SCIENTIFIC ENERGY, INC [SCGY] Filings

10-Q 1 scgy-20240331.htm SCIENTIFIC ENERGY, INC. - FORM 10-Q SEC FILING SCIENTIFIC ENERGY, INC. - Form 10-Q SEC filing

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2024

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

Commission File Number: 000-50559

SCIENTIFIC ENERGY, INC.

(Exact name of registrant as specified in its charter)

Utah 87-0680657

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

Room M, 21F, Tong Nam Ah Commercial Centre, 180 Alameda Dr., Carlos D’Assumpcao. Macau

(Address of principal executive offices including zip code)

(852) 2530-2089

(Registrant’s telephone number)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for 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, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

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

Indicate 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 pursuant to Section 12(b) of the Act: None.

Applicable Only to Corporate Issuers

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 263,337,500 shares of common stock, par value $0.01, as of May 24, 2024.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023 (unaudited)	3
	Condensed Consolidated Statement of Stockholders’ Deficit for the Three Months Ended March 31, 2024 (unaudited)	5
	Condensed Consolidated Statement of Stockholders’ Deficit for the Three Months Ended March 31, 2023 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	22

Item 4.	Controls and Procedures	22

PART II – OTHER INFORMATION		23

Item 6.	Exhibits	23

SIGNATURES		24

Item 1. Financial Statements

SCIENTIFIC ENERGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,	December 31,
	2024	2023
	unaudited
ASSETS
Current assets:
Cash and cash equivalents	$ 2,983,315	$ 3,164,464
Loan receivables	1,018,570	958,534
Accounts receivable	2,149,218	1,338,318
Other receivables	733,574	593,415
Amount due from related companies	1,941,332	491,256
Amount due from joint venture	319	24,679
Inventories	88,573	67,569
Prepaid expense	1,211,556	645,667
Total current assets	10,126,457	7,283,902

Non-current assets:
Property, plant and equipment, net	213,452	192,336
Intangible assets	1,377,246	1,423,234
Goodwill	72,667,589	72,667,589
Operating lease right to use assets	196,600	236,478
Deposits	140,869	145,532
Total non-current assets	74,595,756	74,665,169

Total assets	$ 84,722,213	$ 81,949,071

LIABILITIES AND STOCKHOLDERS' SURPLUS
Current liabilities:
Accounts payable	$ 5,474,993	$ 5,077,329
Accrued expenses	2,994,140	2,699,239
Amount due to related company	1,653,032	-
Deposit received	1,671,317	1,762,678
Other payables	1,501,366	1,308,957
Bank loans	2,226,130	2,239,534
Operating lease liabilities	124,131	188,214
Total current liabilities	15,645,109	13,275,951

Non-current liabilities:
Bank loans	-	18,647
Operating lease liability	72,469	48,264
Total non-current liabilities	72,469	66,911

Total liabilities	15,717,578	13,342,862

Commitments and contingencies	-	-

Stockholders' equity:
Preferred stock: par value $0.01 per share; 25,000,000 shares authorized, none issued and outstanding	-	-
Common stock: par value $0.01 per share, 500,000,000 shares authorized, 263,337,500 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively	2,633,375	2,633,375
Additional paid in capital	78,460,638	78,460,638
Accumulated deficit	(11,530,683)	(11,946,908)
Accumulated other comprehensive income	45,447	40,217
Total stockholders' surplus	69,608,777	69,187,322

Non-controlling interests	(604,142)	(581,113)

Total liabilities and stockholders' equity	$ 84,722,213	$ 81,949,071

See the accompanying notes to the unaudited condensed consolidated financial statements

SCIENTIFIC ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

	Three months ended March 31,
	2024	2023
REVENUE	`$10,404,933`	`$9,217,753`
COST OF REVENUE	`(5,908,122)`	`(5,287,998)`
GROSS PROFIT	`4,496,811`	`3,929,755`

OPERATING EXPENSES:
Selling, general and administrative expenses	`4,040,173`	`3,233,927`
Depreciation and amortization	`47,299`	`31,468`
Total operating expenses	`4,087,472`	`3,265,395`

NET PROFIT FROM OPERATIONS	`409,339`	`664,360`

Other income (expense):
Interest expense, net	`(24,805)`	`(8,791)`

Net income before provision for income taxes	`384,534`	`655,569`

Income taxes	`-`	`-`

NET INCOME	`$384,534`	`$655,569`

Net income/(loss) attributable to non-controlling interests	`31,691`	`(6,510)`

Net income attributable to Scientific Energy, Inc.	`$416,225`	`$649,059`

OTHER COMPREHENIVE (LOSS) / GAIN:
Net income (loss)	`384,534`	`655,569`
Foreign translation (loss) gain	`5,230`	`(11,923)`

Total comprehensive income	`$389.764`	`$637,136`

Foreign translation gain (loss) attributable to non-controlling interest	`8,662`	`-`

Comprehensive income attributable to Scientific Energy, Inc.	`$424,887`	`$649,059`

Net income per common share, basic and diluted	`$0.001`	`$0.002`

Weighted average common shares outstanding, basic and diluted	`263,337,500`	`263,337,500`

See the accompanying notes to the unaudited condensed consolidated financial statements

SCIENTIFIC ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' SURPLUS

THREE MONTHS ENDED MARCH 31, 2024

			Additional		Other	Non-
	Common stock		Paid in	Accumulated	Comprehensive	Controlling
	Shares	Amount	Capital	Deficit	Loss	Interests	Total

Balance, December 31, 2023	263,337,500	$ 2,633,375	$ 78,460,638	$ (11,946,908)	$ 40,217	$ (581,113)	$ 68,606,209

Foreign currency transaction gain	-	-	-	-	5,230	8,662	13,892

Net profit	-	-	-	416,225	-	(31,691)	384,534

Balance, March 31, 2024 (unaudited)	263,337,500	$ 2,633,375	$ 78,460,638	$ (11,530,683)	$ 45,447	$ (604,142)	$ 69,004,635

See the accompanying notes to the unaudited condensed consolidated financial statements

SCIENTIFIC ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' SURPLUS

THREE MONTHS ENDED MARCH 31, 2023

			Additional		Other	Non-
	Common stock		Paid in	Accumulated	Comprehensive	Controlling
	Shares	Amount	Capital	Deficit	Loss	Interests	Total

Balance, December 31, 2022	263,337,500	$ 2,633,375	$ 78,460,638	$ (14,034,905)	$ 32,629	$ (160,788)	$ 66,930,949

Foreign currency transaction gain	-	-	-	-	(11,923)	-	(11,923)

Net profit	-	-	-	649,059	-	6,510	655,569

Balance, March 31, 2023 (unaudited)	263,337,500	$ 2,633,375	$ 78,460,638	$ (13,385,846)	$ 20,706	$ (154,278)	$ 67,574,595

See the accompanying notes to the unaudited condensed consolidated financial statements

SCIENTIFIC ENERGY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended March 31, 2024	Three months ended March 31, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 384,534	$ 655,569
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	18,246	9,555
Amortization	29,053	21,913
Loss on disposal of property and equipment	-	637
Account receivables	(810,900)	268,851
Inventories	(21,003)	28,278
Deposits	4,663	2,447
Prepaid expenses	(565,889)	90,166
Other receivables	(140,158)	(104,937)
Accrued expenses	294,900	(229,344)
Deposits received	(91,361)	(96,781)
Other payable	(8,266)	(42,413)
Accounts payable	397,664	(1,547,381)
Net cash used in operating activities	(508,517)	(943,440)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment	(41,613)	(2,207)
Repayment from related company	202,956	11,086
Repayment from shareholder	200,675	74,935
Repayment from joint venture	24,359	88,283
Loan receivable to joint venture	(60,036)	-
Net cash provided by investing activities	326,341	172,097

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of bank borrowings	(18,615)	(33,624)
Net cash used in financing activities	(18,615)	(33,624)

Effect of currency rate changes on cash	19,642	(17,735)

Net decrease in cash and cash equivalents	(181,149)	(253,854)
Cash and cash equivalents, beginning of period	3,164,464	2,077,797

Cash and cash equivalents, end of period	$ 2,983,315	$ 1,255,095

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$ 24,805	$ 8,791
Income taxes paid	$ -	$ -

Non cash financing activities:
Record right to use assets upon adoption of ASC 842	$ 196,600	$ 426,888
Record lease liabilities upon adoption of ASC 842	$ 196,600	$ 426,888
See the accompanying notes to the unaudited condensed consolidated financial statements

SCIENTIFIC ENERGY, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES

Scientific Energy, Inc., (the "Company") was incorporated under the laws of the State of Utah on May 30, 2001. Prior to August 2011, the Company was principally devoted to the buying and selling of various types and grades of graphite, such as medium- and high-carbon graphite, high-purity graphite, micro-powder graphite and expandable graphite. In August 2011, the Company decided to engage in a business of e-commerce platform. Currently the Company is in the process of developing a website, which provides an e-commerce platform, where registered members can exchange goods and services.

On March 28, 2006, the Company set up a wholly owned subsidiary, PDI Global Limited (“PDI”), which was incorporated in the British Virgin Islands in order to engage in a business of e-commerce platform.

In January 2008, the Company entered into a joint venture agreement with China Resources Development Group Ltd., a Hong Kong company. Under the agreement, a joint venture company, Kabond Investments Ltd (the “JVC”), was established in Hong Kong, and the Company invested $39.6 million Hong Kong dollars (approximately $5.09 million) into the JVC for 72% of the JVC’s capital shares, and China Resources Development Group Ltd., jointly with its partner, invested $15.4 million Hong Kong dollars (approximately $1.98 million) into the JVC to receive 28% of the JVC’s capital shares. In December 2008, all equity interest of the JVC owned by the Company was sold to a third party for $39.6 million Hong Kong dollars (approximately $5,109,743).

In January 2009, the Company through its wholly-owned subsidiary, PDI, entered into a joint venture agreement with China Resources Development Group Ltd. Under the agreement, the Company agreed to invest $43,040,000 Hong Kong dollars (approximately $5.55 million) into a joint venture company Sinoforte Ltd. in Hong Kong (“Sinoforte”). The Company got 80% of Sinoforte's capital shares, and China Resources invested $10,222,000 Hong Kong dollars, approximately $1,318,967, and another investor invested $538,000 Hong Kong dollars, or approximately $69,419, into Sinoforte for 19% and 1% of Sinoforte's capital shares, respectively. The main business of Sinoforte was trading mineral products such as graphite produced in China. In June 2009 and September 2009, respectively, China Resources and the other minority investor cancelled their investments in Sinoforte, and the full amount of their original investments was returned. As a result, Sinoforte became a wholly-owned subsidiary of PDI. On December 8, 2020, PDI sold all the shares of Sinoforte to the Company at consideration of HK$10.

On February 28, 2012, the Company set up a wholly-owned subsidiary, Makeliving Ltd., which was incorporated in the Cayman Islands in order to engage in a business of e-commerce platform.

On January 23, 2018, the Company entered into an agreement with Cityhill Limited, a wholly owned subsidiary of South Sea Petroleum Holdings Limited, a Hong Kong listed public company, pursuant to which parties agreed to establish a joint venture (the “Joint Venture”). Each party owns 50% equity interest in the Joint Venture respectively.

On February 8, 2021, the Company acquired an entire share of a Hong Kong company, Qwestro Limited, for HK$1,000 without any goodwill and bargaining purchase.

On March 24, 2021, the Company disposed of its wholly-owned dormant subsidiary, PDI Global Limited, with a positive net worth of $1 to an unaffiliated third-party purchaser for $1.

In September 27, 2021, the Company completed the acquisition of 98.75% shares of Macao E-Media Development Company Limited (“MED”). As consideration for the MED shares, the Company agreed to issue the Sellers, or its assigns, in a total of 131,337,500 shares of the Company’s restricted common stock, par value $0.01 per share, at a consideration of $0.50 per share, in the aggregate consideration of $65,668,750 (the “Purchase Price”). As a result of this acquisition, MED becomes a 98.75% owned subsidiary of the Company. MED was founded at Macau in 2011. Its main area of business includes food and grocery order-pickup-delivery services from local restaurants, supermarkets and hotels.

MED has five subsidiaries, each of which is in charge of respective area such as Development & Maintenance, Marketing & Operation, Logistics & Delivery, Payment & Clearance, Emerging Market Business Development.

On January 2023, the Company acquired 90% shares of Fresh Life Technology Company Limited (“Fresh Life”) through its subsidiary, Zhuhai Migua Technology Company Limited. The main business of Fresh Life is provision of logistic services in Macau.

On October 9, 2023, the Company acquired 70% shares of Citysearch Technology (HK) Company Limited (“Citysearch”) in Hong Kong. The main business of Citysearch is provision of group dining service platform, which mainly solves the lunch and dinner group dining needs for corporate employees in Hong Kong. As a startup, for the period ended December 31, 2023, Citysearch had a revenue of approximately $27,450, and net loss of approximately $969,632.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying audited consolidated financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the financial position, and the results of its operations and its cash flows. Operating results as presented are not necessarily indicative of the results to be expected for a full year.

The Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain necessary equity financing to continue operations and the attainment of profitable operations. The management will seek to raise funds from shareholders.

The accompanying consolidated financial statements present the financial position and the results of operations of the Company and its 100% owned subsidiaries, Sinoforte Limited. Qwestro Limited, in turn, is the 100% owned subsidiary and consolidates with Sinoforte Limited. The Company has 100% owned subsidiary, Graphite Energy, Inc., established in USA.

The Company has 98.75% owned subsidiary, MED. Zhuhai Chengmi Technology Limited, Guangzhou Chengmi Technology Company Limited, in turn, are the 100% owned subsidiaries with MED. Squirrel Logistic Company Limited and Green Supply Chain Management Company Limited are the 99% owned subsidiaries with MED. Zhuhai Migua Technology Company Limited is 100% owned subsidiary by Zhuhai Chengmi Technology Limited and has a 90% owned subsidiary, Fresh Life Technology Company Limited. The Company acquired 70% shares of Citysearch. All of the above companies consolidate with MED.

Summaries of subsidiaries:

Name of subsidiary		Jurisdiction of organization
Sinoforte Limited		Hong Kong
Qwestro Limited (100% subsidiary of Sinoforte Limited)		Hong Kong
Macao E-Media Development Company Limited		Macau
Squirrel Logistic Company Limited (99% subsidiary of Macao E-Media Development Company Limited)		Macau
Green Supply Chain Management Company Limited (99% subsidiary of Macao E-Media Development Company Limited)		Macau
Guangzhou Chengmi Technology Company Limited (100% subsidiary of Macao E-Media Development Company Limited)		China
Zhuhai Chengmi Technology Limited (100% subsidiary of Macao E-Media Development Company Limited)		China
Zhuhai Migua Technology Company Limited (100% subsidiary of Zhuhai Chengmi Technology Limited)		China
Fresh Life Technology Company Limited (90% subsidiary of Zhuhai Migua Technology Company Limited)		Macau
Citysearch Technology (HK) Company Limited (70% subsidiary of Macao E-Media Development Company Limited		Hong Kong
Graphite Energy, Inc.		USA

All significant intercompany transactions and balances have been eliminated in consolidation.

Business Combinations

The Company accounts for acquisition of entities that include inputs and processes and has the ability to create outputs as business combinations. The Company allocates the purchase price of the acquisition to the tangible assets, liabilities and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition-related expenses and integration costs are expensed as incurred.

Interim Financial Statements

The following (a) condensed consolidated balance sheet as of December 31, 2023, which has been derived from audited financial statements, and (b) the unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of results that may be expected for the year ending December 31, 2023. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on April 16, 2024.

The Company recognizes revenue when: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related revenue is recorded.

The Company defers any revenue for which the product has not been delivered or services have not been rendered or are subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or services have been rendered or no refund will be required.

Revenues on the sale of products, net of estimated costs of returns and allowance, are recognized at the time products are shipped to customers, legal title has passed, and all significant contractual obligations of the Company have been satisfied. Products are generally sold on open accounts under credit terms customary to the geographic region of distribution. The Company performs ongoing credit evaluations of the customers and generally does not require collateral to secure the accounts receivable.

The Company is operating mobile platform of ordering and delivery services for restaurants and supermarket in Macau, together recognizing revenue on closed transactions.

Segment information

ASC 280-10 establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. All sales and substantial assets of the Company are in the Greater Bay Area. The Company applies the management approach to the identification of our reportable operating segments as provided in accordance with ASC 280-10. The information disclosed herein materially represents all of the financial information related to the Company’s principal operating segment.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Concentration of Credit Risk

The Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Generally, the Company’s cash and cash equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management.

As of March 31, 2024, and December 31, 2023, the Company maintained $2,809,330 and $3,157,764 in foreign bank accounts not subject to FDIC coverage.

The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.

Cash and Cash Equivalents

For purposes of the statements of cash flows, cash and cash equivalents include cash on hand and demand deposits held by banks.

Comprehensive Income (Loss)

The Company adopted Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”) which establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments.

Foreign Currency Translation

The Company translates the foreign currency consolidated financial statements into US Dollars (“USD”) using the year or reporting period-end or average exchange rates in accordance with the requirements of Accounting Standards Codification subtopic 830-10, Foreign Currency Matters (“ASC 830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented.

The consolidated financial statements were presented in US Dollars except as other specified.

The cumulative translation adjustment is included in the accumulated other comprehensive gain (loss) within stockholders’ equity (deficit). Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the consolidated results of operations.

The exchange rates used to translate amounts in HKD and MOP into US Dollars for the purposes of preparing the consolidated financial statements were as follows:

	March 31,	December 31,
	2024	2023
Exchange rate on balance sheet dates
USD : HKD exchange rate	7.8235	7.8099
USD : MOP exchange rate	8.0582	8.0441

	For the three months ended March 31,
	2024	2023
Average exchange rate for the period
USD : HKD exchange rate	7.8207	7.8388
USD : MOP exchange rate	8.0553	8.0740

Property, plant and equipment

The estimated useful lives of property, plant and equipment are as follows:

Office equipment		3-5 years
Furniture and fixtures		3-5 years

The Company evaluates the carrying value of items of property, plant and equipment to be held and used whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying value of an item of property, plant and equipment is considered impaired when the projected undiscounted future cash flows related to the asset are less than its carrying value. The Company measures impairment based on the amount by which the carrying value of the respective asset exceeds its fair value. Fair value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved.

Intangible assets

Purchased intangible assets are recognized and measured at fair value upon acquisition. Separately identifiable intangible assets that have determinable lives continue to be amortized over their estimated useful lives using the straight-line method based on their estimated useful lives as follows:

Software

1-10 years

The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Trade receivables

Trade receivables are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and recorded based on management’s assessment of potential losses based on the credit history and relationships with the customers. Management reviews its receivables on a regular basis to determine if bad debt allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

The Company considered the amounts of receivables in dispute and believes an allowance for these receivables were not necessary as of March 31, 2024 and December 31, 2023.

Fair Value Measurements

ASC Topic 820 defines fair value, establishes a framework for measuring fair value and enhances disclosure requirements for fair value measurements. This topic does not require any new fair value measurements. ASC Topic 820 defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC Topic 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 —	Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 —	Other inputs that is directly or indirectly observable in the marketplace.
Level 3 —	Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Earnings (Loss) Per Share

Earnings Per Share (‘EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common stock shares outstanding during the year. Diluted EPS is computed by dividing net income available to common

stockholders by the weighted average number of common stock shares outstanding during the year plus potential dilutive instruments such as stock options and warrants.

The effect of stock options on diluted EPS is determined through the application of the treasury stock method, whereby proceeds received by the Company based on assumed exercises are hypothetically used to repurchase the Company's common stock at the average market price during the period. The Company has no stock options, warrants or other potentially dilutive instruments outstanding at March 31, 2024 and December 31, 2023.

Investment in Unconsolidated Joint Ventures

The Company entered into a JV agreement with an independent third party, to form a JV company. The joint venture agreement provides the Company with only the rights to the assets and obligation for the liabilities of the joint arrangement resting primarily with the JV. In adopting ASC Topic 323, Investments - Equity Method and Joint Ventures (Topic 323), the Company’s investment in joint venture is accounted for using the equity method.

Inventories

Inventories are carried at the lower of cost and net realizable value, as determined using the weighted average cost method. Management compares the cost of inventories with the net realizable value and if applicable, an allowance is made for writing down the inventory to its net realizable value, if lower than cost. On an ongoing basis, inventories are reviewed for potential write-down for estimated obsolescence or unmarketable inventories which equals the difference between the costs of inventories and the estimated net realizable value based upon forecasts for future demand and market conditions. When inventories are written-down to the lower of cost or net realizable value, it is not marked up subsequently based on changes in underlying facts and circumstances.

The Company entered into a purchase agreement with JV company and through their platform to purchase of gold. In adopting ASC Topic 330, Inventory, it permits certain inventories such as precious metals, agricultural and mineral inventories to be stated above cost in exceptional cases. We believe that because our business model is to trade gold and held in short-term, market value is a more useful and relevant measurement than lower of cost or market value.

Goodwill

Goodwill is recorded as the difference between the aggregate consideration paid for in a business combination and the fair value of the acquired net tangible and intangible assets acquired. The Company evaluates goodwill for impairment on an annual basis in the fourth quarter or more frequently if indicators of impairment exist that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Based on that qualitative assessment, if it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company conducts a quantitative goodwill impairment test, which involves comparing the estimated fair value of the reporting unit with its carrying value, including goodwill. The Company estimates the fair value of a reporting unit using a combination of the income and market approach. If the carrying value of the reporting unit exceeds its estimated fair value, an impairment loss is recorded for the difference.

Non-controlling interest

Non-controlling interests represent the equity interests in the subsidiaries that are not attributable, either directly or indirectly, to the Company.

Recent Accounting Pronouncements

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

NOTE 3 – GOING CONCERN

As shown in the accompanying consolidated financial statements, the Company has an accumulated deficit of $11,530,683 as of March 31, 2024. The Company also experienced insufficient cash flows from operations and will be required continuous financial support from the shareholders. The Company will need to raise capital to fund its operations until it is able to generate sufficient revenue to support the future development. Moreover, the Company may be continuously raising capital through the sale of debt and equity securities.

The Company’s ability to achieve these objectives cannot be determined at this stage. If the Company is unsuccessful in its endeavors, it may be forced to cease operations. These consolidated financial statements do not include any adjustments that might result from this uncertainty which may include adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

These factors have raised substantial doubt about the Company’s ability to continue as a going concern. There can be no assurances that the Company will be able to obtain adequate financing or achieve profitability. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 4 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of March 31, 2024 and December 31, 2023 is summarized as follows:

Schedule of Property and Equipment


	March 31, 2024			December 31, 2023
		(unaudited)

Office furniture and fixtures	$	39,117		$	41,725
Office equipment		280,324			243,151
Vehicles		6,391			6,402
Less: accumulated depreciation		(112,380	)		(98,942	)

Property, plant and equipment, net	$	213,452		$	192,336

Depreciation expense for the three months ended March 31, 2024 and 2023 was $18,246 and $9,555, respectively.

NOTE 5 – INTANGIBLE ASSETS

Software as of March 31, 2024 and December 31, 2023 is summarized as follows:

	March 31,			December 31,
	2024			2023
Software	$	2,317,778		$	2,345,637
Less: accumulated amortization		(940,532	)		(922,403	)

Intangible assets, net	$	1,377,246		$	1,423,234

Amortization expense for the three months ended March 31, 2024 and 2023 was $29,053 and $21,913, respectively.

NOTE 6 – ACQUISITION OF SUBSIDIARIES

The Company completed the valuations for Macao E-Media Development Company Limited necessary to assess the fair values of the tangible assets acquired and liabilities assumed, resulting from which the amount of goodwill was determined and recognized as of the respective acquisition date. The following table summarizes the estimated aggregate fair values of the assets acquired and liabilities assumed as of the closing date, September 27, 2021:

(a) Acquisition of Citysearch Technology (HK) Company Limited

On October 9, 2023, the Company acquired 70% shares of Citysearch Technology (HK) Company Limited (“Citysearch”) in Hong Kong with $1,149,346 consideration. The main business of Citysearch is provision of group dining service platform, which mainly solves the lunch and dinner group dining needs for corporate employees in Hong Kong.

The Company completed the valuations necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed, resulting from which the amount of goodwill was determined and recognized as of the respective acquisition date. The following table summarizes the estimated aggregate fair values of the assets acquired and liabilities assumed as of the closing date, October 9, 2023.

Property, plant and equipment	$	6,911
Other receivables and prepayment		94,803
Amount due from related parties		381,086
Cash and cash equivalents		747,332
Other payables and accruals		(323,742)
Goodwill		170,069
Non-controlling interest		72,887
Total consideration paid in cash	$	1,149,346
Less: Cash and cash equivalents		(747,332)
Net cash outflow arising from the acquisition of a subsidiary	$	402,014

The transaction resulted in allocation of $170,069 to goodwill, representing the financial, strategic and operational value of the transaction to the Company. Goodwill is attributed to the premium that the Company paid to obtain the value of the business of Citysearch and the synergies expected from the combined operations of Citysearch and the Company, the assembled workforce and their knowledge and experience in provision of dining services. The total amount of the goodwill acquired is not deductible for tax purposes.

(b) Acquisition of Fresh Life Technology Company Limited

On January 2023, the Company acquired 90% shares of Fresh Life Technology Company Limited (“Fresh Life”) in Macau with Nil consideration. The main business of Fresh Life is provision of logistic services in order to support MED’s business.

Amount due to related parties	$	(925,423)
Goodwill		832,881
Non-controlling interest		92,542
Net cash outflow arising from the acquisition of a subsidiary	$	-

The transaction resulted in allocation of $832,881 to goodwill, representing the financial, strategic and operational value of the transaction to the Company. Goodwill is attributed to the premium that the Company paid to obtain the value of the business of Fresh Life and the synergies expected from the combined operations of Fresh Life and the Company, the assembled workforce and their knowledge and experience in provision of logistic services. The total amount of the goodwill acquired is not deductible for tax purposes.

NOTE 7 – GOODWILL


		March 31, 2024	December 31, 2023
Goodwill	$	72,667,589	$	71,664,639
Acquisition of subsidiaries		-		1,002,950
Balance at end of period	$	72,667,589	$	72,667,589

Goodwill has been allocated for impairment testing purposes to the acquisition of the shares of Macao E-Media Development Company Limited including its subsidiaries Fresh Life Technology Company Limited and Citysearch Technology (HK) Company Limited by the Company.

The Company performed goodwill impairment test at the reporting unit level on an annual basis and between annual tests when an event occurs or circumstances change indicating the asset might be impaired. As of December 31, 2023, the Company performed testing on reporting unit.

The Company first assessed qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. For those reporting units where it is determined that it is more likely than not that their fair values are less than the units’ carrying amounts, the Company will perform the first step of a two-step quantitative goodwill impairment test. After performing the assessment, if the carrying amounts of the reporting units are higher than their fair values, the Company will perform the second step of the two-step quantitative goodwill impairment test.

For the two-step goodwill impairment test, the Company estimated the fair value with income approach for specific reporting unit component. With the income approach, the Company estimates the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on the best estimate of future net sales and operating expenses, based primarily on expected expansion, pricing, market share, and general economic conditions. Certain estimates of discounted cash flows involve businesses with limited financial history and developing revenue models. Changes in these forecasts could significantly change the amount of impairment recorded, if any.

Nil impairment loss of Goodwill being recorded for the three months ended March 31, 2024, and year ended December 31, 2023, respectively.

NOTE 8 – RIGHT TO USE ASSETS AND LEASE LIABILITY

In January 2020, the Company entered a two-year lease for office space of approximately 770 square feet in Hong Kong, expiring January 10, 2022, with monthly payments of approximately $4,404 per month.

In September 2021, the Company entered the lease agreement for office and supermarket with MED and its subsidiaries in Macao and Zhuhai, with monthly payments of approximately $28,351 per month.

In 2023, MED’s subsidiary, Citysearch Technology (HK) Company Limited, entered into a two-year lease for a cafe shop space of approximately 708 square feet in Hong Kong, expiring August 2025 with monthly payment of approximately $5,005 per month.

At lease commencement date, the Company estimated the lease liability and the right of use assets at present value using the Company’s estimated incremental borrowing rate of 8% and determined the initial present value, at inception, of $1,018,954.

Right to use assets is summarized below:


		March 31, 2024	December 31, 2023
Macao and Zhuhai	$	374,154	$	805,253
Hong Kong		213,701		213,701
Subtotal		587,855		1,018,954
Less: accumulated depreciation		(391,255)		(782,476)
Right to use assets, net	$	196,600	$	236,478

During the three months ended March 31, 2024 and 2023, the Company recorded $61,231 and $88,669 as depreciation on ROU assets; and the Company recorded $4,092 and $9,724 as financial interest to current period operations.

Lease liability is summarized below:


		March 31, 2024	December 31, 2023
Macao and Zhuhai	$	21,517	$	134,375
Hong Kong		175,083		102,103
Total lease liability		196,600		236,478
Less: short term portion		(124,131)		(188,214)
Long term portion	$	72,469	$	48,264

Maturity analysis under these lease agreements are as follows:

		March 31, 2024	December 31, 2023
Period / year ended March 31, 2024 and December 31, 2023	$	209,319	$	248,389
Less: Present value discount		(12,719)		(11,911)
Lease liability	$	196,600	$	236,478

Lease expense for the three months ended March 31, 2024 was comprised of the following:


Operating lease expense	$	58,811
Short-term lease expense		52,574
	$	111,385

Lease expense for the three months ended March 31, 2023 was comprised of the following:


Operating lease expense	$	75,103
Short-term lease expense		15,887
	$	90,990

NOTE 9 - LOAN RECEIVABLES

On September 10, 2021, the Company’s subsidiary, Sinoforte Limited entered into a business loan agreement, by and among the company, Gold Gold Gold Limited (“3G”), whereby the Company provide the fund for $1,000,000 to 3G for the business operating use. The loan amount was unsecured, with interest rate 5% p.a. and no fixed term of repayment.

NOTE 10 - INVENTORIES

The Company purchased gold from the platform under its joint venture, Gold Gold Gold Limited. Inventories for gold as of March 31, 2023 was $522. The Macao subsidiary, Green Supply Chain Management Company Limited who was trading as supermarket and had $79,420 merchandise inventory as of March 31, 2023.

NOTE 11 – BANK LOANS

The bank loans are borrowed by MED and Zhuhai Chengmi Technology Company Limited (“Chengmi”). The banking credit facility from MED dated March 3, 2020 for a maximum principal of $374,672 expiring July 31, 2025 at an interest rate of 4.25% per annum. This loan is secured against the directors of MED and for the use of MED operation due to the outbreak of COVID-19. On June 13, 2022, MED borrowed another loan from Ant Bank (Macao) Limited with principle of $623,239 (equivalent to MOP5,000,000), at an interest rate of 4% per annum with no fixed term of repayment. In May and June 2023, Chengmi borrowed the loans with principle of $362,505 and $414,731, repaid within a year and at an interest rate of 4.5% per annum. In June 2023, Chengmi borrowed the loans with principle of $85,518 and $59,052, repaid within a year and at an interest rate of 4.4% per annum.

Bank loans are summarized below:

		March 31, 2024			December 31, 2023
Bank loans	$	2,226,130		$	2,258,181
Less: short term portion		(2,226,130	)		(2,239,534	)
Long term portion	$	-		$	18,647

NOTE 12 – CAPITAL STOCK

The Company is authorized to issue 500,000,000 shares of common stock, $0.01 par value, and 25,000,000 shares of preferred stock, $0.01 par value. As of March 31, 2024 and December 31, 2023, there were 263,337,500 shares of the Company’s common stock issued and outstanding, and none of the preferred shares were issued and outstanding.

As of March 31, 2024, Kelton Capital Group Ltd. owned 31,190,500 shares, or 11.84%, of the Company’s common stock, Jiang Haitao owned 46,588,236 shares, or 17.69%, of the Company’s common stock, and CEDE & Co owned 26,008,850 shares, or 9.88%, of the Company’s common stock. Other than Kelton Capital Group Ltd, Jiang Haitao and CEDE & Co, no person owns 5% or more of the Company’s issued and outstanding shares.

NOTE 13 – INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted profit/(loss) per common share for the three months ended March 31, 2024 and 2023, respectively:


	March 31, 2024			March 31, 2023
			(unaudited)			(unaudited)
Numerator - basic and diluted
Net income		$	384,534		$	649,059
Denominator
Weighted average number of common shares outstanding —basic and diluted			263,337,500			263,337,500
Income per common share — basic and diluted		$	0.001		$	0.002

NOTE 14 - JOINT VENTURE

Gold Gold Gold Limited (“JV”) was created in February 2018. The Company entered into a JV agreement with primary activity of trading of gold. The Company injected $12,839 (HK$100,000) to the JV during the year ended December 31, 2019. The Company shared the operating loss from JV of $12,839 during the year.

Summarized financial information for joint venture is as follows:

Balance Sheets:	March 31, 2024			December 31, 2023
	(unaudited)			(audited)
Property, plant and equipment, net	$	1,213		$	1,488
Other receivables and prepaid		9,413			9,213
Amount due from related company		9,126			-
Inventory		119,101			119,310
Cash and cash equivalents		17,123			49,422
Total assets		155,976			179,433

Accrual expense		(1,003	)		(1,152	)
Other payable to shareholder		(4,352,779	)		(4,310,453	)
Customer deposit		(433,781	)		(404,659	)
Total liabilities		(4,787,563	)		(4,716,264	)

Net liabilities	$	(4,631,587	)	$	(4,536,831	)

Statement of Operations:	Three months ended March 31, 2024
	(unaudited)
Revenue	$	-
Less: Cost of sales		-
		-
Operating expense		(48,320	)
Depreciation		(273	)
Net loss from operations		(48,593	)

Other income (expense):
Interest (expense) income, net		(54,118	)
Net loss	$	(102,711	)

NOTE 15 - RELATED PARTY BALANCES

Due from related parties

The balance due from related parties was as following:


	March 31, 2024	December 31, 2023
	$	$
Citysearch Technology (Macao) Limited (1)	1,402	1,405
Kangaroo Technology Co., Limited (2)	1,452,033	-
Gloryful Company Limited (3)	2,110	2,113
Littlemi Technology Company Limited (4)	117,077	117,282
Nanjing Chengmi Technology Company Limited (5)	149,934	151,297
Watermelon Cultural Communication Company Limited (6)	218,776	219,159
	1,941,332	491,256

Note:

(1)	Citysearch Technology (Macao) Limited is 90% controlled by Jiang Haitao, the shareholder of the Company. The balances represented the amount paid on behalf of the Company for its daily operation purpose.
(2)	Kangaroo Technology Co., Limited has common director with Jiang Haitao, the shareholder of the Company. The balances represented the amount paid on behalf of the Company for its daily operation purpose.
(3)	Gloryful Company Limited is 6% controlled by Jiang Haitao, the shareholder of the Company. The balances represented the amount paid on behalf of the Company for its daily operation purpose.
(4)	Littlemi Technology Company Limited is 50% controlled by Jiang Haitao, the shareholder of the Company. The balances represented the amount paid on behalf of the Company for its daily operation purpose.
(5)	Nanjing Chengmi Technology Company Limited is 100% controlled by Jiang Haitao, the shareholder of the Company. The balances represented the amount paid on behalf of the Company for its daily operation purpose.
(6)	Watermelon Cultural Communication Company Limited 51% controlled by Jiang Haitao, the shareholder of the Company. The balances represented the amount paid on behalf of the Company for its daily operation purpose.

NOTE 16 - COMMITMENTS AND CONTINGENCIES

Legal proceedings

As of March 31, 2024, the Company is not aware of any material outstanding claim and litigation against them.

NOTE 17 - SUBSEQUENT EVENTS

In accordance with ASC 855, “Subsequent Events,” the Company has evaluated subsequent events through the date of filing. No material subsequent events were noted.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains certain forward-looking statements that involve risks and uncertainties. We use words such as "anticipate," "believe," "expect," "future," "intend," "plan," and similar expressions to identify forward-looking statements. These statements are only predictions. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this report. Our actual results could differ materially from those anticipated in these forward-looking statements.

Overview

We conduct our businesses primarily through our 98.75% owned subsidiary, Macao E-Media Development Company Limited, a Macau Company (“MED”), and 50% owned subsidiary, Gold Gold Gold Limited (“3G”), a Hong Kong company. MED has five subsidiaries, each of which is in charge of respective area such as Development & Maintenance, Marketing & Operation, Logistics & Delivery, Payment & Clearance, Emerging Market Business Development.

In this MD&A section, we will primarily discuss the business of MED, as 3G is a joint venture and its financial position and results of operations are not consolidated with our consolidated financial statements. The financial position and results of operations of 3G are summarized in the Notes to our consolidated financial statements.

As a leading mobile platform of ordering and delivery services for restaurants or other merchants, we operate in Macau, and our businesses are built on our platform, Aomi App (the “Platform”). The Platform connects restaurants/merchants (collectively referred to as “Merchants”) with consumers and delivery riders. The Platform is created to serve the needs of these three key constituencies and to become more intelligent and efficient with every customer order. As we grow, we enjoy the benefits of scale and enjoy our competitive advantages, and at the same time we deliver substantial benefits to everyone we serve.

On December 22, 2023, the Company established a new wholly-owned subsidiary, Graphite Energy, Inc., which was incorporated in the State of Florida. The purpose of forming this new subsidiary is to enter the business of graphite production and sales, including establishing a production line for graphite refined powder products in Madagascar. Consequently, the Company first needs to ensure the long-term, sufficient and stable supply of graphite ore, which is the most important raw material for the Company’s graphite production line. On January 18, 2024, the Company entered into a Base Agreement for Purchase of Graphite Ore with Madagascar Graphite Limited (the “Supplier”) to ensure the long-term, sufficient and stable supply of graphite ore, which is the most important raw material for the Company’s graphite production line. The Supplier owns approximately 280-square-kilometer graphite mining area in the Tamatave region of Madagascar, with hundreds of millions of tons of the estimated graphite ore reserves and a history of graphite mining for more than a hundred years. On March 22, 2024, this agreement was amended and restated. Under the amended and restated agreement, the Company will not make advance payments to Supplier for the purchase of graphite ore; instead, payments will be made after manufacturing graphite products using the ore as raw material. The agreement term is one year, ending on March 30, 2025. During the term, Supplier agrees to sell and deliver to the Company, and the Company agrees to purchase and accept from Supplier sufficient amount of graphite ore so that the Company can produce up to 100,000 tons of graphite refined powder products with a carbon content of more than 95%. Parties agree to decide whether to renew or reach a new agreement 30 days before the expiration of this agreement.

Due to the uncontrollable variations among different grades of graphite ore, such as volume, weight, carbon content, as well as inaccuracies in testing, to protect each party’s interest and simplify the process of pricing, parties agree that the price for the graphite ore used for the production of refined graphite powder shall be calculated on an output based formula as follows: (i) for each metric ton of refined graphite powder output, the Company shall pay Supplier a fixed price of $200, regardless of how many metric tons of graphite ore used as input; and (ii) This fixed price shall cover all mining and transporting the graphite ore to the warehousing facility at the Company’s production line in Tamatave, Madagascar by Supplier.

Parties agree that purchase price shall be paid to Supplier by the Company’s issuance of its common stock shares, at a price of $0.50 per share. The Company’s share payment shall be made quarterly in accordance with the quantity of the refined graphite powder produced for the quarter. Parties agree the Company’s shares shall be issued to Supplier within 90 days of each quarterly settlement.

Results of Operations

For the Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

The following table shows operating results for the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
	2024			2023			$ Change			% Change
Revenues	$	10,404,933		$	9,217,753			1,187,180			12.88	%
Cost of revenue		5,908,122			5,287,998			620,124			11.73	%
Gross Profit		4,496,811			3,929,755			567,056			14.43	%

Operating expense		4,087,472			3,265,395			822,077			25.18	%
Net income from operations		409,339			664,360			(255,021	)		(38,39	%)

Other income / (expense)		(24,805	)		(8,791	)		16,014			182.16	%
Net income	$	384,534		$	655,569			(271,035	)		(41.34	%)

Sales

For the three months ended March 31, 2024, the Company generated sales of $10,404,933 compared to $9,217,753 for the same period of 2023. The new generated sales were entirely from the newly acquired 98.75% owned subsidiary, MED.

Costs of Goods Sold

For the three months ended March 31, 2024, the Company generated cost of good sold for $5,908,122 compared to $5,287,998 for the same period of 2023. Currently the Company is attributable to delivery rider costs and purchase of inventory.

Operating expenses

For the three months ended March 31, 2024 and 2023, the Company’s selling, general and administrative expenses were $4,087,472 compared to $3,265,395 for the same period of the previous year. The increase is primarily the result of R&D expense and promotion expense from Macao’s and Zhuhai’s subsidiaries.

Other Income (Expense)

For the three months ended March 31, 2024, the Company had $24,805 of interest expense relating to bank loan interest payable, as compared to $8,791 of interest expense for the same period last year.

Net Income/(Loss)

For the three months ended March 31, 2024, the Company had a net income of $384,534, or $0.001 per share, as compared to a net income of $655,569, or $0.002 per share, for the same period of 2023.

Liquidity and Capital Resources

As of March 31, 2024, the Company had cash and cash equivalents of $$2,983,315 and a working capital deficit of $5,518,652. For the three months ended March 31, 2024, the Company used net cash of $508,517 from its operating activities primarily from our net profit of $384,534, adjusted net with depreciation and amortization of $47,299, an increase in account receivables of $810,900, a increase in inventories of $21,003, a increase in prepaid expenses of $565,889, a decrease in deposits of $4,663, an increase in other receivables of $140,158, an increase in accrued expense of $294,900, a decrease in deposit received of $91,361, a decrease in other payables of $8,266, an increase in account payable of $397,664. By comparison, net cash used in operating activities was $943,440 for the same period of 2023.

During the three months ended March 31, 2024, the Company provided net cash of $326,341 from its investing activities which comprised with purchase of equipment of $41,613, repayment from related company of $202,956, repayment from shareholder of $200,675, repayment from joint venture of $24,359 and loan to joint venture of $60,036. By comparison, net cash provided by investing activities was $172,097 for the same period of 2023.

During the three months ended March 31, 2024, the Company’s financing activities used net cash of $18,615, which was comprised of repayment of bank loans of $18,615. By comparison, net cash used in financing activities was $33,624 for the same period of 2023.

Until we are able to generate sufficient liquidity from operations, we intend to continue to fund operations from cash on-hand, and through private debt or equity placements of our securities. Our continued operations will depend on whether we are able to generate sufficient liquidity from operations and/or raise additional capital through such sources as equity and debt financings, collaborative and licensing agreements and strategic alliances. There can be no assurance that additional capital will become available or, if it does, that it will become available on acceptable terms, or that any additional capital we may obtain will be sufficient to meet our long-term needs. We currently have no commitments for any additional capital, both internally and externally.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations

We have an office in Hong Kong, which is leased on a term of two years ending in January 2026. The space is approximately 770 square feet, and the rent is approximately $4,404 per month. Besides, the acquisition of Macau and Zhuhai subsidiaries, it results on addition lease for office and warehouse approximately 39,800 square feet in Macau and Zhuhai, expiring within year 2023 and 2024 with monthly payment of approximately $28,351 per month. In 2023, MED’s subsidiary, Citysearch Technology (HK) Company Limited, entered into a two-year lease for a cafe shop space of approximately 708 square feet in Hong Kong, expiring August 2025 with monthly payment of approximately $5,005 per month.

Critical Accounting Policies

In preparing the consolidated financial statements, we follow accounting principles generally accepted in the United States (“GAAP”). GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions.

We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied. Our significant accounting policies are summarized in Note 1 to our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

A smaller reporting company is not required to provide the information in this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the Company’s management including its principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation, the principal executive officer and principal financial officer concluded that, as of March 31, 2024, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, in a manner that allows timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

There was no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information in this Item.

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

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

Item 6. Exhibits and Reports

(a) Exhibits:

Exhibit No. Title of Document

31 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101 INS XBRL Instance Document

101SCH XBRL Taxonomy Extension Schema Document

101 CAL XBRL Taxonomy Extension Calculation Linkbase Document

101LAB XBRL Taxonomy Extension Label Linkbase Document

101PRE XBRL Taxonomy Extension Presentation Linkbase Document

101DEF XBRL Taxonomy Extension Definition Linkbase Document.

SIGNATURES

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

SCIENTIFIC ENERGY, INC.

By: /s/ Stanley Chan

Stanley Chan

President and Chief Executive Officer

May 20, 2024