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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September~~March 3031, ~~2023~~ 2024

¨ 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~~10/F, ~~Block~~FT B,Life ~~6 Floor~~Tower, ~~Shatin~~18 ~~Industrial~~Sheung ~~Centre~~Yuet Road, ~~5-7~~Kowloon ~~Yuen Shun Circuit~~Bay, ~~Shatin~~Kowloon, ~~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)

~~Indicate by~~Securities ~~check~~registered ~~mark~~pursuant ~~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~~b), ~~and~~of ~~(2) has been subject to such filing requirements for~~ the ~~past 90 days. Yes x~~Act: ~~. No ¨~~

Title of Class

Trading

Symbol

Name of Each Exchange

on Which Registered

None

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 ¨ Smaller reporting company x Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

~~Securities registered~~As ~~pursuant~~of toJune ~~Section~~30, ~~12(b)~~2024, there were 43,500,762 shares of ~~the~~common ~~Securities~~stock ~~Act~~issued ofand ~~1933:~~outstanding.

Title of each class Trading Symbol Name of each exchange on which registered None N/A N/A

As of November 15, 2023, there were 43,500,762 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”.

Table of Contents
		Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation		32
Item 3. Quantitative and Qualitative Disclosures About Market Risk		43
Item 4. Controls and Procedures		44
PART II - OTHER INFORMATION
Item 1. Legal Proceedings		45
Item 1A. Risk Factors		45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		46
Item 3. Defaults Upon Senior Securities		46
Item 4. Mine Safety Disclosures		46
Item 5. Other Information		46
Item 6. Exhibits		47
Signatures		48

FORM 10-Q

Value Exchange International, Inc.

INDEX

		Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation		42

Item 3. Quantitative and Qualitative Disclosures About Market Risk		53

Item 4. Controls and Procedures		53

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		54

Item 1A. Risk Factors		54

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		54

Item 3. Defaults Upon Senior Securities		54

Item 4. Mine Safety Disclosures		54

Item 5. Other Information		54

Item 6. Exhibits		55

Signatures		56

Please note that throughout this Quarterly Report on Form 10-Q ("Form 10-Q" or "report"), except as otherwise indicated by the context, references in this report to "Company", "we", "us" and "our" are references to Value Exchange International, Inc. and its wholly owned subsidiaries.

ITEM 1. FINANCIAL STATEMENTS

VALUE EXCHANGE INTERNATIONAL, INC.

Financial Statements

		Page
Consolidated Balance Sheets (unaudited)		4
Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)		5
Consolidated Statements of Operations (unaudited)		5
Consolidated Statements of Shareholders’ Equity (unaudited)		6
Consolidated Statements of Comprehensive Income (unaudited)		6
Consolidated Statements of Cash Flows (unaudited)		78
Notes to the Consolidated Financial Statements (unaudited)		89

VALUE EXCHANGE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2023			December 31, 2022
	March 31, 2024			December 31, 2023
	US$	~~US$~~		US$	~~US$~~
ASSETS	(unaudited)	~~(unaudited)~~
CURRENT ASSETS
Cash		~~234~~515,~~724~~113			~~208~~886,~~776~~467
Accounts receivable, less allowance for credit losses		1,~~463~~485,~~901~~055			1,~~133~~736,~~058~~866
Amounts due from related parties		2130,~~672,219~~186			2530,~~400,028~~675
Other receivables and prepayments		~~987~~768,~~920~~803			~~472~~623,~~849~~408
Inventories		~~273~~215,~~386~~313			~~225,662~~-
Total current assets		53,~~632~~114,~~150~~470			43,~~440~~777,~~373~~416
NON-CURRENT ASSETS
Plant and equipment, net		~~343~~344,~~886~~499			~~499~~308,~~497~~135
Deferred tax assets		38,110			38,110
Goodwill		342,079			206,812
Goodwill		206,812			206,812
Operating lease right-of-use assets, net		1,244,569			926,630
Operating lease right-of-use assets, net		1,015,248			555,069
Total non-current assets		1,931,147			1,441,577
Total non-current assets		1,604,056			1,299,488
Total assets		5,045,617			5,218,993
Total assets		7,236,206			5,739,861
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		~~868~~1,~~304~~109,781			~~867~~1,~~425~~615,653
Other payables and accrued liabilities		~~994~~2,~~964~~821,949			~~681~~2,~~564~~601,761
Deferred income		~~568~~967,~~719~~558			~~291~~778,~~171~~126
Amounts due to related parties		3712,~~344~~953			1683,~~918~~649
Operating lease liabilities, current		~~479~~585,~~696~~762			~~423~~463,~~490~~411
Short term bank loan		968,287			1,039,488
Loan from a related party		500,000			500,000
Total current liabilities		3,917,314			3,320,056
Current portion of finance lease liability		27,761			28,867
Short term bank loan from an affiliate		940,147			940,147
Total current liabilities		6,965,911			7,011,614
NON-CURRENT LIABILITIES
Deferred tax liabilities		4,~~821~~855			4,~~821~~889
Convertible loan		446,499			-
Convertible loan from affiliates		352,389			1,061,282
Long term bank loan		20,401			42,649
Long term finance lease liability		6,795			13,056
Operating lease liabilities, non-current		~~524~~653,~~709~~816			~~117~~457,~~592~~982
Total non-current liabilities		~~996~~1,~~430~~017,855			~~165~~1,~~062~~537,209
Total liabilities		47,~~913~~983,~~744~~766			38,~~485~~548,~~118~~823
SHAREHOLDERS’ EQUITY
SHAREHOLDERS’ EQUITY (DEFICIT)
Common stock, 500,000,000 shares authorized, $0.00001 par value; 43,500,762 and 36,156,130 shares issued and outstanding, respectively		435			362
Common stock, 100,000,000 shares authorized, $0.00001 par value; 43,500,762 and 43,500,762 shares issued and outstanding, respectively		435			435
Additional paid-in capital		2,~~520~~480,~~892~~327			12,~~340~~480,~~524~~327
Statutory reserves		11,835			11,835
(Accumulated deficit) Retained earnings		(281,287	)		849,471
Accumulated deficit		(5,469,928	)		(5,859,193	)
Accumulated other comprehensive losses		(6144,~~447~~310	)		(7663,~~986~~063	)
Total shareholders’ equity		2,190,428			2,125,206
Total shareholders’ equity (deficit)		(3,021,641	)		(3,429,659	)
Non-controlling interest		~~132~~83,~~034~~492			~~129~~99,~~537~~829
		2,322,462			2,254,743
		(2,938,149	)		(3,329,830	)
Total liabilities and shareholders’ equity		7,236,206			5,739,861
Total liabilities and shareholders’ equity (deficit)		5,045,617			5,218,993

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

VALUE EXCHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS ~~AND COMPREHENSIVE INCOME (LOSS)~~

	Three Months						Nine Months
	Three Months Ended March 31, 2024			Three Months Ended March 31, 2023
	Ended September 30,						Ended September 30,
	US$			US$
	2023			2022			2023			2022
	(unaudited)			(unaudited)
	US$			US$			US$			US$
NET REVENUES
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Service income		3,370,009			2,884,549
NET REVENUES
COST OF SERVICES
Service income		2,960,825			2,556,808			8,695,412			7,737,842
Cost of service income		(2,227,692	)		(2,502,728	)
COST OF SERVICES
GROSS PROFIT		1,142,317			381,821
Cost of service income		(2,326,079	)		(2,302,012	)		(7,193,622	)		(6,456,673	)
OPERATING EXPENSES:
GROSS PROFIT		634,746			254,796			1,501,790			1,281,169
General and administrative expenses		(1,086,562	)		(731,977	)
OPERATING GAIN (EXPENSES):
Foreign exchange loss		(342,296	)		(87,886	)
General and administrative expenses		(886,442	)		(517,726	)		(2,494,488	)		(1,404,314	)
TOTAL OPERATING EXPENSES		(1,428,858	)		(819,863	)
Foreign exchange gain		17,545			21,980			815			45,323
LOSS FROM OPERATIONS		(286,541	)		(438,042	)
LOSS FROM OPERATIONS		(234,151	)		(240,950	)		(991,883	)		(77,822	)
OTHER INCOME (EXPENSES):
OTHER INCOME (EXPENSES):
Interest income		531			438
Interest income		107			166			703			464
Interest expense		(51,246	)		(29,632	)
Interest expense		(74,851	)		(1,493	)		(120,032	)		(4,180	)
Change in fair value of embedded derivatives		708,893			(34,752	)
Change in fair value of embedded derivatives		(27,164	)		-			(61,916	)		-
Finance cost		(8,809	)		(4,239	)
Finance cost		(5,057	)		(8,105	)		(13,614	)		(14,136	)
VAT refund		11,140			485
VAT refund		3,845			29,854			4,316			92,126
Management fee income		-			32,475
Management fee income		8,410			51,452			36,286			134,589
Others		703			20,588
Others		6,040			2,367			29,691			10,085
Total other income (expenses), net		661,212			(14,637	)
Total other income (expenses), net		(88,670	)		74,241			(124,566	)		218,948
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES		374,671			(452,679	)
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES		(322,821	)		(166,709	)		(1,116,449	)		141,126
INCOME TAXES EXPENSES		(241	)		(1,170	)
INCOME TAXES (EXPENSES) CREDIT		(4,134	)		27			(5,270	)		(2,135	)
NET INCOME (LOSS)		374,430			(453,849	)
NET (LOSS) INCOME		(326,955	)		(166,682	)		(1,121,719	)		138,991
Less: Net loss attributable to the non-controlling interests		14,835			41,163
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX:
Net income (loss) attributable to the Company shareholders		389,265			(412,686	)
Foreign currency translation adjustments		(5,863	)		(44,542	)		8,997			(114,615	)
Net income (loss) per share, basic and diluted, attributable to the Company shareholders		0.01			(0.01	)
TOTAL OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX:		(5,863	)		(44,542	)		8,997			(114,615	)
Weighted average number of shares outstanding		43,500,762			36,156,130
COMPREHENSIVE (LOSS) INCOME		(332,818	)		(211,224	)		(1,112,722	)		24,376
Less: Comprehensive income attributable to the non-controlling interests		(16,084	)		(2,705	)		(2,497	)		(14,922	)
Comprehensive income (loss) attributable to the Company shareholders		(348,902	)		(213,929	)		(1,115,219	)		9,454
Net (loss) income per share, basic and diluted		(0.01	)		(0.00	)		(0.03	)		0.00
Weighted average number of shares outstanding		37,124,653			36,156,130			36,478,971			36,156,130

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

VALUE EXCHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF ~~SHAREHOLDERS'~~COMPREHENSIVE ~~EQUITY~~INCOME

																Accumulated other
	Three Months Ended March 31, 2024		Three Months Ended March 31, 2023
	Common stock					Additional		Retained earnings					Noncontrolling			comprehensive
		US$		US$
	Share		Amount			paid-in capital		(accumulated deficit)			Statutory reserves		Interest			income			Total
NET INCOME (LOSS)		374,430		(453,849	)
			US$			US$		US$			US$		US$			US$			US$
OTHER COMPREHENSIVE INCOME, NET OF TAX:
January 1, 2022		36,156,130		362			1,340,524		867,770			11,835		117,803			8,822			2,347,116
Foreign currency translation adjustment		17,251		41,163
Net (loss) income		-		-			-		110,872			-		28,119			-			138,991
TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX:		17,251		41,163
Foreign currency translation adjustment		-		-			-		-			-		(13,197	)		(101,418	)		(114,615	)
Comprehensive income (loss)		391,681		(412,686	)
September 30, 2022		36,156,130		362			1,340,524		978,642			11,835		132,725			(92,596	)		2,371,492
Less: Comprehensive loss (income) attributable to the non- controlling interests		16,337		(10,258	)
January 1, 2023		36,156,130		362			1,340,524		849,471			11,835		129,537			(76,986	)		2,254,743
Comprehensive income (loss) attributable to the Company shareholders		408,018		(422,944	)
Net (loss) income		-		-			-		(1,130,758	)		-		9,039			-			(1,121,719	)
Conversion of debt to common shares		7,344,632		73			1,180,368		-			-		-			-			1,180,441
Foreign currency translation adjustment		-		-			-		-			-		(6,542	)		15,539			8,997
September 30, 2023		43,500,762		435			2,520,892		(281,287	)		11,835		132,034			(61,447	)		2,322,462

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

VALUE EXCHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF ~~CASH~~SHAREHOLDERS' ~~FLOWS~~EQUITY

	Nine Months Ended September 30, 2023			Nine Months Ended September 30, 2022
	The Company’s Shareholders
		US$			US$
														Accumulated
		(unaudited)			(unaudited)
														other
CASH FLOWS FROM OPERATING ACTIVITIES:
	Common stock						Additional		Retained earnings					comprehensive			Noncontrolling
Net (loss) income		(1,121,719	)		138,991
	Share			Amount			paid-in capital		(accumulated deficit)			Statutory reserves		income			Interest			Total
Adjustments to reconcile net (loss) income to cash used in operating activities:
January 1, 2023		36,156,130			362			1,340,524		849,471			11,835		(76,986	)		129,537			2,254,743
Depreciation		176,538			157,057
Net loss		-			-			-		(6,708,664	)		-		-			(26,247	)		(6,734,911	)
Amortization		358,339			233,403
Conversion of debt to common shares		7,344,632			73			1,139,803		-			-		-			-			1,139,876
Interest expenses		33,922			-
Foreign currency translation adjustment		-			-			-		-			-		13,923			(3,461	)		10,462
Convertible loan interest expenses		65,024			-
December 31, 2023		43,500,762			435			2,480,327		(5,859,193	)		11,835		(63,063	)		99,829			(3,329,830	)
Operating lease interest expense		13,614			14,136
January 1, 2024		43,500,762			435			2,480,327		(5,859,193	)		11,835		(63,063	)		99,829			(3,329,830	)
Change in fair value of embedded derivatives		61,916			-
Net income		-			-			-		389,265			-		-			(14,835	)		374,430
Deferred income taxes		-			5,685
Foreign currency translation adjustment		-			-			-		-			-		18,753			(1,502	)		17,251
Changes in operating assets and liabilities
March 31, 2024		43,500,762			435			2,480,327		(5,469,928	)		11,835		(44,310	)		83,492			(2,938,149	)
Accounts receivable		(330,843	)		15,008
Other receivables and prepayments		(515,071	)		(159,063	)
Amounts due from related parties		(272,191	)		(637,232	)
Inventories		(47,724	)		167,049
Accounts payable		879			62,254
Other payables and accrued liabilities		279,478			(204,040	)
Deferred income		277,548			15,216
Amounts due to related parties		20,426			(2,500	)
Net cash used in operating activities		(999,864	)		(194,036	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment		(30,911	)		(144,664	)
Net cash used in investing activities		(30,911	)		(144,664	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible loan		1,500,000			-
Proceeds from bank loan		450,000			537,349
Principal payments on operating leases		(368,237	)		(220,464	)
Repayment of short term bank loan		(542,579	)		(38,741	)
Net cash provided by financing activities		1,039,184			278,144
EFFECT OF EXCHANGE RATE ON CASH		17,539			(29,729	)
INCREASE (DECREASE) IN CASH		25,948			(90,285	)
CASH, beginning of period		208,776			289,398
CASH, end of period		234,724			199,113
NON-CASH INVESTING AND FINANCING ACTIVITIES
Conversion of convertible debt		1,300,000			-
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes		5,270			664
Cash paid for interest expenses		21,086			4,180

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

VALUE EXCHANGE INTERNATIONAL, INC.

~~NOTES~~CONSOLIDATED TOSTATEMENTS ~~CONSOLIDATED~~OF ~~FINANCIAL~~CASH ~~STATEMENTS~~FLOWS

1. Nature of Operations and Continuance of Business

	Three Months Ended March 31, 2024			Three Months Ended March 31, 2023
	US$			US$
	(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		374,430			(453,849	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation		60,861			61,347
Amortization		160,900			109,362
Noncash operating lease expense		8,809			4,239
Change in fair value of embedded derivatives		(708,893	)		34,752
Deferred income taxes		(34	)		(702	)
Changes in operating assets and liabilities
Accounts receivable		491,023			(86,123	)
Other receivables and prepayments		(139,649	)		82,787
Amounts due from related parties		400,489			(107,566	)
Inventories		64,954			(4,026	)
Operating lease right-of-use assets		(487,156	)		(12,185	)
Accounts payable		(1,088,051	)		(161,476	)
Other payables and accrued liabilities		185,189			22,100
Deferred income		189,432			15,729
Amounts due to related parties		(175,488	)		(6,079	)
Operating lease liabilities		318,185			(92,191	)
Net cash used in operating activities		(344,999	)		(593,881	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment		(99,460	)		(71,694	)
Acquisition of a subsidiary		60,355			-
Net cash used in investing activities		(39,105	)		(71,694	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible loan		-			1,500,000
Repayment of finance lease liability		(7,130	)		(5,889	)
Repayment of bank loan from an affiliate		-			(501,117	)
Net cash (used in) provided by financing activities		(7,130	)		992,994

EFFECT OF EXCHANGE RATE ON CASH		19,880			99,877
(DECREASE) INCREASE IN CASH		(371,354	)		427,296
CASH, beginning of period		886,467			208,776
CASH, end of period		515,113			636,072

NON-CASH INVESTING AND FINANCING ACTIVITIES
ROU asset acquired with operating lease liability		253,834			-
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes		(241	)		(1,170	)
Cash paid for interest expenses		(51,246	)		(29,632	)

~~Value Exchange International, Inc. (“VEII”, “Company”, “we” or “us”) was incorporated in the State of Nevada on June 26, 2007.~~ The ~~Company’s~~accompanying ~~principal~~notes 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~~an onintegral ~~helping~~part ~~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~~these consolidated ~~selling~~financial ~~channel~~statements. VEII’s retail solutions are installed in 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 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 had 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 was 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 for financial reporting purposes. Consequently, the assets and liabilities and the operations that are reflected in the historical financial statements prior to the transaction are those of VEI CHN and are 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.

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.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~On May 14, 2013, VEI CHN established another operating subsidiary, Ke Dao Solutions Limited in Hong Kong, which subsequently changed its name to Cumberbuy~~1.~~com~~ ~~Limited~~Nature ~~(“CUMBERBUY”) on~~of ~~May~~Operations ~~26, 2017. CUMBERBUY conducts consultancy services for IT Services~~ and ~~Solutions~~Continuance ~~activities.~~of Business

InValue ~~January~~Exchange ~~2017~~International, ~~VEI~~Inc. ("VEII", ~~CHN~~"Company", ~~acquired~~"we" ~~100%~~or "us") was incorporated ofin the ~~capital~~State ~~stock~~ of ~~TapServices~~Nevada on June 26, ~~Inc~~2007. The Company’s principal business, aconducted ~~corporation~~through ~~organized~~its ~~under~~operating ~~the~~subsidiaries, is ~~laws~~to ofprovide ~~the~~customer-centric ~~Republic~~solutions offor the retail industry in China, Hong Kong SAR and Manila, Philippines. By integrating market-leading Point-of-Sale/Point-of-Interaction (~~the~~"POS/POI"), ~~“TSI”~~Merchandising, Customer Relations Management or "CRM" and related rewards, Locational Based (Global Positing System ("GPS"). and Indoor Positioning System ("IPS")) ~~TSI~~Marketing, ~~engages~~Customer inAnalytics ~~software~~and ~~development~~Business Intelligence solutions, ~~trading~~VEII provides retailers with the capability to offer a consistent shopping experience across all marketing and ~~servicing~~sales ofchannels, ~~computer~~enabling ~~hardware~~them to easily and ~~software~~effectively ~~activities~~manage inthe ~~Philippines.~~customer ~~TSI~~lifecycle ison ~~operated~~a one-to-one basis. VEII promotes itself as a ~~subsidiary~~single ofinformation ~~VEI~~technology ~~CHN.~~("IT") ~~Prior~~source for retailers who want to ~~and~~extend ~~continuing~~existing traditional ~~after~~transaction processing to multiple points of interaction, including the ~~acquisition~~Internet, ~~TSI~~kiosks ~~relied~~and wireless devices. VEII services are focused on ~~VEI~~helping ~~CHN~~retailers ~~for~~realize ~~provision~~the full benefits of ITCustomer ~~services~~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.

InOn January ~~2019~~1, ~~VEI~~2014, ~~SHG~~VEII ~~established~~received 100% anof ~~operating~~the ~~subsidiary,~~issued and outstanding shares of in Value Exchange Int’l (~~Hunan~~China) Limited (“"VEI ~~HN”~~CHN") in ~~Hunan~~exchange for i) newly issued 12,000,000 ~~PRC~~shares of VEII’s common stock to the majority stockholder of VEI CHN; and ii) 166,667 ~~under~~shares of our common stock held by VEI CHN to be transferred to the ~~laws~~majority stockholder of VEI CHN ("Share Exchange"). This transaction resulted in the ~~PRC~~owners of VEI CHN obtaining a majority voting interest in VEII. The merger of VEI CHN into VEII, which HNhas ~~engages~~nominal net assets, resulted in ITVEI ~~service~~CHN ~~call-center~~having ~~activities~~control of the combined entities.

InFor ~~February~~financial ~~2020~~reporting purposes, ~~VEI~~the transaction ~~SHG~~represents ~~established~~a "reverse merger" rather than a business combination and VEII is deemed to be the accounting acquiree anin ~~operating~~the ~~subsidiary,~~transaction. ~~Shanghai~~The ~~Zhaonan~~transaction ~~Hengan~~is ~~Information~~being ~~Technology~~accounted Cofor 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, ~~Limited~~the ~~(“SZH”)~~assets and liabilities and the operations that will be reflected in ~~Shanghai~~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, ~~PRC~~and no goodwill will be recognized in this transaction. The consolidated financial statements after completion of the transaction will include the assets and liabilities of VEI CHN and VEII, ~~under~~and the ~~laws~~historical operations of VEII and the ~~PRC.~~combined ~~SZH~~operations ~~engages~~of inVEI ITCHN ~~services~~from the initial closing date of the transaction.

InThe ~~January~~Company ~~2022,~~provides ~~VEI~~IT ~~HKG established~~Business’ anservices ~~operating~~and ~~subsidiary,~~solutions ~~Haomeng~~to ~~Technology~~the ~~(Shenzhen)~~retail ~~Co.,~~sector ~~Limited.~~through ~~(“HTS”)~~three operating subsidiaries located in ~~Shenzhen,~~Hong ~~PRC,~~Kong ~~under~~SAR ~~the~~and ~~laws~~People’s Republic of ~~the~~China ("PRC"). ~~HTS engages in IT services.~~

AsOn of September 302, ~~2023,~~2008 ~~the~~VEI ~~Company~~CHN established ~~held~~its ~~five~~first ~~wholly-owned~~operating ~~subsidiaries~~subsidiary, ~~and~~Value ~~two~~Exchange ~~subsidiaries~~Int’l ~~with~~(Shanghai) ~~51%~~Limited ~~ownership.~~("VEI ~~Company~~SHG") ~~establishes~~in ~~operating~~Shanghai, PRC, ~~subsidiaries~~under ~~when~~the alaws ~~perceived or~~of ~~actual~~the ~~opportunity~~PRC. ~~for~~VEI ~~business~~SHG isengages ~~deemed~~in tosoftware bedevelopment, ~~most~~trading ~~efficiently~~and ~~handled~~servicing byof acomputer ~~local~~hardware ~~operating~~and ~~subsidiary~~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.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. On May 21, 2018, VEI CHN disposed of CUCUMBUY with consideration of HK$1.

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") in Shanghai, PRC, under the laws of the PRC. SZH engages in IT services.

In July 2021, VEI CHN established in an associate, Smart Reward Express Limited ("SRE") in Hong Kong. SRE is inactive since its establishment.

In January 2022, VEI HKG established an operating subsidiary, Haomeng Technology (Shenzhen) Co., Limited. ("HTS") in Shenzhen, PRC, under the laws of the PRC. HTS engages in IT services.

On January 2, 2024, VEI CHN acquired 100% of the capital stock of Value E Consultant International (M) Sdn. Bhd, a company established in Malaysia (the "Value E"). Value E engages in software development, trading and servicing of computer hardware and software activities in Malaysia. Value E is operated as a subsidiary of VEI CHN.

As of March 31, 2024, the Company held six wholly-owned subsidiaries, and two subsidiaries with 51% ownership. Company establishes operating subsidiaries when a perceived or actual opportunity for business is deemed to be most efficiently handled by a local operating subsidiary.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies

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 ~~and majority owned~~ subsidiaries that require consolidation. All material intercompany transactions and balances have been eliminated in the consolidation. The Company’s fiscal ~~year~~ year end is December 31st. The following entities were consolidated as of ~~September~~March 3031, ~~2023~~2024:

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%
Haomeng Technology (Shenzhen) Co.,Limited	PRC	100%
Haomeng Technology (Shenzhen) Co., Limited	PRC	100%
Value E Consultant International (M) Sdn. Bhd	Malaysia	100%

Going Concern

These financial statements have ~~been~~ been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. The Company ~~had~~has an operating loss of $~~991~~286,~~883~~ 541 for the ~~nine~~three months period ended ~~September~~March 3031, ~~2023~~2024, ~~and~~ has ~~cash~~an ~~reserves~~accumulated deficit of $~~234~~5,~~724 as of September 30~~469,928 ~~2023.~~and ~~The Company~~ has ~~relied~~only oncash ~~debt funding to pay for operating expenses and business development efforts in~~reserves ~~2023~~of ~~that~~$515,113 ~~were~~as ~~not~~of ~~covered~~March by31, ~~operating revenues~~2024. IfManagement ~~the~~has ~~Company~~evaluated ~~continues~~the tosignificance ~~incur~~of ~~operating~~the ~~losses~~conditions asin ~~incurred~~relation into the ~~first nine~~Company’s ~~months~~ability ofto ~~fiscal~~meet ~~year~~its ~~2023~~obligations and ~~does~~believes ~~not~~that ~~significantly increase~~ its current cash ~~reserves,~~balance ~~and~~along ifwith ~~the~~its ~~Company~~current ~~does~~operations will not ~~also~~provide ~~receive~~sufficient ~~additional~~capital ~~funding~~to ~~from~~continue ~~existing~~as ~~lenders~~a orgoing ~~from~~concern. ~~other~~The ~~sources~~Company’s ability to ~~provide~~continue ~~the~~as ~~working~~a ~~capital~~going ~~needed~~concern tois ~~cover~~dependent ~~those~~upon ~~continuing~~achieving ~~operating~~sales ~~losses~~growth, ~~then~~management ~~the~~of ~~Company would be forced to reduce its~~ operating expenses and ~~business~~ability ~~development efforts and the issue~~ of the Company asto aobtain ~~going concern may arise. While~~ the ~~existing~~necessary ~~lenders~~financing ofto ~~the~~meet ~~Company~~its ~~and~~obligations ~~Company's majority shareholder are~~and ~~affiliated,~~pay ~~there~~its ~~can~~liabilities bearising nofrom ~~assurance~~normal ofbusiness ~~additional~~operations ~~debt~~when orthey ~~equity~~come ~~funding~~due, ~~for~~and ~~the~~upon ~~Company~~profitable ~~from the existing lenders or the majority shareholder~~operations.

c)The ~~Use~~Company has relied on debt funding to pay for operating expenses and business development efforts in 2024 that were not covered by operating revenues. If the Company continues to incur operating losses as incurred within twelve months of ~~Estimates~~filing date and does not significantly increase its cash reserves, and if the Company does not also receive additional funding from existing lenders or from other sources to provide the working capital needed to cover those continuing operating losses, then the Company would be forced to reduce its operating expenses and business development efforts and the issue of the Company as a going concern may arise. While the existing lenders of the Company and Company's majority shareholder are affiliated, there can be no assurance of additional debt or equity funding for the Company from the existing lenders or the majority shareholder. In considering our forecast for the next twelve months and the current cash and working capital as of the filing of this Form 10-Q, such matters create a substantial doubt regarding the Company’s ability to meet their financial needs and continue as a going concern.

~~Preparing~~These ~~consolidated~~ financial statements in ~~conformity~~do ~~with~~not ~~U.S.~~include any ~~GAAP~~adjustments ~~requires~~relating ~~management~~ to ~~make estimates and assumptions affecting~~ the ~~reported~~recoverability ~~amounts of assets~~ and ~~liabilities and~~classification ~~disclosure~~ of ~~contingent~~recorded ~~assets~~asset ~~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~~or ~~fair~~amounts ~~value~~ and ~~accounting~~classification ~~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~~that ~~believed~~might toresult ~~be reasonable under the circumstances. Accordingly, actual results may differ significantly~~ from ~~these~~this ~~estimates~~uncertainty. ~~In addition, different assumptions or circumstances could reasonably be expected to yield different results.~~

1011

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Cash and Cash Equivalents

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of ~~six~~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. ~~The Company does not have any cash equivalents at September 30, 2023 or December 31, 2022.~~

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.

f) Accounts receivable, ~~and~~ other receivables, and current expected credit losses

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~~credit ~~accounts~~losses is adequate. An estimate for ~~doubtful~~credit ~~accounts~~losses 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 ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, allowance for uncollectible accounts receivable amounts to $155,301 and $155,301, respectively; and there was no allowance for uncollectible ~~accounts receivable~~other receivables. Management believes that the remaining accounts receivable and other receivables are collectable.

The company evaluated the accounting standards update related to the Current Expected Credit Losses (“"CECL”") and ~~determined~~adequate ~~that~~allowance ~~the~~for ~~pronouncement~~uncollectible accounts ~~does~~receivable ~~not~~ have a ~~material~~been ~~effect~~made onduring ~~the financial position, results of operations or cash flows of the Company~~2024.

~~g) Inventories~~12

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.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. Cost is defined as the cost to acquire products, cost of conversion and other related costs to bring inventory to present location and condition. Net realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

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:

Schedule of estimated use full life of plant and equipment
		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

i) 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:

Schedule of estimated use full life of goodwill and intangibles
		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.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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~~ unit level. The impairment test involves a two-step process. The first step involves comparing the fair value of the reporting unit to ~~which~~ 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.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair value of financial instruments

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.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The following table represents the fair value hierarchy for the Company’s financial assets and liabilities measured at fair value on a recurring basis as of:

Schedule of measured at fair value on a recurring basis

March 31, 2024

September 30, 2023

December 31, 2022

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

US$

Liabilities:

(unaudited)

Convertible loan and its fair value for the derivative portion (See Note 12)

352,389

Liabilities:

Convertible loan and its fair value for the derivative portion (See Note 10)

446,499

Warrants (See Note 10)

446,499

As of September 30, 2023 and December 31, 2022, the fair values of the Company’s cash and cash equivalents, accounts receivable, accounts payable, other receivables and prepayments, other payables and accrued liabilities, and balances with related parties approximated the carrying values of these instruments presented in the Company’s consolidated balance sheets due to the short maturities of these instruments.

December 31, 2023

Level 1

Level 2

Level 3

Total

US$

Liabilities:

Convertible loan and its fair value for the derivative portion (See Note 12)

1,061,282

As of March 31, 2024 and December 31, 2023, the fair values of the Company’s cash and cash equivalents, accounts receivable, inventory, accounts payable, other receivables and prepayments, other payables and accrued liabilities, and balances with related parties approximated the carrying values of these instruments presented in the Company’s consolidated balance sheets due to the short maturities of these instruments.

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.

1415

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Revenue recognition

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. We recognize revenue from contracts with customers using the five-step model prescribed in ASC 606.

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 performance obligations.

Determining whether such products and services within a customer contract are considered distinct performance obligations that should be accounted for separately requires significant judgment. Accordingly, we review customer contracts to identify all separate promises to transfer goods and services that would be considered performance obligations. Judgment is also required in determining whether an option to acquire additional products and services within a customer contract represents a material right that the customer would not receive without entering into that contract.

The Company’s contracts often contain multiple performance obligations, which 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 performance obligations 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. If a contract contains multiple performance obligations, the Company accounts for each distinct performance obligation separately. The transaction price is allocated to the separate performance obligations on a relative stand-alone selling price basis. Any discounts or expected potential future price concessions are considered when determining the total transaction price.

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.16

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~Revenues~~In ofaddition, ~~maintenance~~the ~~services~~arrangement ~~are~~generally ~~recognized~~includes ~~when~~customer ~~the~~acceptance ~~services~~criteria ~~are~~that ~~performed~~cannot inbe ~~accordance~~tested ~~with~~before installation and integration at the ~~contract~~customer’s ~~term~~site. Accordingly, revenue recognition is deferred until customer acceptance, indicated by an acceptance certificate signed off by the customer.

~~Revenues~~We ofrecognize ~~sale~~revenue over time when there is a continuous transfer of ~~software,~~control ifto ~~not bundled~~our ~~with~~customer. ~~other~~When ~~arrangements~~control is transferred over time, ~~are~~revenue is recognized ~~when~~based ~~shipped~~on the extent of progress towards completion of the performance obligation. Based on the nature of the products and ~~customer~~services ~~acceptance~~provided ~~obtained~~in the contract, we use our judgment to determine if ~~all~~an ~~other~~input ~~revenue~~measure ~~recognition~~or ~~criteria are~~output ~~met~~measure best depicts the transfer of control over time. ~~Costs~~If ~~associated~~a ~~with~~contract ~~revenues~~does not ~~are~~meet ~~recognized~~the ~~when~~criteria ~~incurred~~for recognizing revenue over time, we recognize revenue at a point in time.

Revenues of maintenance services are recognized ~~recorded~~when ~~net~~the ofservices ~~value-added taxes,~~are ~~sales~~performed ~~discounts~~in ~~and~~accordance ~~returns.~~with ~~There~~the ~~were~~contract noterm. ~~sales~~For ~~returns~~maintenance ~~during~~service ~~the~~contracts, ~~nine~~a ~~months~~time-elapsed ~~period~~output method ~~ended~~is ~~September~~used ~~30,~~to ~~2023~~measure progress, and ~~2022~~revenue is recognized straight-line over the term of the contract.

Schedule of revenue record
	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	US$		US$		US$		US$
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
NET REVENUES
Service income
- systems development and integration		68,277		28,964		181,193		236,311
- systems maintenance		2,380,304		2,304,740		7,049,784		6,386,367
- sales of hardware and consumables		512,244		223,104		1,464,435		1,115,164
		2,960,825		2,556,808		8,695,412		7,737,842

For services contracts, we typically satisfy our performance obligations as services are rendered and use a contract cost-based input method to measure progress. Contract costs include labor, material and allocable indirect expenses. Revenue is recognized proportionally as contract costs are incurred plus estimated fees.

~~Billings~~Revenues inof ~~excess~~sale of ~~revenues~~software, ~~recognized~~if not bundled with other arrangements, are ~~recorded~~recognized aswhen shipped and customer acceptance obtained at a point in time, if all other revenue ~~deferred~~recognition ~~income~~criteria are met. Costs associated with revenues are recognized when incurred.

16Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the three months period ended March 31, 2024 and 2023.

	Three Months Ended March 31, 2024		Three Months Ended March 31, 2023
	US$		US$
	(unaudited)		(unaudited)
NET REVENUES
Service income
- systems development and integration		54,115		14,359
- systems maintenance		2,616,667		2,490,154
- sales of hardware and consumables		699,227		380,036
		3,370,009		2,884,549

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

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income taxes

~~The~~Deferred ~~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~~For ~~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~~year incurred.

Lease accounting

The Company categorize leases at their inception as either operating or finance leases. Lease agreements cover certain office space, warehouse space, and vehicles. Most of these leases are operating leases; however, certain vehicles are leased under finance leases.

Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and long-term operating lease liabilities in our consolidated balance sheets. Finance leases are included in net property, current installments of long-term debt, and long-term debt in our consolidated balance sheets.

Leased assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease liabilities and corresponding right-of-use assets include options to extend lease terms that are reasonably certain of being exercised. As the Company’s leases generally do not provide an implicit discount rate, the Company uses the estimated collateralized incremental borrowing rate (i.e. 3%) based on information available at the lease commencement date in determining the present value of lease payments for use in the calculation of the operating lease liabilities and right-of-use assets. This rate is determined using a portfolio approach based on the risk-adjusted rate of interest and requires estimates and assumptions including credit rating, credit spread, and adjustments for the impact of collateral. The Company believes that this is the rate it would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar lease term.

Leases that have a term of twelve months or less upon commencement date are considered short-term in nature. Accordingly, short-term leases are not included on the consolidated balance sheets and are expensed on a straight-line basis over the lease term, which commences on the date we have the right to control the property.

1718

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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~~No advertising and marketing expense for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022 were insignificant~~2023.

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 ~~nine~~three months ended ~~September 30~~March 31, ~~2023~~2024 and ~~2022~~2023 were ~~insignificant~~$11,942 and $18,746 respectively.

Research and development costs

Research and development costs are expensed as incurred and are included in general and administrative expenses. ~~Research~~No research and development costs for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022 were insignificant~~2023.

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~~Chinese ~~subsidiary~~subsidiaries is ~~Renminbi (“~~RMB”). The functional currency of the Philippine subsidiary is Peso. 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.

Schedule of foreign currency translation
Quarter ended	March 31, 2024	March 31, 2023
Quarter ended	September 30, 2023	September 30, 2022
RMB : USD exchange rate	7.1822	6.8133
RMB : USD exchange rate three months average period ended	7.2308	6.8129
average period ended
HKD : USD exchange rate three months average period ended	7.800	7.800
HKD : USD exchange rate	7.800	7.800
PESO : USD exchange rate three months average period ended	54.0664	55.9140
average period ended
PESO : USD exchange rate	54.2137	53.5881
average period ended
MYR : USD exchange rate	4.7088	-
average period ended

Quarter ended	~~September~~March 3031, ~~2023~~2024	~~September~~December 3031, ~~2022~~2023
RMB : USD exchange rate nine months average period ended	7.0075	6.5805
RMB : USD exchange rate	7.2316	7.1155
HKD : USD exchange rate nine months average period ended	7.800	7.800
HKD : USD exchange rate	7.800	7.800
PESO : USD exchange rate nine months average period ended	53.8659	52.9091
PESO : USD exchange rate	54.3554	53.9792
MYR : USD exchange rate	4.7187	-

Quarter ended	September 30, 2023	December 31, 2022
RMB : USD exchange rate	7.2632	7.0483
HKD : USD exchange rate	7.800	7.800
PESO : USD exchange rate	54.7368	58.4270

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

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”.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recent accounting pronouncements

In ~~August~~November ~~2021~~2023, the Financial Accounting Standards Board (FASB) issued ASU No. ~~2021~~2023-0607, ~~“Presentation~~Segment ofReporting ~~Financial Statements~~ (Topic ~~205~~280),: ~~Financial~~Improvements ~~Services—Depository~~to ~~and~~Reportable ~~Lending~~Segment Disclosures (~~Topic~~ASU ~~942~~2023-07), ~~and~~ ~~Financial~~which ~~Services—Investment~~requires ~~Companies~~an ~~(Topic~~enhanced ~~946).”~~disclosure ~~The~~of ~~ASU~~significant ~~includes~~segment ~~Release~~expenses ~~No.33-10786,~~on ~~Amendments~~an toannual ~~Financial Disclosures about Acquired~~ and ~~Disposed~~interim ~~Businesses~~basis. This ~~update amends certain SEC disclosure~~ guidance ~~that~~will isbe ~~included~~effective for in the ~~accounting~~annual ~~standards codification~~periods tobeginning ~~reflect~~ the ~~SEC’s~~year ~~recent~~ended ~~issuance~~December of31, ~~rules intended to modernize and streamline disclosure requirements~~2024, ~~including updates to business acquisition~~ and ~~disposition significance tests used, the significance thresholds~~ for ~~proforma~~beginning ~~statement~~January ~~disclosures~~1, ~~the~~ ~~number~~2025. ofEarly ~~preceding~~adoption ~~years~~is ofpermitted. ~~financial statements required for disclosure~~Upon adoption, ~~and other provisions in~~ the ~~SEC releases. The~~ guidance is ~~effective~~should ~~upon~~be ~~its~~applied ~~addition~~retrospectively to ~~the~~all ~~FASB~~prior ~~codification.~~periods ~~The~~presented ~~Company~~in ~~is assessing~~ the ~~impact~~financial ~~of ASU No~~statements. ~~2021-06~~We ~~but~~do ~~does~~ not expect ~~that~~ itthe ~~will~~adoption of this guidance to have a material impact on ~~its~~our consolidated financial statements ~~and related disclosures~~.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. 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.

1921

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts receivable

Accounts receivable consisted of the following as of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023:

Schedule of accounts receivable
	March 31, 2024			December 31, 2023
	September 30, 2023			December 31, 2022
	US$			US$
	(unaudited)
Accounts receivable		1,640,356			1,892,167
Accounts receivable		1,463,901			1,133,058
Allowance for credit losses		(155,301	)		(155,301	)
		1,485,055			1,736,866

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~~ performs ongoing credit evaluations of its customers and maintains allowances for ~~doubtful~~credit ~~accounts~~losses based on factors surrounding the credit risk of specific customers, historical trends, and other information. The change in accounts receivable for the ~~nine months~~ period ended ~~September~~March 3031, ~~2023~~2024 was primarily due to new billings of revenue recognition.

The following table presents changes in the balances of the company accounts receivable:

Schedule of changes in accounts receivable
	December 31, 2023			Additions		Deductions			March 31, 2024
	December 31, 2022			Additions		Deductions			September 30, 2023
	US$			US$		US$			US$
				(unaudited)		(unaudited)			(unaudited)
Accounts receivable		1,892,167			3,376,571		(3,628,382	)		1,640,356
Accounts receivable		1,133,058			8,321,916		(7,991,073	)		1,463,901
Allowance for credit losses		(155,301	)		-		-			(155,301	)
		1,736,866			3,376,571		(3,628,382	)		1,485,055

	December 31, 2021		Additions			Deductions			December 31, 2022
	December 31, 2022		Additions			Deductions			December 31, 2023
	US$		US$			US$			US$
			(unaudited)			(unaudited)			(unaudited)
Accounts receivable		1,133,058		11,967,888			(11,208,779	)		1,892,167
Accounts receivable		858,617		10,711,439			(10,436,998	)		1,133,058
Allowance for credit losses		-		(155,301	)		-			(155,301	)
		1,133,058		11,812,587			(11,208,779	)		1,736,866

~~4. Other receivables and prepayments~~22

Other receivables and prepayments consisted of the following as of September 30, 2023 and December 31, 2022:

Schedule of other receivables and prepayments
	September 30, 2023		December 31, 2022
	US$		US$
	(unaudited)
Deposits and prepaid expense		588,056		256,355
Others		399,864		216,494
		987,920		472,849

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other receivables and prepayments

Other receivables and prepayments consisted of the following as of March 31, 2024 and December 31, 2023:

	March 31, 2024		December 31, 2023
	US$		US$
	(unaudited)
Deposits and prepaid expense		689,481		448,249
Others		79,322		175,159
		768,803		623,408

Inventories

Inventories as of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023 consisted of the following:

Schedule of inventories
	March 31, 2024		December 31, 2023
	September 30, 2023		December 31, 2022
	US$		US$
		US$		US$
	(unaudited)
		(unaudited)
Finished goods		215,313		-
Finished goods		273,386		225,662

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Plant and equipment, net

Plant and equipment consisted of the following as of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023:

Schedule of plant and equipment
	March 31, 2024			December 31, 2023
	September 30, 2023			December 31, 2022
	US$			US$
		US$			US$
	(unaudited)
		(unaudited)
Leasehold improvements		90,169			91,427
Leasehold improvements		89,716			93,099
Office furniture and equipment		278,783			278,612
Office furniture and equipment		266,498			271,964
Computer equipment		425,064			423,666
Computer equipment		414,851			398,549
Computer software		341,458			250,649
Computer software		245,550			257,943
Motor Vehicle		215,184			216,119
Motor Vehicle		214,713			213,403
Building		61,212			61,596
Building		60,827			60,827
Total		1,411,870			1,322,069
Total		1,292,155			1,295,785
Less: accumulated depreciation		(1,067,371	)		(1,013,934	)
Less: accumulated depreciation		(948,269	)		(796,288	)
Plant and equipment, net		344,499			308,135
Plant and equipment, net		343,886			499,497

Depreciation expense for the ~~nine months~~three months period ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 amounted to $~~176~~60,~~538~~861 and $~~157~~61,~~057~~347, respectively. For the ~~nine~~three months period ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, no interest expense was capitalized into plant and equipment.

As of March 31, 2024 and December 31, 2023, the Company's motor vehicle was under finance lease arrangement with a net carrying amount $89,833 and $101,646 respectively.

Goodwill

Goodwill consisted of the following as of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023:

Schedule of goodwill
	March 31, 2024		December 31, 2023
	September 30, 2023		December 31, 2022
	US$		US$
		US$		US$
	(unaudited)
		(unaudited)
Goodwill arising from acquisition of TSI		206,812		206,812
Goodwill arising from acquisition of Value E		135,267		-
		342,079		206,812

21As of January 2, 2024, VEI CHN acquired 100% of the capital stock of Value E from shareholders of VALUE E, Ms. TSANG Po Yee Bella with 95% shares of interest and Mr. CHAI Li Chen with 5% shares of interest, for the consideration Malaysian ringgit (MYR) 100. Ms. TSANG Po Yee Bella is also a director of the Company. Upon completion of the acquisition, Value E is a wholly owned subsidiary of the Company. Value E engages in software development, trading and servicing of computer hardware and software activities in Malaysia. The Company is undergoing purchase price allocation valuation for the acquisition of Value E currently.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. ~~Leases~~Operating 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 ~~2023~~2024 and ~~2025~~2027. 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.

Schedule of operating lease agreements
	March 31, 2024		December 31, 2023
	September 30, 2023		December 31, 2022
	US$		US$
		US$		US$
	(unaudited)
		(unaudited)
Operating lease right-of-use assets, net		1,244,569		926,630
Operating lease right-of-use assets, net		1,015,248		555,069

The components of lease liabilities are as follows:

Schedule of components of lease liabilities
	March 31, 2024		December 31, 2023
	September 30, 2023		December 31, 2022
	US$		US$
		US$		US$
	(unaudited)
		(unaudited)
Lease liabilities, current		585,762		463,411
Lease liabilities, current		479,696		423,490
Lease liabilities, non-current		653,816		457,982
Lease liabilities, non-current		524,709		117,592
Present value of lease liabilities		1,239,578		921,393
Present value of lease liabilities		1,004,405		541,082

Total ~~lease~~noncash ~~cost~~operating lease expense for the ~~nine~~three months period ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 amounted to $~~381~~8,~~851~~809 and $~~234~~4,~~600~~239 respectively. Principal payments on operating leases liability for the three months period ended March 31, 2024 and 2023 amounted to $164,059 and $112,651 respectively. Weighted-average remaining lease term is 1.75 72 years, and weighted-average discount rate is 3%.

The following is a schedule, by years, of maturities of lease liabilities as of ~~September~~December 3031, 2023:

Schedule of maturities of lease liabilities
	March 31, 2024			December 31, 2023
	September 30, 2023			December 31, 2022
	US$			US$
		US$			US$
	(unaudited)
		(unaudited)
Year one		614,626			484,526
Year one		518,376			380,757
Year two		440,321			299,848
Year two		295,772			132,685
Year three		229,487			169,461
Year three		228,269			38,070
Total undiscounted cash flows		1,284,434			953,835
Total undiscounted cash flows		1,042,417			551,512
Less: Imputed interest		(44,856	)		(32,442	)
Less: Imputed interest		(38,012	)		(10,430	)
Present value of lease liabilities		1,239,578			921,393
Present value of lease liabilities		1,004,405			541,082

2225

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. ~~Bank~~Finance ~~loan~~lease liability

~~Bank~~Finance ~~loan~~lease liability consisted of the following as of ~~September 30~~March 31, ~~2023~~2024 and December 31, ~~2022~~2023:

Schedule of bank loan
	March 31, 2024			December 31, 2023
	September 30, 2023			December 31, 2022
	US$			US$
	(unaudited)
Long term bank loan (i)		48,541			70,027
Long term finance lease liability		34,556			41,922
Less: Current portion of long term bank loan (i)		(28,140	)		(27,378	)
Less: Current portion of finance lease liability		(27,761	)		(28,868	)
		20,401			42,649
		6,795			13,056
Short term bank loan (ii)		940,147			1,012,110
Current portion of finance lease liability		27,761			28,867
Current portion of long term bank loan (i)		28,140			27,378
		27,761			28,867
		968,287			1,039,488

~~(i)~~ As of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~ 2023, the above ~~bank~~finance ~~loan~~lease liability secured by property and equipment with net carrying amount of $~~112~~89,~~211~~833 and $~~143~~101,646 respectively. Total finance lease cost for the three months period ended March 31, 2024 and 2023 amounted to $552 and $1,221 respectively. Principal payments on finance leases liability for the three months period ended March 31, 2024 and 2023 amounted to $7,130 and $5,889 respectively.

~~(ii) The Company and American Pacific Bancorp, Inc~~10., aBank ~~Texas~~loan ~~corporation~~from ~~located~~an in Houston, Texas, (“APB”) signed a Loan Agreement, Security Agreement and Revolving Credit Promissory Note (“Promissory Note”), each dated July 26, 2022 but fully executed and closed as of July 27, 2022, whereby APB will provide a $1 million secured revolving credit line to the Company (“APB Credit Line”). Loan Agreement, Security Agreement and Promissory Note may be referred to collectively as “Credit Line Documents”. The Credit Line Documents provide for a fixed 8% annual interest on sums advanced, two year maturity date for unpaid sums loaned and unpaid interest accrued thereon, and calendar quarterly payments of accrued interest on any sums advanced under Credit Line (interest payments commencing on September 30, 2022). The Credit Line is secured by a first, senior lien on all of the Company’s assets and accounts receivable, with net carrying amount of $7,236,206. Credit Line advances may be used for general working capital.affiliate

~~APB~~Bank isloan ~~affiliated~~from ~~with~~an ~~Chan~~affiliate ~~Heng~~consisted ~~Fai, a director and principal shareholder~~ of the ~~Company, by virtue of Mr. Chan’s equity ownership of parent company of APB and his service~~following as ~~the Executive Chairman~~ of ~~the~~March ~~parent company of APB. APB is also affiliated with the Company directors Lum Kan Fai~~31, ~~Robert~~2024 ~~Trapp, Wong Shui Yeung,~~ and ~~Wong~~December ~~Tat Keung since they are affiliated with Mr. Chan and certain of his affiliated companies by virtue of services as a director~~31, ~~officer or professional advisor to those affiliated companies.~~2023:

	March 31, 2024		December 31, 2023
	US$		US$
	(unaudited)
Short term bank loan from an affiliate		940,147		940,147

The Company and American Pacific Bancorp, Inc., a Texas corporation located in Houston, Texas, (“APB”) signed a Loan Agreement, Security Agreement and Revolving Credit Promissory Note (“Promissory Note”), each dated July 26, 2022 but fully executed and closed as of July 27, 2022, whereby APB will provide a $1 million secured revolving credit line to the Company (“APB Credit Line”). Loan Agreement, Security Agreement and Promissory Note may be referred to collectively as “Credit Line Documents”. The Credit Line Documents provide for a fixed 8% annual interest on sums advanced, two year maturity date for unpaid sums loaned and unpaid interest accrued thereon, and calendar quarterly payments of accrued interest on any sums advanced under Credit Line (interest payments commencing on September 30, 2022). The Credit Line is secured by a first, senior lien on all of the Company’s assets, with net carrying amount of $5,045,617. Credit Line advances may be used for general working capital.

APB is affiliated with Chan Heng Fai, a director and principal shareholder of the Company, by virtue of Mr. Chan’s equity ownership of parent company of APB and his service as the Executive Chairman of the parent company of APB. APB is also affiliated with the Company directors Lum Kan Fai, Robert Trapp and Mr. Lim Sheng Hon Danny since they are affiliated with Mr. Chan and certain of his affiliated companies by virtue of services as a director, officer or professional advisor to those affiliated companies. Further, Wong Shui Yeung, and Wong Tat Keung, who are deemed to be independent directors of the Company, are also independent directors of certain Mr. Chan's affiliated companies. (See Note 12 (iii))

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1011. ~~Convertible~~Loan ~~loan~~from a related party

Movement of the components of the convertible loan

	March 31, 2024		December 31, 2023
	US$		US$
	(unaudited)
Loan from a related party		500,000		500,000

~~The~~On ~~movement~~September in28, 2023, the ~~liability~~Company entered into a Loan Agreement and ~~derivative~~Promissory ~~components of~~Note (collectively, the ~~convertible~~“Loan ~~loan~~Agreement”) aswith ofAlset ~~September~~International 30Limited, ~~2023~~a public Singapore corporation, (“AIL”) for an unsecured loan of Five Hundred Thousand U.S. Dollars and ~~December~~No 31Cents (USD$500,000.00) principal ~~2022~~amount ~~are~~(“Principal”) ~~set~~to ~~out~~the ~~below~~Company. Principal accrues simple interest at Eight Percent (8%) per annum. Repayment of Principal and accrued interest thereon is to be made as follows:

Schedule of convertible debt
	Liability component		Derivative component			Total
January 1, 2023		-		-			-
Issuance of convertible loan		172,789		1,327,211			1,500,000
Conversion		27,091		(1,207,532	)		(1,180,441	)
Change in fair value of embedded derivatives		-		61,916			61,916
Interest expenses		65,024		-			65,024
September 30, 2023		264,904		181,595			446,499

(1) Principal will be paid in a single lump sum payment on or by the six (6) month anniversary of the effective date of the Loan Agreement, being September 28,2023, (being the “Maturity Date”); and

~~VEII entered into a Convertible Credit Agreement, dated and effective as of January 27, 2023,~~ (~~“2023 Credit Agreement”~~2) ~~with~~Interest ~~the~~accrued ~~following~~on ~~lenders:~~Principal ~~(1) Hapi Metaverse,~~shall ~~Inc.,~~be ~~(formerly,~~paid ~~“GigWorld,~~on ~~Inc.”),~~the alast ~~Delaware~~business ~~corporation,~~day ~~(“HMI”)~~on ~~and (2) American Wealth Mining Corp.,~~ a ~~Nevada corporation,~~calendar ~~(“AWMC”).~~monthly ~~HMI~~basis ~~and~~with ~~AWMC~~initial ~~are~~accrued ~~also~~Interest ~~referred~~payments tocommencing ~~individually~~on asSeptember ~~a “Lender” and collectively~~28, ~~as the “Lenders.” AWMC changed its corporate name to “New Electric CV Corp.” in March~~ 2023.

~~Maximum~~Company ~~Credit~~has Line; Interest; Advances; Payment. The 2023 Credit Agreement provides for a maximum credit line of One Million Five Hundred Thousand Dollars and No Cents ($1,500,000.00) (“Maximum Credit Line”) with simple interest accrued on any advances of the ~~money~~right ~~under the 2023 Credit Agreement at Eight Percent (8%) per annum. The principal amount of any advance of money under the 2023 Credit Agreement (each being referred~~ to asprepay ~~an “Advance”)~~all isor ~~due in a lump sum, balloon payment on the third annual anniversary of the date of the Advance (“Advance Maturity Date”). Accrued and unpaid interest on~~ any ~~Advance is due and payable on a semi-annual basis with interest payments due on the last business day of June and last business day of December of each year. A Lender may demand that any~~ portion ~~or all~~ of the ~~unpaid~~Principal ~~principal~~and ~~amount~~Interest ~~of any Advance as well as~~ accrued ~~and~~on ~~unpaid interest thereon may be paid by shares of Company Common Stock in lieu of cash payment. Company must request Advances from~~ the ~~Lenders. Either Lender may elect to separately~~Principal, ~~fully~~without ~~fund the Advance~~penalty, orupon ~~both~~ten ~~Lenders~~(10) ~~may jointly elect to fund the Advance based on Lenders~~days’ ~~agreement~~prior onnotice ~~the portion of the Advance~~ to ~~be funded by each Lender~~AIL. ~~Lenders may severally~~ orThe ~~jointly~~Principal ~~reject~~was ~~any~~advanced ~~request~~in ~~for~~full anby ~~Advance~~AIL ~~and~~on ~~neither~~October ~~Lender~~4, ~~has an obligation to fund any Advance under the~~ 2023 ~~Credit Agreement~~.

~~Use of Proceeds~~Mr. ~~Advances~~Chan ~~may~~Heng beFai, ~~used~~a non-executive todirector ~~fund~~of ~~general~~the ~~working~~Company, ~~capital~~who ~~needs~~is ofdeemed the ~~Company,~~owner ~~which~~of ~~includes:~~49.63% ~~expansion~~of the issued shares of ~~existing~~Company’s ~~business~~Common ~~operations~~Stock orby ~~business~~virtue ~~lines~~of to95,000 ~~new~~shares ~~geographical~~of ~~markets~~Common inStock ~~Asia~~held orby ~~other~~Mr. ~~geographical~~Chan, ~~markets;~~and ~~for~~the ~~development~~following share ownership of ~~new~~Company’s ~~business~~Common ~~lines~~Stock ~~(whether~~by inentities ~~existing~~that orMr. ~~new~~Chan ~~geographical~~is deemed ~~markets);~~to ~~acquisition~~control: of21,120,795 ~~assets~~shares orheld ~~companies~~by ~~(whether~~Hapi inMetaverse ~~existing~~Inc., or39,968 ~~new~~shares ~~geographical~~held ~~markets);~~by BMI Capital Partners International Limited, 18,512 shares held by Liquid Value Development Pte Ltd. and ~~payment~~313,154 ofshares ~~any~~held ~~sums~~by ~~due~~Decentralized ~~under~~Sharing ~~the Credit~~Systems, ~~Agreement~~Inc.

~~Unsecured~~AIL ~~Debt~~is ~~Obligation.~~a ~~Any~~majority-owned ~~Advance~~subsidiary ~~will~~of beAlset anInc., ~~unsecured~~a ~~general~~Texas ~~debt~~corporation, ~~obligation~~(“Alset”). Mr. Chan owns approximately 53.5% of the ~~Company~~issued shares of common stock of Alset and Mr. Chan is the Chairman and Chief Executive Officer of Alset and AIL. Further, ~~there~~Wong ~~are~~Shui noYeung ~~personal~~and ~~guarantees~~Wong ~~under~~Tat Keung, who are independent directors of the ~~2023~~Company, ~~Credit~~are ~~Agreement~~also independent directors of Alset Inc.

24Purpose of the Loan Agreement was to provide short term working capital to the Company.

No repayment of the principal and interest accrued made as of July 16, 2024.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~Events of Default~~12. ~~The~~Convertible ~~following~~loan constitute an event of default under the 2023 Credit Agreement: (1) failure to make a payment of any Advance when due and payable and Company fails to cure such default within ten (10) days after receipt of a written notice from the Lender; (2) failure in the observance or performance of any non-monetary material covenant or agreement and Company fails to cure such default within thirty (30) days after written notice of default from the Lender; (3) failure of Company to comply with the obligations, terms, covenants or conditions of 2023 Credit Agreement, or breach by Company of any obligations, covenant, representation or warranty that is not cured within thirty (30) days from the receipt of a written notice from a Lender; (4) filing of a petition in bankruptcy or the commencement of any proceedings under any bankruptcy laws by or against Company, which filing or proceeding is not dismissed within sixty (60) days after the filing or commencement thereof, or if Company becomes insolvent; (5) petition is filed with a court to place the Company in receivership or similar status for benefit of creditors and appointment of a receiver is unvacated and unstayed for an aggregate of sixty (60) days; (6) for debts or judgments in excess of One Hundred Thousand Dollars and No Cents ($100,000.00) in face amount, a writ of execution or attachment or any similar process shall be issued or levied against all of the Company’s assets, or any judgment involving monetary damages shall be entered against the Company which shall become a lien on all of the Company’s assets and such execution, attachment or similar process or judgment is not released, bonded, satisfied, vacated or stayed within sixty (60) days after its entry or levy; or (7) Company ceases to carry on its primary business line for ninety (90) consecutive days. The remedy for any default that is not timely cured, if a cure period is allowed, is all sums due under the 2023 Credit Agreement becoming immediately due and payable.affiliates

Conversion Right. The 2023 Credit Agreement grants the following conversion rights to each Lender. Optional Conversion. Each Advance shall be convertible, in whole or in part, into shares of Company Common Stock at the option of the Lender who made that Advance (being referred to as a “Conversion”), at any time and from time to time, at a price per share equal the “Conversion Price”. The Conversion Price for a Conversion shall be the average closing price of the Company Common Stock as quoted by the Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the Lender effecting the Conversion if Bloomberg Financial Markets is not then reporting prices of the Company Common Stock), for the three (3) consecutive trading days prior to date of the Notice of Conversion. The Conversion Price is not limited by a minimum price per share of Company Common Stock applicable to the Conversion. As such, if a Lender or Lenders loan a significant sum of money under the 2023 Credit Agreement and then elect to convert all or most of the loaned amount into shares of Company Common Stock, the resulting issuance of shares of Common Stock could significantly dilute existing Company shareholders.

	March 31, 2024		December 31, 2023
	US$		US$
	(unaudited)
Convertible loan		352,389		1,061,282

~~Conversion~~The ~~upon~~movement ~~a Change~~ in ~~Control Transaction. In~~ the ~~event~~liability ~~that~~and ~~prior~~derivative components ~~to the time~~ of ~~repayment of any Advance that has not previously been converted into shares of Company Common Stock,~~ the ~~Company~~convertible ~~shall~~loan ~~consummate a “Change in Control Transaction” (~~as ~~defined below), then the total amount~~ of ~~Advances~~March ~~outstanding shall convert into shares of Company Common Stock at the Conversion Price. “Change in Control Transaction” will be deemed to exist if (1) there occurs any consolidation~~31, ~~merger~~2024 ~~or other business combination of the Company with or into any a third party~~ and ~~the~~ ~~Company~~December ~~is not the surviving entity~~31, or2023 ~~any~~are ~~other~~set ~~corporate~~out reorganization or transaction or series of related transactions in which the voting stockholders of the Company prior to such event cease to own 50% or more of the voting power of the surviving entity after the transaction, or (2) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the operating assets of the Company or all of its wholly-owned subsidiaries, determined on a consolidated basis, to a third party.below:

	Convertible Loan 1 (i) (iii)				Convertible Loan 2 (ii) (iii)
	Liability component		Derivative component		Liability component		Derivative component			Total
	US$		US$		US$		US$			US$

December 31, 2023		9,548		14,898		172,286		864,550			1,061,282

Change in fair value of embedded Derivatives		1,082		3,363		2,455		(715,794	)		(708,893	)

March 31, 2024		10,630		18,261		174,741		148,756			352,389

(i) Movement of the components of the Convertible Loan 1:

	Liability component		Derivative component		Total

December 31, 2023		9,548		14,898		24,446

Change in fair value of embedded derivatives		1,082		3,363		4,446

March 31, 2024		10,630		18,261		28,892

VEII entered into a Convertible Credit Agreement, dated and effective as of January 27, 2023, (“2023 Credit Agreement 1”) with the following lenders: (1) Hapi Metaverse, Inc., a Delaware corporation, (“HMI”, and formerly named “GigWorld, Inc.”) and (2) New Energy CV Corporation (formerly, “American Wealth Mining Corp.”), a Nevada corporation, (“NECV”). HMI and NECV are also referred to individually as a “Lender” and collectively, as the “Lenders”.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~Conversion~~Maximum ~~upon~~Credit ~~Breach~~Line; ofInterest; ~~this~~Advances; ~~Agreement~~Payment. The In2023 ~~the~~Credit Agreement 1 provides for a maximum credit line of One Million Five Hundred Thousand Dollars and No Cents ($1,500,000.00) ~~event~~(“Maximum ~~that~~Credit ~~the~~Line”) ~~Company~~with ~~breaches~~simple interest accrued on any ~~provision~~advances of the money under the 2023 Credit Agreement ~~and~~1 ~~does~~at ~~not~~Eight Percent ~~remedy~~(8%) ~~that~~per ~~breach~~annum. ~~within~~The ~~thirty~~principal amount of any advance of money (30each being referred to as an “Advance”) ~~days~~under ~~after~~the 2023 ~~receipt~~Credit ofAgreement a1 ~~written~~is ~~demand~~due ~~from~~in a ~~Lender~~lump sum, ~~then~~balloon ~~each~~payment on the third annual anniversary of the ~~Lenders~~date ~~may~~of ~~convert~~the ~~all~~Advance orunder the 2023 Credit Agreement 1 (“Advance Maturity Date 1”). Accrued and unpaid interest on any Advance is due and payable on a semi-annual basis with interest payments due on the last business day of June and last business day of December of each year. A Lender may demand that any portion or all of the unpaid principal amount of ~~their~~any ~~respective~~ Advance oras ~~Advances~~well ~~into~~as accrued and unpaid interest thereon may be paid by shares of Company Common Stock atin lieu of cash payment. Company must request Advances from the ~~Conversion~~Lenders. ~~Price~~Either Lender may elect to separately, fully fund the Advance, or both Lenders may jointly elect to fund the Advance based on Lenders’ agreement on the portion of the Advance to be funded by each Lender. Lenders may severally or jointly reject any request for an Advance and neither Lender has an obligation to fund any Advance under the 2023 Credit Agreement 1.

~~Warrants~~Use of Proceeds. InAdvances under the ~~event~~2023 Credit ~~that~~Agreement a1 ~~Lender~~may ~~elects~~be used to ~~convert any~~fund ~~portion~~general ofworking ancapital ~~Advance~~needs ~~into shares~~ of the Company, ~~Common~~which ~~Stock~~includes: inexpansion ~~lieu~~ of ~~cash~~existing ~~payment~~business inoperations or ~~satisfaction~~business oflines ~~that~~to ~~Advance,~~new ~~then~~geographical ~~Company~~markets ~~will issue~~in toAsia ~~the~~or ~~Lender~~other ~~five~~geographical ~~(5)~~markets; ~~detachable warrants~~ for ~~each~~development ~~share~~ of ~~Company~~new ~~Common~~business ~~Stock~~lines ~~issued~~(whether in ~~a Conversion (“Warrants”).~~ ~~Each~~existing ~~Warrant~~or ~~will~~new ~~entitle~~geographical ~~the Lender to purchase one (1~~markets); ~~share~~acquisition of ~~Common~~assets ~~Stock~~or companies (~~“Warrant~~whether ~~Shares”)~~in atexisting aor ~~per-share~~new ~~exercise price~~geographical ~~equal~~markets); toand ~~the Conversion Price. The exercise period~~ payment of ~~each~~any ~~Warrant~~sums ~~will~~due beunder ~~five (5) years from date of issuance of~~ the ~~Warrant~~Credit Agreement.

~~Chan~~Unsecured ~~Heng~~Debt ~~Fai~~Obligation. isAny ~~deemed~~Advance will tobe ~~control~~an ~~HMI~~unsecured bygeneral ~~virtue of~~debt ~~his~~obligation ~~majority ownership~~ of ~~stock of~~ the ~~parent company of HMI’s primary shareholder, Alset International Inc~~Company. ~~(“AIL”). AIL owns approximately 99.69% of HMI issued shares of common stock.~~ Further, ~~Mr.~~there ~~Chan~~are isno ~~the~~personal ~~Chairman~~guarantees ~~and~~under ~~Chief Executive Officer of AIL and he is also~~ the ~~Chairman,~~2023 ~~Chief~~Credit ~~Executive Officer and largest stockholder of Alset Inc., which is the majority stockholder of AIL.~~Agreement ~~Mr. Chan also serves as HMI’s Executive Chairman of the HMI’s Board of Directors since December~~ 1~~, 2017, and he served as a HMI director since October 23, 2014~~. Previously, Mr. Chan served as HMI’s Acting Chief Executive Officer. Lum Kan Fai, a director of the Company, serves as a Vice Chairman of HMI and served as HMI’s chief executive officer, president and chief technology officer.

MrEvents of Default. ~~Chan~~The ~~also~~following ~~controls~~constitute an ~~AWMC~~event of default under the 2023 Credit Agreement 1: (1) failure to make a payment of any Advance under the 2023 Credit Agreement 1 when due and payable and Company fails to cure such default within ten (10) days after receipt of a written notice from the Lender; (2) failure in the observance or performance of any non-monetary material covenant or agreement and Company fails to cure such default within thirty (30) days after written notice of default from the Lender; (3) failure of Company to comply with the obligations, terms, covenants or conditions of 2023 Credit Agreement 1, or breach by ~~virtue~~Company of ~~his~~any ~~ownership~~obligations, covenant, representation or warranty that is not cured within thirty (30) days from the receipt of ~~approximately~~a ~~95.6%~~written notice from a Lender; (4) filing of ~~issued~~a ~~shares~~petition in bankruptcy or the commencement of ~~AWMC~~any ~~common~~proceedings ~~stock.~~under ~~Robert~~any Hbankruptcy laws by or against Company, which filing or proceeding is not dismissed within sixty (60) days after the filing or commencement thereof, or if Company becomes insolvent; (5) petition is filed with a court to place the Company in receivership or similar status for benefit of creditors and appointment of a receiver is unvacated and unstayed for an aggregate of sixty (60) days; (6) for debts or judgments in excess of One Hundred Thousand Dollars and No Cents ($100,000.00) ~~Trapp~~in face amount, a ~~director~~writ of execution or attachment or any similar process shall be issued or levied against all of the Company’s assets, isor ~~also~~any judgment involving monetary damages shall be entered against the Company which shall become a ~~director~~lien on all of ~~AWMC~~the Company’s assets and such execution, attachment or similar process or judgment is not released, bonded, satisfied, vacated or stayed within sixty (60) days after its entry or levy; or (7) Company ceases to carry on its primary business line for ninety (90) consecutive days. The remedy for any default that is not timely cured, if a cure period is allowed, is all sums due under the 2023 Credit Agreement 1 becoming immediately due and payable.

Potential Change of Control. While the purpose of the 2023 Credit Agreement is to provide necessary working capital to the Company and 2023 Credit Agreement is not intended by the Company or Lenders to be a mechanism for effecting any change in control of the Company, if a Lenders or Lenders loan a significant sum under the 2023 Credit Agreement and then elects to convert those sums into shares of Company Common Stock as well as exercise Warrants issued with those shares, then a Lender or the Lenders, either separately or in combination with shares of Company Common Stock held by affiliates, or upon conversion of debt and exercise of Warrants, could attain more than 50% of the issued shares of Company Common Stock and thereby attain voting control of the Company. Since the Conversion Price does not have a floor or minimum per share price, any decrease in the market price of the Company Common Stock will increase the number of shares that a Lender could receive in a Conversion and the exercise of Warrants. See “Conversion of Loan” and Item 15 Loan from related parties below.29

While the conversion provision of the 2023 Credit Agreement and potential issuance of Warrants under the 2023 Credit Agreement are not intended to be anti-takeover provisions by the Company, those provisions of the 2023 Credit Agreement may operate to discourage any bidder from seeking to acquire or control the Company due to the percentage ownership of Company Common Stock and Warrants by, as well as debt obligations owed by the Company to, affiliates of Mr. Chan.

Conversion of Loan. On September 6, 2023, the Company received a Notice of Conversion from HMI to convert One Million Three Hundred Thousand Dollars ($1,300,000.00) of the principal amount loaned to the Company under the 2023 Credit Agreement (“Converted Principal”) into shares of Company’s Common Stock. Under the terms of the 2023 Credit Agreement and Notice of Conversion, HMI has demand rights for the conversion of outstanding debt into equity. On September 18, 2023, the Converted Principal resulted in issuance of 7,344,632 shares of Common Stock to HMI along with issuance of Warrants to purchase a maximum of 36,723,160 shares of Common Stock (“Underlying Shares”) to HMI. Under the 2023 Credit Agreement, the conversion rate for the Conversion Shares is $0.1770 per share, and the Warrants have an exercise price of $0.1770 per share and an exercise period of five (5) years from date of issuance of warrants. The Company was in favor of the conversion in order to end interest payments under the 2023 Credit Agreement and thereby free up capital for operational expenses.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AsConversion ofRight. The 2023 Credit Agreement 1 grants the ~~date~~following conversion rights to each Lender. Each Advance shall be convertible, in whole or in part, into shares of Company Common Stock at the ~~filing~~option of ~~this~~the ~~Quarterly~~Lender ~~Report on~~who ~~Form~~made ~~10-Q,~~that ~~HMI~~Advance ~~has~~(being ~~not~~referred ~~stated~~to ~~when~~as ora if“Conversion itof ~~will~~Convertible ~~exercise~~Loan 1”), at any oftime and from time to time, at a price per share equal the ~~Warrants~~“Conversion Price 1”. The ~~issuance~~Conversion ofPrice 1 for a Conversion of ~~Shares,~~Convertible ~~Warrants~~Loan ~~and~~1 ~~Underlying Shares~~shall ~~was~~be ~~made~~the inaverage ~~reliance~~closing ~~upon~~price of the ~~exemption~~Company ~~from~~Common ~~registration~~Stock ~~contained~~as inquoted ~~Section~~by 4the Bloomberg Financial Markets (or a~~)(2)~~ comparable reporting service of national reputation selected by the ~~Securities~~Company ~~Act~~and ofreasonably ~~1933,~~acceptable asto ~~amended,~~the Lender effecting the Conversion ~~(“Securities~~of ~~Act”~~Convertible Loan 1 if Bloomberg Financial Markets is not then reporting prices of the Company Common Stock), ~~and~~for ~~Rule~~the ~~506~~three (b3) consecutive trading days prior to date of ~~Regulation~~the DNotice ~~thereunder~~of Conversion. The Conversion ~~Shares~~Price ~~and~~1 ~~Warrants~~is ~~are,~~not ~~and~~limited ~~Underlying~~by ~~Shares~~a minimum price per share of Company ~~will~~Common beStock ifapplicable ~~issued~~to the Conversion of Convertible Loan 1. As such, ~~“restricted~~if ~~securities”~~a Lender or Lenders loan a significant sum of money under the ~~Rule~~2023 ~~144~~Credit Agreement 1 and then elect to convert all or most of the ~~Securities~~loaned ~~Act~~amount into shares of Company Common Stock, the resulting issuance of shares of Common Stock could significantly dilute existing Company shareholders.

11Conversion upon a Change in Control Transaction. In ~~Other~~the ~~payables~~event that prior to the time of repayment of any Advance under the 2023 Credit Agreement 1 that has not previously been converted into shares of Company Common Stock, the Company shall consummate a “Change in Control Transaction” (as defined below), then the total amount of Advances outstanding shall convert into shares of Company Common Stock at the Conversion Price 1. “Change in Control Transaction” will be deemed to exist if (1) there occurs any consolidation, merger or other business combination of the Company with or into any third party and ~~accrued~~the ~~liabilities~~Company is not the surviving entity, or any other corporate reorganization or transaction or series of related transactions in which the voting stockholders of the Company prior to such event cease to own 50% or more of the voting power of the surviving entity after the transaction, or (2) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the operating assets of the Company or all of its wholly-owned subsidiaries, determined on a consolidated basis, to a third party.

~~Other~~Conversion ~~payables~~upon ~~and~~Breach ~~accruals~~of ~~consisted~~2023 Credit Agreement 1. In the event that the Company breaches any provision of the ~~following~~2023 Credit Agreement 1 and does not remedy that breach within thirty as(30) days after receipt of ~~September~~a ~~30,~~written ~~2023~~demand ~~and~~from ~~December~~a 31Lender, ~~2022:~~then each of the Lenders may convert all or any portion of the unpaid amount of their respective Advance or Advances into shares of Company Common Stock at the Conversion Price 1.

Schedule of other payables and accrued liabilities
	September 30, 2023		December 31, 2022
	US$		US$
	(unaudited)
Accrual		956,966		652,424
Income taxes payable		37,998		29,140
		994,964		681,564

Warrants. In the event that a Lender elects to convert any portion of an Advance under the 2023 Credit Agreement 1 into shares of Company Common Stock in lieu of cash payment in satisfaction of that Advance, then Company will issue to the Lender five (5) detachable warrants for each share of Company Common Stock issued in a Conversion of Convertible Loan 1 (“Warrants 1”). Each Warrant 1 will entitle the Lender to purchase one (1) share of Common Stock at a per-share exercise price equal to the Conversion Price 1. The exercise period of each Warrant will be five (5) years from date of issuance of the Warrant.

~~Accrual~~Conversion ~~mainly~~of ~~represents~~Loan. ~~salary~~On ~~payables~~September ~~and~~6, ~~fringe~~2023, ~~and~~the ~~social~~Company ~~security~~received ~~accruals.~~a ~~According~~Notice of Conversion from HMI to ~~the~~convert ~~prevailing~~One ~~laws~~Million ~~and~~Three ~~regulations~~Hundred Thousand Dollars ($1,300,000.00) of the ~~PRC,~~principal amount ~~all~~loaned ~~eligible~~to ~~employees~~the ofCompany under the 2023 Credit Agreement 1 (“Converted Principal”) into shares of Company’s Common ~~subsidiaries~~Stock. ~~are~~Under ~~entitled~~the toterms ~~staff~~of ~~welfare~~the ~~benefits~~2023 ~~including~~Credit ~~medical~~Agreement ~~care~~1 and Notice of Conversion, ~~welfare~~HMI ~~subsidies~~has demand rights for the conversion of outstanding debt into equity. On September 18, ~~unemployment~~2023, ~~insurance~~the ~~and~~Converted ~~pension~~Principal ~~benefits~~resulted in issuance of 7,344,632 shares of Common Stock to HMI along ~~through~~with issuance of Warrants 1 to purchase a ~~PRC~~maximum ~~government-mandated~~of ~~multi-employer~~36,723,160 ~~defined~~shares ~~contribution~~of ~~plan~~Common Stock (“Underlying Shares”) to HMI. ~~The~~Under the ~~Company’s~~2023 ~~subsidiaries~~Credit ~~are~~Agreement, ~~required~~the toconversion ~~accrue~~rate for the Conversion Shares is $0.1770 per share, and the Warrants 1 have an exercise price ~~these~~of ~~benefits~~$0.1770 ~~based~~per onshare ~~certain~~and ~~percentages~~an exercise period of ~~the~~five ~~qualified~~(5) ~~employees’~~years ~~salaries~~from date of issuance of warrants. The Company’s ~~subsidiary~~was isin ~~required~~favor toof the conversion ~~make~~in ~~contributions~~order to ~~the~~end ~~plans~~interest ~~out~~payments ofunder the ~~amounts~~2023 ~~accrued~~Credit Agreement 1 and thereby free up capital for operational expenses.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2024, HMI has not stated when or if it will exercise any of the Warrants 1. The issuance of Conversion Shares, Warrants 1 and Underlying Shares was made in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended, (“Securities Act”) and Rule 506(b) of Regulation D thereunder. The Conversion Shares and Warrants 1 are, and Underlying Shares will be if issued, “restricted securities” under Rule 144 of the Securities Act.

(ii) Movement of the components of the Convertible Loan 2:

	Liability component		Derivative component			Total

December 31, 2023		172,286		864,550			1,036,836

Change in fair value of embedded derivatives		2,455		(715,794	)		(713,339	)

March 31, 2024		174,741		148,756			323,497

On December 14, 2023, VEII entered into a Convertible Credit Agreement (“2023 Credit Agreement 2”) with HMI for an unsecured credit line in the maximum amount of One Million U.S. Dollars and No Cents (USD$1,000,000.00) (“Credit Limit”). Advances of the principal under the 2023 Credit Agreement 2 accrue simple interest at Eight Percent (8%) per annum. Each Advance under the 2023 Credit Agreement 2 and all accrued interest thereon may, at the election of HMI, or the Company, be: (1) repaid in cash; (2) converted into shares of the Company Common Stock; or (3) be repaid in a combination of cash and shares of the Company Common Stock. The principal amount of each Advance under the 2023 Credit Agreement 2 shall be due and payable on the third (3^rd) annual anniversary of the date that the Advance is received by the Company along with any unpaid interest accrued on the principal (the “Advance Maturity Date 2”). Prior to the Advance Maturity Date 2, unpaid interest accrued on any Advance shall be paid on the last business day of June and on the last business day of December of each year in which the Advance is outstanding and not converted into shares of Company Common Stock. Company may prepay any Advance under the 2023 Credit Agreement 2 and interests accrued thereon prior to Advance Maturity Date 2 without penalty or charge.

Use of Proceeds. The Company needed funding on an expedited basis and in place prior to 2024 in order to fund requirements for new and existing customer work and to pay for overall general operational expenses. HMI was the only known and identified funding source willing to provide the necessary funding on an expedited basis. Credit Line may be used for general working capital, including possible expansion of existing business operations or business lines to new geographical markets in Asia or other geographical markets; for development of new business lines (whether in existing or new geographical markets); acquisition of assets or companies (whether in existing or new geographical markets); and payment of any sums due under the 2023 Credit Agreement 2 or other loans.

Fee on Advances. The 2023 Credit Agreement 2 provided that each Advance incurs a 10% fee on the amount of the Advance (“Fee”), payable in cash or shares of Company’s Common Stock at the election of Company. Under a December 19, 2023 Amendment to the Credit Agreement, the Fee was amended to provide for a one-time $100,000 payment instead of 10% on an Advance, which amended Fee is payable at option of Company in either cash or shares of Company Common Stock within 30 days of December 19, 2023.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Events of Default. The following constitute an event of default under the 2023 Credit Agreement 2: (1) failure to timely pay of any Advance when due and payable and the Company fails to cure such default within ten (10) days after receipt of a written notice of default from HMI or its authorized agent; (2) a default of any non-monetary material covenant or agreement in the 2023 Credit Agreement 2 that the Company does not remedy within thirty (30) days after receipt by the Company of a written notice of default from HMI or its authorized agent (or within such other longer time period as may be therein specifically provided in the written notice); (3) a breach of any other obligations, covenant, representation or warranty contained in the 2023 Credit Agreement 2 that is not cured within thirty (30) days from the receipt by the Company of a written notice from HMI or its authorized agents; (4) the filing of a petition in bankruptcy or the commencement of any proceedings under any bankruptcy laws by or against the Company, which filing or proceeding, is not dismissed within sixty (60) days after the filing or commencement thereof, or (5) if the Company becomes insolvent, the filing of a petition to a court for the entry of an order, judgment or decree approving a petition in an insolvency, liquidation or similar procedure and the petition shall remain unvacated or not removed for an aggregate of sixty (60) days (whether or not consecutive) from the first date of entry thereof or rejected by such court; (6) all or any part of the Company’s assets, or of any or all of the royalties, revenues, rents, issues or profits thereof, shall be appointed without the consent of the Company and such appointment shall remain unvacated and unstayed for an aggregate of sixty (60) days (whether or not consecutive); (7) entry of judgment or judgements in the aggregate in excess of One Hundred Thousand United States Dollars (US$100,000.00) in face amount, a writ of execution or attachment or any similar process shall be issued or levied against all of the Company’s assets, or any judgment involving monetary damages shall be entered against the Company which shall becomes a lien on all of the Company’s assets and such execution, attachment or similar process or judgment is not released, bonded, satisfied, vacated or stayed within sixty (60) days after its entry or levy; or (8) the Company ceases to conduct its primary business line for ninety (90) consecutive days.

Conversion to Shares of Common Stock. HMI or Company may convert monies owed under any Advance regarding the 2023 Credit Agreement 2 into shares of Company Common Stock (“Conversion of Convertible Loan 2”). The price for conversion of an Advance under the 2023 Credit Agreement 2 and unpaid interest accrued thereon into shares of Common Stock shall be based on US$0.045 per share, which is an approximately twenty-five percent (25%) discount from the market closing price as of December 12, 2023 (the “Conversion Price 2”). No fractional shares may be issued in any Conversion of Convertible Loan 2. If HMI elects to effect a Conversion of Convertible Loan 2, it must deliver a Notice of Conversion to the Company that specifies the amount of the advance and accrued interest, if any, to be converted, and the date on which such conversion shall be effected (the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed received by the Company. Conversions shall reduce the amount advanced in an amount equal to the amount of the advance that is converted in a Conversion of Convertible Loan 2.

Conversion upon a Change in Control Transaction. In the event that the Company consummates a “Change in Control Transaction” (as defined below), then the total amount of Advances outstanding under the 2023 Credit Agreement 2, and not previously converted into shares of Company Common Stock, shall convert into shares of Company Common Stock at the Conversion Price 2 upon receipt of written notice from HMI to the Company. “Change in Control Transaction” will exist if (1) there occurs any consolidation, merger or other business combination of the Company with or into any third party and the Company is not the surviving entity, or any other corporate reorganization or transaction or series of related transactions in which in any of such events the voting stockholders of the Company prior to such event cease to own 50% or more of the voting power, or corresponding voting equity interests, of the surviving entity after the consummation of the transaction or transactions, or (2) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the operating assets of the Company or substantially all of the Company’s operating and wholly-owned subsidiaries, determined on a consolidated basis, to a third party.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Conversion upon Breach of 2023 Credit Agreement 2. In addition to on-demand, non-breach Conversion and a Change of Control Conversion, HMI may convert amounts owed under outstanding Advances if the Company breaches the 2023 Credit Agreement 2 and does not remedy that breach within thirty (30) days after receipt of a written demand from HMI, which demand shall describe the conversion breach event. Upon occurrence of a conversion breach event that is not timely remedied and receipt of a Notice of Conversion, the Company is required to convert the requested conversion amount of all outstanding amount of Advances not previously converted into shares of Company Common Stock within ten (10) days after receipt of the Notice of Conversion.

Warrants. In the event that HMI elects to convert any portion of an advance under the 2023 Credit Agreement 2 into shares of Company Common Stock, the Company is obligated to issue to HMI five (5) detachable warrants for each share of Company Common Stock issued in a Conversion of Convertible Loan 2 (“Warrants 2”) in addition to the shares of Company Common Stock issued in the Conversion of Convertible Loan 2. Each Warrant 2 will entitle HMI to purchase one (1) share of Company Common Stock at a per-share exercise price equal to the Conversion Price 2. The exercise period for each Warrant will be five (5) years from the date of issuance of the Warrant.

(iii) HMI owns 21,120,795 shares of Company Common Stock, which is approximately 48.55% of issued and outstanding shares of Company Common Stock (based on 43,500,762 shares issued and outstanding). On September 6, 2023, HMI converted $1,300,000 in debt owed by the Company into 7,344,632 shares of Company’s Common Stock at a price equivalent to $0.177 pursuant to 2023 Credit Agreement 1. HMI’s ownership of shares of Company Common Stock above does not include a total of 36,723,160 shares of Company Common Stock that HMI may purchase under Warrants 1 issued under the 2023 Credit Agreement 1. The terms of the Warrants 1 entitle the holder to purchase from the Company one (1) share of the Company Common Stock (as adjusted from time to time pursuant to the provisions of the Warrants 2) for each issued Warrant 1. The Warrants 1 are currently exercisable and expire on September 6, 2028.

If HMI exercised the Warrants 1 issued under the 2023 Credit Agreement 1 in full and purchased all 36,723,160 of the underlying shares of Company Common Stock, then HMI would own 57,843,955 shares of Company Common Stock or approximately 72.10% of the then issued and outstanding shares of Company Common Stock (based on the assumption of 80,223,922 shares of Company Common Stock then being issued and outstanding). Mr. Chan Heng Fai Ambrose, a director of the company, would, based on his control of HMI, also be a “shared” or joint owner of those shares of Company Common Stock. Mr. Chan controls HMI by virtue of his majority ownership of shares of common stock of Alset, a Commission-reporting company, which is the parent company of the HMI. Alset owns 99.693% of the issued and outstanding shares of HMI’s common stock. Mr. Chan owns approximately 53.5% of the issued shares of common stock of Alset. Mr. Chan is also the Chairman and Chief Executive Officer of Alset and Executive Chairman of the Board of Directors of HMI.

Mr. Chan is deemed to be the owner of 21,587,429 shares of Common Stock, which represents approximately 49.63% of the issued shares of Company’s Common Stock (based on 43,500,762 shares issued and outstanding), by virtue of: 95,000 shares of Company’s Common Stock held by Mr. Chan, and the following share ownership of Common Stock by entities that Mr. Chan is deemed to control: 21,120,795 shares held by HMI, 39,968 shares held by BMI Capital Partners International Limited, 18,512 shares held by LiquidValue Development Pte Ltd. And 313,154 shares held by Decentralized Sharing Systems, Inc. BMI Capital Partners International Limited is owned by AIL. AIL is a subsidiary of Alset. LiquidValue Development Pte Ltd. is a subsidiary of Alset. Decentralized Sharing Systems, Inc. is a subsidiary of DSS, Inc., a New York Stock Exchange listed company, (“DSS”). Mr. Chan is personally and through entities he controls, the largest shareholder of DSS. Mr. Chan is also the Chairman of the Board of Directors of DSS.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Mr. Chan, HMI, BMI Capital Partners International Limited, LiquidValue Development Pte Ltd. And Decentralized Sharing Systems, Inc. are referred to collectively below as “Affiliated Shareholders”.

As stated above, Mr. Chan controls the HMI by virtue of his control of Alset. Mr. Chan is also Executive Chairman of the Board of Directors of the HMI and a director of American Pacific Bancorp., another lender of the Company. Mr. Lum Kan Fai is Vice Chairman of the Board of Directors of HMI and has served in other management capacities with HMI. Lum Kan Fai is also President of Digital Group of DSS. Mr. Chan is Executive Chairman of the Board of Directors of DSS and owns approximately 58.3% of the issued and outstanding shares of DSS. Wong Shui Keung is a independent director of DSS.

Robert Trapp was a non-executive director of HMI and was a non-executive director of Alset. He also serves or has served as a non-executive director of several subsidiaries of Alset. Mr. Trapp is a non-executive director of Sharing Services Global Corporation, a Nevada corporation and Commission-reporting company, (“SSGC”). Mr. Chan is Executive Chairman of the Board of Directors of SSGC as well as the owner of 49.2% of issued and outstanding shares of SSGC common stock, which ownership position includes shares of SSGC common stock owned by DSS and Alset. Further, Mr. Trapp is a non-executive director of NECV. Mr. Chan controls NECV by virtue of his ownership of approximately 95.6% of issued shares of NECV common stock.

Wong Shui Yeung and Wong Tat Keung are independent directors of Alset, and also serves or has served as an independent director of several entities controlled or affiliated with Mr. Chan. Wong Shui Yeung and Wong Tat Keung serve as independent directors of AIL, a subsidiary of Alset. Wong Shui Keung is an independent director of DSS.

Wong Shui Yeung, Robert Trapp, and Wong Tat Keung also serve as members of the Company’s Audit Committee of the Board of Directors.

Mr. Lim Sheng Hon Danny currently serves as Senior Vice President and Executive Director of AIL. He also serves as an Executive Director of Alset, the parent company of AIL. Mr. Lim also works extensively with Mr. Chan on various business matters concerning AIL, Alset and DSS.

Potential Changes Control of Registrant. As of December 31, 2023, there is no agreement or arrangement between the Company and Mr. Chan or HMI concerning operational management, management decisions, business development or strategic plan of the Company and its subsidiaries; neither HMI nor Mr. Chan has directed or controlled the Company’s day-to-day operational management, management decisions, business development or strategic plan of the Company and its subsidiaries; and Mr. Chan’s involvement in the Company’s operational management, management decisions, business development and strategic planning of the Company and its subsidiaries has been limited to his performance of his duties as an outside director of the Company. Nonetheless, due to the actual and potential ownership of shares of Company Common Stock and Mr. Chan and his affiliates holding three of the nine board seats of the Company’s Board of Directors, Mr. Chan has the ability to significant influence corporate decisions and actions of the Company and its subsidiaries.

While Wong Shui Yeung and Wong Tat Keung are the independent directors of the Company, and Chan Heng Fai, Lum Fai Kai, Robert Trapp, and Lim Sheng Hon Danny have not directed or controlled daily operational management or decision making, or strategic and business development decisions of the Company, beyond input and guidance as non-executive directors, and while the Company is not aware of any agreement among Chan Heng Fai, Lum Fai Kai, Lim Sheng Hon Danny, Wong Shui Yeung, Robert Trapp, and Wong Tat Keung, or among these directors and the Affiliated Shareholders or lenders of the Company, to direct the operational management and strategic planning of the Company or its operating subsidiaries, the Affiliated Shareholders collectively control 49.6% of Company’s issued shares of Common Stock.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Further, while the purpose of the Credit Agreement and January Credit Agreement are to provide necessary working capital to the Company, and the Credit Agreement and January Credit Agreement are not intended by the Company or Lenders to be a mechanism for effecting any change in control of the Company, HMI, as an Affiliated Shareholder, has the right to convert the Warrant 1 issued to HMI under the 2023 Credit Agreement 1 conversion into shares of Company Common Stock that would, if the Warrants 1 are fully exercised, result in ownership of approximately 72.10% of the then issued and outstanding shares of Company Common Stock (based on the assumption of 80,223,922 shares of Company Common Stock then being issued and outstanding). With the 2023 Credit Agreement 2, HMI could, assuming a Conversion of any significant amount of Advances made to the Company, into an ownership position of shares of Common Stock into more than 80% of the then issued and outstanding shares of Common Stock.

13.

Other payables and accrued liabilities

Other payables and accruals consisted of the following as of March 31, 2024 and December 31, 2023:

	March 31, 2024		December 31, 2023
	US$		US$
	(unaudited)
Accrual		1,365,764		1,133,800
Income taxes payable		46,185		57,961
Taxes penalty payable		1,410,000		1,410,000
		2,821,949		2,601,761

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 subsidiary is 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.

~~Expenses on staff welfare benefits and MPF Scheme for the nine months period ended September 30, 2023 and 2022 amounted to $943,384 and $775,030, respectively.~~35

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1214. Deferred income

Deferred income consisted of the following as of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023:

Schedule of deferred income
	March 31, 2024		December 31, 2023
	September 30, 2023		December 31, 2022
	US$		US$
	(unaudited)
Service fees received in advance		~~568~~967,~~719~~558		~~291~~778,~~171~~126

~~The~~Billings ~~change~~ in excess of revenues recognized are recorded as deferred ~~income~~revenue. The opening balance for the ~~nine months~~ period ended ~~September~~March 3031, ~~2023~~2024 ~~was~~and ~~primarily~~for ~~due~~the toyear ~~new~~ended ~~billings~~December in31, ~~advance~~2023 ofamounted to ~~revenue~~$778,126 ~~recognition~~and $291,171 respectively.

~~The~~15. ~~following~~Statutory ~~table presents changes in the balances of the company deferred income:~~reserves

Schedule of changes in deferred income

December 31, 2022

Additions

Deductions

September 30, 2023

US$

(unaudited)

Deferred income

291,171

2,763,993

(2,486,445

)

568,719

December 31, 2021

Additions

Deductions

December 31, 2022

US$

Deferred income

236,612

3,600,335

(3,545,776

)

291,171

13. 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:

Making up cumulative prior years’ losses, if any;

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;

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.

2836

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1416. 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

Schedule of related party balances
	March 31, 2024			December 31, 2023
	September 30, 2023			December 31, 2022
	US$			US$
	(unaudited)
Due from related parties
Value Exchange International Limited (i)		2,~~393~~361,~~457~~150			2,~~058~~401,~~267~~994
Cucumbuy.com Limited (ii)		1880,~~536~~769			~~33,333~~-
SmartMyWays Co., Limited (iii)		5779,~~898~~146			9240,~~308~~098
Retail Intelligent Unit Limited (iv)		928,~~744~~846			~~36,923~~-
AppMyWays Co., Limited (v)		96,709			86,776
TAP Technology (HK) Limited (v)		79,893			73,481
TAP Technology (HK) Limited (vi)		77,349			54,928
Value Exchange International (Taiwan) Co, Ltd (vi)		27,927			11,972
Value Exchange International (Taiwan) Co, Ltd (vii)		18,526			37,493
Value E Consultant International (M) Sdn. Bhd (vii)		-			530,675
		2,672,219			2,400,028
		2,657,731			3,058,220
Allowance for amounts due from related parties		(2,527,545	)		(2,527,545	)
		130,186			530,675
Due to a related party
SA-Network Limited (viii)		22,392			16,918
Cucumbuy.com Limited (ii)		-			17,961
Smart Reward Express Limited (ix)		641			-
Retail Intelligent Unit Limited (iv)		-			36,795
Value E Consultant International (M) Sdn. Bhd (x)		14,311			-
SA-Network Limited (viii)		10,802			10,784
		37,344			16,918
Value X International Pte. Ltd (ix)		1,510			10,014
Smart Reward Express Limited (x)		641			641
Hapi Retail Company Limited (xi)		-			7,454
		12,953			83,649

~~Related party transactions~~37

Schedule of related party transaction
	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
	US$			US$			US$			US$
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Service income received from
Value Exchange International Limited (i)		52,446			120,699			154,122			546,938
AppMyWays Co., Limited (v)		-			-			-			30,654
Value Exchange International (Taiwan) Co, Ltd (vii)		-			-			13,917			-
Subcontracting fees payable to
Value Exchange International Limited (i)		(133,080	)		(207,748	)		(650,455	)		(294,659	)
Cucumbuy.com Limited (ii)		(53,846	)		(3,846	)		(161,538	)		(11,538	)
SmartMyWays Co., Limited (iii)		(46,154	)		-			(138,462	)		-
Retail Intelligent Unit Limited (iv)		(38,462	)		-			(115,385	)		-
TAP Technology (HK) Limited (vi)		(3,846	)		(27,523	)		(35,215	)		(82,569	)
Value Exchange International (Taiwan) Co, Ltd (vii)		-			-			(36,714	)		-
SA-Network Limited (viii)		(92,412	)		-			(182,384	)		-
Value E Consultant International (M) Sdn. Bhd (x)		(64,527	)		(10,064	)		(143,474	)		(17,092	)
Value X International Pte. Ltd (xi)		(8,034	)		-			(8,034	)		-

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Management fees received from
Value Exchange International Limited (i)	8,410	25,298	36,286	55,166
Cucumbuy.com Limited (ii)	-	7,692	-	23,077
SmartMyWays Co., Limited (iii)	-	7,692	-	23,077
Retail Intelligent Unit Limited (iv)	-	3,077	-	9,231
TAP Technology (HK) Limited (vi)	-	7,692	-	23,077

Related party transactions:

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

	Three Months Ended March 31, 2024			Three Months Ended March 31, 2023
	US$			US$
	(unaudited)			(unaudited)
Service income received from
Cucumbuy.com Limited (ii)		107,023			-
SmartMyWays Co., Limited (iii)		51,244			-
Retail Intelligent Unit Limited (iv)		73,333			-
TAP Technology (HK) Limited (v)		12,821			-
Value Exchange International (Taiwan) Co, Ltd (vi)		-			13,917

Subcontracting fees paid to
Value Exchange International Limited (i)		(56,228	)		(262,125	)
Cucumbuy.com Limited (ii)		(46,154	)		(53,846	)
SmartMyWays Co., Limited (iii)		(42,308	)		(46,154	)
Retail Intelligent Unit Limited (iv)		(23,077	)		(38,462	)
TAP Technology (HK) Limited (v)		(19,231	)		(27,523	)
Value Exchange International (Taiwan) Co, Ltd (vi)		(372	)		(5,516	)
Value E Consultant International (M) Sdn. Bhd (vii)		-			(41,450	)
SA-Network Limited (viii)		(96,380	)		(39,070	)
Value X International Pte. Ltd (ix)		(21,534	)		-

Management fees received from
Value Exchange International Limited (i)		-			20,167
Cucumbuy.com Limited (ii)		-			3,077
SmartMyWays Co., Limited (iii)		-			3,077
Retail Intelligent Unit Limited (iv)		-			3,077
TAP Technology (HK) Limited (v)		-			3,077

(iii) Mr. Kenneth Tan and Ms. Bella Tsang, andirectors ~~officer and a director~~ of the Company, isare ashareholders ~~shareholder~~ and a ~~director~~directors of ~~Cucumbuy.com~~Value Exchange International Limited, a company incorporated in Hong Kong. The balance is unsecured, interest free and repayable on demand.

(~~iii~~ii) Ms. Bella Tsang, ~~an officer and~~ a director of the Company, is a shareholder and a director of ~~SmartMyWays Co~~Cucumbuy.,com 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.

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

(viv) Ms. Bella Tsang, ~~an officer and~~ a director of the Company, is a shareholder and a director of ~~AppMyWays~~Retail ~~Co.,~~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.

(vi) Ms. Bella Tsang, an officer and 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.38

~~(vii)~~VALUE ~~Ms.~~EXCHANGE ~~Bella Tsang~~INTERNATIONAL, ~~a director of the Company, is a shareholder and a director of Value Exchange International (Taiwan) Co, Ltd, a company incorporated in Taiwan~~INC. ~~The balance is unsecured, interest free and repayable on demand.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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 Value Exchange International (Taiwan) Co, Ltd, a company incorporated in Taiwan. The balance is unsecured, interest free and repayable on demand.

(vii)

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.

(viii)

Ms. Bella Tsang, a director of the Company, is a shareholder and a director of SA-Network Limited, a company incorporated in England and Wales. The balance is unsecured, interest free and repayable on demand.

(ix) ~~VEI~~Ms. ~~CHN~~Bella ~~owns~~Tsang, ~~50%~~a ~~shares~~director of ~~Smart~~the ~~Reward Express Limited~~Company, anis ~~inactive~~a ~~company~~shareholder ~~incorporated in Hong Kong;~~ and ~~Mr.~~a ~~Chan~~director ~~Heng~~of ~~Fai~~ValueX ~~and~~International MsPte. ~~Bella Tsang~~Ltd., ~~directors~~a ofcompany ~~the~~incorporated ~~Company,~~in ~~are directors of Smart Reward Express Limited~~Singapore. The balance is unsecured, interest free and repayable on demand.

(x) ~~Ms.~~VEI ~~Bella~~CHN ~~Tsang~~owns 50% shares of Smart Reward Express Limited, an ~~officer~~inactive ~~and~~company aincorporated ~~director~~in ofHong ~~the~~Kong; ~~Company,~~and isMr. aChan ~~shareholder~~Heng ofFai, ~~Value~~Mr. ELum ~~Consultant~~Kan ~~International~~Fai ~~(M)~~and ~~Sdn~~Ms. ~~Bhd~~Bella Tsang, adirectors ~~company~~of ~~incorporated~~the inCompany, ~~Malaysia~~are directors of Smart Reward Express Limited. The balance is unsecured, interest free and repayable on demand.

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

3017. Subsequent events

On July 15, 2024, VEII entered into a Convertible Credit Agreement (“2024 Credit Agreement”) with HMI for an unsecured credit line in the maximum amount of One Hundred and Ten Thousand U.S. Dollars and No Cents (USD$110,000.00) (“2024 Credit Line”). Advances of the principal under the 2024 Credit Agreement accrue simple interest at Eight Percent (8%) per annum. Each Advance under the 2024 Credit Agreement and all accrued interest thereon may, at the election of HMI, or the Company, be: (1) repaid in cash; (2) converted into shares of the Company Common Stock; or (3) be repaid in a combination of cash and shares of the Company Common Stock. The principal amount of each Advance under the 2024 Credit Agreement shall be due and payable on the third (3rd) annual anniversary of the date that the Advance is received by the Company along with any unpaid interest accrued on the principal (the “Advance Maturity Date 3”). Prior to the Advance Maturity Date 3, unpaid interest accrued on any Advance shall be paid on the last business day of June and on the last business day of December of each year in which the Advance is outstanding and not converted into shares of Company Common Stock. Company may prepay any Advance under the 2024 Credit Agreement and interests accrued thereon prior to Advance Maturity Date 3 without penalty or charge.

Use of Proceeds. The Company needed funding on an expedited basis in order to fund requirements for new and existing customer work and to pay for overall general operational expenses. HMI was the only known and identified funding source willing to provide the necessary funding on an expedited basis. Credit Line may be used for general working capital, including possible expansion of existing business operations or business lines to new geographical markets in Asia or other geographical markets; for development of new business lines (whether in existing or new geographical markets); acquisition of assets or companies (whether in existing or new geographical markets); and payment of any sums due under the 2024 Credit Agreement or other loans.

VALUE EXCHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15Events of Default. ~~Loan~~The following constitute an event of default under the 2024 Credit Agreement: (1) failure to timely pay of any Advance when due and payable and the Company fails to cure such default within ten (10) days after receipt of a written notice of default from ~~related~~HMI ~~parties~~or its authorized agent; (2) a default of any non-monetary material covenant or agreement in the 2024 Credit Agreement that the Company does not remedy within thirty (30) days after receipt by the Company of a written notice of default from HMI or its authorized agent (or within such other longer time period as may be therein specifically provided in the written notice); (3) a breach of any other obligations, covenant, representation or warranty contained in the 2024 Credit Agreement that is not cured within thirty (30) days from the receipt by the Company of a written notice from HMI or its authorized agents; (4) the filing of a petition in bankruptcy or the commencement of any proceedings under any bankruptcy laws by or against the Company, which filing or proceeding, is not dismissed within sixty (60) days after the filing or commencement thereof, or (5) if the Company becomes insolvent, the filing of a petition to a court for the entry of an order, judgment or decree approving a petition in an insolvency, liquidation or similar procedure and the petition shall remain unvacated or not removed for an aggregate of sixty (60) days (whether or not consecutive) from the first date of entry thereof or rejected by such court; (6) all or any part of the Company’s assets, or of any or all of the royalties, revenues, rents, issues or profits thereof, shall be appointed without the consent of the Company and such appointment shall remain unvacated and unstayed for an aggregate of sixty (60) days (whether or not consecutive); (7) entry of judgment or judgements in the aggregate in excess of One Hundred Thousand United States Dollars (US$100,000.00) in face amount, a writ of execution or attachment or any similar process shall be issued or levied against all of the Company’s assets, or any judgment involving monetary damages shall be entered against the Company which shall becomes a lien on all of the Company’s assets and such execution, attachment or similar process or judgment is not released, bonded, satisfied, vacated or stayed within sixty (60) days after its entry or levy; or (8) the Company ceases to conduct its primary business line for ninety (90) consecutive days.

OnConversion ~~September~~to ~~28,~~Shares ~~2023,~~of ~~the~~Common Stock. HMI or Company ~~entered~~may convert monies owed under any Advance regarding the 2024 Credit Agreement into ashares of Company Common Stock (“Conversion of Convertible Loan 3”). The price for conversion of an Advance under the 2024 Credit Agreement and ~~Promissory~~unpaid ~~Note~~interest ~~(collectively~~accrued thereon into shares of Common Stock shall be based on US$0.06 per share, which is based on VEII’s Volume-Weighted Average Price as of 8 July 2024 (the “~~Loan~~Conversion ~~Agreement~~Price 3”). ~~with~~No ~~Alset~~fractional ~~International~~shares ~~Limited~~may be issued in any Conversion of Convertible Loan 3. If HMI elects to effect a Conversion of Convertible Loan 3, it must deliver a ~~public~~Notice ~~Singapore~~of Conversion to the Company that specifies the amount of the advance ~~corporation~~and accrued interest, if any, to be converted, and the date on which such conversion shall be effected (the “~~Alset~~Conversion ~~International~~Date 3”). If ~~for~~no anConversion ~~unsecured~~Date ~~loan~~3 is specified in a Notice of ~~Five~~Conversion, ~~Hundred~~the ~~Thousand~~Conversion ~~U.S.~~Date ~~Dollars~~3 ~~and~~shall Nobe ~~Cents~~the ~~(USD$500,000.00)~~date that such Notice of Conversion ~~principal~~is ~~amount~~deemed ~~(“Principal”)~~received toby the Company. ~~Principal~~Conversions ~~accrues~~shall ~~simple~~reduce ~~interest~~the atamount ~~Eight~~advanced ~~Percent~~in ~~(8%)~~an ~~per~~amount ~~annum.~~equal ~~Repayment of~~to ~~Principal~~the ~~and~~amount ~~accrued~~of ~~interest~~the ~~thereon~~advance that is converted toin bea ~~made~~Conversion asof ~~follows:~~Convertible Loan 3.

Conversion upon a Change in Control Transaction. In the event that the Company consummates a “Change in Control Transaction” (1as defined below), ~~Principal~~then ~~will~~the betotal amount ~~paid~~of inAdvances aoutstanding ~~single~~under ~~lump~~the ~~sum~~2024 ~~payment~~Credit Agreement, and not previously converted into shares of Company Common Stock, shall onconvert orinto byshares of Company Common Stock at the ~~six~~Conversion Price 3 upon receipt of written notice from HMI to the Company. “Change in Control Transaction” will exist if (61) ~~month~~there ~~anniversary~~occurs any consolidation, merger or other business combination of the ~~effective~~Company ~~date~~with or into any third party and the Company is not the surviving entity, or any other corporate reorganization or transaction or series of related transactions in which in any of such events the ~~Loan~~voting ~~Agreement~~stockholders of the Company prior to such event cease to own 50% or more of the voting power, ~~being~~or ~~September~~corresponding 28voting equity interests,~~2023~~ of the surviving entity after the consummation of the transaction or transactions, or (~~being~~2) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the ~~“Maturity~~operating assets of ~~Date”);~~the Company or substantially all of the Company’s operating and wholly-owned subsidiaries, determined on a consolidated basis, to a third party.

~~(2) Interest accrued on Principal shall be paid on the last business day on a calendar monthly basis with initial accrued Interest payments commencing on September 28, 2023.~~40

~~Company~~VALUE ~~has~~EXCHANGE ~~the right to prepay all or any portion of the Principal and Interest accrued on the Principal~~INTERNATIONAL, ~~without penalty, upon ten (10) days’ prior notice to Alset International~~INC. ~~The Principal was advanced in full by Alset International on October 4, 2023.~~

~~Mr.~~NOTES ~~Chan~~TO ~~Heng~~CONSOLIDATED ~~Fai,~~FINANCIAL a non-executive director of the Company, who is deemed the owner of 49.63% of the issued shares of Company’s Common Stock by virtue of 95,000 shares of Common Stock held by Mr. Chan, and the following share ownership of Company’s Common Stock by entities that Mr. Chan is deemed to control: 21,120,795 shares held by Hapi Metaverse Inc., 39,968 shares held by BMI Capital Partners International Limited, 18,512 shares held by Liquid Value Development Pte Ltd. and 313,154 shares held by Decentralized Sharing Systems, Inc.STATEMENTS

~~Alset~~Conversion ~~International~~upon isBreach aof ~~majority-owned~~2024 ~~subsidiary~~Credit ofAgreement. ~~Alset~~In ~~Inc.~~addition to on-demand, non-breach Conversion and a ~~Texas~~Change ~~corporation~~of Control Conversion, ~~(“Alset”).~~HMI ~~Mr.~~may ~~Chan~~convert ~~owns~~amounts ~~approximately~~owed ~~53.3%~~under ofoutstanding Advances if the ~~issued~~Company ~~shares~~breaches ofthe ~~common~~2024 ~~stock~~Credit Agreement and does not remedy that breach within thirty (30) days after receipt of ~~Alset~~a ~~and~~written ~~Mr.~~demand ~~Chan~~from isHMI, which such demand shall describe the ~~Chairman~~conversion ~~and~~breach ~~Chief~~event. ~~Executive~~Upon ~~Officer~~occurrence of ~~Alset~~a ~~and~~conversion ~~Alset~~breach ~~International.~~event ~~Further,~~that is ~~Wong~~not ~~Shui~~timely ~~Yeung~~remedied and ~~Wong~~receipt ~~Tat~~of ~~Keung~~a Notice of Conversion, ~~who~~ ~~are~~the ~~directors~~Company ofis required to convert the requested conversion amount of all outstanding amount of Advances not previously converted into shares of Company, ~~are~~Common ~~also~~Stock ~~directors~~within ten (10) days after receipt of ~~Alset~~the Notice ~~Inc~~of Conversion.

Company directors Chan Heng Fai, Wong Shui Yeung and Wong Tat Heung recused themselves from the vote of the Company’s Board of Directors on approval of the Loan Agreement and transactions contemplated under the Loan Agreement.41

Purpose of the Loan Agreement was to provide short term working capital to the Company.

16. Subsequent event

The Company has evaluated all subsequent events and transactions through November 14, 2023, the date that the consolidated financial statements were available to be issued and noted no subsequent events requiring financial statement recognition or disclosure.

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

This report on Form 10-Q ~~(“report”)~~ contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act, as amended. 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 ~~to fund operations~~, our intention to pursue and consummate strategic opportunities available to us, ~~our~~and ~~ability~~effects ~~to fund any strategic opportunities~~ as well as ~~existing operations,~~ our ability to ~~efficiently~~fund, and integrate and grow ~~any new or~~ acquired business lines~~, and impact of regulation and economic conditions~~. Business operations and financial condition may be materially and adversely affected by any slowdown in regional and national economic growth, weakened liquidity and financial condition of customers or other factors that Company cannot foresee. While the level of Coronavirus COVID 19 or “COVID 19” infections in Hong Kong and PRC in the fiscal quarter ending September 30, 2023 did not disrupt normal operations, the possibility of new vaccine resistant strains of the virus emerging in the future continues to be a potential future risk to future business and financial operations. 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. Given these uncertainties, you should not place undue reliance on these~~ forward-looking statements. ~~Also, forward-looking statements represent Company’s estimates and assumptions only as of the date of this report.~~ 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, ~~2022~~2023 and any amendments to that Form 10-K.

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 ~~Peoples~~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. Our Common Stock’s trading symbol is “VEII.” Our common stock iswas quoted on the OTCQB Venture Market until July 1, 2024. Due to failure to file the Form 10-K and Form 10-Q by July 1, 2024, the OTC Markets Group downgraded the Common Stock to Pink Sheets Limited Information as of July 2, 2024.

Current Business Focus.

We are a provider of customer-centric ~~technology~~ technology solutions for the retail industry in Hong Kong SAR and certain regions of China ~~and Manila~~, Philippines and Malaysia.

By integrating market-leading Point-of-Sale/Point-of-Interaction (“POS/POI”), Merchandising, Customer Relations Management or “CRM” and related rewards, Locational Based (GPS & Indoor Positioning System (“IPS”)) Marketing, Customer Analytics, Business Intelligence solutions, our products and services are intended to 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 IT source for retailers who want 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. Company is headquartered in Hong Kong and with offices in Shenzhen, Guangzhou, Shanghai, Beijing, China; ~~and~~ Manila, Philippines; and Kuala Lumpur, Malaysia.

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We believe that the IT Business often presents opportunities to expand a provider’s market reach or customer base by acquisitions of existing businesses or operating assets. The Company’s business strategy includes reviewing possible acquisitions of existing businesses or operating assets in existing or adjacent markets and to do so when and if such an acquisition appears to be compatible and an enhancement of our core business lines and can be consummated with available cash and other resources. Our ability to pursue and consummate acquisitions may be limited, and has been limited, by available cash for mergers and acquisitions and other resources and the perceived cost and burdens of acquiring and integrating the target business or new operating assets into our operations. The availability of funding and cash flow are the most significant ~~limitations~~ limitations on our ability to expand through acquisitions of businesses and assets – both in terms of money on hand and ability to finance acquisitions, but the estimated business hurdles in successfully penetrating a new market is also a factor in deciding whether to proceed with that expansion. The limited liquidity and bid price of our Common Stock in the public stock market also hampers our ability to use shares of Common Stock as attractive consideration to target companies in a merger or acquisition. We have not expanded into any new markets by acquisition or otherwise during the fiscal quarter ended ~~September~~March 3031, ~~2023~~2024.

The Company, through its operating subsidiaries, is focusing and will focus on its IT Business, and continue to 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 provide credit card clearing services to merchants and financial institutions in PRC. From inception, we strove unsuccessfully to create and establish a proposed Global Processing Platform concept to support the credit card processing services (“SinoPay GPP”). Specifically, the Company’s Internet Protocol business was to be a provider of Internet Protocol (“IP”) processing services in Asia to bank card-accepting merchants (“IP Business”). The Company efforts to establish a viable IP Business did not succeed.

The acquisition of VEI CHN in 2014 shifted the primary business focus to the IT Business. Company believes that the IT Business provided a more readily attainable revenue generating business line and greater growth and profit potential than IP Business. VEI CHN was acquired in a stock-for-stock exchange (“VEI CHN Share Exchange”).

Smart Baggage Tag. Through a cooperative effort with another company, Company has the ability to market and sell 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 2021 and 2022 due to impact of COVID-19 pandemic on air travel. There are no current plans to make any dedicated marketing effort for expanding the market for or sales of the smart baggage tags in 2023.

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~~ 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~~ 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~~ skilled workers, our growth and ability to attain and sustain profit operations in the IT Business may fail. We have not experienced any ~~significant~~ significant problems in recruiting necessary skilled workers in fiscal years ~~2022~~2023 or ~~2023~~2024 to date.

Another 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. Further, unlike some competitors, the Company has not offered the stock-based incentive compensation to employees that is attractive to prospective technology workers. 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.

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 generally 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 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.

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 ~~2022~~2023 or fiscal year ~~2023~~2024 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 accounts receivable is significant current asset. 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 opportunities in the IT 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 ~~2023~~2024 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 business 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 face competition from competitors in our primary markets, which competitors possess greater name recognition, assets, personnel, sales and financial resources. These entities may be able to respond more quickly to changing market conditions by developing new products and services that meet customer requirements or are otherwise superior to our products and services and may be able to more effectively market their products than we can because they have significantly greater financial, technical and marketing resources than we do. They may also be able to devote greater resources than we can to the development, promotion and sale of their services and products. To the extent that we are unable to successfully compete against existing and future competitors, our business, operating results and financial condition would be materially adversely affected.

~~Regulatory~~History ~~Compliance~~of ~~Costs.~~Value AsExchange ~~a U~~Int’l.S. public company with operations in Hong Kong, PRC and Philippines, we are subject to U.S. and foreign laws and regulation. The need to comply with laws and regulations in these jurisdictions may impose additional operating expenses or restrictions on our business operations. Due to the potential threat of delisting of our Common Stock under the Holding Foreign Companies Accountable Act (~~“HFCAA”~~China) as a Commission Identified Issuer under Commission HFCAA-related rules, the Company transitioned from a Hong Kong-based public auditor to a U.S.-based U.S. auditor on May 25, 2023. The additional audit cost resulting from that transition is estimated, as of the date of this filing of the report, to be $133,120 for audit services for fiscal year 2023. Further, continuing political and economic tensions between the U.S. and PRC may result in other laws or regulations that increase the cost of regulatory compliance for the Company. As of the fiscal quarter ended September 30, 2023, the Company has been able to fund regulatory costs.Limited

~~COVID~~VEI 19CHN ~~Pandemic.~~was ~~COVID~~first ~~19 pandemic~~established ~~affected~~on ~~our~~November ~~primary~~16, ~~operations~~2001 in Hong Kong ~~SAR~~as ~~and~~a ~~Manila,~~limited ~~Philippines~~liability company. VEI CHN is a holding company with two subsidiaries established in ~~first~~Hong Kong, ~~fiscal~~namely ~~quarter~~TAP ofServices ~~2020~~(HK) byLimited ~~forcing~~which ~~limited~~was ~~business~~incorporated ~~travel~~on August 25, ~~remote~~ ~~work~~2003 ~~arrangements~~and acquired by ~~personnel,~~VEI ~~customers~~CHN ~~suspending~~on orSeptember ~~reducing~~25, ~~operations~~2008, and ~~use~~subsequently changed ofto ~~third~~its ~~party~~current ~~services~~name ~~and~~as ~~suspension~~Value orExchange ~~cancellations of~~Int’l ~~normal~~(Hong ~~business~~Kong) ~~activities~~Limited by(“VEI usHKG”) on May 13, 2013, and ~~customers~~Cucumbuy.com Limited (“CUCUMBUY”), which ~~restrictions~~was ~~occurred~~incorporated aton ~~times~~May in14, ~~2021~~2013 and ~~2022~~disposed on May 21, 2018 with consideration of HK$1. ~~During~~VEI CHN also set up a Wholly-owned Foreign Enterprise (WOFE) in Shanghai, PRC, in September 2, 2008 in the ~~fiscal~~name ~~quarter~~of ~~ending~~Value Exchange Int’l ~~September~~(Shanghai) 30Limited (“VEI SHG”). In January 2017, ~~2023~~VEI CHN acquired TapServices, ~~COVID~~Inc., 19a ~~did~~corporation ~~not~~organized ~~disrupt~~under ~~our~~the ~~normal~~laws of ~~business~~the ~~operations~~Republic inof ~~Hong~~the ~~Kong~~Philippines ~~SAR~~(the “TSI”). Prior to acquisition of TSI, the Company provided extensive consulting services to TSI and, ~~China~~from such relationship, the Company was familiar with TSI operations. ~~While~~In ~~there~~January ~~has~~2019, ~~been~~VEI anSHG ~~easing~~completed the setup procedures ~~restrictions~~of ona ~~businesses~~subsidiary with 51% ownership in ~~2023~~Hunan, ~~especially~~PRC, in ~~Hong~~the ~~Kong~~name of Value Exchange Int’l (Hunan) Limited (“VEI HN”). In February 2020, VEI SHG completed the ~~uncertainty~~setup ~~about~~procedures ~~new~~of ~~variants~~a subsidiary with 51% ownership in Shanghai, PRC, in the name of ~~COVID~~Shanghai 19Zhaonan Hengan ~~virus~~Information ~~emerging~~Technology Co., ~~especially~~Limited (“SZH”). In January 2022, VEI HKG completed the setup procedures of a subsidiary ~~variants~~with ~~that~~100% ~~are~~ownership ~~not~~in ~~affected~~Shenzhen, byPRC, ~~current~~in ~~vaccines~~the name of Haomeng Technology (Shenzhen) Co., ~~creates~~Limited. an(“HTS”). ~~ongoing~~). ~~uncertainty~~On ~~about~~January 2, 2024, VEI CHN acquired Value E Consultant International (M) Sdn. Bhd, a company established in Malaysia (the ~~future~~“Value ~~impact~~E”). Prior to acquisition of ~~COVID~~Value 19E, ~~that~~the ~~cannot~~Company beprovided extensive services to Value E and, from such relationship, the Company was familiar with ~~projected~~Value E operations.

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”). In January 2022, VEI HKG completed the setup procedures of a subsidiary with 100% ownership in Shenzhen, PRC, in the name of Haomeng Technology (Shenzhen) Co., Limited. (“HTS”).

Principal business

~~Company’s~~VEII ~~primary~~is ~~operating~~a ~~subsidiary~~holding company isfor its operating subsidiaries. VEI CHN operations are the primary operations of the Company. The principal business of VEI CHN for more than 1520 years is to provide the ~~Information~~IT ~~Technology~~Business ~~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, installation and maintenance, including e-commerce and payment processing) to the Retail Sector, primarily to 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:

Systems maintenance and related service

VEI CHN Group provides development and 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 Chinese-Hong Kong 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~~ installation and implementation, including i) project planning; ii) analysis of customer information and business needs from aan 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, PRC ~~and Manila~~, Philippines and Malaysia.

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~~ Besides use of proprietary, custom software code, ~~VEI~~our ~~CHN~~ services may from time to time license standard third party software programs.

Financial Performance Highlights

The following are some financial highlights for the ~~third~~first quarter of ~~2023~~2024:

· Net revenue: Our net revenues were $83,~~695~~370,~~412~~009 for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, as compared to $72,~~737~~884,~~842~~549 for the same period in ~~2022~~2023, an increase of $~~957~~485,~~570~~460 or 1216.48%.

· Gross profit: Gross profit for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 was $1,~~501~~142,~~790~~317 or 1733.39% of net revenues, as compared to $1381,~~281,169~~821 or 1613.62% of net revenues for the same period in ~~2022~~2023, an increase of $~~220~~760,~~621~~496 or 17199.2%.

· Loss from operations: Our loss from operations totaled $~~991~~286,~~883~~541for ~~for~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, as compared to $77438,~~822~~042 for the same period in ~~2022~~2023, ana ~~increase~~decrease of $~~914~~151,~~061~~501 or ~~1174~~34.6%.

· Net ~~(loss)~~ income: We had a net ~~loss~~income of $1374,~~121,719~~430 for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, as compared to net ~~income~~loss totaled $~~138~~453,~~991~~849 for the same period in ~~2022~~2023, a change of $1828,~~260,710~~279.

· Basic and diluted net income (loss) per share was $0.0301 for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, respectively.

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RESULTS OF OPERATIONS

Comparison of Three Months Ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023

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 September 30, 2023						Three Months Ended September 30, 2022
	Three months ended March 31,						Change
	US$			As a percentage of revenues			US$			As a percentage of revenues
	2024			2023
	US$			US$			US$			%
NET REVENUES
Service income		23,~~960~~370,~~825~~009			~~100~~2,884,549	%		2485,~~556,808~~460			~~100~~16.8	%
COST OF SERVICES
Cost of service income		(2,~~326~~227,~~079~~692	)		(~~78.6~~2,502,728	%)		(2275,~~302,012~~036	)		~~(90~~11.0	%)
GROSS PROFIT		~~634~~1,~~746~~142,317			~~21.4~~381,821	%		~~254~~760,~~796~~496			10199.02	%
Operating gain (expenses):
Operating expenses:
General and administrative expenses		(~~886~~1,~~442~~086,562	)		(~~29.9~~731,977	%)		(~~517~~354,~~726~~585	)		~~(20~~48.34	%)
Foreign exchange gain		17,545			0.6	%		21,980			0.9	%
Foreign exchange gain (loss)		(342,296	)		(87,886	)		(254,410	)		289.5
LOSS FROM OPERATIONS		(~~234~~286,~~151~~541	)		(~~7.9~~438,042	%)		~~(240~~151,~~950~~501	)		(934.46	%)
OTHER INCOME (EXPENSES)		~~(88~~661,~~670~~212	)		(~~3.0~~14,637	%)		74675,~~241~~849			2(4,617.94	%)
LOSS BEFORE PROVISION FOR INCOME TAXES		(322,821	)		(10.9	%)		(166,709	)		(6.5	%)
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES		374,671			(452,679	)		827,350			(182.8	)
INCOME TAXES (EXPENSES) CREDIT		(4,134	)		(0.1	%)		27			0.0	%
INCOME TAXES EXPENSES		(241	)		(1,170	)		929			(79.4	)
NET LOSS		(326,955	)		(11.0	%)		(166,682	)		(6.5	%)
NET INCOME (LOSS)		374,430			(453,849	)		828,279			(182.5	)

Net revenues. Net revenues were $23,~~960~~370,~~825~~009 for the three months ended ~~September~~March 3031, ~~2023~~2024, as compared to $2,~~556~~884,~~808~~549 for the same period in ~~2022~~2023, an increase of $~~404~~485,~~017~~460 or 15 16.8%. ~~This~~ The increase was primarily attributable to the increase in our revenue from i) ~~sales of~~ systems maintenance with ~~revenues~~revenue increasing from $2,~~304~~490,~~740~~154 for the three months ended ~~September~~March 3031, ~~2022~~2023 to $2,~~380~~616,~~304~~667 for the three months ended ~~September~~March 3031, ~~2023~~2024; ii) ~~sales~~systems ~~of hardware~~development and ~~consumables~~integration with revenue increasing from $~~223~~14,~~104~~359 for the three months ended ~~September~~March 3031, ~~2022~~2023 to $~~512~~54,~~244~~115 for the three months ended ~~September~~ 30March 31, ~~2023~~2024; and iii) sales of ~~systems~~hardware ~~development~~ and ~~integration~~consumables with ~~revenues~~revenue increasing from $28380,~~964~~036 for the three months ended ~~September~~ 30March 31, ~~2022~~2023 to $68699,~~277~~227 for the three months ended ~~September~~March 3031, ~~2023~~2024.

Cost of services. Our cost of services is primarily comprised of our costs of technical staff, contracting fees to suppliers and ~~general operating~~ overhead. Our cost of services ~~increased to~~decreased to $2,~~326~~227,~~079~~692 or 7866.61% of net revenues, for the three months ended ~~September~~March 3031, ~~2023~~2024, as compared to $2,~~302~~502,~~012~~728 or 9086.08% of net revenues, ~~for~~ for the same period in ~~2022~~2023, ana ~~increase~~decrease of $24275,~~067~~036 or 111.0%. The ~~increase~~decrease in cost of services was mainly attributable to the ~~increase in~~decrease in our ~~cost of~~ contracting fees to suppliers.

Gross profit. Gross profit for the three months ended ~~September~~March 3031, ~~2023~~2024 was $~~634~~1,~~746~~142,317 or 2133.49% of net revenues, as compared to $~~254~~381,~~796~~821 or 1013.02% of net revenues, for the same ~~period~~ period in ~~2022~~2023, an increase of $~~379~~760,~~950~~496 or ~~149~~199.12%. The increase of gross profit was largely due to the increase in net revenues, ~~offset~~and by the ~~increase~~decrease in cost of services ~~in this period, as~~ compared ~~with~~to the same period of ~~2022~~2023.

37General 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 increased to $1,086,562 or 32.2% of net revenues, for the three months ended March 31, 2024, as compared to $731,977 or 25.4% of net revenues, for the same period in 2023, an increase of $354,585 or 48.4%. The primary reason for the increase was attributable to the increase in audit fee, staff costs and other administrative costs.

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 increased to $886,442 or 29.9% of net revenues, for the three months ended September 30, 2023, as compared to $517,726 or 20.2% of net revenues, for the same period in 2022, an increase of $368,716 or 71.2%. The primary reason for the increase was attributable to the increase in staff cost, audit fee, consultancy and professional fee, and other administrative cost.47

Loss from operations. As a result of the above, our loss from operations totaled $~~234~~286,~~151~~541 for the three months ended ~~September~~March 3031, ~~2023~~2024, as compared to $~~240~~438,~~950~~042 for the same period in ~~2022~~ 2023, a decrease of $6151,~~799~~501 or 234.86%.

Income taxes (expenses~~) credit~~. Income ~~taxes~~ taxes expenses totaled $~~4,134~~241 ~~during~~or 0.007% of net revenues for the three months ended ~~September~~March 3031, ~~2023~~2024, as compared to ~~income~~$1,170 ~~taxes~~or ~~credit~~0.04% ~~totaled $27~~ for the ~~same~~ same period in ~~2022~~2023, a ~~change~~decrease of $929 or 79.4%. The decrease was primarily attributable to the movement in profit tax paid for the three months ended March 31,~~161~~ 2024.

Net income (loss). As a result of the foregoing, we had a net ~~loss~~income of $~~326~~374,~~955~~430 for the three months ended ~~September~~March 3031, ~~2023~~2024, compared to a net loss totaled $~~166~~453,~~682~~849 for the same period in ~~2022~~2023, ana ~~increase~~change of $~~160~~828,~~273~~ 279 or 182.5%, as a result of the factors described above.

Comparison of Nine Months Ended September 30, 2023 and 2022

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)

	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
	US$			As a percentage of revenues			US$			As a percentage of revenues
NET REVENUES
Service income		8,695,412			100	%		7,737,842			100	%
COST OF SERVICES
Cost of service income		(7,193,622	)		(82.7	%)		(6,456,673	)		(83.4	%)
GROSS PROFIT		1,501,790			17.3	%		1,281,169			16.6	%
Operating gain (expenses):
General and administrative expenses		(2,494,488	)		(28.7	%)		(1,404,314	)		(18.1	%)
Foreign exchange gain		815			0.0	%		45,323			0.6	%
LOSS FROM OPERATIONS		(991,883	)		(11.4	%)		(77,822	)		(1.0	%)
OTHER INCOME (EXPENSES)		(124,566	)		(1.4	%)		218,948			2.8	%
(LOSS) PROFIT BEFORE PROVISION FOR INCOME TAXES		(1,116,449	)		(12.8	%)		141,126			1.8	%
INCOME TAXES EXPENSES		(5,270	)		(0.1	%)		(2,135	)		(0.0	%)
NET (LOSS) INCOME		(1,121,719	)		(12.9	%)		138,991			1.8	%

Net revenues. Net revenues were $8,695,412 for the nine months ended September 30, 2023, as compared to $7,737,842 for the same period in 2022, an increase of $957,570 or 12.4%. This increase was primarily attributable to the increase in our revenues from i) sales of systems maintenance with revenues increasing from $6,386,367 for the nine months ended September 30, 2022 to $7,049,784 for the nine months ended September 30, 2023; ii) sales of hardware and consumables with revenue increasing from $1,115,164 for the nine months ended September 30, 2022 to $1,464,435 for the nine months ended September 30, 2023; offset by iii) sales of systems development and integration with revenues decreasing from $236,311 for the nine months ended September 30, 2022 to $181,193 for the nine months ended September 30, 2023.

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 increased to $7,193,622 or 82.7% of net revenues, for the nine months ended September 30, 2023, as compared to $6,456,673 or 83.4% of net revenues, for the same period in 2022, an increase of $736,949 or 11.4%. The increase in cost of services was mainly attributable to the increase in our cost of contracting fees to suppliers.

Gross profit. Gross profit for the nine months ended September 30, 2023 was $1,501,790 or 17.3% of net revenues, as compared to $1,281,169 or 16.6% of net revenues, for the same period in 2022, an increase of $220,621 or 17.2%. The increase of gross profit was largely due to the increase in net revenues, offset by the increase in cost of services in this period, as compared with the same period of 2022.

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 increased to $2,494,488 or 28.7% of net revenues, for the nine months ended September 30, 2023, as compared to $1,404,314 or 18.1% of net revenues, for the same period in 2022, an increase of $1,090,174 or 77.6%. The primary reason for the increase was attributable to the increase in staff cost, audit fee, consultancy and professional fee, and other administrative cost.

Loss from operations. As a result of the above, our loss from operations totaled $991,883 for the nine months ended September 30, 2023, as compared to $77,822 for the same period in 2022, an increase of $914,061 or 1174.6%.

Income tax expenses. Income taxes expenses totaled $5,270 during the nine months ended September 30, 2023, as compared to $2,135 for the same period in 2022, an increase of $3,135 or 146.8%.

Net (loss) income. As a result of the foregoing, we had net loss of $1,121,719 for the nine months ended September 30, 2023, compared to net income $138,991 for the same period in 2022, a change of $1,260,710, as a result of the factors described above.

Liquidity and Capital Resources

As of ~~September~~March 3031, ~~2023~~2024, we had cash and cash equivalents of of $~~234~~515,~~724~~113. The following table provides detailed information about our net cash flow for all financial statement periods presented in ~~this~~ this report.

Cash Flows

(All amounts in U.S. dollars)

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2023			2022
	2024			2023
	US$			US$
Net cash used in operating activities		(~~999~~344,~~864~~999	)		(~~194~~460,~~036~~311	)
Net cash used in investing activities		(3039,~~911~~105	)		(~~144~~71,~~664~~256	)
Net cash provided by financing activities		1,039,184			278,144
Net cash (used in) provided by financing activities		(7,130	)		858,986
Effect of exchange rate changes on cash and cash equivalents		1719,~~539~~880			~~(29~~99,~~729~~877	)
Net increase (decrease) in cash and cash equivalents		25,948			(90,285	)
Net (decrease) increase in cash and cash equivalents		(371,354	)		427,296
Cash and cash equivalents at the beginning of period		~~208~~886,~~776~~467			~~289~~208,~~398~~776
Cash and cash equivalents at the end of period		~~234~~515,~~724~~113			~~199~~636,~~113~~072

Operating Activities

Net cash used in operating activities was $~~999~~344,~~864~~ 999 for the ~~nine~~ three months ended ~~September~~March 3031, ~~2023~~2024, which was ana ~~increase~~change of $~~805~~115,~~828~~312 ~~or 415.3%~~ from $~~194~~460,~~036~~311 for the same period of ~~2022~~2023. The ~~increase~~change in ~~net~~ net cash used in operating activities was mainly attributable to the following:

1) ~~Net~~A ~~loss~~change of $1Accounts receivable,~~121~~ Amounts due from related parties,~~719~~ ~~for~~and ~~the~~Other ~~nine~~payables ~~months~~and ~~ended~~accrued ~~September~~liabilities ~~30,~~increased ~~2023,~~our ~~compared~~operating tocash ~~net~~balances ~~income~~by $~~138~~577,~~991~~146, ~~for~~$508,055 ~~the~~and ~~same~~$163,089 ~~period in 2022~~respectively; ~~and~~offset by

2) ANet ~~change~~income of ~~Amounts due from related parties~~$374,430 ~~Other~~for ~~payables~~the ~~and~~three ~~accrued~~months ~~liabilities~~ended ~~and~~March ~~Deferred~~31, ~~income~~2024, ~~decreased~~compared ~~our~~to ~~operating~~net ~~cash~~loss ~~balances~~of by $~~365~~453,~~041,~~849 ~~$483,518~~for ~~and~~the ~~$262,332;~~same ~~offset~~period byin 2023; and

3) A change of Accounts ~~receivable~~payable, ~~and~~ Other receivables ~~increased~~and prepayments, and Amounts due to related parties decreased our operating cash balances by $~~345~~926,~~851~~575, $222,436 and $~~356~~169,~~008 respectively~~409.

Investing Activities

Net cash used in investing activities was $3039,~~911~~ 105 for the ~~nine~~ three months ended ~~September~~March 3031, ~~2023~~2024, which was aan ~~decrease~~increase of $~~113~~32,~~753~~589 or 7845.65% from $~~144~~71,~~664~~694 in the same period in ~~2022~~2023. The ~~decrease~~ decrease in net cash used in investing activities was attributable to cash used in the purchase of plant and equipment by $3099,~~911 during the nine months ended September 30, 2023~~460; ~~compare~~offset toby ~~the~~cash received ~~purchase~~during acquisition of ~~plant~~a ~~and~~subsidiary ~~equipment~~ by $~~144~~60,~~664~~355, during the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2024.

Financing Activities

Net cash ~~provided~~used byin financing activities was $17,~~039,184 for~~130 for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, which was ana ~~increase~~change of $~~761~~1,~~040~~000,124 orfrom ~~273.6%~~net ~~from~~cash provided by financing activities $~~278~~992,~~144~~994 in the same period in ~~2022~~2023. The ~~increase~~ change in net cash ~~provided~~used byin financing activities was attributable to ~~proceeds of convertible loan by $1,500,000, and proceeds of bank loan by $450,000, and offset by repayment of bank loan by $542,579, principal payments on operating leases by $368,237, during~~ the ~~nine~~Repayment ~~months ended September 30, 2023; compare to the proceeds~~ of ~~bank loan by $537,349, and offset by repayment of bank loan by $38,741, principal payments on~~ finance ~~leases~~lease liability by $~~220~~7,~~464,~~130 during the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2024.

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 ~~growth~~ 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.

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~~ and balances have been eliminated in the consolidation. The Company’s fiscal year end is December 31st. ~~The following entities were consolidated as of September 30, 2023:~~

	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%
Haomeng Technology (Shenzhen) Co., Limited	PRC	100%

The following entities were consolidated as of March 31, 2024:

	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%
Haomeng Technology (Shenzhen) Co., Limited	PRC	100%
Value E Consultant International (M) Sdn. Bhd	Malaysia	100%

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

		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~~The Company’s revenue is ~~recognized~~derived ~~when~~from ~~all~~three primary sources: (i) professional services for systems development and integration, including procurement of ~~the~~related ~~following~~hardware ~~have~~and ~~occurred:~~software ~~(i)~~licenses ~~persuasive~~on ~~evidence~~behalf of ancustomers, ~~arrangement~~if ~~exists,~~required; (ii) ~~delivery~~professional ~~has~~services ~~occurred~~for orsystem ~~services~~maintenance ~~have~~normally ~~been~~for ~~rendered,~~a period of one year; and (iii) sale of hardware and consumables during the ~~price~~service isperformed ~~fixed or~~as ~~determinable,~~stated ~~and~~above. ~~(iv)~~We recognize revenue from contracts with customers using the ~~ability~~five-step tomodel ~~collect~~prescribed isin ~~reasonably~~ASC ~~assured~~606.

~~Multiple~~The Company derives revenue from fixed-~~deliverable~~price ~~arrangements~~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 performance obligations.

~~The~~Determining ~~Company~~whether ~~derives~~such ~~revenue~~products ~~from~~and ~~fixed-price sale contracts~~services ~~with~~within ~~customers~~a ~~that~~customer ~~may~~contract ~~provide~~are ~~for~~considered ~~the~~distinct ~~Company~~performance toobligations ~~procure~~that ~~hardware~~should ~~and~~be ~~software~~accounted ~~licenses~~for ~~with~~separately ~~varied~~requires ~~performance~~significant judgment. ~~specifications~~Accordingly, ~~specific to~~we ~~each~~review customer ~~and~~contracts ~~provide~~to ~~the~~identify ~~technical~~all ~~services~~separate ~~for~~promises ~~systems~~to ~~development~~transfer goods and ~~integration~~services ofthat ~~the~~would ~~hardware~~be ~~and~~considered performance ~~software licenses~~obligations. ~~In instances~~Judgment ~~where the contract price~~ is ~~inclusive~~also ofrequired ~~the~~in ~~technical~~determining ~~services,~~whether ~~the~~an ~~sale~~option ~~contracts~~to ~~include~~acquire ~~multiple~~additional ~~deliverables.~~products Aand ~~multiple-element~~services within ~~arrangement~~a iscustomer ~~separated~~contract ~~into~~represents ~~more~~a ~~than~~material ~~one~~right ~~unit~~that ofthe ~~accounting~~customer ifwould ~~all~~not ofreceive ~~the~~without ~~following~~entering ~~criteria~~into ~~are~~that ~~met:~~contract.

–The Company’s contracts often contain multiple performance obligations, which 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 ~~item(~~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 performance obligations 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. If a contract contains multiple performance obligations, the Company accounts for each distinct performance obligation separately. The transaction price is allocated to the ~~customer~~separate performance obligations on a relative stand-alone selling price basis;. Any discounts or expected potential future price concessions are considered when determining the total transaction price.

–In ~~There~~addition, isthe ~~objective~~arrangement ~~and~~generally ~~reliable~~includes customer ~~evidence~~acceptance ofcriteria ~~the~~that ~~fair~~cannot ~~value~~be oftested ~~the~~before ~~undelivered~~installation ~~item(~~and integration at the customer’s); ~~and~~site. Accordingly, revenue recognition is deferred until customer acceptance, indicated by an acceptance certificate signed off by the customer.

–We Ifrecognize ~~the~~revenue ~~arrangement~~over ~~includes~~time awhen ~~general~~there ~~right~~is ofa continuous ~~return~~transfer ~~relative~~of control to ~~the~~our ~~delivered~~customer. ~~item(s)~~When control is transferred over time, ~~delivery~~revenue oris ~~performance~~recognized based on the extent of progress towards completion of the ~~undelivered~~performance ~~item(s)~~obligation. isBased ~~considered~~on ~~probable~~the nature of the products and ~~substantially~~services provided in the ~~control~~contract, we use our judgment to determine if an input measure or output measure best depicts the transfer of control over time. If a contract does not meet the ~~Company~~criteria for recognizing revenue over time, we recognize revenue at a point in time.

~~The~~Revenues ~~Company’s~~of ~~multiple-element~~maintenance ~~contracts~~services ~~generally~~are ~~include~~recognized ~~customer-acceptance~~when ~~provisions which provide for~~ the ~~Company~~services 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,~~performed ~~integrated and tested at the customer’s site by the Company~~ in accordance with the ~~performance~~contract ~~specifications specific to each customer~~term. InFor ~~addition,~~maintenance ~~under~~service ~~these multiple-element~~ contracts, ~~the~~ ~~Company~~a ~~has~~time-elapsed ~~not~~output ~~sold the equipment and software licenses separately from the installation, integration and testing services, and hence~~method ~~there~~ is noused 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~~measure ~~Subtopic 605-25~~progress, ~~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~~recognized ~~until~~straight-line ~~customer~~over ~~acceptance,~~the ~~indicated~~term byof ~~an acceptance certificate signed off by~~ the ~~customer~~contract.

~~Revenues~~For ofservices ~~maintenance~~contracts, we typically satisfy our performance obligations as services are ~~recognized~~rendered ~~when~~and ~~the~~use ~~services~~a contract cost-based input method to measure progress. Contract costs include ~~are~~labor, ~~performed~~material inand ~~accordance~~allocable ~~with~~indirect ~~the~~expenses. Revenue is recognized proportionally as contract ~~term~~costs are incurred plus estimated fees.

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

4251

Revenues are recorded net of value-added taxes, sales discounts and returns. There were no sales returns during the ~~nine~~three months period ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023.

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31, 2024		Three Months Ended March 31, 2023
	2023		2022		2023		2022
	US$		US$
	US$		US$		US$		US$
	(unaudited)		(unaudited)
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
NET REVENUES
NET REVENUES
Service income
Service income
- systems development and integration		54,115		14,359
- systems development and integration		68,277		28,964		181,193		236,311
- systems maintenance		2,616,667		2,490,154
- systems maintenance		2,380,304		2,304,740		7,049,784		6,386,367
- sales of hardware and consumables		699,227		380,036
- sales of hardware and consumables		512,244		223,104		1,464,435		1,115,164
		3,370,009		2,884,549
		2,960,825		2,556,808		8,695,412		7,737,842

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

Income taxes

~~Under~~For ~~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~~year incurred.

Stock-based Compensation

Company adopted a 2022 Equity Incentive Plan in ~~2022~~ 2024, but has not granted or issued any stock based incentive compensation under this plan as of the date of filing this Form 10-Q report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Not~~As ~~Applicable~~a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, the Company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure Controls and Procedures.

Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) were not effective as of ~~September~~March 3031, ~~2023~~2024, to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal ~~control~~ control over financial reporting during the ~~third~~first quarter of ~~2023~~2024, which were identified in connection with management’s evaluation ~~required~~ required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to ~~materially~~ materially affect, the Company’s internal control over financial reporting.

44Because the Company is a smaller reporting company, this annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in various ~~lawsuits~~ 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

OnAs ~~May 25, 2023, the Company ended the engagement~~ of ~~Zhen Hui Certified Public Accountants, a Hong Kong SAR based public accounting firm, as~~ the Company’s independent registered public accounting firm. The Audit Committee of the Board of Directors of the Company approved the ending of the engagement of Zhen Hui as public auditors. On May 25, 2023, the Company’s Board of Directors ratified the appointment of Grassi & Co. CPAs P.C., based in New York, New York, as the Company’s new independent registered public accounting firm, effective as of May 25, 2023. With the appointment of a U.S. based public accounting firm to audit the Company, the Company does not believe that it is subject to the HFCAA as of the date of the filing of this Form 10-Q, ~~report.~~the ~~The~~ Company ~~has~~is ~~ongoing~~no ~~disclosure obligations about its status as~~ longer a Commission Identified Issuer inunder ~~fiscal year 2022, including~~ the ~~filing~~Holding ofForeign aCompanies ~~Form~~Accountable ~~SPDSCL-~~Act (“HFCAA~~-GOV~~”).

~~Risks~~Risk ~~related~~factors tofor ~~doing business in PRC and Hong Kong. Most of~~ our ~~operating~~company ~~subsidiaries~~ are ~~located~~set inforth ~~PRC or Hong Kong. As such, our company and operating subsidiaries~~ in ~~PRC or Hong~~ ~~Kong~~our ~~can~~Annual beReport ~~affected~~on ~~by:~~Form ~~(1)~~10-K ~~changes~~for inthe ~~PRC~~fiscal oryear ~~Hong~~end ~~Kong~~December ~~laws~~31, ~~regulations,~~2023 or(“2023 ~~economic~~Form ~~policies, or changes in the enforcement of those laws, regulations, policies; (2~~10-K) ~~uncertainties with respect to the interpretation~~ and ~~enforcement~~other offilings ~~PRC or Hong Kong laws, regulations and policies, which may be subject to change from time to time~~ with ~~little or no advance notice, and~~ the ~~risk that the PRC government~~Commission. ~~may~~The ~~intervene~~risks ordescribed ~~influence~~in ~~our~~Part ~~PRC~~I, ~~or Hong Kong operations at any time~~Item 1A, ~~which~~"Risk ~~could~~Factors" ~~result~~ in ~~a material change in~~ our ~~operations~~2023 orForm ~~cause the~~10-K ~~value~~could ofmaterially ~~our~~and ~~securities~~adversely toaffect ~~decline; (3) changes in political,~~ our business, ~~economic~~financial orcondition ~~trade relations between the United States~~ and ~~PRC~~ orresults ~~Hong Kong; (4) fluctuation in the value~~ of ~~the Renminbi; (5) potential limitation on our ability to utilize our cash balances effectively~~operations, ~~including~~ ~~making funds held by our PRC-based subsidiaries unavailable for use outside of mainland PRC, due to interventions in or the imposition of restrictions~~ and ~~limitations by~~ the ~~PRC~~trading ~~government~~price ~~on currency conversion and payments~~ of ~~foreign~~our ~~currency~~common ~~and~~stock ~~RMB~~could ~~outside of~~decline. ~~PRC~~These orrisk ~~Hong~~factors ~~Kong; (6) difficulties in effecting service of legal process, conducting investigations, collecting evidence, enforcing~~do ~~foreign~~not ~~judgments~~identify orall ~~bringing~~risks ~~original~~that ~~actions~~we inface; ~~PRC~~our oroperations ~~Hong~~could ~~Kong~~also ~~against~~be ~~the~~affected ~~Company~~by orfactors ~~members~~that ofare ~~its~~not ~~management;~~presently ~~(7)~~known ~~potential fines and other legal or administrative sanctions for failure~~ to ~~comply~~us ~~with PRC~~ or ~~Hong~~that ~~Kong~~we ~~regulations regarding our employee equity incentive~~currently ~~plans~~consider ~~or any other benefit or retirement plans; (8) possible restrictions on our ability~~ to ~~make~~be ~~loans~~immaterial ~~or additional capital contributions~~ to our ~~PRC~~operations. orDue ~~Hong Kong subsidiaries due~~ to ~~PRC~~risks ~~or Hong Kong regulation of loans to,~~ and ~~direct investment in~~uncertainties, ~~PRC~~known ~~or Hong Kong entities by offshore holding companies~~ and ~~governmental~~unknown, ~~control~~our ofpast ~~currency~~financial ~~conversion;~~results ~~(9)~~may ~~difficulties~~not ~~in pursuing growth through acquisitions~~be ~~due~~a toreliable ~~PRC~~indicator orof ~~Hong~~future ~~Kong regulations regarding acquisitions~~performance, and ~~(10)~~historical ~~changes~~trends inshould ~~PRC~~not orbe ~~Hong~~used ~~Kong laws or regulations that could limit or hinder our ability~~ to ~~offer~~anticipate ~~securities~~results ~~to investors. Further, the United States government, especially Congress, may impose statutory~~ or ~~regulatory~~trends ~~restrictions on U.S. public companies with operations~~ in ~~PRC~~future ~~or Hong Kong and those statutory or regulatory restrictions~~periods. ~~may~~The ~~reduce~~“Risk ~~our~~Factors” ~~company’s~~section ~~ability~~of tothe ~~conduct~~2023 ~~its~~Form ~~operations~~10-K, as ~~a U.S. public holding company with PRC or Hong Kong subsidiaries~~amended, or ~~may~~remains ~~cause~~current ~~the~~in ~~value~~all ofmaterial ~~our publicly traded securities or other securities to significantly decline~~respects.

Other risk factors for our company are set forth in our Annual Report on Form 10-K for the fiscal year end December 31, 2022 (“2022 Form 10-K) and other filings with the Commission. The risks described in Part I, Item 1A, "Risk Factors" in our 2022 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. Except as noted with respect to the HFCAA’s applicability to the Company, the “Risk Factors” section of the 2022 Form 10-K, as amended, remains current in all material respects.

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

On September 18, 2023, Company issued 7,344,632 shares of Common Stock to HMI along with issuance of Warrants to purchase a maximum of 36,723,160 shares of Common Stock to HMI, which issuance was made upon conversion of the Loan Agreement (See “Conversion of Loan” at page 26 above)None. Issuance was made in reliance under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D under the Securities Act. The Warrants have not been exercised as of the date of the filing of this Quarterly Report on Form 10-Q. The issuance was made in connection with converting One Million Three Hundred Thousand Dollars and No Cents ($1,300,000.00) of debt owed under the Loan Agreement into the shares of Common Stock and Warrants.

Mr. Chan Heng Fai, a non-executive director of the Company, who is deemed the owner of 49.63% of the issued shares of Company’s Common Stock by virtue of 95,000 shares of Common Stock held by Mr. Chan, and the following share ownership of Company’s Common Stock by entities that Mr. Chan is deemed to control: 21,120,795 shares held by Hapi Metaverse Inc., 39,968 shares held by BMI Capital Partners International Limited, 18,512 shares held by Liquid Value Development Pte Ltd. and 313,154 shares held by Decentralized Sharing Systems, Inc. With the issuance of the Warrants to HMI, HMI and the other affiliates of Mr. Chan have the ability to attain voting control of the Company upon conversion of any substantial portion of the Warrants. Further, the Company’s current lenders are affiliates of Mr. Chan. As such, Mr. Chan may be deemed a control person of the Company. As of the date of the filing of this Quarterly Report on Form 10-Q, Mr. Chan has not exercised control over the operational or strategic management of the Company and its wholly owned subsidiaries, beyond performance of his customary duties as a non-executive director or the Company, but the Company has been reliant upon loans from lenders affiliated with Mr. Chan for third party funding and Mr. Chan and his affiliates have, with the Warrants issued to HMI, the ability to attain voting control of the Company. There is no known agreement between Mr. Chan, the Company’s lenders, and affiliated companies that own shares of Company Common Stock to cooperate in controlling or influencing the operational and strategic management of the Company.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

~~Insider Trading Arrangements~~None.

During the three months ended September 30, 2023, none of the officers (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.54

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 ~~Hapi Metaverse, Inc. (formerly, “~~GigWorld, Inc.”) (1)
10.2		Registration Rights Agreement, Nov. 8, 2021, by Value Exchange International, Inc., a Nevada corporation, (“Company”) and Mr. Heng Fai Chan (2)
10.3		Registration Rights Agreement, Nov. 8, 2021, by Value Exchange International, Inc., a Nevada corporation, (“Company”) and Mr. Heng Fai Chan (3)
10.4		Registration Rights Agreement, Nov. 8, 2021, by Value Exchange International, Inc., a Nevada corporation, (“Company”) and Mr. Heng Fai Chan (4)
10.5		Convertible Credit Agreement by and among Value Exchange International, Inc., ~~Hapi Metaverse, Inc. (formerly, “~~GigWorld, Inc.”) and American Wealth Mining Corp., dated January 27, 2023 (5)
10.6		Form of Warrant issuable by Value Exchange International, Inc. (6)
10.7		Loan Agreement by Value Exchange International, Inc. and American Pacific Bank, dated July 26, 2022 (7)
10.8		Security Agreement by Value Exchange International, Inc. and American Pacific Bank, dated July 26, 2022 (8)
10.9		Revolving Credit Promissory Note signed by Value Exchange International, Inc. and evidencing debt obligation to American Pacific Bank, dated July 26, 2022 (9)
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
Exhibit 104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

(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.

(2)

Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Company with SEC on Nov. 9, 2021.

(3)

Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Company with SEC on Nov. 9, 2021.

(4)

Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by Company with SEC on Nov. 9, 2021.

(5)

Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company with the SEC on February 2, 2023.

(6)

Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Company with the SEC on February 2, 2023.

(7)

Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K/A filed by the Company with the SEC on July 29, 2022

(8)

Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K/A filed by the Company with the SEC on July 29, 2022

(9)

Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K/A filed by the Company with the SEC on July 29, 2022

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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.~~	Value Exchange International, Inc.
November 15, 2023	/s/	Tan Seng Wee Kenneth
July 16, 2024		/s/	Kenneth Tan
	~~By:~~	~~Tan Seng Wee Kenneth~~By:	Kenneth Tan
	~~Its:~~	~~President and Director (Principal Executive Officer)~~Its:	President and Director (Principal Executive Officer)
November 15, 2023	/s/	Channing Au
July 16, 2024		/s/	Channing Au
	~~By:~~	~~Channing Au~~By:	Channing Au
	~~Its:~~	~~Chief Financial Officer (Principal Financial and Accounting Officer)~~Its:	Chief Financial Officer (Principal Financial and Accounting Officer)

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