EvoAir Holdings Inc. 10-K

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 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 the consideration of US$100 (“EvoAir Transaction”). EvoAir International, through its subsidiaries upon completion of the Transactions (defined hereunder), is engaged in the sale of heating, ventilation and air conditioning (“HVAC”) products 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 the Company’s ordinary 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 (the “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 (“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 Limited and Allegro Investment (BVI) Limited of 24,000 shares and 6,000 shares of common stock, respectively, or approximately 0.02% and 0.01% of the 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 Limited, Allegro Investment (BVI) Limited and WKLEE Sellers of 49,320 shares, 8,280 shares and in aggregate 14,400 shares, respectively, of the common stock of the Company, or approximately 0.05%, 0.009% and in aggregate 0.014%, respectively, of the 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 the Tan Soon Hock, Ivan Oh Joon Wern and the Relevant Interest Holders agreed to sell all relevant interests in the EvoAir and its subsidiaries (“EvoAir Group” or the “Group”) to WKL Eco Earth Holdings in consideration for the allotment and issuance of 7,037,762 shares, 2,520,000 shares and in aggregate 6,001,794 shares, respectively, of the common stock of the Company, or approximately 6.91%, 2.48% and in aggregate 5.90%, respectively, of the Enlarged Share Capital. The board of directors and majority shareholders of the Company have approved the transaction. 4 | Page (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 relating to eco-friendly air-conditioner condenser (external unit), evoair TM and the trademarks described in the deed of assignment thereunder, and in respect of Dr. Low’s patents relating to the portable air-conditioner, e-Cond EVO TM and the trademarks as described in the deed of assignments thereunder (together, the “IP Assignments”). Pursuant to the IP Assignments, WKL Global, Allegro Investment (BVI) Limited and certain nominees shall be allotted and issued 63,362,756 shares, 14,297,259 shares and in aggregate 5,487,752 shares, respectively of the Company’s common stock or approximately 62.25%, 14.05% and in aggregate 5.39%, respectively of the Enlarged Share Capital in consideration for the IP Assignments. EvoAir Transaction, Change of Control Transaction and Allotment Transactions are collectively to be referred to as the “Transactions”. The closing of the Transactions (the “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. EvoAir International is a company incorporated in the British Virgin Islands 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 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 Eco Earth Indochina”), a Cambodia company incorporated on February 4, 2021 (e) WKL Guanzhe Green Technology Guangzhou Co Ltd (“WKL Guanzhe Green Technology Guangzhou”), a Chinese company incorporated in April 6, 2021 and (f) Evo Air Marketing, a Malaysian company incorporated in February 2, 2021, is a wholly owned subsidiary of EvoAir Manufacturing. 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”. Details of the Company’s subsidiaries: Subsidiary company name Place and date of incorporation Particulars of issued capital $ Principal activities Proportion of ownership interest and voting power held 1. Evoair International Limited British Virgin Islands, November 17, 2021 100 Investment holding. 100% Subsidiary of EvoAir International Limited 2. WKL Eco Earth Holdings Pte. Ltd. Singapore, July 12, 2018 1 Marketing and sale of eco-friendly HVAC products and related services. 100% Subsidiaries of WKL Eco Earth Holdings Pte Ltd 3. WKL Eco Earth Sdn. Bhd. Malaysia, May 17, 2017 74,206 Research and development, manufacturing, marketing and sale of eco-friendly HVAC products and related services. 100% 4. WKL Green Energy Sdn. Bhd. Malaysia, October 24, 2017 27,955 Dormant. 100% 5. EvoAir Manufacturing (M) Sdn. Bhd. Malaysia, March 22, 2019 585,374 Research and development, manufacturing, marketing and sale of eco-friendly HVAC products and related services. 67.5% 6. WKL EcoEarth Indochina Co. Ltd Cambodia, February 4, 2021 125,480 Marketing and sale of eco-friendly HVAC products and related services. 55% 7. WKL Guanzhe Green Technology Guangzhou Co. Ltd. People’s Republic of China, April 6, 2021 573,609 Manufacturing, marketing and sale of eco-friendly HVAC products and related services. 55% Subsidiary of EvoAir Manufacturing (M) Sdn Bhd 8. Evo Air Marketing (M) Sdn. Bhd. Malaysia, February 2, 2021 223 Marketing and sale of eco-friendly HVAC products and related services. 100% 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”. 5 | Page Future development EvoAir 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 EvoAir TM brand and e-Cond Evo TM as a truly eco-friendly product aiming to reduce emission of waste heat from the condensing unit and at the same time improving energy efficiency. The Group aims to continue its innovation through investment into research and development, to further improve on its product line, reduce its carbon emissions as it strives to become a leader in green Heating, ventilation, and air conditioning HVAC technology. The Group also 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 Ionic Nano Copper Solution (“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. Product Lines Hybrid Air Conditioners e-Cond EVO TM The Group first invented its line of eco-friendly portable air-conditioners under its e-Cond EVO TM 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 degree Celsius. The patent pending technology in the unit allows it to utilize up to 60% less energy than its traditional portable 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 EVO TM units: the Super King and the Outdoor King. 6 | Page EvoAir TM The Group continued to research on incorporating its patent pending heat emission control system (“HECS”) Technology as well as various other patent pending technologies into its product line, subsequently launching its EvoAir TM hybrid air-conditioners in 2021. The Group’s EvoAir TM hybrid air-conditioners produced less heat emission through its patent pending HECS technology, as well as increased humidity and moisture of the expelled air to allow for a comfortable environment surrounding the external condenser unit during operation. EvoAir TM hybrid air-conditioners replaced traditional outdoor condenser units cooling coils with a Coolpressor Unit that incorporates various patent pending technologies. The Group’s patent pending HECS technology contributes to a reduction in waste heat produced by the Coolpressor unit by up to 25 degrees Celsius as well as reducing energy consumption by up to 20% compared to conventional air-conditioning units that utilizes long copper coils for cooling. The Coolpressor Unit increase the humidity of the expelled air by 20%, producing comfortable humidity levels in the surrounding environment around the Coolpressor Unit. This allows the unit to become a supplementary external-use cooling system by releasing moisturized air at approximately 28 degrees Celsius with a humidity of approximately 58% while operating under outdoor conditions. 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 philosophy of producing eco-friendly products. Air-conditioning refrigerant is harmful to the environment. The EvoAir TM 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. EvoAir TM ’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 EvoAir TM hybrid air-conditioning system was awarded SGS International Certification in 2021. Manufacturing The Group produces its Coolpressor under its EvoAir TM brand. Meanwhile, the Group partners with original equipment manufacturers (“OEM”) to produce an air-conditioner indoor unit (blower) to complement its EvoAir TM Coolpressor as well as its eco-friendly portable air-conditioner systems under its e-Cond EVO TM 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 patent pending 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, Cambodia, Singapore as well as Thailand as well as providing maintenance and installation services of its EvoAir TM products to various commercial customers. 7 | Page Air Purifier E-Cond Life 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 Ionic Nano Copper Solution (“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 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-Cond Life 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-Cond Life products act as environmental disinfecting solutions for air sanitization. The e-Cond Life sanitizer system has been certified under the IECEE CB Scheme, while the INCU 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. QCOV TM To supplement the e-Cond Life line of air purifier products, the Group partnered with various OEMs to produce small air purifier systems under its QCOV TM brand in 2021, which incorporates a diffuser to distribute the INCU ionic nano copper solution in order to sanitize the environment. Distribution As an exclusive authorized distributor of the INCU solution, the Group has partnered with various distributors to distribute the technology to other brands and markets. Through these various partnerships, the Group’s air purifier systems and INCU are produced and distributed to 11 countries by various distribution channels, including through several well established marketing companies with their own respective online platforms. The Group markets 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. Customers Hybrid Air-Conditioner Building on Dr. Low’s research into green technology, the Group first invented its eco-friendly portable air-conditioning system under the e-Cond EVO TM brand in 2017, aimed at a market that is conscious of the effects of global warming and wish to pursue eco-friendly solutions. The Group has since developed its hybrid air-conditioner systems in 2021 under the EvoAir TM in two configurations: (i) an indoor unit together with an outdoor Coolpressor unit; and (ii) an individual Coolpressor unit compatible with the customer’s pre-existing indoor unit. The Group aims to market its EvoAir TM products through 3 main channels: 1) traditional distributor and dealership point of sales model which will increase the Group’s market presence throughout the Malaysia and into other Asian markets; 2) Entry into project based contracts with housing developers, office building management, schools, government offices as well as industrial factories; and 3) E-Commerce online sales and deliveries. The Group currently focuses on the Malaysian and Singapore market as its primary markets, as it continues to expand into the China market as well as other ASEAN countries. The Group also licenses its patent pending technology to partners in its current market, and aims to expand its licensing to partners from potential markets. INCU Technology As an exclusive authorized distributor of the INCU solution, the Group has partnered with various distributors to distribute the technology to other brands and markets. The Group has distributed the INCU technology across the South East Asia region, from locations including Singapore, Malaysia, China and Cambodia, Brunei, Philippines, Indonesia, South Korea, Hong Kong, Thailand and Africa. The Group focuses on marketing its brand to customers that are attracted to the Group’s eco-friendly image, the technology’s ability to inhibit bacteria and viruses, as well as its ability to provide a clean and safe environment. 8 | Page The Air Conditioner Industry Growing demand for cooling Based on the latest report by the International Energy Agency 2018, in 2016 there were approximately 1.6 billion units of air conditioners in use globally, and China and the United States accounted for 36% and 23% of the total consumption, respectively. In addition, total air conditioner sales in the five year period ending December 31, 2020 have averaged approximately 111 million units each year. 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. 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. 9 | Page 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 In 2018, approximately 111 million units of air conditioners were sold globally of which approximately 87% were residential units and approximately 13% were commercial units. The CAGR from 2012 to 2018 was approximately 2.2%. China was the largest consumer of air conditioners globally and it accounted for approximately 40% of all air conditioners sales. Asia (ex-Japan and China) had the highest CAGR of approximately 5.3% from 2012 to 2018 followed by Africa at approximately 3.9% CAGR. The global air conditioners systems market was valued at approximately $106.6 billion in 2020 and was expected to grow at a CAGR of approximately 6.3% from 2021 to 2028. The market size for that of China was approximately $37.0 billion in 2020 and was expected to grow at a CAGR of approximately 7.4%. The major air conditioners manufacturers globally come from Japan, South Korea, China and the USA. Daikin was the leading player globally with approximately $20.3 billion of revenues from the heating, ventilation and air conditioners segment in Financial Year ended 2020. 10 | Page Competition The air-conditioning and air purifying industry in Asia is highly competitive. Key market players in HVAC products includes several multinational, regional and local companies, the largest of which include Daikin Industries Ltd, Midea Group Co, Trane Technologies PLC, Carrier Global Corp, LG Electronics, Inc, Panasonic Corp and Mitsubishi Electric Corp. Sales depend on price, product availability, delivery schedule, product performance, product line breadth, brand reputation, design, technical expertise and service. The Group’s competitiveness arise from its focus on eco-friendly and highly efficient product offerings. 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 patent pending 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, China, Thailand, Philippines, Vietnam, Taiwan, Japan as well as Patent Cooperation Treaty and trademarks in various stages of the registration application process in Malaysia and 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. Additional information about the risks relating to our intellectual property is provided under “Risk Factors—Risks Related to Intellectual Property.” Government Approval And Regulation Our business operations involve the development and sale of HVAC products, which are regulated by the Malaysia Energy Commission. The Group endeavours to ensure the safe and lawful operation of its facilities and distribution of its products and believes it is in compliance in all material respects with applicable laws and regulations. Employees As of December 8, 2022, the Group has approximately 30 employees, all of whom were full-time employees located in Malaysia, Singapore, China and Cambodia. None of the Group’s employees are represented by a labor union. We have never experienced any employment related work stoppages, and we consider our relations with our employees to be good. 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. The Company believes the claims are without merit and will defend itself against the claims. 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.