May 17, 2022

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LEADER CAPITAL : Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

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, 2020 included in our
most recent annual report on Form 10-K/A. 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.

Use of the JFB platform is currently free; however, we have an agreement with a
third party whereby we have authorized the third party to use our investment
platform and related applications until December 31, 2020 for a fee. In the
future, the Company intends to generate additional revenue by developing a new,
more comprehensive mobile application, with similar functions as the JFB
platform, to offer to our clients for a fee.

The Company has been developing a new, more comprehensive FinMaster mobile
application (“FinMaster App”), to offer to our clients for a fee, which has been
made available for download as of December 2020. This FinMaster App offers
one-stop shopping for multi 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. 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.


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We have incurred significant operating losses. As of May 31, 2021 and August 31,
2020
, our accumulated deficits were $19,811,485 and $11,307,575, respectively.
We generated revenue of $78,696 and $5,000 for the nine months ended May 31,
2021
and 2020, respectively. We generated revenue of $23,444 and $1,667 for the
three months ended May 31, 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 May 31, 2021, we have suffered recurring losses from operations, and
recorded an accumulated deficit and a working capital deficit of $19,811,485 and
$393,267, 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.

Any outbreak of contagious diseases, including but not limited to COVID-19, Zika
virus, Ebola virus, avian or swine influenza or severe acute respiratory
syndrome, may disrupt our ability to adequately staff our business and may
generally disrupt our operations. The recent outbreak of COVID-19 epidemic in
China is spreading globally and expected to adversely affect the economic
conditions in Asia and throughout the world. The outbreak has slowed the
economic growth in China and other regions of the world where we and our
customers operate, which will negatively impact the global supply chain, market
and economies. We have significant operations in China, Taiwan and the Asia
Pacific
region, including supply chain and manufacturing facilities and sales
and marketing channels. If the pandemic continues, we may experience a decline
of sales activities and customer orders; reduction of operation and workforce at
our fabs; difficulties in international travels and communications; regulatory
restrictions; reduction of research and development activities; and other risks
resulting from the outbreak. Any of these factors may adversely affect our
business, financial conditions and results of operations. In addition, as a
result of the COVID-19 pandemic and ensuing government regulations implementing
stay-at-home orders and restrictions on travel and other activities, we have
experienced an increase in demand for manufacturing capacity in the
semiconductor industry in respond to increased demand for consumer electronic
products, which had a positive impact on our financial performance. However, we
cannot predict the impact of COVID-19 pandemic on the semiconductor industry in
the future, and any increase in such demand may not be sustainable and we may
experience a decline in our sales activities and customer orders.

In addition, if any of our employees is suspected of having contracted COVID-19
or any contagious disease, we may under certain circumstances be required to
quarantine such employees and the affected areas of our premises. Therefore, we
may 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.

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 our business, and adversely impact
our results of operations. We expect uncertainties around our key accounting
estimates to continue to evolve depending on the duration and degree of impact
associated with the COVID-19 pandemic. Our estimates may change as new events
occur and additional information emerges, and such changes are recognized or
disclosed in its consolidated financial statements.

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 nine months ended
                                                    May 31, 2021        May 31, 2020
Net cash used in operating activities              $    (2,873,554 )   $      (513,865 )
Net cash used in investing activities                      (63,081 )        (1,338,408 )
Net cash provided by financing activities                4,272,333           1,568,269
Cash and cash equivalents and restricted cash,
beginning of period                                        432,087             447,562
Effects of exchange rate changes on cash and
cash equivalents and restricted cash                      (218,623 )                 -
Cash and cash equivalents and restricted cash,
end of period                                      $     1,549,162     $       163,558




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Cash Used in Operating Activities

Net cash used in operating activities for the nine months ended May 31, 2021 and
2020 was $2,873,554 and $513,865, 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 nine months ended May 31, 2021 and
2020 was $63,081 and $1,338,408, respectively. The net cash used in investing
activities for the nine months ended May 31, 2021 was related to the acquisition
of plant and equipment and intangible assets. The net cash used in investing
activities for the nine months ended May 31, 2020 was related to the issuance
and repayment of notes receivable.

Cash Provided by Financing Activities

Net cash provided by financing activities for the nine months ended May 31, 2021
and 2020 was $4,272,333 and $1,568,269, respectively. The cash provided by
financing activities were related to the issuance of shares and convertible
notes, and advances from (to) shareholders and from a director.


Results of Operations


Comparison for the nine months ended May 31, 2021 and 2020


                                                       For the nine months ended
                                                    May 31, 2021      May 31, 2020
Revenue                                             $      78,696     $       5,000
Research and development expenses                        (456,428 )               -
Sales and marketing expenses                             (186,068 )               -
General and administrative expenses                    (7,779,743 )      (3,700,182 )
Loss from operations                                   (8,343,543 )      (3,695,182 )
Interest expenses                                         (51,000 )         (47,303 )
Loss on change in fair value of convertible notes        (129,288 )               -
Other income                                                3,813            89,591
Loss before income tax                                 (8,520,018 )      (3,652,894 )
Income tax benefit (expense)                               16,108           (30,250 )

Net loss                                            $  (8,503,910 )   $  (3,683,144 )




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 $78,696 and $5,000 for the nine months ended May 31,
2021
and 2020, respectively.

Research and Development Expenses

Research and development expenses for the nine months ended May 31, 2021
amounted to $456,428 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. We did not incur any R&D expenses for the
nine months ended May 31, 2020.


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Sales and Marketing Expenses


Sales and marketing expenses were $186,068 and $nil for the nine months ended
May 31, 2021 and 2020, respectively. It consists of the advertising costs
amounted to $155,618 and the redeemable point liability charges of $30,450 after
our acquisition of NPI in August 2020.

General and Administrative Expenses

General and administrative expenses were $7,779,743 and $3,700,182 for the nine
months ended May 31, 2021 and 2020, respectively. We recognized share-based
compensation to directors, employees and consultants of $5,409,296 and
$3,187,500 for the nine months ended May 31, 2021 and 2020, respectively.
Besides, we incurred more payroll costs and other administrative expenses after
our acquisition of NPI in August 2020.

Loss on change in fair value of convertible notes

We incurred a fair value loss of $129,288 and $nil on our convertible promissory
notes for the nine months ended May 31, 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 nine months ended May 31, 2021 amounted to $3,813 as
compared to $89,591 in the same period of prior year.


Net Loss


Our net loss was $8,503,910 and $3,683,144 for the nine months ended May 31,
2021
and 2020, respectively. The net loss was mainly derived from our general
and administrative expenses.

Comparison for the three months ended May 31, 2021 and 2020


                                                       For the three months ended
                                                     May 31, 2021      May 31, 2020
Revenue                                             $       23,444     $       1,667
Research and development expenses                         (151,863 )               -
Sales and marketing expenses                               (15,338 )               -
General and administrative expenses                     (2,301,816 )      (1,215,184 )
Loss from operations                                    (2,445,573 )      (1,213,517 )
Interest expenses                                          (18,597 )         (17,196 )
Gain on change in fair value of convertible notes          201,000                 -
Other (expense) income                                     (19,212 )          39,309
Loss before income tax                                  (2,282,382 )      (1,191,404 )
Income tax benefit                                           5,879                 -

Net loss                                            $   (2,276,503 )   $  (1,191,404 )




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 $23,444 and $1,667 for the three months ended May 31,
2021
and 2020, respectively.


35






Research and Development Expenses

Research and development expenses for the three months ended May 31, 2021
amounted to $151,863 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. We did not incur any R&D expenses for the
three months ended May 31, 2020


Sales and Marketing Expenses


Sales and marketing expenses were $15,338 and $nil for the three months ended
May 31, 2021 and 2020, respectively. It consists of the advertising costs
amounted to $11,790 and the redeemable point liability charges of $3,548 after
our acquisition of NPI in August 2020.

General and Administrative Expenses

General and administrative expenses were $2,301,816 and $1,215,184 for the three
months ended May 31, 2021 and 2020, respectively. We recognized share-based
compensation to directors, employees and consultants of $1,574,704 and
$1,062,500 for the three months ended May 31, 2021 and 2020, respectively.
Besides, we incurred more payroll costs and other administrative expenses in
2020 after our acquisition of NPI in August 2020.

Gain on change in fair value of convertible notes

We incurred a fair value gain of $201,000 and $nil on our convertible promissory
notes for the three months ended May 31, 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 (Expense) Income



Other (expense) income for the three months ended May 31, 2021 amounted to
$(19,212) as compared to $39,309 in the same quarter of prior year.


Net Loss


Our net loss was $2,276,503 and $1,191,404 for the three months ended May 31,
2021
and 2020, respectively. The net loss was mainly derived from our general
and administrative expenses.

Off-Balance Sheet Arrangements

As of May 31, 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.


Contractual Obligations


As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the
Company is not required to provide this information.

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