What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-19 compared with 2022-04-19 · 148 added, 125 removed, 88 unchanged (76% of the section changed)

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

FORWARD-LOOKING

Forward-looking Statements

quarterly report contains forward-looking statements relating to future events or our future financial performance.

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On December 20, 2021, EvoAir

International transferred its HVAC business to Unex, the Company through its subsidiaries upon completion of the Transactions (defined

International transferred its HVAC business to Unex.

The Company through its subsidiaries upon completion of the Transactions (defined

hereunder), is engaged in the sale of (“HVAC”) products in Asia.

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Group partners with various original equipment manufacturers (“OEMs”) in producing air purifier products that incorporate

the INCU Technology under the brand e-Cond Life , as well as distributes the INCU Technology to other brands for incorporation

into their products.

the INCU Technology under the brand e-CondLife, as well as distributes the INCU Technology to other brands for incorporation into their

of Operations

following summary of our operations should be read in conjunction with our unaudited condensed consolidated financial statements

for the three and six months ended February 28, 2022, as compared to the three and six months ended February 28, 2021.

months Quarter Ended February 28, 2022, versus Three months Quarter Ended February 28, 2021

following summary of our operations should be read in conjunction with our unaudited condensed consolidated financial statements for

the three and nine months ended May 31, 2022, as compared to the three and nine months ended May 31, 2021.

months Quarter Ended May 31, 2022, versus Three months Quarter Ended May 31, 2021

Three Months Ended

Cost of revenue

profit / (loss)

from operation

income/ (expense) income

Company generated revenues of $302,884 in the three months ended February 28,2022 as compared to $27,568 in the same financial period

for 2021, a change in revenue of $275,316.

The sales increases in the 2022 are attributable to the expansion of customer base, increase

sales to existing customers as well as expansion of product offering.

of revenue was $194,585 or 64% of revenue in the three months ended February 28 as compared to $67,730 or 246% of revenue in the same

financial period for 2021.

Cost of revenues includes production cost and purchases of goods.

profit was $108,299 or 36% of revenue for the three months ended February 28 ,2022 as compared to gross loss of $40,162 in the same financial

period in 2021 or 146% of revenues.

The improvement in gross profit in the corresponding period in 2022 is attributable to the economies

of scale resulting in higher level of sales

Operating expenses were $1,303,079 for the three months ended February 28, 2022 compared to $558,986 in the corresponding period in 2021,

an increase of $744,093.

The increase of operating expenses were in line with the growth in business operations and business development,

professionals fee and compliance cost in relation to our financial reporting, patent and trademark filings.

net loss from operations for the three months ended February 28,2022 was $2,188,398 as compared to $598,526 for the corresponding period

The continuous operating loss is attributable to the Group’s focused effort in creating the infrastructure and resource

to meet the business expansion needs of the Group’s as well as lack of economies of scale.

Months Ended February 28, 2022, versus Six

months Ended February 28, 2021

Six Months Ended

Gross profit / (loss)

Operating expenses

Loss from operation

Other expense

$ (1,429,356 )

The Company generated revenues of $194,594 in the

three months ended May 31, 2022 as compared to $171,798 in the same financial period for 2021, a change in revenue of $23,156.

month change of the sales is attributable to the expansion of customers base, increase of sales from existing customers and expansion

of product offering of evoair TM line of products.

Cost of revenue was $173,842 or 89% of revenue in

the three months ended May 31, 2022 as compared to $95,953 or 56% of revenue in the same financial period for 2021.

Cost of revenues includes

production costs and purchases of goods.

Higher cost of revenue is attributable to manufacturing and related costs for evoair TM

products, comprising material costs, labor cost, research and development (“R&D”) for product improvement, product testing

and inspection, factory rental, depreciation expense as well as sample products for market penetration.

Gross profit was $21,112 or 11% of revenue for the

three months ended May 31, 2022 as compared to gross profit of $75,845 in the same financial period in 2021 or 44% of revenues.

of gross profit in 2022 is attributable to the commercialization of evoair products TM with higher cost of revenue from manufacturing

and related costs as well as lack of economy of sales during commercialization stage.

The Company anticipates improvement of income and

gross profit margin with the improvement of revenue streams from distributor and dealership model and projects.

Operating expenses were $1,440,623 for the three months

ended May 31, 2022 compared to $245,919 in the corresponding period in 2021, an increase of $1,194,794.

The increases in operating expenses

were in line with the growth in business operations and business development, professional fee and compliance cost in relation to our

financial reporting, patent and trademark filings.

The net loss for the

three months ended May 31, 2022 was $1,429,356 as compared to $170,074 for the corresponding period in 2021.

The continuous net loss

is attributable to the Group’s focused effort in creating the infrastructure and resource to meet the business expansion needs

of the Group’s as well as lack of economies of scale.

Months Quarter Ended May 31, 2022, versus Nine months Quarter Ended May 31, 2021

Nine Months Ended

Cost of revenue

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Loss from operation

Other income /(expense)

Other (expense)/ income

$ (4,001,086 )

Company generated revenue of $1,111,763 for the six months ended February 28, 2022 as compared to $221,231 in the corresponding financial

period in 2021, an increase in revenues of $890,532 which is attributable to the expansion of customers base, increase of sales from

existing customers and expansion of product offerings as well as increased sales to existing customers.

of revenues was $901,999 or 81% of revenues in the six months ended February 28, 2022 as compared to $117,226 or 53% of revenue in the

corresponding period in 2021.

The Company generated revenue of $1,306,717 for the

nine months ended May 31, 2022 as compared to $393,029 in the corresponding financial period in 2021, an increase in revenues of $913,688

which is attributable to the expansion of customers base, increase of sales from existing customers and expansion of product offerings

of evoair TM line of products.

of revenues was $1,075,841 or 82% of revenues in the nine months ended May 31, 2022 as compared to $213,179 or 54% of revenue in the corresponding

period in 2021.

Cost of revenues includes production cost and purchases of goods.

profit was $209,764 or 19% of revenue for the six months ended February 28, 2022 as compared to $104,005 in the corresponding period

in 2021 or 47% of revenues.

The improvement of gross income in the corresponding period in 2022 is attributable to the increase in sales

of higher margin products and economy of scale resulting from higher level of sales.

expenses were $1,813,136 for the six months ended February 28, 2022 compared to $739,376 in the corresponding period in 2021, an increase

of $1,073,760.

An increased operating expense was in line with the growth in business operations and business development, professionals

fee and compliance cost in relation to our financial reporting, patent and trademark filings.

net loss from operations for the six month first half of fiscal 2022 was $1,603,372 as compared to $635,371for the comparable period

of the prior year.

The continuous operating loss is attributable to the infrastructure and resource to meet the business expansion needs

of the Group’s as well as lack of economies of scale.

Higher cost of revenue is attributable

to manufacturing and related costs for evoair TM products, comprising material costs, labor cost, R&D for product improvement,

product testing and inspection, factory rental, depreciation expense as well as sample products for market penetration.

profit was $230,876 or 18% of revenue for the nine months ended May 31, 2022 as compared to $179,850 in the corresponding period in 2021

or 46% of revenue.

The decrease of gross profit in 2022 is attributable to the commercialization

of evoair products TM with higher cost of revenue from manufacturing and related costs as well as lack of economy of sales during

commercialization stage.

The Company anticipates improvement of income and gross profit margin with improvement of revenue streams from

distributor and dealership model and projects.

expenses were $3,253,759 for the nine months ended May 31, 2022 compared to $985,295 in the corresponding period in 2021, an

increase of $2,268,464.

Increased in operating expense was in line with the growth in business operations and business

development, professional fee and compliance cost in relation to our financial reporting, patent and trademark filings.

expense were $978,203 for the first nine months ended May 31, 2022, including amortization of beneficial conversion feature of convertible

bonds $1,005,645, and $154 interest expense, offset with other income $27,596.

net loss for the first nine months ended May 31, 2022 was $4,001,086 as compared to $803,996 for the corresponding period in 2021.

The continuous net loss is attributable to the infrastructure and resource to meet the business

expansion needs of the Group’s as well as lack of economies of scale.

and Capital Resources

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Working Capital

at February 28, 2022, our company’s liabilities stood at $1,279,058, which included account payable and accruals of $17,694, other

payable of $655,946, hire purchase creditor $34,372, amount due to related party $22,204 and current portion operating lease liabilities

of $49,070, and the non-current portion operating lease liabilities of $499,772.

at February 28, 2022 our company had a positive working capital of $1,886,958 compared with the positive working capital of $1,558,893

as at August 31, 2021.

The increase in working capital was primarily due to a decrease in convertible bonds balance at current period

at May 31, 2022, our company’s liabilities stood at $1,004,967, which included accounts payable and accruals of $27,013, other payable

of $881,654, hire purchase creditor $30,975, amount due to shareholders $20,735 and current portion operating lease liabilities of $44,590,

and the non-current portion operating lease liabilities of $458,470.

at May 31, 2022 our company had a positive working capital of $1,596,020 compared with the positive working capital of $1,558,893 as

at August 31, 2021.

The increase in working capital was primarily due to a decrease in convertible bonds balance at current

financial period end.

Cash flows (used in)/ generated from operating activities

$ (1,023,037 )

Cash flows used in investing activities

Cash flows provided by financing activities

Cash flows generated from financing activities

Net changes in cash

Company’s cash and cash equivalents stood at $508,490 as of February 28, 2022.

Cash used in operating activities for the six months

ended February 28, 2022, was $881,506.

This resulted from primarily from a net loss of $2,571,730 which was offset by depreciation of

$18,375, operating lease $23,460, increase in inventories of $335,183, decrease in account receivable of $96,277 and $116,416 decrease

in other receivables, decrease in account payable and accruals of $520,255, increase in other payable of $622,868 and decrease in amount

due to related party of $30,277.

used in investing activities resulted from purchase of fixed assets amounting to $524,148 for the six months ended February

Company’s cash and cash equivalents stood at $465,719 as of May 31, 2022.

Cash used in operating activities for the nine

months ended May 31, 2022, was $1,023,037.

This resulted primarily from a net loss of $4,001,086 which was offset by depreciation of

$59,987, amortization of $1,778,828, beneficial conversion feature $1,005,645, operating lease $22,321, increase in inventories of

$408,290, decrease in deposit, prepayment and advances to supplier of $194,879, decrease in other receivables of $66,824, decrease in

account payable and accruals of $514,333, increase in other payable of $848,576 and decrease in amount due to related party of

used in investing activities resulted from purchase of fixed assets amounting to $566,734 for the nine months ended May 31, 2022.

generated from financing activities resulted from the proceeds from capital raising amounting to $185,185 during the nine months

ended May 31, 2022

Company’s business is not subject to seasonality.

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of revenue when (or as) the Company satisfies each performance obligation.

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.

only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in

exchange for the goods or services we transfer 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

all reporting periods, we have not disclosed the value of unsatisfied performance obligations for all product revenue contracts with

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and Assumptions

preparing our condensed consolidated financial statements, we use estimates and assumptions that affect the reported amounts and

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 2022 and 2021 include the assumptions used to value tax liabilities, derivative

financial instruments, the estimates of the allowance for deferred tax assets, and the accounts receivable allowance, and impairment

of long-lived assets and inventory write-offs.

preparing our unaudited condensed 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 2022 and 2021 include the assumptions used to value tax

liabilities, derivative financial instruments, the estimates of the allowance for deferred tax assets, the accounts receivable

allowance, impairment of intangible assets and long-lived assets and inventory write-offs.

to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets which could impact our

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could differ materially from these estimates under different assumptions or conditions.

of February 28, 2022 and August 31, 2021, the accumulated deficit stood at $4,613,553 and $2,233,496 respectively, which included a net

loss of $2,571,730 and $633,918 for six months ended February 28, 2022 and February 28, 2021, respectively.

The cash used in operating

activities for the six months ended February 28, 2022, was $881,506.

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.

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.

the injection of a viable business into the Company (“New Business”) contemplated under the Transactions (defined in Note

1), the Management believes that the actions to be taken by the Management to further implement the business plans for the New Business

including expansion in product offerings, geographical expansion, generate revenue through expansion of revenue streams and customer

base (retail, commercial and industrial as well as private label and licensing clientele), improvement of profitability by achieving

of May 31, 2022 and August 31, 2021, the Company had an accumulated deficit of $5,906,875 and $2,233,496 respectively.

The Company incurred

net loss of $4,001,086 and $803,996 for nine months ended May 31, 2022 and May 31, 2021, respectively.

The cash used in operating activities

for the nine months ended May 31, 2022, was $1,023,037.

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.

the injection of New Business into the Company contemplated under the Transactions (defined in Note 1), the Management believes that

the actions to be taken by the Management to further implement the business plans for the New Business including expansion in

product offerings, geographical expansion, generate revenue through expansion of revenue streams and customer base (retail,

commercial and industrial as well as private label and licensing clientele), as well as improvement of profitability by achieving

economies of scale provide the opportunity for the Company to continue as a going concern.

In addition, the Company is also working on

raising additional funding to finance the operations as well as business expansion.

consolidated financials 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.

March 22, 2021, the Group entered into a tenancy agreement to lease the premise at No 31-2A, Jalan 5/32A, 6 ½ Miles, Off Jalan

Kepong, 52000 Kuala Lumpur, Malaysia for 2 years from 1 May 2021 to 30 April 2023.

The lease may be terminated by either party with 3

month notice.

Monthly rental is RM 23,000.

This tenancy agreement has a renewal option of 2 years plus2 years with the agreed month rental

of RM25,000 for the first term of two (2) years, and RM27,000 for the second term of two (2) years.

February 5, 2021, the Group entered into a lease agreement to lease a factory at 3rd Floor, No.

1, Depin Road, Xingtan Town, Shunde District,

Foshan City for a 5 year period from April 1, 2021 to April 30, 2026 for a monthly rental of RMB54,578.

December 22, 2020, the Group entered into a lease agreement to lease the premise at No 65 Floor 1, 2 & 3, Street 123, Phum 4, Sangkat

Toul Tumpong I, Khan Chamkarman, Phnom Penh at a monthly of $4,500 from December 1, 2020 to November 30, 2022.

the monthly rental will

be increased to $6,000 per month from December 1, 2022 to November 30, 2024.

In addition, the Company is also working

on raising additional funding to finance the operations as well as business expansion.

unaudited condensed consolidated financials have been prepared assuming that the Company will continue as a going concern and,

accordingly the 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

have no material commitments as of May 31, 2022.

Sheet Arrangements

of the date of this Quarterly 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, revenues or expenses, results of operations,

liquidity, capital expenditures or capital resources that are material to investors.

of the date of this Quarterly 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, revenues or expenses, results of operations, liquidity,

capital expenditures or capital resources that are material to investors.

Accounting Pronouncements

for rules and interpretive releases of the SEC under the authority of federal securities laws and a limited number of grandfathered standards,

the FASB Accounting Standards Codification™ (“ASC”) is the sole source of authoritative US GAAP literature recognized

the FASB ASC is the sole source of authoritative US GAAP literature recognized

by the FASB and applicable to the Company.

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not have a material impact on the Company’s present or future financial statements.

December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), which enhances and simplifies various aspects of the income tax

accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination,

ownership changes in investments, and interim-period accounting for enacted changes in tax law.

The amendment will be effective for public

companies with fiscal years beginning after December 15, 2020;

early adoption is permitted.

There is no material impact on the Company’s

financial statements.

October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities

from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized

and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers.

This ASU should

be applied prospectively to acquisitions occurring on or after the effective date of December 15, 2022, and early adoption is permitted.

There is no material impact on the Company’s financial statements.

In June 2016, the FASB issued ASU No.

2016-13 “Financial

Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments”;

In November 2019, the FASB issued

2019-10 “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates”;

In March 2020, the FASB issued ASU No.

2020-03 “Codification Improvements to Financial Instruments”;

which modifies the measurement of expected credit losses of certain financial instruments.

This ASU is effective for fiscal years and

interim periods within those years beginning after December 15, 2022.

The Company is currently assessing the impact of these ASUs on its

consolidated financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis