NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
For
the six months ended February 28, 2023 and 2022
(In
U.S. dollars except for share data)
1.
ORGANIZATION AND BUSINESS BACKGROUND
Leader
Capital Holdings Corp. (“LCHD” or the “Company”) was incorporated on March 22, 2017 under the laws of the State
of Nevada.
The
Company, through its subsidiaries, mainly operates and services a mobile application investment platform.
SCHEDULE OF SUBSIDIARIES OF COMPANY
| Company
Name |
|
Place/Date
of Incorporation |
|
Principal
Activities |
| |
|
|
|
|
| 1.
Leader Financial Group Limited (“LFGL”) |
|
Seychelles
/ March 6, 2017 |
|
Investment
Holding |
| |
|
|
|
|
| 2.
JFB Internet Service Limited (“JFB”) |
|
Hong
Kong / July 6, 2017 |
|
Provides
an Investment Platform |
On
August 17, 2020, LCHD, through JFB, acquired all of the issued and outstanding capital stock (the “Acquisition”) of Nice
Products Inc. (“NPI”), pursuant to the terms and conditions of that certain Stock Purchase Agreement, dated as of August
17, 2020, among the Company, JFB, NPI, the selling shareholders of NPI identified therein (each a “Seller,” and, collectively,
the “Sellers”) and the representative of the Sellers identified therein. As a result of the Acquisition, the Company now
owns indirectly 100% of NPI, LOC Weibo Co., Ltd. and Beijing DataComm Cloud Media Technology Co., Ltd.
The
aggregate purchase price for the Acquisition was $4,850,000, less certain discounts, expenses and reductions for outstanding NPI debt
owed to the Company and/or its affiliates, resulting in a net purchase price of $3,506,042, payable in 8,415,111 shares of the Company’s
common stock to the Sellers in accordance with their respective pro rata percentage.
After
the completion of the acquisition, NPI became an indirect wholly owned subsidiary of the Company.
NPI
was incorporated in the British Virgin Islands on December 17, 2018.
NPI,
through its subsidiaries, mainly engages in the development of ecological-systems applications, integration of big data and promotion
of Over-the-Top (“OTT”) applications.
On
March 15, 2023, the board of directors decided to dissolve LOC. LOC then entered into a de-registration process and its business was
taken over by LCHD. Taichung City Government approved the dissolution on April 25, 2023.
LCHD
and its subsidiaries (including NPI and its subsidiaries) are hereinafter referred to as the “Company”.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
These
unaudited condensed consolidated financial statements of the Company and its subsidiaries are unaudited. In the opinion of management,
all adjustments (which are of a normal recurring nature) and disclosures necessary for a fair presentation of these unaudited condensed
consolidated financial statements have been included. The results reported in the unaudited condensed consolidated financial statements
for any interim periods are not necessarily indicative of the results that may be reported for the entire year. The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange
Commission (“SEC”) and United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”),
and include the accounts of the Company and its subsidiaries. However, they do not include all information and footnotes necessary for
a complete presentation of financial statements in conformity with U.S. GAAP. Certain information and footnote disclosures normally present
in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Intercompany accounts and transactions
have been eliminated in consolidation.
The
Company has adopted August 31 as its fiscal year end. These unaudited financial statements should be read in conjunction with the Company’s
audited consolidated financial statements and the notes thereto included in the Company’s annual report on amended Form 10-K for
the year ended August 31, 2022.
Going
Concern
The
accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities and commitments in the normal course of business.
As
of February 28, 2023, the Company has suffered recurring losses from operations, and records an accumulated deficit, a working capital
deficit and a shareholders’ deficit of $36,367,167,
$2,782,280 and
$2,851,104,
respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The ability
to continue as a going concern is dependent upon the Company’s profit generating operations in the future and/or obtaining the
necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due.
The
Company expects to finance its operations primarily through cash flows from operations, loans from existing directors and shareholders
and placements of capital stock for additional funding. In the event that the Company requires additional funding to finance the growth
of the Company’s current and expected future operations as well as to achieve our strategic objectives, a shareholder has indicated
the intent and ability to provide additional financing. No assurance can be given that any future financing, if needed, will be available
or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing,
if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its
stock holders, in the case of equity financing.
In
March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted
the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted
the normal operations of many businesses, including the Company’s businesses. This outbreak could decrease spending, adversely
affect demand for the Company’s services and harm its business and results of operations. It is not possible for the Company to
predict the duration or magnitude of the adverse results of the outbreak and its effects on its business or results of operations at
this time.
Affected
by the COVID-19, the Company had to re-organize to improve its market competitiveness and to warrant the survival and future development.
The Company also had downsized the operations to safeguard the financial position by reduction of labor costs, reduction of office space,
and simplified operational procedures.
The
Company’s reduction of labor costs were done through resignation and layoffs, whereas all layoffs were processed according to local
governing labor laws.
These
unaudited condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded
asset amounts and the classification of liabilities that might be necessary should the Company be unable to continue as going concern.
Use
of Estimates
The
preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company’s
management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and
related disclosures. On an on-going basis, the Company evaluates its estimates based on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
The
COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further
business slowdowns or shutdowns, depress demand for the Company’s business, and adversely impact its results of operations. The
severity of the impact of the COVID-19 pandemic on the Company’s business will continue to depend on a number of factors, including,
but not limited to, the duration and severity of the pandemic, the new variants of COVID-19, the efficacy and distribution of COVID-19
vaccines and the extent and severity of the impact on the global supply chain and the Company’s customers, service providers and
suppliers, all of which are uncertain and cannot be reasonably predicted at this time. As of the date of issuance of the Company’s
financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition,
liquidity or results of operations is uncertain. The Company is monitoring and assessing the evolving situation closely and evaluating
its potential exposure. Its estimates may change as new events occur and additional information emerges, and such changes are recognized
or disclosed in its consolidated financial statements.
Identified
below are the accounting policies that reflect the Company’s most significant estimates and judgments, and those that the Company
believes are the most critical to fully understanding and evaluating its unaudited condensed consolidated financial statements.
Business
combination
The
Company accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification
(“ASC”) 805 “Business Combinations.” The cost of an acquisition is measured as the aggregate of the acquisition
date fair values of the assets transferred and liabilities incurred by the Company to the sellers and equity instruments issued. Transaction
costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are
measured separately at their fair values as of the acquisition date, irrespective of the extent of any non-controlling interests. The
excess of (i) the total costs of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously
held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill.
If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly
in the consolidated statements of comprehensive income. During the measurement period, which can be up to one year from the acquisition
date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon
the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes
first, any subsequent adjustments are recorded to the consolidated statements of comprehensive income.
When
there is a change in ownership interests that result in a loss of control of a subsidiary, the Company deconsolidates the subsidiary
from the date control is lost. Any retained non-controlling investment in the former subsidiary is measured at fair value and is included
in the calculation of the gain or loss upon deconsolidation of the subsidiary.
Goodwill
and impairment of Goodwill
Goodwill
represents the excess of the purchase price and related costs over the fair value of the net identified tangible and intangible assets
and liabilities assumed and is not amortized (“Goodwill”). The total amount of Goodwill is deductible for tax purposes.
In
accordance with ASC Topic 350, “Intangibles-Goodwill and Other,” Goodwill is not amortized but is tested for impairment,
annually or more frequently when circumstances indicate a possible impairment may exist. Impairment testing is performed at a reporting
unit level. An impairment loss generally would be recognized when the carrying amount of the reporting unit exceeds its fair value.
The
Company estimates fair value of the applicable reporting unit or units using a discounted cash flow methodology. This methodology represents
a level 3 fair value measurement as defined under ASC 820, Fair Value Measurements and Disclosures, since the inputs are not readily
observable in the marketplace. The goodwill impairment testing process involves the use of significant assumptions, estimates and judgments,
including projected sales, gross margins, selling, general and administrative expenses, and capital expenditures, and the selection of
an appropriate discount rate, all of which are subject to inherent uncertainties and subjectivity. When the Company performs goodwill
impairment testing, its assumptions are based on annual business plans and other forecasted results, which it believes represent those
of a market participant. The Company selects a discount rate, which is used to reflect market-based estimates of the risks associated
with the projected cash flows based on the best information available as of the date of the impairment assessment. Based on the annual
impairment analysis, there is 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.
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 as of 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.
No
development costs were expensed as general and administrative expenses for the six and three months ended February 28, 2023 and 2022.
Revenue
Recognition
The
Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU
2014-09”), which establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and
cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity
to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects
to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
The
Company recognizes revenue following the five-step model prescribed under ASU 2014-09:
Step
1: Identify the contract
Step
2: Identify the performance obligations
Step
3: Determine the transaction price
Step
4: Allocate the transaction price
Step
5: Recognize revenue
Revenues
are recognized when control of the promised goods or services is transferred to the Company’s customers, which may occur at a point
in time or over time depending on the terms and conditions of the agreement, in an amount that reflects the consideration we expect to
be entitled to in exchange for those goods or services.
Provision
of investment platform services
The
Company signed an agreement with a third party whereby the Company authorized the third party to use the Company’s JFB platform
and related applications for a period until December 31, 2020. Income from provision of investment platform services with the use of
the Company’s mobile applications is recognized when the service is performed.
From
September, 2020, the Company generated additional revenue from a new, more comprehensive mobile application, which refer to as the FinMaster
mobile application (the “FinMaster App” and together with the JFB platform, the “Apps”), with similar functions
as the JFB platform. Income from providing investment platform services with the use of a mobile application is recognized when the service
is performed.
The
Company offers a self-managed points program, which can be used in the FinMaster App to redeem merchandise or services. The
Company determines the value of each point based on estimated incremental cost. Customers and advocates have a variety of ways to obtain
the points. The loyalty program was subsequently ended on April 30, 2023 after the Company withdrew from the investment platform service. 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
| | |
February 28, 2023 | | |
February 28, 2022 | | |
February 28,2023 | | |
February 28, 2022 | |
| | |
For the six months ended | | |
For the three months ended | |
| | |
February 28, 2023 | | |
February 28, 2022 | | |
February 28,2023 | | |
February 28, 2022 | |
| Provision of investment platform services | |
$ | 17,397 | | |
$ | 4,799 | | |
$ | 8,249 | | |
$ | 1,557 | |
| Provision of software development service and maintenance service | |
| 331,064 | | |
| 17,637 | | |
| 85,672 | | |
| 6,074 | |
| Revenue | |
$ | 348,461 | | |
$ | 22,436 | | |
$ | 93,921 | | |
$ | 7,631 | |
Revenue
by Recognition Over Time vs Point in Time
SCHEDULE
OF REVENUE BY RECOGNITION OVER TIME VS POINT IN TIME
| | |
February 28, 2023 | | |
February 28, 2022 | | |
February 28, 2023 | | |
February 28, 2022 | |
| | |
For the six months ended | | |
For the three months ended | |
| | |
February 28, 2023 | | |
February 28, 2022 | | |
February 28, 2023 | | |
February 28, 2022 | |
| Revenue by recognition over time | |
$ | 348,461 | | |
$ | 22,436 | | |
$ | 93,921 | | |
$ | 7,631 | |
| Revenue by recognition at a point in time | |
| - | | |
| - | | |
| - | | |
| - | |
| Revenue | |
$ | 348,461 | | |
$ | 22,436 | | |
$ | 93,921 | | |
$ | 7,631 | |
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 February 28, 2023, the Company’s remaining performance obligations were $50,000, 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. The Company withdrew from the investment platform service in February 2023 and the advance payment from FinMaster App would be refunded to customers upon requests received. The Company updated its assessment of amount of refunds and recognized the amounts received for which it did not expect to be entitled as a refund liability. Below is the summary
presenting the movement of the Company’s contract liabilities for the six months ended February 28, 2023 and 2022:
SCHEDULE
OF CONTRACT LIABILITIES
| Receipt in advance | |
2023 | | |
2022 | |
| | |
| | |
| |
| Balance as of September 1 | |
$ | 169,951 | | |
$ | 16,225 | |
| Advances received from customers | |
| 211,734 | | |
| 2,677 | |
| Revenue recognized | |
| (318,267 | ) | |
| (15,948 | ) |
| Refund liability recognized | |
| (13,019 | ) | |
| - | |
| Exchange difference | |
| (399 | ) | |
| (101 | ) |
| Balance as of February 28 | |
$ | 50,000 | | |
$ | 2,853 | |
Practical
Expedients and Exemption
The
Company has not incurred any costs to obtain contracts, and does not disclose the value of unsatisfied performance obligations for contracts
with an original expected length of one year or less.
Research
and development expenses
Research
and development (“R&D”) expenses are primary comprised of charges for R&D and consulting work performed by third
parties; salaries and benefits for those employees engaged in research, design and development activities; costs related to design tools;
and allocated costs.
For
the six months ended February 28, 2023 and 2022, the total R&D expenses were $216,688 and $261,179, respectively.
For
the three months ended February 28, 2023 and 2022, the total R&D expenses were $110,410 and $114,896, 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 six months
ended February 28, 2023 and 2022, advertising costs totaled $18,423 and $240,049, respectively. For the three months ended February 28,
2023 and 2022, advertising costs totaled $4,613 and $29,446, respectively.
From
September 2019, customers or users of the FinMaster App can obtain points through any other ways such as account registration referral
to the FinMaster App, frequent sign-ins to the application and sharing articles from the application to users’ own social media,
etc. The Company believes these points are to encourage user engagement and generate market awareness. As a result, the Company accounts
for such points as sales and marketing expenses with a corresponding liability recorded under other current liabilities of its unaudited
condensed consolidated balance sheets upon the points offering. The Company estimates liabilities under the customer loyalty program
based on cost of the merchandise that can be redeemed, and its estimate of probability of redemption. At the time of redemption, the
Company records a reduction of inventory and other current liabilities. The loyalty program was subsequently ended on April 30, 2023 after the Company withdrew from the investment platform service.
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 six months ended February 28, 2023 and 2022, redeemable point liability (credited) charged as sales and marketing expenses were $(1,477)
and $7,487, respectively.
For
the three months ended February 28, 2023 and 2022, redeemable point liability (credited) charged as sales and marketing expenses were
$(1,450) and $4,318, respectively.
As
of February 28, 2023 and August 31, 2022, liabilities recorded related to unredeemed points were $80,338 and $82,638, 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 an average basis and includes all costs to acquire and
other costs to bring the inventories to their present location and condition. The Company records inventory write-downs for excess or
obsolete inventories based upon assumptions on current and future demand forecasts. If the inventory on hand is in excess of future demand
forecast, the excess amounts are written off. The Company also reviews inventory to determine whether its carrying value exceeds the
net amount realizable upon the ultimate sale of the inventory. This requires the determination of the estimated selling price of the
vehicles less the estimated cost to convert inventory on hand into a finished product. Once inventory is written-down, a new, lower-cost
basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase
in that newly established cost basis.
Inventory
as of February 28, 2023 and 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.
Plant
and Equipment
Plant
and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated
on the straight-line basis over the following expected useful lives from the date on which they become fully operational:
SCHEDULE
OF PLANT AND EQUIPMENT USEFUL LIVES
| | |
Expected useful life | |
| Furniture and fixture | |
| 3 | |
| Office equipment | |
| 3 | |
| Leasehold improvement | |
| 3 | |
Intangible
assets
The
Company recorded intangible assets with definite lives, including investment platform and technical know-hows. Intangible assets are
recorded at cost less accumulated amortization with no residual value. Amortization of intangible assets is computed using the straight-line
method over their estimated useful lives.
The
estimated useful lives of the Company’s intangible assets are listed below:
SCHEDULE
OF USEFUL LIVES OF COMPANY’S INTANGIBLE ASSETS
| Investment platform | |
| 5
years | |
| Technical know-hows | |
| 8
years | |
| Trademarks | |
| 10
years | |
Impairment
of Long-Lived Assets (including amortizable intangible assets)
The
Company reviews the carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If the assets are considered to be
impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the
assets. No impairment has been recorded by the Company for the six and three months ended February 28, 2023 and 2022.
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 $4,839 (NTD150,000). Total amounts of such employee benefit expenses,
which were expensed as incurred, were approximately $9,869 and $23,387 for the six months ended February 28, 2023 and 2022, respectively.
Total amounts of such employee benefit expenses, which were expensed as incurred, were approximately $4,592 and $12,478 for the three
months ended February 28, 2023 and 2022, 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 $58,050 and $62,771 for the
six months ended February 28, 2023 and 2022, respectively. Total amounts of such employee benefit expenses, which were expensed as incurred,
were approximately $30,145 and $31,559 for the three months ended February 28, 2023 and 2022, 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 $5,115 and $5,124 for the six months ended February 28, 2023 and 2022, respectively. Total amounts of
such employee benefit expenses, which were expensed as incurred, were approximately $3,524 and $4,083 for the three months ended February
28, 2023 and 2022, respectively.
Income
taxes
Income
taxes are determined in accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 740, “Income
Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the
periods in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC
740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements
uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the
financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax
positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. As of February
28, 2023, the Company has no accrued interest or penalties related to uncertain tax positions.
The
Company conducts business in the PRC, Taiwan and Hong Kong and is subject to tax in these jurisdictions. As a result of its business
activities, the Company will file tax returns that are subject to examination by the respective tax authorities.
Net
Loss Per Share
The
Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income/(loss)
per share is computed by dividing the net income/(loss) by the weighted-average number of shares of common stock outstanding during the
period. Diluted income per share is computed similar to basic income/(loss) per share except that the denominator is increased to include
the number of additional shares of common stock that would have been outstanding if the potential common stock equivalents had been issued
and if the additional shares of common stock were dilutive. The following table presents a reconciliation of basic and diluted net loss
per share:
SCHEDULE
OF RECONCILIATION OF BASIC AND DILUTED NET LOSS PER SHARE
| | |
February 28, 2023 | | |
February 28, 2022 | | |
February 28, 2023 | | |
February 28, 2022 | |
| | |
For the six months ended | | |
For the three months ended | |
| | |
February 28, 2023 | | |
February 28, 2022 | | |
February 28, 2023 | | |
February 28, 2022 | |
| | |
| | |
| | |
| | |
| |
| Net loss | |
$ | (1,446,003 | ) | |
$ | (4,496,286 | ) | |
$ | (726,930 | ) | |
$ | (2,377,399 | ) |
| Weighted average number of shares of common stock outstanding - Basic and diluted** | |
| 201,084,637 | | |
| 165,431,246 | | |
| 202,304,158 | | |
| 170,033,710 | |
| Net loss per share - Basic and diluted | |
$ | (0.01 | ) | |
$ | (0.03 | ) | |
$ | (0.00 | )* | |
$ | (0.02 | ) |
| |
* |
Less
than $0.01 |
| |
|
|
| |
** |
Including
4,522,262 shares granted and vested but not yet issued for the period ended February 28, 2023; and including 1,600,000 shares converted
from convertible notes but not yet issued and 4,578,868 shares that were granted and vested but not yet issued for the period ended
February 28, 2022. |
Stock-based
compensation
Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment topic of ASC Topic 718 (“ASC 718”), which
requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity
instruments over the vesting period or immediately if fully vested and non-forfeitable. The Financial Accounting Standards Board (“FASB”)
also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair
value of the award.
Additionally,
ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, permits the election of an accounting policy for forfeitures
of share-based payment awards, either to recognize forfeitures as they occur or estimate forfeitures over the vesting period of the award.
The Company has elected to recognize forfeitures as they occur.
On
September 1, 2019, the Company adopted ASU No. 2018-07, “Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee
Share-Based Payment Accounting” (“ASU 2018-07”), which simplifies several aspects of the accounting for nonemployee
share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment
transactions for acquiring goods and services from non-employees. Before the adoption of this guidance, the equity-classified share-based
awards held by non-employees were subject to re-measurement through each vesting date. Upon the adoption of this guidance, the Company
no longer re-measures equity-classified share-based awards granted to consultants or non-employees at each reporting date through the
vesting date and the accounting for these share-based awards to consultants or non-employees and employees was substantially aligned.
Cancellation
of a share-based payment by the entity results in accelerated recognition of any unrecognised cost. Cancellation by the counterparty
does not change recognition of the compensation cost. The termination of an employee that resulted in the forfeiture of share-based awards
is not considered to be a cancellation of the awards.
Foreign
Currencies Translation
Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing
at the dates of the transactions. Monetary assets and liabilities denominated in currencies other than the functional currency are translated
into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded
in the statements of operations.
The
reporting currency of the Company is United States Dollars (“US$”). The Company’s subsidiary in Seychelles, the PRC,
Taiwan and Hong Kong maintains its books and record in United States Dollars (“US$”), Renminbi (“RMB”), New Taiwanese
Dollars (“NT$”) and United States Dollars (“US$”) respectively, which are the primary currencies of the economic
environment in which the entities operate (the functional currencies).
In
general, for consolidation purposes, the assets and liabilities of the Company’s subsidiaries whose functional currency is not
US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the
exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains
and losses resulting from the translation of the financial statements of foreign subsidiaries are recorded as a separate component of
accumulated other comprehensive income within the statement of retained earnings.
Translation
of amounts from foreign currencies into US$ has been made at the following exchange rates for the respective periods:
SCHEDULE OF FOREIGN CURRENCY TRANSLATION
| | |
As of
February 28, 2023 | | |
As of
August 31, 2022 | |
| | |
| | |
| |
| Period-end NT$ : US$ 1 exchange rate | |
| 30.68 | | |
| 30.38 | |
| Period-end RMB : US$ 1 exchange rate | |
| 6.95 | | |
| 6.89 | |
| | |
February 28, 2023 | | |
February 28, 2022 | |
| | |
For the six months ended, | |
| | |
February 28, 2023 | | |
February 28, 2022 | |
| | |
| | |
| |
| Period average NT$ : US$ 1 exchange rate | |
| 31.00 | | |
| 27.82 | |
| Period average RMB : US$ 1 exchange rate | |
| 7.00 | | |
| 6.42 | |
Related
Parties
Parties,
which can be a corporation or an individual, are considered to be related if the Company has the ability to, directly or indirectly,
control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies
are also considered to be related if they are subject to common control or common significant influence.
Convertible
instruments
The
Company accounts for hybrid contracts that feature conversion options in accordance with U.S. GAAP. ASC 815 “Derivatives and Hedging
Activities,” (“ASC 815”) requires companies to bifurcate conversion options from their host instruments and account
for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which
(a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic
characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the
host contract is not 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.
Segment
reporting
ASC
Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management
approach model is based on the way a company’s chief operating decision maker organizes segments within the company for making
operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography,
legal structure, management structure, or any other manner in which management disaggregates a company.
Management
determined the Company’s operations constitute a single reportable segment in accordance with ASC 280. The Company operates exclusively
in one business and industry segment: the provision of investment platform services through mobile application.
Recent
Accounting Pronouncements
Recently
Adopted Accounting Standards
In
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 Company adopted ASU 2021-04 effective September 1, 2022. The adoption of ASU 2021-04 did not have any impact
on the Company’s condensed consolidated financial statement presentation or disclosures.
In
November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.
This update requires certain annual disclosures about transactions with a government that are accounted for by applying a grant or contribution
accounting model by analogy. This update is effective for annual periods beginning after December 15, 2021, and early application is
permitted. This guidance should be applied either prospectively to all transactions that are reflected in financial statements at the
date of initial application and new transactions that are entered into after the date of initial application or retrospectively to those
transactions. The Company adopted ASU 2021-10 effective September 1, 2022. The adoption
of ASU 2021-04 did not have any impact on the Company’s condensed consolidated financial
statement presentation or disclosures.
Recently
issued accounting pronouncements not yet adopted
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which requires
entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current
conditions, and reasonable and supportable forecasts. ASU 2016-13 replaces the existing incurred loss model and is applicable to the
measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 is to be adopted on a modified retrospective
basis. As a smaller reporting company, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning
after December 15, 2022. In March 2023, the FASB issued ASU 2023-02, Topic 326. The ASU eliminates the accounting guidance for trouble
debt restructurings by creditors in Subtopic 310-40, and enhances the disclosure requirements for modifications of loans to borrowers
experiencing financial difficulty. Additionally, the ASU requires disclosure of gross writeoffs of receivables by year of origination
for receivables within the scope of Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost. This ASU is
effective for periods beginning after December 15, 2023. The Company is currently evaluating the impact that the adoption of ASU 2016-13
and ASU 2023-02 will have on its condensed 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 does not expect the impact of this guidance to
have a material impact on the Company’s condensed consolidated financial statements.
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 condensed consolidated financial statements.
In
March 2023, the FASB issued ASU 2023-01, Lease (Topic 842): Common Control Arrangements, which clarifies the accounting for
leasehold improvements associated with leases between entities under common control (hereinafter referred to as common control
lease). ASU 2023-01 requires entities to amortize leasehold improvements associated with common control lease over the useful life
to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset through a
lease, and to account for any remaining leasehold improvements as a transfer between entities under common control through an
adjustment to equity when the lessee no longer controls the underlying asset. This ASU will be effective for fiscal years beginning
after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and
annual financial statements that have not yet been made available for issuance. An entity may apply ASU 2023-01 either prospectively
or retrospectively. The Company is currently evaluating the impact that the adoption of ASU 2023-01 will have on our condensed
consolidated financial statement presentations and disclosures.
The
Company’s management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently
adopted, would have a material impact on the Company’s financial statement presentation or disclosures.
3.
ACQUISITION OF SUBSIDIARIES
On
August 17, 2020, the Company, through its wholly-owned subsidiary JFB, acquired all of the issued and outstanding capital stock (the
“Acquisition”) of NPI, pursuant to the terms and conditions of that certain Stock Purchase Agreement, dated as of August
17, 2020, among the Company, JFB, NPI, the selling shareholders of NPI identified therein (each a “Seller,” and, collectively,
the “Sellers”) and the representative of the Sellers identified therein.
The
aggregate purchase price for the Acquisition was $4,850,000, less certain discounts, expenses and reductions for outstanding NPI debt
owed to the Company and/or its affiliates, resulting in a net purchase price of $3,506,042, payable in 8,415,111 shares of the Company’s
common stock to the Sellers in accordance with their respective pro rata percentage.
After
the completion of the Acquisition, NPI became an indirect wholly owned subsidiary of the Company.
The
Company completed the valuations necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed,
resulting from which the amount of Goodwill was determined and recognized as of the respective acquisition date. The following table
summarizes the estimated aggregate fair values of the assets acquired and liabilities assumed as of the closing date, August 31, 2020.
SUMMARY
OF FAIR VALUES OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
| | |
| | |
| Cash and cash equivalents | |
$ | 185,117 | |
| Prepayments, deposits and other receivables | |
| 145,228 | |
| Due from a shareholder | |
| 34,048 | |
| Right-of-use operating lease assets | |
| 113,590 | |
| Plant and equipment, net | |
| 30,365 | |
| Intangible assets- Technical know-hows | |
| 818,200 | |
| Goodwill | |
| 2,974,364 | |
| Other payables and accrued liabilities | |
| (383,087 | ) |
| Contract liabilities | |
| (2,896 | ) |
| Due to shareholders | |
| (99,730 | ) |
| Operating lease liability | |
| (113,646 | ) |
| Tax payable | |
| (31,871 | ) |
| Deferred tax liabilities | |
| (163,640 | ) |
| Net purchase price | |
$ | 3,506,042 | |
| | |
| | |
| Less: Outstanding NPI debt owed to the Company | |
| | |
| Accounts receivable | |
| 989,854 | |
| Notes payable | |
| (3,066,617 | ) |
| Aggregate fair values
of the assets acquired and liabilities assumed | |
$ | 1,429,279 | |
The
transaction resulted in a purchase price allocation of $2,974,364 to Goodwill, representing the financial, strategic and operational
value of the transaction to the Company. Goodwill is attributed to the premium that the Company paid to obtain the value of the business
of NPI and the synergies expected from the combined operations of NPI and the Company, the assembled workforce and their knowledge and
experience in provision of products and projects utilizing NPI’s technical know-hows. The total amount of the Goodwill acquired
is not deductible for tax purposes.
The
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. Goodwill was fully impaired as of August 31, 2022. No impairment loss
of Goodwill of the reporting unit of the Fintech App development was recognized for the six and three months ended February 28, 2023
and 2022.
4.
PLANT AND EQUIPMENT, NET
Plant
and equipment as of February 28, 2023 and August 31, 2022 are summarized below:
SCHEDULE OF PLANT AND EQUIPMENT, NET
| | |
As of
February 28, 2023 | | |
As of
August 31, 2022 | |
| Furniture and fixtures | |
$ | 30,340 | | |
$ | 30,494 | |
| Office equipment | |
| 83,466 | | |
| 89,858 | |
| Leasehold improvement | |
| 82,631 | | |
| 82,969 | |
| Total | |
| 196,437 | | |
| 203,321 | |
| Less: Accumulated depreciation | |
| (150,488 | ) | |
| (132,317 | ) |
| Plant and Equipment, net | |
$ | 45,949 | | |
$ | 71,004 | |
Depreciation
expenses, classified as operating expenses, were $22,116 and $21,072 for the six months ended February 28, 2023 and 2022, respectively;
and $11,040 and $11,217 for the three months ended February 28, 2023 and 2022, respectively.
5.
INTANGIBLE ASSETS, NET
Intangible
assets costs as of February 28, 2023 and August 31, 2022 are summarized below:
SCHEDULE OF INTANGIBLE ASSETS
| | |
As of
February 28, 2023 | | |
As of
August 31, 2022 | |
| Investment platform | |
$ | 30,000 | | |
$ | 30,000 | |
| Technical know-hows | |
| 818,200 | | |
| 818,200 | |
| Trademarks | |
| 4,920 | | |
| 4,920 | |
| Total | |
| 853,120 | | |
| 853,120 | |
| Less: Accumulated amortization | |
| (199,281 | ) | |
| (199,035 | ) |
| Impairment | |
| (649,781 | ) | |
| (649,781 | ) |
| Intangible assets, net | |
$ | 4,058 | | |
$ | 4,304 | |
Amortization
expense for intangible assets was $246 and $45,008 for the six months ended February 28, 2023 and 2022, respectively; and $123 and $22,509
for the three months ended February 28, 2023 and 2022, respectively.
During
the course of the Company’s strategic review of its operations, the Company assessed the recoverability of the carrying value of
the Company’s intangible assets. The impairment charge, if any, represented the excess of carrying amounts of the Company’s
intangible assets over their fair value, using the expected future discounted cash flows. No impairment loss of intangible asset was
recognized for the six and three months ended February 28, 2023 and 2022.
As
of February 28, 2023, amortization expenses related to intangible assets for future periods are estimated to be as follows:
SCHEDULE OF AMORTIZATION EXPENSES RELATED TO INTANGIBLE ASSETS
| | |
| | |
| 2023 (remaining
period) | |
$ | 246 | |
| 2024 | |
| 492 | |
| 2025 | |
| 492 | |
| 2026 | |
| 492 | |
| 2027 | |
| 492 | |
| 2028
and thereafter | |
| 1,844 | |
| Total | |
$ | 4,058 | |
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 February 28, 2023 and August 31, 2022, the Company held 7.01% and 7.06%, respectively 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 |
| Reblood Biotech Corp. | |
Note b |
| Reblood Biotech Limited | |
Note b |
| Asia Pacific Integrating System 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 |
| Shih-Chu Lo | |
Shareholder of the Company |
| (a) |
As
of February 28, 2023, the Company and Yi-Hsiu Lin held 7.01% and 7.01% of DFP’s outstanding common stock. DFP was also the
shareholder of the Company. |
| |
|
| (b) |
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. |
| |
|
| (c) |
Asia
Pacific Integrating System Limited, a Taiwanese company, wholly owned by Shih-Chu Lo, a shareholder of the Company, holding 100%
equity interests as of February 28, 2023. |
Related
party transactions:
The
Company entered into the following significant related party transactions:
SCHEDULE
OF RELATED PARTY TRANSACTIONS
| | |
For the six months ended | | |
For the three months ended | |
| | |
February 28, 2023 | | |
February 28, 2022 | | |
February 28, 2023 | | |
February 28, 2022 | |
| | |
| | |
| | |
| | |
| |
| Provision of software development service to DFP (a) | |
$ | 300,000 | | |
$ | - | | |
$ | 70,000 | | |
$ | - | |
| Provision of software maintenance service to DFP (a) | |
| 31,065 | | |
| - | | |
| 15,673 | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | |
| Rental expense to Yu-Cheng Tu (b) | |
| - | | |
| 3,239 | | |
| - | | |
| 4 | |
| Rental expense to Reblood Biotech Limited (d) | |
| 18,302 | | |
| 17,745 | | |
| 9,545 | | |
| 8,889 | |
| | |
| | | |
| | | |
| | | |
| | |
| Interest expense to: | |
| | | |
| | | |
| | | |
| | |
| Teh-Ling Chen (Note 13) | |
| - | | |
| 6,000 | | |
| - | | |
| 3,000 | |
| CPN Investment Limited (c) | |
| - | | |
| - | | |
| - | | |
| - | |
| Chun-Shuo Huang (Note 10(a)) | |
| 17,143 | | |
| - | | |
| 8,726 | | |
| - | |
| Ching-Nan Wang (Note 12) | |
| 36,000 | | |
| 30,000 | | |
| 18,000 | | |
| 15,000 | |
| Jui-Chin Chen (Note 10(b) and 13) | |
| 2,400 | | |
| 3,000 | | |
| 1,200 | | |
| 1,500 | |
| Chin-Chiang Wang (Note 10(c) and 13) | |
| 6,000 | | |
| 6,000 | | |
| 3,000 | | |
| 3,000 | |
| Chin-Ping Wang (Note 13) | |
| - | | |
| 2,835 | | |
| - | | |
| (165 | ) |
| Ching-Nan Wang (Note 13) | |
| - | | |
| 2,835 | | |
| - | | |
| (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 since August 2022.
For the six and three months ended February 28, 2023, software maintenance income of $31,065 and $15,673, respectively was generated
from this customer. Both parties entered another software development agreement on March 31, 2022 and the Company delivered the app
on January 16, 2023. For the six and three months ended February 28, 2023, revenue of $300,000 and $70,000, respectively was generated. |
| (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 and early terminated on October 31, 2021. The monthly lease was for the amount of NTD
45,000 ($1,617), with a term of one year. During the six months ended February 28, 2023 and 2022, the Company recognized rental expenses
of $nil and $3,239, respectively that are included in general and administrative expenses. During the three months ended February
28, 2023 and 2022, the Company recognized rental expenses of $nil and $4, respectively that are included in general and administrative
expenses. |
| |
|
| (c) |
The
Company borrowed a principal amount of $62,000 on September 27, 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 November 1, 2022. Further
$73,400 was borrowed during the three months ended February 28, 2023. The loan was 6% interest bearing payable on maturity and would
be matured in one year. Interest of $nil was incurred for the six and three months ended February 28, 2023. |
| |
|
| (d) |
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 ($2,647), with a term of 16 months. On October 1, 2022, the lease was renewed for additional
one year. The monthly rental was NTD 97,062 ($3,131). During the six months ended February 28, 2023 and 2022, the Company recognized
rental expenses of $18,302 and $17,745, respectively that are included in general and administrative expenses. During the three months
ended February 28, 2023 and 2022, the Company recognized rental expenses of $9,545 and $8,889, respectively that are included in
general and administrative expenses. |
| |
|
| (e) |
NTD64,000
($2,086) was paid for Hsu Kuo-Hsun’s quarter on November 3, 2022. |
Related
party balances:
Apart
from the above, the Company recorded the following significant related party balances as of February 28, 2023 and August 31, 2022:
SCHEDULE
OF RELATED PARTY BALANCES
| | |
As
of
February 28, 2023 | | |
As
of
August 31, 2022 | |
| Accounts receivable from related parties | |
| | | |
| | |
| | |
| | | |
| | |
| Receivables from DFP | |
$ | 2,705 | | |
$ | 2,732 | |
Up
to the date of this report, DFP had repaid $nil
to the Company.
| | |
As
of
February 28, 2023 | | |
As
of
August 31, 2022 | |
| Contract liabilities due to related parties | |
| | | |
| | |
| | |
| | | |
| | |
| due to DFP | |
$ | - | | |
$ | 150,000 | |
| due to Asia Pacific Integrating System Limited | |
$ | 50,000 | | |
$ | - | |
| Contract liabilities due to related parties | |
$ | 50,000 | | |
$ | - | |
Up
to the date of this report, $nil
of the above contract liabilities had been utilized.
| | |
As of
February 28, 2023 | | |
As of
August 31, 2022 | |
| Accrued interests payable to related parties | |
| | | |
| | |
| | |
| | | |
| | |
| Ching-Nan Wang (note 12) | |
$ | 20,935 | | |
$ | 2,935 | |
| Chun-Shuo Huang (note 10 (a)) | |
| 2,851 | | |
| 2,851 | |
| Jui-Chin Chen (note 10(b)) | |
| 5,629 | | |
| 3,229 | |
| Chin-Chiang Wang (note 10(c)) | |
| 3,165 | | |
| 9,165 | |
| Accrued interests payable to related parties | |
$ | 32,580 | | |
$ | 18,180 | |
8. PREPAYMENTS, DEPOSITS
AND OTHER RECEIVABLES
SCHEDULE
OF PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
| | |
As
of
February 28, 2023 | | |
As
of
August 31, 2022 | |
| | |
| | |
| |
| Rental and management fee deposits | |
$ | 50,952 | | |
$ | 100,498 | |
| Other prepaid expenses | |
| 46,663 | | |
| 52,723 | |
| Other taxes recoverable | |
| 2,132 | | |
| 35,802 | |
| Prepayments, deposits and other receivables | |
| 99,747 | | |
| 189,023 | |
| Less: non-current portion | |
| | | |
| | |
| Rental and management fee deposits | |
| 6,519 | | |
| 12,822 | |
| Prepayments, deposits and other receivables, non-current | |
| 6,519 | | |
| 12,822 | |
| Prepayments, deposits and other receivables, current | |
$ | 93,228 | | |
$ | 176,201 | |
9.
ACCRUED EXPENSES AND OTHER PAYABLES
SCHEDULE OF ACCRUED EXPENSES AND OTHER PAYABLES
| | |
As of
February 28, 2023 | | |
As
of
August 31, 2022 | |
| Accrued interests (Note 7, 10 and 12) | |
$ | 32,580 | | |
| 18,180 | |
| Accrued payroll | |
| 244,805 | | |
| 150,932 | |
| Other accrued expenses | |
| 279,627 | | |
| 197,428 | |
| Other taxes payable | |
| 462 | | |
| 1,377 | |
| Refund liabilities | |
| 13,154 | | |
| - | |
| Point liabilities | |
| 80,338 | | |
| 82,638 | |
| Accrued expenses and
other payables | |
$ | 650,966 | | |
| 450,555 | |
10.
DUE FROM (TO) SHAREHOLDERS AND DIRECTORS
SCHEDULE
OF DUE FROM (TO) SHAREHOLDERS AND DIRECTORS
| | |
As
of
February 28, 2023 | | |
As
of
August 31, 2022 | |
| Other loans from shareholders: | |
| | | |
| | |
| Jui-Chin Chen (b) | |
$ | (80,000 | ) | |
$ | (80,000 | ) |
| Chun-Shuo Huang (a) | |
| (144,248 | ) | |
| (145,159 | ) |
| Mei-Ying Huang (d) | |
| (2,608 | ) | |
| (35,550 | ) |
| Chin-Chiang Wang (c) | |
| (200,000 | ) | |
| (200,000 | ) |
| CPN Investment Limited (g) | |
| (73,400 | ) | |
| - | |
| Total (Note 11) | |
| (500,256 | ) | |
| (460,709 | ) |
| Less: Other loans from shareholders, non-current | |
| 200,000 | | |
| 200,000 | |
| | |
$ | (300,256 | ) | |
$ | (260,709 | ) |
| | |
| | | |
| | |
| Due to a director - current: | |
| | | |
| | |
| Yi-Hsiu Lin (e) | |
$ | (1,159,788 | ) | |
$ | (973,564 | ) |
| | |
| | | |
| | |
| Due to shareholders - current: | |
| | | |
| | |
| Yu-Cheng Tu (e) | |
$ | (41,377 | ) | |
$ | (42,472 | ) |
| Hung-Pin Cheng (e) | |
| (5,363 | ) | |
| (471 | ) |
| Mei-Ying Huang (e) | |
| (800 | ) | |
| (800 | ) |
| Shih-Chu Lo (e) | |
| (800 | ) | |
| (800 | ) |
| Jun-Yuan Chen (e) | |
| (800 | ) | |
| (800 | ) |
| Total | |
$ | (49,140 | ) | |
$ | (45,343 | ) |
| | |
| | | |
| | |
| Due from a shareholder - current: | |
| | | |
| | |
| Kuo-Hsun Hsu (f) | |
$ | 2,086 | | |
$ | - | |
| (a) |
On
February 28, 2022, the Company obtained a loan of RMB1,000,000 ($144,248) 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. The repayment was extended to June 30, 2023 as agreed by both parties. Interest of $17,143 and $nil respectively was incurred
for the six months ended February 28, 2023 and 2022. Interest of $8,726 and $nil respectively was incurred for the three months ended
February 28, 2023 and 2022. Interest of $2,851 was accrued as of February 28, 2023 and August 31, 2022. |
| |
|
| (b) |
The
loan was modified from convertible note on March 23, 2022 and would be repayable in five installments before February 28, 2023 with
6% interest-bearing per annum. $20,000 was repaid by the Company as of February 28, 2023. On November 29, 2022, both parties entered
into an amendment agreement to extend the payment time of the remaining loans and interests by November 30, 2023. For the six months
ended February 28, 2023, interest of $2,400 and $3,000 were incurred respectively. For the three months ended February 28, 2023,
interest of $1,200 and $1,500 were incurred respectively. Interest of $5,629 and $3,229 was accrued as of February 28, 2023 and August
31, 2022, respectively. |
| |
|
| (c) |
The
loan was modified from convertible note on May 3, 2022 and would mature on November 25, 2024 with 6% interest-bearing per annum.
For the six months ended February 28, 2023 and 2022, interest of $6,000 were incurred. For the three months ended February 28, 2023
and 2022, interest of $3,000 were incurred. Interest of $3,165 and $9,165 was accrued as of February 28, 2023 and August 31, 2022,
respectively. |
| |
|
| (d) |
The
Company borrowed non-interest bearing loans in the aggregate amount of NTD4,000,000 ($130,378) from Huang Mei-Ying. The loan of NTD2,500,000
($81,486) borrowed on November 24, 2021 was due on May 24, 2022 but further extended to December 31, 2022. The loan was fully repaid
on October 25, 2022. The loan of NTD1,000,000 ($32,594) borrowed on January 12, 2022 was fully repaid on July 22, 2022. NTD420,000
($13,690) was repaid for the remaining loan of NTD500,000 ($16,297) obtained on February 9, 2022 which would be repayable based on
the Company’s financial ability. |
| |
|
| (e) |
Amounts
due to shareholders and a director are unsecured, interest-free with no fixed payment term. |
| |
|
| (f) |
NTD64,000
($2,086) was paid for Hsu Kuo-Hsun’s quarter on November 3, 2022. The advance is non-interest bearing and would repayable on
demand. |
| |
|
| (g) |
The
Company borrowed a principal amount of $62,000 on September 27, 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 November 1, 2022. Further
$73,400 was borrowed during the three months ended February 28, 2023. The loan was 6% interest bearing payable on maturity and would
be matured in one year. No interest was accrued as of February 28, 2023. |
11.
OTHER LOANS
SCHEDULE OF OTHER LOANS
| | |
As
of
February 28, 2023 | | |
As
of
August 31, 2022 | |
| Other loans: | |
| | | |
| | |
| - from shareholders (note 10) | |
$ | 500,256 | | |
$ | 460,709 | |
| - from a non-related party | |
| 5,802 | | |
| - | |
| | |
| 506,058 | | |
| 460,709 | |
| Less: Other loan, non-current: | |
| (200,000 | ) | |
| (200,000 | ) |
| | |
$ | 506,058 | | |
$ | 260,709 | |
On
September 15, 2022, the Company borrowed non-interest bearing loan of NTD30,000 ($978) from a non-related company which was owned by
an employee of the Company. The loan would be repayable on September 15, 2023. Further non-interest loan of NTD148,000 ($4,824) was borrowed
in January 2023 and would be repayable in one year.
12.
BONDS PAYABLE
The
Company 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 purchase price of $600,000. The bond
will mature three years from August 14, 2019. Interest on the bond accrues at rate of 10% per annum and is payable on semi-yearly basis.
The Company may exercise its right to repay this bond at any time on or before two years from the maturity date by wiring 100% of all
outstanding principal and interest to the purchaser. 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 $36,000 and $30,000 was incurred in six months ended February 28, 2023 and 2022, respectively.
Interest of $18,000 and $15,000 was incurred in three months ended February 28, 2023 and 2022, respectively. Interest of $20,935 and
$2,935 was accrued as of February 28, 2023 and August 31, 2022, respectively.
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
| | |
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 | % |
| Chin-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(b)). 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. It was later
extended to November 30, 2023. 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(c)). |
| |
|
| (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 six months ended February 28, 2023 and 2022, interest of $nil and $20,670 were incurred on the Notes, respectively.
During
the three months ended February 28, 2023 and 2022, interest of $nil and $7,170 were incurred on the Notes, respectively.
14.
INCOME TAXES
For
the period ended February 28, 2023 and 2022, the local (United States) and foreign components of loss before income tax were comprised
of the following:
SCHEDULE OF INCOME/(LOSS) BEFORE INCOME TAXES
| | |
February
28, 2023 | | |
February
28, 2022 | | |
February
28, 2023 | | |
February
28, 2022 | |
| | |
Six
months ended | | |
Three
months ended | |
| | |
February
28, 2023 | | |
February
28, 2022 | | |
February
28, 2023 | | |
February
28, 2022 | |
| Tax jurisdictions from: | |
| | | |
| | | |
| | | |
| | |
| - Local | |
$ | (457,623 | ) | |
$ | (2,375,752 | ) | |
$ | (349,474 | ) | |
$ | (1,450,149 | ) |
| - Foreign, representing | |
| | | |
| | | |
| | | |
| | |
| Seychelles | |
| - | | |
| - | | |
| - | | |
| - | |
| British Virgin Islands | |
| (1,399 | ) | |
| (1,855 | ) | |
| (255 | ) | |
| (298 | ) |
| Taiwan | |
| (437,102 | ) | |
| (1,251,440 | ) | |
| (134,125 | ) | |
| (567,529 | ) |
| PRC | |
| (337,557 | ) | |
| (254,628 | ) | |
| (131,628 | ) | |
| (135,191 | ) |
| Hong Kong | |
| (208,857 | ) | |
| (621,575 | ) | |
| (107,983 | ) | |
| (228,714 | ) |
| Tax jurisdictions from foreign | |
| (208,857 | ) | |
| (621,575 | ) | |
| (107,983 | ) | |
| (228,714 | ) |
The
components of the benefit for income taxes expenses are:
SCHEDULE OF COMPONENTS OF PROVISION BENEFIT FOR INCOME TAXES
| | |
February
28, 2023 | | |
February
28, 2022 | | |
February
28, 2023 | | |
February
28, 2022 | |
| | |
Six
months ended | | |
Three
months ended | |
| | |
February
28, 2023 | | |
February
28, 2022 | | |
February
28, 2023 | | |
February
28, 2022 | |
| Current | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
| Deferred | |
| - | | |
| (8,964 | ) | |
| - | | |
| (4,482 | ) |
| Total income tax benefit | |
$ | - | | |
$ | (8,964 | ) | |
$ | - | | |
$ | (4,482 | ) |
The
benefit for income taxes consisted of the following:
SCHEDULE OF PROVISION FOR INCOME TAXES
| | |
February
28, 2023 | | |
February
28, 2022 | | |
February
28, 2023 | | |
February
28, 2022 | |
| | |
Six
months ended | | |
Three
months ended | |
| | |
February
28, 2023 | | |
February
28, 2022 | | |
February
28, 2023 | | |
February
28, 2022 | |
| Statutory income tax rate | |
| 21 | % | |
| 21 | % | |
| 21 | % | |
| 21 | % |
| Income tax credit computed at statutory income rate | |
| (302,933 | ) | |
| (946,103 | ) | |
| (151,928 | ) | |
| (400,195 | ) |
| Reconciling items: | |
| | | |
| | | |
| | | |
| | |
| Non-deductible expenses | |
| 53,183 | | |
| 311,315 | | |
| 5,280 | | |
| 256,929 | |
| Share-based payments | |
| 92,867 | | |
| 222,771 | | |
| 56,467 | | |
| 47,373 | |
| Tax effect of tax exempt entity | |
| 294 | | |
| 390 | | |
| 54 | | |
| 63 | |
| Rate differential in different tax jurisdictions | |
| (9,006 | ) | |
| 15,988 | | |
| (5,678 | ) | |
| 7,410 | |
| Valuation allowance on deferred tax assets | |
| 165,595 | | |
| 386,675 | | |
| 95,805 | | |
| 183,938 | |
| Income tax benefit | |
$ | - | | |
$ | (8,964 | ) | |
$ | - | | |
$ | (4,482 | ) |
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 February 28, 2023,
the operations in the United States of America incurred $2,399,038
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 February 28, 2023, the Company has provided for a full valuation allowance of $503,798
against the deferred tax assets on the expected
future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets
will not be realized in the future.
Seychelles
Under
the current laws of the Seychelles, LFGL is registered as an international business company, as such, LFGL is governed by the International
Business Companies Act of Seychelles and not subject to income taxes in Seychelles.
British
Virgin Islands
NPI
is tax exempted in the British Virgin Islands where it was incorporated.
Taiwan
LOC
is subject to corporate income tax (“CIT”) in Taiwan. Since January 1, 2018, the CIT rate in Taiwan is 20%.
As of February 28, 2023, LOC had net operating loss carry-forwards in Taiwan of $3,883,706,
which will expire in various years through 2027. The Company has provided for a full valuation allowance of $697,724
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 February 28, 2023, BJDC had net operating loss carry-forwards
in the PRC of $2,790,898,
which will expire in various years through 2029. The Company has provided for a full valuation allowance of $697,724
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 period. As of February 28, 2023,
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 February 28, 2023, 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.
SCHEDULE
OF DEFERRED TAX ASSETS
| | |
February 28, 2023 | | |
August 31, 2022 | |
| Deferred tax assets: | |
| | | |
| | |
| Net operating loss carryforwards | |
| | | |
| | |
| – United States of America | |
$ | (503,798 | ) | |
$ | (500,564 | ) |
| – Taiwan | |
| (776,741 | ) | |
| (699,772 | ) |
| – PRC | |
| (697,724 | ) | |
| (600,648 | ) |
| – Hong Kong | |
| - | | |
| - | |
| Deferred tax assets: net operating loss carryforwards | |
| - | | |
| - | |
| Less: valuation allowance | |
| 1,978,263 | | |
| 1,800,984 | |
| Deferred tax assets,
net of valuation allowance | |
$ | - | | |
$ | - | |
15.
COMMON STOCK
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 each of the years ending August 31, 2023 and 2022 was $250,000, which was
calculated based on a price per share of $0.10 and amortized over the service term. During the six months ended February 28, 2023 and
2022, the Company amortized $125,000 as remuneration. During the three months ended February 28, 2023 and 2022, the Company amortized
$62,500 as remuneration.
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. On September 1, 2022, the Company
re-issued a director offer letter to Shui Fung Cheng with the same compensation for further one year. The fair value of the shares of
restricted common stock granted on September 1, 2021 and 2022 was $150,000 each, which was calculated based on a price per share of $0.10
and amortized over the service term. During the six months ended February 28, 2023 and 2022, the Company amortized $75,000 as remuneration.
During the three months ended February 28, 2023 and 2022, the Company amortized $37,500 as remuneration.
On
March 1, 2021, the Company renewed the 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, 2021, prorated for any partial year. The fair value of the shares of restricted common
stock was $100,000 which was calculated based on a price per share of $0.10 and amortized over the service term. During the six and three
months ended February 28, 2022, the Company amortized $50,000 and $25,000 respectively as consulting expenses under this agreement. The
shares were granted and issued on December 16, 2021.
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. The fair value of the shares of restricted common stock to be 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 six and three months ended February 28, 2022, the Company amortized $242,481 and $33,084, respectively, as salaries.
As of February 28, 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
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 six and three months ended February 28, 2022, the Company recognized $16,666 and $nil respectively
as compensation under these arrangements. The shares were issued on January 6, 2021.
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 six and three months ended February
28, 2022, the Company amortized $416,666 and $nil respectively as consulting expenses under these agreements. The shares were issued
on December 22, 2020.
On
February 8, 2021, the Company and First Leader Capital Ltd. mutually agreed to further forfeit and surrender 5,000,000 shares (the “Surrendered
Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”). The Surrendered Shares
were automatically cancelled and retired. First Leader Capital Ltd. agreed to forfeit and cancel the Surrendered Shares in exchange for
reducing the Company’s outstanding Common Stock to be more in line with what management deems to be market expectations based on
the Company’s current valuation.
On
May 17, 2021, the Company and First Leader Capital Ltd., again, mutually agreed to forfeit and surrender 13,132,500 shares (the “Surrendered
Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”). The Surrendered Shares
were automatically cancelled and retired. First Leader Capital Ltd. agreed to forfeit and cancel the Surrendered Shares in exchange for
reducing the Company’s outstanding Common Stock to be more in line with what management deems to be market expectations based on
the Company’s current valuation.
On
September 1, 2021, the Company issued an offer letter to Hsu Kuo-Hsun, pursuant to which Mr. Hsu agreed to serve as chairman of LOC for
two years. Per the terms of the offer letter, Mr. Hsu will receive a monthly remuneration of NT$60,000 (equivalent to $1,902) 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 each of years ending August 31, 2023 and 2022 was $120,000, which
was calculated based on a price per share of $0.10 and amortized over the service term. During the six months ended February 28, 2023
and 2022, the Company amortized $60,000 each as consulting expenses under this agreement. During the three months ended February 28,
2023 and 2022, the Company amortized $30,000 each as consulting expenses under this agreement. 1,200,000 shares were issued on October
5, 2022.
On
September 1, 2021, the Company issued a Senior Vice President (“SVP”) offer letter to Chiao Chien, pursuant to which Mr.
Chiao agreed to serve as SVP of user experience of the Company for two years. For his services, Mr. Chiao will receive a monthly remuneration
of RMB 17,000 (equivalent to $2,385) 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 each of years ending August
31, 2023 and 2022 was $150,000, which was calculated based on a price per share of $0.10 and amortized over the service term. During
the six months ended February 28, 2023 and 2022, the Company amortized $75,000 each as consulting expenses under this agreement. During
the three months ended February 28, 2023 and 2022, the Company amortized $37,500 each as consulting expenses under this agreement. 1,500,000
shares were issued on October 5, 2022.
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 $nil for the six and three months ended February 28, 2022, in respect of the non-restricted shares granted. The shares were issued
on March 2, 2022. As of February 28, 2023, neither unrecognized stock-based compensation was associated with the above share units nor
vested shares were to be issued.
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.
On
October 1, 2022, the Company entered into consultant agreement with Shou-Hung Hsu for two years. Pursuant to the agreement, Mr. Hsu was
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 $35,000, which was calculated based on a price per share of $0.10 and amortized over the service term. During the six months ended
February 28, 2023 and 2022, the Company amortized $14,583 and $nil, respectively as consulting expenses under this agreement. During
the three months ended February 28, 2023 and 2022, the Company amortized $8,750 and $nil, respectively as consulting expenses under this
agreement.
On
February 28, 2023, the Company dismissed ten employees located in Beijing and was liable to pay severance payment of $129,572 (RMB907,000),
payable in cash of $36,930 (RMB258,500) and with 926,429 shares of restricted common stock, which would vest on August 31, 2023. The
fair value of the shares of restricted common stock was $92,642, which was calculated based on a price per share of $0.10. During the
six months ended February 28, 2023 and 2022, the Company recognized $92,642 and $nil, respectively as severance payment. During the three
months ended February 28, 2023 and 2022, the Company recognized $92,642 and $nil, respectively as severance payment.
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 September 2, 2022.
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.
As
of February 28, 2023, unrecognized share-based compensation expense was $355,417.
As
of February 28, 2023, 4,522,262 shares were granted to employees and vested but not yet issued.
16.
COMMITMENTS AND CONTINGENCIES
During
the period ended February 28, 2023, the Company entered into month-to-month lease agreements with independent third parties to rent office
and staff quarter premises in Taiwan, Shenzhen, Beijing and Hong Kong. The rental expense for the six months ended February 28, 2023
and 2022 were $130,646 and
$148,477 respectively;
and $64,964 and
$59,758 for
the three months ended February 28, 2023 and 2022 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 six months ended | |
| | |
February
28, 2023 | | |
February
28, 2022 | |
| | |
| | |
| |
| Operating lease cost – classified
as general and administrative expenses | |
$ | 123,169 | | |
$ | 176,635 | |
| Weighted Average Remaining Lease Term – Operating leases | |
| 1.20
years | | |
| 1.43
years | |
| Weighted Average Discounting Rate – Operating leases | |
| 5.42 | % | |
| 5.42 | % |
The
following is a schedule, by years, of maturities of lease liabilities as of February 28, 2023:
SCHEDULE
OF MATURITIES OF LEASE LIABILITIES
| | |
Operating leases | |
| 2023 (remaining period) | |
$ | 49,100 | |
| 2024 | |
| 42,472 | |
| 2025 | |
| 6,300 | |
| 2026 | |
| - | |
| 2027 | |
| - | |
| Thereafter | |
| - | |
| Total undiscounted cash flows | |
| 97,872 | |
| Less: imputed interest | |
| (3,097 | ) |
| Present value of lease liabilities | |
$ | 94,775 | |
Contingencies
The
Labor Contract Law of the People’s Republic of China requires employers to assure the liability of the severance payments if
employees are terminated due to restructuring, mutual agreement or expiration of a fixed-term labor contract. The Company has
estimated its possible severance payments of approximately $72,000 and $146,000 as of February 28, 2023 and August 31, 2022,
respectively. On February 28, 2023, the
Company dismissed ten employees and severance payments of $129,572
(RMB907,000)
were incurred. The compensation was payable in the form of cash of $36,930
(RMB258,500)
and 926,429
restricted shares of the Company. The fair value of the shares of restricted common stock was $92,642,
which was calculated based on a price per share of $0.10.The shares will be issued by August 31, 2023.
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 $40,000 and $52,000 as of February 28, 2023 and August 31, 2022, respectively, which have
not been reflected in its condensed consolidated financial statements, because it is more likely than not that this will not be paid
or incurred.
17.
SUBSEQUENT EVENTS
On
March 15, 2023, the Company issued an offer letter to Kuo-Kang Chang, pursuant to which Mr. Chang agreed to serve as senior VP of marketing
and branding strategy for two years. For his services, Mr. Chang will receive an annual remuneration of $20,000 in cash or 1,000,000
shares of restricted common stock. In addition, Mr. Chang may be entitled to additional 1,000,000 restricted shares based on his achievement
of appropriate performance criteria to be determined by the board of directors or a committee thereof. The fair value of the shares of
restricted common stock for the first year was $10,000, which was calculated based on a price per share of $0.10 and amortized over the
service term. 1,000,000 shares were issued to Mr. Chang on April 10, 2023.
On
March 15, 2023, the board of directors decided to dissolve LOC. LOC then entered into a de-registration process and its business was
taken over by LCHD. Taichung City Government approved the dissolution on April 25, 2023. $204,759 (approximately NTD6.3 million)
of overdue debt was claimed by the creditors and it was included in the other accrued expenses (note 9).
From March to April 2023, the Company entered into
securities purchase agreements with two accredited investors whereby the investors purchased a total of 5,000,000 shares of
the Company’s common stock at a price of $0.10 per share. The Company received aggregate gross proceed of $500,000. Pursuant
to the terms of the securities purchase agreement, the investor will have piggyback registration rights with respect to the shares. The
shares were issued to the investors by April 10, 2023.
From May to June 2023, the Company received aggregate
gross proceeds of $201,540 from several accredited investors whereby the investors intended to purchase a total of 4,030,000 shares of
the Company’s restricted common stock at an average price of $0.05 per share. The shares are expected to be issued by end of July
2023.
On
April 20, 2023, the Company entered into consultant agreement with Yueh-Hung Chou for one year. Pursuant to the agreement, Mr. Chou will
be compensated at NT$25,000 per month. In addition, he would be remunerated by 300,000 restricted shares of the Company upon the achievement
of certain performance as agreed.
The
Company borrowed a principal amount of $100,974 (RMB700,000) on April 26, 2023 from a shareholder – Chang-Ming Lu. The loan was
5% p.a. interest bearing payable on monthly basis and would be matured on December 31, 2023. The loan was fully received by May 8, 2023.
A further loan of $43,274 (RMB300,000) was borrowed on June 5, 2023. The loan was 5% p.a. interest bearing payable on monthly basis and
would be matured on July 5, 2023.
