Leader Capital Holdings Corp. - Quarter Report: 2018 November (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For The Quarterly Period Ended November 30, 2018

or

For the transition period from ____________ to ____________

Commission File Number 333-221548

LEADER CAPITAL HOLDINGS CORP

(Exact name of registrant issuer as specified in its charter)

Rm 2201, Malaysia Building, 50 Gloucester Road,

Wanchai, Hong Kong

(Address of principal executive offices, including zip code)

Registrant’s phone number, including area code +886-4-23138178

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES [X] NO [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit and post such files).

YES [  ] NO [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes [  ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1. Financial statements

LEADER CAPITAL HOLDINGS CORP

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to the condensed consolidated financial statements.

LEADER CAPITAL HOLDINGS CORP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

See accompanying notes to the condensed consolidated financial statements.

LEADER CAPITAL HOLDINGS CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to the condensed consolidated financial statements.

LEADER CAPITAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

For the THREE MONTH ended November 30, 2018 (unaudited) and August 31, 2018 (audited)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

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 engages in the provision of investment platform services with the use of a mobile application.

We are a development-stage company with a fiscal year end of August 31. At this moment, we operate exclusively through our wholly owned subsidiaries Leader Financial Group Limited and JFB Internet Service Limited and share the same business plan of our subsidiaries which is to provide services through a mobile application 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

The consolidated financial statements for Leader Capital Holdings Corp. and its subsidiaries are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and include the accounts of Leader Capital Holdings Corp. and its wholly owned subsidiaries, Leader Financial Group Limited and JFB Internet Service Limited. Intercompany accounts and transactions have been eliminated in consolidation. The Company has adopted August 31 as its fiscal year end.

Going Concern

The accompanying 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 reflected in the accompanying financial statements, for the period ended November 30, 2018, the Company incurred a net loss of $399,313 and used cash in operating activities of $87,872.

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. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company expects to finance its operations primarily through cash flow from revenue and continuing financial support from a shareholder. In the event that we require additional funding to finance the growth of the Company’s current and expected future operations as well as to achieve our strategic objectives, the 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.

Use of estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with US GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities in the balance sheets, and the reported revenue and expenses during the periods reported. Actual results may differ from these estimates.

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 expense 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.

We capitalize 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. Costs capitalized for developing such software applications were not material for the periods presented.

Revenue recognition

Rental income

Revenue from rental of leasehold land and buildings are 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 leases its commercial office in Taipei under non-cancelable operating leases with terms of 31 months to a related party which is Greenpro LF Limited, a Seychelles company, owned by Mr. Lin Yi-Hsiu, the director of the Company and Mr. Lee Chong Kuang.

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:

Intangible asset

All of our intangible assets are subject to amortization and are amortized using the straight-line method over their estimated period of benefit which is 5 years.

The Company follows ASC Topic 350 in accounting for intangible assets, which requires impairment losses to be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by the assets are less than the assets’ carrying amounts. There was no impairment losses recorded on intangible assets for the period ended November 30, 2018.

Income taxes

Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC Topic 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

The Company conducts major businesses in Hong Kong. The Company is subject to tax in Hong Kong jurisdictions. 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 common shares 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 common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.

Foreign currencies translation

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of operations.

The reporting currency of the Company is United States Dollars (“US$”). The Company’s subsidiary in Seychelles and Hong Kong maintains its books and record in United States Dollars (“US$”) and Hong Kong Dollars (“HK$”) respectively, and Hong Kong Dollars is functional currency as being the primary currency of the economic environment in which the entity operates.

In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not the US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statement of retained earnings.

Translation of amounts from HK$ into US$1 has been made at the following exchange rates for the respective periods:

Related parties

Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

Fair value of financial instruments:

The carrying value of the Company’s financial instruments: cash and cash equivalents, prepayment, deposits, accounts payable and accrued liabilities and amount due to a director approximate at their fair values because of the short-term nature of these financial instruments.

The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08) which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The new standard further requires new disclosures about contracts with customers, including the significant judgments the company has made when applying the guidance.

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

3. OTHER INVESTMENT

At November 30, 2018, the Company had an investment in Leader Financial Asset Management Limited of $102,564, which is 6.25% of the equity interest of Leader Financial Asset Management Limited and is accounted for under the cost method of accounting. Leader Financial Asset Management Limited is a company incorporated in Hong Kong and is 59.38% and 31.25% owned by the Company’s director Lin Yi-Hsiu and Cheng Shui Fung respectively. The Company performed an impairment test on the investment and expect that will not to generate revenues in the near future. The impairment losses of other investment were $102,564 for the period ended November 30, 2018.

4. PLANT AND EQUIPMENT, NET

Plant and equipment as of November 30, 2018 are summarized below:

Depreciation expense, classified as operating expenses, was $2,091 for the three months ended November 30, 2018.

5. RELATED PARTY TRANSACTIONS

Related party A is Greenpro Financial Consulting Limited. Directors of related party A are the investment managers of Greenpro Asia Strategic SPC-Greenpro Asia Strategic SP, Mr. Lee Chong Kuang and Mr. Loke Che Chan. This fee will be due to related party A upon receipt of an invoice. Related party A provides professional services to the company.

The Company incurred professional fees $0 and $192,364 for the three months ended November 30, 2018 and for the year ended August 31, 2018 respectively.

Related Party B is Greenpro LF Limited. Directors of related party B are Mr. Lin Yi-Hsiu, the director of the Company and Mr. Lee Chong Kuang. The Company leases its commercial office in Taipei under non-cancelable operating leases with terms of 31months.

The Company received $11,356 and $18,923 rental income from related party B for the three months period ended November 30, 2018 and for the year ended August 31, 2018 respectively.

6. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

As of November 30, 2018, the balance $76,870 represented an outstanding deposit and other receivable which included rental deposit and management fee deposit. The prepaid expense is the prepaid consulting fee and transfer agent fee.

7. ACCRUED EXPENSES AND OTHER PAYABLES

As of November 30, 2018, the balance $66,020 represented an outstanding payable which included accrued expenses and unearned income. The unearned income is the upfront fee $27,000 which allocated to the whole contract term. The Company signed a service agreement with a third party which acts as agent to promote and sale the investment platform. The third party needs to pay an upfront fee and shares 30% of its profit to the Company. The accrued expenses is the accrued salary expenses.

8. AMOUNT DUE FROM DIRECTOR

As of November 30, 2018, the balance $842 represented an outstanding loan from the Company’s director, Lin Yi-Hsiu. It is unsecured, interest-free with no fixed payment term, for loan purpose.

9. COMMON STOCK

On March 22, 2017, the company issued 100,000 shares of restricted common stock, each with a par value of $0.0001 per share, to Mr. Lin for initial working capital of $10.

On June 16, 2017, the company issued 83,000,000, 5,000,000, 7,000,000 and 5,000,000 shares of restricted common stock to First Leader Capital Ltd., CPN Investment Ltd., Cheng Shui Fung and Greenpro Asia Strategic SPC respectively, each with par value of $0.0001 per share, for additional working capital of $10,000.

In July 2017 the Company sold shares to 22 shareholders, all of which reside in China, Hong Kong and Taiwan. A total of 1,474,995 shares of restricted common stock were sold at a price of $0.20 per share. The total proceeds to the Company amounted to a total of $294,999. The proceeds will be used as working capital.

In August 2017 the Company sold shares to 8 shareholders, all of which reside in China, Hong Kong and Taiwan. A total of 700,400 shares of restricted common stock were sold at a price of $0.20 per share. The proceeds will be used as working capital.

In May 2018, the Company has issued 2,000,000 shares of common stock in the initial public offering at a price of $0.50 per share and received $1,000,000.

On September 1, 2018, the Company appointed a Taiwan company to develop a mobile application which costs TWD20,000,000 (~$650,618) and will pay in four installments. The company will pay 30% upon signed the agreement, 40% after the base set up of the mobile application, 20% after completed and tested all set up of the mobile application and 10% after 6 month’s stable operation. As consideration thereof, the Company issued 390,375 restricted shares of our common stock which was $0.5 per share as the first payment. The share price is based on the latest share price to third party.

As of November 30, 2018, there are 104,665,770 shares of common stock issued and outstanding. There are no shares of preferred stock issued and outstanding.

10. COMMITMENTS AND CONTINGENCIES

During the period ended November 30, 2018, the Company entered into an agreement with an independent third party to lease office premises in Taiwan on a monthly basis, for the operations of the Company. The rental expense for the period ended November 30, 2018 was $35,088. The Company plans to use these three offices for business development in different locations.

As of November 30, 2018, the Company has the aggregate minimal rent payments due in the next four years as follow.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended June 30, 2017 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.

The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations. “These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form S-1 Amendment No.6, dated April 18, 2016, in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this transition report on Form10-Q. The following should also be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto that appear elsewhere in this report.

Company Overview

Leader Capital Holdings Corp. is a company that operates through its wholly owned subsidiary, Leader Financial Group Limited, a Seychelles Company. It should be noted that our wholly owned subsidiary, Leader Financial Group Limited owns 100% of JFB Internet Service Limited, a Hong Kong Company.

At this time, we operate exclusively through our wholly owned subsidiary and share the same business plan of our subsidiary which is to function as the service provider of an investment platform. JFB Internet Service Limited owns the JFB mobile application. JFB is a platform that connects investor with other financial service providers in an effort to sharpen operational efficiency and respond to customer demands for more innovative services. It is a ready-made application to meet generic needs of financial service providers, especially for trust companies and insurance companies. Some degree of customization can be added to brand the application to better suit the client’s requirements. The JFB application has completed development, but we may evaluate the possibility of improving the application as time goes on. Additionally, it should be noted that the Company has not yet generated any revenue, and we currently operate at a net loss.

Liquidity and Capital Resources

Our cash and cash equivalents balance is $650,124 as of November 30, 2018. Our cash balance is sufficient to fund our operations for a period of time.

Cash Used in Operating Activities

Net cash used in operating activities was $87,872 for the three months ended November 30, 2018. 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 was $102,564 for the three months ended November 30, 2018. The cash used in investing activities for the three months ended November 30, 2018 was resulted from the acquisition of 6.25% shareholding of a financial asset management company in Hong Kong company which is 59.38% and 31.25% owned by the Company’s director Lin Yi-Hsiu and Cheng Shui Fung respectively and paid HK$800,000 (USD102,564) in cash.

Cash Provided by Financing Activities

Net cash provided by financing activities were $1,237 for the three months ended November 30, 2018. The cash provided by financing activities were the issuance of shares, repayment from employees and director.

In regards to all of the above transactions we claim an exemption from registration afforded by Section 4(a)(2) and/or Regulation S of the Securities Act of 1933, as amended (“Regulation S”) for the above sales of the stock since the sales of the stock were made to non-U.S. persons (as defined under Rule 902 section (k)(2)(i) of Regulation S), pursuant to offshore transactions, and no directed selling efforts were made in the United States by the issuer, a distributor, any of their respective affiliates, or any person acting on behalf of any of the foregoing.

Comparison for the three month ended November 30, 2018 and 2017

Revenue

We have not generated any revenue for the year ended November 30, 2018 and 2017.

General and administrative expenses

General and administrative expenses were $410,794 and $144,995 for the three months ended November 30, 2018 and 2017 respectively. These expenses are comprised of salary and wages expenses, impairment loss of investment and rent and rates of for the three months ended November 30, 2018.

Net loss

Our net loss was $399,313 and $144,995 for the three months ended November 30, 2018 and 2017 respectively. The net loss mainly derived from the general and administrative expenses incurred.

Off-balance Sheet Arrangements

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 as of November 30, 2018.

Contractual Obligations

As of November 30, 2018, the Company has no contractual obligations involved.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4 CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures:

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of November 30, 2018. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of November 30, 2018, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of November 30, 2018, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

Changes in Internal Control Over Financial Reporting:

There were no changes in our internal control over financial reporting during the quarter ending November 30, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We know of no materials, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

ITEM 6. Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.