam Ka Man Chief Financial Officer & Treasurer
Jian Hua Wu Chairman
Yuan Guo Shao Independent Director
Yu Ming Lo Independent Director
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