Leader Capital Holdings Corp. - Quarter Report: 2019 May (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For The Quarterly Period Ended May 31, 2019

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. 3, 9F., No.910, Sec. 2, Taiwan Blvd.,

Xitun Dist., Taichung City 407, Taiwan (R.O.C.)

(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 unaudited consolidated financial statements.

LEADER CAPITAL HOLDINGS CORP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

See accompanying notes to the condensed unaudited consolidated financial statements.

LEADER CAPITAL HOLDINGS CORP

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MAY 31, 2018 and 2019 AND FOR THE NINE MONTHS ENDED MAY 31, 2018 AND MAY 31, 2019

(UNAUDITED)

For the three months ended May 31, 2019

For the nine months ended May 31, 2019

For the three months ended May 31, 2018

For the nine months ended May 31, 2018

See accompanying notes to the unaudited condensed consolidated financial statements.

LEADER CAPITAL HOLDINGS CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

See accompanying notes to the condensed unaudited consolidated financial statements.

LEADER CAPITAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO unaudited FINANCIAL STATEMENTS

(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.

The summary of significant accounting policies presented below is designed to assist in understanding the Company’s unaudited financial statements. Such unaudited financial statements and accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects and have been consistently applied in preparing the accompanying unaudited financial statements.

Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) were omitted pursuant to such rules and regulations. The results for the nine months period ended May 31, 2019 are not necessarily indicative of the results to be expected for the year ending August 31, 2019.

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 nine months ended May 31, 2019, the Company incurred a net loss of $876,042 and used cash in operating activities of $309,511.

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. Our cash and cash equivalent balance is $151,289 and $839,323 as of May 31, 2019 and August 31,2018, respectively.

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, The Company has issued 390,375 restricted common shares at $0.50 per share and incurred total costs of $195,188 for the first development stage in the nine months ended May 31,2019. The Company expensed all $195,188 development costs in G&A expenses.

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. The Company has issued 518,303 restricted common shares at $0.50 per share and incurred total costs of $259,152 for the second development stage in the nine months period ended May 31, 2019. The second development stage is for basic set of the mobile application. The Company has expensed all $259,152 development costs for the second development stage in G&A expenses. As of the reporting date, the second development stage is still under process and thus the Company did not capitalize the cost of development.

Revenue recognition

The Company adopted Accounting Standards Codification (“ASC”) 606. ASC 606, Revenue from Contracts with Customers, establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The Company has assessed the impact of the guidance by performing the following five steps analysis:

The Company had net revenue of $0 for the nine months period ended May 31,2019 and 2018, respectively.

Other Income- Related Party

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 May 31, 2019.

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.

Loss per common 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. As of May 31, 2019, there are no outstanding dilutive securities. For nine months ended March 31, 2019, the Company had net loss per common share, basic and diluted of $0.01 and $0.004, respectively.

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 and its subsidiaries is United States Dollars (“US$”). It is also the functional currency as being the primary currency of the economic environment in which the entity operates.

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 August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement. The new guidance modifies disclosure requirements related to fair value measurement. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date.

ASU 2016-02, Leases (Topic 842). The standard requires a lessee to recognize a liability to make lease payments and a right-of-use asset representing a right to use the underlying asset for the lease term on the balance sheet. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the impact that this standard will have on our consolidated financial statements.

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 nine month period ended May 31, 2019.

4. PLANT AND EQUIPMENT, NET

Plant and equipment as of May 31, 2019 and August 31, 2018 are summarized below:

Depreciation expense, classified as operating expenses, was $6,352 and $4,707 for the nine months ended May 31, 2019 and 2018, respectively.

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 as the Company obtains control of the services. Related party A provides professional services to the company.

The Company incurred professional fees $8,800 and $187,824 for the nine months ended May 31, 2019 and 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 31 months.

The Company received $25,560  and $7,569 rental income from related party B for the nine months period ended May 31, 2019 and 2018, respectively.

6. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

As of May 31, 2019, the balance $69,820 represented an outstanding deposit and other receivable which included rental deposit, management fee deposit and interest receivables. The prepaid expense is the prepaid transfer agent fee.

7. SHORT TERM NOTES RECEIVABLES

On February 13, 2019 the Company entered into a loan agreement with Kurrency Technology Holding Limited. (“Kurrency”) and loaned Kurrency $50,000. The loan is unsecured, bears interest at 8% per annum, and is due in August 2019. The Company made the loan to Kurrency as part of the Company’s plans to expand its business in software technology.

The Company entered into multiple short-term loan agreements with two unrelated parties and loaned them for a total amount of $223,283.  The loans are unsecured, bears interest at 8% per annum, and are due in March 2020 to May 2020. The Company made the loans to these two unrelated parties as part of the Company’s plans to expand its business in software technology.

8. ACCRUED EXPENSES AND OTHER PAYABLES

As of May 31, 2019, the balance $50,646 represented accrued expenses including office expenses and salary expenses.

9. AMOUNT DUE FROM DIRECTOR

As of May 31, 2019, and August 31,2018, the balance $4,755 and $1,201 represented outstanding loans from the Company’s director, Lin Yi-Hsiu. The loans are unsecured, interest-free with no fixed payment term, for loan purpose. The imputed interest of these loans is immaterial for the nine months ended May 31,2019.

10. 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 Yi-Hsiu 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 LOC Weibo Co., Ltd (“LOC”), a Taiwan company to develop a mobile application which costs TWD20,000,000 (USD651,466) in total. As consideration thereof, the Company issued 908,678 restricted common shares in aggregate at $0.50 per share during the nine month period ended May 31, 2019. LOC Weibo Co., Ltd is not related to the Company as of May 31, 2019.

As of May 31, 2019 and August 31, 2018, there are 105,184,073 and 104,275,395 shares of common stock issued and outstanding, respectively. There are no preferred stock issued and outstanding as of May 31, 2019 and August 31, 2018.

11. COMMITMENTS AND CONTINGENCIES

During the nine months period ended May 31, 2019, 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 nine months period ended May 31, 2019 was $98,356. The Company plans to use these three offices for business development in different locations.

As of May 31, 2019, the Company has the aggregate minimal rent payments due in the next two years as follow.

12. SUBSEQUENT EVENTS

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to May 31, 2019 to the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.

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 August 31, 2018 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. 4, dated February 5, 2018, 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.

RESULTS OF OPERATIONS

Our cash and cash equivalent balance is $151,289 as of May 31, 2019. Our cash balance is sufficient to fund our operations for a period of time

Result of Operation For the three months ended May 31, 2019 and 2018

General and Administrative Expenses

General and Administrative Expenses were $336,351 and $93,275 for the three months ended May 31, 2019 and 2018 respectively. These expenses are mainly comprised of salary and wages expenses of $3,761 ,rent of $25,527 and mobile application development costs of $259,152 for the three months ended May 31, 2019.

Net Loss

We recorded a net loss of $330,950 and $85,467 for the three months ended May 31, 2019 and 2018 respectively. The net loss mainly derived from the general and administrative expenses incurred.

Result of Operations For the nine months ended May 31, 2019 and 2018

Revenue

We have not generated any revenue for the nine months ended May 31, 2019 and 2018.

General and administrative expenses

General and administrative expenses were $904,981 and $405,949 for the nine months ended May 31, 2019 and 2018 respectively. These expenses are mainly comprised of the Company’s consulting fees, website maintenance fees, salary and wage expenses, rent incurred and mobile application development costs.

Net loss

Our net loss was $876,042 and $398,141 for the nine months ended May 31, 2019 and 2018 respectively. The net loss mainly derived from the general and administrative expenses incurred.

Liquidity and Capital Resources

Cash Used in Operating Activities

Net cash used in operating activities was $309,511 and $368,175 for the nine months ended May 31, 2019 and 2018 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 was $102,564 and $24,858 for the nine months ended May 31, 2019 and 2018 respectively. The cash used in investing activities for the nine months ended May 31, 2019 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 Used in Financing Activities

Net cash used in financing activities were $275,959 for the nine months ended May 31, 2019, whereas net cash provided by financing activities were $720,095 for the nine months ended May 31, 2018. The cash used in financing activities for the nine months ended May 31, 2019 was mainly contributed from the increase of note receivables to several unrelated companies. The cash generated from financing activities were mainly from the proceeds from share issuance.

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.

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 May 31, 2019.

Contractual Obligations

As of May 31, 2019, 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 May 31, 2019. 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 May 31, 2019, 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 May 31, 2019, 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 May 31, 2019, 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.