NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the YEARS ended August 31, 2021 and 2020
(In
U.S. dollars)
1.
ORGANIZATION AND BUSINESS BACKGROUND
Leader
Capital Holdings Corp. (“LCHD” or the “Company”) was incorporated on March 22, 2017 under the laws of the State
of Nevada.
The
Company mainly engages in the provision of investment platform services with the use of a mobile application through the following subsidiaries:
SCHEDULE OF SUBSIDIARIES
OF COMPANY
Company
name
|
|
Place/date
of incorporation
|
|
Principal
activities
|
|
|
|
|
|
1.
Leader
Financial Group Limited (“LFG”)
|
|
Seychelles
/ March 6, 2017
|
|
Investment
Holding
|
|
|
|
|
|
2.
JFB
Internet Service Limited (“JFB”)
|
|
Hong
Kong / July 6, 2017
|
|
Provide
an Investment platform
|
On
August 17, 2020, LCHD, through JFB, acquired all of the issued and outstanding capital stock (the “Acquisition”) of Nice
Products Inc. (“NPI”), pursuant to the terms and conditions of that certain Stock Purchase Agreement, dated as of the Closing
Date, among the Company, JFB, NPI, the selling shareholders of NPI identified therein (each a “Seller,” and, collectively,
the “Sellers”) and the representative of the Sellers identified therein. As a result of the Acquisition, the Company now
owns indirectly 100%
of NPI, LOC Weibo Co., Ltd. and Beijing DataComm Cloud Media Technology Co., Ltd.
The
aggregate purchase price for the Acquisition was $4,850,000,
less certain discounts, expenses and reductions for outstanding NPI debt owed to the Company and/or its affiliates, resulting in a net
purchase price of $3,506,042,
payable in 8,415,111
shares of the Company’s common stock to
the Sellers in accordance with their respective pro rata percentage.
After
the completion of the acquisition, NPI became a wholly owned subsidiary of the Company.
NPI
was incorporated in the British Virgin Islands on December 17, 2018.
NPI,
through its subsidiaries, mainly engages in the development of ecological-systems applications, integration of big data and promotion
of OTT applications.
LCHD
and its subsidiaries (including NPI and its subsidiaries) are hereinafter referred to as the “Company”.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America
(“US GAAP”) and include the financial statements of LCHD and its wholly owned subsidiaries. Intercompany accounts and transactions
have been eliminated in consolidation. The Company has adopted August 31 as its fiscal year end.
Going
concern
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of business.
The
Company has suffered recurring losses from operations, and records an accumulated deficit and a working capital deficit of $23,001,067 and
$1,521,119 respectively
as of August 31, 2021. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
The ability to continue as a going concern is dependent upon the Company’s profit generating operations in the future and/or
obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when
they become due.
The
Company expects to finance its operations primarily through cash flows from operations, loans from existing directors and shareholders
and placements of capital stock for additional funding. In the event that the Company requires additional funding to finance the growth
of the Company’s current and expected future operations as well as to achieve our strategic objectives, a shareholder has indicated
the intent and ability to provide additional financing. No assurance can be given that any future financing, if needed, will be available
or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing,
if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its
stock holders, in the case of equity financing.
In
March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted
the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted
the normal operations of many businesses, including the Company’s businesses. This outbreak could decrease spending, adversely
affect demand for the Company’s services and harm its business and results of operations. It is not possible for the Company to
predict the duration or magnitude of the adverse results of the outbreak and its effects on its business or results of operations at
this time.
These
consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Use
of estimates
The
preparation of these consolidated financial statements in conformity with U.S. GAAP requires management of the Company to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an on-going
basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The
COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further
business slowdowns or shutdowns, depress demand for the Company’s business, and adversely impact its results of operations. The
Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact
associated with the COVID-19 pandemic. Its estimates may change as new events occur and additional information emerges, and such changes
are recognized or disclosed in its consolidated financial statements.
Identified
below are the accounting policies that reflect the Company’s most significant estimates and judgments, and those that the Company
believes are the most critical to fully understanding and evaluating its consolidated financial statements.
Business
combination
The
Company accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification
(“ASC”) 805 “Business Combinations.” The cost of an acquisition is measured as the aggregate of the acquisition
date fair values of the assets transferred and liabilities incurred by the Company to the sellers and equity instruments issued. Transaction
costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are
measured separately at their fair values as of the acquisition date, irrespective of the extent of any non-controlling interests. The
excess of (i) the total costs of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously
held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill.
If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly
in the consolidated statements of comprehensive income. During the measurement period, which can be up to one year from the acquisition
date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon
the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes
first, any subsequent adjustments are recorded to the consolidated statements of comprehensive income.
When
there is a change in ownership interests that result in a loss of control of a subsidiary, the Company deconsolidates the subsidiary
from the date control is lost. Any retained non-controlling investment in the former subsidiary is measured at fair value and is included
in the calculation of the gain or loss upon deconsolidation of the subsidiary.
Goodwill
and impairment of goodwill
Goodwill
represents the excess of the purchase price and related costs over the fair value of the net identified tangible and intangible assets
and liabilities assumed and is not amortized. The total amount of goodwill is deductible for tax purposes.
In
accordance with ASC Topic 350, “Intangibles-Goodwill and Other,” goodwill is not amortized but is tested for impairment,
annually or more frequently when circumstances indicate a possible impairment may exist. Impairment testing is performed at a reporting
unit level. An impairment loss generally would be recognized when the carrying amount of the reporting unit exceeds its fair value.
The
Company estimates fair value of the applicable reporting unit or units using a discounted cash flow methodology. This methodology represents
a level 3 fair value measurement as defined under ASC 820, Fair Value Measurements and Disclosures, since the inputs are
not readily observable in the marketplace. The goodwill impairment testing process involves the use of significant assumptions,
estimates and judgments, including projected sales, gross margins, selling, general and administrative expenses, and capital expenditures,
and the selection of an appropriate discount rate, all of which are subject to inherent uncertainties and subjectivity. When the Company
performs goodwill impairment testing, its assumptions are based on annual business plans and other forecasted results, which it believes
represent those of a market participant. The Company selects a discount rate, which is used to reflect market-based estimates of the
risks associated with the projected cash flows based on the best information available as of the date of the impairment assessment. Based
on the annual impairment analysis, there is impairment of $1,226,419
and $nil on the goodwill recorded in the Company’s
financial statements for the years ended August 31, 2021 and 2020, respectively. The impairment loss of goodwill was primarily
attributable to the impairment related to NPI as the financial performance of the reporting unit of FinTech App development continued
to fall below the Company’s original expectations.
Given
the current macro-economic environment and the uncertainties regarding its potential impact on the Company’s business, there can
be no assurance that its estimates and assumptions used in its impairment tests will prove to be accurate predictions of the future.
If the Company’s assumptions regarding forecasted cash flows are not achieved, it is possible that an impairment review may be
triggered and goodwill may be impaired.
Cash
and cash equivalents
Cash
and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions
and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Software
development costs
The
Company expenses software development costs, including costs to develop software products or the software component of products to be
marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before
the release of such products and as a result, development costs that meet the criteria for capitalization were not material for the periods
presented.
The
Company capitalizes development costs related to these software applications once the preliminary project stage is complete and it is
probable that the project will be completed and the software will be used to perform the function intended.
On
September 1, 2018 (before the acquisition of NPI (Note 1)), JFB appointed LOC to develop a mobile application in four stages for a total
consideration of TWD20,000,000
($651,466),
payable in the form of shares of common stock of the Company. As of August 31, 2019, the first and second stages of development
for the basic functions of the mobile application have been completed, and the Company has issued a total of 908,678
of restricted shares of common stock
in aggregate at $0.50
per share for the work completed up to August
31, 2019. The Company has expensed $454,339
development costs for the first and second development
stage in general and administrative expenses for the year ended August 31, 2019. In August 2020, the development of the mobile application
has been completed, and the Company expensed $0.2
million development costs in general and administrative
expenses for the year ended August 31, 2020. Further $0.6
million was incurred for additional functions
developed and $0.2
million was incurred for the acquisition of the
ownership of the intellectual property (Note 6).
Revenue
recognition
The
Company adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which establishes principles
for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s
contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer
of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange
for those goods or services recognized as performance obligations are satisfied.
The
Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09:
|
Step
1: Identify the contract
|
|
Step
2: Identify the performance obligations
|
|
Step
3: Determine the transaction price
|
|
Step
4: Allocate the transaction price
|
|
Step
5: Recognize revenue
|
Revenues
are recognized when control of the promised goods or services is transferred to the Company’s customers, which may occur at a point
in time or over time depending on the terms and conditions of the agreement, in an amount that reflects the consideration the Company
expects to be entitled to in exchange for those goods or services.
Provision
of investment platform services
The
Company signed an agreement with a third party whereby the Company authorizes the third party to use the Company’s investment platform
and related applications for a period until December 31, 2020. Income from provision of investment platform services with the use of
the Company’s mobile applications is recognized when the service is performed.
From
September, 2020, the Company generated additional revenue from a new, more comprehensive mobile application, which refer to as the FinMaster
mobile application (the “FinMaster App” and together with the JFB platform, the “Apps”), with similar functions
as the JFB platform. Income from providing investment platform services with the use of a mobile application is recognized when the service
is performed.
The
Company offers a self-managed points program, which can be used in the FinMaster App to redeem merchandise or services. The Company determines
the value of each point based on estimated incremental cost. Customers and advocates have a variety of ways to obtain the points. The
major accounting policy for its points program is described as follows:
The
Company concludes the bonus points offered linked to the purchase transaction of the points is a material right and accordingly a separate
performance obligation according to ASC 606, and should be taken into consideration when allocating the transaction price of the point
sales. The Company also estimates the probability of points redemption when performing the allocation. The amount allocated to the bonus
points as separate performance obligation is recorded as contract liability (deferred revenue) and revenue should be recognized when
future goods or services are transferred. The Company will continue to monitor when and if forfeiture rate data becomes available and
will apply and update the estimated forfeiture rate at each reporting period.
Since
historical information is limited for the Company to determine any potential points forfeitures and most merchandise can be redeemed
without requiring a significant amount of points compared with the amount of points provided to users, the Company has used an estimated
forfeiture rate of zero.
Provision
of software development service and maintenance service
The
Company entered into several agreements with third party customers to assist the customers in the development of their mobile communications
software and mobile e-commerce software. Income from provision of software development service and maintenance service are recognized
when the service is performed.
Revenue
by major product line
SCHEDULE
OF REVENUE BY MAJOR PRODUCT LINE
|
|
Year ended August 31,
|
|
|
|
2021
|
|
|
2020
|
|
Provision of investment platform services
|
|
$
|
19,606
|
|
|
$
|
6,667
|
|
Provision of software development service and maintenance service
|
|
|
75,560
|
|
|
|
-
|
|
|
|
$
|
95,166
|
|
|
$
|
6,667
|
|
Revenue
by recognition over time vs point in time
SCHEDULE
OF REVENUE BY RECOGNITION OVER TIME VS POINT IN TIME
|
|
Year ended August 31,
|
|
|
|
2021
|
|
|
2020
|
|
Revenue by recognition over time
|
|
$
|
95,166
|
|
|
$
|
6,667
|
|
Revenue by recognition at a point in time
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
95,166
|
|
|
$
|
6,667
|
|
Remaining
performance obligations represent contracted revenues that had not yet been recognized, and include deferred revenues; invoices that
have been issued to customers but were uncollected and have not been recognized as revenues; and amounts that will be invoiced and recognized
as revenues in future periods. As of August 31, 2021, the Company’s remaining performance obligations were $16,225,
which it expects to recognize as revenues over the next twelve months and the remainder thereafter.
The
Company had not occurred any costs to obtain contracts.
The
Company does not have amounts of contract assets since revenue is recognized as control of goods or services is transferred. The contract
liabilities consist of advance payments from customers. The contract liabilities are reported in a net position on a customer-by-customer
basis at the end of each reporting period. All contract liabilities are expected to be recognized as revenue within one year and are
included in other payables and accrued liabilities in the consolidated balance sheet.
Contract
balances
The
Company’s contract liabilities consist of receipts in advance for software development and FinMaster App. Below is the summary
presenting the movement of the Company’s contract liabilities for the year ended August 31, 2021:
SCHEDULE OF CONTRACT
LIABILITIES
Receipt in advance
|
|
August
31, 2021
|
|
|
August
31, 2020
|
|
|
|
|
|
|
|
|
Balance as of September 1
|
|
$
|
2,896
|
|
|
$
|
-
|
|
Advances received from customers related to unsatisfied performance obligations
|
|
|
15,903
|
|
|
|
2,826
|
|
Revenue recognized from beginning contract liability balance
|
|
|
(3,014
|
)
|
|
|
-
|
|
Exchange difference
|
|
|
440
|
|
|
|
70
|
|
Balance as of August 31
|
|
$
|
16,225
|
|
|
$
|
2,896
|
|
Practical
expedients and exemption
The
Company had not occurred any costs to obtain contracts, and do not disclose the value of unsatisfied performance obligations for contracts
with an original expected length of one year or less.
Research
and development expenses
Research
and development (“R&D”) expenses are primary comprised of charges for R&D and consulting work performed by third
parties; salaries and benefits for those employees engaged in research, design and development activities; costs related to design tools;
and allocated costs.
For
the year ended August 31, 2021 and 2020, the total R&D expenses were $602,118
and $nil,
respectively.
Sales
and marketing expenses
Sales
and marketing expenses consist primarily of marketing and promotional expenses, salaries and other compensation-related expenses to sales
and marketing personnel. Advertising expenses consist primarily of costs for the promotion of corporate image and product marketing.
The Company expenses all advertising costs as incurred and classifies these costs under sales and marketing expenses. For the years ended
August 31, 2021 and 2020, advertising costs totaled $168,535
and $nil
respectively.
From
September, 2019, customers or users of the Company’s mobile application can obtain points through ways such as frequent sign-ins
to the Company’s mobile application, sharing articles from the application to users’ own social media. The Company believes
these points are to encourage user engagement and generate market awareness. As a result, the Company accounts for such points as selling
and marketing expenses with a corresponding liability recorded under other current liabilities of its consolidated balance sheets upon
the points offering. The Company estimates liabilities under the customer loyalty program based on cost of the merchandise that can be
redeemed, and its estimate of probability of redemption. At the time of redemption, the Company records a reduction of inventory and
other current liabilities.
Since
historical information is limited for the Company to determine any potential points forfeiture and most merchandise can be redeemed without
requiring a significant amount of points compared with the amount of points provided to users, the Company has used an estimated forfeiture
rate of zero.
For
the year ended August 31, 2021 and 2020, redeemable point liability charged as selling and marketing expenses were $35,111
and $nil,
respectively.
As
of August 31, 2021 and 2020, liabilities recorded related to unredeemed points were $75,648
and $40,003,
respectively, which were included in other payables (note 8).
General
and administrative expenses
General
and administrative expenses consist primarily of salaries, bonuses and benefits for employees involved in general corporate functions,
depreciation and amortization of fixed assets, legal and other professional services fees, rental and other general corporate related
expenses.
Inventory
Inventories
are stated at the lower of cost or net realizable value. Cost is calculated on the average basis and includes all costs to acquire and
other costs to bring the inventories to their present location and condition. The Company records inventory write-downs for excess or
obsolete inventories based upon assumptions on current and future demand forecasts. If the inventory on hand is in excess of future demand
forecast, the excess amounts are written off. The Company also reviews inventory to determine whether its carrying value exceeds the
net amount realizable upon the ultimate sale of the inventory. This requires the determination of the estimated selling price of the
vehicles less the estimated cost to convert inventory on hand into a finished product. Once inventory is written-down, a new, lower-cost
basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase
in that newly established cost basis.
Inventory
as of August 31, 2021 represents merchandise inventory which can be redeemed by deducting membership rewards points of customer loyalty
program.
Leases
The
Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on
the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the
rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate
based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use
(“ROU assets”) assets represent the Company’s right to control the use of an identified asset for the lease term and
lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized
based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the
lease term. The Company elected the package of practical expedients permitted under the transition guidance to combine the lease and
non-lease components as a single lease component for operating leases associated with the Company’s office space lease, and to
keep leases with an initial term of 12
months or less off the balance sheet and recognize
the associated lease payments in the consolidated statements of income on a straight-line basis over the lease term.
The
operating lease is included in operating lease right-of-use assets, operating lease liabilities-current and operating lease liabilities-non-current
on the Company’s consolidated balance sheets.
Accounts
receivable
Accounts
receivable are stated at the original amount less an allowance for doubtful receivables, if any, based on a review of all outstanding
amounts at period end. An allowance is also made when there is objective evidence that the Company will not be able to collect all amounts
due according to the original terms of the receivables. The Company analyzes the aging of the customer accounts, coverage of credit insurance,
customer concentrations, customer credit-worthiness, historical and current economic trends and changes in its customer payment patterns
when evaluating the adequacy of the allowance for doubtful accounts.
Plant
and equipment
Plant
and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated
on the straight-line basis over the following expected useful lives from the date on which they become fully operational:
SCHEDULE
OF PLANT AND EQUIPMENT USEFUL LIVES
|
|
Expected useful life
|
|
Furniture and fixtures
|
|
|
3
|
|
Office equipment
|
|
|
3
|
|
Leasehold improvements
|
|
|
3
|
|
Intangible
assets
The
Company recorded intangible assets with definite lives, including investment platform and technical know-hows. Intangible assets are
recorded at cost less accumulated amortization with no residual value. Amortization of intangible assets is computed using the straight-line
method over their estimated useful lives.
The
estimated useful lives of the Company’s intangible assets are listed below:
SCHEDULE OF USEFUL
LIVES OF COMPANY'S INTANGIBLE ASSETS
Investment platform
|
|
|
5
years
|
|
Technical know-hows
|
|
|
8
years
|
|
Trademarks
|
|
|
10
years
|
|
Impairment
of long-lived assets (including amortizable intangible assets)
The
Company reviews the carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to the undiscounted future net cash flows expected to be generated by the asset. If the assets are considered to be
impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the
assets. Impairment of $88,415
and $nil
has been recorded by the Company for the years
ended August 31, 2021 and 2020, respectively. The impairment loss of intangible assets was primarily attributable to the financial
performance of NPI’s technical know-hows fall below the Company’s original expectations and they assessed the recoverability
of the carrying value of certain intangible assets which resulted in impairment losses.
Income
taxes
Income
taxes are determined using an asset and liability method in accordance with the provisions of ASC Topic 740, “Income Taxes”
(“ASC Topic 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the
periods in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC
740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements
uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the
financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such
tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood
of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
As of August 31, 2021 and 2020, the Company has no
accrued interest or penalties related to uncertain
tax positions.
The
Company conducts businesses in the PRC, Taiwan and Hong Kong. The Company is subject to tax in these jurisdictions. As a result of its
business activities, the Company will file tax returns that are subject to examination by the respective tax authorities.
Net
loss per share
The
Company calculates net income/(loss) per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income/(loss)
per share is computed by dividing the net income/(loss) by the weighted-average number of shares of common stock outstanding during
the period. Diluted income per share is computed similar to basic income/(loss) per share except that the denominator is increased to
include the number of additional shares of common stock that would have been outstanding if the potential common stock equivalents
had been issued and if the additional shares of common stock were dilutive. The following table presents a reconciliation of basic
and diluted net loss per share:
SCHEDULE
OF RECONCILIATION OF BASIC AND DILUTED NET LOSS PER SHARE
|
|
2021
|
|
|
2020
|
|
|
|
Year ended August 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(11,693,492
|
)
|
|
$
|
(9,842,829
|
)
|
Weighted average number of shares of common stock outstanding - Basic and diluted (Note)
|
|
|
143,714,764
|
|
|
|
115,207,489
|
|
Net loss per share - Basic and diluted
|
|
$
|
(0.08
|
)
|
|
$
|
(0.09
|
)
|
Note:
Including 1,122,668
vested shares granted as stock compensation but not yet issued
for the year ended August 31, 2021; and including 5,500,000
shares to be canceled, 593,750
shares as stock compensation and 375,000
shares to be issued to investors for the year
ended August 31, 2020 (note 13).
As
of August 31, 2021 and 2020, the Company’s convertible notes payable were excluded from the diluted loss per share calculation
as they were anti-dilutive.
Stock-based
compensation
Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment topic of ASC Topic 718 (“ASC 718”), which
requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity
instruments over the vesting period or immediately if fully vested and non-forfeitable. The Financial Accounting Standards Board (“FASB”)
also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair
value of the award.
Additionally,
ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, permits the election of an accounting policy for forfeitures
of share-based payment awards, either to recognize forfeitures as they occur or estimate forfeitures over the vesting period of the award.
The Company has elected to recognize forfeitures as they occur.
On
September 1, 2019, the Company adopted ASU No. 2018-07, “Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee
Share-Based Payment Accounting” (“ASU 2018-07”). Before the adoption of this guidance, the equity-classified share-based
awards held by non-employees were subject to re-measurement through each vesting date. Upon the adoption of this guidance, the Company
no longer re-measures equity-classified share-based awards granted to consultants or non-employees at each reporting date through the
vesting date and the accounting for these share-based awards to consultants or non-employees and employees was substantially aligned.
Cancellation
of a share-based payment by the entity results in accelerated recognition of any unrecognized cost. Cancellation by the counterparty
does not change recognition of the compensation cost. The termination of an employee that resulted in the forfeiture of share-based awards
is not considered to be a cancellation of the awards.
Foreign
currencies translation
Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing
at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated
into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded
in the statements of operations.
The
reporting currency of the Company is United States Dollars (“US$”), which is also the Company’s functional currency.
The Company’s subsidiary in Seychelles, the PRC, Taiwan and Hong Kong maintains its books and record in United States Dollars (“US$”),
Renminbi (“RMB”), New Taiwanese Dollars (“NT$”) and Hong Kong Dollars (“HK$”) respectively, which
are the primary currencies of the economic environment in which the entities operate (the functional currencies).
In
general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not the US$ are translated
into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement,” using the exchange
rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses
resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive
income as a component of shareholders’ equity.
Translation
of amounts from foreign currencies into US$ has been made at the following exchange rates for the respective periods:
SCHEDULE OF FOREIGN
CURRENCY TRANSLATION
|
|
As of and for the
year ended
August 31, 2021
|
|
|
As of and for the
year ended
August 31, 2020
|
|
Year-end / average HK$ : US$ 1 exchange rate
|
|
|
7.80
|
|
|
|
7.80
|
|
Year-end NT$ : US$ 1 exchange rate
|
|
|
27.66
|
|
|
|
29.37
|
|
Year-average NT$ : US$ 1 exchange rate
|
|
|
28.22
|
|
|
|
30.10
|
|
Year-end RMB : US$ 1 exchange rate
|
|
|
6.46
|
|
|
|
6.85
|
|
Year-average RMB : US$ 1 exchange rate
|
|
|
6.54
|
|
|
|
7.03
|
|
Related
parties
Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control
the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also
considered to be related if they are subject to common control or common significant influence.
Convertible
instruments
The
Company accounts for hybrid contracts that feature conversion options in accordance with U.S. GAAP. ASC 815 “Derivatives and Hedging
Activities,” (“ASC 815”) requires companies to bifurcate conversion options from their host instruments and account
for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which
(a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic
characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the
host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair
value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would
be considered a derivative instrument.
Conversion
options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity
or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation
from the host instrument.
The
Company accounts for convertible instruments, when the Company has determined that the embedded conversion options should not be bifurcated
from their host instruments, in accordance with ASC 470-20 “Debt with Conversion and Other Options” (“ASC 470-20”).
Under ASC 470-20 the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded
in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note
transaction and the effective conversion price embedded in the note. The Company accounts for convertible instruments (when the Company
has determined that the embedded conversion options should be bifurcated from their host instruments) in accordance with ASC 815. Under
ASC 815, a portion of the proceeds received upon the issuance of the hybrid contract are allocated to the fair value of the derivative.
The derivative is subsequently marked to market at each reporting date based on current fair value, with the changes in fair value reported
in results of operations.
Fair
value of financial instruments
The
carrying value of the Company’s financial instruments: cash and cash equivalents, deposits, accounts payable and accrued liabilities,
balances due with directors and shareholders, convertible notes payable and bonds payable approximate at their fair values because of
the short-term nature of these financial instruments or the rate of interest of these instruments approximate the market rate of interest.
The
Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”),
with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy
that prioritizes the inputs used in measuring fair value as follows:
Level
1: Observable inputs such as quoted prices in active markets;
Level
2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level
3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The
following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair
value on a recurring basis:
SCHEDULE OF FAIR
VALUE HIERARCHY AND FINANCIAL ASSETS LIABILITIES
|
|
Carrying Value at
|
|
|
Fair Value Measurement at
|
|
|
|
August
31, 2020
|
|
|
August 31, 2020
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Convertible notes measured at fair value
|
|
$
|
104,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
104,000
|
|
|
|
Carrying Value at
|
|
|
Fair Value Measurement at
|
|
|
|
August 31, 2021
|
|
|
August 31, 2021
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Convertible notes measured at fair value
|
|
$
|
990,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
990,000
|
|
A
summary of changes in financial liabilities for the year ended August 31, 2021 was as follows:
SCHEDULE OF CHANGE
IN FINANCIAL LIABILITY
Balance at September 1, 2019
|
|
|
|
|
|
$
|
-
|
|
Issuance of convertible notes
|
|
|
|
|
|
|
230,000
|
|
Interest expenses on convertible notes
|
|
|
|
|
|
|
3,997
|
|
Interest waived on conversion of convertible notes
|
|
|
|
|
|
|
(3,997
|
)
|
Change in fair value of convertible notes
|
|
|
|
|
|
|
199,000
|
|
Conversion of convertible notes
|
|
|
|
|
|
|
(325,000
|
)
|
Balance at September 1, 2020
|
|
|
|
|
|
$
|
104,000
|
|
Issuance of convertible notes
|
|
|
|
|
|
|
800,000
|
|
Interest paid
|
|
|
|
|
|
|
(6,000
|
)
|
Interest expenses on convertible notes
|
|
|
|
|
|
|
44,908
|
|
Change in fair value of convertible notes
|
|
|
|
|
|
|
47,092
|
|
Balance at August 31, 2021
|
|
|
|
|
|
$
|
990,000
|
|
Fair
value of the convertible notes is determined using the binomial model using the following assumptions at inception and on subsequent
valuation dates:
SCHEDULE OF FAIR
VALUE ASSUMPTION OF CONVERTIBLE NOTES
Convertible
notes holders
|
|
Teh-Ling
Chen
|
|
|
Li-Ching
Yang
|
|
|
Jui-Chin
Chen
|
|
|
Teh-Ling
Chen
|
|
|
Chin-Ping
Wang Chin-Nan Wang Chin-Chiang Wang
|
|
|
Teh-Ling
Chen
|
|
Appraisal
Date (Inception Date)
|
|
|
February
24, 2020
|
|
|
|
February
27, 2020
|
|
|
|
March
18, 2020
|
|
|
|
November
2, 2020
|
|
|
|
November
25, 2020
|
|
|
|
January
15, 2021
|
|
Risk-free
Rate
|
|
|
1.25
|
%
|
|
|
1.06
|
%
|
|
|
0.54
|
%
|
|
|
0.16
|
%
|
|
|
0.16
|
%
|
|
|
0.1
|
%
|
Applicable
Closing Stock Price
|
|
$
|
1.25
|
|
|
$
|
1.25
|
|
|
$
|
1.20
|
|
|
$
|
0.12
|
|
|
$
|
3.00
|
|
|
$
|
2.00
|
|
Conversion
Price
|
|
$
|
1.00
|
(i)
|
|
$
|
1.00
|
(i)
|
|
$
|
1.00
|
(i)
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
|
$
|
1.50
|
(ii)
|
|
$
|
1.50
|
(ii)
|
|
$
|
1.50
|
(ii)
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility
|
|
|
27.82
|
%
|
|
|
27.94
|
%
|
|
|
34.20
|
%
|
|
|
41.51
|
%
|
|
|
42.00
|
%
|
|
|
43.50
|
%
|
Dividend
Yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Credit
Spread
|
|
|
2.71
|
%
|
|
|
2.96
|
%
|
|
|
6.88
|
%
|
|
|
7.52
|
%
|
|
|
6.93
|
%
|
|
|
6.76
|
%
|
Liquidity
Risk Premium
|
|
|
42.09
|
%
|
|
|
36.26
|
%
|
|
|
51.08
|
%
|
|
|
77.62
|
%
|
|
|
78.14
|
%
|
|
|
75.73
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appraisal
Date
|
|
|
|
|
|
|
|
|
|
|
August
31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free
Rate
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0.13
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Applicable
Closing Stock Price
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
1.00
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Conversion
Price
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0.40
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Volatility
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
43.71
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Dividend
Yield
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Credit
Spread
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
3.80
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Liquidity
Risk Premium
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
76.69
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appraisal
Date
|
|
|
|
|
|
|
|
|
|
|
August
31, 2021
|
|
|
|
August
31, 2021
|
|
|
|
August
31, 2021
|
|
|
|
August
31, 2021
|
|
Risk-free
Rate
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0.05
|
%
|
|
|
0.09
|
%
|
|
|
0.10
|
%
|
|
|
0.12
|
%
|
Applicable
Closing Stock Price
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
2.01
|
|
|
$
|
2.01
|
|
|
$
|
2.01
|
|
|
$
|
2.01
|
|
Conversion
Price
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
Volatility
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
45.20
|
%
|
|
|
49.90
|
%
|
|
|
49.76
|
%
|
|
|
48.45
|
%
|
Dividend
Yield
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Credit
Spread
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
3.63
|
%
|
|
|
3.63
|
%
|
|
|
3.63
|
%
|
|
|
3.63
|
%
|
Liquidity
Risk Premium
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
84.04
|
%
|
|
|
86.98
|
%
|
|
|
86.63
|
%
|
|
|
85.12
|
%
|
(i)
|
USD1.00
per share if converted
on or before the one-year anniversary of the issuance date
|
(ii)
|
USD1.50
per share if converted
at any time after the one-year anniversary of the issuance date
|
Segment
reporting
ASC
Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management
approach model is based on the way a company’s chief operating decision maker organizes segments within the company for making
operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography,
legal structure, management structure, or any other manner in which management disaggregates a company.
Management
determined that the Company’s operations constitute a single reportable segment in accordance with ASC 280. The Company operates
exclusively in one business and industry segment: the provision of investment platform services through mobile application.
Recent
accounting pronouncements
Recently
Adopted Accounting Standards
In
August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements
for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value
hierarchy. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years,
with early adoption permitted for any eliminated or modified disclosures. The Company applied the new standard beginning September 1,
2020.
Accounting
Pronouncements Issued But Not Yet Adopted
In
January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill
impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting
unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on
a prospective basis. As a smaller reporting company, the standard will be effective for the Company for interim and annual reporting
periods beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of adopting
this standard on its unaudited condensed consolidated financial statements.
In
May 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-05, which is an update to ASU Update No. 2016-13,
Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected
credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous
incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several
consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which
must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30,
Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this ASU address those stakeholders’
concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized
cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing
an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce
the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful
information. ASU 2019-05 is effective for “smaller reporting companies” for fiscal year beginning after December 15, 2022.
The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.
In
December 2019, the FASB issued ASU 2019-12: Simplifying the Accounting for Income Taxes (Topic 740), which removes certain exceptions
to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying
and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within
those fiscal years, with early adoption permitted. The Company is evaluating the effect of adopting this new accounting guidance but
does not expect adoption will have a material impact on the Company’s consolidated financial statements and related disclosures.
In
March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical
expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU
2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact
of the guidance and may apply the elections as applicable as changes in the market occur.
In
August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging
- Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities
and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing
guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features
and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception
from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s
own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises
the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments
by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an
instrument may be settled in cash or shares.
For
SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 including
interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15,
2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods
within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the
guidance in an interim reporting period. The Company is currently evaluating the impact that ASU 2020-06 may have on its consolidated
financial statements and related disclosures.
In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50),
Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic
815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU
2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an
exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange
as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as
the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification
or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment
for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination
or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods
within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring
on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects
to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes
that interim period. The adoption of ASU 2021-04 is not expected to have any impact on the Company’s consolidated financial statement
presentation or disclosures.
Except
for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the consolidated
financial position, statements of operations and cash flows.
3.
ACQUISITION OF SUBSIDIARIES
On
August 17, 2020, the Company acquired all of the issued and outstanding capital stock (the “Acquisition”) of NPI, pursuant
to the terms and conditions of that certain Stock Purchase Agreement, dated as of the Closing Date, among the Company, NPI, the selling
shareholders of NPI identified therein (each a “Seller,” and, collectively, the “Sellers”) and the representative
of the Sellers identified therein.
The
aggregate purchase price for the Acquisition was $4,850,000,
less certain discounts, expenses and reductions for outstanding NPI debt owed to the Company and/or its affiliates, resulting in a net
purchase price of $3,506,042,
payable in 8,415,111
shares of the Company’s common stock to
the Sellers in accordance with their respective pro rata percentage.
After
the completion of the Acquisition, NPI became a wholly owned subsidiary of the Company.
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, August 31, 2020.
SUMMARY
OF FAIR VALUES OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
185,117
|
|
Prepayments, deposits and other receivables
|
|
|
145,228
|
|
Due from a shareholder
|
|
|
34,048
|
|
Right-of-use operating lease assets
|
|
|
113,590
|
|
Plant and equipment, net
|
|
|
30,365
|
|
Intangible assets- Technical know-hows
|
|
|
818,200
|
|
Goodwill
|
|
|
2,974,364
|
|
Other payables and accrued liabilities
|
|
|
(383,087
|
)
|
Contract liabilities
|
|
|
(2,896
|
)
|
Due to shareholders
|
|
|
(99,730
|
)
|
Operating lease liability
|
|
|
(113,646
|
)
|
Tax payable
|
|
|
(31,871
|
)
|
Deferred tax liabilities
|
|
|
(163,640
|
)
|
Net purchase price
|
|
$
|
3,506,042
|
|
|
|
|
|
|
Less: Outstanding NPI debt owed to the Company
|
|
|
|
|
Accounts receivable
|
|
|
989,854
|
|
Notes payable
|
|
|
(3,066,617
|
)
|
Aggregate fair values
of the assets acquired and liabilities assumed
|
|
$
|
1,429,279
|
|
The
transaction resulted in a purchase price allocation of $2,974,364
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 NPI and the synergies expected from the combined operations of NPI and the Company, the assembled workforce and their
knowledge and experience in provision of products and projects utilizing NPI’s technical know-hows and FinTech App development.
The total amount of the goodwill acquired is not deductible for tax purposes.
The
movement of the goodwill for the years ended August 31, 2021 and 2020 are as follows:
Schedule Of Movement Of Goodwill
Balance as of September 1, 2019
|
|
$
|
-
|
|
Acquisition of NPI
|
|
|
2,974,364
|
|
Balance as of August 31, 2020
|
|
$
|
2,974,364
|
|
Impairment of goodwill in relation to NPI
|
|
|
(1,226,419
|
)
|
Balance as of August 31, 2021
|
|
$
|
1,747,945
|
|
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 August 31, 2021, the Company performed testing on reporting unit
of the Fintech App development.
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.
In 2021, the Company performed qualitative assessments
for FinTech App development reporting unit. Based on the requirements of ASC 350-20-35-3C through ASC 350-20-35-3G, the Company evaluated
all relevant factors, weighed all factors in their totality. As the financial performance of FinTech App development reporting unit was
below original expectations, fair value of this reporting unit was indicated to be lower than its carrying value. For this reporting
unit, where it was determined that it was more likely than not that its fair value was less than the units’ carrying amount after
performing the qualitative assessment, as a result, the Company performed the two-step quantitative goodwill impairment test for these
two reporting units.
For the two-step goodwill impairment test, the
Company estimated the fair value with either income approach or asset approach for specific reporting unit components. 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. Asset based approach
is used in evaluating the fair value of some specific components which is deemed as the most prudent approach due to the unpredictability
of future cash flows.
The result of step
one impairment test for the FinTech App development reporting unit failed, with its determined fair value lower than the book value.
The Company performed step two impairment test, applying the income approach, resulting an impairment loss of goodwill of $1,226,419
being recorded for the year ended August 31, 2021. The impairment loss of goodwill was primarily attributable to the impairment
related to NPI as the financial performance of the reporting unit of FinTech App development continued to fall below the Company’s
original expectations.
4.
PLANT AND EQUIPMENT, NET
Plant
and equipment as of August 31, 2021 and 2020 are summarized below:
SCHEDULE
OF PLANT AND EQUIPMENT, NET
|
|
2021
|
|
|
2020
|
|
|
|
As of August 31,
|
|
|
|
2021
|
|
|
2020
|
|
Furniture and fixtures
|
|
$
|
64,791
|
|
|
$
|
20,159
|
|
Office equipment
|
|
|
32,038
|
|
|
|
65,809
|
|
Leasehold improvements
|
|
|
83,883
|
|
|
|
18,832
|
|
Total
|
|
|
180,712
|
|
|
|
104,800
|
|
Less: Accumulated depreciation
|
|
|
(110,952
|
)
|
|
|
(71,133
|
)
|
Plant and equipment, net
|
|
$
|
69,760
|
|
|
$
|
33,667
|
|
Depreciation
expense, classified as operating expenses, was $36,674
and $9,349
for the year ended August 31, 2021 and 2020 respectively.
5.
INTANGIBLE ASSETS, NET
Intangible
assets, net, as of August 31, 2021 and 2020 consisted of the following:
SCHEDULE
OF INTANGIBLE ASSETS
|
|
2021
|
|
|
2020
|
|
|
|
As of August 31,
|
|
|
|
2021
|
|
|
2020
|
|
Investment platform (a)
|
|
$
|
30,000
|
|
|
$
|
30,000
|
|
Technical know-hows (Note 3)
|
|
|
818,200
|
|
|
|
818,200
|
|
Trademarks
|
|
|
3,483
|
|
|
|
-
|
|
Total
|
|
|
851,683
|
|
|
|
848,200
|
|
Less: Accumulated amortization
|
|
|
(108,959
|
)
|
|
|
(6,500
|
)
|
Impairment
|
|
|
(111,915
|
)
|
|
|
(23,500
|
)
|
Intangible assets, net
|
|
$
|
630,809
|
|
|
$
|
818,200
|
|
Amortization
expense for intangible assets was $102,459
and $nil,
respectively, for the years ended August 31, 2021 and 2020.
During
the course of the Company’s strategic review of its operations, the Company assessed the recoverability of the carrying value of
the Company’s intangible assets. The impairment charge, if any, represented the excess of carrying amounts of the Company’s
intangible assets over their fair value, using the expected future discounted cash flows. Impairment loss of $88,415 and $nil
was recognized for the years ended August 31,
2021 and 2020, respectively. The impairment loss of intangible assets was primarily attributable to the financial performance
of NPI’s technical know-hows fall below the Company’s original expectations and they assessed the recoverability of the carrying
value of certain intangible assets which resulted in impairment losses.
As
of August 31, 2021, amortization expenses related to intangible assets for future periods are estimated to be as follows:
SCHEDULE
OF AMORTIZATION EXPENSES RELATED TO INTANGIBLE ASSETS
12 months ending August 31,
|
|
|
|
2022
|
|
$
|
89,993
|
|
2023
|
|
|
89,993
|
|
2024
|
|
|
89,993
|
|
2025
|
|
|
89,993
|
|
2026
and thereafter
|
|
|
270,837
|
|
Total
|
|
$
|
630,809
|
|
6.
RELATED PARTY TRANSACTIONS
SCHEDULE
OF RELATED PARTY TRANSACTIONS
|
|
Year ended August 31,
|
|
|
|
2021
|
|
|
2020
|
|
Professional fee - Greenpro Financial Consulting Limited (a)
|
|
$
|
-
|
|
|
$
|
21,753
|
|
Computer and networking - LOC (note 2)
|
|
|
-
|
|
|
|
1,000,000
|
|
Rental expense (b)
|
|
|
19,135
|
|
|
|
-
|
|
Other income:
|
|
|
|
|
|
|
|
|
Other income from Greenpro LF Limited(c)
|
|
|
1,838
|
|
|
|
-
|
|
Note interest income from LOC (d)
|
|
|
-
|
|
|
|
92,395
|
|
Note interest income from BJDC (d)
|
|
|
-
|
|
|
|
45,231
|
|
(a)
|
The
directors of Greenpro Financial Consulting Limited (Mr. Lee Chong Kuang and Mr. Loke Che Chan) are also the directors of the investment
managers of Greenpro Asia Strategic SPC, a 4.75%
shareholder of the Company. This fee is due for payment to Greenpro Financial Consulting Limited upon receipt of an invoice.
|
(a)
|
The
directors of Greenpro Financial Consulting Limited (Mr. Lee Chong Kuang and Mr. Loke Che Chan) are also the directors of the investment
managers of Greenpro Asia Strategic SPC, a 4.75% shareholder of the Company. This fee is due for payment to Greenpro Financial Consulting
Limited upon receipt of an invoice. Greenpro Financial Consulting Limited provides services to the Company and the Company incurred
professional fees $nil and $21,753 for the year ended August 31, 2021 and 2020, respectively. There is no accrued amount as of August
31, 2021 and 2020.
|
|
|
|
Greenpro
Financial Consulting Limited provides services to the Company and the Company incurred professional fees $nil
and $21,753
for the year ended August 31, 2021 and 2020,
respectively. There is no
accrued amount as of August 31, 2021 and
2020.
|
|
|
(b)
|
On
September 1, 2020, LOC leased an office in Taichung, Taiwan from the Company’s shareholder. The lease was renewed on April
1, 2021 for additional one-year term. The monthly lease was for the amount of NTD 45,000
($1,595),
with a term of one year. During the year ended August 31, 2021, the Company recognized rental expenses of $19,135
that are included in general
and administrative expenses.
|
|
|
(c)
|
Greenpro
LF Limited, a Seychelles company, owned by Mr. Lin Yi-Hsiu, a director of the Company and Mr. Lee Chong Kuang.
|
(d)
|
From
April 2019, the Company entered into multiple loan agreements with LOC and loaned LOC a total
amount of $2,164,082
as
of August 31, 2020. The loans are secured by personal guarantees of certain of its ultimate
shareholders, bear interest at 8% per annum, and are due on various dates through August
2021. From May 2019, the Company entered into multiple short-term loan agreements
with BJDC and loaned this company a total amount of $841,763 as of August 31, 2020. The loans
are secured by personal guarantees of certain of its ultimate shareholders, bear interest
at 8% per annum, and are due on various dates through August 2021. Interest
totaled $137,626 was charged by these two companies for the year ended August 31, 2020.
|
|
|
(d)
|
From
April 2019, the Company entered into multiple loan agreements with LOC and loaned LOC a total
amount of $2,164,082
as
of August 31, 2020. The loans are secured by personal guarantees of certain of its ultimate
shareholders, bear interest at 8%
per annum, and are due on various dates through August 2021.
From
May 2019, the Company entered into multiple short-term loan agreements with BJDC and loaned this company a total amount of $841,763
as of August 31, 2020. The loans are secured
by personal guarantees of certain of its ultimate shareholders, bear interest at 8%
per annum, and are due on various dates through August 2021.
Interest
totaled $137,626
was charged to these two companies
for the year ended August 31, 2020.
|
7.
PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
SCHEDULE
OF PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
|
|
2021
|
|
|
2020
|
|
|
|
As of August 31,
|
|
|
|
2021
|
|
|
2020
|
|
Rental and management fee deposits
|
|
$
|
120,831
|
|
|
$
|
137,088
|
|
Other prepaid expenses
|
|
|
194,040
|
|
|
|
81,108
|
|
Staff advances
|
|
|
-
|
|
|
|
2,970
|
|
Other taxes recoverable
|
|
|
19,183
|
|
|
|
|
|
Prepayments, deposits and other receivables
|
|
|
334,054
|
|
|
|
221,166
|
|
Less: non-current portion
|
|
|
|
|
|
|
|
|
Rental and management fee deposits
|
|
|
54,204
|
|
|
|
-
|
|
Other prepaid expenses
|
|
|
48,135
|
|
|
|
-
|
|
Prepayments, deposits and other receivables, non-current
|
|
|
102,339
|
|
|
|
-
|
|
Prepayments, deposits and other receivables, current
|
|
$
|
231,715
|
|
|
$
|
221,166
|
|
8.
ACCRUED EXPENSES AND OTHER PAYABLES
SCHEDULE
OF ACCRUED EXPENSES AND OTHER PAYABLES
|
|
2021
|
|
|
2020
|
|
|
|
As of August 31,
|
|
|
|
2021
|
|
|
2020
|
|
Accrued interests (Notes 9, 10 and 11)
|
|
$
|
2,935
|
|
|
$
|
6,191
|
|
Accrued expenses
|
|
|
295,686
|
|
|
|
240,172
|
|
Unearned income
|
|
|
-
|
|
|
|
2,222
|
|
Other taxes payable
|
|
|
-
|
|
|
|
31,871
|
|
Other payable
|
|
|
75,648
|
|
|
|
43,661
|
|
Accrued expenses and
other payables
|
|
$
|
374,269
|
|
|
$
|
324,117
|
|
The
Company signed an agreement with a third party whereby the Company authorizes the third party to use the Company’s investment platform
and related applications for a period until December 31, 2020, for an upfront fee. An additional fee is charged upon the third party’s
sale of products on the Company’s mobile application. Unearned income on this contract was $nil
and $2,222
as of August 31, 2021 and 2020, respectively.
9.
DUE FROM (TO) SHAREHOLDERS, DIRECTORS AND A RELATED COMPANY
SCHEDULE
OF DUE FROM (TO) SHAREHOLDERS, DIRECTORS AND A RELATED COMPANY
|
|
As of August 31,
|
|
|
As of August 31,
|
|
|
|
2021
|
|
|
2020
|
|
Loan to Cheng Hung-Pin (a shareholder)
|
|
$
|
-
|
|
|
$
|
34,048
|
|
|
|
|
|
|
|
|
|
|
Due from a director:
|
|
|
|
|
|
|
|
|
Cheng Shui-Fung
|
|
$
|
-
|
|
|
$
|
189,474
|
|
|
|
|
|
|
|
|
|
|
Due from a related company:
|
|
|
|
|
|
|
|
|
Greenpro LF Limited
|
|
$
|
-
|
|
|
$
|
36,666
|
|
|
|
|
|
|
|
|
|
|
Due to a director:
|
|
|
|
|
|
|
|
|
Lin Yi-Hsiu
|
|
$
|
1,098,374
|
|
|
$
|
1,400,459
|
|
|
|
|
|
|
|
|
|
|
Loan from Hsu Kuo-Hsun (a shareholder)
|
|
$
|
-
|
|
|
$
|
60,075
|
|
|
|
|
|
|
|
|
|
|
Due to shareholders:
|
|
|
|
|
|
|
|
|
Tu Yu-Cheng
|
|
$
|
50,591
|
|
|
$
|
96,530
|
|
Cheng Hung-Pin
|
|
|
800
|
|
|
|
800
|
|
Huang Mei-Ying
|
|
|
800
|
|
|
|
800
|
|
Lo Shih-Chu
|
|
|
800
|
|
|
|
800
|
|
Chen Jun-Yuan
|
|
|
800
|
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
53,791
|
|
|
$
|
99,730
|
|
On
March 10, 2020, LOC entered into a loan agreement with Cheng Hung-Pin and loaned him $33,322
(NT$1,000,000).
The loan is unsecured, bears interest at a rate of 3%
per annum and repayable on demand. The loan was fully repaid on May 12, 2021.
On
July 20, 2020, the Company obtained a loan of RMB420,000
($60,075)
from Hsu Kuo-Hsun which accrues interest at the rate of 8%
per annum. The loan is due on July
17, 2021 and Mr. Lin Yi-Hsiu would be liable when
the Company fails to repay. The loan was fully repaid on May 26, 2021. Interest of $nil
and $544
was accrued as of August 31, 2021 and 2020, respectively.
Amounts
due from (to) shareholders, directors and a related company are unsecured, interest-free with no fixed payment term.
10.
BONDS PAYABLE
The
Company had entered into a Bond Purchase Agreement with an individual third party on August 14, 2019, pursuant to which the Company issued
and sold to the purchaser a bond at an aggregate principal amount and an aggregate purchase price of $600,000.
The bond will mature in three
years from August
14, 2019. Interest on the bond will be payable
on semi-yearly basis at 10%
per annum. The
Company may exercise its right to repay this bond at any time on or before two years from the maturity date by wiring 100% of all outstanding
principal and interest(s) to the Purchaser. Interest
of $2,935
was accrued as of August 31, 2021 and August
31, 2020.
11.
CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES
The
Company entered into a series of Convertible Promissory Note Purchase Agreements (the “Agreements”) with certain investors
between February 2020 and January, 2021. Pursuant to the Agreements, the Company issued certain Convertible Promissory Notes (the “Notes”)
to the investors in a total principal amount of $1,030,000.
A summary of the major terms of the Agreements are presented as follows:
SCHEDULE
OF CONVERTIBLE NOTES PAYABLE
Investor
|
|
Principal amount
|
|
|
Issue date
|
|
Maturity date
|
|
Interest rate
|
|
Teh-Ling Chen
|
|
$
|
110,000
|
|
|
February
24, 2020
|
|
February
24, 2022
|
|
|
6
|
%
|
Li-Ching Yang
|
|
|
20,000
|
|
|
February
27, 2020
|
|
February
27, 2022
|
|
|
6
|
%
|
Jui-Chin Chen
|
|
|
100,000
|
|
|
March
18, 2020
|
|
March
18, 2022
|
|
|
6
|
%
|
Teh-Ling Chen
|
|
|
100,000
|
|
|
November
2, 2020
|
|
November
2, 2022
|
|
|
6
|
%
|
Chin-Ping Wang
|
|
|
200,000
|
|
|
November
25, 2020
|
|
November
25, 2022
|
|
|
6
|
%
|
Chin-Nan Wang
|
|
|
200,000
|
|
|
November
25, 2020
|
|
November
25, 2022
|
|
|
6
|
%
|
Chin-Chiang Wang
|
|
|
200,000
|
|
|
November
25, 2020
|
|
November
25, 2022
|
|
|
6
|
%
|
Teh-Ling Chen
|
|
|
100,000
|
|
|
January
15, 2021
|
|
January
15, 2023
|
|
|
6
|
%
|
|
|
$
|
1,030,000
|
|
|
|
|
|
|
|
|
|
On
February 24, 2020, the Company issued a convertible promissory note in the principal amount of $110,000,
which accrues interest at the rate of 6%
per annum, to a shareholder – Teh-Ling Chen. The note is due on February
24, 2022 and unsecured.
On
February 27, 2020, the Company issued a convertible promissory note in the principal amount of $20,000,
which accrues interest at the rate of 6%
per annum, to a shareholder – Li-Ching Yang. The note is due on February
27, 2022 and unsecured.
On
March 18, 2020, the Company issued a convertible promissory note in the principal amount of $100,000,
which accrues interest at the rate of 6%
per annum, to a shareholder – Jui-Chin Chen. The note is due on March
18, 2022 and unsecured.
On
August 17, 2020, the Company entered into amendments to the Notes and the convertible promissory note purchase agreements with each of
the Noteholders, wherein, at the sole option of the applicable Noteholder, all or part of the unpaid outstanding principal of such Noteholder’s
Note would be convertible into shares of restricted common stock of the Company at a conversion price equal to $0.40
per share. On August 18, 2020, two of the Noteholders
submitted conversion notices to the Company converting all of the outstanding balances of their Notes into an aggregate of 325,000
shares of the Company’s common stock.
On
November 2, 2020, the Company issued a convertible promissory note in the principal amount of $100,000,
which accrues interest at the rate of 6%
per annum, to a shareholder – Teh-Ling Chen. The note is due on November
2, 2022 and unsecured.
On
November 25, 2020, the Company further issued convertible promissory notes in the total principal amount of $600,000,
which accrues interest at the rate of 6%
per annum, to shareholders –Chin-Ping Wang, Chin-Nan Wang and Chin-Chiang Wang. The note is due on November
25, 2022 and unsecured.
On
January 15, 2021, the Company issued a convertible promissory note in the principal amount of $100,000,
which accrues interest at the rate of 6%
per annum, to a shareholder – Teh-Ling Chen. The note is due on January
15, 2023 and unsecured.
For
each of the convertible promissory notes, the Company is entitled to a one-year extension. The outstanding principal amounts of the notes
are convertible at any time at the option of the holders into common stock at a conversion price of either $1 per share if converted
within one year or $1.5 per share if converted after one year. Each of the lenders may convert part of the principal outstanding in increments
of $10,000 or multiples of $10,000 at any time. Accrued
interest, if any, will be forfeited on any principal amount being converted.
The
conversion feature is dual indexed to the Company’s stock, and is considered an embedded derivative which needs to be bifurcated
from the host instrument in accordance with ASC 815.
ASC
815-15-25 provides that if an entity has a hybrid financial instrument that would require bifurcation of embedded derivatives under ASC
815, the entity may irrevocably elect to initially and subsequently measure a hybrid financial instrument in its entirety at fair value
with changes in fair value recognized in earnings. The fair value election can be made instrument by instrument and shall be supported
by concurrent documentation or a preexisting documented policy for automatic election.
The
Company elected to measure the Notes in their entirety at fair value with changes in fair value recognized as non-operating income or
loss at each balance sheet date in accordance with ASC 815-15-25.
Fair
value of the convertible promissory notes of $990,000
and $104,000
as of August 31, 2021 and 2020 respectively are
determined using the binomial model, one of the option pricing methods. The valuation involves complex and subjective judgment and the
Company’s best estimates of the probability of occurrence of future events, such as fundamental changes, on the valuation date.
Under the binomial valuation model, the Group uses a weighted risk-free and risk interest rate (the combination of the risk free rate
plus the credit spread for the underlying Notes) weighted by the probability of conversion as internally solved out by binomial model
in discounting its cash flows. The main inputs to this model include the underlying share price, the expected share volatility, the expected
dividend yield, the risk free and risk interest rate.
During the years ended August 31, 2021 and 2020, interest of $44,908
and $3,997 were incurred on the Notes, respectively.
12.
INCOME TAXES
For
the years ended August 31, 2021 and 2020, the local (United States) and foreign components of loss before income tax were comprised of
the following:
SCHEDULE
OF INCOME/(LOSS) BEFORE INCOME TAXES
|
|
Year ended August 31,
|
|
|
|
2021
|
|
|
2020
|
|
Tax jurisdictions from:
|
|
|
|
|
|
|
|
|
- Local
|
|
$
|
(5,200,428
|
)
|
|
$
|
(6,387,031
|
)
|
- Foreign, representing
|
|
|
|
|
|
|
|
|
Seychelles
|
|
|
(1,610
|
)
|
|
|
(1,603
|
)
|
British Virgin Islands
|
|
|
(89,403
|
)
|
|
|
-
|
|
Taiwan
|
|
|
(3,077,725
|
)
|
|
|
76,245
|
|
PRC
|
|
|
(594,153
|
)
|
|
|
-
|
|
Hong Kong
|
|
|
(2,768,311
|
)
|
|
|
(3,530,440
|
)
|
Loss before income tax
|
|
$
|
(11,731,630
|
)
|
|
$
|
(9,842,829
|
)
|
The
components of the provision for income taxes benefits are:
SCHEDULE
OF COMPONENTS OF PROVISION BENEFIT FOR INCOME TAXES
|
|
Year ended August 31,
|
|
|
|
2021
|
|
|
2020
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
(38,138
|
)
|
|
|
-
|
|
Total income tax benefits
|
|
$
|
(38,138
|
)
|
|
$
|
-
|
|
The
provision for income taxes consisted of the following:
SCHEDULE
OF PROVISION FOR INCOME TAXES
|
|
Year ended August 31,
|
|
|
|
2021
|
|
|
2020
|
|
Loss before income taxes
|
|
$
|
(11,731,630
|
)
|
|
$
|
(9,842,829
|
)
|
Statutory income tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
Income tax credit computed at statutory income rate
|
|
|
(2,463,642
|
)
|
|
|
(2,066,994
|
)
|
Reconciling items:
|
|
|
|
|
|
|
|
|
Non-deductible expenses
|
|
|
413,599
|
|
|
|
1,980
|
|
Share-based payments
|
|
|
1,378,279
|
|
|
|
1,693,125
|
|
Tax effect of tax exempt entity
|
|
|
19,113
|
|
|
|
337
|
|
Rate differential in different tax jurisdictions
|
|
|
18,838
|
|
|
|
158,107
|
|
Valuation allowance on deferred tax assets
|
|
|
595,675
|
|
|
|
213,445
|
|
Income tax benefits
|
|
$
|
(38,138
|
)
|
|
$
|
-
|
|
United
States of America
The
Company is registered in the State of Nevada and is subject to the tax laws of the United States of America. As of August 31, 2021, the
operations in the United States of America incurred $2,237,348
of cumulative net operating losses (NOL’s)
which can be carried forward to offset future taxable income. The
NOL carryforwards begin to expire in 2037, if
unutilized. As of August 31, 2021 and 2020, the Company has provided for a full valuation allowance of $469,843
and $339,334,
respectively, against the deferred tax assets on the expected future
tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not
be realized in the future.
Seychelles
Under
the current laws of the Seychelles, LFG is registered as an international business company which governs by the International Business
Companies Act of Seychelles and there is no income tax charged in Seychelles.
British
Virgin Islands
NPI
is tax exempted in the British Virgin Islands where it was incorporated.
Taiwan
LOC
is subject to corporate income tax (“CIT”) in Taiwan. With effect from January 1, 2018, the CIT rate in Taiwan is 20%.
However, for profit-seeking entities with less than NT$ 500,000
(approximately $16,000)
in taxable income, the CIT rate is 18%
in 2018, 19%
in 2019, and 20%
since 2020 if taxable income exceeds NT$120,000
(approximately $3,900).
As of August 31, 2021, LOC had net operating loss carry-forwards in Taiwan of $3,090,707,
which will expire
in various years through 2025. The Company has
provided for a full valuation allowance of $618,141
against the deferred tax assets on the expected
future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets
will not be realized in the future.
PRC
BJDC
is subject to corporate income tax (“CIT”) at 25%
in accordance with the relevant tax laws and regulations of the PRC. As of August 31, 2021, BJDC had net operating loss carry-forwards
in the PRC of $1,831,208,
which will expire
in various years through 2028. The Company has
provided for a full valuation allowance of $457,802
against the deferred tax assets on the expected
future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets
will not be realized in the future.
Hong
Kong
JFB
is subject to Hong Kong Profits Tax, which is charged at the statutory income rate of 16.5%
on its assessable income. No provision for Hong Kong profits tax has been made in the financial statements as JFB has no assessable profits
for the years. As of August 31, 2021, the operations in Hong Kong incurred $2,843,554
of cumulative net operating losses (NOL’s)
which can be carried forward indefinitely to offset future taxable income. As of August 31, 2021 and 2020, the Company has provided for
a full valuation allowance of approximately $469,186
and $357,545,
respectively, against the deferred tax assets on the expected future
tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not
be realized in the future.
The tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and liabilities as of August 31, 2021 and 2020 are presented below:
SCHEDULE
OF DEFERRED TAX ASSETS
|
|
As of August 31,
|
|
|
|
2021
|
|
|
2020
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
|
|
|
|
|
|
– United States of America
|
|
$
|
(469,843
|
)
|
|
$
|
(339,334
|
)
|
– Taiwan
|
|
|
(618,141
|
)
|
|
|
(81,803
|
)
|
– PRC
|
|
|
(457,802
|
)
|
|
|
(309,264
|
)
|
– Hong Kong
|
|
|
(469,186
|
)
|
|
|
(357,545
|
)
|
Less: valuation allowance
|
|
|
2,014,972
|
|
|
|
1,087,946
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
Intangible assets- Technical know-hows
|
|
$
|
125,502
|
|
|
$
|
163,640
|
|
13.
COMMON STOCK
On
September 1, 2019, the Company entered into an employment agreement with Yi-Hsiu Lin to serve as the Chief Executive Officer of the Company
for a two-year
term. Pursuant to the agreement, Mr. Lin will be compensated at an annual rate of $50,000
per year (the “Base Compensation”),
prorated for any partial year in cash or 2,500,000
shares of restricted common stock, which vested
on September 16, 2019 and September 1, 2020. In addition, Mr. Lin may be entitled to bonus compensation of up to three (3) times Base
Compensation based on his achievement of appropriate performance criteria to be determined by the board of directors or a committee
thereof. The fair value of the shares of restricted common stock was $1,250,000
and $1,000,000,
respectively, which was calculated based on a price per share of $0.50
and $0.40,
respectively and amortized over the service term. During the year ended August 31, 2021 and 2020, the Company amortized $1,000,000
and $1,250,000,
respectively, as remuneration.
On
September 1, 2019, the Company issued a director offer letter to Shui Fung Cheng, pursuant to which Mr. Cheng agreed to serve as a director
of the Company for a one-year
term. For his service as a director, Mr. Cheng will receive an annual compensation, prorated for any partial year, in the form of $30,000
in cash or 1,500,000
shares of restricted common stock. The offer
letter provided that compensation, either in cash or shares of restricted common stock, shall be paid or granted immediately on September
1, 2019. The fair value of the shares of restricted common stock was $750,000,
which was calculated based on a price per share of $0.50
and amortized over the service term. The offer
was renewed on September 1, 2020 and all shares were granted and vested on the same date. The fair value of the shares of restricted
common stock was $600,000,
which was calculated based on a price per share of $0.40
and amortized over the service term. During the
year ended August 31, 2021 and 2020, the Company amortized $600,000
and $750,000,
respectively, as remuneration.
On
September 1, 2019, the Company entered into a consulting agreement with a consultant to provide business development services to the
Company for a one-year
term. Pursuant to the agreement, the Company agreed to pay the consultant a fee of $40,000
in the form of 2,000,000
shares of restricted common stock, which vested
on September 15, 2019, prorated for any partial year. The fair value of the shares of restricted common stock was $1,000,000,
which was calculated based on a price per share of $0.50
and amortized over the service term. During the
year ended August 31, 2021 and 2020, the Company amortized $nil
and $1,000,000,
respectively, as consulting expenses under this agreement.
On
September 1, 2019, the Company entered into a consulting agreement with a consultant to provide business advisory services to the Company
for a one-year
term. Pursuant to the agreement, the Company agreed to pay the consultant a fee of $50,000
in the form of 2,500,000
shares of restricted common stock, which vested
on September 15, 2019, prorated for any partial year. The fair value of the shares of restricted common stock was $1,250,000,
which was calculated based on a price per share of $0.50
and amortized over the service term. During the
year ended August 31, 2021 and 2020, the Company amortized $nil
and $1,250,000,
respectively, as consulting expenses under this agreement.
On
June 30, 2020, the Company entered into a stock forfeiture letter (the “Stock Forfeiture Letter”) with First Leader Capital
Ltd., a significant stockholder of the Company and an entity solely owned and controlled by Yi-Hsiu Lin, the Company’s Chief Executive
Officer and a member of the Company’s board of directors. Pursuant to the Stock Forfeiture Letter, on June 30, 2020, First Leader
Capital Ltd. forfeited and surrendered 5,500,000
shares (the “Surrendered Shares”)
of the Company’s common stock, par value $0.0001
per share (the “Common Stock”), and
the Surrendered Shares were automatically cancelled and retired (the “Stock Cancellation”). First Leader Capital Ltd. agreed
to forfeit and cancel the Surrendered Shares in exchange for the benefit from reducing the Company’s outstanding Common Stock to
be more in line with what management deems to be market expectations based on the Company’s current valuation. 5,500,000
shares were canceled on September 21, 2020.
On
March 1, 2020, the Company entered into a consulting agreement with a consultant to provide business advisory services to the Company
for a one-year
term. Pursuant to the agreement, the Company agreed to pay the consultant a fee of $60,000
and 1,000,000
shares of restricted common stock, which vested
not later than June 30, 2020, prorated for any partial year. On June 30, 2020, the Company’s board of directors approved additional
500,000
shares to the consultant in exchange for services
rendered. The shares were granted on July 7, 2020. On March 1, 2021, the Company renewed the consulting agreement for a one-year
term. Pursuant to the agreement, the Company
agreed to pay the consultant a fee of $60,000
and 1,000,000
shares of restricted common stock, which vested
not later than June 30, 2021, prorated for any partial year. The fair value of the shares of restricted common stock was $750,000
and $100,000,
respectively which was calculated based on a price per share of $0.50
and $0.10
respectively and amortized over the service term.
During the year ended August 31, 2021 and 2020, the Company amortized $425,000
and $375,000,
respectively, as consulting expenses under this agreement.
On
June 30, 2020, the
Company’s board of directors agreed to grant a new employee of JFB, (i) 5,000,000
shares
of Restricted Common Stock in connection with such employee’s employment (the “Inducement Shares”) and (ii) 5,000,000
shares
of Restricted Common Stock upon the achievement of each of two
milestones
set forth in such employee’s offer letter relating to the FinMaster mobile application. In addition, on that same day, the Company’s
board of directors approved an aggregate of 3,000,000 shares to a service provider in exchange for services rendered. As
of August 31, 2020, 5,000,000
and 3,000,000
shares of common stock of the Company
have been issued to the employee and service provider respectively. The fair value of the shares of restricted common stock to them was
$3,200,000,
which was calculated based on a price per share of $0.40.
For the year ended August 31, 2021, a further 4,928,918
shares were vested to the employee upon achievement
of the milestones set forth in the employee’s offer letters. During the year ended August 31, 2021, the Company amortized $nil
and $1,971,567
as professional fees and salaries respectively.
During the year ended August 31, 2020, the Company amortized $1,200,000
and $2,237,500
as professional fees and salaries respectively.
The shares were granted on July 7, 2020.
From
May to August 2020, the Company entered into securities purchase agreement with several accredited investors whereby the investors purchased
a total of 3,925,035
shares of the Company’s common stock at
$0.40
per share. The Company received aggregate gross
proceeds of $1,570,014.
Pursuant to the terms of the securities purchase agreements, the investors have piggyback registration rights with respect to the shares.
The Company issued 3,550,035
shares in July 2020 and the remaining was issued
by early January 2021.
The
Company issued 8,415,111
shares of common stock for the acquisition of
NPI in August 2020 (Note 1).
On
July 27, 2020, the Company issued an offer letter to a staff, pursuant to which the staff agreed to serve as an executive
assistant of the Company. For the service as an executive assistant, the staff received a monthly compensation in the form
of NT$77,000
($2,717)
for the first three months (probationary period) and thereafter NT$92,500
($3,264)
in cash. In addition, The staff would have been granted 50,000
shares of restricted common stock upon completion
of the first year of service and 50,000
shares of restricted common stock if the staff
met the criteria established by the Company. The fair value of the shares of restricted common stock was $50,000,
which was calculated based on a price per share of $1.00
and amortized over the service term. The Company
cancelled the offer on May 1, 2021. During the year ended August 31, 2021 and 2020, the Company recognized $50,000
and $nil
respectively as compensation under this arrangement.
On
August 1, 2020, the Company entered into an agreement with a company for provision of consulting services by its employee to the Company
for a one-year
term. Pursuant to the agreement, the Company agreed to pay the provider an annual compensation of $66,000,
prorated for any partial year. In February 2021, both parties agreed to amend the annual compensation to $57,750.
In addition, for the services of its employees on a one-year term,
the provider was granted 1,000,000
shares of restricted common stock, vested on
September 15, 2020. The fair value of 1,000,000
shares granted was $400,000,
which was calculated based on the stock price of $0.40
per share on September 15, 2020 and will be amortized
over the service term. During the year ended August 31, 2021 and 2020, the Company recognized $383,334
and $5,500
as compensation under these arrangements. The
shares were issued on January 6, 2021.
On
August 3, 2020, the Company issued an offer letter to a staff, pursuant to which the staff agreed to serve as an executive
assistant of the Company. For the service as an executive assistant, the staff received a monthly compensation in the form
of NT$77,000
($2,717)
in cash. In
addition, the staff would have been granted 50,000
shares
of restricted common stock upon completion of the first year of service and 50,000
shares
of restricted common stock if the staff met the criteria established by the Company. The
fair value of the shares of restricted common stock was $50,000,
which was calculated based on a price per share of $1.00
and amortized over the service term. The Company
cancelled the offer on May 1, 2021. During the year ended August 31, 2021 and 2020, the Company recognized $50,000
and $nil
respectively as compensation under this arrangement.
On
November 1, 2020, the Company entered into consulting agreements with two consultants to assist in monitoring and improving FinMaster
APP for a one-year
term. Pursuant to the agreement, the Company agreed to pay the consultants in the form of 2,500,000
shares of restricted common stock, which vested
on November 1, 2020, prorated for any partial year. The fair value of the shares of restricted common stock was $2,500,000,
which was calculated based on a price per share of $1.00
and amortized over the service term. During the
year ended August 31, 2021 and 2020, the Company amortized $2,083,334
and $nil
respectively as consulting expenses under these
agreements.
On
February 8, 2021, the Company and First Leader Capital Ltd. mutually agreed to forfeit and surrender further 5,000,000
shares (the “Surrendered Shares”)
of the Company’s common stock, par value $0.0001
per share (the “Common Stock”), and
the Surrendered Shares were automatically cancelled and retired. First Leader Capital Ltd. agreed to forfeit and cancel the Surrendered
Shares in exchange for the benefit from reducing the Company’s outstanding Common Stock to be more in line with what management
deems to be market expectations based on the Company’s current valuation.
On
May 17, 2021, the Company and First Leader Capital Ltd. mutually agreed to forfeit and surrender further 13,132,500
shares (the “Surrendered Shares”)
of the Company’s common stock, par value $0.0001
per share (the “Common Stock”), and
the Surrendered Shares were automatically cancelled and retired. First Leader Capital Ltd. agreed to forfeit and cancel the Surrendered
Shares in exchange for the benefit from reducing the Company’s outstanding Common Stock to be more in line with what management
deems to be market expectations based on the Company’s current valuation.
From
May 2020 to August 2021, the Company entered into securities purchase agreements with several accredited investors whereby the investors
purchased a total of 37,157,535
shares of the Company’s common stock at
an average price of $0.140
per share. The Company received aggregate gross
proceeds of $5,206,994.
Pursuant to the terms of the securities purchase agreements, the investors have piggyback registration rights with respect to the shares.
The shares were fully issued by August 30, 2021.
As
of August 31, 2021, unrecognized share-based compensation expense was $2,274,266.
As
of August 31, 2021, 100,000
shares were granted to employees and vested but
not yet issued.
14.
COMMITMENTS AND CONTINGENCIES
During
the year ended August 31, 2021, the Company entered into agreements with independent third parties to lease office and staff quarter
premises in Taiwan, Shenzhen, Beijing and Hong Kong on a monthly basis, for the operations of the Company. Rental expense for the year
ended August 31, 2021 and 2020 was $333,118 and
$130,999,
respectively.
The
following table lists the future minimal payments to be paid by the Company under a non-cancellable operating lease for office space
in Taiwan with an initial term of one-year
as of August 31, 2021:
SCHEDULE
OF OPERATING LEASE MINIMUM RENT PAYMENTS
Year ending August 31,
|
|
|
|
2022
|
|
$
|
11,388
|
|
2023
|
|
|
-
|
|
2024
|
|
|
-
|
|
2025
|
|
|
-
|
|
2026
|
|
|
-
|
|
Thereafter
|
|
|
-
|
|
Present
value of lease liabilities
|
|
$
|
11,388
|
|
As
of August 31, 2021, the Company had future minimum lease payments for non-cancelable short-term operating leases of $11,388
payable to a shareholder.
The
components of lease costs, lease term and discount rate with respect of leases with an initial term of at least 12
months are as follows:
SCHEDULE
OF COMPONENTS OF LEASE COSTS, LEASE TERM AND DISCOUNT RATE
|
|
For the year ended
August 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Operating lease cost – classified as general
and administrative expenses
|
|
$
|
292,567
|
|
|
$
|
128,580
|
|
Weighted Average Remaining Lease Term – Operating leases
|
|
|
0.95
years
|
|
|
|
1.30
years
|
|
Weighted Average Discounting Rate – Operating leases
|
|
|
4.20
|
%
|
|
|
5.53
|
%
|
The
following is a schedule, by years, of maturities of lease liabilities as of August 31, 2021:
SCHEDULE
OF MATURITIES OF LEASE LIABILITIES
|
|
Operating
leases
|
|
|
|
|
|
|
2022
|
|
$
|
286,843
|
|
2023
|
|
|
89,857
|
|
2024
|
|
|
-
|
|
2025
|
|
|
-
|
|
2026
|
|
|
-
|
|
Thereafter
|
|
|
-
|
|
Total undiscounted cash flows
|
|
|
376,700
|
|
Less: imputed interest
|
|
|
(24,345
|
)
|
Present value of lease liabilities
|
|
$
|
352,355
|
|
Contingencies
The
Labor Contract Law of the People’s Republic of China requires employers to assure the liability of the severance payments if employees
are terminated due to restructuring, termination as a result of a mutual agreement or termination as a result of the expiration of a
fixed-term labor contract. The Company has estimated its possible severance payments of approximately $129,000
and $86,000
as of August 31, 2021 and 2020, respectively,
which have not been reflected in its consolidated financial statements, because it is more likely than not that this will not be paid
or incurred.
In
Taiwan, an employer can terminate an employment contract with notice (or with pay in lieu of notice) and with severance pay only due
to stoppage of business or a transfer of ownership, business losses or curtailment of business operations, suspension of operations due
to a force majeure event, or alteration of the business nature, forcing a reduction in the number of employees, and those employees cannot
be reassigned to other suitable positions, or the employee is incapable of performing the tasks assigned. The Company has estimated its
possible severance payments of approximately $69,000
and $28,000
as of August 31, 2021 and 2020, respectively,
which have not been reflected in its consolidated financial statements, because it is more likely than not that this will not be paid
or incurred.
15.
SUBSEQUENT EVENTS
On
September 1, 2021, the Company renewed the employment agreement with Yi-Hsiu Lin for additional two years. Pursuant to the agreement,
Mr. Lin will be compensated at an annual rate of $120,000 per year (the “Base Compensation”), prorated for any partial year,
payable in cash or with 2,500,000 shares of restricted common stock, which would vest as of March 1, 2022 and March 1, 2023. In addition,
Mr. Lin may be entitled to bonus compensation of up to three times the Base Compensation based on his achievement of appropriate performance
criteria to be determined by the board of directors or a committee thereof. The fair value of the shares of restricted common stock for
the first year was $250,000, which was calculated based on a price per share of $0.10 and amortized over the service term.
On
September 1, 2021, the Company issued a director offer letter to Shui Fung Cheng, pursuant to which Mr. Cheng agreed to serve as a director
of the Company for a one-year term. For his service as a director, Mr. Cheng will receive an annual compensation, prorated for any partial
year, in the form of $80,000 in cash or 1,500,000 shares of restricted common stock. The offer letter provided that compensation, either
in cash or shares of restricted common stock, shall be paid or granted immediately on September 1, 2021. The fair value of the shares
of restricted common stock was $150,000, which was calculated based on a price per share of $0.10 and amortized over the service term.
On
September 3, 2021, the Company entered into a securities purchase agreement with an individual accredited investor whereby the investor
purchased 100,000 shares of the Company’s common stock at a price of $0.25 per share. The Company received gross proceeds of $25,000.
Pursuant to the terms of the securities purchase agreement, the investor will have piggyback registration rights with respect to the
shares. The shares were issued on September 8, 2021.
On
September 28, 2021, the Company entered into a securities purchase agreement with an accredited investor whereby the investor purchased
800,000 shares of the Company’s common stock at a price of $0.25 per share. The Company received gross proceeds of $200,000. Pursuant
to the terms of the securities purchase agreement, the investor will have piggyback registration rights with respect to the shares. The
shares were issued on October 5, 2021.
On
October 5, 2021, the Company received the second tranches gross proceeds of $250,000 from the individual accredited investor who entered
into a securities purchase agreement with the Company on August 20, 2021 whereby the investor may purchase up to 6,000,000 shares of
Common Stock at a price of $0.10 per share in three tranches: up to 1,000,000 shares purchasable on or before August 31, 2021, in the
first tranche, and up to 2,500,000 shares purchasable in each of the second and third tranches on or before October 29, 2021, and December
31, 2021, respectively, to purchase 2,500,000 shares of the Company’s common stock. Pursuant to the terms of the securities purchase
agreement, the investor will have piggyback registration rights with respect to the shares. The shares were issued on October 7, 2021.
On
October 27, 2021, the Company entered into a securities purchase agreement with an individual accredited investor whereby the investor
purchased 200,000 shares of the Company’s common stock at an average price of $0.25 per share. The Company received aggregate gross
proceeds of $50,000. Pursuant to the terms of the securities purchase agreement, the investor will have piggyback registration rights
with respect to the shares. The shares were issued on October 29, 2021.
On
October 28, 2021, the Company entered into a securities purchase agreement with an individual accredited investor whereby the investor
purchased 560,000 shares of the Company’s common stock at a price of $0.25 per share. The Company received gross proceeds of $140,000.
Pursuant to the terms of the securities purchase agreement, the investors will have piggyback registration rights with respect to the
shares. The shares were issued on October 29, 2021.
On
December 9, 2021, the Company received the third tranches gross proceeds of $250,000 from the individual accredited investor who entered
into a securities purchase agreement with the Company on August 20, 2021 whereby the investor may purchase up to 6,000,000 shares of
Common Stock at a price of $0.10 per share in three tranches: up to 1,000,000 shares purchasable on or before August 31, 2021, in the
first tranche, and up to 2,500,000 shares purchasable in each of the second and third tranches on or before October 29, 2021, and December
31, 2021, respectively, to purchase 2,500,000 shares of the Company’s common stock. Pursuant to the terms of the securities purchase
agreement, the investor will have piggyback registration rights with respect to the shares. The shares are not yet issued.