NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the YEARS ended August 31, 2022 and 2021
(In
U.S. dollars)
1.
ORGANIZATION AND BUSINESS BACKGROUND
Leader
Capital Holdings Corp. (“LCHD” or the “Company”) was incorporated on March 22, 2017 under the laws of the State
of Nevada.
The
Company mainly engages in the provision of investment platform services with the use of a mobile application through the following subsidiaries:
SCHEDULE OF SUBSIDIARIES OF COMPANY
Company
name |
|
Place/date
of incorporation |
|
Principal
activities |
|
|
|
|
|
1. Leader Financial Group Limited (“LFG”) |
|
Seychelles / March 6, 2017 |
|
Investment Holding |
|
|
|
|
|
2. JFB Internet Service Limited (“JFB”) |
|
Hong Kong / July 6, 2017 |
|
Provide an Investment platform |
On
August 17, 2020, LCHD, through JFB, acquired all of the issued and outstanding capital stock (the “Acquisition”) of Nice
Products Inc. (“NPI”), pursuant to the terms and conditions of that certain Stock Purchase Agreement, dated as of the Closing
Date, among the Company, JFB, NPI, the selling shareholders of NPI identified therein (each a “Seller,” and, collectively,
the “Sellers”) and the representative of the Sellers identified therein. As a result of the Acquisition, the Company now
owns indirectly 100% of NPI, LOC Weibo Co., Ltd. and Beijing DataComm Cloud Media Technology Co., Ltd.
The
aggregate purchase price for the Acquisition was $4,850,000, less certain discounts, expenses and reductions for outstanding NPI debt
owed to the Company and/or its affiliates, resulting in a net purchase price of $3,506,042, payable in 8,415,111 shares of the Company’s
common stock to the Sellers in accordance with their respective pro rata percentage.
After
the completion of the acquisition, NPI became a wholly owned subsidiary of the Company.
NPI
was incorporated in the British Virgin Islands on December 17, 2018.
NPI,
through its subsidiaries, mainly engages in the development of ecological-systems applications, integration of big data and promotion
of OTT applications.
LCHD
and its subsidiaries (including NPI and its subsidiaries) are hereinafter referred to as the “Company”.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America
(“US GAAP”) and include the financial statements of LCHD and its wholly owned subsidiaries. Intercompany accounts and transactions
have been eliminated in consolidation. The Company has adopted August 31 as its fiscal year end.
Going
concern
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of business.
The
Company has suffered recurring losses from operations, and records an accumulated deficit, a working capital deficit and a net stockholders’
deficit of $34,921,164, $2,248,545 and $2,200,107 respectively as of August 31, 2022. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company’s
profit generating operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities
arising from normal business operations when they become due.
The
Company expects to finance its operations primarily through cash flows from operations, loans from existing directors and shareholders
and placements of capital stock for additional funding. In the event that the Company requires additional funding to finance the growth
of the Company’s current and expected future operations as well as to achieve our strategic objectives, a shareholder has indicated
the intent and ability to provide additional financing. No assurance can be given that any future financing, if needed, will be available
or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing,
if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its
stock holders, in the case of equity financing.
In
March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted
the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted
the normal operations of many businesses, including the Company’s businesses. This outbreak could decrease spending, adversely
affect demand for the Company’s services and harm its business and results of operations. It is not possible for the Company to
predict the duration or magnitude of the adverse results of the outbreak and its effects on its business or results of operations at
this time.
These
consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Use
of estimates
The
preparation of these consolidated financial statements in conformity with U.S. GAAP requires management of the Company to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an on-going
basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The
COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further
business slowdowns or shutdowns, depress demand for the Company’s business, and adversely impact its results of operations. The
Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact
associated with the COVID-19 pandemic. Its estimates may change as new events occur and additional information emerges, and such changes
are recognized or disclosed in its consolidated financial statements.
Identified
below are the accounting policies that reflect the Company’s most significant estimates and judgments, and those that the Company
believes are the most critical to fully understanding and evaluating its consolidated financial statements.
Business
combination
The
Company accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification
(“ASC”) 805 “Business Combinations.” The cost of an acquisition is measured as the aggregate of the acquisition
date fair values of the assets transferred and liabilities incurred by the Company to the sellers and equity instruments issued. Transaction
costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are
measured separately at their fair values as of the acquisition date, irrespective of the extent of any non-controlling interests. The
excess of (i) the total costs of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously
held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill.
If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly
in the consolidated statements of comprehensive income. During the measurement period, which can be up to one year from the acquisition
date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon
the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes
first, any subsequent adjustments are recorded to the consolidated statements of comprehensive income.
When
there is a change in ownership interests that result in a loss of control of a subsidiary, the Company deconsolidates the subsidiary
from the date control is lost. Any retained non-controlling investment in the former subsidiary is measured at fair value and is included
in the calculation of the gain or loss upon deconsolidation of the subsidiary.
Goodwill
and impairment of goodwill
Goodwill
represents the excess of the purchase price and related costs over the fair value of the net identified tangible and intangible assets
and liabilities assumed and is not amortized. The total amount of goodwill is deductible for tax purposes.
In
accordance with ASC Topic 350, “Intangibles-Goodwill and Other,” goodwill is not amortized but is tested for impairment,
annually or more frequently when circumstances indicate a possible impairment may exist. Impairment testing is performed at a reporting
unit level. An impairment loss generally would be recognized when the carrying amount of the reporting unit exceeds its fair value.
The
Company estimates fair value of the applicable reporting unit or units using a discounted cash flow methodology. This methodology represents
a level 3 fair value measurement as defined under ASC 820, Fair Value Measurements and Disclosures, since the inputs are
not readily observable in the marketplace. The goodwill impairment testing process involves the use of significant assumptions,
estimates and judgments, including projected sales, gross margins, selling, general and administrative expenses, and capital expenditures,
and the selection of an appropriate discount rate, all of which are subject to inherent uncertainties and subjectivity. When the Company
performs goodwill impairment testing, its assumptions are based on annual business plans and other forecasted results, which it believes
represent those of a market participant. The Company selects a discount rate, which is used to reflect market-based estimates of the
risks associated with the projected cash flows based on the best information available as of the date of the impairment assessment. Based
on the annual impairment analysis, there is impairment of $1,747,945 and $1,226,419 on the goodwill recorded in the Company’s financial
statements for the years ended August 31, 2022 and 2021, respectively. The impairment loss of goodwill was primarily attributable to
the impairment related to NPI as the financial performance of the reporting unit of FinTech App development continued to fall below the
Company’s original expectations.
Given
the current macro-economic environment and the uncertainties regarding its potential impact on the Company’s business, there can
be no assurance that its estimates and assumptions used in its impairment tests will prove to be accurate predictions of the future.
If the Company’s assumptions regarding forecasted cash flows are not achieved, it is possible that an impairment review may be
triggered and goodwill may be impaired. During the year ended August 31, 2022, the Company expects the reporting unit of FinTech App
development not to generate profits in the near future. As a result, the goodwill was fully impaired during the year ended August 31,
2022.
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.
Revenue
recognition
The
Company adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which establishes principles
for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s
contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer
of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange
for those goods or services recognized as performance obligations are satisfied.
The
Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09:
|
Step 1: Identify the contract |
|
Step 2: Identify the performance obligations |
|
Step 3: Determine the transaction price |
|
Step 4: Allocate the transaction price |
|
Step 5: Recognize revenue |
Revenues
are recognized when control of the promised goods or services is transferred to the Company’s customers, which may occur at a point
in time or over time depending on the terms and conditions of the agreement, in an amount that reflects the consideration the Company
expects to be entitled to in exchange for those goods or services.
Provision
of investment platform services
The
Company signed an agreement with a third party whereby the Company authorizes the third party to use the Company’s investment platform
and related applications for a period until December 31, 2020. Income from provision of investment platform services with the use of
the Company’s mobile applications is recognized when the service is performed.
From
September, 2020, the Company generated additional revenue from a new, more comprehensive mobile application, which refer to as the FinMaster
mobile application (the “FinMaster App” and together with the JFB platform, the “Apps”), with similar functions
as the JFB platform. Income from providing investment platform services with the use of a mobile application is recognized when the service
is performed.
The
Company offers a self-managed points program, which can be used in the FinMaster App to redeem merchandise or services. The Company determines
the value of each point based on estimated incremental cost. Customers and advocates have a variety of ways to obtain the points. The
major accounting policy for its points program is described as follows:
The
Company concludes the bonus points offered linked to the purchase transaction of the points is a material right and accordingly a separate
performance obligation according to ASC 606, and should be taken into consideration when allocating the transaction price of the point
sales. The Company also estimates the probability of points redemption when performing the allocation. The amount allocated to the bonus
points as separate performance obligation is recorded as contract liability (deferred revenue) and revenue should be recognized when
future goods or services are transferred. The Company will continue to monitor when and if forfeiture rate data becomes available and
will apply and update the estimated forfeiture rate at each reporting period.
Since
historical information is limited for the Company to determine any potential points forfeitures and most merchandise can be redeemed
without requiring a significant amount of points compared with the amount of points provided to users, the Company has used an estimated
forfeiture rate of zero.
Provision
of software development service and maintenance service
The
Company entered into several agreements with third party customers to assist the customers in the development of their mobile communications
software and mobile e-commerce software. Income from provision of software development service and maintenance service are recognized
when the service is performed.
Revenue
by major product line
SCHEDULE
OF REVENUE BY MAJOR PRODUCT LINE
| |
2022 | | |
2021 | |
| |
Year ended August 31, | |
| |
2022 | | |
2021 | |
Provision of investment platform services | |
$ | 17,930 | | |
$ | 19,606 | |
Provision of software development service and maintenance service | |
| 321,512 | | |
| 75,560 | |
Revenue by major product line | |
$ | 339,442 | | |
$ | 95,166 | |
Revenue
by recognition over time vs point in time
SCHEDULE OF REVENUE BY RECOGNITION OVER TIME VS POINT IN TIME
| |
2022 | | |
2021 | |
| |
Year ended August 31, | |
| |
2022 | | |
2021 | |
Revenue by recognition over time | |
$ | 339,442 | | |
$ | 95,166 | |
Revenue by recognition at a point in time | |
| - | | |
| - | |
Revenue by recognition | |
$ | 339,442 | | |
$ | 95,166 | |
Remaining
performance obligations represent contracted revenues that had not yet been recognized, and include deferred revenues; invoices that
have been issued to customers but were uncollected and have not been recognized as revenues; and amounts that will be invoiced and recognized
as revenues in future periods. As of August 31, 2022, the Company’s remaining performance obligations were $169,951, 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 years ended August 31, 2022 and 2021:
SCHEDULE OF CONTRACT LIABILITIES
Receipt in advance | |
August 31, 2022 | | |
August 31, 2021 | |
| |
| | |
| |
Balance as of September 1 | |
$ | 16,225 | | |
$ | 2,896 | |
Advances received from customers | |
| 492,289 | | |
| 110,485 | |
Revenue recognized | |
| (336,796 | ) | |
| (97,596 | ) |
Exchange difference | |
| (1,767 | ) | |
| 440 | |
Balance as of August 31 | |
$ | 169,951 | | |
$ | 16,225 | |
Practical
expedients and exemption
The
Company had not occurred any costs to obtain contracts, and do not disclose the value of unsatisfied performance obligations for contracts
with an original expected length of one year or less.
Research
and development expenses
Research
and development (“R&D”) expenses are primary comprised of charges for R&D and consulting work performed by third
parties; salaries and benefits for those employees engaged in research, design and development activities; costs related to design tools;
and allocated costs.
For
the year ended August 31, 2022 and 2021, the total R&D expenses were $510,723 and $602,118, respectively.
Sales
and marketing expenses
Sales
and marketing expenses consist primarily of marketing and promotional expenses, salaries and other compensation-related expenses to sales
and marketing personnel. Advertising expenses consist primarily of costs for the promotion of corporate image and product marketing.
The Company expenses all advertising costs as incurred and classifies these costs under sales and marketing expenses. For the years ended
August 31, 2022 and 2021, advertising costs totaled $285,908 and $168,535 respectively.
From
September, 2019, customers or users of the Company’s mobile application can obtain points through ways such as frequent sign-ins
to the Company’s mobile application, sharing articles from the application to users’ own social media. The Company believes
these points are to encourage user engagement and generate market awareness. As a result, the Company accounts for such points as selling
and marketing expenses with a corresponding liability recorded under other current liabilities of its consolidated balance sheets upon
the points offering. The Company estimates liabilities under the customer loyalty program based on cost of the merchandise that can be
redeemed, and its estimate of probability of redemption. At the time of redemption, the Company records a reduction of inventory and
other current liabilities.
Since
historical information is limited for the Company to determine any potential points forfeiture and most merchandise can be redeemed without
requiring a significant amount of points compared with the amount of points provided to users, the Company has used an estimated forfeiture
rate of zero.
For
the year ended August 31, 2022 and 2021, redeemable point liability charged as selling and marketing expenses were $14,599 and $35,111,
respectively.
As
of August 31, 2022 and 2021, liabilities recorded related to unredeemed points were $82,638 and $75,648, respectively, which were included
in other payables (note 9).
General
and administrative expenses
General
and administrative expenses consist primarily of salaries, bonuses and benefits for employees involved in general corporate functions,
depreciation and amortization of fixed assets, legal and other professional services fees, rental and other general corporate related
expenses.
Inventory
Inventories
are stated at the lower of cost or net realizable value. Cost is calculated on the average basis and includes all costs to acquire and
other costs to bring the inventories to their present location and condition. The Company records inventory write-downs for excess or
obsolete inventories based upon assumptions on current and future demand forecasts. If the inventory on hand is in excess of future demand
forecast, the excess amounts are written off. The Company also reviews inventory to determine whether its carrying value exceeds the
net amount realizable upon the ultimate sale of the inventory. This requires the determination of the estimated selling price of the
vehicles less the estimated cost to convert inventory on hand into a finished product. Once inventory is written-down, a new, lower-cost
basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase
in that newly established cost basis.
Inventory
as of August 31, 2022 represents merchandise inventory which can be redeemed by deducting membership rewards points of customer loyalty
program.
Leases
The
Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on
the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the
rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate
based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use
(“ROU assets”) assets represent the Company’s right to control the use of an identified asset for the lease term and
lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized
based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the
lease term. The Company elected the package of practical expedients permitted under the transition guidance to combine the lease and
non-lease components as a single lease component for operating leases associated with the Company’s office space lease, and to
keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated
statements of income on a straight-line basis over the lease term.
The
operating lease is included in operating lease right-of-use assets, operating lease liabilities-current and operating lease liabilities-non-current
on the Company’s consolidated balance sheets.
Accounts
receivable
Accounts
receivable are stated at the original amount less an allowance for doubtful receivables, if any, based on a review of all outstanding
amounts at period end. An allowance is also made when there is objective evidence that the Company will not be able to collect all amounts
due according to the original terms of the receivables. The Company analyzes the aging of the customer accounts, coverage of credit insurance,
customer concentrations, customer credit-worthiness, historical and current economic trends and changes in its customer payment patterns
when evaluating the adequacy of the allowance for doubtful accounts.
Plant
and equipment
Plant
and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated
on the straight-line basis over the following expected useful lives from the date on which they become fully operational:
SCHEDULE OF PLANT AND EQUIPMENT USEFUL LIVES
| |
Expected useful life |
Furniture and fixtures | |
3 |
Office equipment | |
3 |
Leasehold improvements | |
3 |
Non-marketable
equity securities
Non-marketable
equity Securities represent the investments in a privately held company without readily determinable market value. The Company measures
investments in non-marketable equity securities without a readily determinable fair value using a measurement alternative that measures
these securities at the cost method minus impairment, if any, plus or minus changes resulting from observable price changes on a non-recurring
basis. The fair value of non-marketable equity securities that have been remeasured due to impairment are classified within Level 3.
The Company adjusts the carrying value of non-marketable equity securities which have been remeasured during the period and recognize
resulting gains or losses as a component of other operating income (expense), net. The Company recognized an impairment loss of $nil
on the non-marketable equity securities for the year ended August 31, 2022.
Intangible
assets
The
Company recorded intangible assets with definite lives, including investment platform and technical know-hows. Intangible assets are
recorded at cost less accumulated amortization with no residual value. Amortization of intangible assets is computed using the straight-line
method over their estimated useful lives.
The
estimated useful lives of the Company’s intangible assets are listed below:
SCHEDULE OF USEFUL LIVES OF COMPANY'S INTANGIBLE ASSETS
Investment platform | |
| 5 years | |
Technical know-hows | |
| 8 years | |
Trademarks | |
| 10 years | |
Impairment
of long-lived assets (including amortizable intangible assets)
The
Company reviews the carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to the undiscounted future net cash flows expected to be generated by the asset. If the assets are considered to be
impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the
assets. Impairment of $537,866 and $88,415 has been recorded by the Company for the years ended August 31, 2022 and 2021, respectively.
The impairment loss of intangible assets was primarily attributable to the financial performance of NPI’s technical know-hows fall
below the Company’s original expectations and they assessed the recoverability of the carrying value of certain intangible assets
which resulted in impairment losses.
Employee
benefits
The
Taiwan subsidiary also operates a Defined Contribution Pension Plan under the Labor Pension Act (the Act) for employees in Taiwan. The
Act stipulated that the contribution rate by the employer per month shall not be less than 6% of the employees’ monthly salary,
and the Table of Monthly Contribution Salary Classification shall be prescribed by Central Competent Authority. The highest bracket of
Monthly Contribution Salary issued by Central Competent Authority is $5,237 (NTD150,000). Total amounts of such employee benefit expenses,
which were expensed as incurred, were approximately $128,350 and $116,069 for the years ended August 31, 2022 and 2021, respectively.
Full
time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension
benefits, medical care, employee housing fund and other welfare benefits are provided to the employees. Chinese labor regulations require
that the PRC subsidiary of the Company make contributions to the government for these benefits based on certain percentages of the employees’
salaries, up to a maximum amount specified by the local government. The Company has no legal obligation for the benefits beyond the contributions
made. Total amounts of such employee benefit expenses, which were expensed as incurred, were approximately $126,568 and $87,793 for the
years ended August 31, 2022 and 2021, respectively.
The
Hong Kong subsidiary operates a Mandatory Provident Fund (“MPF”) scheme for all qualifying employees in Hong Kong. The MPF
is a defined contribution scheme and the assets of the scheme are managed by a trustee independent of the Group. The MPF is available
to all employees aged 10 to 64 with a least 60 days of service under the employment of the Group in Hong Kong. Contributions are made
by the Group to a cap of HK$1,500 (equivalent to $192 per month). Total amounts of such employee benefit expenses, which were expensed
as incurred, were approximately $4,291 and $4,328 for the years ended August 31, 2022 and 2021, respectively
Income
taxes
Income
taxes are determined using an asset and liability method in accordance with the provisions of ASC Topic 740, “Income Taxes”
(“ASC Topic 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the
periods in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC
740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements
uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the
financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax
positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. As of August
31, 2022 and 2021, the Company has no accrued interest or penalties related to uncertain tax positions.
The
Company conducts businesses in the PRC, Taiwan and Hong Kong. The Company is subject to tax in these jurisdictions. As a result of its
business activities, the Company will file tax returns that are subject to examination by the respective tax authorities.
Net
loss per share
The
Company calculates net income/(loss) per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income/(loss)
per share is computed by dividing the net income/(loss) by the weighted-average number of shares of common stock outstanding during the
period. Diluted income per share is computed similar to basic income/(loss) per share except that the denominator is increased to include
the number of additional shares of common stock that would have been outstanding if the potential common stock equivalents had been issued
and if the additional shares of common stock were dilutive. The following table presents a reconciliation of basic and diluted net loss
per share:
SCHEDULE OF RECONCILIATION OF BASIC AND DILUTED NET LOSS PER SHARE
| |
2022 | | |
2021 | |
| |
Year ended August 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Net loss | |
$ | (11,920,097 | ) | |
$ | (11,693,492 | ) |
Weighted average number of shares of common stock outstanding - Basic and diluted (Note) | |
| 177,602,306 | | |
| 143,714,764 | |
Net loss per share - Basic and diluted | |
$ | (0.07 | ) | |
$ | (0.08 | ) |
Note:
Including 6,800,000 vested shares granted as stock compensation but not yet issued for the year ended August 31, 2022; and including
1,122,668 vested shares granted as stock compensation but not yet issued for the year ended August 31, 2021 (note 15).
As
of August 31, 2022 and 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”). Before the adoption of this guidance, the equity-classified share-based
awards held by non-employees were subject to re-measurement through each vesting date. Upon the adoption of this guidance, the Company
no longer re-measures equity-classified share-based awards granted to consultants or non-employees at each reporting date through the
vesting date and the accounting for these share-based awards to consultants or non-employees and employees was substantially aligned.
Cancellation
of a share-based payment by the entity results in accelerated recognition of any unrecognized cost. Cancellation by the counterparty
does not change recognition of the compensation cost. The termination of an employee that resulted in the forfeiture of share-based awards
is not considered to be a cancellation of the awards.
Foreign
currencies translation
Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing
at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated
into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded
in the statements of operations.
The
reporting currency of the Company is United States Dollars (“US$”), which is also the Company’s functional currency.
The Company’s subsidiary in Seychelles, the PRC, Taiwan and Hong Kong maintains its books and record in United States Dollars (“US$”),
Renminbi (“RMB”), New Taiwanese Dollars (“NT$”) and United States Dollars (“US$”) respectively, which
are the primary currencies of the economic environment in which the entities operate (the functional currencies).
In
general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not the US$ are translated
into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement,” using the exchange rate on the
balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting
from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive
income as a component of shareholders’ equity.
Translation
of amounts from foreign currencies into US$ has been made at the following exchange rates for the respective periods:
SCHEDULE OF FOREIGN CURRENCY TRANSLATION
| |
As of and for the year ended August 31, 2022 | | |
As of and for the year ended August 31, 2021 | |
Year-end NT$ : US$ 1 exchange rate | |
| 30.38 | | |
| 27.66 | |
Year-average NT$ : US$ 1 exchange rate | |
| 28.64 | | |
| 28.22 | |
Year-end RMB : US$ 1 exchange rate | |
| 6.89 | | |
| 6.46 | |
Year-average RMB : US$ 1 exchange rate | |
| 6.51 | | |
| 6.54 | |
Related
parties
Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control
the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also
considered to be related if they are subject to common control or common significant influence.
Convertible
instruments
The
Company accounts for hybrid contracts that feature conversion options in accordance with U.S. GAAP. ASC 815 “Derivatives and Hedging
Activities,” (“ASC 815”) requires companies to bifurcate conversion options from their host instruments and account
for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which
(a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic
characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the
host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair
value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would
be considered a derivative instrument.
Conversion
options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity
or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation
from the host instrument.
The
Company accounts for convertible instruments, when the Company has determined that the embedded conversion options should not be bifurcated
from their host instruments, in accordance with ASC 470-20 “Debt with Conversion and Other Options” (“ASC 470-20”).
Under ASC 470-20 the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded
in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note
transaction and the effective conversion price embedded in the note. The Company accounts for convertible instruments (when the Company
has determined that the embedded conversion options should be bifurcated from their host instruments) in accordance with ASC 815. Under
ASC 815, a portion of the proceeds received upon the issuance of the hybrid contract are allocated to the fair value of the derivative.
The derivative is subsequently marked to market at each reporting date based on current fair value, with the changes in fair value reported
in results of operations.
Fair
value of financial instruments
The
carrying value of the Company’s financial instruments: cash and cash equivalents, deposits, accounts payable and accrued liabilities,
balances due with directors and shareholders and bonds payable approximate at their fair values because of the short-term nature of these
financial instruments or the rate of interest of these instruments approximate the market rate of interest.
The
Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”),
with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy
that prioritizes the inputs used in measuring fair value as follows:
Level
1: Observable inputs such as quoted prices in active markets;
Level
2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level
3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The
following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair
value on a recurring basis:
SCHEDULE OF FAIR VALUE HIERARCHY AND FINANCIAL ASSETS LIABILITIES
| |
August 31, 2021 | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| |
Carrying
Value at | | |
Fair Value Measurement at | |
| |
August 31, 2021 | | |
August 31, 2021 | |
| |
| | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Convertible notes measured at fair value | |
$ | 990,000 | | |
$ | - | | |
$ | - | | |
$ | 990,000 | |
| |
| August 31, 2022 | | |
| Level 1 | | |
| Level 2 | | |
| Level 3 | |
| |
| Carrying
Value at | | |
| Fair Value Measurement at | |
| |
| August 31, 2022 | | |
| August 31, 2022 |
| |
| | | |
| Level 1 | | |
| Level 2 | | |
| Level 3 | |
Convertible notes measured at fair value | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
A
summary of changes in financial liabilities for the year ended August 31, 2022 was as follows:
SCHEDULE OF CHANGE IN FINANCIAL LIABILITY
Balance at September 1, 2020 | |
$ | 104,000 | |
Issuance of convertible notes | |
| 800,000 | |
Interest expenses on convertible notes | |
| 44,908 | |
Interest paid | |
| (6,000 | ) |
Change in fair value of convertible notes | |
| 47,092 | |
Balance at September 1, 2021 | |
$ | 990,000 | |
Interest paid | |
| (48,000 | ) |
Interest expenses on convertible notes | |
| 29,983 | |
Interest waived in conversion of convertible notes | |
| (15,606 | ) |
Modification of interest payable on convertible notes to loans | |
| (5,285 | ) |
Modification of convertible notes to loans | |
| (300,000 | ) |
Conversion of convertible notes | |
| (4,632,000 | ) |
Change in fair value of convertible notes | |
| 3,980,908 | |
Balance at August 31, 2022 | |
$ | - | |
Fair
value of the convertible notes is determined using the binomial model using the following assumptions at inception and on subsequent
valuation dates:
SCHEDULE OF FAIR VALUE ASSUMPTION OF CONVERTIBLE NOTES
Convertible notes holders | |
Teh-Ling Chen | | |
Li-Ching Yang | | |
Jui-Chin Chen | | |
Teh-Ling Chen | | |
Chin-Ping Ching-Nan Wang Chin-Chiang Wang Wang | | |
Teh-Ling Chen | |
Appraisal Date (Inception Date) | |
| February
24, 2020 | | |
| February 27, 2020 | | |
| March
18, 2020 | | |
| November
2, 2020 | | |
| November
25, 2020 | | |
| January
15, 2021 | |
Risk-free Rate | |
| 1.25 | % | |
| 1.06 | % | |
| 0.54 | % | |
| 0.16 | % | |
| 0.16 | % | |
| 0.1 | % |
Applicable Closing Stock Price | |
$ | 1.25 | | |
$ | 1.25 | | |
$ | 1.20 | | |
$ | 0.12 | | |
$ | 3.00 | | |
$ | 2.00 | |
Conversion Price | |
$ | 1.00 | (i) | |
$ | 1.00 | (i) | |
$ | 1.00 | (i) | |
$ | 0.40 | | |
$ | 0.40 | | |
$ | 0.40 | |
| |
$ | 1.50 | (ii) | |
$ | 1.50 | (ii) | |
$ | 1.50 | (ii) | |
| | | |
| | | |
| | |
Volatility | |
| 27.82 | % | |
| 27.94 | % | |
| 34.20 | % | |
| 41.51 | % | |
| 42.00 | % | |
| 43.50 | % |
Dividend Yield | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % |
Credit Spread | |
| 2.71 | % | |
| 2.96 | % | |
| 6.88 | % | |
| 7.52 | % | |
| 6.93 | % | |
| 6.76 | % |
Liquidity Risk Premium | |
| 42.09 | % | |
| 36.26 | % | |
| 51.08 | % | |
| 77.62 | % | |
| 78.14 | % | |
| 75.73 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Appraisal Date | |
| | | |
| | | |
| August 31, 2021 | | |
| August
31, 2021 | | |
| August
31, 2021 | | |
| August
31, 2021 | |
Risk-free Rate | |
| N/A | | |
| N/A | | |
| 0.05 | % | |
| 0.09 | % | |
| 0.10 | % | |
| 0.12 | % |
Applicable Closing Stock Price | |
| N/A | | |
| N/A | | |
$ | 2.01 | | |
$ | 2.01 | | |
$ | 2.01 | | |
$ | 2.01 | |
Conversion Price | |
| N/A | | |
| N/A | | |
$ | 0.40 | | |
$ | 0.40 | | |
$ | 0.40 | | |
$ | 0.40 | |
Volatility | |
| N/A | | |
| N/A | | |
| 45.20 | % | |
| 49.90 | % | |
| 49.76 | % | |
| 48.45 | % |
Dividend Yield | |
| N/A | | |
| N/A | | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % |
Credit Spread | |
| N/A | | |
| N/A | | |
| 3.63 | % | |
| 3.63 | % | |
| 3.63 | % | |
| 3.63 | % |
Liquidity Risk Premium | |
| N/A
| | |
| N/A
| | |
| 84.04 | % | |
| 86.98 | % | |
| 86.63 | % | |
| 85.12 | % |
(i) |
USD1.00
per share if converted on or before the one-year anniversary of the issuance date |
(ii) |
USD1.50
per share if converted at any time after the one-year anniversary of the issuance date |
Segment
reporting
ASC
Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management
approach model is based on the way a company’s chief operating decision maker organizes segments within the company for making
operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography,
legal structure, management structure, or any other manner in which management disaggregates a company.
Management
determined that the Company’s operations constitute a single reportable segment in accordance with ASC 280. The Company operates
exclusively in one business and industry segment: the provision of investment platform services through mobile application.
Recent
accounting pronouncements
Recently
Adopted Accounting Standards
In
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.
Accounting
Pronouncements Issued But 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
October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers, which requires the recognition and measurement of contract assets and contract liabilities acquired in
a business combination in accordance with ASC 606, Revenue from Contracts with Customers. This creates an exception to the general recognition
and measurement principles in ASC 805. As a smaller reporting company, ASU 2021-08 will be effective for the Company for interim and
annual reporting periods beginning after December 15, 2023, with early adoption permitted. The amendments in this ASU should be applied
prospectively to business combinations occurring on or after the effective date of the amendments. The Company does not anticipate that
the adoption of this guidance will have a material impact on the consolidated financial statements.
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.
Except
for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the consolidated
financial position, statements of operations and cash flows.
3.
ACQUISITION OF SUBSIDIARIES
On
August 17, 2020, the Company acquired all of the issued and outstanding capital stock (the “Acquisition”) of NPI, pursuant
to the terms and conditions of that certain Stock Purchase Agreement, dated as of the Closing Date, among the Company, NPI, the selling
shareholders of NPI identified therein (each a “Seller,” and, collectively, the “Sellers”) and the representative
of the Sellers identified therein.
The
aggregate purchase price for the Acquisition was $4,850,000, less certain discounts, expenses and reductions for outstanding NPI debt
owed to the Company and/or its affiliates, resulting in a net purchase price of $3,506,042, payable in 8,415,111 shares of the Company’s
common stock to the Sellers in accordance with their respective pro rata percentage.
After
the completion of the Acquisition, NPI became a wholly owned subsidiary of the Company.
The
Company completed the valuations necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed,
resulting from which the amount of goodwill was determined and recognized as of the respective acquisition date. The following table
summarizes the estimated aggregate fair values of the assets acquired and liabilities assumed as of the closing date, August 31, 2020.
SUMMARY
OF FAIR VALUES OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
| |
| |
Cash and cash equivalents | |
$ | 185,117 | |
Prepayments, deposits and other receivables | |
| 145,228 | |
Due from a shareholder | |
| 34,048 | |
Right-of-use operating lease assets | |
| 113,590 | |
Plant and equipment, net | |
| 30,365 | |
Intangible assets- Technical know-hows | |
| 818,200 | |
Goodwill | |
| 2,974,364 | |
Other payables and accrued liabilities | |
| (383,087 | ) |
Contract liabilities | |
| (2,896 | ) |
Due to shareholders | |
| (99,730 | ) |
Operating lease liability | |
| (113,646 | ) |
Tax payable | |
| (31,871 | ) |
Deferred tax liabilities | |
| (163,640 | ) |
Net purchase price | |
$ | 3,506,042 | |
| |
| | |
Less: Outstanding NPI debt owed to the Company | |
| | |
Accounts receivable | |
| 989,854 | |
Notes payable | |
| (3,066,617 | ) |
Aggregate fair values of
the assets acquired and liabilities assumed | |
$ | 1,429,279 | |
The
transaction resulted in a purchase price allocation of $2,974,364 to goodwill, representing the financial, strategic and operational
value of the transaction to the Company. Goodwill is attributed to the premium that the Company paid to obtain the value of the business
of NPI and the synergies expected from the combined operations of NPI and the Company, the assembled workforce and their knowledge and
experience in provision of products and projects utilizing NPI’s technical know-hows and FinTech App development. The total amount
of the goodwill acquired is not deductible for tax purposes.
The
movement of the goodwill for the years ended August 31, 2022 and 2021 are as follows:
SCHEDULE
OF MOVEMENT OF GOODWILL
Balance as of September 1, 2020 | |
$ | 2,974,364 | |
Impairment of goodwill in relation to NPI | |
| (1,226,419 | ) |
Balance as of August 31, 2021 | |
$ | 1,747,945 | |
Impairment of goodwill in relation to NPI | |
| (1,747,945 | ) |
Balance as of August 31, 2022 | |
$ | - | |
The
Company performed goodwill impairment test at the reporting unit level on an annual basis and between annual tests when an event occurs
or circumstances change indicating the asset might be impaired. As of August 31, 2022, the Company performed testing on reporting unit
of the Fintech App development.
The
Company first assessed qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is
less than its carrying amount. For those reporting units where it is determined that it is more likely than not that their fair values
are less than the units’ carrying amounts, the Company will perform the first step of a two-step quantitative goodwill impairment
test. After performing the assessment, if the carrying amounts of the reporting units are higher than their fair values, the Company
will perform the second step of the two-step quantitative goodwill impairment test.
In
2022 and 2021, the Company performed qualitative assessments for FinTech App development reporting unit. Based on the requirements of
ASC 350-20-35-3C through ASC 350-20-35-3G, the Company evaluated all relevant factors, weighed all factors in their totality. As the
financial performance of FinTech App development reporting unit was below original expectations, fair value of this reporting unit was
indicated to be lower than its carrying value. For this reporting unit, where it was determined that it was more likely than not that
its fair value was less than the units’ carrying amount after performing the qualitative assessment, as a result, the Company performed
the two-step quantitative goodwill impairment test for these two reporting units.
For
the two-step goodwill impairment test, the Company estimated the fair value with either income approach or asset approach for specific
reporting unit components. With the income approach, the Company estimates the fair value of the reporting units using discounted cash
flows. Forecasts of future cash flows are based on the best estimate of future net sales and operating expenses, based primarily on expected
expansion, pricing, market share, and general economic conditions. Certain estimates of discounted cash flows involve businesses with
limited financial history and developing revenue models. Changes in these forecasts could significantly change the amount of impairment
recorded, if any. Asset based approach is used in evaluating the fair value of some specific components which is deemed as the most prudent
approach due to the unpredictability of future cash flows.
The
result of step one impairment test for the FinTech App development reporting unit failed, with its determined fair value lower than the
book value. The Company performed step two impairment test, applying the income approach, resulting an impairment loss of goodwill of
$1,747,945 and $1,226,419, respectively being recorded for the years ended August 31, 2022 and 2021. The impairment loss of goodwill
was primarily attributable to the impairment related to NPI as the financial performance of the reporting unit of FinTech App development
continued to fall below the Company’s original expectations.
4.
PLANT AND EQUIPMENT, NET
Plant
and equipment as of August 31, 2022 and 2021 are summarized below:
SCHEDULE OF PLANT AND EQUIPMENT, NET
| |
2022 | | |
2021 | |
| |
As of August 31, | |
| |
2022 | | |
2021 | |
Furniture and fixtures | |
$ | 30,494 | | |
$ | 64,791 | |
Office equipment | |
| 89,858 | | |
| 32,038 | |
Leasehold improvements | |
| 82,969 | | |
| 83,883 | |
Total | |
| 203,321 | | |
| 180,712 | |
Less: Accumulated depreciation | |
| (132,317 | ) | |
| (110,952 | ) |
Plant and equipment, net | |
$ | 71,004 | | |
$ | 69,760 | |
Depreciation
expense, classified as operating expenses, was $44,326 and $36,674 for the year ended August 31, 2022 and 2021 respectively.
5.
INTANGIBLE ASSETS, NET
Intangible
assets, net, as of August 31, 2022 and 2021 consisted of the following:
SCHEDULE OF INTANGIBLE ASSETS
| |
2022 | | |
2021 | |
| |
As of August 31, | |
| |
2022 | | |
2021 | |
Investment platform | |
$ | 30,000 | | |
$ | 30,000 | |
Technical know-hows (Note 3) | |
| 818,200 | | |
| 818,200 | |
Trademarks | |
| 4,920 | | |
| 3,483 | |
Total | |
| 853,120 | | |
| 851,683 | |
Less: Accumulated amortization | |
| (199,035 | ) | |
| (108,959 | ) |
Impairment | |
| (649,781 | ) | |
| (111,915 | ) |
Intangible assets, net | |
$ | 4,304 | | |
$ | 630,809 | |
Amortization
expense for intangible assets was $90,076 and $102,459, respectively, for the years ended August 31, 2022 and 2021.
During
the course of the Company’s strategic review of its operations, the Company assessed the recoverability of the carrying value of
the Company’s intangible assets. The impairment charge, if any, represented the excess of carrying amounts of the Company’s
intangible assets over their fair value, using the expected future discounted cash flows. Impairment loss of $537,866 and $88,415 was
recognized for the years ended August 31, 2022 and 2021, respectively. The impairment loss of intangible assets was primarily attributable
to the financial performance of NPI’s technical know-hows fall below the Company’s original expectations and they assessed
the recoverability of the carrying value of certain intangible assets which resulted in impairment losses.
As
of August 31, 2022, amortization expenses related to intangible assets for future periods are estimated to be as follows:
SCHEDULE OF AMORTIZATION EXPENSES RELATED TO INTANGIBLE ASSETS
12 months ending August 31, | |
| |
2023 | |
$ | 492 | |
2024 | |
| 492 | |
2025 | |
| 492 | |
2026 | |
| 492 | |
2027 and thereafter | |
| 2,336 | |
Total | |
$ | 4,304 | |
6.
NON-MARKETABLE EQUITY SECURITIES
On
August 5, 2022, the Company obtained an aggregate of 15,000,000 shares of common stock, par value $0.0001 per share of DFP Holdings Limited
(“DFP”), a Nevada corporation, as return of software development service rendered (note 7), pursuant to the Software Development
Agreement and Supplementary Agreement dated January 27, 2022 and June 28, 2022, respectively among DFP and LCHD.
DFP
engages in online higher education services. It is committed to promoting Asian talent education services, and cooperating with practical
entrepreneurs on both sides of the strait to offer courses related to business management and business marketing, assisting Taiwan’s
small and medium-sized corporations, entrepreneurs, and middle and high-level managers open up new ideas and improve their business vision.
As of August 31, 2022, the Company held 7.06% of DFP’s outstanding common stock.
7.
RELATED PARTY TRANSACTIONS AND BALANCES
SCHEDULE
OF RELATED PARTY RELATIONSHIP
Name
of Entity or Individual |
|
Relationship
with the Company |
DFP
Holdings Limited (“DFP”) |
|
Note
a |
Greenpro
LF Limited |
|
Note
b |
Reblood
Biotech Corp. |
|
Note
c |
Reblood
Biotech Limited |
|
Note
c |
Yi-Hsiu
Lin |
|
Shareholder
and director of the Company |
Jui-Chin
Chen |
|
Shareholder
of the Company |
Teh-Ling
Chen |
|
Shareholder
of the Company |
CPN
Investment Limited |
|
Shareholder
of the Company |
Kuo-Hsun
Hsu |
|
Shareholder
of the Company |
Chun-Shuo
Huang |
|
Shareholder
of the Company |
Yu-Cheng
Tu |
|
Shareholder
of the Company |
Chin-Chiang
Wang |
|
Shareholder
of the Company |
Ching-Nan
Wang |
|
Shareholder
of the Company |
Chin-Ping
Wang |
|
Shareholder
of the Company |
Wang
Ding-Yu |
|
Shareholder
of the Company |
(a) | As
of August 31, 2022, the Company and Yi-Hsiu Lin held 7.06% and 7.06% of DFP’s outstanding
common stock. |
(b) | Greenpro
LF Limited, a Seychelles company, owned by Mr. Yi-Hsiu Lin, a director of the Company and
Mr. Lee Chong Kuang. |
(c) | Reblood
Biotech Corp., a Nevada company, in which Yi-Hsiu Lin was the shareholder. Reblood Biotech Limited, a Hong Kong company, which was a
subsidiary of Reblood Biotech Corp. |
Related
party transactions:
The
Company entered into the following significant related party transactions:
SCHEDULE
OF RELATED PARTY TRANSACTIONS
| |
Year ended August 31, | |
| |
2022 | | |
2021 | |
Provision of software development service and maintenance service to DFP (a) | |
$ | 301,500 | | |
$ | - | |
Provision of software maintenance service to DFP | |
| 2,898 | | |
| - | |
| |
| | | |
| | |
Rental expense to Yu-Cheng Tu (b) | |
| 3,142 | | |
| 19,135 | |
Rental expense to Reblood Biotech Limited (g) | |
| 34,571 | | |
| 8,724 | |
| |
| | | |
| | |
Other income: | |
| | | |
| | |
Other income from Greenpro LF Limited | |
| - | | |
| 1,838 | |
| |
| | | |
| | |
Interest expense to: | |
| | | |
| | |
Teh-Ling Chen ((c) and Note 13) | |
| 9,670 | | |
| 8,701 | |
CPN Investment Limited (f) | |
| 100 | | |
| - | |
Chun-Shuo Huang (Note 10) | |
| 12,366 | | |
| - | |
Ching-Nan Wang (Note 12) | |
| 60,000 | | |
| 60,000 | |
Jui-Chin Chen (Note 10 and 13) | |
| 6,517 | | |
| 6,000 | |
Chin-Chiang Wang (Note 10 and 13) | |
| 200 | | |
| 9,165 | |
Chin-Ping Wang (Note 13) | |
| 2,835 | | |
| 9,165 | |
Ching-Nan Wang (Note 13) | |
| 2,835 | | |
| 9,165 | |
| (a) | The
Company entered into a Customized App Development Agreement providing the online and offline
learning opportunities across different subjects on January 27, 2022 with DFP. The Company
delivered an app and provided the follow-up maintenance service in August 2022. |
| (b) | On
September 1, 2020, LOC leased an office in Taichung, Taiwan from the Company’s shareholder-
Yu-Cheng Tu. The lease was renewed on April 1, 2021 for additional one-year term. The monthly
lease was for the amount of NTD 45,000 ($1,595), with a term of one year. During the year
ended August 31, 2022 and 2021, the Company recognized rental expenses of $3,142 and $19,135,
respectively that are included in general and administrative expenses. |
| (c) | The
Company entered into a loan agreement with Teh-Ling Chen for $50,000 for a period of four
months from March 1, 2022 to June 30, 2022. NTD1,480,000 ($50,000) was received during March
to May 2022. On June 17, 2022, 500,576 shares of the Company were subsequently issued to
Teh-Ling Chen at a market value of $0.10 per share for the repayment of principal and accrued
interest. Interest of $576 was incurred for the year ended August 31, 2022. No interest was
accrued as of August 31, 2022 and 2021. |
| (d) | On
April 25, 2022, the Company obtained non-interest bearing loan of NTD214,500 ($7,061) from
Ding-Yu Wang. The loan was fully repaid on July 19, 2022. |
| (e) | A
principal of NTD40,000 ($1,317) was obtained from Kuo-Hsun Hsu on May 13, 2022. The loan
is non-interest bearing and was fully repaid on July 19, 2022. |
| (f) | 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. Interest
of $100 was incurred for the year ended August 31, 2022. |
| (g) | On
June 1, 2021, JFB leased an office in Taipei, Taiwan from a company which was the subsidiary
of Reblood Biotech Corp.. The monthly lease was for the amount of NTD 82,062 ($2,865), with
a term of 16 months. During the years ended August 31, 2022 and 2021, the Company recognized
rental expenses of $34,571 and $8,724, respectively that are included in general and administrative
expenses. |
Related
party balances:
Apart
from the above, the Company recorded the following significant related party balances as of August 31, 2022 and 2021:
SCHEDULE
OF RELATED PARTY BALANCES
| |
| | | |
| | |
| |
As of August 31, | |
Accounts receivable from related parties | |
2022 | | |
2021 | |
| |
| | | |
| | |
Receivables from DFP | |
$ | 2,732 | | |
$ | - | |
Up
to the date of this report, DFP had repaid $2,732 to the Company.
| |
| | | |
| | |
| |
As of August 31, | |
Contract liabilities due to related parties | |
2022 | | |
2021 | |
| |
| | | |
| | |
Contract liabilities due to DFP | |
$ | 150,000 | | |
$ | - | |
Up
to the date of this report, $150,000 of the contract liabilities had been utilized.
| |
| | |
| |
| |
As of August 31, | |
Accrued interests payable to related parties | |
2022 | | |
2021 | |
| |
| | |
| |
Ching-Nan Wang (note 12) | |
$ | 2,935 | | |
$ | 2,935 | |
Chun-Shuo Huang (note 10 (a)) | |
| 2,851 | | |
| - | |
Jui-Chin Chen (note 10(b)) | |
| 3,229 | | |
| - | |
Chin-Chiang Wang (note 10(c)) | |
| 9,165 | | |
| - | |
Total | |
$ | 18,180 | | |
$ | 2,935 | |
8.
PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
SCHEDULE
OF PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
| |
2022 | | |
2021 | |
| |
As of August 31, | |
| |
2022 | | |
2021 | |
Rental and management fee deposits | |
$ | 100,498 | | |
$ | 120,831 | |
Other prepaid expenses | |
| 52,723 | | |
| 194,040 | |
Other taxes recoverable | |
| 35,802 | | |
| 19,183 | |
Prepayments, deposits and other receivables | |
| 189,023 | | |
| 334,054 | |
Less: non-current portion | |
| | | |
| | |
Rental and management fee deposits | |
| 12,822 | | |
| 54,204 | |
Other prepaid expenses | |
| - | | |
| 48,135 | |
Prepayments, deposits and other receivables, non-current | |
| 12,822 | | |
| 102,339 | |
Prepayments, deposits and other receivables, current | |
$ | 176,201 | | |
$ | 231,715 | |
9.
ACCRUED EXPENSES AND OTHER PAYABLES
SCHEDULE
OF ACCRUED EXPENSES AND OTHER PAYABLES
| |
2022 | | |
2021 | |
| |
As of August 31, | |
| |
2022 | | |
2021 | |
Accrued interests (Notes 7, 10 and 12) | |
$ | 18,180 | | |
$ | 2,935 | |
Accrued payroll | |
| 150,932 | | |
| 207,864 | |
Accrued expenses, others | |
| 197,428 | | |
| 87,822 | |
Other taxes payable | |
| 1,377 | | |
| - | |
Point liabilities | |
| 82,638 | | |
| 75,648 | |
Accrued expenses and
other payables | |
$ | 450,555 | | |
$ | 374,269 | |
10.
DUE TO SHAREHOLDERS, DIRECTORS AND OTHER LOANS FROM SHAREHOLDERS
SCHEDULE OF DUE FROM (TO) SHAREHOLDERS, DIRECTORS AND A RELATED COMPANY
| |
As of August 31, | | |
As of August 31, | |
| |
2022 | | |
2021 | |
Other loans from shareholders: | |
| | | |
| | |
Jui-Chin Chen (b) | |
| 80,000 | | |
| - | |
Chun-Shuo Huang (a) | |
| 145,159 | | |
| - | |
Mei-Ying Huang (d) | |
| 35,550 | | |
| - | |
Chin-Chiang Wang (c) | |
| 200,000 | | |
| - | |
Total (Note 11) | |
| 460,709 | | |
| - | |
Less: Other loans from shareholders, non-current | |
| (200,000 | ) | |
| - | |
| |
$ | 260,709 | | |
$ | - | |
| |
| | | |
| | |
Due to a director - current: | |
| | | |
| | |
Yi-Hsiu Lin (e) | |
$ | 973,564 | | |
$ | 1,098,374 | |
| |
| | | |
| | |
Due to shareholders - current: | |
| | | |
| | |
Yu-Cheng Tu (e) | |
$ | 42,472 | | |
$ | 50,591 | |
Hung-Pin Cheng (e) | |
| 471 | | |
| 800 | |
Mei-Ying Huang (e) | |
| 800 | | |
| 800 | |
Shih-Chu Lo (e) | |
| 800 | | |
| 800 | |
Jun-Yuan Chen (e) | |
| 800 | | |
| 800 | |
| |
| | | |
| | |
| |
$ | 45,343 | | |
$ | 53,791 | |
(a) |
On
February 28, 2022, the Company obtained a loan of RMB1,000,000
($145,159)
from Chun-Shuo Huang, which accrues interest at the rate of 8%
per annum. The loan was due on May
27, 2022 and further extended to December 31, 2022 and accrued interest at the rate of 2% per month. Interest of $12,366
was incurred for the year ended August 31, 2022. $Nil
was subsequently repaid by the Company as of December 14, 2022. Interest of $2,851
was accrued as of August 31, 2022. |
|
|
(b) |
The
loan was modified from convertible note on March 23, 2022 (note 13(a)) and the principal amount of $100,000
would be repayable by October 31, 2022. The balance was classified as 6%
short-term loan on the same date (Note 10). On May 29, 2022, the Company further amended the Note and the principal and interests
would be repayable in five installments before November 30, 2022 with 6%
interest-bearing per annum. For the year ended August 31, 2022, principal of $20,000
was repaid and interest of $3,164
was incurred. Interest of $3,229
was accrued as of August 31, 2022. On November 29, 2022, the loan and interests payable were further extended
to November 30, 2023. $Nil
was subsequently repaid by the Company as of December 14, 2022. |
|
|
(c) |
The
loan was modified from convertible note on May 3, 2022 (note 13(c)) and the principal amount of $200,000 would mature on November
25, 2024 with 6% interest-bearing per annum. For the year ended August 31, 2022, interest of $3,945 were incurred. Interest of $9,165
was accrued as of August 31, 2022. |
|
|
(d) |
The
Company borrowed non-interest bearing loans in the aggregate amount of NTD4,000,000 ($131,665) from Mei-Ying Huang. The loan of NTD2,500,000
($82,291) borrowed on November 24, 2021 was due on May 24, 2022 but further extended to December 31, 2022. During the year ended
August 31, 2022, NTD1,500,000 ($49,374) was repaid. The loan of NTD1,000,000 ($32,916) borrowed on January 12, 2022 was fully repaid
on July 22, 2022. NTD420,000 ($13,825) was repaid for the remaining loan of NTD500,000 ($16,458) obtained on February 9, 2022 which
would be repayable based on the Company’s financial ability. |
|
|
(e) |
Amounts
due to other shareholders and a director are unsecured, interest-free with no fixed payment term. |
11.
OTHER LOANS FROM A NON-RELATED PARTY
On
May 20, 2022, the Company borrowed non-interest bearing loan of NTD250,000 ($8,729) from a non-related company which was owned by an
employee of the Company. The loan would be repayable on December 31, 2022. Further NTD50,000 ($1,746) was borrowed on July 8, 2022. The
Company fully repaid the loans on July 19, 2022.
12.
BONDS PAYABLE TO RELATED PARTY
The
Company had entered into a Bond Purchase Agreement with Ching-Nan Wang (who became the Company’s shareholder in May 2021) on August
14, 2019, pursuant to which the Company issued and sold to the purchaser a bond at an aggregate principal amount and an aggregate purchase
price of $600,000. The bond will mature in three years from August 14, 2019. Interest on the bond will be payable on semi-yearly basis
at 10% per annum. The Company may exercise its right to repay this bond at any time on or before two years from the maturity date by
wiring 100% of all outstanding principal and interest(s) to the Purchaser. On August 10, 2022, the bond was further extended to August
14, 2023 and 12% p.a. interest was payable quarterly. The bond was collateralized by 2,000,000 shares of DFP Holdings Limited and 1,000,000
shares of Reblood Biotech Corp. held by Yi-Hsiu Lin. Interest of $60,000 was incurred in each of the years ended August 31, 2022 and
2021, respectively. Interest of $2,935 was accrued as of August 31, 2022 and 2021.
13.
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
Investor | |
Principal amount | | |
Issue date | |
Maturity date | |
Interest rate | |
Jui-Chin Chen (a) | |
$ | 100,000 | | |
March 18, 2020 | |
March 18, 2022 | |
| 6 | % |
Teh-Ling Chen (b) | |
| 100,000 | | |
November 2, 2020 | |
November 2, 2022 | |
| 6 | % |
Chin-Ping Wang (c) | |
| 200,000 | | |
November 25, 2020 | |
November 25, 2022 | |
| 6 | % |
Ching-Nan Wang (d) | |
| 200,000 | | |
November 25, 2020 | |
November 25, 2022 | |
| 6 | % |
Chin-Chiang Wang (d) | |
| 200,000 | | |
November 25, 2020 | |
November 25, 2022 | |
| 6 | % |
Teh-Ling Chen (e) | |
| 100,000 | | |
January 15, 2021 | |
January 15, 2023 | |
| 6 | % |
| |
$ | 900,000 | | |
| |
| |
| | |
(a) | 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 installments and accrued interest during that period
before October 31, 2022. The balance was classified as 6% short-term loan on the same date
(Note 10). 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 installments before
November 30, 2022. Up to the date of this report, the Company repaid $nil to Jui-Chin Chen. |
(b) | 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. 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. |
(c) | 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. The balance was classified as non-current 6% loan on the same date (Note 10). |
(d) | 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 Ching-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. 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. |
(e) | 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. 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. |
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.
During
the years ended August 31, 2022 and 2021, interest of $14,376 and $42,196 were incurred on the Notes, respectively.
14.
INCOME TAXES
For
the years ended August 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
| |
2022 | | |
2021 | |
| |
Year ended August 31, | |
| |
2022 | | |
2021 | |
Tax jurisdictions from: | |
| | | |
| | |
- Local | |
$ | (6,165,700 | ) | |
$ | (7,272,060 | ) |
State and local income tax expense (benefit), continuing operations | |
$ | (6,165,700 | ) | |
$ | (7,272,060 | ) |
- Foreign, representing | |
| | | |
| | |
Seychelles | |
| - | | |
| (1,610 | ) |
British Virgin Islands | |
| (2,059 | ) | |
| (89,403 | ) |
Taiwan | |
| (4,577,208 | ) | |
| (3,077,725 | ) |
PRC | |
| (739,876 | ) | |
| (594,153 | ) |
Hong Kong | |
| (560,756 | ) | |
| (696,679 | ) |
Tax jurisdictions from: foreign, representing | |
| (560,756) | | |
| (696,679) | |
The
components of the provision for income taxes benefits are:
SCHEDULE OF COMPONENTS OF PROVISION BENEFIT FOR INCOME TAXES
| |
2022 | | |
2021 | |
| |
Year ended August 31, | |
| |
2022 | | |
2021 | |
Current | |
$ | - | | |
$ | - | |
Deferred | |
| (125,502 | ) | |
| (38,138 | ) |
Total income tax benefits | |
$ | (125,502 | ) | |
$ | (38,138 | ) |
The
provision for income taxes consisted of the following:
SCHEDULE OF PROVISION FOR INCOME TAXES
| |
2022 | | |
2021 | |
| |
Year ended August 31, | |
| |
2022 | | |
2021 | |
Statutory income tax rate | |
| 21 | % | |
| 21 | % |
Income tax credit computed at statutory income rate | |
| (2,529,576 | ) | |
| (2,463,642 | ) |
Reconciling items: | |
| | | |
| | |
Non-deductible expenses | |
| 1,447,143 | | |
| 406,560 | |
Share-based payments | |
| 398,864 | | |
| 1,378,279 | |
Tax effect of tax exempt entity | |
| 432 | | |
| 19,113 | |
Rate differential in different tax jurisdictions | |
| 18,468 | | |
| 29,490 | |
Change in unrecognized deferred tax assets | |
| - | | |
| 39,667 | |
Valuation allowance on deferred tax assets | |
| 539,167 | | |
| 552,395 | |
Income tax benefits | |
$ | (125,502 | ) | |
$ | (38,138 | ) |
United
States of America
The
Company is registered in the State of Nevada and is subject to the tax laws of the United States of America. As of August 31, 2022, the
operations in the United States of America incurred $2,383,640 of cumulative net operating losses (NOL’s) which can be carried
forward to offset future taxable income. The NOL carryforwards begin to expire in 2037, if unutilized. As of August 31, 2022 and 2021,
the Company has provided for a full valuation allowance of $500,564 and $440,622, respectively, against the deferred tax assets on the
expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these
assets will not be realized in the future.
Seychelles
Under
the current laws of the Seychelles, LFG is registered as an international business company which governs by the International Business
Companies Act of Seychelles and there is no income tax charged in Seychelles.
British
Virgin Islands
NPI
is tax exempted in the British Virgin Islands where it was incorporated.
Taiwan
LOC
is subject to corporate income tax (“CIT”) in Taiwan. With effect from January 1, 2018, the CIT rate in Taiwan is 20%. However,
for profit-seeking entities with less than NT$ 500,000 (approximately $16,000) in taxable income, the CIT rate is 18% in 2018, 19% in
2019, and 20% since 2020 if taxable income exceeds NT$120,000 (approximately $4,190). As of August 31, 2022, LOC had net operating loss
carry-forwards in Taiwan of $3,498,858, which will expire in various years through 2027. The Company has provided for a full valuation
allowance of $699,772 against the deferred tax assets on the expected future tax benefits from the net operating loss carryforwards as
the management believes it is more likely than not that these assets will not be realized in the future.
PRC
BJDC
is subject to corporate income tax (“CIT”) at 25% in accordance with the relevant tax laws and regulations of the PRC. As
of August 31, 2022, BJDC had net operating loss carry-forwards in the PRC of $2,402,593, which will expire in various years through 2029.
The Company has provided for a full valuation allowance of $600,648 against the deferred tax assets on the expected future tax benefits
from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized
in the future.
Hong
Kong
JFB
is subject to Hong Kong Profits Tax, which is charged at the statutory income rate of 16.5% on its assessable income. No provision for
Hong Kong profits tax has been made in the financial statements as JFB has no assessable profits for the years. As of August 31, 2022,
the operations in Hong Kong incurred $nil of cumulative net operating losses (NOL’s) which can be carried forward indefinitely
to offset future taxable income. As of August 31, 2022 and 2021, the Company has provided for a full valuation allowance of approximately
$nil against the deferred tax assets on the expected future tax benefits from the net operating loss carryforwards as the management
believes it is more likely than not that these assets will not be realized in the future.
The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of August 31,
2022 and 2021 are presented below:
SCHEDULE
OF DEFERRED TAX ASSETS
| |
As of August 31, | |
| |
2022 | | |
2021 | |
Deferred tax assets: | |
| | | |
| | |
Net operating loss carryforwards | |
| | | |
| | |
– United States of America | |
$ | (500,564 | ) | |
$ | (440,622 | ) |
– Taiwan | |
| (699,772 | ) | |
| (351,606 | ) |
– PRC | |
| (600,648 | ) | |
| (421,733 | ) |
– Hong Kong | |
| - | | |
| - | |
Less: valuation allowance | |
| 1,800,984 | | |
| 1,213,961 | |
| |
$ | - | | |
$ | - | |
Deferred tax liabilities: | |
| | | |
| | |
Intangible assets- Technical know-hows | |
$ | - | | |
$ | 125,502 | |
15.
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 years ended August 31, 2022 and 2021, the Company amortized $250,000 and $1,000,000, respectively, as remuneration. 2,500,000 shares
were subsequently issued to Yi-Hsiu Lin on October 5, 2022.
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 years ended August 31, 2022 and 2021, the Company amortized $150,000 and $600,000, respectively, as
remuneration. 1,500,000 shares were subsequently issued to Shui Fung Cheng on October 5, 2022.
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 year ended August 31, 2022 and 2021, the Company amortized $50,000
and $425,000, respectively, as consulting expenses under this agreement.
On
June 30, 2020, the Company’s board of directors agreed to grant a new employee of JFB, (i) 5,000,000 shares of restricted common
stock in connection with such employee’s employment (the “Inducement Shares”) and (ii) 5,000,000 shares of restricted
common stock upon the achievement of each of two milestones set forth in such employee’s offer letter relating to the FinMaster
mobile application. 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 August
31, 2022, apart from the 5,000,000 Inducement Shares, 5,000,000 shares were vested to the employee upon achievement of the first milestone
set forth in the employee’ offer letters, the Company amortized $139,560, $1,622,940 and $237,500, respectively as salaries under
this milestone for the years ended August 2022, 2021 and 2020. However, during the year ended August 31, 2022, the company reassessed
the likelihood that the employee will achieve for the second milestone and determined that the employees will not achieve the targets
of the second milestone, the Company recognized a reverse to salary $348,627 under this milestone. During the year ended August 31, 2022
and 2021, the Company (reversed) amortized $(209,066) and $1,971,567 as salaries respectively. As of August 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 years ended August 31, 2022 and 2021, the Company recognized $nil and $50,000 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 years ended August 31, 2022 and 2021, the Company recognized $16,666 and $383,334 respectively as compensation
under these arrangements. The shares were issued on January 6, 2021.
On
August 3, 2020, the Company issued an offer letter to a staff 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 years ended August 31, 2022 and 2021, the Company recognized
$nil and $50,000 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 years ended August 31, 2022 and 2021,
the Company amortized $416,666 and $2,083,334 respectively as consulting expenses under these agreements.
On
February 8, 2021, the Company and First Leader Capital Ltd. mutually agreed to forfeit and surrender further 5,000,000 shares (the “Surrendered
Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and the Surrendered
Shares were automatically cancelled and retired. First Leader Capital Ltd. agreed to forfeit and cancel the Surrendered Shares in exchange
for the benefit from reducing the Company’s outstanding Common Stock to be more in line with what management deems to be market
expectations based on the Company’s current valuation.
On
May 17, 2021, the Company and First Leader Capital Ltd. mutually agreed to forfeit and surrender further 13,132,500 shares (the “Surrendered
Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and the Surrendered
Shares were automatically cancelled and retired. First Leader Capital Ltd. agreed to forfeit and cancel the Surrendered Shares in exchange
for the benefit from reducing the Company’s outstanding Common Stock to be more in line with what management deems to be market
expectations based on the Company’s current valuation.
On
September 1, 2021, the Company issued an offer letter to Kuo-Hsun Hsu, 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 year ended August 31, 2022, the Company amortized
$120,000 as consulting expenses under this agreement. 1,200,000 shares were subsequently issued to Kuo-Hsun Hsu on October 5, 2022.
On
September 1, 2021, the Company issued a Senior Vice President (“SVP”) offer letter to Chien Chiao, 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 year
ended August 31, 2022, the Company amortized $150,000 as consulting expenses under this agreement. 1,500,000 shares were subsequently
issued to Chien Chiao on October 5, 2022.
On
January 26, 2022, the shareholders- Chin-Ping Wang and Ching-Nan Wang, submitted conversion notices to the Company converting all of
the outstanding balances of their Convertible Notes payable (Note 13) 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.
On
May 12, 2022, the shareholder- Teh-Ling Chen submitted conversion notice to the Company converting all of the outstanding balance of
his Convertible Notes payable (Note 13) into an aggregate of 2,000,000 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.
On
June 17, 2022, 500,576 shares of the Company were issued to shareholder- Teh-Ling Chen for the repayment of loan balance and accrued
interest (Note 7).
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 year ended August 31, 2022, in respect of the non-restricted shares granted. The shares were issued on March 2, 2022.
As of August 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 August 2022, the Company entered into securities purchase agreements with several accredited investors whereby the
investors purchased a total of 19,170,000 shares of the Company’s common stock at an average price of $0.12 per share. The Company
received aggregate gross proceeds of $2,290,000. 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 August 31, 2022.
As
of August 31, 2022, unrecognized share-based compensation expense was $nil.
As
of August 31, 2022, 6,800,000 shares were granted to employees and vested but not yet issued.
16.
COMMITMENTS AND CONTINGENCIES
During
the year ended August 31, 2022, the Company entered into agreements with independent third parties to lease office and staff quarter
premises in Taiwan, Shenzhen, Beijing and Hong Kong on a monthly basis, for the operations of the Company. Rental expense those premises
for the year ended August 31, 2022 and 2021 was $344,429 and $333,118, respectively.
The
components of lease costs, lease term and discount rate with respect of leases with an initial term of at least 12 months are as follows:
SCHEDULE OF COMPONENTS OF LEASE COSTS, LEASE TERM AND DISCOUNT RATE
| |
For the year ended August 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Operating lease cost – classified as general and administrative expenses | |
$ | 336,147 | | |
$ | 292,567 | |
Weighted Average Remaining Lease Term – Operating leases | |
| 1.61 years | | |
| 0.95 years | |
Weighted Average Discounting Rate – Operating leases | |
| 4.90 | % | |
| 4.20 | % |
Supplementary cash flow information related to leases
where the Company was the lessee for the year ended August 31, 2022 and 2021 was as follows:
SCHEDULE
OF SUPPLEMENTARY CASH FLOW INFORMATION RELATED TO LEASES
| |
1 | | |
2 | |
| |
For
the year ended August 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Operating
cash outflows from operating assets | |
$ | 344,575 | | |
$ | 303,276 | |
The
following is a schedule, by years, of maturities of lease liabilities as of August 31, 2022:
SCHEDULE OF MATURITIES OF LEASE LIABILITIES
| |
Operating leases | |
| |
| |
2023 | |
$ | 146,842 | |
2024 | |
| 71,875 | |
2025 | |
| 6,362 | |
2026 | |
| - | |
2027 | |
| - | |
Thereafter | |
| - | |
Total undiscounted cash flows | |
| 225,079 | |
Less: imputed interest | |
| (6,276 | ) |
Present value of lease liabilities | |
$ | 218,803 | |
Contingencies
The
Labor Contract Law of the People’s Republic of China requires employers to assure the liability of the severance payments if employees
are terminated due to restructuring, termination as a result of a mutual agreement or termination as a result of the expiration of a
fixed-term labor contract. The Company has estimated its possible severance payments of approximately $146,000 and $129,000 as of August
31, 2022 and 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 August 31, 2022 and 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.
17.
Concentrations and Credit Risk
The
Company had the following customers that individually comprised 10% or more of net revenue for the years ended August 31, 2022 and 2021
as follows:
SCHEDULE
OF CONCENTRATIONS AND CREDIT RISK
| |
Year ended | | |
Year ended | |
| |
August 31, 2022 | | |
August 31, 2021 | |
Customer A | |
$ | -* | | |
| -* | | |
$ | 31,277 | | |
| 33 | % |
Customer B | |
| -* | | |
| -* | | |
| 38,968 | | |
| 41 | % |
Customer C | |
| -* | | |
| -* | | |
| 19,606 | | |
| 21 | % |
DFP Holdings Limited (note 7) | |
| 304,398 | | |
| 90 | % | |
| -* | | |
| -* | |
* |
Comprised
less than 10% of net revenue for the respective period. |
The
Company had the following customers that individually comprised 10% or more of net trade receivable (included VAT) as of August 31, 2022
and 2021 as follows:
| |
August 31, 2022 | | |
August 31, 2021 | |
DFP Holdings Limited (note 7) | |
$ | 2,732 | | |
| 62 | % | |
$ | -* | | |
| -* | |
* |
Comprised
less than 10% of net accounts receivable for the respective period. |
Financial
instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents
and pledged deposits. As of August 31, 2022 and 2021, substantially $135,413 and $405,528 of the Company’s cash and cash equivalents
were held by major financial institutions located in the PRC and Hong Kong, which management believes are of high credit quality.
For
the credit risk related to trade accounts receivable, the Company performs ongoing credit evaluations of its customers and, if necessary,
maintains reserves for potential credit losses.
18.
SUBSEQUENT EVENTS
On
October 1, 2022, the Company entered into consultant agreement with Shou-Hung Hsu for two years. Pursuant to the agreement, Mr. Hsu will
be compensated at $25,000 per year, prorated for any partial year, payable in cash or with 700,000 shares of restricted common stock,
which would vest as of December 31, 2022 and September 30, 2023. The fair value of the shares of restricted common stock for the first
year was $105,000, which was calculated based on a price per share of $0.30 and amortized over the service term.
On
October 31, 2022, the Company entered into a securities purchase agreement with an individual accredited investor (the “Investor”),
to issue and sell to the Investor 1,000,000 shares (the “Shares”) of the Company’s restricted common stock, par value
$0.0001 per share, for a purchase price of $0.30 per share. Pursuant to the terms of the securities purchase agreement, the investor
will have piggyback registration rights with respect to the shares. The Company issued the Shares to the Investor on November 2, 2022,
resulting in $300,000 in aggregate proceeds for the Company.