NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
For
the nine and three months ended May 31, 2022 and 2021
(In
U.S. dollars except for share data)
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, through its subsidiaries, mainly operates and services a mobile application investment platform.
SCHEDULE OF SUBSIDIARIES OF COMPANY
| Company
Name |
|
Place/Date
of Incorporation |
|
Principal
Activities |
| |
|
|
|
|
| 1.
Leader Financial Group Limited (“LFGL”) |
|
Seychelles
/ March 6, 2017 |
|
Investment
Holding |
| |
|
|
|
|
| 2.
JFB Internet Service Limited (“JFB”) |
|
Hong
Kong / July 6, 2017 |
|
Provides
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 August
17, 2020, 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 an indirect 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 Over-the-Top (“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
These
unaudited condensed consolidated financial statements of the Company and its subsidiaries are unaudited. In the opinion of management,
all adjustments (which are of a normal recurring nature) and disclosures necessary for a fair presentation of these unaudited condensed
consolidated financial statements have been included. The results reported in the unaudited condensed consolidated financial statements
for any interim periods are not necessarily indicative of the results that may be reported for the entire year. The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange
Commission (“SEC”) and United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”),
and include the accounts of the Company and its subsidiaries. However, they do not include all information and footnotes necessary for
a complete presentation of financial statements in conformity with U.S. GAAP. Certain information and footnote disclosures normally present
in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Intercompany accounts and transactions
have been eliminated in consolidation.
The
Company has adopted August 31 as its fiscal year end. These unaudited financial statements should be read in conjunction with the Company’s
audited consolidated financial statements and the notes thereto included in the Company’s annual report on amended Form 10-K for
the year ended August 31, 2021.
Going
Concern
The
accompanying unaudited condensed 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.
As
of May 31, 2022, the Company has suffered recurring losses from operations, and records an accumulated deficit and a working capital
deficit of $32,271,468 and $2,310,367, respectively. 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
unaudited condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded
asset amounts and the classification of liabilities that might be necessary should the Company be unable to continue as going concern.
Use
of Estimates
The
preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company’s
management 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 unaudited condensed 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 (“Goodwill”). 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 no impairment on the goodwill recorded in the Company’s financial statements.
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.
No
development costs were expensed as general and administrative expenses for the nine and three months ended May 31, 2022 and 2021.
Revenue
Recognition
The
Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU
2014-09”), 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 revenue following the five-step model prescribed under ASU 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 we expect 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 authorized the third party to use the Company’s JFB 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.
The
Company entered into a Customized App Development Agreement providing the online and offline learning opportunities across different
subjects on January 27, 2022. The Company plans to deliver an app and the follow-up maintenance service. As of May 31, 2022, the development
work was in the process and the Company will deliver the app by the fourth quarter of current fiscal year. For the nine and three months
ended May 31, 2022, revenue of $130,231
was generated from this customer.
Revenue
by major product line
SCHEDULE OF REVENUE BY MAJOR PRODUCT LINE
| | |
May 31,
2022 | | |
May 31, 2021 | | |
May 31, 2022 | | |
May 31, 2021 | |
| | |
For the nine months ended | | |
For
the three months ended | |
| | |
May 31,
2022 | | |
May 31, 2021 | | |
May 31, 2022 | | |
May 31, 2021 | |
| Provision of investment platform services | |
$ | 8,927 | | |
$ | 15,508 | | |
$ | 4,128 | | |
$ | 5,100 | |
| Provision of software development service and maintenance service | |
| 147,600 | | |
| 63,188 | | |
| 129,963 | | |
| 18,344 | |
| Revenue by major product line | |
$ | 156,527 | | |
$ | 78,696 | | |
$ | 134,091 | | |
$ | 23,444 | |
Revenue
by Recognition Over Time vs Point in Time
SCHEDULE OF REVENUE BY RECOGNITION OVER TIME VS POINT IN TIME
| | |
May 31, 2022 | | |
May 31, 2021 | | |
May 31, 2022 | | |
May 31, 2021 | |
| | |
For the nine months ended | | |
For
the three months ended | |
| | |
May 31, 2022 | | |
May 31, 2021 | | |
May 31, 2022 | | |
May 31, 2021 | |
| Revenue by recognition over time | |
$ | 156,527 | | |
$ | 78,696 | | |
$ | 134,091 | | |
$ | 23,444 | |
| Revenue by recognition at a point in time | |
| - | | |
| - | | |
| - | | |
| - | |
| Revenue by recognition | |
$ | 156,527 | | |
$ | 78,696 | | |
$ | 134,091 | | |
$ | 23,444 | |
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 May 31, 2022, the Company’s remaining performance obligations were $188,508, 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 nine months ended May 31, 2022 and 2021:
SCHEDULE OF CONTRACT LIABILITIES
| Receipt in advance | |
2022 | | |
2021 | |
| | |
| | |
| |
| Balance as of September 1 | |
$ | 16,225 | | |
$ | 2,896 | |
| Advances received from customers related to unsatisfied performance obligations | |
| 184,967 | | |
| 9,354 | |
| Revenue recognized from beginning contract liability balance | |
| (11,851 | ) | |
| (3,001 | ) |
| Exchange difference | |
| (833 | ) | |
| 321 | |
| Balance as of May 31 | |
$ | 188,508 | | |
$ | 9,570 | |
Practical
Expedients and Exemption
The
Company has not incurred any costs to obtain contracts, and does 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 nine months ended May 31, 2022 and 2021, the total R&D expenses were $366,040 and $456,428, respectively.
For
the three months ended May 31, 2022 and 2021, the total R&D expenses were $104,861 and $151,863, 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 nine months
ended May 31, 2022 and 2021, advertising costs totaled $252,951 and $155,618, respectively. For the three months ended May 31, 2022 and
2021, advertising costs totaled $12,902 and $11,790, respectively.
From
September 2019, customers or users of the FinMaster App can obtain points through any other ways such as account registration referral
to the FinMaster App, frequent sign-ins to the application and sharing articles from the application to users’ own social media,
etc. The Company believes these points are to encourage user engagement and generate market awareness. As a result, the Company accounts
for such points as sales and marketing expenses with a corresponding liability recorded under other current liabilities of its unaudited
condensed 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 nine months ended May 31, 2022 and 2021, redeemable point liability charged as sales and marketing expenses were $19,850 and $30,450,
respectively.
For
the three months ended May 31, 2022 and 2021, redeemable point liability charged as sales and marketing expenses were $12,363 and $3,548,
respectively.
As
of May 31, 2022 and August 31, 2021, liabilities recorded related to unredeemed points were $91,500 and $75,648, 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 an 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 May 31, 2022 and 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.
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 fixture | |
| 3 | |
| Office equipment | |
| 3 | |
| Leasehold improvement | |
| 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 future undiscounted 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. No impairment has been recorded by the Company for the nine and three months ended May 31, 2022 and 2021.
Income
taxes
Income
taxes are determined in accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 740, “Income
Taxes” (“ASC 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 May
31, 2022, the Company has no accrued interest or penalties related to uncertain tax positions.
The
Company conducts business in the PRC, Taiwan and Hong Kong and 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 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
| | |
May 31, 2022 | | |
May 31, 2021 | | |
May 31, 2022 | | |
May 31, 2021 | |
| | |
For the nine months ended | | |
For the three months ended | |
| | |
May 31, 2022 | | |
May 31, 2021 | | |
May 31, 2022 | | |
May 31, 2021 | |
| | |
| | |
| | |
| | |
| |
| Net loss | |
$ | (9,270,401 | ) | |
$ | (8,503,910 | ) | |
$ | (4,774,115 | ) | |
$ | (2,276,503 | ) |
| Weighted average number of shares of common stock outstanding - Basic and diluted* | |
| 171,713,173 | | |
| 139,771,102 | | |
| 184,072,180 | | |
| 141,699,780 | |
| Net loss per share - Basic and diluted | |
$ | (0.05 | ) | |
$ | (0.06 | ) | |
$ | (0.02 | ) | |
$ | (0.01 | ) |
| |
* |
Including
6,442,936 shares granted and vested but not yet issued for the period ended May 31, 2022; and including nil shares that were granted
and vested but not yet issued for the period ended May 31, 2021. |
As
of May 31, 2022 and August 31, 2021, 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”), which simplifies several aspects of the accounting for nonemployee
share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment
transactions for acquiring goods and services from non-employees. 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 unrecognised 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 transactions. 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$”). The Company’s subsidiary in Seychelles, the PRC,
Taiwan and Hong Kong maintains its books and record in United States Dollars (“US$”), 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, the assets and liabilities of the Company’s subsidiaries whose functional currency is not
US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the
exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains
and losses resulting from the translation of the financial statements of foreign subsidiaries are recorded as a separate component of
accumulated other comprehensive income within the statement of retained earnings.
Translation
of amounts from foreign currencies into US$ has been made at the following exchange rates for the respective periods:
SCHEDULE OF FOREIGN CURRENCY TRANSLATION
| | |
As of
May 31, 2022 | | |
As of
August 31, 2021 | |
| | |
| | |
| |
| Period-end HK$ : US$ 1 exchange rate | |
| 7.80 | | |
| 7.80 | |
| Period-end NT$ : US$ 1 exchange rate | |
| 28.99 | | |
| 27.66 | |
| Period-end RMB : US$ 1 exchange rate | |
| 6.67 | | |
| 6.46 | |
| | |
May 31, 2022 | | |
May 31, 2021 | |
| | |
For the nine months ended, | |
| | |
May 31, 2022 | | |
May 31, 2021 | |
| | |
| | |
| |
| Period average HK$ : US$ 1 exchange rate | |
| 7.80 | | |
| 7.80 | |
| Period average NT$ : US$ 1 exchange rate | |
| 28.22 | | |
| 28.34 | |
| Period average RMB : US$ 1 exchange rate | |
| 6.42 | | |
| 6.56 | |
| Foreign currency exchange
rate | |
| 6.42 | | |
| 6.56 | |
Related
Parties
Parties,
which can be a corporation or an individual, are considered to be related if the Company has the ability to, directly or indirectly,
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 remeasured 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, “Fair Value Measurements and Disclosures” (“ASC 820”),
with respect to financial assets and liabilities that are measured at fair value. ASC 820 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
| | |
August 31, 2021 | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| | |
Carrying | | |
Fair
Value Measurement at | |
| | |
Value at | | |
August
31, 2021 | |
| | |
August 31, 2021 | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Convertible notes measured at fair value | |
$ | 990,000 | | |
$ | - | | |
$ | - | | |
$ | 990,000 | |
| |
|
May
31, 2022 |
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
| |
|
Carrying |
|
|
Fair
Value Measurement at |
|
| |
|
Value at |
|
|
May
31, 2022 |
|
| |
|
May
31, 2022 |
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
| Convertible
notes measured at fair value |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
A
summary of changes in financial liabilities for the nine months ended May 31, 2022 and 2021 was as follows:
SCHEDULE OF CHANGE IN FINANCIAL LIABILITY
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Balance at September 1 | |
$ | 990,000 | | |
$ | 104,000 | |
| Issuance of convertible notes | |
| - | | |
| 800,000 | |
| Fair value loss on issuance of convertible notes | |
| - | | |
| 526,838 | |
| Interest waived in conversion of convertible notes | |
| (18,031 | ) | |
| - | |
| Interest paid | |
| (48,000 | ) | |
| - | |
| Interest expenses on convertible notes | |
| 31,518 | | |
| 2,712 | |
| Change in fair value of convertible notes | |
| 3,983,877 | | |
| (397,550 | ) |
| Modification of interest payable on convertible notes to loans | |
| (7,364 | ) | |
| - | |
| Modification of convertible notes to loans | |
| (300,000 | ) | |
| - | |
| Conversion of convertible notes | |
| (4,632,000 | ) | |
| - | |
| Balance at May 31 | |
$ | - | | |
$ | 1,036,000 | |
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 | |
Jui-Chin
Chen | | |
Teh-Ling Chen | | |
Chin-Ping Wang Chin-Nan Wang | | |
Chin-
Chiang Wang | | |
Teh-Ling Chen | |
| Appraisal Date (Inception Date) | |
| March
18, 2020 | | |
| November
2, 2020 | | |
| November 25,
2020 | | |
| November 25,
2020 | | |
| January 15,
2021 | |
| Risk-free Rate | |
| 0.54 | % | |
| 0.16 | % | |
| 0.16 | % | |
| 0.16 | % | |
| 0.1 | % |
| Applicable Closing Stock Price | |
$ | 1.20 | | |
$ | 0.12 | | |
$ | 3.00 | | |
$ | 3.00 | | |
$ | 2.00 | |
| Conversion Price | |
$ | 1.00 | (i) | |
$ | 0.40 | | |
$ | 0.40 | | |
$ | 0.40 | | |
$ | 0.40 | |
| | |
$ | 1.50 | (ii) | |
| | | |
| | | |
| | | |
| | |
| Volatility | |
| 34.20 | % | |
| 41.51 | % | |
| 42.00 | % | |
| 42.00 | % | |
| 43.50 | % |
| Dividend Yield | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % |
| Credit Spread | |
| 6.88 | % | |
| 7.52 | % | |
| 6.93 | % | |
| 6.93 | % | |
| 6.76 | % |
| Liquidity Risk Premium | |
| 51.08 | % | |
| 77.62 | % | |
| 78.14 | % | |
| 78.14 | % | |
| 75.73 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Appraisal Date | |
| August 31,
2021 | | |
| August
31, 2021 | | |
| August 31,
2021 | | |
| August 31,
2021 | | |
| August 31,
2021 | |
| Risk-free Rate | |
| 0.05 | % | |
| 0.09 | % | |
| 0.10 | % | |
| 0.10 | % | |
| 0.12 | % |
| Applicable Closing Stock Price | |
$ | 2.01 | | |
$ | 2.01 | | |
$ | 2.01 | | |
$ | 2.01 | | |
$ | 2.01 | |
| Conversion Price | |
$ | 0.40 | | |
$ | 0.40 | | |
$ | 0.40 | | |
$ | 0.40 | | |
$ | 0.40 | |
| Volatility | |
| 45.20 | % | |
| 49.90 | % | |
| 49.76 | % | |
| 49.76 | % | |
| 48.45 | % |
| Dividend Yield | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % |
| Credit Spread | |
| 3.63 | % | |
| 3.63 | % | |
| 3.63 | % | |
| 3.63 | % | |
| 3.63 | % |
| Liquidity Risk Premium | |
| 84.04 | % | |
| 86.98 | % | |
| 86.63 | % | |
| 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 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
December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)
2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the
accounting for income taxes by removing certain exceptions and enhances and simplifies various aspects of the income tax accounting guidance
in ASC 740. The Company adopted ASU 2019-12 on September 1, 2021. The adoption of ASU 2019-12 did not have any impact on the Company’s
consolidated financial statement presentation or disclosures.
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”). ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and
cash conversion accounting models. Upon adoption of ASU 2020-06, convertible debt proceeds, unless issued with a substantial premium
or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt
and equity components. This modification will reduce the issue discount and result in less non-cash interest expense in financial statements.
ASU 2020-06 also updates the earnings per share calculation and requires entities to assume share settlement when the convertible debt
can be settled in cash or shares. For contracts in an entity’s own equity, the type of contracts primarily affected by ASU 2020-06
are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the
settlement assessment by removing the requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider
whether collateral is required to be posted, and (iii) assess shareholder rights. ASU 2020-06 is effective for fiscal years beginning
after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and only if
adopted as of the beginning of such fiscal year. The Company adopted ASU 2020-06 effective September 1, 2021. The adoption of ASU 2020-06
did not have any impact on the Company’s consolidated financial statement presentation or disclosures.
Recently
issued accounting pronouncements not yet adopted
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which requires
entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current
conditions, and reasonable and supportable forecasts. ASU 2016-13 replaces the existing incurred loss model and is applicable to the
measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 is to be adopted on a modified retrospective
basis. As a smaller reporting company, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning
after December 15, 2022. The Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on its consolidated
financial statement presentations and disclosures.
In
January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill
Impairment (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 of the two-step Goodwill impairment test, under which a goodwill
impairment loss was measured by comparing the implied fair value of a reporting unit’s Goodwill with the carrying amount of that
Goodwill. ASU 2017-04 requires only a one-step quantitative impairment test, whereby a Goodwill impairment loss is measured as the excess
of a reporting unit’s carrying amount over its fair value (not to exceed the total Goodwill allocated to that reporting unit).
Adoption of the ASUs is on a modified retrospective 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. The Company is currently evaluating the impact that the adoption
of ASU 2017-04 will have on its consolidated financial statement presentation or 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.
In
November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.
This update requires certain annual disclosures about transactions with a government that are accounted for by applying a grant or contribution
accounting model by analogy. This update is effective for annual periods beginning after December 15, 2021, and early application is
permitted. This guidance should be applied either prospectively to all transactions that are reflected in financial statements at the
date of initial application and new transactions that are entered into after the date of initial application or retrospectively to those
transactions. The Company does not expect the impact of this guidance to have a material impact on the Company’s consolidated financial
statements.
The
Company’s management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently
adopted, would have a material impact on the Company’s financial statement presentation or disclosures.
3.
ACQUISITION OF SUBSIDIARIES
On
August 17, 2020, the Company, through its wholly-owned subsidiary JFB, 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 August
17, 2020, 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.
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 an indirect 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. The total amount of the Goodwill acquired
is not deductible for tax purposes.
The
balances of the Goodwill as of May 31, 2022 and August 31, 2021 are as follows
SCHEDULE
OF MOVEMENT OF GOODWILL
| | |
As of
May 31, 2022 | | |
As of
August 31, 2021 | |
| | |
| | | |
| | |
| Balance
of Goodwill | |
$ | 1,747,945 | | |
$ | 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. No impairment loss of Goodwill of the reporting unit of the Fintech App
development was recognized for the nine and three months ended May 31, 2022 and 2021.
4.
PLANT AND EQUIPMENT, NET
Plant
and equipment as of May 31, 2022 and August 31, 2021 are summarized below:
SCHEDULE OF PLANT AND EQUIPMENT, NET
| | |
As of
May 31, 2022 | | |
As of
August 31, 2021 | |
| Furniture and fixtures | |
$ | 80,880 | | |
$ | 64,791 | |
| Office equipment | |
| 31,247 | | |
| 32,038 | |
| Leasehold improvement | |
| 85,995 | | |
| 83,883 | |
| Total | |
| 198,122 | | |
| 180,712 | |
| Less: Accumulated depreciation | |
| (124,249 | ) | |
| (110,952 | ) |
| Plant and Equipment, net | |
$ | 73,873 | | |
$ | 69,760 | |
Depreciation
expenses, classified as operating expenses, were $32,738 and $27,978 for the nine months ended May 31, 2022 and 2021, respectively; and
$9,406 and $8,443 for the three months ended May 31, 2022 and 2021, respectively.
5.
INTANGIBLE ASSETS, NET
Intangible
assets costs as of May 31, 2022 and August 31, 2021 are summarized below:
SCHEDULE OF INTANGIBLE ASSETS
| | |
As of
May 31, 2022 | | |
As of
August 31, 2021 | |
| Investment platform | |
$ | 30,000 | | |
$ | 30,000 | |
| Technical know-hows | |
| 818,200 | | |
| 818,200 | |
| Trademarks | |
| 4,920 | | |
| 3,483 | |
| Total | |
| 853,120 | | |
| 851,683 | |
| Less: Accumulated amortization | |
| (176,501 | ) | |
| (108,959 | ) |
| Impairment | |
| (111,915 | ) | |
| (111,915 | ) |
| Intangible assets, net | |
$ | 564,704 | | |
$ | 630,809 | |
Amortization
expense for intangible assets was $67,542 and $76,803 for the nine months ended May 31, 2022 and 2021, respectively; and $22,534 and
$25,625 for the three months ended May 31, 2022 and 2021, respectively.
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 . No impairment loss of intangible asset
was recognized for the nine and three months ended May 31, 2022 and 2021.
As
of May 31, 2022, amortization expenses related to intangible assets for future periods are estimated to be as follows:
SCHEDULE OF AMORTIZATION EXPENSES RELATED TO INTANGIBLE ASSETS
| | |
| | |
| 2022 (remaining period) | |
$ | 22,534 | |
| 2023 | |
| 90,136 | |
| 2024 | |
| 90,136 | |
| 2025 | |
| 90,136 | |
| 2026 | |
| 90,136 | |
| 2027 and thereafter | |
| 181,626 | |
| Total | |
$ | 564,704 | |
6.
RELATED PARTY TRANSACTIONS
SCHEDULE OF RELATED PARTY TRANSACTIONS
| | |
For the nine months ended | | |
For the three months ended | |
| | |
May 31, 2022 | | |
May 31, 2021 | | |
May 31, 2022 | | |
May 31, 2021 | |
| | |
| | |
| | |
| | |
| |
| Other Income: | |
| | | |
| | | |
| | | |
| | |
| Miscellaneous income from Greenpro LF Limited (a) | |
$ | - | | |
$ | 1,823 | | |
$ | - | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | |
| Interest expense: | |
| | | |
| | | |
| | | |
| | |
Interests charged to shareholders
(Note 9 and 11) | |
| 62,246 | | |
| - | | |
| 23,220 | | |
| - | |
| (a) |
Mr.
Lin is a director of Greenpro LF Limited. |
7.
PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
SCHEDULE OF PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
| | |
| | | |
| | |
| | |
As of
May 31, 2022 | | |
As of
August 31, 2021 | |
| | |
| | |
| |
| Rental and management fee deposits | |
$ | 115,646 | | |
| 120,831 | |
| Other prepaid expenses | |
| 104,942 | | |
| 194,040 | |
| Other taxes recoverable | |
| 34,267 | | |
| 19,183 | |
| Prepayments, deposits and other receivables | |
$ | 254,855 | | |
| 334,054 | |
| Less: non-current portion | |
| | | |
| | |
| Rental and management fee deposits | |
| 6,899 | | |
| 54,204 | |
| Other prepaid expenses | |
| - | | |
| 48,135 | |
| Prepayments, deposits and other receivables, non-current | |
| 6,899 | | |
| 102,339 | |
| Prepayments, deposits and other receivables, current | |
$ | 247,956 | | |
| 231,715 | |
8.
ACCRUED EXPENSES AND OTHER PAYABLES
SCHEDULE OF ACCRUED EXPENSES AND OTHER PAYABLES
| | |
As of
May 31, 2022 | | |
As of
August 31, 2021 | |
| Accrued interests (Note 9 and 11) | |
$ | 29,057 | | |
| 2,935 | |
| Accrued payroll | |
| 140,720 | | |
| 207,864 | |
| Other accrued expenses | |
| 229,613 | | |
| 87,822 | |
| Other payables | |
| 91,500 | | |
| 75,648 | |
| Accrued expenses and
other payables | |
$ | 490,890 | | |
| 374,269 | |
9.
DUE TO SHAREHOLDERS AND DIRECTORS
SCHEDULE OF DUE FROM (TO) SHAREHOLDERS, DIRECTORS AND A RELATED COMPANY
| | |
As of
May 31, 2022 | | |
As of
August 31, 2021 | |
| Other loans from shareholders: | |
| | | |
| | |
| Chen Jui-Chin (c) (Note 12) | |
$ | 100,000 | | |
$ | - | |
| Chen Teh-Ling (b) | |
| 50,000 | | |
| - | |
| Huang Chun-Shuo (a) | |
| 158,000 | | |
| - | |
| Huang Mei-Ying (e) | |
| 123,491 | | |
| - | |
| Hsu Kuo-Hsun (g) | |
| 1,380 | | |
| - | |
| Wang Chin-Chiang (d) (Note 12) | |
| 200,000 | | |
| - | |
| Wang Ding-Yu (f) | |
| 7,399 | | |
| - | |
| Total (Note 10) | |
| 640,270 | | |
| - | |
| Less: Other loans, non-current | |
| (200,000 | ) | |
| - | |
| | |
$ | 440,270 | | |
$ | - | |
| | |
| | | |
| | |
| Due to a director - current: | |
| | | |
| | |
| Lin Yi-Hsiu (i) | |
$ | 978,027 | | |
$ | 1,098,374 | |
| | |
| | | |
| | |
| Due to shareholders - current: | |
| | | |
| | |
| Tu Yu-Cheng (i) | |
$ | 47,841 | | |
$ | 50,591 | |
| Cheng Hung-Pin (i) | |
| 7,544 | | |
| 800 | |
| Huang Mei-Ying (i) | |
| 800 | | |
| 800 | |
| Lo Shih-Chu (i) | |
| 800 | | |
| 800 | |
| Chen Jun-Yuan (i) | |
| 800 | | |
| 800 | |
| Total | |
$ | 57,785 | | |
$ | 53,791 | |
| (a) |
On
February 28, 2022, the Company obtained a loan of RMB1,000,000 ($158,000) from Huang Chun-Shuo, which accrues interest at
the rate of 8% per annum. The loan was due on May 27, 2022 and further extended to November 27, 2022. Interest of $3,186 and $3,160 respectively was incurred for the nine
and three months ended May 31, 2022. Interest of $3,186 and $nil was accrued as of May 31, 2022 and August 31, 2021, respectively. |
| |
|
| (b) |
The
Company borrowed a total of principal amounted to NTD1,480,000
($50,000)
from Teh-Ling Chen with 6%
p.a. interest bearing payable on maturity. The loan of NTD1,000,000
($33,784)
borrowed on March 1, 2022 was due on April
30, 2022 but extended a further 6-month while NTD480,000
($16,216)
obtained on May 16, 2022 would be due on August
31, 2022. Interest of $572
was incurred for the nine and three months ended May 31, 2022. Interest of $572
and $nil was accrued as of May 31, 2022 and August 31, 2021, respectively. On June 17, 2022, 500,576
shares of the Company were subsequently issued to Teh-Ling Chen for the repayment of principal and accrued interest. |
| |
|
| (c) |
The
loan was modified from convertible note on March 23, 2022 and would be repayable in five
installments before November 30, 2022 with 6%
interest-bearing per annum. For the nine and three months ended May 31, 2022, interest of $4,488
and $1,488
were incurred respectively. Interest of $1,199 and $nil was accrued as of May 31, 2022 and August 31, 2021, respectively. $10,000
was subsequently repaid by the Company on June 1, 2022. |
| |
|
| (d) |
The
loan was modified from convertible note on May 3, 2022 and would mature on November
25, 2024 with 6%
interest-bearing per annum. For the nine and three months ended May 31, 2022, interest of $9,000
and $3,000
were incurred respectively. Interest of $6,165 and $nil was accrued as of May 31, 2022 and August 31,
2021, respectively. |
| |
|
| (e) |
The Company borrowed
non-interest bearing loans in the aggregate amount of NTD4,000,000
($137,979)
from Huang Mei-Ying. The loans of NTD2,500,000
($86,237)
and NTD1,000,000
($34,494)
borrowed on December 25, 2021 and January 12, 2022 were due on May 24, 2022 and June 30, 2022, respectively but further extended to
December 31, 2022. NTD420,000
($14,488)
was repaid for the remaining loan of NTD500,000
($17,248)
obtained on February 9, 2022 which would be repayable based on the Company’s financial ability |
| |
|
| (f) |
On April 25, 2022, the Company obtained non-interest bearing loan of NTD214,500
($7,399) from Wang Ding-Yu. The loan would mature on December 31, 2022. |
| |
|
| (g) |
A principal of NTD40,000 ($1,380) was obtained from Hsu Kuo-Hsun on May
13, 2022. The loan is non-interest bearing and would mature on December 31, 2022. |
| |
|
| (h) |
The Company borrowed a principal amount of $40,000 on May 16, 2022 from
a shareholder – CPN Investment Limited. The loan was 6% interest bearing payable on maturity and would be matured in one year. The
loan was fully repaid on May 31, 2022. No interest was accrued as of May 31, 2022. |
| |
|
| (i) |
Amounts
due to other shareholders and a director are unsecured, interest-free with no fixed payment term. |
10.
OTHER LOANS
SCHEDULE OF OTHER LOANS
| | |
As of May 31, 2022 | | |
As of August 31, 2021 | |
| Other loans: | |
| | | |
| | |
| - from shareholders (note 9) | |
$ | 640,270 | | |
$ | - | |
| - from a non-related party | |
| 8,624 | | |
| - | |
| | |
| 648,894 | | |
| - | |
| Less: Other loan, non-current: | |
| (200,000 | ) | |
| - | |
| | |
$ | 448,894 | | |
$ | - | |
On
May 20, 2022, the Company borrowed non-interest bearing loan of NTD250,000 ($8,624) from a non-related company which was owned by an
employee of the Company. The loan would be repayable on December 31, 2022.
11.
BONDS PAYABLE
The
Company 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 purchase price of $600,000. The bond will mature three years from August 14, 2019. Interest
on the bond accrues at rate of 10% per annum and is payable on semi-yearly basis. 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 to the purchaser.
Interest of $17,935 and $2,935 was accrued as of May 31, 2022 and August 31, 2021, respectively.
Interest expenses of $45,000 and $15,000 were
incurred for the nine and three months ended May 31, 2022 and 2021, respectively.
12.
CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES
The
Company entered into a series of Convertible Promissory Note Purchase Agreements (the “Agreements”) with certain investors
between March 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 $900,000. A summary of the major terms of the Agreements are presented as follows:
SCHEDULE OF CONVERTIBLE NOTES PAYABLE
| | |
Principal amount | | |
Issue date | |
Maturity date | |
Interest rate | |
| 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 | % |
| | |
$ | 900,000 | | |
| |
| |
| | |
On
March 18, 2020, the Company issued an unsecured note in the principal amount of $100,000,
which accrues interest at the rate of 6%
per annum, to a shareholder – Jui-Chin Chen. On August 17, 2020, the Company amended the Note and the Agreement, 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 March 23, 2022, the Company further amended the Note and the Agreement with the noteholder, mutually agreed to cancel the
conversion option and to repay the principal in two instalments and accrued interest during that period before October 31, 2022. The
balance was classified as 6%
short-term loan on the same date (Note 9). ($4,088) and $1,912 was recognized for the (gain) loss on change in fair value of the
modification during the nine and three months ended May 31, 2022, respectively. On May 29, 2022, the Company further amended the
Note and the Agreement with the noteholder, mutually agreed to repay the principal and interests in five instalments before November
30, 2022.
On
November 2, 2020, the Company issued a 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 May 10, 2022, the Company entered into an amendment to the Note with the shareholder, 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 $0.10
per share. $178,000 was recognized for the loss on change in fair value of the modification during the nine and three months ended
May 31, 2022. On May 12, 2022, the shareholder submitted conversion notice to the Company converting all of the outstanding balance
of his Note into an aggregate of 1,000,000
shares of the Company’s common stock. The conversion was approved by the Company on May 17, 2022 and the shares were issued on
May 19, 2022. Further $1,217,841 and $1,222,841 of the loss on change in fair value was recognized during the nine and three months
ended May 31, 2022, respectively.
On
November 25, 2020, the Company issued a Note in the principal amount of $200,000,
which accrues interest at the rate of 6%
per annum, to a shareholder – Chin-Chiang Wang. The Note is due on November
25, 2022 and unsecured. On May 3, 2022, the Company entered into an amendment to the Note and the convertible promissory note
purchase agreement with Chin-Chiang Wang, mutually agreed to extend the maturity date to November 25, 2024 and cancel the conversion
option. ($10,835) and $1,165 was recognized for the (gain) loss on change in fair value of the modification during the nine and
three months ended May 31, 2022, respectively. The balance was classified as non-current 6%
loan on the same date (Note 9).
On
November 25, 2020, the Company issued several Notes in the total principal amount of $400,000,
which accrues interest at the rate of 6%
per annum, to shareholders – Chin-Ping Wang and Chin-Nan Wang. The notes are due on November
25, 2022 and unsecured. On January 24, 2022, the Company entered into an amendment to the Notes with these two shareholders,
wherein, at the sole option of the applicable noteholder, all or part of the unpaid outstanding principal of such noteholder’s
Notes would be convertible into shares of restricted common stock of the Company at a conversion price equal to $0.25
per share. $141,000 and $nil was recognized for the loss on change in fair value of the modification during the nine and three
months ended May 31, 2022, respectively. On January 26, 2022, the shareholders submitted conversion notices to the Company
converting all of the outstanding balances of their Notes into an aggregate of 1,600,000
shares of the Company’s common stock. The conversion was approved by the Company on January 31, 2022 and the shares were
issued on March 15, 2022. Further $1,069,330 and $nil of the loss on change in fair value was recognized during the nine and three months ended
May 31, 2022, respectively.
On
January 15, 2021, the Company issued a 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. On May 10, 2022, the Company entered into an amendment to the Note with the shareholder, 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 $0.10
per share. $176,000 was recognized for the loss on change in fair value of the modification during the nine and three months ended
May 31, 2022. On May 12, 2022, the shareholder submitted conversion notice to the Company converting all of the outstanding balance
of his Note into an aggregate of 1,000,000
shares of the Company’s common stock. The conversion was approved by the Company on May 17, 2022 and the shares were issued on
May 19, 2022. Further $1,216,629 and $1,222,629 of the loss on change in fair value was recognized during the nine and three months
ended May 31, 2022, respectively.
For
each of the 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 $0.40 per share. Each of the noteholders 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.
No
convertible note was held while interest of $nil was accrued as of May 31, 2022.
During
the nine months ended May 31, 2022 and 2021, interest of $31,518 and $2,712 were incurred on the Notes, respectively. During the three
months ended May 31, 2022 and 2021, interest of $10,848 and $nil were incurred on the Notes, respectively.
13.
INCOME TAXES
For
the period ended May 31, 2022 and 2021, the local (United States) and foreign components
of loss before income tax were comprised of the following:
SCHEDULE OF INCOME/(LOSS) BEFORE INCOME TAXES
| | |
|
May 31, 2022 | | |
|
May 31, 2021 | | |
|
May 31, 2022 | | |
|
May 31, 2021 | |
| | |
Nine months ended | | |
Three months ended | |
| | |
May 31, 2022 | | |
May 31, 2021 | | |
May 31, 2022 | | |
May 31, 2021 | |
| Tax jurisdictions from: | |
| | | |
| | | |
| | | |
| | |
| - Local | |
$ | (6,263,237 | ) | |
$ | (4,279,016 | ) | |
$ | (3,887,485 | ) | |
$ | (1,374,280 | ) |
| State and local income tax expense (benefit), continuing operations | |
$ | (6,263,237 | ) | |
$ | (4,279,016 | ) | |
$ | (3,887,485 | ) | |
$ | (1,374,280 | ) |
| - Foreign, representing | |
| | | |
| | | |
| | | |
| | |
| Seychelles | |
| - | | |
| (1,610 | ) | |
| - | | |
| - | |
| British Virgin Islands | |
| (2,046 | ) | |
| (89,604 | ) | |
| (191 | ) | |
| (4,626 | ) |
| Taiwan | |
| (1,792,198 | ) | |
| (1,331,039 | ) | |
| (540,758 | ) | |
| (380,979 | ) |
| PRC | |
| (520,338 | ) | |
| (457,705 | ) | |
| (265,710 | ) | |
| (146,307 | ) |
| Hong Kong | |
| (706,029 | ) | |
| (2,361,044 | ) | |
| (84,454 | ) | |
| (376,190 | ) |
| Tax jurisdictions from: foreign, representing | |
| (706,029 | ) | |
| (2,361,044 | ) | |
| (84,454 | ) | |
| (376,190 | ) |
The
components of the benefit for income taxes expenses are:
SCHEDULE OF COMPONENTS OF PROVISION BENEFIT FOR INCOME TAXES
| | |
|
May 31, 2022 | | |
|
May 31, 2021 | | |
|
May 31, 2022 | | |
|
May 31, 2021 | |
| | |
Nine months ended | | |
Three months ended | |
| | |
May 31, 2022 | | |
May 31, 2021 | | |
May 31, 2022 | | |
May 31, 2021 | |
| Current | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
| Deferred | |
| (13,447 | ) | |
| (16,108 | ) | |
| (4,483 | ) | |
| (5,879 | ) |
| Total income tax benefit | |
$ | (13,447 | ) | |
$ | (16,108 | ) | |
$ | (4,483 | ) | |
$ | (5,879 | ) |
The
benefit for income taxes consisted of the following:
SCHEDULE OF PROVISION FOR INCOME TAXES
| | |
|
May 31, 2022 | | |
|
May 31, 2021 | | |
|
May 31, 2022 | | |
|
May 31, 2021 | |
| | |
Nine months ended | | |
Three months ended | |
| | |
May 31, 2022 | | |
May 31, 2021 | | |
May 31, 2022 | | |
May 31, 2021 | |
| Statutory income tax rate | |
| 21 | % | |
| 21 | % | |
| 21 | % | |
| 21 | % |
| Income tax credit computed at statutory income rate | |
| (1,949,608 | ) | |
| (1,789,204 | ) | |
| (1,003,505 | ) | |
| (479,300 | ) |
| Reconciling items: | |
| | | |
| | | |
| | | |
| | |
| Non-deductible expenses (non-taxable income) | |
| 929,439 | | |
| 84,775 | | |
| 618,124 | | |
| (28,271 | ) |
| Share-based payments | |
| 474,395 | | |
| 1,139,058 | | |
| 251,624 | | |
| 333,794 | |
| Tax effect of tax exempt entity | |
| 430 | | |
| 19,154 | | |
| 40 | | |
| 970 | |
| Rate differential in different tax jurisdictions | |
| 9,560 | | |
| 101,249 | | |
| (6,428 | ) | |
| 14,886 | |
| Valuation allowance on deferred tax assets | |
| 522,337 | | |
| 428,858 | | |
| 135,662 | | |
| 152,040 | |
| Income tax benefit | |
$ | (13,447 | ) | |
$ | (16,108 | ) | |
$ | (4,483 | ) | |
$ | (5,879 | ) |
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 May 31, 2022, the
operations in the United States of America incurred $2,575,789 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 May 31, 2022, the Company
has provided for a full valuation allowance of $540,916 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, LFGL is registered as an international business company, as such, LFGL is governed by the International
Business Companies Act of Seychelles and not subject to income taxes 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. Since January 1, 2018, the CIT rate in Taiwan is 20%. As of May 31,
2022, LOC had net operating loss carry-forwards in Taiwan of $4,524,813, which will expire in various years through 2025. The Company
has provided for a full valuation allowance of $904,963 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 May 31, 2022, BJDC had net operating loss carry-forwards in the PRC of $2,351,545, which will expire in various years through 2027.
The Company has provided for a full valuation allowance of $587,886 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 May 31, 2022, the
operations in Hong Kong incurred $3,214,781 of cumulative net operating losses (NOL’s) which can be carried forward indefinitely
to offset future taxable income. As of May 31, 2022, the Company has provided for a full valuation allowance of approximately $530,439
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.
SCHEDULE OF DEFERRED TAX ASSETS
| | |
May 31, 2022 | | |
August 31, 2021 | |
| Deferred tax assets: | |
| | | |
| | |
| Net operating loss carryforwards | |
| | | |
| | |
| – United States of America | |
$ | (540,916 | ) | |
$ | (469,843 | ) |
| – Taiwan | |
| (904,963 | ) | |
| (618,141 | ) |
| – PRC | |
| (587,886 | ) | |
| (457,802 | ) |
| – Hong Kong | |
| (530,439 | ) | |
| (469,186 | ) |
| Deferred tax assets: net operating loss carryforwards | |
| (530,439 | ) | |
| (469,186 | ) |
| Less: valuation allowance | |
| 2,564,204 | | |
| 2,014,972 | |
| Deferred tax assets,
net of valuation allowance | |
$ | - | | |
$ | - | |
| Deferred tax liabilities: | |
| | | |
| | |
| Intangible assets – Technical know-hows | |
$ | 112,055 | | |
$ | 125,502 | |
| Deferred tax liabilities, net | |
$ | 112,055 | | |
$ | 125,502 | |
14.
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 was 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 was 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. 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 bonus compensation offer was cancelled on March 1, 2022. The
fair value of the shares of restricted common stock for the first year ending August 31, 2022 was $250,000,
which was calculated based on a price per share of $0.10
and amortized over the service term. During the nine months ended May 31, 2022 and 2021, the Company amortized $187,500
and $750,000,
respectively, as remuneration. During the three months ended May 31, 2022 and 2021, the Company amortized $62,500
and $250,000,
respectively.
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. Mr. Cheng would 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, would 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 granted on September 1, 2020 was $1,500,000,
which was calculated based on a price per share of $0.40
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 would 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, would be paid or granted immediately on
September 1, 2021. The fair value of the shares of restricted common stock granted on September 1, 2021 was $150,000,
which was calculated based on a price per share of $0.10
and amortized over the service term. During the nine months ended May 31, 2022 and 2021, the Company amortized $112,500 and $450,000, respectively,
as remuneration. During the three months ended May 31, 2022 and 2021, the Company amortized $37,500 and $150,000, respectively.
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. 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 nine months ended May 31, 2022 and 2021, the Company amortized
$50,000 and $625,000 respectively as consulting expenses under this agreement. During the three months ended May 31, 2022 and 2021, the
Company amortized $nil and $250,000 respectively. The shares were granted on July 7, 2020 and December 16, 2021, respectively.
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. As of August 31,
2020, 5,000,000
common shares of the Company had been
issued to the employee. The fair value of the shares of restricted common stock issued to him was $6,000,000,
which was calculated based on a price per share of $0.40. As of May
31, 2022, apart from the 5,000,000 Inducement Shares, 6,128,868 shares were vested to the employee upon achievement of the milestones
set forth in the employee’ offer letters. During the nine months ended May 31, 2022 and 2021, the Company amortized $318,108 and
$1,742,630, respectively, as salaries. During the three months ended May 31, 2022 and 2021, the Company amortized $75,627 and $158,037,
respectively. As of May 31, 2022, 10,000,000 shares were issued.
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 member, pursuant to which the staff member agreed to serve
as an executive assistant of the Company. For the service as an executive assistant, the staff member 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 member 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 member 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 nine and three months ended May 31, 2021, the Company recognized
$50,000 and $20,833 respectively as compensation under this arrangement.
On
August 1, 2020, the Company entered into a one-year consulting services agreement with a company. Pursuant
to the agreement, the Company agreed to pay the provider an annual compensation of $66,000,
prorated for any partial year. In addition, for the services rendered by the provider’s employees, 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 and will be amortized over the service
term. During the nine months ended May 31, 2022 and 2021, the Company recognized $16,666 and $283,333 respectively as
compensation under these arrangements. During the three months ended May 31, 2022 and 2021, the Company recognized $nil and $100,000
respectively. The shares were issued on January 6, 2021.
On
August 3, 2020, the Company issued an offer letter to a staff member, pursuant to which the staff member agreed to serve
as an executive assistant of the Company. For the service as an executive assistant, the staff member 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 she 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 nine and three months ended May 31, 2021, the Company recognized
$50,000 and $20,833 respectively as compensation under this arrangement.
On
November 1, 2020, the Company entered into one-year consulting agreements with two consultants to assist in monitoring and improving
FinMaster APP. Pursuant to the agreement, the Company agreed to pay the consultants 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 nine months ended May 31, 2022 and
2021, the Company amortized $416,666 and $1,458,333 respectively as consulting expenses under these agreements. During the three months
ended May 31, 2022 and 2021, the Company amortized $nil and $625,000 respectively.
On
February 8, 2021, the Company and First Leader Capital Ltd. mutually agreed to further forfeit and surrender 5,000,000
shares (the “Surrendered Shares”)
of the Company’s common stock, par value $0.0001
per share (the “Common Stock”).
The Surrendered Shares were automatically cancelled and retired. First Leader Capital Ltd. agreed to forfeit and cancel the Surrendered
Shares in exchange for 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., again, mutually agreed to forfeit and surrender 13,132,500
shares (the “Surrendered Shares”)
of the Company’s common stock, par value $0.0001
per share (the “Common Stock”).
The Surrendered Shares were automatically cancelled and retired. First Leader Capital Ltd. agreed to forfeit and cancel the Surrendered
Shares in exchange for 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
September 1, 2021, the Company issued an offer letter to Hsu Kuo-Hsun, pursuant to which Mr. Hsu agreed to serve as chairman of LOC for
two
years. Per the terms of the offer letter,
Mr. Hsu will receive a monthly remuneration of NT$60,000
(equivalent to $2,157)
in cash and 2,400,000
shares of restricted common stock, which shall
be granted in two equal tranches and vested on March 1, 2022 and March 1, 2023. The fair value of the shares of restricted common stock
for the first year ending August 31, 2022 was $120,000,
which was calculated based on a price per share of $0.10
and amortized over the service term. During the nine and three months ended May 31, 2022, the Company
amortized $90,000 and $30,000, respectively, as consulting expenses under this agreement.
On
September 1, 2021, the Company issued a Senior Vice President (“SVP”) offer letter to Chiao Chien, pursuant to which Mr.
Chiao agreed to serve as SVP of user experience of the Company for two
years. For his services, Mr. Chiao will
receive a monthly remuneration of RMB 17,000
(equivalent to $2,648)
in cash and 3,000,000
shares of restricted common stock, which shall
be granted in two equal tranches and vested on March 1, 2022 and March 1, 2023. The fair value of the shares of restricted common stock
for the first year ending August 31, 2022 was $150,000,
which was calculated based on a price per share of $0.10
and amortized over the service term. During the nine
and three months ended May 31, 2022, the Company amortized $112,500 and $37,500, respectively, as consulting expenses under this agreement.
On
December 21, 2021, pursuant to the 2021 Equity Incentive Plan, the Company granted an aggregate of 9,550,850
non-restricted share units of the Company’s common stock to certain employees and consultants of the Company. In accordance
with the vesting schedule of the grant, the restricted shares will vest immediately. The fair price of the non-restricted
shares was $0.10
per share. The Company recognized the share-based compensation expenses over the vesting period on a graded-vesting method. The
Company recorded non-cash share-based compensation of $955,085
for the nine and three months ended May 31, 2022, in respect of the non-restricted shares granted. The shares were issued on March
2, 2022. As of May 31, 2022, neither unrecognized stock-based compensation was associated with the above share units nor vested
shares were to be issued.
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.
From
September 2021 to May 2022, the Company entered into securities purchase agreements with several accredited investors whereby the investors
purchased a total of 14,170,000 shares of the Company’s common stock at an average price of $0.12 per share. The Company received
aggregate gross proceeds of $1,690,000. 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 May 31, 2022.
In January 2022, two holders agreed to convert
convertible notes with a principal amount of $400,000 for a total of 1,600,000 shares of the Company’s common stock. The amount of $1,631,840 was classified as shares issued under paid-in capital as of May 31, 2022.
The shares were issued on March 15, 2022.
In
May 2022, a holder agreed to convert convertible notes with a principal amount of $200,000 for a total of 2,000,000 shares of the Company’s
common stock. The amount of $2,999,800 was classified as shares issued under paid-in capital as of May 31, 2022. The shares were issued
on May 19, 2022.
As
of May 31, 2022, unrecognized share-based compensation expense was $1,640,326.
As
of May 31, 2022, 6,442,936 shares were granted to employees and vested but not yet issued.
15.
COMMITMENTS AND CONTINGENCIES
During
the period ended May 31, 2022, the Company entered into month-to-month lease agreements with independent third parties to rent office
and staff quarter premises in Taiwan, Shenzhen, Beijing and Hong Kong. The rental expense for the nine months ended May 31, 2022 and
2021 were $259,402 and $235,765 respectively; and $110,925 and $72,361 for the three months ended May 31, 2022 and 2021 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 May 31, 2022:
SCHEDULE OF MATURITIES OF LEASE LIABILITIES
| Year ending May 31, | |
|
| |
| 2023 | |
$ | 2,760 | |
| 2024 | |
| - | |
| 2025 | |
| - | |
| 2026 | |
| - | |
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 nine months ended | |
| | |
May 31, 2022 | | |
May 31, 2021 | |
| | |
| | |
| |
| Operating lease cost – classified as general and administrative expenses | |
$ | 259,402 | | |
$ | 229,234 | |
| Weighted Average Remaining Lease Term – Operating leases | |
| 1.54 years | | |
| 1.18 years | |
| Weighted Average Discounting Rate – Operating leases | |
| 5.31 | % | |
| 5.78 | % |
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, mutual agreement or expiration of a fixed-term labor contract. The Company has estimated its possible
severance payments of approximately $150,000 and $129,000 as of May 31, 2022 and August 31, 2021, 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 $52,000 and $69,000 as of May 31, 2022 and August 31, 2021, 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.
16.
SUBSEQUENT EVENTS
On
July 14, 2022, the Company entered into securities purchase agreement with an accredited investor whereby the investor purchased a
total of 5,000,000
shares of the Company’s common stock at a price of $0.10
per share. The Company received aggregate gross proceed of $500,000.
Pursuant to the terms of the securities purchase agreement, the investor will have piggyback registration rights with respect to
the shares. The shares are expected to be issued by end of July 2022.
