SHARING ECONOMY INTERNATIONAL: DISCUSSION AND ANALYSIS BY THE MANAGEMENT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

Overview

Historically, our main activities involved the design, manufacture and distribution of a range of proprietary high and low temperature dyeing and finishing machines for the textile industry, which ended in December 2019.



With the termination of the manufacturing businesses, we are actively exploring
other new ventures and opportunities that could contribute to our business
in
the future.


Given the termination of our manufacturing business, we continued to pursue what
we believe are high growth opportunities for the Company, particularly our new
business divisions focused on the development of sharing economy platforms and
related rental businesses within the company. These initiatives are still in an
early stage and are dependent in large part on availability of capital to fund
their future growth. We did not generate significant revenues from our sharing
economy business initiatives in 2020 or during the six months ended June 30,
2021.



Recent developments



Inspirit Studio



During the period, BuddiGo, the sharing economy mobile platform developed by
Inspirit Studio Limited ("Inspirit Studio"), continuously promoted its service
to the local market in Hong Kong. BuddiGo offers a wide range of errand
services. Currently, about 80 percent of the orders received are for on-demand
urgent delivery of items such as documents, flowers and cakes. Food delivery
services are also available. During the period from June 2018 to June 30, 2019,
over 1,200 individuals have officially registered as sell-side buddies, who
completed over 600 delivery orders from June 2018 to June 30, 2020, majority
orders were happened in the third quarter of year 2018. In addition, BuddiGo has
signed up with a number of local business partners to provide ongoing delivery
services for these clients. BuddiGo's goal is to connect with the community and
deliver localized content featuring BuddiGo's core features and advantages.
BuddiGo is actively seeking strategic investors or collaborative parties who are
enthusiastic about its business model and can help achieve its business targets
and expand into different countries.



3D Discovery Co. Limited



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



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



EC Advertising Limited


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



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ECrent Platform Business


In December 2019, we acquired the global business of ECrent.

Going forward, we will continue to target the technology and global sharing economy markets, developing online platforms and rental business partnerships that will drive the global development of sharing through cost-effective rental business models. .

Critical accounting conventions and estimates



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



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

Accounts Receivable


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



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



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Property and Equipment


Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful life of the assets. The estimated useful lives of the assets are as follows:



                                   Useful Life
Office equipment and furniture       5 Years
Vehicles                             5 Years
Vessels                              5 Years




The cost of repairs and maintenance is expensed as incurred; major replacements
and improvements are capitalized. When assets are retired or disposed of, the
cost and accumulated depreciation are removed from the accounts, and any
resulting gains or losses are included in the statements of income and
comprehensive income in the year of disposition.



We examine the possibility of decreases in the value of fixed assets when events
or changes in circumstances reflect the fact that their recorded value may not
be recoverable. We recognize an impairment loss when the sum of expected
undiscounted future cash flows is less than the carrying amount of the asset.



Stock-based Compensation



FASB's ASC Topic 718, Stock Compensation (formerly, FASB Statement 123R) ("ASC
Topic 718"), prescribes accounting and reporting standards for all stock-based
payment transactions in which employee and non-employee services are acquired.
The Company measures the cost of employee and non-employee services received in
exchange for an award of equity instruments based on the grant-date fair value
of the award.



The Company estimates the fair value of each restricted stock award as of the
date of grant using the closing price as reported by the OTC Markets Group Inc.
(the "OTCM") on the date of grant. The fair value determined represents the cost
for the award and is recognized over the vesting period during which an employee
is required to provide service in exchange for the award. The Company accounts
for forfeitures of restricted stock as they occur.



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Currency Exchange Rates


Our functional currency is we dollar, and the functional currency of our operating subsidiaries is the RMB and the Hong Kong dollar.



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



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



Recent accounting positions

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". Under ASU
2016-02, lessees will be required to recognize all leases (with the exception of
short-term leases) at the commencement date including a lease liability, which
is a lessee's obligation to make lease payments arising from a lease, measured
on a discounted basis; and a right-of-use (ROU) asset, which is an asset that
represents the lessee's right to use, or control the use of, a specified asset
for the lease term. Leases with a term of twelve months or less will be
accounted for similar to existing guidance for operating leases. In December
2017, January 2018, July 2018, December 2018, December 2019 and March 2020, the
FASB issued ASU 2017-13, ASU 2018-01, ASU 2018-10 & 11, ASU 2018-20 and ASU
2019-01, respectively, which contain modifications and improvements to ASU
2016-02. The amendments provide entities with an additional (and optional)
transition method to adopt the new leases standard. Under the Optional
Transition Method, an entity initially applies the new leases standard at the
adoption date and recognizes a cumulative-effect adjustment to the opening
balance of retained earnings in the period of adoption. On January 1, 2019, the
Company adopted ASC Topic 842 using the modified retrospective approach and
elected to utilize the Optional Transition Method. In addition, the Company
elected the land easement transition practical expedient and did not reassess
whether an existing or expired land easement is a lease or contains a lease if
it has not historically been accounted for as a lease. The adoption did not
impact the Company's previously reported consolidated financial statements nor
did it result in a cumulative effect adjustment to retained earnings as of
January 1, 2019.



In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation
(Topic 718): Improvements to Nonemployee Share-Based Payment. ASU 2018-07 aligns
the accounting for share based payments granted to non-employees with that of
share based payments granted to employees. The Company early adopted ASU No.
2018-07 in the fourth quarter of 2018 and there was no cumulative effect of
adoption. The adoption of this ASU did not have a material impact on our
financial position, results of operations, cash flows, or presentation thereof.



                                       23





RESULTS OF OPERATIONS


Three months ended June 30, 2021 and 2020

The following table presents the results of our operations for the three months ended June 30, 2021 and 2020:


                                                                         Three Months ended
                                                                              June 30,
                                                                        2021             2020
Revenues                                                            $     42,078     $     56,073
Cost of revenues                                                               -           36,364
Gross profit                                                              42,078           19,709
Operating expenses                                                     1,653,162        1,539,590
Loss from operations                                                  (1,611,084 )     (1,519,881 )
Other (expense) income, net                                              295,959         (413,377 )
Loss from continuing operations before provision for income taxes     (1,315,125 )     (1,933,258 )
Provision for income taxes                                                     -                -
Net loss                                                            $ 

(1,315,125) $ (1,933,258)



Revenues.



During the three months ended June 30, 2021, we recognized revenues from our
sharing economy business of $42,078 compared to $56,073 for the three months
ended June 30, 2020, a decrease of $13,995, or 25.0%.



Cost of revenues.


Cost of revenues includes commission costs. For the three months ended June 30,
2021, cost of revenues was $0 as compared to $36,364 for the three months ended
June 30, 2020, a decrease of $36,364, or 100%.



Gross profit and gross margin.



Our gross profit was $42,078 for the three months ended June 30, 2021 as
compared to gross profit of $19,709 for the three months ended June 30, 2020,
representing gross margins of 100% and 35%, respectively. The increase in our
gross margin for the three months ended June 30, 2021 was primarily attributed
to the new business revenue from acquisition of a wholly owned subsidiary.

Operating expenses.



For the three months ended June 30, 2021, operating expenses were $1,653,162 as
compared to $1,539,590 for the three months ended June 30, 2020, an increase of
$113,572, or 7.38%, due to increase in selling, general and administrative
expense.



                                       24





Loss from operations.


As a result of the factors described above, for the three months ended June 30,
2021, loss from operations amounted to $1,611,084 as compared to $1,519,881 for
the three months ended June 30, 2020.



Other income (expense).


Other income (expense) includes interest income, interest expense, foreign
currency transaction gain (loss), gain on disposal of marketable securities,
loss on disposal of a subsidiary, and other income. For the three months ended
June 30, 2021, total other income, net, amounted to $295,959 as compared to
other expense, net, of $413,377 for the three months ended June 30, 2020, an
increase of $709,336. The increase in other income, net, was primarily
attributable to gain on sale of marketable securities incurred in the three
months ended June 30, 2021.



Income tax provision. Income tax expense was $ 0 for the three months ended June 30, 2021 and 2020.


 Net loss.



As a result of the foregoing, our net loss was $1,315,125, or $(0.01) per share
(basic and diluted), for the three months ended June 30, 2021, as compared with
net loss $1,933,258, or $(0.00) per share (basic and diluted), for the three
months ended June 30, 2020, a change of approximately $618,134, or 32.0%.



                                       25




Six months ended June 30, 2021 and 2020

The following table presents the results of our operations for the half-year ended. June 30, 2021 and 2020:


                                                                          Six Months ended
                                                                              June 30,
                                                                        2021             2020
Revenues                                                            $    130,285     $     67,982
Cost of revenues                                                               -           37,145
Gross profit                                                             130,285           30,837
Operating expenses                                                     2,082,504        4,132,108
Loss from operations                                                  (1,952,219 )     (4,101,271 )
Other income (expense), net                                              405,868         (509,642 )
Loss from continuing operations before provision for income taxes     (1,546,351 )     (4,610,913 )
Provision for income taxes                                                     -                -
Net loss                                                            $ (1,546,351 )   $ (4,610,913 )




Revenues.


During the six months ended June 30, 2021, we saw income from our sharing economy activity $ 130,285 compared to $ 67,982 for the six months ended June 30, 2020, an augmentation of $ 62,303, or 91.6%.


Cost of revenues.



Cost of revenues includes commission costs. For the six months ended June 30,
2021, cost of revenues was $0 as compared to $37,145 for the six months ended
June 30, 2020, a decrease of $37,145, or 100%.



Gross profit and gross margin.



Our gross profit was $130,285 for the six months ended June 30, 2021 as compared
to gross profit of $30,837 for the six months ended June 30, 2020, representing
gross margins of 100% and 45%, respectively. The increase in our gross margin
for the six months ended June 30, 2021 was primarily attributed to the increase
revenue generated from engineering service income of the new acquired wholly
owned subsidiary.



Operating expenses.


For the six months ended June 30, 2021, operating expenses were $2,082,504 as
compared to $4,132,108 for the six months ended June 30, 2020, a decrease of
$2,049,604, or 49.6%, due to decrease in impairment loss on goodwill and
impairment loss on marketable securities.



                                       26





Loss from operations.



As a result of the factors described above, for the six months ended June 30,
2021, loss from operations amounted to $1,952,219, as compared to $4,101,271 for
the six months ended June 30, 2020.



Other income (expense)


Other expense includes interest income, interest expense, foreign currency
transaction gain (loss), gain on disposal of marketable securities, loss on
disposal of a subsidiary, and other income. For the six months ended June 30,
2021, total other income, net, amounted to $405,868 as compared to total other
expense $509,642 for the six months ended June 30, 2020, an increase of
$915,510, or 179.6%. The increase in other income, net, was primarily gain on
sale of marketable securities incurred in the six months ended June 30, 2021.



Income tax provision. Income tax expense was $ 0 for the six months ended June 30, 2021 and 2020.


Net loss.



As a result of the foregoing, our net loss was $1,546,351, or $(0.01) per share
(basic and diluted), for the six months ended June 30, 2021, as compared with
net loss $4,610,913, or $(0.00) per share (basic and diluted), for the six
months ended June 30, 2020, a change of approximately $3,064,562, or 66.5%.

Liquidity and capital resources

Six months ended June 30, 2021 Compared to the six months ended June 30, 2020

From June 30, 2021 and December 31, 2020, we had cash and cash equivalents of approximately $ 581,320 and $ 1,805,417, respectively.



The following table sets forth a summary of our cash flows for the periods as
indicated:



                                                                 For the Six Months ended
                                                                         June 30,
                                                                   2021             2020
Net cash used in operating activities                          $    (795,531 )   $  (755,715 )
Net cash used in investing activities                          $    (724,349 )   $  (200,388
Net cash provided by financing activities                      $     320,062     $ 1,886,407
Effect of exchange rate changes on cash and cash equivalents   $     (24,279 )   $   (20,564 )
Net increase (decrease) in cash and cash equivalents           $  (1,224,097     $   909,740 )
Cash and cash equivalents at beginning of period               $   1,805,417     $    83,667
Cash and cash equivalents at end of period                     $     581,320     $   993,407



The following table presents a summary of the changes in our working capital since
December 31, 2020 To June 30, 2021 (dollars in thousands):



                                                                                    Change in
                                            June 30,                                 Working         Percentage
                                              2021         December 31, 2020         Capital           Change
Working capital:
Total current assets                       $    4,554     $             3,967     $         487              12.2 %
Total current liabilities                      11,413                  11,707              (294 )            (2.5 )%
Working capital                            $   (6,859 )   $            (7,740 )   $        (881 )           (11.4 )%




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Working Capital. Total working capital deficit as of June 30, 2021 amounted to
approximately $6.8 million, as compared to approximately $7.7 million as of
December 31, 2020. The decrease in working capital deficit due to the settlement
of debt upon stock conversion.



Net cash used in operating activities was $802,753 for the six months ended June
30, 2021, and consisted primarily of a net loss of $1,546,351, adjusted for
depreciation and amortization of $115,844, stock-based consultancy fee of
$1,051,410, stock-based business promotion fee of $599,220, gain on disposal of
marketable securities of $1,051,410, an increase in accounts receivable of
$25,607, an increase in prepaid expenses and other receivables of $429,979, a
decrease in accounts payable and accrual of $74,113, an increase in other
payable of $120,750, and a decrease in deferred revenue of $107.



Net cash flow used in investing activities was $724,349 for the six months ended
June 30, 2021 as compared to $200,838 for the six months ended June 30, 2020.
For the six months ended June 30, 2021, net cash flow used in investing
activities reflects cash received from dividend of $7,222, purchase of
marketable securities of $17,381,542 and proceeds from sale of marketable
securities of $16,649,971.



Net cash flow provided by financing activities was $320,062 for the six months
ended June 30, 2021 as compared to $1,886,407 for the six months ended June 30,
2020. During the six months ended June 30, 2021, we received advances from
related party of $149,884, received from issuance of note payable of $230,770,
offset by repayments for bank loans of approximately $60,592. During the six
months ended June 30, 2020, we received advances from related party of $329,982
and received from issuance of note payable of $183,000, repayments for bank
loans of approximately $39,149.



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


Contractual obligations and off-balance sheet arrangements


Contractual Obligations


We have certain fixed contractual obligations and commitments that include
future estimated payments. Changes in our business needs, cancellation
provisions, changing interest rates, and other factors may result in actual
payments differing from the estimates. We cannot provide certainty regarding the
timing and amounts of payments. We have presented below a summary of the most
significant assumptions used in our determination of amounts presented in the
tables, in order to assist in the review of this information within the context
of our consolidated financial position, results of operations, and cash flows.
The following tables summarize our contractual obligations as of June 30, 2021
(dollars in thousands), and the effect these obligations are expected to have on
our liquidity and cash flows in future periods.



                                                   Payments Due by Period
                                         Less than
Contractual obligations:    Total         1 year         1-3 years       3-5 years      5+ years
Bank loans                 $ 11,290     $     6,426     $     4,864     $         -     $       -
Convertible note (1)            634             634               -               -             -
Total                      $ 11,924     $     7,060     $     4,864     $         -     $       -



(1) The convertible note is currently in default with the outstanding balance of

$ 634,341 in principle and $ 853,080 accrued interest at June 30, 2021. At

filing date, the two parties did not reach a mutual agreement.



                                       28




Off-balance sheet provisions



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



Inflation


The effect of inflation on our revenues and operating results was not material.

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