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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the financial year ended AUGUST 31, 2024

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ___________

 

COMMISSION FILE NO. 333-228161

 

EvoAir Holdings Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   98-1353613   8713
(State or Other Jurisdiction of   IRS Employer   Primary Standard Industrial
Incorporation or Organization)   Identification Number   Classification Code Number

 

EvoAir Holdings Inc.
31-A2, Jalan 5/32A
6 ½ Miles, Off Jalan Kepong
52000 Kuala Lumpur, Malaysia
Tel. +603 6243 3379

 

(Address and telephone number of registrant’s executive office)

 

 

Copies to:
Lawrence Venick, Esq.
Loeb & Loeb LLP
2206-19 Jardine House
1 Connaught Place, Central
Hong Kong SAR
Tel: +852.3923.1111
Fax: +852.3923.1100

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

 

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 shorter period that the registrant as required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ☐ No ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐ Accelerated filer ☐  
Non-accelerated filer Smaller reporting company  
Emerging growth company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act. Yes No

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. 

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ No

 

The registrant had 27,180,631 shares of our Common Stock par value, $0.001 issued and outstanding as of November 27, 2024.

 

The aggregate market value of the Company’s common stock held by non-affiliates of 14,698,737 shares (or 3,674,684 shares after being retroactively adjusted to give effect to the 1-for-4 reverse split effective on September 11, 2024 (the “Reverse Stock Split”)) computed by reference to the closing bid price of the Company’s, common stock of $5.51 (or $22.04 after being retroactively adjusted to give effect to the Reverse Stock Split), as of the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $80,990,040.87 (or $80,990,035.36 after being retroactively adjusted to give effect to the Reverse Stock Split) on February 29, 2024.

 

 

 

 
 

 

Table of Contents

 

  Part I    
       
Item 1 Business   4
       
Item 1a Risk Factors   18
       
Item 1b Unresolved Staff Comments   27
       
Item 2 Properties   27
       
Item 3 Legal Proceedings   27
       
Item 4 Mine Safety Disclosures   27
       
  Part II    
       
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   28
       
Item 6 Selected Financial Data   28
       
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations   28
       
Item 7a Quantitative and Qualitative Disclosures About Market Risk   32
       
Item 8 Financial Statements and Supplementary Data   33
       
Item 9 Changes in And Disagreements with Accountants on Accounting and Financial Disclosure   58
       
Item 9a Controls and Procedures   58
       
Item 9b Other Information   58
       
  Part III    
       
Item 10 Directors, Executive Officers and Corporate Governance   59
       
Item 11 Executive Compensation   62
       
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   63
       
Item 13 Certain Relationships and Related Transactions, And Director Independence   64
       
Item 14 Principal Accountant Fees and Services   65
       
  Part IV    
       
Item 15 Exhibits and Financial Statement Schedules   65

 

2 | Page

 

 

FORWARD-LOOKING STATEMENTS

 

This Annual Report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

 

As used in this Annual Report, the terms “we”, “us”, “our”, “Company” or “EVOH”, mean EvoAir Holdings Inc., unless otherwise indicated.

 

As used in this Annual Report, the term “Group”, “EvoAir Group” means EvoAir Holdings Inc. and its subsidiaries, unless otherwise indicated.

 

All dollar amounts refer to US dollars unless otherwise indicated.

 

3 | Page

 

 

PART I

 

ITEM 1 BUSINESS

 

Organization and Business Background

 

EvoAir Holdings Inc. (formerly Unex Holdings Inc.) (the “Company”, “EVOH”, “we”, “us”, or “our”) is a corporation established under the corporation laws in the State of Nevada, United States of America (“U.S”) on February 17, 2017. The Company has adopted an August 31 fiscal year end.

 

On December 20, 2021, the Company and Low Wai Koon (“Dr. Low”) entered into a share transfer agreement, (the “EvoAir International Share Transfer Agreement”), pursuant to which Dr. Low agreed to sell all of his ordinary shares of EvoAir International Limited (“EvoAir International”) to the Company for a consideration of US$100 (“EvoAir Transaction”). EvoAir International, through its subsidiaries upon completion of the Transactions (defined hereunder), is engaged in the research and development (“R&D”), manufacturing, trading, sale of heating, ventilation and air conditioning (“HVAC”) products and related services in Asia.

 

Pursuant to the terms of a share transfer agreement dated December 20, 2021, Dr. Low, the then sole executive officer and director of the Company and the owner of 2,000,000 restricted shares of common stock, with par value of $0.001 per share (“Common Stock”) of the Company (“EvoAir Shares”) representing approximately 67.34% of the Company’s then issued and outstanding shares, sold his entire shareholding of the Company to WKL Global Limited (“WKL Global”) for an aggregate consideration of $100 (“Change of Control Transaction”). Upon completion of the Change of Control Transaction, WKL Global owned 2,000,000 shares, or approximately 67.34% of the then issued and outstanding ordinary shares of the Company, which resulted in a change of control of the Company.

 

On December 20, 2021, several transactions took place (together, the “Allotment Transactions”) whereby the Company issued and allotted in aggregate 98,809,323 ordinary shares of Common Stock to certain parties. On completion of the Allotment Transactions, the total number of issued and outstanding shares of Common Stock of the Company were 101,779,323 (“Then Enlarged Share Capital”):

 

(A) On December 20, 2021, Dr. Low and Chan Kok Wei entered into a share exchange agreement with WKL Eco Earth Holdings Pte Ltd (“WKL Eco Earth Holdings”), pursuant to which Dr. Low and Chan Kok Wei agreed to sell all their ordinary shares of WKL Green Energy Sdn Bhd (“WKL Green Energy”) to WKL Eco Earth Holdings in consideration for the allotment and issuance to WKL Global and Allegro Investment (BVI) Limited (“Allegro Investment”), a company incorporated in the British Virgin Islands (“BVI”) with 50% shareholdings held by Chan Kok Wei and Ong Bee Chen, respectively, of 24,000 shares and 6,000 EvoAir Shares, respectively, or approximately 0.02% and 0.01% of the Then Enlarged Share Capital, respectively.

 

(B) On December 20, 2021, Dr. Low, Chan Kok Wei, Ong Bee Chen and certain sellers (“WKLEE Sellers”) entered into a share exchange agreement with WKL Eco Earth Holdings, pursuant to which Dr. Low, Chan Kok Wei, Ong Bee Chen and WKLEE Sellers agreed to sell all their ordinary shares of WKL Eco Earth Sdn Bhd (“WKL Eco Earth”) to WKL Eco Earth Holdings in consideration for the allotment and issuance to WKL Global, Allegro Investment and WKLEE Sellers of 49,320 EvoAir Shares, 8,280 EvoAir Shares and in aggregate 14,400 shares, respectively, or approximately 0.05%, 0.009% and in aggregate 0.014%, respectively, of the Then Enlarged Share Capital.

 

(C) On December 20, 2021, Tan Soon Hock, Ivan Oh Joon Wern and certain relevant interest holders (“Relevant Interest Holders”) entered into an investment exchange agreement with WKL Eco Earth Holdings, pursuant to which Tan Soon Hock, Ivan Oh Joon Wern and the Relevant Interest Holders agreed to sell all relevant interests in the EvoAir International and its subsidiaries to WKL Eco Earth Holdings in consideration for the allotment and issuance of 7,037,762 EvoAir Shares, 2,520,000 EvoAir Shares and in aggregate 6,001,794 EvoAir shares, respectively, or approximately 6.91%, 2.48% and in aggregate 5.90%, respectively, of the Then Enlarged Share Capital. The board of directors and majority shareholders of the Company have approved the transaction.

 

(D) On December 20, 2021, Dr. Low entered into two deeds of assignment of intellectual properties with WKL Eco Earth Holdings, in respect of Dr. Low’s patents and patent applications relating to eco-friendly air-conditioner condenser (external unit), EvoAirTM and the trademarks and trademark applications described in the deeds of assignment thereunder, and in respect of Dr. Low’s patents and patents applications relating to the portable air-conditioner, e-Cond EVOTM and the trademarks and trademark applications as described in the deeds of assignment thereunder (together, the “IP Assignments”). Pursuant to the IP Assignments, WKL Global, Allegro Investment and certain nominees shall be allotted and issued 63,362,756 EvoAir Shares, 14,297,259 EvoAir Shares and in aggregate 5,487,752 EvoAir Shares, respectively or approximately 62.25%, 14.05% and in aggregate 5.39%, respectively of the Then Enlarged Share Capital in consideration for the IP Assignments.

 

EvoAir Transaction, Change of Control Transaction and Allotment Transactions are collectively referred to as the “Transactions”. The closing of the Transactions (“Closing”) occurred on December 20, 2021 (the “Closing Date”).

 

From and after the Closing Date, at which time EvoAir International transferred its HVAC business to the Company, the Company’s primary operations will consist of the prior operations of EvoAir International and its subsidiaries.

 

4 | Page

 

 

EvoAir International is a company incorporated in BVI on November 17, 2021. Effective from the December 20, 2021, it wholly owns WKL Eco Earth Holdings, a company incorporated in Singapore on July 12, 2018, which in turn wholly owns (a) WKL Eco Earth, a Malaysian company incorporated on May 17, 2017, and (b) WKL Green Energy, a Malaysian company incorporated on October 24, 2017. WKL Eco Earth Holdings acquired (c) EvoAir Manufacturing (M) Sdn Bhd (“EvoAir Manufacturing”) on April 19, 2021, a Malaysian company incorporated on March 22, 2019, as well as acquiring (d) WKL EcoEarth Indochina Co Ltd (“WKL EcoEarth Indochina”), a Cambodia company incorporated on February 4, 2021, (e) WKL Guanzhe Green Technology Guangzhou Co Ltd (“WKL Guanzhe”), a Chinese company incorporated on April 6, 2021. EvoAir Manufacturing wholly owns (f) Evo Air Marketing (M) Sdn Bhd (“Evo Air Marketing”), a Malaysian company incorporated on February 2, 2021.

 

On June 15, 2022, the Company filed a Certificate of Amendment (the “Amendment”) to the Articles of Incorporation with Nevada’s Secretary of State to change the name of the Company from Unex Holdings Inc. to EvoAir Holdings Inc. (the “Name Change”), and the Name Change became market effective on November 4, 2022. Effective on November 11, 2022, the Company’s shares began trading under the new ticker symbol “EVOH”.

 

On November 21, 2023, the Company issued in aggregate, 52,107 shares of Common Stock to 15 referral agents (“Referral Agents”) in consideration for their referral to the Company of certain investors. Each Referral Agent is a “non-U.S. Persons” as defined in Regulation S.

 

On November 21, 2023, the Company issued, in aggregate, 5,500 shares of Common Stock to two individuals in consideration for marketing services provided to the Company by Artisan Creative Studio, a marketing entity based in Malaysia. Each of the individuals is a “non-U.S. Persons” as defined in Regulation S.

 

Round 2 Stockholders

 

The Company entered into a series of offerings for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50, as follows:

 

  On February 15, 2022, the Company entered into certain share subscription agreement with Ms. Ang Lee Kim Jane, who is a “non-U.S. Persons” as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to which the Company agreed to issue and sell 74,074 shares of Common Stock, at a per share purchase price of $2.50, as part of a series of offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds were $185,185.
     
  On June 3, 2022, the Company entered into certain share subscription agreement with Mr. Wong Hon Wai who is a “non-U.S. Persons” as defined in Regulation S of the Securities Act pursuant to which the Company agreed to issue and sell 5,000 shares of Common Stock, at a per share purchase price of $2.50, as part of a series of offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds were $12,500.
     
  On October 25, 2022, the Company entered into Regulation S share subscription agreements with eight investors, each of whom represented that it was a “non-U.S. Persons” as defined in Securities Act. On the same date, the Company entered into Regulation D share subscription agreements with two investors, each of whom represented that it was an “Accredited Investors” as defined in Regulation D of the Securities Act. Pursuant to the share subscription agreements, the Company agreed to issue and sell in aggregate, (i) 129,621 shares of Common Stock to the Regulation S investors, and (ii) 15,000 shares of Common Stock to the Regulation D investors, respectively, at a per share purchase price of $2.50, as part of a series of offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds in aggregate were $361,553.
     
  On February 20, 2023, the Company entered into Regulation S share subscription agreements with eleven investors, each of whom represented that it was a “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the share subscription agreements, the Company agreed to issue and sell in aggregate, (i) 57,783 shares of Common Stock to the Regulation S investors, at a per share purchase price of $2.50 as part of a series of the offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds in aggregate were $144,443.
     
  On July 13, 2023, the Company entered into Regulation S share subscription agreements with 31 investors, each of whom represented that it was a “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the share subscription agreements, the Company agreed to issue and sell in aggregate, (i) 250,132 shares of Common Stock to the Regulation S Investors, at a per share purchase price of $2.50 as part of a series of the offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds in aggregate were approximately $625,330.
     
  On September 7, 2023, the Company entered into Regulation S share subscription agreements with 71 investors, each of whom represented that it was a “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the share subscription agreements, the Company agreed to issue and sell in aggregate, 365,164 shares of Common Stock to the Regulation S investors, at a per share purchase price of $2.50 as part of a series of the offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds in aggregate were approximately $912,889.
     
  On November 21, 2023, the Company entered into a Regulation S share subscription agreement with Wong Chun Shoong who represented that he was a “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the share subscription agreement, the Company agreed to issue and sell in aggregate, 8,658 shares of Common Stock to the Regulation S investors, at a per share purchase price of $2.50 as part of a series of the offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds in aggregate were approximately $21,645 Reverse S

 

Reverse Stock Split

 

On April 12, 2024, the Company’s board of directors (the “Board”) unanimously resolved to effect a reverse stock split of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1-for-4. Following such resolution, on September 9, 2024, the Company filed a Certificate of Amendment (the “Certificate of Amendment”) with the Secretary of State of the State of Nevada to effect the reverse stock split, with an effective time of 9:00AM. Eastern Time on September 11, 2024 (the “Reverse Stock Split”).

 

Split Adjustment; Treatment of Fractional Shares

 

As a result of the 1:4 Reverse Stock Split, each 4 pre-split shares of Common Stock outstanding will automatically combine into one new share of Common Stock without any action on the part of the holders, and the number of outstanding shares of Common Stock was reduced from 102,742,362 shares to 25,685,591 shares (subject to rounding up of fractional shares to the nearest whole number).

 

No fractional shares was issued in connection with the Reverse Stock Split. Fractional shares were rounded up to the nearest whole number

 

Share Issuance

 

On November 25, 2024, the Company issued, in aggregate, 679,516 shares of Common Stock, representing 2.5% issued and outstanding shares of Common Stock to certain consultant in consideration for their services in relation to proposed initial public offering.

 

On November 25, 2024, the Company issued, in aggregate, 815,419 shares of Common Stock, representing 3.0% issued and outstanding shares of Common Stock to certain consultant in consideration for their consulting services.

 

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Details of the Company’s subsidiaries:

 

Name   Place and date of incorporation   Principal activities   Ownership
EvoAir International Limited (“EvoAir International”)   British Virgin Islands, November 17, 2021   Investment holding.   100%
             
Subsidiary of EvoAir International        
WKL Eco Earth Holdings Pte. Ltd. (“WKL Eco Earth Holdings”)   Singapore, July 12, 2018   Investment holding and research and development (“R&D”), marketing and sale of eco-friendly heating, ventilation, and air conditioning (“HVAC”) products and related services.   100%
             
Subsidiaries of WKL Eco Earth Holdings        
WKL Eco Earth Sdn. Bhd. (“WKL Eco Earth”)   Malaysia, May 17, 2017   R&D, manufacturing, marketing and sale of eco-friendly HVAC products, and the manufacture and sale of related services as well as food, pharmaceutical products, and orthopaedic goods.   100%
             
WKL Green Energy Sdn Bhd (“WKL Green Energy”)   Malaysia, October 24, 2017   R&D on biotechnology.   100%
             
EvoAir Manufacturing (M) Sdn Bhd (“EvoAir Manufacturing”)   Malaysia, March 22, 2019   Holding company, R&D, manufacturing, marketing and sale of eco-friendly HVAC products and related services.   67.5%
             
WKL EcoEarth Indochina Co. Ltd (“WKL EcoEarth Indochina”)   Cambodia,
February 4, 2021
  Marketing and sale of eco-friendly HVAC products and related services.   55%
             
WKL Guanzhe Green Technology Guangzhou Co Ltd (“WKL Guanzhe”)   People’s Republic of China, April 6, 2021   Manufacturing, marketing and sale of eco-friendly HVAC products and related services   55%*
             
Subsidiary of EvoAir Manufacturing        
Evo Air Marketing (M) Sdn. Bhd. (“Evo Air Marketing”)   Malaysia, February 2, 2021   Marketing and sale of eco-friendly HVAC products and related services   100%

 

* Shareholding increased to 62.5% on August 14, 2024

 

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Our Future Strategies

 

We intend to pursue the following strategies to further develop and expand our business:

 

Continued investment in research and development in hybrid air-conditioning products

 

The Group intends to continue development of its hybrid air-conditioning products to further increase its product offerings, as well as to expand its client base, especially with commercial and industrial clients. The Group plans to expand its distribution into other South East Asia markets, China and Asia markets, which has high potential demand for air-conditioning as their population gross domestic product (“GDP”) increases. Taking advantage of the global awareness and push to reduce harmful factors leading to global warming, the Group continues to market its EvoAirTM brand and e-Cond EvoTM as eco-friendly products aiming to reduce emission of waste heat from the air-conditioner condensing units and at the same time improving energy efficiency. The Group aims to continue innovation through investment into research and development, to further improve on its product lines, reduce its carbon emissions as it strives to become a leader in HVAC green inventions.

 

Continued production of air purifier and air-sanitizing systems
   
  The Group continues to improve on its production of air purifier and air-sanitizing systems in order to capitalize on increased market demand for air sanitizing products in the wake of the global coronavirus pandemic. The Group is expanding usage and application of its INCU Technology, which acts as an effective disinfectant solution into more sectors and markets as the Group foresees growth in demand for air-sanitizing products as a must-have product in general consumer households in the near future. Besides household consumers, the Group also aims to expand its commercial and industrial customer base, as well as partake in public sanitation projects. In terms of sanitation products, the company aims to expand into personal healthcare products such as formulated toiletries cleansers incorporating the INCU ionic nano copper solution as an active ingredient.
   
Geographical expansion
   
  A key component of our strategy is to enter into and expand into new markets with high demand for HVAC. The Group intends to replicate the similar model, continue development of its product line and expand into other Southeast Asian countries and the Chinese market, with possible expansion into the Middle East, Indonesia and India in the future.
   
Promoting importance of environmental-friendly technology
   
 

The Group also advocates the importance of promoting environmentally friendly technology and creating awareness to the public to play a part in protecting the environment as well as creating synergy with the Group’s products and brand image.

 

On 5 May 2023, the Company launched ‘Cool the Earth Day’ which marks the birth of the environmental movement for HVAC industry. It was a movement launched by EvoAir Group advocating that (i) everyone can enhance his/her lifestyle through green inventions while preserving the Earth; and (ii) everyone can be the ‘Ambassador of the Earth’ - everyone can do a part, be it in the smallest way in protecting our environment. ‘Cool the Earth Day’ is a movement in line with the Company’s mission to contribute to the Earth and society amidst the alarming global warming and climate change issues confronting the world and its 8 billion population through green inventions and creating awareness. We hope that through this movement, people will raise their awareness that everyone can do a part, be it in the smallest way in protecting our environment. At EvoAir, every member is an Ambassador of the Earth, sharing the same mission of protecting the Earth. The Company believes that everyone around the globe can be an Ambassador of the Earth.

 

In 2023, the Group collaborated with a university in Malaysia to study the effect of heat generated by outdoor condensing unit of traditional air-conditioning system towards surrounding environment, by studying the effects of air conditioning system on plant growth in a green-house setting. The study concludes that air produced by EvoAirTM outdoor condensing unit, Coolpressor, is lower in temperature and is more environmental friendly and favourable for the growth of green planted compared to hot air produced by conventional air-conditioner outdoor condensing unit. This positive outcome will surely path a new and sustainable direction in terms of energy savings. The Group looks to continue embracing such promotions and is committed to creating awareness and promoting environmental sustainability. We envision becoming an international player in HVAC sector focusing on environmental, social, governance (“ESG”) efforts and initiatives in the future.

   
Developing and distributing INCZN health supplement
   
  The Group has launched an INCZN health supplement product and is partnering with OEM to manufacture the supplements. INCZN is designed to provide health benefits including improving immune system, protecting against diseases such as mouth, throat and lung cancer, regulate blood pressure and strengthening cardiovascular health, improve stomach digestion and gout repair through the benefit of zinc and copper. The Company intends to build on the further development and distribution of INCZN in order to diversify our product offerings in the future.

 

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Product Lines

 

Hybrid Air Conditioners

 

e-Cond EVOTM

 

With the objective of embracing well-being of mankind through green living and preserving the Earth through green inventions e-Cond EVOTM is a breakthrough invention building on the research and development (“R&D”) of Dr Low Wai Koon (“Dr. Low”), our Director, Chairman and Chief Executive Officer and his team, it is the Group’s first invented its line of eco-friendly portable air-conditioners under its e-Cond EVOTM brand in 2017.

 

The unit is an eco-friendly air-conditioning system with patent pending heat emission control system (“HECS”) technology, which regulates the temperature and volume of heat transferred from the air-conditioning system into the environment. This product employs an innovative hydro-refrigeration system (“HRS”) integrating evaporative cooling process with refrigeration cycle, reducing temperature of the output air by approximately 30% while achieving an optimal cooling performance of approximately 25 to 28 degrees Celsius. The patent pending technology in the unit allows it to utilize substantially lower energy than its traditional air-conditioning units. The portable air-conditioning systems also incorporate ionizer technology producing high concentrations of negative ions to purify the surrounding air of mold spores, pollen, pet dander, odors, cigarette smoke, bacteria, viruses, dust and other hazardous airborne particles.

 

The Company markets two models of the e-Cond EVOTM units: the Super King and the Outdoor King.

 

 

EvoAirTM

 

The Group continued to research on incorporating its patent pending HECS Technology as well as various other patent pending technologies into its product line, subsequently launching its EvoAirTM hybrid air-conditioners in 2021.

 

The Group’s core product, EvoAirTM, is a first-of-its-kind eco-friendly air-conditioner with granted patent or utility model/ patent or utility model pending heat emission control system (“HECS”) proprietary technology, which turns waste heat released by conventional air-conditioner condenser (external unit) into cool and moisturised air at approximately 26oC to 32oC with a humidity of ±60%, operating under outdoor condition, which is optimal for human and living things. The re-engineering of the air-conditioning system has transformed the air-conditioner condenser (external unit) into a supplementary cooling unit or ‘Coolpressor’, which also functions as an air cooler. It also reduces energy consumption of at least 20% compared to conventional air-conditioning units. The significant decrease in waste heat and reduction in energy consumption play an important role in reducing harmful effects to the environment, in line with the Group’s mission of producing eco-friendly invention in protecting the Earth.

 

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Air-conditioning refrigerant is harmful to the environment. The EvoAirTM system utilizes the R32 refrigerant in its operation, which is 9% lower in density than the traditionally used R410A refrigerant found in various conventional air-conditioning systems, while maintaining approximately 43-50% higher latent heat vaporization and approximately 41% higher thermal conductivity when combined with the Group’s other patent-pending technologies. EvoAirTM’s system design also allows for a further reduction in refrigerant use of at least 30% compared to conventional air-conditioning systems with traditional long copper coils by increasing the efficiency of the heat transfer in the R32 refrigerant, in doing so, further increasing refrigerant efficiency.

 

The EvoAirTM hybrid air-conditioning system was awarded SGS International Certification in 2021.

 

The Group’s core product, EvoAirTM, is a first-of-its-kind eco-friendly air-conditioner with granted patent or utility model/ patent or utility model pending heat emission control system (“HECS”) proprietary technology, which turns waste heat released by conventional air-conditioner condenser (external unit) into cool and moisturised air at approximately 26oC to 32oC with a humidity of ±60%, operating under outdoor condition, which is optimal for human and living things. The re-engineering of the air-conditioning system has transformed the air-conditioner condenser (external unit) into a supplementary cooling unit or ‘Coolpressor’, which also functions as an air cooler. It also reduces energy consumption of at least 20% compared to conventional air-conditioning units. The significant decrease in waste heat and reduction in energy consumption play an important role in reducing harmful effects to the environment, in line with the Group’s mission of producing eco-friendly invention in protecting the Earth.

 

 

Residential Units

 

We offer a variety options of EvoAirTM hybrid air conditioner range from 1.0 HP to 2.5 HP, where indoor units of wall mounted and ceiling cassette (selected models) options are available for residential users. Our residential EvoAirTM units are all supplied by 220-240V, single phase and 50Hz of power supply, using R32 as refrigerant. While the dimension size for outdoor unit (Coolpressor) is 925mm x 355mm x 685mm, which comes with an LCD remote control to operate it individually. Each coolpressor is equipped with an up & down automatic louver.

 

Commercial Units

 

Aside from residential units, we also offer EvoAirTM commercial / industrial units range from 5HP to 25HP, where the placement of air conditioner unit in the ideal settings would be most cooling effective to the certain area. The application of commercial units are normally office buildings, retail stores, warehouses, or manufacturing facilities. Due to efficiency consideration, commercial units are using 3 phase power supply and R410A as refrigerant charge (instead of R32). Dimension size of Coolpressor comparing to residential units are larger and heavier too.

 

Retrofitting Service

 

We also provide retrofit service to commercial customers that wishes to keep their existing HVAC systems. Our retrofitting services include replacing the customers’ outdoor condensing unit with the patent-pending HECS technology. Retrofitting service allow for large saving of resources for our enterprise customers, who can avoid fully replacing their air conditioning units, which may be costly depending on the number of existing air conditioning unites already deployed.

 

Customization Services

 

We also provide customization services for specific customers, including stainless-steel coverings to prevent corrosion for customers in locations susceptible to erosion, such as near the coastline.

 

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Manufacturing

 

The Group produces its Coolpressor under its EvoAirTM brand. Meanwhile, the Group partners with OEMs to produce an air-conditioner indoor unit (blower) to complement its EvoAirTM Coolpressor as well as its eco-friendly portable air-conditioner systems under its e-Cond EVOTM brand. The Group has managed to situate its manufacturing plants in both Malaysia and China through its operating subsidiaries, EvoAir Manufacturing and WKL Guanzhe Green Technology Guangzhou, respectively. The Group operates manufacturing plants and assembly lines in China and Malaysia approximately 60,000 square feet of manufacturing space. By distributing its manufacturing capacity geographically, the Group is able to maintain a flexible supply chain concentrating production of products according to demand from different regions.

 

Licensing, Supply and Maintenance Service

 

The Group licenses its various proprietary and granted patent or utility model/ patent or utility model pending patent technologies to OEMs and other brands to be incorporated in various HVAC products. The Group has also catered to industrial clients including supplying products to factory settings or real estate developments spread out across different geographical locations including Malaysia, and Cambodia and Singapore as well as Indonesia as well as providing maintenance and installation services of its EvoAirTM products to various commercial customers.

 

Air Purifier

 

E-CondLife

 

To address the spread of the Covid-19 pandemic which arose during the end of 2019, the EvoAir Group launched a new series of air-sanitizing products during the middle of 2020.

 

Partnering with its supplier, the Group became an exclusive authorized distributor of INCU technology, which involves the use of an ionic nano copper solution. The active ingredients of the solutions, Copper Sulphate Pentha-Hydrate, has a proven track record as well as having been certified and reported to inhibit larvidie, germicide, bactericide, fungicide, algaecide and virucide, while being non-toxic and safe for human and animal use. INCU (Ionic Nano Copper) has been recognized as being vital to health, as well as having proven to be effective against influenzas, bacteria such as E. Coli, bacteria groups such as MRSA as well as inhibiting against Covid-19.

 

The Group partnered with various OEMs to produce air-purifier products under its e-CondLife brand, in accordance to the Group’s specifications in terms of modifications to the micro-chips, magnetic control valves and systems flows to work with INCU technology. By disinfecting water in a water tank reserve through hydro-curtain technology, followed by purifying the output air in the form of water vapour or mist, E-CondLife products act as environmental disinfecting solutions for air sanitization.

 

The e-CondLife sanitizer system has been certified under the IECEE CB Scheme, while the INCU ionic nano copper solution used by the system has been certified by NSF International (USA) to be compliant with NSF / ANSI60 standards for all applicable requirements. The EvoAir Group has also obtained safety test reports from TUV SUD in Singapore and ICAS Shanghai for Cytotoxicity Testing.

 

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QCOVTM

 

To supplement the e-CondLife line of air purifier products, the Group partnered with various OEMs to produce small air purifier systems under its QCOVTM brand in 2021, which incorporates a diffuser to distribute the INCU ionic nano copper solution in order to sanitize the environment.

 

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Distribution

 

As an exclusive authorized distributor of the INCU ionic nano copper solution, the Group has partnered with various distributors to distribute the technology to other brands and markets, Singapore, Thailand. We entered into a long term original design manufacturer supply agreement with our nano copper solution supplier in September, 2020. There were no purchases from our nano copper supplier for FYE2024 and FYE 2023, respectively, representing approximately Nil% and Nil% of our total purchases, respectively. As is customary in the supply or sales arrangements, the agreements with our supplier are terminable by either party by giving notice. Through these various partnerships, the Group’s air purifier systems and INCU are produced and distributed by various distribution channels, including through several well established marketing companies with their own respective online platforms. The Group market its brand to target customers that are attracted to the Group’s eco-friendly image, the product’s ability to inhibit bacteria and viruses, as well as to provide a clean and safe environment.

 

Intellectual Property

 

The Group’s success and future revenue growth depend, in part, on our ability to protect our intellectual property. The Group relies primarily on patent and trademark laws, as well as confidentiality procedures, to protect our proprietary technologies and processes.

 

The Group believes that the core of its business is comprised of our proprietary technologies, including its granted patent or utility model/ patent or utility model pending patent HECS technology. As a result, the Group will strive to maintain a robust intellectual property portfolio. The Group’s success and future revenue growth may depend, in part, on its ability to protect its intellectual property as products and services that are material to its operating results incorporate patented technology.

 

The Group believes its rights to patents and trademark rights serve to distinguish and protect its products from infringement and contribute to our competitive advantages. The Group had patents and trademarks in various stages of the registration application process in Malaysia and trademarks in various stages of the registration application process in China.

 

We cannot assure you that any patents or copyrights will be issued from any of our pending applications. In addition, any rights granted under any of our existing or future patents, copyrights or trademarks may not provide meaningful protection or any commercial advantage to us. With respect to our other proprietary rights, it may be possible for third parties to copy or otherwise obtain and use proprietary technology without authorization or to develop similar technology independently. We may in the future initiate claims or litigation against third parties to determine the validity and scope of proprietary rights of others. In addition, we may in the future initiate litigation to enforce our intellectual property rights or to protect our trade secrets.

 

The Air Conditioner Industry

 

Growing demand for cooling

 

According to International Energy Agency (“IEA”) (https://www.iea.org/energy-system/buildings/space-cooling#tracking), there are currently about 2 billion air conditioning units operating worldwide, and by 2050, it is predicted that there will be 5.6 billion units. According to the statistics report published by the Japan Refrigeration and Air Conditioning Industry Association (“JRAIA”) (https://www.jraia.or.jp) in July 2022, the world’s total air conditioner demand in 2021 is estimated at 110 million, which represent 102% of the world demand in 2020. Looking at the 2021 world demand in terms of Japan, China and other regions, the largest demand is from China, of which demand is estimated to have reached 41.305 million, representing 98% of 2020’s demand. China’s demand accounts for 38% of the total global demand. Next to China, the Asian region (excluding Japan and China) stands at approximately 17.983 million, followed by North America with 16.515 million, Japan with 10.201 million, Europe with 8.885 million and Latin America with 6.547 million.

 

Air-conditioners vary in energy efficiency and their usage lead to a global consumption of approximately 2,000 terawatt hours of electricity annually. In addition, almost 20% of all the electricity used in buildings is for cooling, accounting for 14% of average peak residential electricity demand globally.

 

The emerging economies are expected to use more air-conditioners as income levels rise. Of the 2.8 billion people living in the hottest parts of the world, only 8% currently own air-conditioning units compared to approximately 90% ownership in the United States and Japan. By 2050, India, China and Indonesia may account for 50% of the projected growth in energy use for space cooling.

 

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Global Emissions from the use of Air Conditioners

 

The efficiency of air conditioners vary widely, in all major markets today, consumers are typically buying air conditioners whose average efficiencies are less than half of what is available. Carbon dioxide emissions from cooling systems have tripled since 1990 to 1,130 million tons in 2016, and local air pollutants caused by cooling systems have also increased. Greenhouse Gases produced include Carbon Dioxide and Climate Change:

 

  Carbon dioxide is called a greenhouse gas because it absorbs infrared energy and remits this energy back in all directions. About half of that energy goes out into space and about half of it returns to Earth as heat, contributing to the greenhouse effect and climate change
  The four main greenhouse gases are carbon dioxide, methane, nitrous oxide and fluorinated gases. Carbon dioxide accounts for about 75% of global greenhouse gas emissions.
  About 30% of greenhouse gas emissions come from transportation, 25% come from the production of electricity, 23% comes from industrial production, 12% comes from commercial and residential sources and 10% comes from agriculture.
  Climate change could increase the occurrence and severity of weather events, such as heat waves, droughts and floods. These changes are likely to increase losses to property and crops and affect economic activity.
  The usage of air conditioners has a significant impact on the environment. Air-conditioners use chemical refrigerants, usually hydrofluorocarbons in their heat exchange systems. The hydrofluorocarbons contributes significantly to global warming if leaked to the atmosphere.
  The generation of the electricity to power the air conditioners also contribute to significant emissions, especially when fossil fuels are burnt to produce electricity.

 

Urbanized areas have higher temperatures than less urbanized areas, contributing to heat islands. This is because urban areas usually have less greenery. Roads and buildings absorb and re-emit daytime heat more than forests and water bodies. As a result, urban daytime temperatures can reach approximately 1 to 7 degrees higher in Fahrenheit than the outlying areas and night-time temperatures can reach approximately 2 to 5 degrees higher in Fahrenheit. The use of air conditioners extract hot air to the outside of buildings. On high temperature days, the hot air emitted by air-conditioner units increases the outdoor temperature. This in turn increases the need for more cooling and creates a feedback loop. The use of air conditioners can increase outdoor urban temperatures by more than approximately 1 degree Celsius in some cities

 

Global Efforts to combat Climate Change and Global Warming

 

If the current rate of growth of energy use by air conditioners continues, the U.S. Energy Information Administration (“EIA”) predicts that by 2050, global energy usage for space cooling would triple to 6,200 terra watts. This would triple the amount of carbon dioxide emissions and heavy investments in electricity infrastructure to meet peak electricity demand. This could cause severe financial strain on emerging economies.

 

Over the years, countries around the world have come together to support policies to combat climate change. However, obtaining consensus has been challenging because of political and national circumstances. The Kigali Amendment to the Montreal Protocol, which entered into force on 1 January 2019, help protect the climate by phasing down high global warming potential hydrofluorocarbons (HFCs), which are commonly used as refrigerants. Promoting the energy efficiency of cooling technology can also significantly increase climate benefits.

 

From October 31 to November 12, 2021, the 26th annual UN Climate Change Conference (COP26) was held in Glasgow, Scotland. The objectives of COP26 were:

 

i. Countries were called out to reach net-zero carbon emissions by 2050 and to cap the increase in global temperatures below 1.5°C from current levels;

 

ii. To protect and restore ecosystems and habitats and build resilient infrastructures to withstand climate change;

 

iii. Developed nations to mobilize $100bn in climate finance per year for poorer nations; and

 

iv. Parties of COP26 to finalize the agreement and rules for action and monitoring.

 

The Role of Air conditioners Efficiency in combating Climate Change

 

Intuitively, the more energy efficient air-conditioners are, the less electricity they would consume, and less fossil fuels would be burnt to produce electricity. This would lead to less carbon dioxide emissions which could reduce global warming.

 

The EIA highlighted one area where policy action could deliver substantial energy savings quickly — by making air conditioners equipment more efficient. Through stricter minimum energy performance standards and other measure such as labelling, the average energy efficiency of the stock of air conditioners globally could more than double in efficiency between now and 2050. This could reduce cooling-related energy demand to 3,400 terawatts in 2050 compared to 6,200 terawatts if efficiency remained at current levels. The 45% reduction in energy usage or 2,800 terawatts could reduce carbon dioxide emissions by 1,582 megatons annually. This scenario was called the Efficient Cooling Scenario by EIA.

 

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In addition, the use of less electricity because of more efficient air conditioners greatly reduces the need to build new generation capacity to meet peak electricity demand. In the Efficient Cooling Scenario, there would not be a need to build additional capacity deliver the 1,300 gigawatts of power with more efficient air conditioners. This is equivalent to all the coal-fired power generation in China and India today. In addition, the cumulative infrastructure, fuel and operating costs savings amounted to $2.9 trillion from 2017 to 2050. This means 45% lower electricity costs for everyone as well, compared to if there were no efficiency improvements in air conditioners

 

   Number of Aircon sold per Year (Thousands of units) 
   2019   2020   2021   2022   2023 
World   115,872    107,447    110,041    117,770    123,932 
Residential Aircon   101,952    93,949    95,162    99,899    105,857 
Commercial Aircon   13,920    13,499    14,879    17,871    18,075 
                          
By Continent                         
North America   14,226    15,029    16,515    19,026    18,416 
Asia (Ex-Japan and China)   19,245    16,196    17,983    20,066    22,464 
Europe   7,991    7,604    8,885    9,517    9,650 
Latin America   8,254    7,423    6,547    7,016    7,288 
Middle East   4,194    3,992    3,684    4,227    4,009 
Africa   3,125    2,981    3,489    3,572    3,699 
Ocenia   1,319    1,396    1,432    1,464    1,376 
    58,354    54,621    58,535    64,888    66,902 
                          
By Country (Standalone)                         
Japan   10,768    10,687    10,201    9,885    9,589 
China   46,751    42,142    41,305    42,998    47,440 
    57,519    52,829    51,506    52,883    57,029 
                          
Total   115,873    107,450    110,041    117,771    123,931 
                          
Selected South East Asia                         
Malaysia   1,001    902    867    889    913 
Singapore   135    113    121    129    127 
Indonesia   2,365    1,929    2,159    2,374    2,693 

 

Source: Estimates of World Air Conditioner Demand (July 2022 & July 2024) - The Japan Refrigeration and Airconditioning Industry Association (JRAIA)

 

As derived from the JRAIA report, in 2023, approximately 124 million units of air conditioners were sold globally of which approximately 85% were residential units and approximately 15% were commercial units.

 

Based on statistics available in the JRAIA report, we calculated both CAGR of residential and commercial air conditioners from 2019 to 2023 increased to approximately 0.94% and 6.75% respectively. China was the largest consumer of air conditioners globally and it accounted for approximately 45% of all air conditioners sales. By continent, North America had the highest CAGR of approximately 6.67% from 2019 to 2023 followed by Europe at approximately 4.83% CAGR.

 

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No.   Major Aircon Brands Globally   Company   Securities Exchange(1)   Principal Activities (2)   Market Capitalisation (USD’bn) (3)   HVAC Revenues (USD’bn) (4)
1   Daikin   Daikin Industries Ltd   Tokyo Stock Exchange   Daikin Industries Ltd manufactures air conditioners and refrigerants. The company provides an array of products and technologies related to air-conditioning, refrigeration systems, oil hydraulics, defense systems, chemicals, and other electronics. The company’s air conditioners are widely used in residential, commercial, and industrial applications. It also offers chemical products such as fluoroplastics, chemical engineering machinery, fluorocarbons, and fine chemical products. The company offers industrial hydraulic equipment and machinery, mobile hydraulic equipment, components for guided missiles and oxygen therapy equipment.   35.56   23.86(5)
2   Midea   Midea Group Co   Shenzhen Stock Exchange   Midea Group Co Ltd is a manufacturer, marketer, and seller of diversified products, including consumer appliances, HVAC (heating, ventilation and air-conditioning) systems, robotics and industrial automation and smart supply chain. The company’s major products include both residential and commercial air-conditioners, laundry appliances, kitchen appliances, refrigerators, smart logistics, components, and various small home appliances. It also provides installation, maintenance, after-sale and professional services.   81.26   22.59
3   Trane   Trane Technologies PLC   New York Stock Exchange   Trane Technologies Plc is a manufacturer of industrial goods. It designs, manufactures, and sells a portfolio of industrial and commercial products. The company’s products enhance the quality, energy efficiency and comfort of air in homes and buildings, transport and protect food, and perishables; and increase industrial productivity and efficiency.   88.51   12.73
4   Carrier   Carrier Global Corp   New York Stock Exchange   Carrier Global Corp is a provider of heating, ventilating, air-conditioning, refrigeration systems, building automation, and fire and security technologies. The company’s products comprise furnaces, air conditioners, heat pumps, ductless systems, refrigeration equipment, boilers, indoor air quality products, compressors, thermostats, and refrigeration equipment. It also offers design, maintenance, and installation services.   72.60   14.81
5   LG   LG Electronics Inc   Korean Exchange   LG Electronics Inc manufactures and distributes consumer electronics and home appliances. The company’s product portfolio comprises televisions, monitors, personal computers, refrigerators, audio and beauty appliances, video equipment, washing machines, dishwashers, air purifiers, dehumidifiers, residential and commercial air conditioners, and vacuum cleaners. It also offers vehicle components, smartphones, information displays, solar panels, substrate and material, motor and sensor components, optic solutions, automotive components and camera modules.   12.76   N/A
6   Panasonic   Panasonic Corp   Tokyo Stock Exchange   Panasonic Holdings Corp develops, produces, sells and services a range of electric and electronic products. Panasonic’s product portfolio includes room air-conditioners, TVs, fixed-phones, digital cameras, video equipment, home audio equipment, rice cookers, lamps, wiring devices, air-conditioning equipment, air purifiers and bicycles. It also offers electronic components, mounting machines, welding equipment, PCs and tablets, projectors, batteries, electric motors, electronic components, electronic materials, semiconductors and LCD panels. It provides consumer, logistics, automotive, aviation, entertainment, manufacturing and housing solutions, among others.   19.39   5.75(5)
7   Mitsubishi Electric   Mitsubishi Electric Corp   Tokyo Stock Exchange   Mitsubishi Electric Corp develops, manufactures, and markets electrical and electronics products. The companys product portfolio comprises of air conditioning systems, home products, factory automation systems, automotive equipment, building systems, energy systems, visual information systems, transportation systems, semiconductors and devices, information and communication systems, space systems and public systems. It also offers maintenance services, it infrastructure services and network services. Mitsubishi Electric serves information processing and communications, space development and satellite communications, consumer electronics, industrial technology, energy, transportation, and building equipment sectors.   32.63   9.38(5)

 

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8   Haier   Haier Smart Home Co Ltd   Shanghai Stock Exchange   Haier Group is involved in the manufacturing, marketing and selling of a wide range of home appliances and consumer electronic products such as refrigerators, air conditioners, washing machines, water heaters, TVs, kitchen electric appliances, digital and home appliances, and computers.   39.77   6.47
9   Lennox   Lennox International Inc   New York Stock Exchange   Lennox International Inc is a climate control solutions provider. The company designs, manufactures and markets a wide range of products for the heating, ventilation, air conditioning and refrigeration (HVACR) markets. Its heating and cooling products comprise a broad range of heat pumps, furnaces, packaged heating and cooling systems, accessories to improve indoor air quality, air conditioners, comfort control products, installation and services of commercial heating and cooling equipment, replacement parts and supplies.   21.45   3.29
10   Johnson Controls   Johnson Controls International PLC   New York Stock Exchange   Johnson Controls International Plcis a technology and multi-industrial company. It engineers, develops, manufactures, and installs building products and systems. The company offers HVAC equipment, fire suppression, distributed energy storage, fire detection, industrial refrigeration, building automation and controls, digital solutions, residential and smart home security, and retail solutions, among others.   NA   NA
11   Samsung   Samsung Electronics Co. Ltd   Korean Exchange   Samsung Electronics Co Ltd is a manufacturer of consumer electronics, information technology and mobile communications, and device solutions. The company’s product portfolio includes televisions, refrigerators, washing machines, air conditioners, medical devices, printers, monitors, computers, network systems, and digital cameras. It also manufactures LCD and LED panels, mobile phones and smartphones, tablets, and related accessories. Samsung provides solutions to retail, hospitality, healthcare institutions, finance, education, transportation, and government sectors.   287.46   NA
12   Whirlpool   Whirlpool Corp   New York Stock Exchange   Whirlpool Corp is a designer, manufacturer, and supplier of home and kitchen appliances. Its product portfolio includes laundry appliances, refrigerators and freezers, cooking appliances, dishwashers, mixers, washing machines, air conditioners, heating and cooling products, water filters, and other portable household appliances.   5.65   NA
13   Sharp   Sharp Corp   Tokyo Stock Exchange   Sharp Corp (Sharp) designs, develops, and markets digital information equipment, health and environmental equipment, energy, and business solutions. The company’s major products include refrigerators, microwave ovens, electric fans, beauty appliances, LED lights, air conditioners, washing machines, televisions, projectors, mobile phones, tablets, calculators, telephones, thin-film solar cells, solar cells, and storage battery. It also provides sensors, office solutions, humidifiers, dehumidifiers, business projectors, information displays, options and consumables, software, and ultrasonic cleaners. The company serves to original equipment manufacturers, electronics industries, solar industries, and household customers.   4.26   NA

 

(1) Source: https://finance.yahoo.com/

(2) Source: https://www.globaldata.com/

(3) Source: Bloomberg (as at 22 Oct 2024)

(4) Source: Bloomberg, Valuer’s estimates, Financial year ended 31 December 2023

(5) Financial year ended 31 March 2024

 

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Intellectual Property

 

As reflected in the table below, we currently have registered trademarks, several patents or pending patents for our proprietary drone, sensor and software technologies filed in the United States and certain jurisdictions abroad. As of November 27, 2024, our trademark portfolio includes granted patent or utility model/ patent or utility model pending in various countries and stages. We also consider our manufacturing processes to be trade secrets and have non-disclosure agreements with current employees and business partners to protect those and other trade secrets held by the Company. Risks related to the protection and exploitation of IP rights are set forth in “Risk Factors.”

 

Trademarks
Mark   Country   Application No.   Filing Date   Status
A black chinese characters on a white background

Description automatically generated Malaysia TM2021004997 24.02.2021 Registered
QCOV   Malaysia   TM2021004999   24.02.2021   Registered
A circle with hands and a drop of water with a cross

Description automatically generated   Malaysia   TM2021025558   14.09.2021   Registered
A grey and white logo

Description automatically generated   Malaysia   TM2021018495   07.07.2021   Registered
A close up of a logo

Description automatically generated   Malaysia   TM2021012892   04.05.2021   Registered
EvoAir   Malaysia   TM2021002685   29.01.2021   Registered
We Cha   Malaysia   TM2020000453   09.01.2020   Registered
回球   Malaysia   TM2020000455   09.01.2020   Registered
回球   China   43752514   13.01.2020   Registered
  Malaysia   2017076420   27.12.2017   Pending Publication

 

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Grated Patents or Utility Models and Pending Patents or Utility Models
Invention Name   Country Code   Status   Application No.   Filing Date   Publication No.   Publication Date
Condensing Unit (E-coil)   Malaysia   Granted   UI2019003217   04.06.2019   -   04.12.2020
Condensing Unit (E-coil)   PCT   Completed   PCT/MY2020/050038   30.06.2020   WO/2020/246871   10.12.2020
Condensing Unit (E-coil)   Thailand   Granted   2103003569   03.12.2021   20596   23.12.2022
Condensing Unit (E-coil)   Philippines   Pending Certificate   22021550009   02.12.2021   N/A   11.03.2022
Condensing Unit (E-coil)   Vietnam   Pending Certificate   2-2021-00562   17.12.2021   N/A   N/A
Condensing Unit (E-pad)   PCT   Completed   PCT/MY2020/050070   18.08.2020   WO/2021/034185   25.02.2021
Condensing Unit (E-pad)   Thailand   Granted   2203000456   21.02.2022   -   -
Condensing Unit (E-pad)   Vietnam   Pending   2-2022-00092   08.03.2022   5467 A   25/05/2022
Condensing Unit (E-ball 1)   Malaysia   Granted   PI2019007957   31.12.2019   MY-201420-A   21.02.2024
Condensing Unit (E-ball 1)   PCT   Completed   PCT/MY2020/050207   29.12.2020   WO/2021/137695   08/07/2021
Condensing Unit (E-ball 1)   Thailand   Granted   2203001623   29.06.2022   22097   14.07.2023
Condensing Unit (E-ball 1)   Vietnam   Granted   2-2022-00320   22.07.2022   5633 A   26.09.2022
Condensing Unit (E-ball 1)   China   Granted   202090001025.2   30.06.2022   CN 218846310 U   11.04.2023
Condensing Unit (E-ball 1)   Japan   Granted   2022-600153   29.06.2022   N/A   N/A
Condensing Unit (E-ball 2)   Malaysia   Pending   PI2020006990   23.12.2020   N/A   23.06.2022
Condensing Unit (E-ball 2)   PCT   Completed   PCT/MY2021/050119   14.12.2021   WO/2022/139572   30.06.2022
Condensing Unit (E-ball 2)   Taiwan   Granted   110148426   23.12.2021   -   -
Condensing Unit (E-ball 2)   China   Granted   202190000952.7   21.06.2023   202190000952.7   26.12.2023
Condensing Unit (E-ball 2)   Thailand   Granted   2303001671   21.06.2023   24046   04.07.2024
Condensing Unit (E-ball 2)   Philippines   Pending   22023550013   20.06.2023   -   -
Condensing Unit (E-ball 2)   Japan   Granted   2023-600140   22.06.2023   3244796   21.11.2023
Condensing Unit (E-ball 2)   UAE   Pending   P6001550/2023   19.06.2023   -   -
Condensing Unit (E-ball 2)   Saudi Arabia   Pending   523441275   18.06.2023   -   -
Condensing Unit (E-ball 2)   Cambodia   Pending   KH/UM/2023/00003   19.06.2023   -   -
Condensing Unit (E-ball 2)   Singapore   Pending   11202304828V   21.06.2023   -   -
Condensing Unit (E-ball 2)   USA   Pending   18/258,525   20.06.2023   -   -
Condensing Unit (E-ball 2)   Australia   Pending   2021409614   15.07.2023   -   -
Condensing Unit (E-ball 2)   Republic of Korea   Pending   10-2023-7024626   18.07.2023   -   -
Condensing Unit (E-ball 2)   Indonesia   Pending   P00202306541   20.07.2023   -   -
Condensing Unit (E-ball 2)   Vietnam   Pending   2-2023-00377   17.07.2023   -   -
Condensing Unit (E-ball 2)   UK   Granted   2310921.8   17.07.2023   GB2617967   25.10.2023
Condensing Unit (E-ball 2)   India   Pending   202347048973   20.07.2023   -   -
Portable Air Cooler   Malaysia   Pending   PI 2017704572   28.11.2017   N/A   28.05.2019
Portable Air Cooler   PCT   Completed   PCT/MY2018/050076   15.11.2018   WO/2019/108053   06.06.2019
Portable Air Cooler   Thailand   Pending   2001002798   15.11.2018   2001002798A   09.01.2023
System Heating and Cooling Air   Malaysia   Granted   UI2020003656   15.07.2020   MY-204298-A   15.01.2022
A new type of air conditioner outdoor unit   China   Granted   2022200638879   07.01.2022   CN216667840U   03.06.2022
Water pump bracket and air conditioner with the water pump bracket   China   Granted   2022200416765   07.01.2022   CN216665887U   03.06.2022
A water curtain structure   China   Granted   2022200417471   07.01.2022   CN216667874U   03.06.2022
A fan air guide frame assembly   China   Granted   2022200452850   07.01.2022   CN216667843U   2022.06.03
An air conditioner   China   Granted   2021233235910   25.12.2021   CN216620015U   27.05.2022
A water distributor damping groove and an air conditioner having the water distributor damping groove   China   Granted   2021233235696   25.12.2021   CN216620215U   27.05.2022
Wind board device   China   Granted   2021233216873   25.12.2021   CN216620075U   27.05.2022
A water tank structure   China   Granted   2021233215851   25.12.2021   CN216620214U   27.05.2022
Air conditioner outdoor unit   China   Granted   2021308587838   25.12.2021   CN307226419S   01.04.2022

 

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Employees

 

As of November 27, 2024, the Group has approximately 24 employees, 22 of whom are full-time employees and 2 of whom are part-time located in Malaysia, Singapore and China.

 

Function   Number of Full-Time Employees   Office
Senior Management   4   Malaysia, Singapore, China
Finance and Accounting   4   Malaysia, China
Sales & Marketing   7   Malaysia
Human Resources & Administrative   2   Malaysia
Production & Operation   5   Malaysia, China
Research & Development   1   Malaysia
Corporate Affairs & Investor Relationship   1   Malaysia

 

Principal Executive Offices

 

Our principal executive office is located at 31-A2, Jalan 5/32A, 6 ½ Miles off Jalan Kepong, 52000 Kuala Lumpur, Malaysia.

 

ITEM 1A. RISK FACTORS

 

Risks Related to Our Business and Industry

 

If we are unable to continue to innovate, meet evolving market trends, adapt to changing customer demands and maintain our culture of innovation, our ability to sustain and grow our business may suffer.

 

The ongoing success of our business depends on our ability to continue to introduce innovative eco-friendly HVAC products to meet evolving market trends and satisfy changing customer demands. We must continue to adapt by innovating, improving our products and modifying our strategies, which could cause us to incur substantial costs. We may not be able to continue to innovate or adapt to changing market and customer needs in a timely and cost-effective manner, if at all. This could adversely impact our ability to expand our ecosystem and grow our business. Failure to develop new products to meet evolving market demands through innovation could cause us to lose current and potential customers and harm our operating results and financial condition.

 

In addition, we may not be able to maintain our culture of innovation, which has been critical to our success and has helped us create value for our shareholders, succeed as a leader in eco-friendly HVAC products, attract, retain and motivate employees and other ecosystem participants. Among other challenges, we may not be able to identify and promote people into leadership positions who share our culture and also focus on technology and innovation. Competitive pressure may also cause us to move in directions that may divert us from our mission, vision and values. If we cannot maintain our culture of innovation, our long-term business prospects could be materially and adversely affected.

 

We operate in a competitive industry, and if we fail to compete effectively, our business could suffer.

 

The air-conditioning and air purifying industry in Asia is highly competitive. Competition in our HVAC products includes several multinational, regional and local companies, the largest players of which include Daikin Industries, Gree Electric, Trane Technologies, Johnson Controls, Lennox International, Midea Group and Mitsubishi Electric. Sales depend on price, product availability, delivery schedule, product performance, product line breadth, brand reputation, design, technical expertise and service. In addition to established players, we face competition from new market entrants. Increased competition may lead to a loss of market share, increased difficulty in launching new service offerings, reduction in revenue or increase in loss, any one of which could harm our business, financial condition and results of operations.

 

In certain of our businesses, our contracts are typically awarded on a competitive basis. Our bids are based upon, among other factors, the cost to timely provide the products and services. To generate an acceptable return, we must accurately estimate our costs and schedule. If we fail to do so, the profitability of contracts may be materially and adversely affected – including because some of our contracts provide for liquidated damages if we do not perform on time – which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

 

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If we are unable to create brand influence, we may not be able to maintain current or attract new users and customers for our products.

 

Our operational and financial performance is highly dependent on the strength of our brand. We believe brand familiarity and preference will continue to have a significant role in winning over customers. In order to further expand our customer base, we may need to substantially increase our marketing expenditures to enhance brand awareness through various online and offline means. Moreover, negative coverage in the media of our company could threaten the perception of our brand, and we cannot assure you that we will be able to defuse negative press coverage about our company to the satisfaction of our investors, customers and suppliers. If we are unable to defuse negative press coverage about our company, our brand may suffer in the marketplace, our operational and financial performance may be negatively impacted.

 

Currently, we sell our products, under our various product line brands, to domestic customers in Malaysia and to overseas customers. However, while the management does not consider the likelihood to be high, if our competitors initiate a lawsuit against us for infringing their trademarks, we may be forced to adopt a new brand name for our products. As a result, we may incur additional marketing costs to raise awareness of such new brand name. We may also be ordered to pay a significant amount of damages, and our business, results of operations and financial condition could be materially and adversely affected. We operate in a competitive environment and our profitability and competitive position depend on our ability to accurately estimate the costs and timing of providing our products and services.

 

Climate change and regulations associated with climate change could adversely affect our business.

 

The effects of climate change, including extreme weather conditions, create financial risks to our business. The effects of climate change could disrupt our operations by impacting the availability and cost of materials and by increasing insurance and other operating costs. The effects of climate change also may impact our decisions to construct new facilities or maintain existing facilities in the areas most prone to physical risks, which could similarly increase our operating and material costs. We could also face indirect financial risks passing through the supply chain that could result in higher prices for our products and the resources needed to produce them.

 

There is a general consensus that greenhouse gas emissions are linked to climate change, and that these emissions must be reduced dramatically to avert its worst effects. As a result, increased public awareness and concern about climate change will likely continue to (1) generate more international, regional and/or national concerns and result in the implementation of further requirements and restrictions at international, regional and/or national level to curtail the use of high global warming potential refrigerants (which are essential to many of our products); (2) encourage increase in building energy efficiency; and (3) cause a shift away from the use of fossil fuels as an energy source. While our products are focused on being eco-friendly, these requirements may render some of the existing technology, particularly some of our products that require refrigerant use, non-compliant or obsolete. While we continue to be committed to developing eco-friendly sustainable solutions for our products, there can be no assurance that our development efforts will be successful, that our products will be accepted by the market, that proposed regulations or deregulation will not have an adverse effect on our competitive position, or that economic returns will reflect our investments in new product development.

 

The inconsistent international, regional and/or national requirements associated with climate change regulations also create economic and regulatory uncertainty. There is also regulatory and budgetary uncertainty associated with government incentives, which, if discontinued, could adversely impact the demand for energy-efficient buildings and could increase costs of compliance.

 

Our business and financial performance depend on continued and substantial investments in our information technology infrastructure, which may not yield anticipated benefits and which may be vulnerable to cyber-attacks.

 

The efficient operation of our business requires continued and substantial investments in information technology (“IT”) infrastructure systems. The failure to design, develop and implement new IT technology infrastructure systems in an effective and timely manner or to maintain existing systems could divert management’s attention and resources. Our information systems may also become obsolete because of inadequate investments, requiring an unplanned transition to a new platform that could be time consuming, costly, and damaging to our competitive position and could require additional management attention. Repeated or prolonged interruptions of service because of poor execution, inadequate investments or obsolescence could have a significant adverse impact on our reputation and our ability to sell products and services.

 

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In addition, our business may be impacted by disruptions to our or third-party IT infrastructure, which could result from (among other causes) cyber-attacks, infrastructure failures or compromises to our physical security. Cyber-based risks are evolving and include attacks: (i) on our IT infrastructure (ii) targeting the security, integrity and/or availability of hardware and software; (iii) on information installed, stored or transmitted in our products (including after the purchase of those products and when they are installed into third-party products); and (iv) on facilities or similar infrastructure. Such attacks could disrupt our systems (or those of third parties) and business operations, impact the ability of our products to work as intended or result in the unauthorized access, use, disclosure, modification, or destruction of information in violation of applicable law and/or contractual obligations. We have experienced cyber-based attacks and, due to the evolving threat landscape, may continue to experience them going forward, potentially with more frequency or severity. We continue to make investments and adopt measures to enhance our protection, detection, response and recovery capabilities, and to mitigate potential risks to our technology, products, services, operations and confidential data. However, depending on the nature, sophistication and scope of cyber-attacks, it is possible that potential vulnerabilities could go undetected for an extended period. As a result, we could potentially experience: (i) production downtimes; (ii) operational delays or other detrimental impacts on our operations; (iii) destruction or corruption of data; (iv) security breaches; (v) manipulation or improper use of our or third-party systems, networks or products; and (vi) financial losses from remedial actions, loss of business, liability, penalties, fines and/or damage to our reputation—any of which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition. Due to the evolving nature of such risks, the impact of any potential incident cannot be predicted. In addition, because of the global nature of our business, our internal systems and products must comply with applicable laws, regulations and standards in a number of jurisdictions, and government enforcement actions and violations of data privacy and cybersecurity laws could be costly or interrupt our business operations. Any disruption to our business arising from such issues, or an increase in our costs to cover these issues that is greater than what we have anticipated, could have an adverse effect on our competitive position, reputation, results of operations, cash flows or financial condition.

 

We depend on our intellectual property and have access to certain intellectual property and information of our customers and suppliers. Infringement of or the failure to protect that intellectual property could adversely affect our future growth and success.

 

The Company’s intellectual property rights are important to our business and include numerous patents, trademarks, proprietary technology, technical data, business processes and other confidential information. Although we consider our intellectual property rights in the aggregate to be valuable, we do not believe that our business is materially dependent on a single intellectual property right or any group of them. We nonetheless rely on a combination of patents, trademarks, nondisclosure agreements, customer and supplier agreements, license agreements, information technology security systems, internal controls and compliance systems and other measures to protect our intellectual property. We also rely on nondisclosure agreements, information technology security systems and other measures to protect certain customer and supplier information and intellectual property that we have in our possession or to which we have access. Our efforts to protect such intellectual property and proprietary information may not be sufficient, however.

 

We cannot be sure that our pending patent applications will result in the issuance of patents, that patents issued to or licensed by us in the past or in the future will not be challenged or circumvented by competitors, or that these patents will found to be valid or sufficiently broad to preclude our competitors from introducing technologies similar to those covered by our patents and patent applications.

 

In addition, we may be the target of competitor or other third-party patent enforcement actions seeking substantial monetary damages or seeking to prevent the sale and marketing of certain of our products. Our competitive position also may be adversely impacted by limitations on our ability to obtain possession, ownership or necessary licenses concerning data important to the development or sale of our products or service offerings, or by limitations on our ability to restrict the use by others of data related to our products or services. Any of these events or factors could subject us to judgments, penalties and significant litigation costs or temporarily or permanently disrupt our sales and marketing of the affected products or services and could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

 

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We use a variety of raw materials and supplier-provided parts in our business. Significant shortages, supplier capacity constraints or production disruptions, price increases, or tariffs could increase our operating costs and adversely impact the competitive positions of our products.

 

Our reliance on suppliers and commodity markets to secure components and raw materials (such as copper and steel as well as INCU ionic copper solution), and on service providers to deliver our products, exposes us to volatility in the prices and availability of these materials and services. That potential volatility is particularly acute in certain instances where we depend upon a single source. Issues with suppliers (such as delivery or production disruptions, capacity constraints, quality issues, consolidations, closings or bankruptcies), price increases, raw material shortages, or the decreased availability of trucks and other delivery services could have a material adverse effect on our ability to meet our commitments to customers or increase our operating costs.

 

We use various strategies to lock in prices of expected purchases of certain raw materials; however, these efforts could cause us to pay higher prices for a commodity when compared with the market price at the time the commodity is actually purchased or delivered. Tariffs can also increase our costs, the impact of which is difficult to predict. However, we believe that our supply management and production practices appropriately balance the foreseeable risks and the costs of alternative practices. Nonetheless, these risks may have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

 

We design, manufacture and service products that incorporate advanced technologies. The introduction of new products and technologies involves risks, and we may not realize the degree or timing of benefits initially anticipated.

 

Our future success depends on designing, developing, producing, selling and supporting innovative products that incorporate advanced technologies. The regulations applicable to our products, as well as our customers’ product and service needs, change from time to time. Moreover, regulatory changes may render our products and technologies non-compliant. Our ability to realize the anticipated benefits of our technological advancements or product improvements – including those associated with regulatory changes – depends on a variety of factors, including: meeting development, production, and regulatory approval schedules; meeting performance plans and expectations; the availability of raw materials and parts; our suppliers’ performance; the hiring, training and deployment of qualified personnel; achieving efficiencies; identifying emerging regulatory and technological trends; validating innovative technologies; the level of customer interest in new technologies and products; and the costs and customer acceptance of our new or improved products.

 

Failure to achieve and maintain a high level of product and service quality could damage our reputation with customers and negatively impact our results.

 

Product and service quality issues could harm customer confidence in our company and our brands. If certain of our product offerings do not meet applicable safety standards or our customers’ expectations regarding safety or quality, we can experience lost sales and increased costs and we can and have been exposed to legal, financial and reputational risks. Actual, potential or perceived product safety concerns could expose us to litigation as well as government enforcement actions, which has also occurred in certain instances. In addition, when our products fail to perform as expected, we are exposed to warranty, product liability claims, personal injury and other claims.

 

We maintain strict quality controls and procedures. However, we cannot be certain that these controls and procedures will reveal defects in our products or their raw materials, which may not become apparent until after the products have been placed in use in the market. Accordingly, there is a risk that products will have defects, which could require a product recall. Product recalls can be expensive to implement, and may damage our reputation, customer relationships and market share.

 

In many jurisdictions, product liability claims are not limited to any specified amount of recovery. If any such claims or contribution requests or requirements exceed our available insurance or if there is a product recall, there could be an adverse impact on our results of operations. In addition, a recall or claim could require us to review our entire product portfolio to assess whether similar issues are present in other products, which could result in a significant disruption to our business and which could have a further adverse impact on our business, financial condition, results of operations and cash flows. There can be no assurance that we will not experience any material warranty or product liability claim losses in the future, that we will not incur significant costs to defend such claims or that we will have adequate reserves to cover any recalls, repair and replacement costs.

 

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We are subject to litigation, environmental, and other legal and compliance risks.

 

We are subject to a variety of litigation, legal and compliance risks. These risks relate to, among other things, personal injuries, intellectual property rights, contract-related claims, taxes, environmental matters, employee health and safety, competition laws and laws governing improper business practices. If found responsible in connection with such matters, we could be subject to significant fines, penalties, repayments and other damages (in certain cases, treble damages), and experience reputational harm.

 

On October 8, 2021, a filing (the “Filing”) was made with the Kuala Lumpur High Court by a reseller (the “Reseller”) of the Company’s INCU ionic nano copper solution (the “Solution”) and the Reseller’s related party (together with the Reseller, the “Plaintiffs”). The Reseller was authorized by WKL Eco Earth as its sole distributor of the Solution (the “WKL Distributor”) to resell the Solution together with a diffuser with a capacity of not more than 1000ml through a tripartite agreement (the “Tripartite Agreement”) entered into between (a) the Reseller, (b) the WKL Distributor and (c) a solution packaging company (the “Packaging Company”). WKL Eco Earth was not a party to the Tripartite Agreement and did not directly authorize or engage the Reseller in the resale of the Solution. In the Filing, the Plaintiffs claimed against (i) WKL Eco Earth; (ii) Dr. Low; (iii) Chan Kok Wei, (iv) the Packaging Company and (v) two directors of the Packaging Company for loss and damages arising from an alleged breach of contract, defamation and tort of inducement. The Plaintiffs also alleged that pursuant to the Tripartite Agreement, WKL Eco Earth was prohibited from selling the Solution to any party other than the WKL Distributor, and that the Tripartite Agreement allowed for the resale of the Solution by the Plaintiffs without limitation, the Plaintiffs were not confined in their resale of the Solution to a product consisting of a diffuser with a capacity of not more than 1000ml. The Company believes the claims are without merit and will defend itself against the claims.

 

On April 9, 2024, a notice of withdrawal was filed with the Kuala Lumpur High Court, whereby it was agreed upon both the Reseller and the Company that the Reseller withdraws their claims in the Filing without liberty to file afresh and with no order as to costs, and that the Company withdraws its counterclaim against the Reseller without liberty to file afresh and with no order as to costs.

 

As a global business, we are subject to complex laws and regulations in Malaysia. and other countries in which we operate. Those laws and regulations may be interpreted in different ways. They may also change from time to time, as may related interpretations and other guidance. Changes in laws or regulations could result in higher expenses. Uncertainty relating to laws or regulations may also affect how we operate, structure our investments and enforce our rights.

 

Changes in environmental and climate change related-laws could require additional investments in product designs, which may be more expensive or difficult to manufacture, qualify and sell and/or may involve additional product safety risks and could increase environmental compliance expenditures.

 

At times we are involved in disputes with private parties over environmental issues, including litigation over the allocation of cleanup costs, alleged personal injuries and property damage. Existing and future asbestos-related claims could adversely affect our financial condition, results of operations and cash flow. Personal injury lawsuits may involve individual and purported class actions alleging that contaminants originating from our current or former products or operating facilities caused or contributed to medical conditions. Property damage lawsuits may involve claims relating to environmental damage or diminution of real estate values. Even in litigation where we believe our liability is remote, there is a risk that a negative finding or decision could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition, in particular with respect to environmental claims in regions where we have, or previously had, significant operations or where certain of our products have been manufactured and used.

 

Our failure to comply with anti-corruption laws and regulations, or effectively manage our employees, customers and business partners, could severely damage our reputation, and materially and adversely affect our business, financial condition, results of operations and prospects.

 

We are subject to risks in relation to actions taken by us, our employees, third-party customers or third-party suppliers that constitute violations of the anti-corruption laws and regulations. While we adopt strict internal procedures and work closely with relevant government agencies to ensure compliance of our business operations with relevant laws and regulations, our efforts may not be sufficient to ensure that we comply with relevant laws and regulations at all times. If we, our employees, third-party customers or third-party suppliers violate these laws, rules or regulations, we could be subject to fines and/or other penalties. Actions by Malaysia regulatory authorities or the courts to provide an alternative interpretation of the laws and regulations or to adopt additional anti-bribery or anti-corruption related regulations could also require us to make changes to our operations. Our reputation, corporate image, and business operations may be materially and adversely affected if we fail to comply with these measures or become the target of any negative publicity as a result of actions taken by us, our employees, third-party customers or third-party suppliers.

 

Our business depends on the continued contributions made by Low Wai Koon (“Dr. Low”), as our founder, chief executive officer, chief operating officer and chairman of the board, the loss of who may result in a severe impediment to our business, results of operation and financial condition.

 

Our success is dependent upon the continued contributions made by founder, chief executive officer, chief operating officer and chairman of the board, Dr. Low. We rely on his expertise in business operations when we are developing our business. We have no “Key Man” insurance to cover the resulting losses in the event that Dr. Low should die or resign. In order to mitigate this risk, the Group has continued to invest in its personnel training as well as investment into its research and development department.

 

However, if Dr. Low cannot serve the Company or is no longer willing to do so, the Company may not be able to find alternatives in a timely manner or at all. This would likely result in severe damage to our business operations and would have an adverse material impact on our financial position and operating results. To sustain our operations, the Company may have to recruit and train replacement personnel at a higher cost. In addition, if Dr. Low joins our competitors or develops similar businesses that are in competition with our Company, our business, results of operation and financial conditions may also be negatively impacted.

 

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Risks Related to Doing Business in Malaysia

 

Developments in the social, political, regulatory and economic environment in Malaysia may have a material adverse impact on us.

 

Our business, prospects, financial condition and results of operations may be adversely affected by social, political, regulatory and economic developments in Malaysia. Such political and economic uncertainties include, but are not limited to, the risks of war, terrorism, nationalism, nullification of contract, changes in interest rates, imposition of capital controls and methods of taxation.

 

According to Economy Outlook 2024 from Ministry of Finance Malaysia, global growth is projected to moderate in 2023 and 2024 following slow growth in advanced economies; volatile financial market due to tightening monetary policy; prolonged geopolitical tensions; and increasing climatic changes. Nevertheless, inflation continues to soften as markets head towards supply chain stabilisation. In addition, world trade is projected to moderate in 2023 in line with weaker global demand. However, global trade is expected to increase in 2024 in tandem with improved trade activity in advanced economies, and emerging market and developing economies (“EMDEs”). In the case of Malaysia, the economy continued to expand amid these persistent challenges in the external environment. During the first half of 2023, GDP posted a growth of 4.2% supported by resilient domestic demand, in particular private expenditure.

 

Recent updates confirm Malaysia’s resilience, with the World Bank revising its 2024 GDP growth forecast to 4.9%, up from 4.3%. This growth is driven by strong domestic demand, trade recovery, and policy initiatives like the National Energy Transition Roadmap (NETR) and New Industrial Master Plan 2030 (NIMP 2030). Malaysia’s GDP growth reached 5.1% in the first half of 2024, a marked improvement from 4.1% in first half of 2023. This growth has put Malaysia on track to achieve a full-year growth rate in the range of 4.8% to 5.3%, surpassing earlier projections of 4% to 5%. The economy exceeded expectations with first-half growth of 5.1% in 2024, reflecting robust private spending and export recovery.

 

(source: https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099100924041013169/p506961179149705518d2e155d032837a3f#:~:text=In%202024%2C%20the%20economy%20is,previous%20forecast%20in%20April... )

 

(source: https://www.mof.gov.my/portal/en/news/press-release/economic-growth-trumps-expectations-for-two-straight-quarters-in-2024?highlight=WzIwMjVd )

 

On March 11, 2020, the World Health Organization or WHO declared the corona virus or COVID-19 a pandemic. To help counter the transmission of COVID-19, from March 18, 2020 to April 26, 2022, the government of Malaysia initiated Movement Control Orders (“MCO”). The MCO had resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities in Malaysia. Conditional Movement Control Orders were introduced where most business sectors were allowed to operate under strict rules and Standard Operating Procedures mandated by the government of Malaysia, followed by Recovery Movement Control Orders. At the height of the pandemic, on January 12, 2021, the Malaysian government even declared a state of emergency nationwide to combat COVID-19. On April 1, 2022, the Malaysian government announced the country had begun transitioning into the endemic phase with further easing of restrictions. We are witnessing the adverse impact on the purchasing power of consumers in Malaysia, where our products are mainly sold as a direct result of the prolonged pandemic. As such, the extent to which the coronavirus may continue to adversely impact the Malaysian economy is uncertain. In the event that the Malaysia economy suffers, demand for our products may diminish, which would in turn result in our profitability. This could in turn result in a substantial need for restructuring of our business objectives and could result in a partial or entire loss of an investment in our Company.

 

We are subject to foreign exchange control policies in Malaysia.

 

The ability of our subsidiaries to pay dividends or make other payments to us may be restricted by the foreign exchange control policies in the countries where we operate. For example, there are foreign exchange policies in Malaysia which support the monitoring of capital flows into and out of the country in order to preserve its financial and economic stability. The foreign exchange policies are administered by the Foreign Exchange Administration, an arm of Bank Negara Malaysia (“BNM”), the central bank of Malaysia. The foreign exchange policies monitor and regulate both residents and non-residents. Under the current Foreign Exchange Administration rules issued by BNM, non-residents are free to repatriate any amount of funds from Malaysia in foreign currency other than the currency of Israel at any time (subject to limited exceptions), including capital, divestment proceeds, profits, dividends, rental, fees and interest arising from investment in Malaysia, subject to any withholding tax. In the event BNM or any other country where we operate introduces any restrictions in the future, we may be affected in our ability to repatriate dividends or other payments from our subsidiaries in Malaysia or in such other countries. Since we are a holding company and rely principally on dividends and other payments from our subsidiaries for our cash requirements, any restrictions on such dividends or other payments could materially and adversely affect our liquidity, financial condition and results of operation.

 

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Many of the economies in Asia, including Singapore, are experiencing substantial inflationary pressures which may prompt the governments to take action to control the growth of the economy and inflation that could lead to a significant decrease in our profitability in the future.

 

While many of the economies in Asia have experienced rapid growth over the last two decades, they currently are experiencing inflationary pressures. As governments take steps to address the current inflationary pressures, there may be significant changes in the availability of bank credit, interest rate increases, limitations on loans, or restrictions on currency conversions and foreign investment. There also may be imposition of price controls. If prices for the products we source or if wages rise at a rate that is insufficient to compensate for the rise in these costs, it may have an adverse effect on our profitability. If these or other similar restrictions are imposed by a government to influence the economy, it may lead to a slowing of economic growth. Singapore’s core inflation declined to 2.1% on a year-on-year (y-o-y) basis in October 2024, compared to 2.8% in September 2024. This was due to a moderation in services, electricity & gas, and retail & other goods inflation. CPI (consumer price index)—All Items inflation eased to 1.4% year-over-year in October 2024, from 2.0% in September 2024.

 

(source: https://www.mas.gov.sg/-/media/mas-media-library/news/consumer-price-developments/2024/inflation202410.pdf

 

While this inflationary trend will result in higher operational costs, we believe that this also strengthens our value proposition by emphasizing potential savings to customers through improved productivity and workflow efficiency derived from our technology solutions. To mitigate inflationary pressures, we will regularly review our pricing structure to ensure sustainable profitability.

 

Risks Related to Intellectual Property

 

If we are not able to adequately protect our proprietary intellectual property and information, and protect against third party claims that we are infringing on their intellectual property rights, our results of operations could be adversely affected.

 

The value of our business depends in part on our ability to protect our intellectual property including our patents applications and trademarks, as well as our customer, employee, and customer data. Third parties may try to challenge our ownership of our intellectual property in Asia and around the world. In addition, intellectual property rights and protections in Malaysia may be insufficient to protect material intellectual property rights. Further, our business is subject to the risk of third parties counterfeiting our products or infringing on our intellectual property rights. The steps we have taken may not prevent unauthorized use of our intellectual property. We may need to resort to litigation to protect our intellectual property rights, which could result in substantial costs and diversion of resources. If we fail to protect our proprietary intellectual property and information, including with respect to any successful challenge to our ownership of intellectual property or material infringements of our intellectual property, this failure could have a significant adverse effect on our business, financial condition, and results of operations.

 

If we are unable to adequately protect our intellectual property rights, or if we are accused of infringing on the intellectual property rights of others, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights.

 

Our commercial success will depend in part on our success in obtaining and maintaining patents, copyrights, trademarks, trade secrets and other intellectual property rights in Malaysia and elsewhere and protecting our proprietary technology. If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

 

We cannot provide any assurances that any of our pending patent applications that mature into issued patents will include a scope sufficient to protect our products, any additional features we develop for our products or any new products. Other parties may have developed technologies that may be related or competitive to our system, may have filed or may file patent applications and may have received or may receive patents that overlap or conflict with our patent applications, either by claiming the same methods or devices or by claiming subject matter that could dominate our patent position. Our patent position may involve complex legal and factual questions, and, therefore, the scope, validity and enforceability of any patent claims that we may obtain cannot be predicted with certainty. Patents, if issued, may be challenged, deemed unenforceable, invalidated or circumvented. Proceedings challenging our patents could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such proceedings may be costly. Thus, any patents that we may own may not provide any protection against competitors. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought by us, which in turn could affect our ability to commercialize our products.

 

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Though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our patents, or develop and obtain patent protection for more effective technologies, designs or methods.

 

We may be unable to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, suppliers, vendors, former employees and current employees.

 

Our ability to enforce our patent rights depends on our ability to detect infringement. It may be difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

 

In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable. If any of our patents covering our products are invalidated or found unenforceable, or if a court found that valid, enforceable patents held by third parties covered one or more of our products, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights.

 

The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

 

● any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products;

 

● any of our pending patent applications will be issued as patents;

 

● we were the first to file patent applications for these inventions;

 

● others will not develop similar or alternative technologies that do not infringe our patents; any of our patents will be found to ultimately be valid and enforceable;

 

● any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;

 

● we will develop additional proprietary technologies or products that are separately patentable; or

 

● our commercial activities or products will not infringe upon the patents of others.

 

We rely, in part, upon unpatented know-how and continuing technological innovation to develop and maintain our competitive position. Further, our trade secrets could otherwise become known or be independently discovered by our competitors.

 

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Risks Relating to Our Securities

 

There may not be sufficient liquidity in the market for our securities in order for investors to sell their securities.

 

There is currently only a limited public market for our ordinary share, which is listed on the Over-the-Counter Pink Sheets, and there can be no assurance that a trading market will develop further or be maintained in the future.

 

Volatility in our shares price may subject us to securities litigation.

 

The market for our shares may have, when compared to seasoned issuers, significant price volatility and we expect that our share price may continue to be more volatile than that of a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

 

Our ordinary share may be considered a “penny stock” and may be difficult to sell.

 

The SEC has adopted regulations which generally define a “penny stock” to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our ordinary share is less than $5.00 per share and, therefore, it may be designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our ordinary share and may affect the ability of investors to sell their shares.

 

The market for penny stocks has experienced numerous frauds and abuses, which could adversely impact investors in our stock.

 

OTC Pink Sheet securities are frequent targets of fraud or market manipulation, both because of their generally low prices and because OTC Pink Sheet reporting requirements are less stringent than those of the stock exchanges or NASDAQ.

 

Patterns of fraud and abuse include:

 

● Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

 

● Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

 

● “Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

 

● Excessive and undisclosed bid-ask differentials and mark-ups by selling broker-dealers; and

 

● Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

 

● Our management is aware of the abuses that have occurred historically in the penny stock market.

 

We have not paid dividends in the past and do not expect to pay dividends in the foreseeable future and any return on investment may be limited to the value of our stock.

 

We have never paid any cash dividends on our ordinary share and do not anticipate paying any cash dividends on our ordinary share in the foreseeable future and any return on investment may be limited to the value of our stock. We plan to retain any future earnings to finance growth.

 

We are a “smaller reporting company,” and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.

 

We are currently a “smaller reporting company”, meaning that we are not an investment company, an asset- backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and annual revenues of less than $50.0 million during the most recently completed fiscal year. In the event that we are still considered a “smaller reporting company,” at such time as we cease being an “emerging growth company,” we will be required to provide additional disclosure in our SEC filings. However, similar to an “emerging growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company” may make it harder for investors to analyze our results of operations and financial prospects.

 

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General Risks

 

Natural disasters, epidemics or other unexpected events may disrupt our operations, adversely affect our results of operations, financial condition and may not be fully covered by insurance.

 

The occurrence of one or more natural disasters, power outages or other unexpected events, including hurricanes, fires, earthquakes, volcanic eruptions, tsunamis, floods and other forms of severe weather, health epidemics, pandemics (including COVID-19) or other contagious outbreaks, conflicts, wars or terrorist acts, in the U.S. or in other countries in which we or our suppliers or customers operate could adversely affect our operations and financial performance. Natural disasters, power outages or other unexpected events could damage or close one or more of our facilities or disrupt our operations temporarily or long-term, such as by causing business interruptions or by affecting the availability and/or cost of materials needed for manufacturing. We have only one factory and another assembly line that can manufacture a specific product or product line. As a result, damage to or the closure of that factory may disrupt or prevent us from manufacturing certain products. Existing insurance arrangements may not cover all of the costs or lost cash flows that may arise from such events. The occurrence of any of these events could also increase our insurance and other operating costs or harm our sales.

 

We may be affected by global economic, capital market and political conditions, and conditions in the construction, transportation and infrastructure industries in particular.

 

Our business, financial condition, operating results and cash flows may be adversely affected by changes in global economic conditions and geopolitical risks and conditions, including credit market conditions, levels of consumer and business confidence, fluctuations in residential, commercial and industrial construction activity, pandemic health issues (including COVID-19 and its effects), natural disasters, commodity prices, energy costs, interest rates, foreign exchange rates, levels of government spending and deficits, trade policies (including tariffs, boycotts and sanctions), regulatory changes, actual or anticipated default on sovereign debt and other challenges that could affect the global economy.

 

These economic and political conditions affect our business in a number of ways. Additionally, the tightening of credit in the capital markets could adversely affect the ability of our customers, including individual end-customers and businesses, to obtain financing for significant purchases and operations, which could result in a decrease in or cancellation of orders for our products and services. Similarly, tightening credit may adversely affect our supply base and increase the potential for one or more of our suppliers to experience financial distress or bankruptcy. Additionally, because we have a number of factories and suppliers in foreign countries, the imposition of tariffs or sanctions or unusually restrictive border crossing rules could adversely affect our supply chain, operations and overall business.

 

Our business and financial performance is also adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending and construction (both residential and commercial as well as remodelling).

 

Our business success depends on attracting and retaining qualified personnel.

 

Our ability to sustain and grow our business requires us to hire, retain and develop a highly skilled and diverse management team and workforce. Failure to ensure that we have leadership with the necessary skill sets and experience could impede our ability to deliver our growth objectives, execute our strategic plan and effectively transition our leadership.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

The Company’s principal executive office is located at 31-A2, Jalan 5/32A, 6 ½ Miles off Jalan Kepong, 52000 Kuala Lumpur, Malaysia. We also have an office located in Cambodia located at R01 of House No 62Z Street 274, Village 04, Sangkat Tonle Basak, Khan Chamkamorn, Phnom Pehnh, Cambodia and an office located in China at Shunde Western Ecological Industry Startup Zone D-08-01 (Foshan City, Shunde District, Xingtan Town, Depin Road no.1, Level 3).

 

ITEM 3. LEGAL PROCEEDINGS

 

On October 8, 2021, a filing (the “Filing”) was made with the Kuala Lumpur High Court by a reseller (the “Reseller”) of the Company’s INCU ionic nano copper solution (the “Solution”) and the Reseller’s related party (together with the Reseller, the “Plaintiffs”).

 

The Reseller was authorized by WKL Eco Earth’s sole distributor of the Solution (the “WKL Distributor”) to resell the Solution together with a diffuser with a capacity of not more than 1000ml through a tripartite agreement (the “Tripartite Agreement”) entered into between (a) the Reseller, (b) the WKL Distributor and (c) a solution packaging company (the “Packaging Company”). WKL Eco Earth was not a party to the Tripartite Agreement and did not directly authorize or engage the Reseller in the resale of the Solution.

 

In the Filing, the Plaintiffs claimed against (i) WKL Eco Earth; (ii) Dr. Low; (iii) Chan Kok Wei, (iv) the Packaging Company and (v) two directors of the Packaging Company for loss and damages arising from an alleged breach of contract, defamation and tort of inducement. The Plaintiffs also alleged that pursuant to the Tripartite Agreement, WKL Eco Earth was prohibited from selling the Solution to any party other than the WKL Distributor and allow for the resale of the Solution by the Plaintiffs without limitation, and that the Plaintiffs were not confined in their resale of the Solution to a diffuser with a capacity of not more than 1000ml.

 

On April 9, 2024, a notice of withdrawal was filed with the Kuala Lumpur High Court, whereby it was agreed upon both the Reseller and the Company that the Reseller withdraws their claims in the Filing without liberty to file afresh and with no order as to costs, and that the Company withdraws its counterclaim against the Reseller without liberty to file afresh and with no order as to costs.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

No report required.

 

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PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

MARKET INFORMATION

 

The registrant had 27,180,631 shares of our Common Stock par value, $0.001 issued and outstanding as of November 27, 2024. There were 312 record holders of our common stock.

 

DIVIDENDS

 

We have never paid or declared any dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.

 

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

 

We currently do not have any equity compensation plans.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not Applicable.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Annual Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include but are not limited to those discussed below and elsewhere in this Annual Report. Our audited consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”).

 

Plan of Operation and Funding

 

We expect that working capital requirements will continue to be funded through internally generated funds and proceeds from issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.

 

Existing working capital, proceeds from issuance of securities, further advances, and anticipated cash flow are expected to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through internally generated funds, advances and proceeds from issuance of securities. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) research and development; (ii) expansion of product offerings; (iii) geographical expansion; and (iv) marketing expenses. We intend to finance these expenses with further issuances of securities and advances. Thereafter, we expect we will need to raise additional capital and generate revenue to meet long-term operating requirements. Additional issuances of equity will result in dilution to our current shareholders. Further, such securities might have rights, preferences, or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

 

Results of Operations

 

The following table sets forth certain selected statement of operations data for the financial year indicated in U.S. Dollars. In addition, we note that the year-to-year comparison may not be indicative of future performance.

 

The following summary of our operations should be read in conjunction with our audited financial statements for the financial years ended August 31 (“FYE”), 2024, and 2023, which are included herein.

 

   Year Ended August 31,         
   2024   2023   Changes   % 
Revenue  $314,719   $388,038   $(73,319)   (19)%
Cost of revenue   323,038    424,189    (101,151)   (24)%
Gross loss   (8,319)   (36,151)   27,832    77%
Operating expenses   26,311,487    6,097,019    20,214,468    332%
Loss from operations   (26,319,806)   (6,133,170)   (20,186,636)   (329)%
Other income/(expense)   4,410    (184,203)   188,613    102%
Net Loss   (26,315,396)   (6,317,373)   (19,998,023)   (317)%

 

Revenue

 

The Group recorded a revenue of $314,719 for FYE 2024, representing a decrease of approximately $73,319, or 19%, compared to FYE 2023 revenue of $388,038. This decline was primarily driven by a reduction in sales of our eco-friendly air-conditioning units, particularly our flagship product, EvoAir™, which is a pioneering hybrid air-conditioner designed with a proprietary HECS system.

 

As the first mover in the eco-friendly air-conditioning market, the Group encountered both significant opportunities and challenges during the year. The EvoAir™ air-conditioner, which is either granted a patent or utility model pending, presented unique challenges related to its certifications and testings. Specifically, while working with relevant authorities and organizations to apply for the necessary safety and performance certifications and approvals, the Group encountered difficulties in having our product appropriately categorized within the existing frameworks for conventional air conditioners. In certain cases, the authorities lacked the equipment or resources to conduct the required tests.

 

Despite these challenges, the Group actively engaged in educating and collaborating with these organizations to resolve compliance and testing issues. A positive outcome of this effort was the recommendation from one of the authorities to apply under a newly established category: ‘Hybrid Air Conditioners.’ However, this process, due to its novelty, was more time-consuming than the typical certification processes for traditional air-conditioning systems.

 

In addition to certification challenges, the adoption of EvoAir™ by corporate clients also experienced delays. While the Group received significant interest from several corporate clients who were impressed with the product’s potential for energy savings and performance, many of them undertook additional studies to evaluate the long-term benefits of EvoAir™. This independent research and assessment by potential customers resulted in extended decision-making timelines.

 

Despite these hurdles, the Group remains optimistic about the long-term potential of EvoAir™. We are steadily building momentum and expanding the product’s reach across various markets, including residential, commercial, and industrial sectors. This is being achieved through the development of strategic distribution channels, project collaborations, and private labelling and licensing models. The Group remains committed to strengthening the traction of EvoAir™ and driving its adoption across diverse market segments, positioning ourselves for future growth in the emerging eco-friendly air-conditioning space.

 

We remain confident in the long-term prospects of EvoAir™ and are focused on continuing to innovate and address challenges, with a view to establishing the product as a leading solution in the sustainable cooling market.

 

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Cost of revenue

 

The Company recorded a cost of revenue of $323,038 for FYE 2024, which represents 103% of total revenue, compared to $424,189, or 109% of revenue, in FYE 2023. The decrease in cost of revenue is consistent with the decline in sales of our eco-friendly air conditioning products and reflects improvements in our overall cost structure.

 

The cost of revenue encompasses production costs and the purchase of goods. The reduction in cost of revenue as a percentage of sales reflects both the lower volume of sales and the Company’s ongoing efforts to optimize production efficiencies and manage costs. These efforts include streamlining procurement processes and enhancing cost management, which have contributed to the improvement in our overall cost of revenue despite the sales decline.

 

Looking ahead, the Company remains focused on further optimizing its cost structure and maintaining efficiencies as it continues to scale its operations and expand its product offerings.

 

Gross (loss)

 

The Company reported a gross loss of $8,319 for FYE 2024, representing 3% of revenue. This reflects a significant improvement compared to the gross loss of $36,151 in the FYE 2023, which constituted 9% of revenue.

 

The improvement in gross loss margin from FYE 2023 to FYE 2024 was primarily driven by a strategic reduction in the overall cost of revenue. These efforts included more efficient cost management, supplier renegotiations, and optimized production processes. This progress underscores the Company’s commitment to enhancing operational efficiency and moving toward sustained profitability.

 

Management will continue to focus on cost control measures and revenue growth initiatives to build on this positive momentum in the upcoming financial periods.

 

Operating expenses

 

Operating expenses for FYE 2024 amounted to $26,311,487, reflecting a 332% increase compared to $6,097,019 recorded in FYE 2023. This increase of $20,214,468 was primarily attributable to an increase in technology-related intangible asset impairment and net off with the decrease in general administrative expenses since the IPO related offering cost has been capitalized.

 

Key components of operating expenses included salaries and related expenses, commissions, rental costs, patent and trademark application/renewal fees, professional and compliance fees.

 

The Company remains focused on prudent cost management to maintain operational efficiency while supporting strategic initiatives for growth and value creation.

 

Other income/ (expenses)

 

Other income for FYE 2024 was not material. By comparison, in FYE 2023, other income primarily comprised realized foreign exchange losses.

 

The minimal impact of other income in FYE 2024 reflects a limited exposure to foreign exchange fluctuations. Management remains committed to monitoring external factors that may affect foreign exchange losses and will take proactive measures to mitigate any potential risks in the future.

 

Net loss

 

The Company reported a loss from operations before income taxes of $26,315,369 for FYE 2024, compared to $6,317,373 for FYE 2023.

 

Apart from the technology-related intangible asset impairment, the continued net loss is primarily attributable to the Company’s strategic investments in building the necessary infrastructure and resources to support its business expansion objectives. Additionally, the lack of economies of scale during this growth phase has impacted the bottom line.

 

Management remains confident that these investments will position the Company for long-term growth and profitability as it scales operations and capitalizes on emerging opportunities. Strategies to enhance operational efficiencies and achieve economies of scale are key priorities moving forward.

 

Liquidity and Capital Resources

 

Working capital

 

   Year Ended         
   August 31,         
   2024   2023   Changes   % 
Current assets  $790,752   $2,071,164   $(1,280,412)   (62)%
Current liabilities   1,684,638    964,642    719,996    75%
Working capital   (893,886)   1,106,522    (2,000,408)   (181)%

  

As of August 31, 2024, our company’s current liabilities stood at $1,684,638, which included accounts payable and accruals of $267,900, other payables of $95,831, deferred revenue $10,012, current portion hire purchase creditor $8,758, amount due to shareholders $1,202,692, and current portion operating lease liabilities of $99.445. The increase in current liabilities was mainly attributable to amount due to shareholders.

 

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As of August 31, 2024, the Company had a deficit working capital of $893,886 compared with the positive working capital of $1,106,522 as of August 31, 2023. The drop in working capital for the comparative figures was mainly attributable to the decrease in cash proceeds from issuance of common stock or capital contribution, decrease in deposits, prepayments and other receivables, increase in accounts payable and accruals and the increase in amount owing to shareholders.

 

The decline in working capital underscores the Company’s strategic use of resources to support ongoing operations and investments during a critical growth phase. Management is actively monitoring the Company’s liquidity position and evaluating strategies to enhance working capital and ensure sustainable financial stability.

 

Cash flows

 

   Year Ended         
   August 31,         
   2024   2023   Changes   % 
Cash flows generated from / (used in) operating activities  $30,822   $(1,674,395)  $1,705,217    102%
Cash flows used in investing activities   (146,269)   (14,189)   (132,080)   (931)%
Cash flows (used in) / generated from financing activities   (456,253)   2,392,710    (2,848,963)   (119)%
Net changes in cash   (571,700)   704,126    (1,275,826)   (181)%

 

The Company generated net cash from operating activities of $30,822 for FYE 2024, compared to a net cash outflow of $1,674,395 in FYE 2023.

 

The improvement in cash flow from operating activities mainly attributable to a reduction of $170,431 in inventory levels, significant decreases in deposits, prepayments, and advances to suppliers, contributing $502,701 to cash flow and increased support from shareholders, with amounts due to shareholders rising by $970,597.

 

These improvements were partially offset by reductions in deferred revenue and increased accounts payable and accruals. As of August 31, 2024, the Company’s cash and cash equivalents stood at $152,985. The improved operating cash flow reflects the Company’s ongoing efforts to optimize cost efficiency positioning it for sustainable growth.

 

During the FYE 2024, cash used in investing activities amounted to $146,269. This was primarily attributable to capital expenditures for the purchase of property, plant and equipment, reflecting the company’s continued investments in operational infrastructure to support its long-term growth stategy.

 

Cash used in financing activities for FYE 2024 totaled $456,253, consisting of $6,677 for hire purchase payments and $449,576 related to the payment of offering cots.

 

Seasonality

 

The Company’s business is not subject to seasonality.

 

Off-Balance Sheet Arrangements.

 

As of the date of this Annual Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

Critical Accounting Policies

 

Revenue recognition

 

Our revenue recognition policy is in compliance with ASC 606, Revenue from Contracts with Customers whereby revenue is recognized when a customer obtains control of promised goods and is recognized in an amount that reflects the consideration that we expect to receive in exchange for those goods. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that we expect to receive in exchange for those goods. We apply the following five-step model to determine this amount:

 

  (i) identification of the promised goods and services in the contract;
     
  (ii) determination of whether the promised goods and services are performance obligations, including whether they are distinct in the context of the contract;
     
  (iii) measurement of the transaction price, including the constraint on variable consideration;
     
  (iv) allocation of the transaction price to the performance obligations; and
     
  (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

 

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We only apply the five-step model to contracts when it is probable that we will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, we review the contract to determine which performance obligations we must deliver and which of these performance obligations are distinct. We recognize as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, our performance obligations are transferred to customers at a point in time, typically upon delivery for local sales and upon shipment of the products for export sale.

 

For all reporting periods, we have not disclosed the value of unsatisfied performance obligations for all product revenue contracts with an original expected length of one year or less, which is an optional exemption that is permitted under the adopted rules.

 

Estimates and Assumptions

 

In preparing our consolidated financial statements, we use estimates and assumptions that affect the reported amounts and disclosures. Our estimates are often based on complex judgments, probabilities, and assumptions that we believe to be reasonable, but that are inherently uncertain and unpredictable. We are also subject to other risks and uncertainties that may cause actual results to differ from estimated amounts. Significant estimates in FYE 2024 and 2023 include the assumptions used to value tax liabilities, derivative financial instruments, estimates of the allowance for deferred tax assets, accounts receivable allowance, impairment of long-lived assets and inventory write-offs.

 

Going Concern

 

The Company’s financial statements as of August 31, 2024, is prepared using generally accepted accounting principles in the United States of America (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established a sustainable ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern.

 

As of August 31, 2024, and 2023, the Company had an accumulated deficit of $39,401,857 and $13,523,266 respectively. The Company incurred net loss of $26,315,396 and $6,317,373 for the years ended August 31, 2024, and 2023, respectively. The cash generated from operating activities was $30,822 for the year ended August 31, 2024, the cash used in operating activities was $1,674,395 for the year ended August 31, 2023. It was brought to the attention of the Management to assess going concern considering all facts and circumstances about the foreseeable future of the Company as well as its assets and liabilities on the basis that it will be able to realize and discharge them in the normal course of business.

 

To address these challenges and ensure the Company’s long-term viability, Management has developed a strategic plan focused on the continued development and expansion of its HVAC business. Key initiatives include:

 

 Expansion of Product Offerings: Broadening the range of HVAC products to meet diverse market needs.
 Geographical Expansion: Penetrating new markets to drive revenue growth.
 Revenue Diversification: Expanding customer segments across retail, commercial, industrial, and project-based clients, as well as private label and licensing opportunities.
 Improved Profitability: Achieving economies of scale through operational efficiencies and growth.

 

Additionally, the Company is actively pursuing plans to raise additional funding to support operations and business expansion. This includes preparations to uplist on the Nasdaq Capital Market, which is expected to enhance access to capital and further strengthen the Company’s financial position.

 

The consolidated financial have been prepared assuming that the Company will continue as a going concern and accordingly financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Material Commitments

 

We have no material commitments as of August 31, 2024.

 

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Recent Accounting Pronouncements

 

Recently Issued Accounting Pronouncements – Adopted

 

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related earnings per share guidance. This standard becomes effective for the Company beginning on October 1, 2024. Adoption is either a modified retrospective method or a fully retrospective method of transition. The Company adopted this guidance effective September 1, 2023, and the adoption of this standard did not have a material impact on its consolidated financial statements.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 provides guidance for recognizing credit losses on financial instruments based on an estimate of current expected credit losses model. The amendments are effective for fiscal years beginning after December 15, 2019. Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies for discal years beginning after December 15, 2022. We adopted ASU 2016-13 on September 1, 2023, and it did not have a material impact on out consolidated financial statements and related disclosures.

 

Recently Issued Accounting Pronouncements – Unadopted

 

In November 2023, the FASB issued ASU 2023-07, Improvement to Reportable Segment Disclosures. This ASU aims to improve segment disclosures through enhanced disclosures about significant segment expenses. The standard requires disclosure of significant expense categories and amounts for such expenses, including those segment expenses that are regularly provided to the chief operating decision maker, easily computable from information that is regularly provided, or significant expenses that are expressed in a form other than actual amounts. This standard will be effective for the Company in Fiscal Year 2025 and is required to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of the additional disclosure requirements on the Company’s consolidated financial statements.

 

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, a final standard on improvements to income tax disclosures which applies to all entities subject to income taxes. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. This standard will be effective for the Company in Fiscal Year 2026 and should be applied prospectively. The Company is currently evaluating the impact of the additional disclosure requirements on the Company’s consolidated financial statements.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by Management to have a material impact on the Company’s present or future financial statements.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not Applicable.

 

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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and the Board of Directors of EvoAir Holdings Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of EvoAir Holdings Inc. (the “Company”) as of August 31, 2024 and 2023, the related statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for each of the two years ended August 31, 2024 and 2023, and the related notes to the financial statements and schedule (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2024 and 2023, and the results of its operations and its cash flows for the year ended August 31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America.

 

Going concern uncertainty

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in Note 3 to the financial statements, the Company had an accumulated deficit of $39,401,857. The Company incurred net loss of $26,315,396 for the year ended August 31, 2024. The cash generated from operating activities was $30,822 for the year ended August 31, 2024. The Company has accumulated losses since inception which raise doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

/s/ Audit Alliance LLP

 

We have served as the Company’s auditor since 2021.

 

Singapore

November 29, 2024

(PCAOB ID No. 3487)

 

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EVOAIR HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

(In U.S. Dollars, except share data or otherwise stated)

AS OF AUGUST 31, 2024 AND 2023

 

   August 31, 2024   August 31, 2023 
ASSETS          
Current assets          
Cash and cash equivalents   152,985   $779,049 
Accounts receivable   62,914    44,130 
Inventories   460,047    630,478 
Deposit, prepayments and other receivables   114,806    617,507 
Total current assets   790,752    2,071,164 
           
Non-current assets          
Property, plant and equipment, net   357,778    463,387 
Operating lease right-of-use assets   199,647    271,021 
Deferred offering cost   449,576    - 
Technology-related intangible assets, net   51,481,358    76,218,786 
Total non-current assets   52,488,359    76,953,194 
           
TOTAL ASSETS  $53,279,111   $79,024,358 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current liabilities          
Accounts payable and accruals  $267,900   $170,888 
Other payables   95,831    27,487 
Deferred revenue   10,012    440,069 
Hire purchase creditor   8,758    9,224 
Amounts due to shareholders   1,202,692    232,095 
Operating lease liabilities    99,445    84,879 
Total current liabilities   1,684,638    964,642 
           
Non-current liabilities          
Hire purchase creditor   4,320    10,531 
Operating lease liabilities   108,891    198,163 
Total non-current liabilities   113,211    208,694 
           
TOTAL LIABILITIES   1,797,849    1,173,336 
           
Commitments and contingencies (Note 14)   -    - 
           
Shareholders’ equity          
Common stock, 250,000,000 authorized; $0.001 par value, 25,685,591 and 25,577,734 shares issued and outstanding as at August 31, 2024 and August 31, 2023*   25,686    25,578 
Additional paid in capital   91,513,818    90,447,874 
Shares to be issued   -    1,066,052 
Accumulated other comprehensive loss   (48,827)   (17,036)
Accumulated deficit   (39,401,857)   (13,523,266)
Non-controlling interest   (607,558)   (148,180)
Total shareholders’ equity   51,481,262    77,851,022 
           
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $53,279,111   $79,024,358 

 

*Retroactively presented to reflect 1-for-4 reverse stock split effective on September 11, 2024.

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

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EVOAIR HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In U.S. Dollars, except share data or otherwise stated)

FOR THE YEARS ENDED AUGUST 31, 2024 AND 2023

 

   August 31, 2024   August 31, 2023 
         
Revenue  $314,719    388,038 
Cost of revenue   323,038    424,189 
Gross loss   (8,319)   (36,151)
           
Operating expenses:          
Selling and marketing expenses   61,211    33,531 
General and administrative expenses   26,250,276    6,063,488 
Total operating expenses   26,311,487    6,097,019 
           
Loss from operation   (26,319,806)   (6,133,170)
           
Other income/(expense)          
Interest income/(expense)   142    (11)
Other income/(expense)   4,268    (184,192)
Total other income/(expense)   4,410    (184,203)
           
Loss from operation before income taxes   (26,315,396)   (6,317,373)
           
Income tax expenses   -    - 
           
Net loss  $(26,315,396)  $(6,317,373)
           
Less: Net loss attributable to non-controlling interests   (436,805)   (259,480)
           
Net loss attributable to equity holders of the Company   (25,878,591)   (6,057,893)
           
Other comprehensive loss:          
Foreign currency translation adjustment   (54,364)   (77,381)
Total comprehensive loss   (25,932,955)   (6,135,274)
           
Less: net comprehensive loss attributable to non-controlling interests   (22,573)   (5,535)
           
Net comprehensive loss attributable to equity holders of the Company   (25,910,382)   (6,129,739)
           
Net loss attributable to equity holders of the Company per common share:          
Basic and diluted*   (1.01)   (0.24)
           
Weighted average number of common shares outstanding:          
Basic and diluted   25,678,138    25,505,879 

 

*Retroactively presented to reflect 1-for-4 reverse stock split effective on September 11, 2024.

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

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EVOAIR HOLDINGS INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(In U.S. Dollars, except share data or otherwise stated)

FOR THE YEARS ENDED AUGUST 31, 2024 AND 2023

 

   shares   amount   capital   deficit   income   be issued  

interests

   Total 
   Common Stock   Additional paid in   Accumulated   Accumulated other comprehensive   Shares to   Non-controlling     
   Shares*   amount   capital   deficit   income   be issued  

interests

   Total 
                             
Balance as of August 31, 2022    25,463,349   $25,464   $89,202,262   $(7,465,373)  $65,880   $75,000   $(58,754)  $81,844,479 
Capital contribution   -    -    101,998    -         -    164,519    266,517 
Issuance of common stock for Cash   114,385    114    1,143,614    -    -    991,052    -    2,134,780 
Foreign currency translation adjustment   -    -    -    -    (82,916)   -    5,535    (77,381)
Net loss   -    -    -    (6,057,893)   -    -    (259,480)   (6,317,373)
Balance as of August 31, 2023    25,577,734   $25,578   $90,447,874   $(13,523,266)  $(17,036)  $1,066,052   $(148,180)  $77,851,022 
Issuance of common stock for Cash   93,455    94    934,504    -    -    (934,598)   -    - 
Issuance of common stock for service   14,402    14    131,440    -    -   (131,454)   -    - 
Foreign currency translation adjustment   -    -    -    -    (31,791)   -    (22,573)   (54,364)
Net loss   -    -    -    (25,878,591)   -    -    (436,805)   (26,315,396)
Balance as of August 31, 2024   25,685,591   $25,686   $91,513,818   $(39,401,857)  $(48,827)  $-   $(607,558)  $51,481,262 

 

*Retroactively presented to reflect 1-for-4 reverse stock split effective on September 11, 2024.

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

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EVOAIR HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. Dollars, except share data or otherwise stated)

FOR THE YEARS ENDED AUGUST 31, 2024 AND 2023

 

   August 31, 2024   August 31, 2023 
         
Cash flows from operating activities          
Net loss  $(26,315,396)   (6,317,373)
Adjustments for non-cash income and expenses:          
Depreciation of property, plant and equipment   251,878    132,170 
Amortization of technology-related intangible assets   4,157,388    4,157,389 
Technology-related intangible asset impairment   20,580,040    - 
Property, plant and equipment impairment and abandonments   -    21,387 
Changes in operating assets and liabilities:          
(Increase)/decrease in accounts receivables   (18,784)   41,830 
Decrease/(increase) in inventories   170,431    (11,482)
Decrease in deposit, prepayments and advances to suppliers   502,701    214,159 
Decrease in operating lease right-of-use assets   71,374    170,999 
Increase/(decrease) in accounts payable and accruals   97,012    (45,942)
Decrease in deferred revenue   (430,057)   (73,003)
Decrease in operating lease liabilities   (74,706)   (189,830)
Increase/(decrease) in other payables   68,344    (4,493)
Increase in amounts due to shareholders   970,597    229,794 
           
Net cash generated from /(used in) operations  $30,822   $(1,674,395)
           
Cash flows from investing activity          
Purchase of property, plant and equipment   (146,269)   (14,189)
Cash used in investing activity  $(146,269)  $(14,189)
           
Cash flows from financing activities          
Payments of hire purchase   (6,677)   (8,587)
Payment of offering costs   (449,576)   - 
Proceeds from issuance of common stock   -    1,143,728 
Proceeds from shares to be issued   -    991,052 
Proceeds from capital contribution   -    266,517 
Net cash (used in)/generated from financing activities  $(456,253)  $2,392,710 
           
Net (decrease)/increase in cash and cash equivalents   (571,700)   704,126 
Effect of exchange rate changes   (54,364)   (77,381)
Cash and cash equivalents at start of year   779,049    152,304 
Cash and cash equivalents at end of year   152,985    779,049 

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

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EVOAIR HOLDINGS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED AUGUST 31, 2024, AND 2023

 

NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS

 

EvoAir Holdings Inc. (formerly Unex Holdings Inc.) (the “Company”, “EVOH”, “we”, “us”, or “our”) is a corporation established under the corporation laws in the State of Nevada, United States of America (“U.S”) on February 17, 2017. The Company has adopted an August 31 fiscal year end.

 

On December 20, 2021, the Company and Low Wai Koon (“Dr. Low”) entered into a share transfer agreement, (the “EvoAir International Share Transfer Agreement”), pursuant to which Dr. Low agreed to sell all of his ordinary shares of EvoAir International Limited (“EvoAir International”) to the Company for a consideration of US$100 (“EvoAir Transaction”). EvoAir International, through its subsidiaries upon completion of the Transactions (defined hereunder), is engaged in the research and development (“R&D”), manufacturing, trading, sale of heating, ventilation and air conditioning (“HVAC”) products and related services in Asia.

 

Pursuant to the terms of a share transfer agreement dated December 20, 2021, Dr. Low, the then sole executive officer and director of the Company and the owner of 2,000,000 restricted shares of common stock, with par value of $0.001 per share (“Common Stock”) of the Company (“EvoAir Shares”) representing approximately 67.34% of the Company’s then issued and outstanding shares, sold his entire shareholding of the Company to WKL Global Limited (“WKL Global”) for an aggregate consideration of $100 (“Change of Control Transaction”). Upon completion of the Change of Control Transaction, WKL Global owned 2,000,000 shares, or approximately 67.34% of the then issued and outstanding ordinary shares of the Company, which resulted in a change of control of the Company.

 

On December 20, 2021, several transactions took place (together, the “Allotment Transactions”) whereby the Company issued and allotted in aggregate 98,809,323 ordinary shares of Common Stock to certain parties. On completion of the Allotment Transactions, the total number of issued and outstanding shares of Common Stock of the Company were 101,779,323 (“Then Enlarged Share Capital”):

 

(A) On December 20, 2021, Dr. Low and Chan Kok Wei entered into a share exchange agreement with WKL Eco Earth Holdings Pte Ltd (“WKL Eco Earth Holdings”), pursuant to which Dr. Low and Chan Kok Wei agreed to sell all their ordinary shares of WKL Green Energy Sdn Bhd (“WKL Green Energy”) to WKL Eco Earth Holdings in consideration for the allotment and issuance to WKL Global and Allegro Investment (BVI) Limited (“Allegro Investment”), a company incorporated in the British Virgin Islands (“BVI”) with 50% shareholdings held by Chan Kok Wei and Ong Bee Chen, respectively, of 24,000 shares and 6,000 EvoAir Shares, respectively, or approximately 0.02% and 0.01% of the Then Enlarged Share Capital, respectively.

 

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(B) On December 20, 2021, Dr. Low, Chan Kok Wei, Ong Bee Chen and certain sellers (“WKLEE Sellers”) entered into a share exchange agreement with WKL Eco Earth Holdings, pursuant to which Dr. Low, Chan Kok Wei, Ong Bee Chen and WKLEE Sellers agreed to sell all their ordinary shares of WKL Eco Earth Sdn Bhd (“WKL Eco Earth”) to WKL Eco Earth Holdings in consideration for the allotment and issuance to WKL Global, Allegro Investment and WKLEE Sellers of 49,320 EvoAir Shares, 8,280 EvoAir Shares and in aggregate 14,400 shares, respectively, or approximately 0.05%, 0.009% and in aggregate 0.014%, respectively, of the Then Enlarged Share Capital.
   
(C) On December 20, 2021, Tan Soon Hock, Ivan Oh Joon Wern and certain relevant interest holders (“Relevant Interest Holders”) entered into an investment exchange agreement with WKL Eco Earth Holdings, pursuant to which Tan Soon Hock, Ivan Oh Joon Wern and the Relevant Interest Holders agreed to sell all relevant interests in the EvoAir International and its subsidiaries to WKL Eco Earth Holdings in consideration for the allotment and issuance of 7,037,762 EvoAir Shares, 2,520,000 EvoAir Shares and in aggregate 6,001,794 EvoAir shares, respectively, or approximately 6.91%, 2.48% and in aggregate 5.90%, respectively, of the Then Enlarged Share Capital. The board of directors and majority shareholders of the Company have approved the transaction.
   
(D) On December 20, 2021, Dr. Low entered into two deeds of assignment of intellectual properties with WKL Eco Earth Holdings, in respect of Dr. Low’s patents and patent applications relating to eco-friendly air-conditioner condenser (external unit), evoairTM and the trademarks and trademark applications described in the deeds of assignment thereunder, and in respect of Dr. Low’s patents and patents applications relating to the portable air-conditioner, e-Cond EVOTM and the trademarks and trademark applications as described in the deeds of assignment thereunder (together, the “IP Assignments”). Pursuant to the IP Assignments, WKL Global, Allegro Investment and certain nominees shall be allotted and issued 63,362,756 EvoAir Shares, 14,297,259 EvoAir Shares and in aggregate 5,487,752 EvoAir Shares, respectively or approximately 62.25%, 14.05% and in aggregate 5.39%, respectively of the Then Enlarged Share Capital in consideration for the IP Assignments.

 

EvoAir Transaction, Change of Control Transaction and Allotment Transactions are collectively referred to as the “Transactions”. The closing of the Transactions (“Closing”) occurred on December 20, 2021 (the “Closing Date”).

 

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From and after the Closing Date, at which time EvoAir International transferred its HVAC business to the Company, the Company’s primary operations will consist of the prior operations of EvoAir International and its subsidiaries.

 

EvoAir International is a company incorporated in BVI on November 17, 2021. Effective from the December 20, 2021, it wholly owns WKL Eco Earth Holdings, a company incorporated in Singapore on July 12, 2018, which in turn wholly owns (a) WKL Eco Earth, a Malaysian company incorporated on May 17, 2017, and (b) WKL Green Energy, a Malaysian company incorporated on October 24, 2017. WKL Eco Earth Holdings acquired (c) EvoAir Manufacturing (M) Sdn Bhd (“EvoAir Manufacturing”) on April 19, 2021, a Malaysian company incorporated on March 22, 2019, as well as acquiring (d) WKL EcoEarth Indochina Co Ltd (“WKL EcoEarth Indochina”), a Cambodia company incorporated on February 4, 2021, (e) WKL Guanzhe Green Technology Guangzhou Co Ltd (“WKL Guanzhe”), a Chinese company incorporated on April 6, 2021. EvoAir Manufacturing wholly owns (f) Evo Air Marketing (M) Sdn Bhd (“Evo Air Marketing”), a Malaysian company incorporated on February 2, 2021.

 

On June 15, 2022, the Company filed a Certificate of Amendment (the “Amendment”) to the Articles of Incorporation with Nevada’s Secretary of State to change the name of the Company from Unex Holdings Inc. to EvoAir Holdings Inc. (the “Name Change”), and the Name Change became market effective on November 4, 2022. Effective on November 11, 2022, the Company’s shares began trading under the new ticker symbol “EVOH”.

 

Round 2 Stockholders

 

The Company entered into a series of offerings for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50, as follows:

 

On February 15, 2022, the Company entered into certain share subscription agreement with Ms. Ang Lee Kim Jane, who is a “non-U.S. Persons” as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to which the Company agreed to issue and sell 74,074 shares of Common Stock, at a per share purchase price of $2.50, as part of a series of offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds were $185,185.
   
On June 3, 2022, the Company entered into certain share subscription agreement with Mr. Wong Hon Wai who is a “non-U.S. Persons” as defined in Regulation S of the Securities Act pursuant to which the Company agreed to issue and sell 5,000 shares of Common Stock, at a per share purchase price of $2.50, as part of a series of offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds were $12,500.

 

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On October 25, 2022, the Company entered into Regulation S share subscription agreements with eight investors, each of whom represented that it was a “non-U.S. Persons” as defined in Securities Act. On the same date, the Company entered into Regulation D share subscription agreements with two investors, each of whom represented that it was an “Accredited Investors” as defined in Regulation D of the Securities Act. Pursuant to the share subscription agreements, the Company agreed to issue and sell in aggregate, (i) 129,621 shares of Common Stock to the Regulation S investors, and (ii) 15,000 shares of Common Stock to the Regulation D investors, respectively, at a per share purchase price of $2.50, as part of a series of offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds in aggregate were $361,553.
   
On February 20, 2023, the Company entered into Regulation S share subscription agreements with eleven investors, each of whom represented that it was a “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the share subscription agreements, the Company agreed to issue and sell in aggregate, 57,783 shares of Common Stock to the Regulation S investors, at a per share purchase price of $2.50 as part of a series of the offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds in aggregate were $144,443.
   
On July 13, 2023, the Company entered into Regulation S share subscription agreements with 31 investors, each of whom represented that it was a “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the share subscription agreements, the Company agreed to issue and sell in aggregate, 250,132 shares of Common Stock to the Regulation S Investors, at a per share purchase price of $2.50 as part of a series of the offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds in aggregate were approximately $625,330.
   
On September 7, 2023, the Company entered into Regulation S share subscription agreements with 71 investors, each of whom represented that it was a “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the share subscription agreements, the Company agreed to issue and sell in aggregate, 365,164 shares of Common Stock to the Regulation S investors, at a per share purchase price of $2.50 as part of a series of the offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds in aggregate were approximately $912,889.
   
On November 21, 2023, the Company entered into a Regulation S share subscription agreement with Wong Chun Shoong who represented that he was a “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the share subscription agreement, the Company agreed to issue and sell in aggregate, 8,658 shares of Common Stock to the Regulation S investors, at a per share purchase price of $2.50 as part of a series of the offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $2.50. The gross proceeds in aggregate were approximately $21,645.
   
  Reverse Stock Split
   
  On April 12, 2024, the Company’s board of directors (the “Board”) unanimously resolved to effect a reverse stock split of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1-for-4. Following such resolution, on September 9, 2024, the Company filed a Certificate of Amendment (the “Certificate of Amendment”) with the Secretary of State of the State of Nevada to effect the reverse stock split, with an effective time of 9:00AM. Eastern Time on September 11, 2024 (the “Reverse Stock Split”).
   
  Split Adjustment; Treatment of Fractional Shares
   
  As a result of the 1:4 Reverse Stock Split, each 4 pre-split shares of Common Stock outstanding will automatically combine into one new share of Common Stock without any action on the part of the holders, and the number of outstanding shares of Common Stock was reduced from 102,742,362 shares to 25,685,591 shares (subject to rounding up of fractional shares to the nearest whole number).
   
  No fractional shares was issued in connection with the Reverse Stock Split. Fractional shares were rounded up to the nearest whole number
   
  Share Issuance
   
  On November 25, 2024, the Company issued, in aggregate, 679,516 shares of Common Stock, representing 2.5% to certain consultant in consideration for their services in relation to proposed initial public offering.
   
  On November 25, 2024, the Company issued, in aggregate, 815,419 shares of Common Stock, representing 3.0% to certain consultant in consideration for their consulting services.

 

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Details of the Company’s subsidiaries:

 

Subsidiaries of EVOH  Attributable interest 
EvoAir International Limited (British Virgin Islands)   100%
Subsidiary of EvoAir International Limited     
WKL Eco Earth Holdings Pte Ltd (Singapore)   100%
Subsidiaries of WKL Eco Earth Holdings Pte Ltd     
WKL Eco Earth Sdn Bhd (Malaysia)