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DECONSOLIDATION OF SUBSIDIARY

6 Months Ended

Jun. 30, 2024

NOTE 15 – DECONSOLIDATION OF SUBSIDIARY

On January 1, 2024 and effective on the same date., JHJ, SSET and Xiangyueheng entered into the Agreement on the Termination of the Concerted Action Agreement (the “Termination Agreement”), pursuant to which the parties release each other from any and all obligations under the CAA. Due to the Termination Agreement, the Company now holds less than 50% of the voting rights in Shuya. The Company has determined that Shuya no longer constitutes a VIE and the Company will not consolidate Shuya into its consolidated financial statements on or after January 1, 2024. Accordingly, started from January 1, 2024, the Company deconsolidated Shuya. Under ASC 810-10-40-5, deconsolidation of a VIE generally results in recognition of a gain or loss in the income statement. In addition, any retained equity interest or investment in the former subsidiary is measured at fair value as of the date of deconsolidation. The consideration for deconsolidating of Shuya is $0, the Company used discounted cash flow method to evaluate the fair value of Shuya, and determined the fair value of retained equity interest for Shuya and NCI approximate its carry value; therefore, no gain or loss was recognized from deconsolidation of Shuya.

The Company recalculated the fair value of Shuya as of January 1, 2024 using the income approach at $1,387,213 and recorded a loss of $27,139 from deconsolidation of Shuya for the six months ended June 30, 2024.

The following table summarizes the carrying value of the assets and liabilities of Shuya at December 31, 2023.


Cash	$	85,226
Accounts receivable		164,744
Advance to supplier-prepayment		317,557
Advance to supplier-related party		466,914
Due from related party		752,066
Inventory		308,481
Total current assets		2,094,988
Fixed assets, net		74,158
Intangible assets, net		12,914
Right of use assets		207,995
Total non-current assets		295,067
Total assets		2,390,055

Accounts payable	$	41,503
Accounts payable-related party		315,361
Tax payable		13,225
Due to related party-existing companies		103,939
Customer deposits		45,074
Accrued expense		135,087
Facility lease liability-current		229,201
Total current liabilities		883,390
Facility lease liability-long term		81,506

Total liabilities		964,896

The following table shows the results of operations relating to discontinued operations Shuya for the six months ended June 30, 2024 and 2023, respectively.

	2024		2023

	SIX MONTHS ENDED JUNE 30,
	2024		2023

Revenues	$	-	$	4,422,400
Cost of goods sold		-		4,192,172

Gross profit		-		230,228

Operating expenses
Selling		-		137,606
General and administrative		-		17,433

Total operating expenses		-		155,039

Income from operations		-		75,189
		-
Other income		-		2,329

Income before income tax		-		77,518

Income tax		-		2,739

Income before noncontrolling interest		-		74,779

Less: income attributable to noncontrolling interest		-		38,137

Net gain to the Company	$	-	$	36,642