The following discussion and analysis of our financial condition and results of
operations should be read together with our unaudited financial statements and
related notes appearing elsewhere in this Form 10-Q and our audited financial
statements and related notes for the year ended August 31, 2021 included in our
most recent annual report on Form 10-K. In addition to historical information,
this discussion and analysis contains forward-looking statements that involve
risks, uncertainties and assumptions. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of
certain factors.
Company Overview
Leader Capital Holdings Corp. is an early stage technology company that conducts
its operations through its wholly owned subsidiaries, Leader Financial Group
Limited, a Seychelles corporation incorporated on March 6, 2017 ("LFGL"), and
JFB Internet Service Limited, a Hong Kong corporation incorporated on July 6,
2017 ("JFB").
Through LFGL, we act as the service provider for a mobile application investment
platform that is owned by JFB. The platform connects investors with financial
service providers in an effort to sharpen operational efficiency and seeks to
address customer demands for more innovative services. It is a ready-made
application created to meet the needs of financial service providers, especially
trust companies and insurance companies. The platform is customizable and each
financial institution can adjust the platform to better suit their client's
needs.
We had an agreement with a third party whereby we authorized the third party to
use our investment platform and related applications until December 31, 2020 for
a fee. We were in discussion with the third party and both parties decided to
terminate the agreement at maturity.
We developed a new, more comprehensive mobile application, the FinMaster App.
The FinMaster App intends to offer one-stop solution for multi-facet financial
services. Key services include real-time Taiwan stock market quotes, financial
industry information and news, social media activities, on-line live broadcast,
A.I. stock selection and other features. With more than 370,000 downloads of the
FinMaster App, we continue to collect data as well as user feedback to enhance
current APP features and fine tune R&D plans to optimize customer experience.
On August 17, 2020, the Company, through its wholly-owned subsidiary JFB,
acquired all of the issued and outstanding capital stock (the "Acquisition") of
Nice Products Inc., a company organized under the laws of the British Virgin
Islands and the Company's software ODM developer of the FinMaster APP ("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. The net purchase price for the acquisition was
$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.
As a result of the acquisition, the Company now owns, indirectly through JFB,
100% of NPI. NPI, through its wholly-owned subsidiaries, LOC Weibo Co., Ltd. and
Beijing DataComm Cloud Media Technology Co., Ltd., companies organized under the
laws of the Republic of China and the laws of the People's Republic of China,
respectively, engages primarily in the development of ecological-system
applications, integration of big data and promotion of OTT applications. As a
result of the acquisition, our FinMaster App was launched to the market in a
timely and efficient manner and clients on this open platform are served more
effectively and satisfactorily. Based on the successful development of our
FinMaster App, LOC and BJDC jointly accumulated in-depth knowledge of FinTech
App development, including the marketing expertise built up and the perfect
allocation of the Company's resources. We believe LCHD, through LOC and BJDC
will further conclude more customized App contracts to help the clients to
incubate the avant-garde Apps to expand their businesses efficiently and
effectively.
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We have incurred significant operating losses. As of November 30, 2021 and
August 31, 2021, our accumulated deficits were $25,119,954 and $23,001,067,
respectively. We generated revenue of $14,805 and $22,863 for the three months
ended November 30, 2021 and 2020, respectively. Our net losses were principally
attributed to general and administrative expenses.
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 November 30, 2021, we have suffered recurring losses from operations, and
recorded an accumulated deficit and a working capital deficit of $25,119,954 and
$2,873,919, respectively. These conditions raise substantial doubt about our
ability to continue as a going concern. The ability to continue as a going
concern is dependent upon our profit generating operations in the future and/or
obtaining the necessary financing to meet our obligations and repay our
liabilities arising from normal business operations when they become due.
We expect to finance our 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 we require additional
funding to finance the growth of our 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 us. Even if we are 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.
Our business continues to be impacted by the COVID-19 pandemic. Significant
COVID-19 related restrictions, including those in response to the outbreak of
the Delta variant in the second and third quarters and the Omicron variant in
the fourth quarter of calendar year 2021, have continued and in some instances,
have been significantly tightened, in markets in which we operate. Taiwan's
Central Epidemic Command Center ("CECC") confirms that the outbreak of the
latest wave of COVID-19 cases stemming from Taoyuan International Airport in the
first half of January 2022 already generated more than 124 domestic infection
cases and reported more than 804 imported cases. More Taiwanese are flying back
to Taiwan recently due to Chinese New Year started from February 1, 2022, which
triggered another wave of the outbreak in Taoyuan City, where Taoyuan
International Airport located. These new local cases in Taoyuan City include
local bank branch-related 17 cases and restaurant-related 23 cases, where the
bank abovementioned held a year-end dinner, but cases are still developing. CECC
urgently re-activated the online booking system for the COVID-19 booster shots
on Jan 18, 2022.
Border controls and travel restrictions, such as those imposed in Taiwan, Hong
Kong, and mainland China, have had and may continue to have an adverse effect on
our operations. The impact of the pandemic and the measures taken by the
relevant governments to contain the disease on the global economy, the economies
of the markets in which we operate, and the movement of people have adversely
affected, and we expect will continue to adversely affect, the roll out of our
business plans and results of operations throughout the fiscal year of 2022. If
any of our employees is suspected of having infected COVID-19, we may under
certain circumstances be required to quarantine such employees and the affected
areas of our premises, thus we have to temporarily suspend part of or all of our
operations. Furthermore, government actions to contain the outbreak may restrict
the level of economic activities in affected regions, including Taiwan, and
affect the willingness and ability of our employees and customers to travel,
which may also adversely affect our business and prospects. As a result, we
cannot assure you that any future outbreak of contagious diseases would not have
a material adverse effect on our financial condition and results of operations.
These unaudited condensed consolidated financial statements do not include any
adjustments to the recoverability and classification of recorded asset amounts
and classification of liabilities that might be necessary should we be unable to
continue as going concern.
Liquidity and Capital Resources
The following table sets forth a summary of our cash flows for the periods
indicated:
For the three months ended
November 30,
November 30, 2021 2020
Net cash used in operating activities $ (1,092,170 ) $ (766,843 )
Net cash used in investing activities (22,005 ) (59,632 )
Net cash provided by financing activities 641,740 932,561
Cash and cash equivalents and restricted cash,
beginning of period 787,154 432,087
Effects of exchange rate changes on cash and cash
equivalents and restricted cash 1,175 12,332
Cash and cash equivalents and restricted cash, end of
period $ 315,894 $ 550,505
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Cash Used in Operating Activities
Net cash used in operating activities for the three months ended November 30,
2021 and 2020 was $1,092,170 and $766,843, respectively. The cash used in
operating activities was mainly for payment of general and administrative
expenses.
Cash Used in Investing Activities
Net cash used in investing activities for the three months ended November 30,
2021 and 2020 was $22,005 and $59,632, respectively. The net cash used in
investing activities was related to the acquisition of plant and equipment and
intangible assets.
Cash Provided by Financing Activities
Net cash provided by financing activities for the three months ended November
30, 2021 and 2020 was $641,740 and $932,561, respectively. The cash provided by
financing activities were related to the issuance of shares and convertible
notes, and advances from (to) shareholders and a director.
Results of Operations
Comparison for the three months ended November 30, 2021 and 2020
For the three months ended
November 30,
November 30, 2021 2020
Revenue $ 14,805 $ 22,863
Research and development expenses (146,283 ) (146,971 )
Sales and marketing expenses (213,772 ) (109,702 )
General and administrative expenses (1,670,490 ) (2,953,167 )
Loss from operations (2,015,740 ) (3,186,977 )
Interest expenses (28,500 ) (15,446 )
Loss on change in fair value of convertible notes (104,500 ) (481,043 )
Other income 25,371 21,292
Loss before income tax (2,123,369 ) (3,662,174 )
Income tax benefit 4,482 5,114
Net loss $ (2,118,887 ) $ (3,657,060 )
Revenue
We signed an agreement with a third party whereby we authorized the third party
to use our investment platform and related applications, from January 1, 2018 to
December 31, 2020, for an upfront service fee. An additional fee is charged upon
the third party's sale of products on our mobile application. From September
2020, we generated additional revenue from a new, more comprehensive mobile
application, which we 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. We also provided software maintenance services.
We generated revenue of $14,805 and $22,863 for the three months ended November
30, 2021 and 2020, respectively. During the three months ended November 30,
2021, we, through the newly acquired subsidiary, NPI, earned revenue of $14,805,
compared to $21,196 for the three months ended November 30, 2020. Since some of
the custom-made APP projects have been completed, the revenue decreased. We look
forward to strengthening our APP development through media, marketing and
advertisement to raise the income.
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Research and Development Expenses
Research and development expenses for the three months ended November 30, 2021
and 2020 amounted to $146,283 and $146,971, respectively which primarily
represented the charges for R&D and consulting work performed by third parties
and salaries and benefits for those employees engaged in research, design and
development activities after our acquisition of NPI in August 2020.
Sales and Marketing Expenses
Sales and marketing expenses were $213,772 and $109,702 for the three months
ended November 30, 2021 and 2020, respectively. It consists of the advertising
costs and the redeemable point liability charges after our acquisition of NPI in
August 2020. To promote the FinMaster APP downloads, LOC allocated the
substantial funding to the marketing for the three months ended November 20,
2021, thus the sales and marketing expenses increased.
General and Administrative Expenses
General and administrative expenses were $1,670,490 and $2,953,167 for the three
months ended November 30, 2021 and 2020, respectively. We recognized share-based
compensation to directors, employees and consultants of $835,229 and $2,159,261
for the three months ended November 30, 2021 and 2020, respectively. Such
share-based compensation decreased by $1.3 million from the three months ended
November 30, 2020 to the same period in 2021.
Loss on change in fair value of convertible notes
We incurred a fair value loss of $104,500 and $481,043 on our convertible
promissory notes for the three months ended November 30, 2021 and 2020,
respectively. We elected to measure the convertible promissory notes in their
entirety at fair value with changes in fair value recognized as non-operating
income or loss at each balance sheet date.
Other Income
Other income for the three months ended November 30, 2021 amounted to $25,371 as
compared to $21,292 in the same quarter of prior year. Other income mainly
consists of the exchange difference, net.
Net Loss
Our net loss was $2,118,887 and $3,657,060 for the three months ended November
30, 2021 and 2020, respectively. The net loss was mainly derived from our
general and administrative expenses.
Off-Balance Sheet Arrangements
As of November 30, 2021, we have no significant off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in our financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to our stockholders.
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LEADER CAPITAL HOLDINGS CORP. 
