U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
Or
For the transition period from __________ to __________
Commission
file number:
(Exact name of Company as specified in its charter)
| (State of incorporation) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Company’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Act:
| Title of Each Class | Name of Each Exchange On Which Registered | |
| Common Stock, $0.001 par value per share | N/A |
Indicate by check mark if the Company is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the Company 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 issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding
12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate
by check mark whether the Company has submitted electronically and posted on its corporate Web site, if any, 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 Company was required to submit and post such files). Yes ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Company’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. ☐
Indicate by check mark whether the Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☐ | Smaller reporting company | ||
| (Do not check if a 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 accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate
by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
As of October 4, 2023, shares of the issuer’s common stock were issued and outstanding.
Documents Incorporated By Reference: None
FORM 10-Q
TABLE OF CONTENTS
Page No. | ||
| PART I. - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | |
| Condensed Consolidated Balance Sheets as of August 31, 2023 (Unaudited) and May 31, 2023 (Audited) | 3 | |
| Condensed Consolidated Statements of Operations for the Three Months Ended August 31, 2023 and 2022 | 4 | |
| Condensed Consolidated Statements of Stockholders’ Equity/(Deficit) | 5 | |
| Condensed Consolidated Statements of Cash Flows for the Three Months Ended August 31, 2023 and 2022 | 6 | |
| Notes to Financial Statements (Unaudited) | 7 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 31 |
| Item 4. | Controls and Procedures | 31 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 32 |
| Item 1A | Risk Factors | 32 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 32 |
| Item 3. | Defaults Upon Senior Securities | 32 |
| Item 4. | Mine Safety Disclosures | 32 |
| Item 5. | Other Information | 32 |
| Item 6. | Exhibits | 32 |
| SIGNATURES | 33 | |
| 2 |
SAVMOBI TECHNOLIGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| August
31, 2023 (Unaudited) | May
31, 2023 (Audited) | |||||||
| $ | $ | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Amount due from related parties | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Right-of-use assets | ||||||||
| Other non-current assets | ||||||||
| Total non-current assets | ||||||||
| Total Assets | ||||||||
| Liabilities and Stockholders’ (Deficit) Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payables | ||||||||
| Advances from customers | ||||||||
| Other current payables | ||||||||
| Taxes payable | ||||||||
| Amounts due to related parties | ||||||||
| Operating lease liabilities, current | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Long-term loan | ||||||||
| Operating lease liabilities | ||||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ (Deficit) Equity | ||||||||
| Common stock ($ par value, shares authorized, share issued and outstanding as of August 31, 2023 and May 31, 2023, respectively) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total (Deficit) Equity | ( | ) | ( | ) | ||||
| Total Liabilities and (Deficit) Equity | ||||||||
| 3 |
SAVMOBI TECHNOLIGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
for the three months ended August 31, 2023 and 2022
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Net revenues | ||||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Gross loss | ( | ) | ( | ) | ||||
| Operating expenses: | ||||||||
| Tax and surcharges | ( | ) | ( | ) | ||||
| Selling and marketing expenses | ( | ) | ( | ) | ||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Research and development expenses | ( | ) | ( | ) | ||||
| Impairment losses | ( | ) | ||||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Interest income | ||||||||
| Other income/(expense) | ( | ) | ||||||
| Total other income and (expenses) | ( | ) | ||||||
| Loss before taxes from operations | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Other comprehensive income: | ||||||||
| Foreign currency translation income | ||||||||
| Total comprehensive loss | ( | ) | ( | ) | ||||
| Net loss attributable to : | ||||||||
| Owners of the Company | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Total comprehensive loss attributable to : | ||||||||
| Owners of the Company | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Loss per common share: | ||||||||
| Basic and diluted | ) | ) | ||||||
| Weighted Average Number of Common Share Outstanding: | ||||||||
| Basic and Diluted | ||||||||
| 4 |
SAVMOBI TECHNOLIGY, INC. AND SUBSIDIARIES
CONDENSE CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the three months ended August 31, 2023 and 2022
| Common Stock | Additional Paid In | Retained | Other Comprehensive | Total Shareholders’ | Non- controlling | Total | ||||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Income/(loss) | Equity | Interest | Equity | |||||||||||||||||||||||||
| Balance at, May 31, 2022 (Unaudited) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustments | - | |||||||||||||||||||||||||||||||
| Balance at, August 31, 2022 (Unaudited) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at, May 31,2023 (Audited) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustments | - | ( | ) | |||||||||||||||||||||||||||||
| Balance at, August 31, 2023 (Unaudited) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| 5 |
SAVMOBI TECHNOLIGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended August 31, 2023 and 2022
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Depreciation of right-of-use assets | ||||||||
| Bad debt expense | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Other non-current assets | ||||||||
| Accounts payable and other current liabilities | ||||||||
| Net cash provided by/(used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities | ||||||||
| Repaid for right-of-use assets | ( | ) | ( | ) | ||||
| Proceeds from sale of property and equipment | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash (used in)/provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Amount due to related party | ||||||||
| Proceeds from long-term borrowings | ||||||||
| Repayments of long-term borrowings | ( | ) | ||||||
| Net cash (used in)/provided by financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | ||||
| Net increase/(decrease) of cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents–beginning of year | ||||||||
| Cash and cash equivalents–end of year | ||||||||
| Supplementary cash flow information: | ||||||||
| Interest received | ||||||||
| 6 |
1. Organization and Principal Activities
On March 6, 2015, SavMobi Technology Inc. (“the Company”), was incorporated in the State of Nevada and established a fiscal year end of May 31. Initially the business platform was in providing application software to a global vendor platform to connect people to businesses and provide a new shopping experience.
On
May 18, 2017, Lakwinder Singh Sidhu, the Company’s former Director and CEO, completed a transaction with New Reap Global Ltd.,
by which New Reap Global Ltd. acquired shares of common stock, representing
On March 19, 2018 New Reap Global transferred restricted shares to Eng Wah Kung.
On May 10, 2018 and May 30, 2018, were transferred to Arden Wealth and Trust. shares are free trading from HongLing Shang, restricted shares from New Reap Global, LTD and each from Xuedong Zhang, Jingmei Jiang, Qianxian, Yulan Qi, Baoxin Song, Jianlong Wu. On June 15, 2018 New Reap Global transferred restricted shares to EMRD Global Holdings.
On June 26, 2018 New Reap Global transferred restricted shares to FORTRESS ADVISORS, LLC and to Baywall Inc.
On
June 8, 2022, three (3) shareholders of the Company, including Ma Hongyu, Ye Caiyun, and Li Wenzhe entered into stock purchase agreements
with an aggregate of five (5) non-U.S. accredited investors (the “Purchase Agreements”) to sell an aggregate of
shares of common stock of the Company, which represents approximately
The
Purchase Agreements were fully executed and delivered on June 8, 2022. Zhang Yiping and Chen Xinxin acquired approximately
| Purchasers | Shares acquired | % | ||||||
| Zhang Yiping | % | |||||||
| Chen Xinxin | % | |||||||
| Wang Yanfang | % | |||||||
| Liu Chen | % | |||||||
| Liu Ying | % | |||||||
On
December 15, 2022, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Intellegence
Parking Group Limited (“Intellegence”), a Cayman Island company formed on June 29, 2022, Chen Xinxin (“Xinxin”),
the officer and director, and control shareholder of Intelligence and the shareholders of Intelligence (the “Shareholders”).
Under the Share Exchange Agreement, One Hundred Percent (
Immediately after completion of such share exchange, SVMB will hold a total of issued and outstanding shares of Intellegence. Zhang Guowei is the sole director of Intellegence Parking Group Limited.
| 7 |
Consequently, SVMB has ceased to fall under the definition of shell company as define in Rule 12b-2 under the Exchange Act of 1934, as amended (the “Exchange Act”) and Intellegence is now a wholly owned subsidiary.
Intellegence Parking Group Limited (“Intellegence Parking”) was incorporated on June 29, 2022 under the laws of Cayman Islands. It is controlled by Guowei Zhang, Xiujuan Chen, Hongwei Li and Chuchu Zhang. Intellegence Parking is an investment holding company.
Intellegence Parking (Hong Kong) Limited (“Intellegence HK”) was incorporated on July 20, 2022 under the laws of Hong Kong SAR. Intelligence HK is a wholly subsidiary of Intellegence Parking since incorporation and it is an investment holding company.
Huixin Zhiying (Hangzhou) Technology Co. (“Huixin”) was incorporated on October 24, 2022 under the laws of PRC. It is a wholly owned subsidiary of Intellegence HK since incorporation and it is an investment holding company.
Pursuant to the Business Operation Agreement entered into among Huixin WFOE and Zhejiang Jingbo Ecological Technology Co. between November 15 and 11, 2022, the Company obtained control over these PRC domestic companies by entering into a series of contractual arrangements with these PRC domestic companies and their respective Nominee Shareholders. These contractual agreements include power of attorney, exclusive option agreement, exclusive business cooperation agreements, equity pledge agreements, and other operating agreements. These contractual agreements can be extended at the relevant PRC subsidiaries’ options prior to the expiration date. As a result, the Company maintains the ability to control these PRC domestic companies, is entitled to substantially all of the economic benefits from these PRC domestic companies and is obligated to absorb all expected losses of these PRC domestic companies.
The Company consolidated its financial statements due to common control.
The Company’s major subsidiaries, VIEs and VIE’s subsidiaries are described as follows:
| Companies | Country/Place and date of incorporation/establishment | Percentage of direct or indirect economic benefits ownership August 31, | ||||||||
| 2023 | 2022 | |||||||||
| Major Subsidiaries | ||||||||||
| Intellegence Parking Group Limited | Cayman | % | % | |||||||
| Intellegence Parking (Hong Kong) Limited | Hong Kong | % | % | |||||||
| Huixin Zhiying (Hangzhou) Technology Co. | PRC | % | % | |||||||
| Major VIEs (Including VIE’s Subsidiaries) | ||||||||||
| Zhejiang Jingbo Ecological Technology Co. | PRC | % | % | |||||||
| Hangzhou Zhuyi Technology Co. | PRC | % | % | |||||||
2. Variable Interest Entities
Pursuant to the Business Operation Agreement entered into among Huixin WFOE and Zhejiang Jingbo Ecological Technology Co., the Company obtained control over these PRC domestic companies by entering into a series of contractual arrangements with these PRC domestic companies and their respective Nominee Shareholders. These contractual agreements include power of attorney, exclusive option agreement, exclusive business cooperation agreements, equity pledge agreements, and other operating agreements. These contractual agreements can be extended at the relevant PRC subsidiaries’ options prior to the expiration date. As a result, the Company maintains the ability to control these PRC domestic companies, is entitled to substantially all of the economic benefits from these PRC domestic companies and is obligated to absorb all expected losses of these PRC domestic companies.
Zhejiang Jingbo Ecological Technology Co. is a PRC company which was formed on December 18, 2019 and is engaged in the business of smart parking application software and platform operations business. Zhang Guowei has been the Chairman of Zhejiang Jingbo Ecological Technology Co. since December 2019.
| 8 |
Hangzhou
Zhuyi Technology Co. (“Hangzhou Zhuyi”) was incorporated under the laws of the PRC on November 13, 2017 with a capital of
RMB
Zhejiang Linglingyi Network Technology Co. (“Linglingyi”) was incorporated on November 17, 2018. Its sole director is Guowei Zhang. Hangzhou Zhuyi acquired % of Linglingyi on April 29. 2022. Its main businesses are smart parking projects and smart parking mobile applications.
Liangshan Tongfu Technology Co. (“Liangshan”) was incorporated on November 13, 2018. On September 29, 2022, Hangzhou Zhuyi entered in a share agreement with Hangzhou Kaai Technology Co. to purchase % of Liangshan’s shares. As a result, Hangzhou Zhuyi holds % of Liangshan. Liangshan is into smart parking projects and smart parking mobile applications businesses.
Zhuyi Technology (Anping) Co. (“Anping”) was incorporated on May 12, 2022, which is % owned by Hangzhou Zhuyi and it mainly focuses on smart parking projects and smart parking mobile applications.
Haikou Zhuyi Technology Co. (“Haikou”) was incorporated on May 9, 2022 which is a wholly subsidiary of Hangzhou Zhuyi. It mainly focuses on smart parking projects and smart parking mobile applications.
Yibin Huibo Technology Co. (“Yibin”) was incorporated on July 4, 2019, which is % owned by Hangzhou Zhuyi. It mainly focuses on smart parking projects and smart parking mobile applications.
Xide Zhuyi Technology Co. (“Xide”) was incorporated on October 14, 2021, which is % owned by Hangzhou Zhuyi. It mainly focuses on smart parking projects and smart parking mobile applications.
Hubei Tongpo Parking Management Co. (“Tongpo”) was incorporated on November 4, 2020, which is a wholly subsidiary of Hangzhou Zhuyi. It mainly focuses on smart parking projects and smart parking mobile applications.
Zhuyi Technology (Taining) Co. (“Taining”) was incorporated on May 18, 2021, which is % owned by Hangzhou Zhuyi. It mainly focuses on smart parking projects and smart parking mobile applications.
Intellengence Parking Group Limited provides smart parking projects, smart parking mobile applications and cloud platform construction innovation through its consolidated subsidiaries, variable interest entities (“VIE”s) and VIE’s subsidiaries (Collectively, the “Group”).
a. Contractual agreements with VIEs
Power of Attorney
Pursuant to the power of attorney agreements among the Wholly Foreign Owned Enterprises (“WFOE”s), the VIEs and their respective Nominee Shareholders, each Nominee Shareholder of the VIEs irrevocably undertakes to appoint the WFOE, as the attorney-in-fact to exercise all of the rights as a shareholder of the VIEs, including, but not limited to, the right to convene and attend shareholders’ meeting, vote on any resolution that requires a shareholder vote, such as appoint or remove directors and other senior management, and other voting rights pursuant to the articles of association (subject to the amendments) of the VIEs. Each power of attorney agreement is irrevocable and remains in effect as long as the Nominee Shareholder continues to be a shareholder of the VIEs. Unless otherwise required by PRC Laws, none of the VIEs or its shareholders can unilaterally terminate this agreement.
Exclusive Option Agreements
Pursuant to the exclusive option agreements among WFOEs, the VIEs and their respective Nominee Shareholders, the Nominee Shareholders granted WFOEs exclusive right to purchase, when and to the extent permitted under PRC law, all or part of the equity interests from shareholders of VIEs. The exercise price for the options to purchase all or part of the equity interests shall be the minimum amount of consideration permissible under then applicable PRC law. The agreement shall be valid until WFOEs or its designated party purchases all the shares from shareholders of VIEs. The terms of the exclusive option agreement are 10 years and can be automatically extended until such time WFOEs delivers a confirmation letter specifying the renewal term of this agreement. Unless otherwise required by PRC Laws, the VIEs or its shareholders shall not unilaterally terminate this agreement.
| 9 |
Exclusive Business Corporation Agreement
Pursuant to the exclusive business cooperation agreements among the WFOEs and the VIEs, respectively, the WFOEs have the exclusive right to provide the VIEs with services related to, among other things, comprehensive technical support, professional training, consulting services, trademark and copyright of system,. Without prior written consent of the WFOEs, the VIEs agree not to directly or indirectly accept the same or any similar services provided by any others regarding the matters ascribed by the exclusive business cooperation agreements. The VIEs agree to pay the WFOEs services fees, which shall be determined by the WFOEs. The WFOEs have the exclusive ownership of intellectual property rights created as a result of the performance of the agreements. The agreements shall remain effective except that the WFOEs are entitled to terminate the agreements in writing. Unless otherwise required by PRC Laws, the VIEs shall not unilaterally terminate this agreement.
Equity Pledge Agreement
Pursuant to the equity pledge agreements among the WFOEs, the VIEs and their respective Nominee Shareholders, the Nominee Shareholders of the VIEs pledged all of their respective equity interests in the VIEs to the WFOEs as collaterals for performance of the obligations of the VIEs and their Nominee Shareholders under the exclusive business cooperation agreements, the power of attorney agreements, and the exclusive option agreements. The Nominee Shareholders of the VIEs also undertake that, during the term of the equity pledge agreements, unless otherwise approved by the WFOEs in writing, they will not transfer the pledged equity interests or create or allow any new pledge or other encumbrance on the pledged equity interests. These equity pledge agreements remain in force until VIEs and their respective Nominee Shareholders discharge all their obligations under the contractual agreements.
Spousal Consent Letter
Pursuant to the spousal consent letters, the spouses of some of the individual Nominee Shareholders of the VIEs unconditionally and irrevocably agree that the equity interest in the VIEs held by and registered in the name of his or her respective spouse will be disposed of pursuant to the relevant exclusive business cooperation agreements, equity pledge agreements, the exclusive option agreements and the power of attorney agreements, without his or her consent. In addition, each of them agrees not to assert any rights over the equity interest in the VIEs held by their respective spouses. In addition, in the event that any of them obtains any equity interest in the VIEs held by their respective spouses for any reason, such spouses agree to be bound by similar obligations and agreed to enter into similar contractual arrangements.
b. Risks in relation to the VIE structure
On March 15, 2019, the National People’s Congress adopted the Foreign Investment Law of the PRC, which became effective on January 1, 2020, together with their implementation rules and ancillary regulations. The Foreign Investment Law does not explicitly classify contractual arrangements as a form of foreign investment, but it contains a catch-all provision under the definition of “foreign investment”, which includes investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. It is unclear whether the Group’s corporate structure will be seen as violating the foreign investment rules as the Group is currently leveraging the contractual arrangements to operate certain business in which foreign investors are prohibited from or restricted to investing. If variable interest entities fall within the definition of foreign investment entities, the Group’s ability to use the contractual arrangements with its VIEs and the Group’s ability to conduct business through the VIEs could be severely limited.
If the PRC government otherwise finds that the Group in violation of any existing or future PRC laws or regulations or lacks the necessary permits or licenses to operate the business, the Group’s relevant PRC regulatory authorities could:
● revoke the business licenses and/or operating licenses of the Group’s PRC entities;
| 10 |
● impose fines;
● confiscate any income that they deem to be obtained through illegal operations, or impose other requirements with which the Group may not be able to comply;
● discontinue or place restrictions or onerous conditions on the Group’s operations;
● place restrictions on the right to collect revenues;
● require the Group to restructure ownership structure or operations, including terminating the contractual agreements with the VIEs and deregistering the equity pledges of the VIEs, which in turn would affect the ability to consolidate the financial results of and derive economic interests from the VIEs and their subsidiaries;
● restrict or prohibit the use of the proceeds from financing activities to finance the business and operations of the VIEs and their subsidiaries; or
● take other regulatory or enforcement actions that could be harmful to the Group’s business.
The imposition of any of these penalties may result in a material and adverse effect on the Group’s ability to conduct the Group’s business. In addition, if the imposition of any of these penalties causes the Group to lose the rights to direct the activities of the VIEs or the right to receive its economic benefits, the Group would no longer be able to consolidate the VIEs. The management believes that the likelihood for the Group to lose such ability is remote based on current facts and circumstances. However, the interpretation and implementation of the laws and regulations in the PRC and their application to an effect on the legality, binding effect and enforceability of contracts are subject to the discretion of competent PRC authorities, and therefore there is no assurance that relevant PRC authorities will take the same position as the Group herein in respect of the legality, binding effect and enforceability of each of the contractual arrangements. Meanwhile, since the PRC legal system continues to rapidly evolve, it may lead to changes in PRC laws, regulations and policies or in the interpretation and application of existing laws, regulations and policies, which may limit legal protections available to the Group to enforce the contractual arrangements should the VIEs or the Nominee Shareholders of the VIEs fail to perform their obligations under those arrangements. The enforceability, and therefore the benefits, of the contractual agreements between the Company and the VIEs depend on Nominee Shareholders enforcing the contracts. There is a risk that Nominee shareholders of VIEs, who in some cases are also shareholders of the Company may have conflict of interests with the Company in the future or fail to perform their contractual obligations. Given the significance and importance of the VIEs, there would be a significant negative impact to the Company if these contracts were not enforced.
The Group’s operations depend on the VIEs to honor their contractual agreements with the Group. The Company’s ability to direct activities of the VIEs that most significantly impact their economic performance and the Company’s right to receive the economic benefits that could potentially be significant to the VIEs depend on the authorization by the shareholders of the VIEs to exercise voting rights on all matters requiring shareholder approval in the VIEs. The Company believes that the agreements on authorization to exercise shareholder’s voting power are enforceable against each party thereto in accordance with their terms and applicable PRC laws or regulations currently in effect and the possibility that it will no longer be able to consolidate the VIEs as a result of the aforementioned risks and uncertainties is remote.
c. Summary of financial information of the Group’s VIEs (inclusive of VIE’s subsidiaries)
The following tables set forth the financial statement balances and amounts of the VIEs and their subsidiaries included in the condensed financial statements after the elimination of intercompany balances and transactions among VIEs and their subsidiaries within the Group.
The consolidated financial statements of the Group’s VIEs have been audited by filing the Form 10-K for the year ended May 31, 2023.
| 11 |
August 31, 2023 | May 31, 2023 (Audited) | |||||||
| $ | $ | |||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Right-of-use assets | ||||||||
| Other non-current assets | ||||||||
| Total Assets | ||||||||
| Accounts payables | ||||||||
| Advances from customers | ||||||||
| Other current payables | ||||||||
| Taxes payable | ||||||||
| Amounts due to related parties | ||||||||
| Operating lease liabilities, current | ||||||||
| Long-term loan | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Total Liabilities | ||||||||
| Total (Deficit) Equity of VIEs | ( | ) | ( | ) | ||||
| Total Liabilities and (Deficit) Equity of VIEs | ||||||||
Three Months Ended August 31, 2023 |
Three Months Ended August 31, 2022 | ||||||
| $ | $ | ||||||
| Net revenues | |||||||
| Cost of revenues | ( |
( | |||||
| Gross loss | ( |
( | |||||
| Total costs and expenses | ( |
( | |||||
| Operating loss | ( |
( | |||||
| Total other income and (expenses) | ( | ||||||
| Loss before taxes from operations | ( |
( | |||||
| Provision for income taxes | |||||||
| Net loss | ( |
( | |||||
| Net loss attributable to VIEs | ( |
( |
| Three Months Ended August 31, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by/(used in) operating activities | ( | ) | ||||||
| Net cash provided by/(used in) investing activities | ( | ) | ||||||
| Net cash (used in)/provided by financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | ||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at the beginning of period | ||||||||
| Cash and cash equivalents at the end of period | ||||||||
| 12 |
3. Summary of Significant Accounting Policies
The Company’s significant accounting policies have not changed from the year ended May 31, 2023.
The accompanying unaudited condensed interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United Statements of America. However, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial position and operating results have been included in these unaudited condensed interim financial statements. These unaudited condensed interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2023, as filed with the SEC on October 2, 2023. Operating results for the three months ended August 31, 2023 are not necessarily indicative of the results that may be expected for any subsequent quarter or for the year ending May 31, 2024.
Going Concern
The
Company incurred net loss of $
The ability to continue as a going concern is dependent upon long-term loans related to Shaoxing Keqiao Zhuyi Technology Co. and the director (Guowei Zhang) to meet its obligations and repay its liabilities arising from normal business operations when they become due. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on long term loans related to Shaoxing Keqiao Zhuyi Technology Co. and the director (Guowei Zhang) to meet obligations as they become due and to obtain additional equity or alternative financing required to fund operations until sufficient sources of recurring revenues can be generated. There can be no assurance that the Company will be successful in its plans described above or in attracting equity or alternative financing on acceptable terms, or if at all. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Foreign currency translation
The accompanying financial statements are presented in United States dollars. The functional currencies of the Company are in Renminbi (RMB). The Company’s assets and liabilities are translated into United States dollars from RMB at year-end exchange rates, and its revenues and expenses are translated at the average exchange rate during the year. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.
| 08312023 | 05312023 | 08312022 | ||||||||||
| Period/Year end RMB: US$ exchange rate | ||||||||||||
| Annual average RMB: US$ exchange rate |
The RMB is not freely convertible into foreign currencies and all foreign exchange transactions must be conducted through authorized financial institutions.
The Company computes earnings per share (“EPS”) in accordance with ASC Topic 260, “Earnings per share”. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis from the potential conversion of convertible securities or the exercise of options and or warrants; the dilutive effects of potentially convertible securities are calculated using the as-if method; the potentially dilutive effect of options or warrants are calculated using the treasury stock method. Securities that are potentially an anti-dilutive effect (i.e. those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
| 13 |
4. Trade Receivables
The Company does not provide any credit terms to its customers for smart parking. Cash will be collected by the exit of parking lots. The Company provides one to three months credits term for customers purchasing parking equipment.
5. Prepaid Expenses and Other Current Assets
| August 31, 2023 | May 31, 2023 | |||||||
| Prepayment | ||||||||
| Prepayment for rental (a) | ||||||||
| Deposit | ||||||||
| Loan receivable (b) | ||||||||
| Advances to employees | ||||||||
| Other | ||||||||
| VAT | ||||||||
| (a) |
| (b) |
6. Property and Equipment
| Furniture, fixtures and office equipment | Building (a) | Vehicles | Project Facilities | Construction
in progress (b) | Total | |||||||||||||||||||
| Cost | ||||||||||||||||||||||||
| At May 31,2023 | ||||||||||||||||||||||||
| Additions during the year | ||||||||||||||||||||||||
| Disposals during the year | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| At August 31,2023 | ||||||||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||||||
| At May 31,2023 | ||||||||||||||||||||||||
| Depreciation during the year | ||||||||||||||||||||||||
| Disposals during the year | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| At August 31,2023 | ||||||||||||||||||||||||
| Net book value | ||||||||||||||||||||||||
| At May 31,2023 | ||||||||||||||||||||||||
| At August 31,2023 | ||||||||||||||||||||||||
| 14 |
| (a) |
| (b) |
7. Intangible Assets
| Cost | ||||
| At May 31,2023 | ||||
| Additions during the period | ||||
| Disposals during the period | ||||
| Effects of currency translation | ( | ) | ||
| At August 31,2023 | ||||
| Accumulated depreciation | ||||
| At May 31,2023 | ||||
| Depreciation during the period | ||||
| Disposals during the period | ||||
| Effects of currency translation | ( | ) | ||
| At August 31,2023 | ||||
| Net book value | ||||
| At May 31,2023 | ||||
| At August 31,2023 | ||||
8. Right-of-use Assets
| $ | ||||
| Cost | ||||
| At May 31, 2023 | ||||
| Additions during the period | ||||
| Write-off during the period | ||||
| Effects of currency translation | ( |
|||
| At August 31, 2023 | ||||
| Accumulated depreciation | ||||
| At May 31,2023 | ||||
| Depreciation during the period | ||||
| Write-off during the period | ||||
| Effects of currency translation | ( |
|||
| At August 31, 2023 | ||||
| Net book value | ||||
| At May 31, 2023 | ||||
| At August 31, 2023 | ||||
Right of use assets consisted of 16 contracts renting offices, warehouses and parking lots. Contracted terms ranged between two and eight years with the earliest start date being January 8, 2019.
| 15 |
9. Other non-current assets
Other non-current assets mainly consisted of a rental agreement of parking lot with a third party. The contract became effective on January 1, 2021 and will end on December 31, 2030. The Company has paid full rent as of August 31, 2023.
10. Other payables and Accruals
| August 31, 2023 | May 31, 2023 | |||||||
| $ | $ | |||||||
| Accrued payroll and welfare payables | ||||||||
| Deposit | ||||||||
| Loans payable | ||||||||
| Other (a) | ||||||||
| (a) |
11. Related Party Transactions
(a) The Company had the following balances due to and due from related parties:
At August 31, 2023 and May 31, 2023, the Company owned funds from the following related parties:
| August 31, 2023 | May 31, 2023 | Relationship | ||||||||
| Intellegence Triumph Holdings Limited | ||||||||||
| Virtue Victory Holdings Limited | ||||||||||
| Strength Union Holdings Limited | ||||||||||
At August 31, 2023 and May 31, 2023, the Company owed funds to the following related parties:
| August 31, 2023 | May 31.2023 | Relationship | ||||||||
| Guowei Zhang | ||||||||||
| Xinxin Chen | ||||||||||
| Shaoxing Keqiao Zhuyi Technology Co., Ltd | ||||||||||
Advances from Guowei Zhang were unsecured, non-interest bearing and due on demand.
During
the three months ended August 31, 2023, the Company borrowed from related parties of $
| 16 |
As
of May 31, 2022, the outstanding balance of long-term loans was RMB
Due to business restructure, Zhibo was deregistered at the beginning of 2023. Before deregistration, on January 15, 2023, Zhibo transferred the debts to a number of companies/partnerships with the clauses unchanged. The table below set forth the amount transferred to each Zhibo’s creditor as of January 15, 2023.
| Transferee | Transferred amounts (RMB) | Transferred amounts (USD) | ||||||
| Hangzhou Chiyi Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou Chuangzhu Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou HongKuo Enterprise Management Partnership (Limited partnership) | ||||||||
| Hangzhou Hongying Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou Liujin Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou Ruiqi Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou Zhusheng Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou Zhuyuan Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou Jizhong Ecological Technology Co., Ltd. | ||||||||
| Hangzhou Liujin Enterprise Management Partnership Co., Ltd. | ||||||||
| Hangzhou Renyigou E-Commerce Co., Ltd. | ||||||||
| Hangzhou Yixin Supply Chain Management Co., Ltd. | ||||||||
| Hangzhou Zhizhu Parking Co., Ltd. | ||||||||
| Total | ||||||||
For helping the Company consolidate debts and providing financial support to the Company, Shaoxin Keqiao Zhuyi Technology Co., Ltd., whose sole shareholder is Xiujuan Chen, took over the debts from the businesses mentioned in the table. Loan transfer agreements were executed on March 16 and 17, 2023 with the original clauses unchanged. Xiujuan Chen is also one of the shareholders of the Company. After the loans transferred to Shaoxin Keqiao Zhuyi Technology Co., Ltd., outstanding balances were offset in part or in full if the transferees were our current debtors.
| 17 |
The below table shows the movements of loans before the transfers and the final amounts being transferred.
| Transferor | Balance as at January 15, 2023 (RMB) | Offset (RMB) | Increase (RMB) | Transferred amounts (RMB) | Transferred amounts (USD) | |||||||||||||||
| Hangzhou Chiyi Enterprise Management Partnership (Limited Partnership) | ||||||||||||||||||||
| Hangzhou Chuangzhu Enterprise Management Partnership (Limited Partnership) | ||||||||||||||||||||
| Hangzhou HongKuo Enterprise Management Partnership (Limited partnership) | ||||||||||||||||||||
| Hangzhou Hongying Enterprise Management Partnership (Limited Partnership) | ||||||||||||||||||||
| Hangzhou Liujin Enterprise Management Partnership (Limited Partnership) | ||||||||||||||||||||
| Hangzhou Liujin Enterprise Management Partnership Co., Ltd. | ||||||||||||||||||||
| Hangzhou Ruiqi Enterprise Management Partnership (Limited Partnership) | ( | ) | ||||||||||||||||||
| Hangzhou Zhusheng Enterprise Management Partnership (Limited Partnership) | ||||||||||||||||||||
| Hangzhou Zhuyuan Enterprise Management Partnership (Limited Partnership) | ||||||||||||||||||||
| Hangzhou Jizhong Ecological Technology Co., Ltd. | ( | ) | ||||||||||||||||||
| Hangzhou Renyigou E-Commerce Co., Ltd. | ( | ) | ||||||||||||||||||
| Hangzhou Yixin Supply Chain Management Co., Ltd. | ( | ) | ||||||||||||||||||
| Hangzhou Zhizhu Parking Co., Ltd. | ( | ) | ||||||||||||||||||
| Total | ( | ) | ||||||||||||||||||
During
the three months ended August 31, 2023, the Company did not borrow extra funds from and made repayments of RMB
| 18 |
12. Income Taxes
PRC
The
Company’s subsidiaries incorporated in the PRC are subject to a profits tax rate of
The full realization of the tax benefit associated with the carry forward losses depends predominantly upon the Company’s ability to generate taxable income during the carry forward period.
Income tax expense (benefits)
| August 31, 2023 | August 31, 2022 | |||||||
| $ | $ | |||||||
| Loss before tax | ( | ) | ( | ) | ||||
| Tax credit calculated at statutory tax rate | ( | ) | ( | ) | ||||
| Effect of different tax rates | ||||||||
| Deferred tax asset not recognized during the period/year | ||||||||
The Company accounts for income taxes using the asset/liability method prescribed by ASC 740 Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be available against which the Company can utilise the benefits.
Management believes that it is more likely than not that the deferred tax assets will not be fully realizable in the future. Accordingly, the Company provided for a full valuation allowance against its deferred tax assets.
13. Long-term Borrowings
As
of May 31, 2022, the outstanding balance of long-term loans was RMB
Due to business restructure, Zhibo was deregistered at the beginning of 2023. Before deregistration, on January 15, 2023, Zhibo transferred the debts to a number of companies/partnerships with the clauses unchanged. The table below set forth the amount transferred to each Zhibo’s creditor as of January 15, 2023.
| 19 |
| Transferee | Transferred amounts (RMB) | Transferred amounts (USD) | ||||||
| Hangzhou Chiyi Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou Chuangzhu Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou HongKuo Enterprise Management Partnership (Limited partnership) | ||||||||
| Hangzhou Hongying Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou Liujin Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou Ruiqi Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou Zhusheng Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou Zhuyuan Enterprise Management Partnership (Limited Partnership) | ||||||||
| Hangzhou Jizhong Ecological Technology Co., Ltd. | ||||||||
| Hangzhou Liujin Enterprise Management Partnership Co., Ltd. | ||||||||
| Hangzhou Renyigou E-Commerce Co., Ltd. | ||||||||
| Hangzhou Yixin Supply Chain Management Co., Ltd. | ||||||||
| Hangzhou Zhizhu Parking Co., Ltd. | ||||||||
| Total | ||||||||
For helping the Company consolidate debts and providing financial support to the Company, Shaoxin Keqiao Zhuyi Technology Co., Ltd., whose sole shareholder is Xiujuan Chen, took over the debts from the businesses mentioned in the table. Loan transfer agreements were executed on March 16 and 17, 2023 with the original clauses unchanged. Xiujuan Chen is also one of the shareholders of the Company. After the loans transferred to Shaoxin Keqiao Zhuyi Technology Co., Ltd., outstanding balances were offset in part or in full if the transferees were our current debtors.
The below table shows the movements of loans before the transfers and the final amounts being transferred.
| 20 |
| Transferor | Balance
as at January 15, 2023 (RMB) | Offset
(RMB) | Increase
(RMB) | Transferred amounts (RMB) | Transferred amounts (USD) | |||||||||||||||
| Hangzhou Chiyi Enterprise Management Partnership (Limited Partnership) | ||||||||||||||||||||
| Hangzhou Chuangzhu Enterprise Management Partnership (Limited Partnership) | ||||||||||||||||||||
| Hangzhou HongKuo Enterprise Management Partnership (Limited partnership) | ||||||||||||||||||||
| Hangzhou Hongying Enterprise Management Partnership (Limited Partnership) | ||||||||||||||||||||
| Hangzhou Liujin Enterprise Management Partnership (Limited Partnership) | ||||||||||||||||||||
| Hangzhou Liujin Enterprise Management Partnership Co., Ltd. | ||||||||||||||||||||
| Hangzhou Ruiqi Enterprise Management Partnership (Limited Partnership) | ( | ) | ||||||||||||||||||
| Hangzhou Zhusheng Enterprise Management Partnership (Limited Partnership) | ||||||||||||||||||||
| Hangzhou Zhuyuan Enterprise Management Partnership (Limited Partnership) | ||||||||||||||||||||
| Hangzhou Jizhong Ecological Technology Co., Ltd. | ( | ) | ||||||||||||||||||
| Hangzhou Renyigou E-Commerce Co., Ltd. | ( | ) | ||||||||||||||||||
| Hangzhou Yixin Supply Chain Management Co., Ltd. | ( | ) | ||||||||||||||||||
| Hangzhou Zhizhu Parking Co., Ltd. | ( | ) | ||||||||||||||||||
| Total | ( | ) | ||||||||||||||||||
During
the three months ended August 31, 2023, the Company did not borrow extra funds from and made repayments of RMB
| 21 |
14. Leases
Right-of-use
(“ROU”) assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation
to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the
estimated present value of lease payments over the lease term. The Company entered into 16 agreements for renting offices, warehouses
and parking lots. As of August 31, 2023, the Company has $
Significant assumptions and judgments made as part of the adoption of this new lease standard include determining (i) whether a contract contains a lease, (ii) whether a contract involves an identified asset, and (iii) which party to the contract directs the use of the asset. The discount rates used to calculate the present value of lease payments were determined based on hypothetical borrowing rates available to the Company over terms similar to the lease terms.
The Company’s future minimum payments under long-term non-cancellable operating leases are as follows:
| As
of August 31, 2023 | As
of | |||||||
| $ | $ | |||||||
| Within 1 year | ||||||||
| After 1 year but within 5 years | ||||||||
| Total lease payments | ||||||||
| Less: imputed interest | ( | ) | ( | ) | ||||
| Total lease obligations | ||||||||
| Less: current obligations | ( | ) | ( | ) | ||||
| Long-term lease obligations | ||||||||
15. Non-controlling interests (NCI)
Non-controlling interests (“NCI”) represent the portion of net assets in consolidated entities that are not owned by the Company.
The following table represent the non-controlling ownership interests and non-controlling interest balances reported in stockholder’s equity as of August 31, 2023 and May 31, 2023 respectively.
| 22 |
| Liangshan | Yibin | Xide | Taining | Anping | Total | |||||||||||||||||||||||||||||||||||||||||||
| 083123 | 053123 | 083123 | 053123 | 083123 | 053123 | 083123 | 053123 | 083123 | 053123 | 083123 | 053123 | |||||||||||||||||||||||||||||||||||||
| NCI ownership interest | % | % | % | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||||||||
| NCI balances | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
The summarized financial information for subsidiary that has non-controlling interest which are material to the Company is provided below. This information is based on amounts before inter-company elimination.
Summarized statement of financial position as at
| Liangshan | Yibin | Xide | Taining | Anping | Total | |||||||||||||||||||||||||||||||||||||||||||
| 083123 | 053123 | 083123 | 053123 | 083123 | 053123 | 083123 | 053123 | 083123 | 053123 | 083123 | 053123 | |||||||||||||||||||||||||||||||||||||
| Non-current assets | ||||||||||||||||||||||||||||||||||||||||||||||||