What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-01-17 compared with 2022-07-19 · 138 added, 163 removed, 73 unchanged (80% of the section changed)

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

Forward-looking Statements

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

Forward-looking

This Quarterly Report contains forward-looking statements relating to future events or our future financial performance.

In some cases, you

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which have been prepared in accordance with U.S.

was incorporated in the State of Nevada on February 17, 2017 and was formed to provide geodesy services.

On December 20, 2021, EvoAir

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.

International is a company incorporated in the BVI on November 17, 2021 and the parent company of WKL Eco Earth Holdings, WKL Eco Earth,

WKL Green Energy, EvoAir Manufacturing, WKL EcoEarth Indochina, WKL Guanzhe and Evo Air Marketing (M) Sdn.

(“Evo Air Marketing”)

(together with Unex, EvoAir International, to be referred to as the “WKL Group” or “the Group”).

The WKL Group

is principally engaged in the research and development, manufacturing sale and marketing of HVAC products for residential, commercial

and industrial uses.

WKL Group operates manufacturing plants and assembly lines in China and Malaysia in order to develop and manufacture its HVAC products,

totaling approximately 60,000 square feet of manufacturing space.

With the rise of the Covid-19 pandemic, the Group has been engaged

as an authorized exclusive distributor of the INCU branded Ionic Nano Copper Solution Technology (“INCU Technology”).

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

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

Holdings Inc.

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.

December 20, 2021, the Company and Dr.

Low entered into the “EvoAir

International Share Transfer Agreement, pursuant to which Dr.

Low agreed to sell all of his ordinary shares of EvoAir International to

the Company for the consideration of US$100 (“EvoAir Transaction”).

EvoAir International, through its subsidiaries upon completion

of the Transactions, is engaged in the sale of HVAC products in Asia.

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 for an aggregate consideration of $100.

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.

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 on April 19, 2021, a Malaysian

company incorporated on March 22, 2019, as well as acquiring (d) WKL EcoEarth Indochina, a Cambodia company incorporated on February 4,

2021, (e) WKL Guanzhe Green Technology Guangzhou, a Chinese company incorporated on April 6, 2021.

EvoAir Manufacturing wholly owns

(f) Evo Air Marketing, a Malaysian company incorporated on February 2, 2021.

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”.

of Operations

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

the three months ended November 30, 2022, as compared to the three months ended November 30, 2021.

Months Ended November 30, 2022, versus Three Months Ended November 30,

Three Months Ended

Cost of revenue

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

Gross (loss)/profit

Operating expenses

Loss from operation

Other (expense)/ income

$ (1,440,143 )

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.

Company generated revenues of $142,685 in the three months ended November 30, 2022, as compared to $808,879 in the three months ended November 30 2021, a decrease in revenue of $666,194.

The decline in revenue for the comparative figures is mainly due to the

decrease in sales in air purifier products as a result of rollbacking of preventative measures taken by businesses and public from spreading

infection as the World and society progresses towards living with Covid-19.

The Company is building up its traction for the evoair TM

hybrid air-conditioners in 3 months ended November 2022.

of revenue was $162,858 or 114% of revenue for the three months ended November 30, 2022, as compared to $707,414 or 87% of revenue in the

same financial period in 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, 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

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.

The higher cost of revenue than revenue in the 3 months ended November 30, 2022 is attributable to the lack of economies

of scale and the Company has yet to achieve optimal production efficiency.

loss was $20,173 or negative gross profit margin of 14% for the three months ended November 30, 2022, as compared to gross profit of

$101,465 in the same financial period in 2021 or 13% of revenue.

The decrease of gross profit is mainly due to the Company

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

during commercialization stage.

The Company anticipates improvement of income and gross profit margin with the

improvement of revenue streams from distributor and dealership model, projects as well as licensing model.

expenses were $1,426,947 for the three months ended November 30, 2022, compared to $510,057 in the corresponding period in 2021, an increase

The increases in operating expenses were mainly due to the commencement of amortization of intangible assets starting

from December 2021.

net loss for the three months ended November 30, 2022, was $1,440,143 as compared to $383,332 for the corresponding period in 2021.

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.

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Working Capital

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 November 30, 2022, our company’s current liabilities stood at $727,014, which included accounts payable and accruals of

$134,784, other payables of $21,311, current portion hire purchase creditor $7,856, amount due to shareholders $2,301, current

portion operating lease liabilities of $127,220, and the deferred revenue of $433,542.

at November 30, 2022 our company had a positive working capital of $702,983 compared with the positive working capital of $796,922 as

at August 31, 2022.

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 used in operating activities

Cash flows used in investing activity

Cash flows generated from financing activities

Net changes in cash

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 cash and cash equivalents stood at $166,226 as of November 30, 2022.

Cash used in operating activities for the three

months ended November 30, 2022, was $264,216.

This resulted primarily from a net loss of $1,440,362 which was offset by depreciation

of $35,126, amortization of $1,065,646, decrease in operating lease $25,232, decrease in inventories of $71,438, decrease in deposit,

prepayment and other receivables of $183,110, decrease in accounts receivable of $18,303, decrease in accounts payable and accruals

of $82,046, and decrease in other payable of $10,669.

used in investing activities resulted from purchase of property plant and equipment amounting to $1,044 for the three months ended

November 30, 2022.

generated from financing activities resulted from the proceeds from capital raising amounting to $299,055, proceeds from capital contribution

amounting to $100, and payments of hire purchase amounting to $2,066 during the three months ended November 30, 2022.

Company’s business is not subject to seasonality.

Sheet Arrangements

Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial

condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

of the date of this Quarterly Report on Form 10-Q, we do not have any off-balance sheet arrangements that have or are reasonably likely to have

a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations,

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

Accounting Policies

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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 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

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 revenue 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.

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 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.

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 2023 and 2022 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 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

of November 30, 2022, and August 31, 2021, the Company had an accumulated deficit of $8,838,700 and $7,465,373 respectively.

Company incurred net loss of $1,440,362 and $383,332 for three months ended November 30, 2022, and November 30, 2021, respectively.

The cash used in operating activities were $264,216 and $159,933 for the three months ended November 30, 2022, and November 30, 2021,

respectively.

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 a New Business contemplated under the Transaction, 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

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.

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.

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

have no material commitments as of November 30, 2022.

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 ASC is the sole source of authoritative US GAAP literature recognized

by the FASB and applicable to the Company.

Management has reviewed the aforementioned rules and releases and believes any effect will

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

for rules and interpretive releases of the SEC under the authority

of federal securities laws and a limited number of grandfathered standards, the ASC is the sole source of authoritative GAAP literature

recognized by the FASB and applicable to the Company.

Management has reviewed the aforementioned rules and releases and believes any effect

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

June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 adds the

CECL impairment model to U.S.

GAAP that is based on expected losses rather than incurred losses.

Modified retrospective adoption is

required with any cumulative-effect adjustment recorded to retained earnings as of the beginning of the period of adoption.

2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within the year of adoption.

Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

The Company does not expect the application of the CECL impairment model to have a significant impact on its allowance for

uncollectible amounts for accounts receivable.

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

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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.

Company has implemented all new applicable accounting pronouncements that are in effect.

These pronouncements did not have any material

impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting

pronouncements that have been issued that might have a material impact on its financial position or results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

a “smaller reporting company”, we are not required to provide the information required by this Item.

a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information

required by this Item.

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