NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES

Scientific Energy, Inc., (the "Company") was incorporated under the laws of the State of  i Utah on  i 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 four subsidiaries, each of which is in charge of respective area such as Development & Maintenance, Marketing & Operation, Logistics & Delivery, Payment & Clearance, Emerging Market Business Development.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 Macao. 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 June 30, 2022, and December 31, 2021, the Company maintained $ i 4,741,715 and $ i 4,899,488 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:

Property, plant and equipment

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:

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 June 30, 2022 and December 31, 2021.

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:

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 June 30, 2022 and December 31, 2021.

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 generated a net loss of $ i 2,533,133 and an accumulated deficit of $ i 12,801,909 as of June 30, 2022. 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 June 30, 2022 and December 31, 2021 is summarized as follows:

Depreciation expense for the three months and six months ended June 30, 2022 were $11,808 and 23,659 respectively; and for the three months and six months ended June 30, 2021 were $245 and $490, respectively.

NOTE 5 – INTANGIBLE ASSETS

Software as of June 30, 2022 and December 31, 2021 is summarized as follows:

Amortization expense for the three months and six months ended June 30, 2022 were $52,657 and $107,765, respectively; and for the three months and six months ended June 30, 2021 was $Nil.

NOTE 6 – GOODWILL

NOTE 7 – 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 $4,418 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 $44,724 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 $1,302,109.  

Right to use assets is summarized below:

During the six months ended June 30, 2022 and 2021, the Company recorded $ i 234,002 and $ i 24,887 as depreciation on ROU assets; and the Company recorded $24,517 and $1,620 as financial interest to current period operations.

Lease liability is summarized below:

Maturity analysis under these lease agreements are as follows:

NOTE 8 - LOAN RECEIVABLES

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

NOTE 9 - INVENTORIES

The Company purchased gold from the platform under its joint venture, Gold Gold Gold Limited. Inventories for gold as of June 30, 2022 was $ i 522. The Macao subsidiary, Green Supply Chain Management Company Limited who was trading as supermarket and had $269,650 merchandise inventory as of June 30, 2022.

NOTE 10 – BANK LOANS

The bank loans are borrowed by MED and Zhuhai Chengmi Technology Company Limited (“Chengmi”), which are the new subsidiaries during business combinations in September 2021. 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%. This loan is secured against the directors of MED and for the use of MED operation due to the outbreak of COVID-19. Another bank loan borrowed by Chengmi with principle of $464,583 and $309,721 and expiring December 2022 and May 2023 respectively, at an interest rate of 4.6% and 4.45% per annum.

In June 13, 2022, MED borrowed a new loan from Macao local bank, Ant Bank with the principle of $618,521 (equivalent to MOP5,000,000).

NOTE 11 – CAPITAL STOCK

The Company is authorized to issue  i 500,000,000 shares of common stock, $ i 0.01 par value, and  i 25,000,000 shares of preferred stock, $ i 0.01 par value.  As of June 30, 2022 and December 31, 2021, there were  i  i 263,337,500 /  shares of the Company’s common stock issued and outstanding, and  i  i  i  i no /  /  / ne of the preferred shares were issued and outstanding.

As of June 30, 2022, Kelton Capital Group Ltd. owned 31,190,500 shares or 11.8% of the Company’s common stock, and Aspect Group Limited owned 26,000,000 shares, or 9.9% of the Company’s common stock, and Jiang Haitao owned 46,588,236 shares, or 17.7% of the Company’s common stock. Other than Kelton Capital Group Ltd, Aspect Group Ltd, and Jiang Haitao, no person owns 5% or more of the Company’s issued and outstanding shares.

NOTE 12 – LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per common share for the six months ended June 30, 2022 and 2021, respectively:

NOTE 13 - 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 2019. The Company shared the operating loss from JV of $12,839.

Summarized financial information for joint venture is as follows:

NOTE 14 - COMMITMENTS AND CONTINGENCIES

Legal proceedings

As of June 30, 2022, the Company is  i not aware of any material outstanding claim and litigation against them.

NOTE 15 - 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.