Trans Global Group, Inc. (TGGI), a publicly traded company, recently expanded its presence in the beverage distribution market by acquiring 100% equity interest in ZXG Holdings Limited (ZXGBVI) on June 30, 2022. The acquisition was valued at $11,597,106. TGGI is now positioned to further penetrate the growing beverage distribution and delivery market in the People’s Republic of China (PRC), following this strategic acquisition.
The purchase consideration for the acquisition consists of 1,465,761,690 shares of the company’s common stock, which were issued to ZXGBVI’s original owner at the acquisition date. The acquisition was accounted for using the purchase method of accounting for business combination under ASC 805, with fair values determined using significant judgment and estimates.
According to the details of the acquisition, the company’s major subsidiaries as of December 31, 2022, include ZXG Holdings Limited, Hong Kong Zuixiangui International Holding Co., Ltd., Zui Xian Gui International Holding (Shenzhen) Ltd., and Shenzhen Zui Xian Gui Brewery Technology Ltd., with operations ranging from investment holding to trading of beverages. These subsidiaries are incorporated in various jurisdictions such as The British Virgin Islands (BVI), Hong Kong, and PRC.
Financial Impact of the Acquisition
The acquisition of ZXGBVI has had a significant impact on Trans Global Group’s financial statements. The company reported a net loss of $1,828,118 for the financial year ended December 31, 2022, along with an accumulated deficit of $4,427,506 up to the same date. As of December 31, 2022, the company’s current liabilities exceeded its current assets by $927,531. This raises substantial doubt about the company’s ability to continue as a going concern.
However, Trans Global Group, Inc. has generated revenue primarily from the sales of beverages directly to agents, wholesalers, and end-users since the acquisition of ZXGBVI. The company recognized product revenue at a point in time when the control of the products has been transferred to customers, with packaging, shipping, and handling fees treated as fulfillment costs.
To further support their growth and development, Trans Global Group, Inc. has been following the guidance of ASC 606 on revenue recognition using a five-step process that includes identifying contracts and performance obligations, determining transaction prices, allocating transaction prices to performance obligations, and recognizing revenue when performance obligations are satisfied.
Future Growth and Market Expansion
The acquisition of ZXGBVI has undoubtedly expanded Trans Global Group’s presence in the beverage distribution market in the PRC. While the company still faces financial challenges, this strategic move may provide a strong foundation for future growth and a more significant market share in the coming years.
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