Value Exchange International Stock

Value Exchange International, Inc. (VEII) provides customer-centric technology solutions for the retail industry in Hong Kong SAR (special administrative region) and certain regions of China and the Philippines.

Due to impact of Coronavirus/COVID-19 pandemic ('COVID 19 pandemic') and lack of adequate funding for business expansion into Southeast Asia, the company's strategic plan to expand its business into Southeast Asia made no progress in 2022.

The company's business strategy includes reviewing possible acquisitions of existing businesses or operating assets in existing or adjacent markets and to do so when and if such an acquisition appears to be compatible and an enhancement of the company's core business lines and can be consummated with available cash and other resources. The company's ability to pursue and consummate acquisitions may be limited, and has been limited, by available cash for mergers and acquisitions and other resources and the perceived cost and burdens of acquiring and integrating the target business or new operating assets into the company's operations. The availability of funding and cash flow are the most significant limitations on the company's ability to expand through acquisitions of businesses and assets - both in terms of money on hand and ability to finance acquisitions, but the estimated business hurdles in successfully penetrating a new market is also a factor in deciding whether to proceed with that expansion.

Initial Business Focus. The company's initial intended, primary business was to operate a credit card processing and merchant-acquiring services company that provide credit card clearing services to merchants and financial institutions in PRC. From inception, the company strives unsuccessfully to create and establish a proposed Global Processing Platform concept to support the credit card processing services ('SinoPay GPP'). Specifically, the company's Internet Protocol business was to be a provider of Internet Protocol ('IP') processing services in Asia to bank card-accepting merchants ('IP Business'). The company efforts to establish a viable IP Business did not succeed.

The acquisition of VEI CHN in 2014 shifted the primary business focus to the IT Business because IT Business provided a more readily attainable revenue generating business line and because of the company's strategic decision that IT Business presented a greater growth and profit potential than IP Business. Further, the SinoGPP system would require ongoing and potentially expensive marketing and sales effort, as well as extensive technical upgrades and function enhancements due to the highly competitive market for Point Of Sale ('POS') systems and longer sales cycle for POS systems than IT Business project and consulting sales. VEI CHN was acquired in a stock-for-stock exchange ('VEI CHN Share Exchange').

Smart Baggage Tags. Through a cooperative effort with another company, Company has the ability to market a smart baggage tag that allows consumers to track the location of their baggage through a smart phone or device using the smart baggage tag and related application. Efforts to promote the smart baggage tag were suspended in 2021 and 2022 due to impact of COVID-19 pandemic on air travel.

Principal business of VEI and its Subsidiaries

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

'VEI CHN' refers to Value Exchange Int'l (China) Limited, and its consolidated subsidiaries, namely Value Exchange Int'l (Hong Kong) Limited ('VEI HKG') and Cucumbuy.com Limited ('CUCUMBUY'), formerly known as Ke Dao Solutions Limited, both are companies incorporated in Hong Kong as limited liability companies, and Value Exchange Int'l (Shanghai) Limited ('VEI SHG'), a wholly Foreign Owned Enterprise ('WFOE') registered in Shanghai, PRC. VEI HKG, CUCUMBUY, all of which Hong Kong SAR subsidiaries are collectively referred to as 'HKG subsidiaries' and VEI SHG is referred to as 'PRC Subsidiary' (collectively PRC Subsidiary and HKG subsidiaries may be referred to as 'VEI CHN Group'). WFOE is a form of company owned by foreign investors recognized under Chinese laws.

Systems Maintenance and Related Service

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

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

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

Systems Development and Integration

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

Business Partner and Customers

The main business partner of the IT Business group is the Chinese and Hong Kong subsidiary operations ('WN') of Diebold Nixdorf Inc. (formerly, 'Wincor Nixdorf AG', a German public company), a U.S.-German public company subject to the reporting requirements of the Exchange Act, ('DN'). Since 1990's, VEI CHN Group served the AS Watson Group, a retail conglomerate, including Watsons, Parknshop and Fortress, directly and through a sub-contracting arrangement with WN in the China-Hong Kong region. This contributes almost half of the gross sales revenue each year to VEI CHN.

In recent years, VEI CHN has striven to broaden its clientele in retail sector and to other business sectors. VEI CHN Group secured a number of service contracts for leading retail groups, Robinson Retails Group in Philippines and Dairy Farm in Hong Kong. PCCW, a leading telecommunication company in Hong Kong, and Inland Revenue Department of the Hong Kong Government have also become major customers of the VEI CHN Group. The focus on expanding clientele in the retail sector is a current priority of Company's growth strategy.

The annual sales of VEI CHN Group have been increasing over the past few years in its IT Business by expanding its customer base and its scope of services. VEI CHN Group solution now runs in over 10,000 POS in the region and provides a solid foundation to VEII's services for IP systems. Also, VEI CHN Group is seeking to leverage its existing POS solution customer base to expand into the mobile Customer Relationship Management and Rewards market. The importance of the mobile market in commerce is globally recognized. Even through the Mobile Customer Relationship Management and Rewards programs has not produced any significant revenues to the VEI CHN Group, the programs seek to exploit the increasing use of mobile devices to shop and purchase products and services, to sustain consumer loyalty by rewards for repeat purchases by mobile devices and to permit companies to develop consumer profile databases used to fashion targeted marketing to the consumers based on purchasing habits. The company provides no assurances that the company will be able to develop a profitable or significant mobile market program or operation. Further, mobile applications and products and services may contain defects in design, manufacture, or operation that make them insecure or ineffective for their intended purposes. Mobile application products and services may have multiple layers of hardware, sensors, processors, software, and firmware, several of which the company may not develop or control. Each layer, including the weakest layer, can impact the security of the whole system.

The company will evaluate the merits of this business and growth strategy from time to time and may elect in the future to continue the company's IT Business focus, or focus more on one segment than the other, including seek business opportunities in the applications of digital technology, which can raise its customers' competitive edge leading to possible increase in market share and profitability in their business sectors. Any change in business focus will be based on current economic conditions, competitive environment, the company's available cash and infrastructure resources, current customer demand trends and financial results of each segment of the company's post-VEI CHN Share Exchange business plan. As of December 31, 2022, the company was pursuing its emphasis on IT Business in the company's core Hong Kong SAR and PRC market while also exploring expansion opportunities in adjacent Asia Pacific markets. The company's ability to exploit adjacent market opportunities for expansion will be limited and governed by available, affordable funding and cash flow, as well as consideration of business and regulatory hurdles in penetrating a new market.

Health and Cosmetic Retailer Agreement. On February 16, 2018, VEI SHG, signed a January 24, 2018 stores equipment support agreement ('Agreement') with the largest health care and beauty retailer ('Retailer') in China. Under the Agreement, the Retailer has contracted for site and preventive maintenance and support for computer and point of sale systems ('Systems'), as well as new store and store renovation install and migration services for Systems from the VEI SHG. The Agreement is non-exclusive, covers Retailer's stores in the northern and eastern region of China and runs through since December 2019. In March 2020, a renewal agreement signed with the Retailer, and related service extended to March 31, 2023.

Marketing

Marketing activities are designed to inform potential clients about the benefits of using the company's services and include and will include the following: face-to-face sales and marketing (including online presentations); development and distribution of marketing literature; direct mail and email; advertising; promotion of the company's web site; attendance at trade shows or product seminars; and industry analyst relations campaign.

Sales are managed at the subsidiary level by each subsidiary. The company has a Sales and Marketing team in each regional office of its existing China/Hong Kong and Manilla markets to promote and maintain good business relationships with the company's customers. The company strives to provide high quality and fast response services to the company's customers in its Help Centre, Maintenance Support Team and Professional IT Engineer to help customers solve their problems and satisfy their IT needs.

VEI CHN Group has been serving in IT Business sectors for over 15 years, focusing on POS maintenance and support to retail sector. The VEI CHN Group will continue its key business and seek to expand its client base to gain more market share in PRC, Hong Kong, and certain other areas of the Asia Pacific. VEII may consider acquiring companies in the Asia Pacific region with similar business, subject to financial wherewithal to do so and subject to a suitable and affordable acquisition opportunity.

The company uses strategic partnerships as another way of marketing and selling the company's IT Business. The operating subsidiaries will also cooperate with strategic partners in the local markets to secure and provide maintenance services to major retail customers and as a basis for attempting to expand the company's business in its markets. In 2022, the company had over 10 strategic partner arrangements engaged in providing its services to customers in the company's China/Hong Kong markets.

Competition

The company faces significant competition from large multinational service providers, such as DN, NCR, Fujitsu IBM, and Toppan Forms; and large national companies, such as Octopus card, an electronic payment in online or offline system in Hong Kong.

Government Regulation

As a U.S. incorporated company, the company is subject to the Foreign Corrupt Practice Act, or 'FCPA,' and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by the U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business.

As a general business legal requirement, the company's Chinese subsidiaries are required to obtain a business license from the State Administration for Market Regulation ('SAMR').

History

The company was incorporated in 2007. It was formerly known as Sino Payments, Inc. and changed its name to Value Exchange International, Inc. in 2017.