1.
ORGANIZATION AND BUSINESS BACKGROUND
Leader
Capital Holdings Corp. 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.
Company
Name
|
|
Place/Date
of Incorporation
|
|
Principal
Activities
|
|
|
|
|
|
1.
Leader Financial Group Limited
|
|
Seychelles
/ March 6, 2017
|
|
Investment
Holding
|
|
|
|
|
|
2.
JFB Internet Service Limited
|
|
Hong
Kong / July 6, 2017
|
|
Provides
an Investment Platform
|
Leader
Capital Holdings Corp. and its subsidiaries are hereinafter referred to as the “Company”.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
These
interim condensed consolidated financial statements of the Company and its subsidiaries are unaudited. In the opinion of management,
all adjustments (consisting of normal recurring accruals) and disclosures necessary for a fair presentation of these interim 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 Form 10-K for the year ended August 31, 2019, which was filed with the SEC on November
29, 2019.
Going
Concern
The
accompanying interim 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.
The
Company has suffered recurring losses from operations, and recorded an accumulated deficit of $5,147,890 as of May 31, 2020. 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 loans from existing directors and stockholders, sales of capital stock
and cash flow from operations. In the event that the Company requires additional funding to finance the Company’s current
and expected future operations, as well as to achieve its strategic objectives, a stockholder 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. Any such additional financing may contain undue restrictions on
the Company’s operations and/or cause substantial dilution to its stockholders.
These
interim 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. 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 condensed consolidated financial statements.
Cash
and Cash Equivalents
Cash
and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions
and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Software
Development Costs
The
Company expenses software development costs, including costs to develop software products or the software component of products
to be marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached
shortly before the release of such products and, as a result, development costs that meet the criteria for capitalization were
not material for the periods presented.
The
Company capitalizes development costs related to these software applications once the preliminary project stage is complete and
it is probable that the project will be completed and the software will be used to perform the function intended.
On September 1, 2018, the Company engaged
LOC Weibo Co., Ltd (“LOC”), a company incorporated in Taiwan, to develop a mobile application in four stages
for total consideration of TWD20,000,000 ($651,466), payable in the form of shares of the Company’s restricted common stock.
The first and second stages of development for the basic functions of the mobile application have been completed, and the Company
has issued an aggregate total of 908,678 shares of restricted common stock at a price per share of $0.50 for the work completed
up to May 31, 2020.
Of
the shares of restricted common stock that have been issued to LOC, nil and 908,678 shares of restricted common stock were issued
during the nine months ended May 31, 2020 and 2019, respectively, for the work completed during each period. The Company expensed
$0 and $454,338 in development costs as general and administrative expenses for the nine months ended May 31, 2020 and 2019, respectively;
and $0 and $259,152 for the three months ended May 31, 2020 and 2019, respectively. As of May 31, 2020, the development of the
mobile application is still in progress and the Company has not capitalized any of the development costs.
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. Revenue is 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
Revenue
is 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.
Currently,
the Company has an agreement with a third party whereby the Company authorized the third party to use the Company’s investment
platform and related applications from January 1, 2018 to December 31, 2020. Income from providing investment platform services
with the use of a mobile application is recognized when the service is performed.
Revenue
by Recognition Over Time vs Point in Time
|
|
For the nine months ended
May 31,
|
|
|
For the three months ended
May 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenue by recognition over time
|
|
$
|
5,000
|
|
|
$
|
-
|
|
|
$
|
1,667
|
|
|
$
|
-
|
|
Revenue by recognition at a point in time
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
5,000
|
|
|
$
|
-
|
|
|
$
|
1,667
|
|
|
$
|
-
|
|
Other
Income – Related Party
Revenue
from the subletting of leasehold land and buildings is recognized on a straight-line basis over the lease term when collectability
is reasonably assured and the tenant has taken possession or controls the physical use of the leased assets. The Company leased
its commercial office in Taipei from April 1, 2018 to February 28, 2019 under a non-cancelable operating lease with a term of
31 months to a related party, Greenpro LF Limited, which is owned by Mr. Yi-Hsiu Lin, the Company’s Chief Executive Officer
and a member of its board of directors (“Mr. Lin”), and Mr. Chong Kuang Lee.
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.
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:
|
|
Expected useful life
|
|
Furniture and fixtures
|
|
|
3
|
|
Office equipment
|
|
|
3
|
|
Leasehold improvement
|
|
|
3
|
|
Impairment
of Long-Lived Assets
The
Company reviews the carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate that
the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If the assets
are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. No impairment has been recorded by the Company for the nine and three months ended May 31,
2020 and 2019.
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.
The
Company recorded a liability for an uncertain income tax position, tax penalties and any imputed interest thereon of $30,250 and
$0 at May 31, 2020 and August 31, 2019, respectively, included in accrued payables and accrued liabilities due to the potential
of incurring a tax penalty for late filing of its tax returns with the Internal Revenue Service and, if recognized, such penalty
will affect the Company’s effective tax rate.
The
Company conducts business in Hong Kong and is subject to tax in the jurisdiction of Hong Kong. As a result of its business activities,
the Company will file tax returns that are subject to examination by the Hong Kong tax authority.
Net
Income (Loss) Per Share
The
Company calculates net income (loss) per share in accordance with ASC Topic 260, “Earnings per Share.” Basic
income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares of common stock
outstanding during the period. Diluted income per share is computed similar to basic income (loss) per share except that the denominator
is increased to include the number of additional shares of common stock that would have been outstanding if the potential common
stock equivalents had been issued and if the additional shares of common stock were dilutive. The following table presents a reconciliation
of basic and diluted net income (loss) per share:
|
|
Nine Months Ended May 31,
|
|
|
Three Months Ended May 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(3,683,144
|
)
|
|
$
|
(876,042
|
)
|
|
$
|
(1,191,404
|
)
|
|
$
|
(330,950
|
)
|
Weighted average number of shares of common stock outstanding - Basic and diluted (Note)
|
|
|
113,700,043
|
|
|
|
104,778,733
|
|
|
|
113,824,027
|
|
|
|
104,778,733
|
|
Net loss per share - Basic and diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.003
|
)
|
Note: Including
700,035 shares to be issued to investors (note 11).
As
of May 31, 2020, the Company’s convertible notes payable were excluded from the diluted loss per share calculation as they
were anti-dilutive.
Stock-based
compensation
Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment topic of ASC Topic 718 (“ASC 718”),
which requires recognition in the financial statements of the cost of employee and director services received in exchange for
an award of equity instruments over the vesting period or immediately if fully vested and non-forfeitable. The Financial Accounting
Standards Board (“FASB”) also requires measurement of the cost of employee and director services received in exchange
for an award based on the grant-date fair value of the award.
Additionally,
ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, permits the election of an accounting policy for forfeitures
of share-based payment awards, either to recognize forfeitures as they occur or estimate forfeitures over the vesting period of
the award. The Company has elected to recognize forfeitures as they occur.
In
June 2018, the FASB issued 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. ASU 2018-07 is effective for annual periods beginning
after December 15, 2018, including interim periods within those annual periods. The Company adopted ASU 2018-07 on September 1,
2019 and there was no cumulative effect of adoption.
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$”). The Company’s subsidiaries in Seychelles
and Hong Kong maintain their books and records in US$ and Hong Kong Dollars (“HK$”), respectively. HK$ is the functional
currency and the primary currency of the economic environment in which the Company operates.
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.
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.
Given
the Company’s shares are thinly traded, the conversion features of the convertible promissory notes issued in February 2020
did not qualify as embedded derivative instruments and were not bifurcated from the host convertible notes payable. Accordingly,
these instruments have not been classified as derivative liabilities in the accompanying consolidated balance sheet.
Fair
Value of Financial Instruments:
The
carrying value of the Company’s financial instruments, such as cash and cash equivalents, deposits, notes receivable, accounts
payable and accrued liabilities, balances due to a director, bonds payable and notes payable approximate at their fair values
because of the short-term nature of these financial instruments or the rate of interest of these instruments approximate the market
rate of interest.
The
Company also follows the guidance of the ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”),
with respect to financial assets and liabilities that are measured at fair value. ASC 820 establishes a three-tier fair value
hierarchy that prioritizes the inputs used in measuring fair value as follows:
Level
1: Observable inputs such as quoted prices in active markets;
Level
2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level
3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The
Company did not have any liabilities carried at fair value measured on a recurring basis as of May 31, 2020 and August 31, 2019.
Leasing
Under
ASC Topic 842, “Leases”, the Company determines if an arrangement is a lease at inception. Operating lease right-of-use
(“ROU”) assets and lease liabilities are recognized at the commencement date, based on the present value of the remaining
lease payments, and discounted using the discount rate for the lease at the commencement date. The ROU assets represent the Company’s
right to control the use of an identified asset for the lease term and the 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. The ROU assets also include any lease payments made prior to the commencement of the lease and is recorded
net of any lease incentives received. 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
Company’s only lease meets the definition of a short-term lease because the initial lease term is 12 months or less. Consequently,
the Company does not recognize the ROU asset and the lease liability arising from this lease.
Recent
Accounting Pronouncements
In
February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” and issued certain transitional guidance and
subsequent amendments between January 2018 and March 2019 within ASU No. 2018-01, ASU No. 2018-10, ASU No. 2018-11, ASU No. 2018-20
and ASU No. 2019-01 (collectively, including ASU No. 2016-02, “ASC 842”), which amends ASC Topic 840, the existing
accounting standards for lease accounting. ASC 842 generally requires lessees to recognize operating and financing lease liabilities
and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing
and uncertainty of cash flows arising from leasing arrangements. We adopted ASC 842 on September 1, 2019 using the modified retrospective
transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative
periods. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. The adoption
of ASC 842 did not have a material impact on net assets and the consolidated statement of comprehensive income.
In
June 2018, the FASB issued ASU 2018-07, which expands the scope of ASC 718 to include share-based payment transactions for acquiring
goods and services from non-employees. The new standard became effective for the Company on September 1, 2019. The adoption of
ASU 2018-07 did not have a material impact on the Company’s condensed consolidated financial statements.
Reclassification
Certain
prior year amounts have been reclassified to conform to the current year presentation. The reclassifications have no effect on
the accompanying consolidated financial statements.
3.
PLANT AND EQUIPMENT, NET
Plant
and equipment as of May 31, 2020 and August 31, 2019 are summarized below:
|
|
As of
May 31, 2020
|
|
|
As of
August 31, 2019
|
|
Furniture and fixtures
|
|
$
|
3,912
|
|
|
$
|
3,912
|
|
Office equipment
|
|
|
8,049
|
|
|
|
7,678
|
|
Leasehold improvement
|
|
|
16,178
|
|
|
|
16,178
|
|
Total
|
|
|
28,139
|
|
|
|
27,768
|
|
Less: Accumulated depreciation
|
|
|
(22,492
|
)
|
|
|
(15,489
|
)
|
Plant and Equipment, net
|
|
$
|
5,647
|
|
|
$
|
12,279
|
|
Depreciation
expenses, classified as operating expenses, were $7,003 and $6,352 for the nine months ended May 31, 2020 and 2019, respectively;
and $2,345 and $2,117 for the three months ended May 31, 2020 and 2019, respectively.
4.
RELATED PARTY TRANSACTIONS
|
|
Nine Months Ended May 31,
|
|
|
Three Months Ended May 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees - Greenpro Financial Consulting Limited (a)
|
|
$
|
18,503
|
|
|
$
|
8,800
|
|
|
$
|
3,250
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Rental income from Greenpro LF Limited (b)
|
|
|
-
|
|
|
|
25,560
|
|
|
|
-
|
|
|
|
2,853
|
|
(a)
|
The
Company incurred professional fees of $18,503 and $8,800 for services provided by Greenpro Financial Consulting Limited for
the nine months ended May 31, 2020 and 2019, respectively; and $3,250 and $0 for the three months ended May 31, 2020 and 2019,
respectively. The fees are due for payment to Greenpro Financial Consulting Limited upon receipt of an invoice.
|
|
|
|
The
directors of Greenpro Financial Consulting Limited (Mr. Chong Kuang Lee and Mr. Che Chan Loke) are the directors of the investment
managers of Greenpro Asia Strategic SPC. As of May 31, 2020, Greenpro Asia Strategic SPC is the holder of approximately 4.40%
of the Company’s issued and outstanding common stock.
|
|
|
(b)
|
The
Company sublet its commercial office in Taipei to Greenpro LF Limited under a non-cancelable operating lease at a monthly
rate of HK$22,000 ($2,821) until October 31, 2019, with a term of 31 months. Beginning November 1, 2019, the monthly rate
would have adjusted to HK$22,900 ($2,936); however, the subletting arrangement was early terminated on February 28, 2019.
Mr. Lin is a director of Greenpro LF Limited.
|
|
|
|
Greenpro
LF Limited was also obligated to pay the Company HK$230,000 ($29,487) for leasehold improvements. The Company received $0
and $25,560 in rental income from Greenpro LF Limited for the nine months ended May 31, 2020 and 2019, respectively; and $0
and $2,853 for the three months ended May 31, 2020 and 2019, respectively. The rental income is recorded under other income.
|
|
|
(c)
|
The
Company contemplated an investment of HK$800,000 ($102,564) in Leader Financial Asset Management Limited, a Hong Kong corporation,
which was accounted for under the cost method of accounting. The Company’s directors, Mr. Lin and Mr. Shui Fung Cheng,
are directors of Leader Financial Asset Management Limited.
|
|
|
|
The
Company performed an impairment test on the investment and expected that it would not generate revenues in the near future.
The impairment loss was $102,564 and $0 for the nine months and three months ended May 31, 2019, respectively. The Company
did not proceed with the investment and HK$800,000 ($102,564) was reflected as being refunded to the Company during the year
ended August 31, 2019.
|
5.
PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
|
|
As
of
May 31, 2020
|
|
|
As
of
August 31, 2019
|
|
Rental and management fee deposits
|
|
$
|
34,272
|
|
|
$
|
44,076
|
|
Prepaid share-based compensation to directors (Note 11)
|
|
|
500,000
|
|
|
|
-
|
|
Prepaid share-based compensation to consultants (Note 11)
|
|
|
562,500
|
|
|
|
-
|
|
Other prepaid expenses
|
|
|
5,728
|
|
|
|
135
|
|
Interest receivables (Note 6)
|
|
|
96,917
|
|
|
|
11,581
|
|
|
|
$
|
1,199,417
|
|
|
$
|
55,792
|
|
6.
NOTES RECEIVABLE
On
February 13, 2019, the Company entered into a loan agreement with a third party, Kurrency Technology Holding Limited. (“Kurrency”)
and loaned Kurrency a total of $50,000. The loan was unsecured and bears interest at a rate of 8% per annum. Kurrency agreed to
repay the loan principal in five equal installments commencing on December 15, 2019. Kurrency paid off the loan on March 26, 2020.
As of May 31, 2020 and August 31, 2019, the outstanding balance on the note was $0 and $50,000, respectively. Interest of $0 and
$2,181 was accrued as of May 31, 2020 and August 31, 2019, respectively.
In
April 2019, the Company entered into multiple loan agreements with LOC (Notes 2 and 11) and loaned LOC a total amount of $1,458,727
and $582,521 as of May 31, 2020 and August 31, 2019, respectively. The loans are secured by the personal guarantees of some of
LOC’s stockholders, bear interest at a rate of 8% per annum, and are due on various dates from April 12, 2020 through May
27, 2021. Upon the expiration of these loans, the Company has agreed to extend the terms of the loans for one year. Interest of
$63,494 and $6,564 was accrued as of May 31, 2020 and August 31, 2019, respectively.
In May 2019, the Company entered into
multiple short-term loan agreements with Beijing Datacom Cloud Mediatechnology Co., Ltd. (“Beijing Datacom”), a
company in Beijing, China, and loaned Beijing Datacom a total amount of $704,168 and $192,337 as of May 31, 2020 and
August 31, 2019, respectively. The loans are secured by the personal guarantees of some of that company’s stockholders,
bear interest at a rate of 8% per annum, and are due on various dates from May 14, 2020 through May 8, 2021. Upon the expiration
of these loans, the Company has agreed to extend the terms of the loans for one year. Interest of $33,423 and $2,836 was accrued
as of May 31, 2020 and August 31, 2019, respectively.
The
Company made the loans to LOC and Beijing Datacom as part of the Company’s plans to expand its business in software
technology.
7.
ACCRUED EXPENSES AND OTHER PAYABLES
|
|
As of
May 31, 2020
|
|
|
As
of
August 31,2019
|
|
Accrued interests (Note 9 and 10)
|
|
$
|
20,238
|
|
|
$
|
2,794
|
|
Accrued expenses-others
|
|
|
64,020
|
|
|
|
20,294
|
|
Unearned income
|
|
|
3,889
|
|
|
|
8,889
|
|
Other payables
|
|
|
11,404
|
|
|
|
11,673
|
|
|
|
$
|
99,551
|
|
|
$
|
43,650
|
|
The
Company signed an agreement with a third party whereby it authorized the third party to use its investment platform and related
applications, for a period until December 31, 2020, for an upfront service fee. An additional fee is charged upon the third party’s
sale of products on the Company’s mobile application. Unearned income on this contract was $3,889 and $8,889 as of May 31,
2020 and August 31, 2019, respectively.
8.
AMOUNT DUE TO DIRECTOR
The
outstanding amounts of $1,320,414 and $262,159 as of May 31, 2020 and August 31, 2019, respectively, represent an advance from
Mr. Lin. It is unsecured and interest-free with no fixed payment term.
9.
BONDS PAYABLE
The
Company entered into a Bond Purchase Agreement with an individual third party on August 14, 2019, pursuant to which the Company
issued and sold to the purchaser a bond at an aggregate purchase price of $600,000. The bond will mature three years from August
14, 2019. Interest on the bond accrues at rate of 10% per annum and is payable on a semi-annual basis. The Company may exercise
its right to repay this bond at any time on or before two years from the maturity date by wiring 100% of all outstanding principal
and interest to the purchaser. Interest of $17,935 and $2,794 was accrued as of May 31, 2020 and August 31, 2019, respectively.
10.
CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES
Convertible
notes payable consist of the following:
|
|
As
of
May 31, 2020
|
|
|
As
of
August 31, 2019
|
|
Convertible
note payable to a shareholder, unsecured, 6% interest, due February 24, 2022
|
|
$
|
110,000
|
|
|
$
|
-
|
|
Convertible
note payable to a shareholder, unsecured, 6% interest, due February 27, 2022
|
|
|
20,000
|
|
|
|
-
|
|
Convertible
note payable to a shareholder, unsecured, 6% interest, due March 18, 2022
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable
|
|
$
|
230,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Less:
current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes payable, net – Long-term
|
|
$
|
230,000
|
|
|
$
|
-
|
|
On
February 24, 2020, the Company issued a convertible promissory note in the principal amount of $110,000, which accrues interest
at the rate of 6% per annum, to a shareholder – Teh-Ling Chen. The note is due on February 24, 2022 and unsecured.
On
February 27, 2020, the Company issued a convertible promissory note in the principal amount of $20,000, which accrues interest
at the rate of 6% per annum, to a shareholder – Li-Ching Yang. The note is due on February 27, 2022 and unsecured.
On
March 18, 2020, the Company issued a convertible promissory note in the principal amount of $100,000, which accrues interest at
the rate of 6% per annum, to a shareholder – Jui-Chin Chen. The note is due on March 18, 2022 and unsecured.
For
each of the promissory notes, the Company is entitled to a one-year extension. The outstanding principal amounts of the notes
are convertible at any time at the option of the holders into common stock at a conversion price of either $1 per share if converted
within one year or $1.5 per share if converted after one year. Each of the lenders may convert part of the principal outstanding
in increments of $10,000 or multiples of $10,000 at any time. Accrued interest, if any, will be forfeited on any principal amount
being converted. Interest of $2,303 and $0 was accrued as of May 31, 2020 and August 31, 2019, respectively.
11.
COMMON STOCK
On
September 1, 2018, the Company engaged LOC to develop a mobile application in four stages for total consideration of TWD20,000,000
($651,466), payable in the form of shares of the Company’s restricted common stock. As of May 31, 2020, the first and second
stages of development for the basic functions of the mobile application have been completed.
During
the nine months ended May 31, 2020 and 2019, the Company issued nil and 908,678 shares of restricted common stock, respectively,
and nil and 518,303 shares for the three months ended May 31, 2020 and 2019, respectively, for the work completed during the respective
periods. The Company has issued an aggregate total of 908,678 shares of restricted common stock at a price per share of $0.50
for the work completed up to May 31, 2020 (Note 2).
On
September 1, 2019, the Company entered into an employment agreement with Yi-Hsiu Lin to serve as the Chief Executive Officer of
the Company for a two-year term. Pursuant to the agreement, Mr. Lin will be compensated at an annual rate of $50,000 per year
(the “Base Compensation”), prorated for any partial year, payable in cash or with 2,500,000 shares of restricted common
stock, which would vest as of September 16, 2019. In addition, Mr. Lin may be entitled to bonus compensation of up to three times
the Base Compensation based on his achievement of appropriate performance criteria to be determined by the board of directors
or a committee thereof. The fair value of the shares of restricted common stock was $1,250,000, which was calculated based on
a price per share of $0.50 and amortized over the service term. During the nine months ended May 31, 2020 and 2019, the Company
amortized $937,500 and $0, respectively and amortized $312,500 and $0 for the three months ended May 31, 2020 and 2019, respectively,
as remuneration. Prepaid expenses were $312,500 as of May 31, 2020 (Note 5).
On
September 1, 2019, the Company issued a director offer letter to Shui Fung Cheng, pursuant to which Mr. Cheng agreed to serve
as a director of the Company for a one-year term. For his service as a director, Mr. Cheng will receive an annual compensation,
prorated for any partial year, in the form of $30,000 in cash or 1,500,000 shares of restricted common stock. The offer letter
provided that compensation, either in cash or shares of restricted common stock, shall be paid or granted immediately on September
1, 2019. The fair value of the shares of restricted common stock was $750,000, which was calculated based on a price per share
of $0.50 and amortized over the service term. During the nine months ended May 31, 2020 and 2019, the Company amortized $562,500
and $0, respectively and amortized $187,500 and $0 for the three months ended May 31, 2020 and 2019, respectively, as remuneration.
Prepaid expenses were $187,500 as of May 31, 2020 (Note 5). The shares were granted on December 11, 2019.
On
September 1, 2019, the Company entered into a consulting agreement with a consultant to provide business development services
to the Company for a one-year term. Pursuant to the agreement, the Company agreed to pay the consultant a fee of $40,000 in the
form of 2,000,000 shares of restricted common stock, which vested on September 15, 2019, prorated for any partial year. The fair
value of the shares of restricted common stock was $1,000,000, which was calculated based on a price per share of $0.50 and amortized
over the service term. During the nine months ended May 31, 2020 and 2019, the Company amortized $750,000 and $0, respectively
and amortized $250,000 and $0 for the three months ended May 31, 2020 and 2019, respectively, as consulting expenses under this
agreement. Prepaid expenses were $250,000 as of May 31, 2020 (Note 5).
On
September 1, 2019, the Company entered into a consulting agreement with a consultant to provide business advisory services to
the Company for a one-year term. Pursuant to the agreement, the Company agreed to pay the consultant a fee of $50,000 in the form
of 2,500,000 shares of restricted common stock, which vested on September 15, 2019, prorated for any partial year. The fair value
of the shares of restricted common stock was $1,250,000, which was calculated based on a price per share of $0.50 and amortized
over the service term. During the nine months ended May 31, 2020 and 2019, the Company amortized $937,500 and $0, respectively
and amortized $312,500 and $0 for the three months ended May 31, 2020 and 2019, respectively, as consulting expenses under this
agreement. Prepaid expenses were $312,500 as of May 31, 2020 (Note 5).
From May to July 2020, the Company entered
into securities purchase agreement with several accredited investors whereby the investors purchased a total of 3,550,035
shares of the Company’s common stock at $0.40 per share. The Company received aggregate gross proceeds of $1,420,014. Pursuant
to the terms of the securities purchase agreements, the investors have piggyback registration rights with respect to the shares.
The Company intends to issue the shares by the end of July 2020.
12.
COMMITMENTS AND CONTINGENCIES
During
the period ended May 31, 2020, the Company entered into an agreement with independent third parties to lease office premises in
Shenzhen and Hong Kong on a monthly basis for the operations of the Company. The rental expense for the nine months ended May
31, 2020 and 2019 were $99,917and $98,356, respectively and $36,352 and $40,457 for the three months ended May 31, 2020 and 2019,
respectively.
The
following table lists the future minimal payments to be paid by the Company under a non-cancellable operating lease for office
space in Hong Kong with an initial term of one-year as of May 31, 2020:
Year ending May 31,
|
|
|
|
|
|
2021
|
|
|
$
|
-
|
|
2022
|
|
|
|
-
|
|
2023
|
|
|
|
-
|
|
2024
|
|
|
|
-
|
|
13.
SUBSEQUENT EVENTS
(a)
|
Since
the beginning of January 2020 and through the date of this report, the entire global economy has been substantially impacted
by the coronavirus pandemic which began in China and has spread to most other parts of the world. The range of possible impacts
on the Company’s business from the coronavirus pandemic could include, but would not necessarily be limited to, one
or more of the following factors:
|
|
-
|
A
negative impact due to a contraction in the demand for the Company’s services
|
|
-
|
A
negative impact due to a contraction in the capital markets required to support the Company’s new business strategy
|
|
-
|
A
negative impact on the availability of key personnel necessary to conduct the Company’s business activities
|
|
-
|
A
negative impact on the business and operations of third-party service providers
who perform critical services for the Company
|
(b)
|
In
June 2020, the Company entered into short-term loan agreements with LOC and a company in Beijing, whereby the Company provided
additional loans of $226,000 and $43,000 respectively. The loans are secured by the personal guarantees of some of the stockholders,
bear interest at a rate of 8% per annum, and are due in June 2021.
|
|
|
(c)
|
On
June 1, 2020, the Company and LOC entered into the Supplement of FinMaster Mobile
Application Platform Agreement, wherein LOC agreed to add new functionality to the
FinMaster mobile application for total consideration of $600,000, payable either in cash
or in the form of shares of the Company’s common stock. In addition, the
Company agreed to pay LOC $200,000 for LOC’s intellectual property rights
to the mobile application being developed by LOC under the agreement dated September
1, 2018 (Note 2).
|
|
|
(d)
|
On
June 30, 2020, the Company entered into a stock forfeiture letter (the “Stock Forfeiture Letter”) with First Leader
Capital Ltd., a significant stockholder of the Company and an entity solely owned and controlled by Yi-Hsiu Lin, the Company’s
Chief Executive Officer and a member of the Company’s board of directors. Pursuant to the Stock Forfeiture Letter, on
June 30, 2020, First Leader Capital Ltd. forfeited and surrendered 5,500,000 shares (the “Surrendered Shares”)
of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and the Surrendered Shares
were automatically cancelled and retired (the “Stock Cancellation”). First Leader Capital Ltd. agreed to forfeit
and cancel the Surrendered Shares in exchange for the benefit from reducing the Company’s outstanding Common Stock to
be more in line with what management deems to be market expectations based on the Company’s current valuation.
|
|
|
(e)
|
Also
on June 30, 2020, the Company’s board of directors agreed to grant a new employee of JFB Internet Service Limited, a
wholly owned subsidiary of the Company (i) 5,000,000 shares of Common Stock in connection with such employee’s employment
(the “Inducement Shares”) and (ii) 5,000,000 shares of Common Stock upon the achievement of each of two milestones
set forth in such employee’s offer letter relating to the FinMaster mobile application. In addition, on that same day,
the Company’s board of directors granted an aggregate of 4,500,000 shares of Common Stock to a consultant and a service
provider in exchange for services rendered (the “Consultant Shares”).
|