EvoAir Holdings Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS EVOAIR HOLDINGS INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In U.S. Dollars, except share data or otherwise stated) AS OF MAY 31, 2024 AND AUGUST 31, 2023 May 31, 2024 August 31, 2023 (Unaudited) (Audited) ASSETS Current assets Cash and cash equivalents $ 45,502 $ 779,049 Accounts receivable 56,777 44,130 Inventories 735,470 630,478 Deposit, prepayments and other receivables 469,853 617,507 Total current assets 1,307,602 2,071,164 Non-current assets Property, plant and equipment, net 378,072 463,387 Operating lease right-of-use assets 209,670 271,021 Deferred offering cost 449,576 - Technology-related intangible assets, net 73,100,745 76,218,786 Total non-current assets 74,138,063 76,953,194 TOTAL ASSETS $ 75,445,665 $ 79,024,358 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable and accruals $ 227,472 $ 170,888 Other payables 21,229 27,487 Deferred revenue 391,437 440,069 Hire purchase creditor 7,472 9,224 Amounts due to shareholders 756,682 232,095 Operating lease liability - current 91,658 84,879 Total current liabilities 1,495,950 964,642 Non-current liabilities Non-current hire purchase creditor 6,398 10,531 Non-current operating lease liabilities 127,015 198,163 Total non-current liabilities 133,413 208,694 TOTAL LIABILITIES 1,629,363 1,173,336 Commitments and contingencies (Note 14) - - Shareholders’ equity Common stock, 1,000,000,000 authorized; $ 0.001 par value, 102,742,362 and 102,310,933 shares issued and outstanding as at May 31, 2024 and August 31, 2023 102,742 102,311 Additional paid in capital 91,502,360 90,371,141 Shares to be issued - 1,066,052 Accumulated other comprehensive loss ( 190,036 ) ( 17,036 ) Accumulated deficit ( 17,227,187 ) ( 13,523,266 ) Non-controlling interest ( 371,577 ) ( 148,180 ) Total shareholders’ equity 73,816,302 77,851,022 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 75,445,665 $ 79,024,358 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. 3 | Page EVOAIR HOLDINGS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In U.S. Dollars, except share data or otherwise stated) FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2024 AND 2023 ‎May 31, 2024 ‎May 31, 2023 ‎May 31, 2024 ‎May 31, 2023 Three months ended Nine months ended ‎May 31, 2024 ‎May 31, 2023 ‎May 31, 2024 ‎May 31, 2023 Revenue $ 89,616 165,726 $ 222,108 $ 379,323 Cost of revenue 56,741 124,647 244,142 376,445 Gross profit/(loss) 32,875 41,079 ( 22,034 ) 2,878 Operating expenses: Selling and marketing expenses 23,646 8,744 61,849 21,079 General and administrative expenses 984,048 1,459,409 3,936,596 4,300,802 Total operating expenses 1,007,694 1,468,153 3,998,445 4,321,881 Loss from operation ( 974,819 ) ( 1,427,074 ) ( 4,020,479 ) ( 4,319,003 ) Other income/(expense) Interest income(expense) ( 32 ) 5 44 11 Other income 410 ( 86,354 ) 90,915 ( 71,871 ) Total other income/(expense) 378 ( 86,349 ) 90,959 ( 71,860 ) Loss from operation before income taxes ( 974,441 ) ( 1,513,423 ) ( 3,929,520 ) ( 4,390,863 ) Income tax expenses - - - - Net loss $ ( 974,441 ) $ ( 1,513,423 ) $ ( 3,929,520 ) $ ( 4,390,863 ) Less: Net loss attributable to non-controlling interests ( 81,747 ) ( 61,768 ) ( 225,599 ) ( 189,719 ) Net loss attributable to equity holders of the Company ( 892,694 ) ( 1,451,655 ) ( 3,703,921 ) ( 4,201,144 ) Other comprehensive income/(loss): Foreign currency translation adjustment ( 86,717 ) ( 50,873 ) ( 170,798 ) ( 61,568 ) Total comprehensive loss ( 979,411 ) ( 1,502,528 ) ( 3,874,719 ) ( 4,262,712 ) Less: net comprehensive income attributable to non-controlling interests 7,368 ( 396 ) 2,202 293 Net comprehensive loss attributable to equity holders of the Company ( 986,779 ) ( 1,502,132 ) ( 3,876,921 ) ( 4,263,005 ) Net loss attributable to equity holders of the Company per common share: Basic and diluted ( 0.01 ) ( 0.01 ) ( 0.04 ) ( 0.04 ) Weighted average number of common shares outstanding: Basic and diluted 102,742,362 102,006,158 102,704,115 101,973,933 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. 4 | Page EVOAIR HOLDINGS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT) (In U.S. Dollars, except share data or otherwise stated) FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2024 AND 2023 Common Stock Additional paid in Accumulated Accumulated Other Comprehensive Shares to be Non- controlling shares amount capital deficit income issued interests Total Balance as of August 31, 2022 101,853,397 $ 101,854 $ 89,125,872 $ ( 7,465,373 ) $ 65,880 $ 75,000 $ ( 58,754 ) $ 81,844,479 Capital contribution - - 100 - - - - 100 Issuance of common stock for Cash 149,621 150 373,905 - - ( 75,000 ) - 299,055 Foreign currency translation adjustment - - - - ( 13,723 ) - ( 4,184 ) ( 17,907 ) Net loss - - - ( 1,373,327 ) - - ( 67,035 ) ( 1,440,362 ) Balance as of November 30, 2022 102,003,018 $ 102,004 $ 89,499,877 $ ( 8,838,700 ) $ 52,157 $ - $ ( 129,973 ) $ 80,685,365 Issuance of common stock pursuant to share subscription agreement - - - - - 144,443 - 144,443 Foreign currency translation adjustment - - - - 3,717 - 3,495 7,212 Net loss - - - ( 1,376,162 ) - - ( 60,916 ) ( 1,437,078 ) Balance as of February 28, 2023 102,003,018 $ 102,004 $ 89,499,877 $ ( 10,214,862 ) $ 55,874 $ 144,443 $ ( 187,394 ) $ 79,399,942 Issuance of common stock for Cash 57,783 58 144,385 - - $ 480,888 - 625,331 Capital contribution - - ( 62,885 ) - 15,542 - 204,498 157,155 Foreign currency translation adjustment - - - - ( 51,269 ) - 396 ( 50,873 ) Net loss - - - ( 1,451,655 ) - - ( 61,768 ) ( 1,513,423 ) Balance as of May 31, 2023 102,060,801 $ 102,062 $ 89,581,377 $ ( 11,666,517 ) $ 20,147 $ 625,331 $ ( 44,268 ) $ 78,618,132 Common Stock Additional paid in Accumulated Accumulated Other Comprehensive Shares to be Non- controlling shares amount capital deficit income issued interests Total Balance as of August 31, 2023 102,310,933 $ 102,311 $ 90,371,141 $ ( 13,523,266 ) $ ( 17,036 ) $ 1,066,052 $ ( 148,180 ) $ 77,851,022 Issuance of common stock for Cash 373,822 374 934,181 - - ( 934,555 ) - - Issuance of common stock for service 57,607 57 131,440 - - ( 131,497 ) - - Foreign currency translation adjustment - - - - ( 85,208 ) - ( 2,793 ) ( 88,001 ) Net loss - - - ( 1,444,323 ) - - ( 79,998 ) ( 1,524,321 ) Balance as of November 30, 2023 102,742,362 $ 102,742 $ 91,436,762 $ ( 14,967,589 ) $ ( 102,244 ) $ - $ ( 230,971 ) $ 76,238,700 Foreign currency translation adjustment - - - - 6,293 - ( 2,373 ) 3,920 Net loss - - - ( 1,366,904 ) - - ( 63,854 ) ( 1,430,758 ) Balance as of February 29, 2023 102,742,362 $ 102,742 $ 91,436,762 $ ( 16,334,493 ) $ ( 95,951 ) $ - $ ( 297,198 ) $ 74,811,862 Balance 102,742,362 $ 102,742 $ 91,436,762 $ ( 16,334,493 ) $ ( 95,951 ) $ - $ ( 297,198 ) $ 74,811,862 Capital contribution - - 65,598 - - - - 65,598 Foreign currency translation adjustment - - - - ( 94,085 ) - 7,368 ( 86,717 ) Net loss - - - ( 892,694 ) - - ( 81,747 ) ( 974,441 ) Balance as of May 31, 2024 102,742,362 $ 102,742 $ 91,502,360 $ ( 17,227,187 ) $ ( 190,036 ) $ - $ ( 371,577 ) $ 73,816,302 Balance 102,742,362 $ 102,742 $ 91,502,360 $ ( 17,227,187 ) $ ( 190,036 ) $ - $ ( 371,577 ) $ 73,816,302 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. 5 | Page EVOAIR HOLDINGS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In U.S. Dollars, except share data or otherwise stated) FOR THE NINE MONTHS ENDED MAY 31, 2024 AND 2023 May 31, 2024 May 31, 2023 Cash flows from operating activities Net loss $ ( 3,929,520 ) ( 4,390,863 ) Adjustments for non-cash income and expenses: Depreciation 187,729 126,139 Amortization 3,118,041 3,118,041 Property, plant and equipment impairment and abandonments - 21,387 Changes in operating assets and liabilities: (Increase)/decrease in accounts receivables ( 12,647 ) 11,928 (Increase)/decrease in inventories ( 104,992 ) 25,532 Decrease in deposit, prepayments and advances to suppliers 147,654 205,213 Decrease in operating lease right-of-use assets 61,351 148,286 Increase/(decrease) in accounts payable and accruals 56,584 ( 74,641 ) Decrease in deferred revenue ( 48,632 ) ( 69,922 ) Decrease in operating lease liabilities ( 64,369 ) ( 165,987 ) Decrease in other payables ( 6,258 ) ( 14,152 ) Increase in amounts due to shareholders 524,587 303,123 Net cash used in operations $ ( 70,472 ) $ ( 755,916 ) Cash flows from investing activity Purchase of property, plant and equipment ( 102,414 ) ( 29,473 ) Cash used in investing activity $ ( 102,414 ) $ ( 29,473 ) Cash flows from financing activities Payments of hire purchase ( 5,885 ) ( 6,570 ) Payment of offering costs ( 449,576 ) - Proceeds from issuance of common stock - 443,498 Proceeds from shares to be issued - 625,331 Proceeds from capital contribution 65,598 157,255 Net cash (used in)/generated from financing activities $ ( 389,863 ) $ 1,219,514 Net (decrease)/increase in cash and cash equivalents ( 562,749 ) 434,125 Effect of exchange rate changes ( 170,798 ) ( 61,568 ) Cash and cash equivalents at start of period 779,049 152,304 Cash and cash equivalents at end of period 45,502 524,861 The accompanying footnotes are an integral part of these condensed consolidated financial statements. 6 | Page EVOAIR HOLDINGS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2024, AND 2023 NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS EvoAir Holdings Inc. (formerly Unex Holdings Inc.) (the “Company”, “EVOH”, “we”, “us”, or “our”) is a corporation established under the corporation laws in the State of Nevada, United States of America (“U.S”) on February 17, 2017. The Company has adopted an August 31 fiscal year end. On December 20, 2021, the Company and Low Wai Koon (“Dr. Low”) entered into a share transfer agreement, (the “EvoAir International Share Transfer Agreement”), pursuant to which Dr. Low agreed to sell all of his ordinary shares of EvoAir International Limited (“EvoAir International”) to the Company for a consideration of US$ 100 (“EvoAir Transaction”). EvoAir International, through its subsidiaries upon completion of the Transactions (defined hereunder), is engaged in the research and development (“R&D”), manufacturing, trading, sale of heating, ventilation and air conditioning (“HVAC”) products and related services in Asia. Pursuant to the terms of a share transfer agreement dated December 20, 2021, Dr. Low, the then sole executive officer and director of the Company and the owner of 2,000,000 restricted shares of common stock, with par vaue of $ 0.001 per share (“Common Stock”) of the Company (“EvoAir Shares”) representing approximately 67.34 % of the Company’s then issued and outstanding shares, sold his entire shareholding of the Company to WKL Global Limited (“WKL Global”) for an aggregate consideration of $ 100 (“Change of Control Transaction”). Upon completion of the Change of Control Transaction, WKL Global owned 2,000,000 shares, or approximately 67.34 % of the then issued and outstanding ordinary shares of the Company, which resulted in a change of control of the Company. On December 20, 2021, several transactions took place (together, the “Allotment Transactions”) whereby the Company issued and allotted in aggregate 98,809,323 ordinary shares of Common Stock to certain parties. On completion of the Allotment Transactions, the total number of issued and outstanding shares of Common Stock of the Company were 101,779,323 (“Then Enlarged Share Capital”): (A) On December 20, 2021, Dr. Low and Chan Kok Wei entered into a share exchange agreement with WKL Eco Earth Holdings Pte Ltd (“WKL Eco Earth Holdings”), pursuant to which Dr. Low and Chan Kok Wei agreed to sell all their ordinary shares of WKL Green Energy Sdn Bhd (“WKL Green Energy”) to WKL Eco Earth Holdings in consideration for the allotment and issuance to WKL Global and Allegro Investment (BVI) Limited (“Allegro Investment”), a company incorporated in the British Virgin Islands (“BVI”) with 50 % shareholdings held by Chan Kok Wei and Ong Bee Chen, respectively, of 24,000 shares and 6,000 EvoAir Shares, respectively, or approximately 0.02 % and 0.01 % of the Then Enlarged Share Capital, respectively. (B) On December 20, 2021, Dr. Low, Chan Kok Wei, Ong Bee Chen and certain sellers (“WKLEE Sellers”) entered into a share exchange agreement with WKL Eco Earth Holdings, pursuant to which Dr. Low, Chan Kok Wei, Ong Bee Chen and WKLEE Sellers agreed to sell all their ordinary shares of WKL Eco Earth Sdn Bhd (“WKL Eco Earth”) to WKL Eco Earth Holdings in consideration for the allotment and issuance to WKL Global, Allegro Investment and WKLEE Sellers of 49,320 EvoAir Shares, 8,280 EvoAir Shares and in aggregate 14,400 shares, respectively, or approximately 0.05 %, 0.009 % and in aggregate 0.014 %, respectively, of the Then Enlarged Share Capital. (C) On December 20, 2021, Tan Soon Hock, Ivan Oh Joon Wern and certain relevant interest holders (“Relevant Interest Holders”) entered into an investment exchange agreement with WKL Eco Earth Holdings, pursuant to which Tan Soon Hock, Ivan Oh Joon Wern and the Relevant Interest Holders agreed to sell all relevant interests in the EvoAir International and its subsidiaries to WKL Eco Earth Holdings in consideration for the allotment and issuance of 7,037,762 EvoAir Shares, 2,520,000 EvoAir Shares and in aggregate 6,001,794 EvoAir shares, respectively, or approximately 6.91 %, 2.48 % and in aggregate 5.90 %, respectively, of the Then Enlarged Share Capital. The board of directors and majority shareholders of the Company have approved the transaction. 7 | 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 and patent applications relating to eco-friendly air-conditioner condenser (external unit), evoair TM and the trademarks and trademark applications described in the deeds of assignment thereunder, and in respect of Dr. Low’s patents and patents applications relating to the portable air-conditioner, e-Cond EVO TM and the trademarks and trademark applications as described in the deeds of assignment thereunder (together, the “IP Assignments”). Pursuant to the IP Assignments, WKL Global, Allegro Investment and certain nominees shall be allotted and issued 63,362,756 EvoAir Shares, 14,297,259 EvoAir Shares and in aggregate 5,487,752 EvoAir Shares, respectively or approximately 62.25 %, 14.05 % and in aggregate 5.39 %, respectively of the Then Enlarged Share Capital in consideration for the IP Assignments. EvoAir Transaction, Change of Control Transaction and Allotment Transactions are collectively referred to as the “Transactions”. The closing of the Transactions (“Closing”) occurred on December 20, 2021 (the “Closing Date”). From and after the Closing Date, at which time EvoAir International transferred its HVAC business to the Company, the Company’s primary operations will consist of the prior operations of EvoAir International and its subsidiaries. EvoAir International is a company incorporated in BVI on November 17, 2021. Effective from the December 20, 2021, it wholly owns WKL Eco Earth Holdings, a company incorporated in Singapore on July 12, 2018, which in turn wholly owns (a) WKL Eco Earth, a Malaysian company incorporated on May 17, 2017, and (b) WKL Green Energy, a Malaysian company incorporated on October 24, 2017. WKL Eco Earth Holdings acquired (c) EvoAir Manufacturing (M) Sdn Bhd (“EvoAir Manufacturing”) on April 19, 2021, a Malaysian company incorporated on March 22, 2019, as well as acquiring (d) WKL EcoEarth Indochina Co Ltd (“WKL EcoEarth Indochina”), a Cambodia company incorporated on February 4, 2021, (e) WKL Guanzhe Green Technology Guangzhou Co Ltd (“WKL Guanzhe”), a Chinese company incorporated on April 6, 2021. EvoAir Manufacturing wholly owns (f) Evo Air Marketing (M) Sdn Bhd (“Evo Air Marketing”), a Malaysian company incorporated on February 2, 2021. On June 15, 2022, the Company filed a Certificate of Amendment (the “Amendment”) to the Articles of Incorporation with Nevada’s Secretary of State to change the name of the Company from Unex Holdings Inc. to EvoAir Holdings Inc. (the “Name Change”), and the Name Change became market effective on November 4, 2022. Effective on November 11, 2022, the Company’s shares began trading under the new ticker symbol “EVOH”. Round 2 Stockholders The Company entered into a series of offerings for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $ 2.50 , as follows: ● On February 15, 2022, the Company entered into certain share subscription agreement with Ms. Ang Lee Kim Jane, who is a “non-U.S. Persons” as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to which the Company agreed to issue and sell 74,074 shares of Common Stock, at a per share purchase price of $ 2.50 , as part of a series of offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $ 2.50 . The gross proceeds were $ 185,185 . ● On June 3, 2022, the Company entered into certain share subscription agreement with Mr. Wong Hon Wai who is a “non-U.S. Persons” as defined in Regulation S of the Securities Act pursuant to which the Company agreed to issue and sell 5,000 shares of Common Stock, at a per share purchase price of $ 2.50 , as part of a series of offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $ 2.50 . The gross proceeds were $ 12,500 . ● On October 25, 2022, the Company entered into Regulation S share subscription agreements with eight investors, each of whom represented that it was a “non-U.S. Persons” as defined in Securities Act. On the same date, the Company entered into Regulation D share subscription agreements with two investors, each of whom represented that it was an “Accredited Investors” as defined in Regulation D of the Securities Act. Pursuant to the share subscription agreements, the Company agreed to issue and sell in aggregate, (i) 129,621 shares of Common Stock to the Regulation S investors, and (ii) 15,000 shares of Common Stock to the Regulation D investors, respectively, at a per share purchase price of $ 2.50 , as part of a series of offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $ 2.50 . The gross proceeds in aggregate were $ 361,553 . 8 | Page ● On February 20, 2023, the Company entered into Regulation S share subscription agreements with eleven investors, each of whom represented that it was a “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the share subscription agreements, the Company agreed to issue and sell in aggregate, 57,783 shares of Common Stock to the Regulation S investors, at a per share purchase price of $ 2.50 as part of a series of the offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $ 2.50 . The gross proceeds in aggregate were $ 144,443 . ● On July 13, 2023, the Company entered into Regulation S share subscription agreements with 31 investors, each of whom represented that it was a “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the share subscription agreements, the Company agreed to issue and sell in aggregate, 250,132 shares of Common Stock to the Regulation S Investors, at a per share purchase price of $ 2.50 as part of a series of the offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $ 2.50 . The gross proceeds in aggregate were approximately $ 625,330 . ● On September 7, 2023, the Company entered into Regulation S share subscription agreements with 71 investors, each of whom represented that it was a “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the share subscription agreements, the Company agreed to issue and sell in aggregate, 365,164 shares of Common Stock to the Regulation S investors, at a per share purchase price of $ 2.50 as part of a series of the offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $ 2.50 . The gross proceeds in aggregate were approximately $ 912,889 . ● On November 21, 2023, the Company entered into a Regulation S share subscription agreement with Wong Chun Shoong who represented that he was a “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the share subscription agreement, the Company agreed to issue and sell in aggregate, 8,658 shares of Common Stock to the Regulation S investors, at a per share purchase price of $ 2.50 as part of a series of the offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $ 2.50 . The gross proceeds in aggregate were approximately $ 21,645 . Details of the Company’s subsidiaries: SUMMARY OF CONSOLIDATED SUBSIDIARIES Subsidiaries of EVOH Attributable interest EvoAir International Limited (British Virgin Islands) 100 % Subsidiary of EvoAir International Limited WKL Eco Earth Holdings Pte Ltd (Singapore) 100 % Subsidiaries of WKL Eco Earth Holdings Pte Ltd WKL Eco Earth Sdn Bhd (Malaysia) 100 % WKL Green Energy Sdn Bhd (Malaysia) 100 % EvoAir Manufacturing (M) Sdn Bhd (Malaysia) 67.5 % WKL EcoEarth Indochina Co Ltd (Cambodia) 55 % WKL Guanzhe Green Technology Guangzhou Co Ltd (China) 55 % Subsidiary of EvoAir Manufacturing (M) Sdn Bhd Evo Air Marketing (M) Sdn Bhd (Malaysia) 100 % NOTE 2 – CHANGE OF CONTROL 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 for an aggregate consideration of $ 100 . Upon completion of the Change of Control Transaction, WKL Global then owned 2,000,000 shares, or approximately 67.34 % of the Company’s then issued and outstanding shares, which resulted in a change of control of the Company. 9 | Page NOTE 3 – GOING CONCERN The Company’s financial statements as of May 31, 2024, is prepared using generally accepted accounting principles in the United States of America (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established a sustainable ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. As of May 31, 2024, and August 31, 2023, the Company had an accumulated deficit of $ 17,227,187 and $ 13,523,266 respectively. The Company incurred net loss of $ 3,929,520 and $ $ 4,390,863 for the nine months ended May 31, 2024, and 2023, respectively. The cash used in operating activities was $ 70,472 and $ 755,916 for the nine months ended May 31, 2024, and 2023, 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. With the development of HVAC business (“HVAC Business”) pursuant to 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 HVAC Business including expansion in product offerings, geographical expansion, generate revenue through expansion of revenue streams and customer base (retail, commercial, industrial, projects 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 in conjunction with the Company’s plan to uplist on Nasdaq Capital Market (“Uplisting”) to finance the operations as well as business expansion. The unaudited condensed 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. NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation and principles of consolidation : The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with U.S. GAAP for financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of EvoAir International, WKL Eco Earth Holdings, WKL Eco Earth, WKL Green Energy, and its 67.5 % owned EvoAir Manufacturing which included a 100 % owned subsidiary, Evo Air Marketing, 55 % owned WKL EcoEarth Indochina, and its 55 % owned WKL Guanzhe. All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of the Management, the accompanying financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly all financial statements in accordance with U.S. GAAP. The non-controlling interests are presented in the consolidated balance sheets, separately from equity attributable to the stockholders of the Company. Non-controlling interests in the results of the Company are presented on the face of the consolidated statements of operations and comprehensive loss as an allocation of the total loss for the year between non-controlling interest holders and the stockholders of the Company. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Key estimates in the accompanying consolidated financial statements include, among others, revenue recognition, allowances for doubtful accounts and product returns, provisions for obsolete inventory, valuation of long-lived assets and Rights of Use (“ROU”) assets (including lease liabilities), and deferred income tax asset valuation allowances. Actual results could differ materially from these estimates. 10 | Page Fiscal Year End The Company operates on a fiscal year basis with the fiscal year ending on August 31. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents. The Company places its cash with a high credit quality financial institution. WKL Guanzhe business is primarily conducted in China and substantially all of revenue are denominated in RMB. The government of People’s Republic of China (“PRC”) imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. Comprehensive Gain or Loss ASC 220 “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of May 31, 2024 and August 31, 2023, the Company established that there are items that represented components of comprehensive income and, therefore, has included a statement of comprehensive income in the financial statements. Foreign Currency Translation The functional currency of Chinese operations is Chinese Renminbi, (“RMB”). The functional currency of the Company’s Singapore operations is Singapore dollars (“SGD”). The functional currency of the Company’s Malaysia operations is Ringgit Malaysia (“RM”). Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods. Assets and liabilities of the Company’s operations are translated into the reporting currency, United States Dollars, at the exchange rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historical rate when the transaction occurred. The resulting translation adjustment is reflected as accumulated other comprehensive income, a separate component of stockholders’ equity in the statement of stockholders’ equity. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the net value of face amount less any allowance for expected credit loss The allowance for expected credit loss is the Company’s best estimate of the amount of probable credit losses in our existing accounts receivable. An allowance for doubtful accounts is recorded in the period when loss is probable based on an assessment of specific evidence indicating troubled collection, historical experience, accounts aging and other factors. The Company reviews the allowance for expected credit loss on a regular basis, and all past due balances are reviewed individually for collectability. An account receivable is written off after all collection effort has ceased. Recoveries of receivables previously written off are recorded when received. Interest is not charged on past due accounts. As of May 31, 2024, and August 31, 2023, our accounts receivable amounted to $ 56,777 and $ 44,130 , respectively, with no allowance for expected credit loss for both periods. 11 | Page Inventories Inventories consist primarily of finished goods, raw materials, and work-in-process (“WIP”) from WKL Eco Earth, WKL EcoEarth Indochina, WKL Guanzhe, and EvoAir Manufacturing. Inventories are recognized at the lower of cos t or net realizable value. We determine the costs of inventory using the standard cost method, which approximates actual cost based on a first-in, first-out method. All other costs, including administrative costs, are expensed as incurred. Deposit, prepayments, and other receivables Deposit, prepayments and other receivables are comprised of prepayments paid to vendors to initiate orders and prepaid services fees and are classified as current assets if such amounts are to be recognized within one year from the balance sheet date. Property, Plant and Equipment Property, plant and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related capitalized assets. Property plant and equipment are depreciated over 5 to 10 years. SUMMARY OF ESTIMATED USEFUL LIVES OF ASSETS Useful lives Plant and machineries 5 years Office equipment 5 years Vehicles 5 years Furniture and equipment 10 years Renovation 10 years Repair and maintenance costs are charged to expense as incurred. At the time of retirement or other disposition of property, plant and equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations. Intangible Assets and Other Long-Lived Assets The Company’s intangible assets consist of patents and trademarks related to assignments of intellectual properties by Dr. Low into WKL Eco Earth Holdings under the IP Assignments as contemplated in Note 1. The intangible assets are recorded at fair market value and are amortized using the straight-line method over an estimated life of 20 years for both patents and trademarks. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value. Revenue Recognition Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company does not disaggregate its revenue streams as the economic factors underlying the contracts are similar and provide no significant distinction. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. 12 | Page The Company only applies the five-step model to contracts when it is probable that the entity 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, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Deferred Revenue The Company collects deposits from customers in advance for some business contracts. The customer payments received in advance are recorded as deferred revenue on the balance sheet. The deferred revenue of $ 440,069 was recorded as of August 31, 2023, with $ 23,332 recognized as revenue for nine months ended May 31, 2024. The Company recognized $ 391,437 deferred revenue as of May 31, 2024 . Deferred Offering Costs Deferred offering costs include specific incremental costs directly attributable to the Company’s public offering of securities in conjunction with the Upliting. Deferred offering costs exclude management salaries or other general and administrative expenses. These costs are being deferred and will be charged against the gross proceeds of the offering. Leases We have entered into operating agreements primarily for office and factory. We determine if an arrangement is a lease at inception. For all classes of underlying assets, we elect not to recognize right of use assets or lease liabilities when a lease has a lease term of 12 months or less at the commencement date and does not include an option to purchase the underlying asset that we are reasonably certain to exercise. Operating lease assets and liabilities are included on our consolidated balance sheet as of May 31, 2024. Operating lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in most of our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in the economic environments where the leased asset is located. Operating lease assets also include any prepaid lease payments and lease incentives. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We generally use the base, non-cancellable, lease term when determining the lease assets and liabilities. Operating lease expense is recognized on a straight-line basis over the lease term. Our lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. We combine fixed payments for non-lease components with our lease payments and account for them together as a single lease component, which increases the amount of our lease assets and liabilities. Income Taxes The Company utilizes ASC Topic 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized. 13 | Page The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the consolidated statements of operations. Measurement of Fair Value The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following three categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. Earnings (Loss) per Share The Company computes basic and diluted earnings (loss) per share amounts in accordance with ASC Topic 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. As of May 31, 2024, the Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding. Recently Issued Accounting Pronouncements In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related earnings per share guidance. This standard becomes effective for the Company beginning on October 1, 2024. Adoption is either a modified retrospective method or a fully retrospective method of transition. The Company adopted this guidance effective September 1, 2023, and the adoption of this standard did not have a material impact on its consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, Improvement to Reportable Segment Disclosures. This ASU aims to improve segment disclosures through enhanced disclosures about significant segment expenses. The standard requires disclosure of significant expense categories and amounts for such expenses, including those segment expenses that are regularly provided to the chief operating decision maker, easily computable from information that is regularly provided, or significant expenses that are expressed in a form other than actual amounts. This standard will be effective for the Company in Fiscal Year 2025 and is required to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of the additional disclosure requirements on the Company’s condensed consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, a final standard on improvements to income tax disclosures which applies to all entities subject to income taxes. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. This standard will be effective for the Company in Fiscal Year 2026 and should be applied prospectively. The Company is currently evaluating the impact of the additional disclosure requirements on the Company’s condensed consolidated financial statements. 14 | Page Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by Management to have a material impact on the Company’s present or future financial statements. NOTE 5 INVENTORIES Inventories consist of the following: SCHEDULE OF INVENTORIES May 31, 2024 August 31, 2023 Finished goods $ 300,917 $ 329,420 Raw materials and supplies 170,157 138,869 Work in progress 264,396 162,189 Total inventory on hand $ 735,470 $ 630,478 NOTE 6 DEPOSIT, PREPAYMENTS AND OTHER RECEIVABLES Deposit, prepayments, and other receivables consists of the following: SCHEDULE OF DEPOSIT PREPAYMENTS AND OTHER RECEIVABLES May 31, 2024 August 31, 2023 Deposits and Prepayments $ 45,914 $ 20,777 Other receivables (Advances to suppliers) 423,939 596,730 Total $ 469,853 $ 617,507 NOTE 7 PROPERTY, PLANT AND EQUIPMENT, NET Property, plant, and equipment consist of the following: SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT May 31, 2024 August 31, 2023 Plant and machinery $ 575,803 $ 476,219 Office equipment 56,720 55,848 Vehicles 76,391 77,497 Furniture and equipment 21,967 22,285 Renovation 111,687 113,305 Property, plant and equipment gross 842,568 745,154 Less: Accumulated depreciation ( 464,496 ) ( 281,767 ) Property, plant and equipment, net $ 378,072 $ 463,387 Depreciation expense for the nine months ended May 31, 2024, was $ 187,729 , and for the nine months ended May 31, 2023, it was $ 126,139 . NOTE 8 – INTANGIBLE ASSETS The below table summarizes the identifiable intangible assets as of May 31, 2024, and August 31, 2023: SUMMARY OF INTANGIBLE ASSETS May 31, 2024 August 31, 2023 Technology 1-Portable Air Cooler $ 27,438,763 $ 27,438,763 Technology 2-Condensing Unit 55,709,004 55,709,004 Finite- lived intangible assets, gross 83,147,767 83,147,767 Less: Accumulated amortization ( 10,047,022 ) ( 6,928,981 ) Intangible assets, net $ 73,100,745 $ 76,218,786 Amortization expenses for intangible assets for the nine months ended May 31, 2024, and 2023, were both $ 3,118,041 . 15 | Page NOTE 9 ACCOUNTS PAYABLE, ACCRUALS, AND OTHER PAYABLES Accounts payable, accruals, and other payables consist of the following: SCHEDULE OF ACCOUNTS PAYABLES ACCRUALS AND OTHER PAYABLE May 31, 2024 August 31, 2023 Accounts payable $ 185,190 $ 40,939 Accruals 42,282 129,949 Other payables 21,229 27,487 Total $ 248,701 $ 198,375 NOTE 10 RELATED PARTY TRANSACTIONS Amounts due to shareholders Amounts due to shareholders are unsecured, with interest of 3% per annum and tenure of 6 months, or mutually agreed between the parties . The Company reported amount due to shareholders of $ 756,682 and $ 232,095 as of May 31, 2024 and August 31, 2023, respectively. NOTE 11 STOCKHOLDERS’ EQUITY On December 16, 2021, the Company increased the authorized common stock from 75,000,000 shares with a par value of $ 0.001 per share to 1,000,000,000 shares with a par value of $ 0.001 per share. During the nine months period ended May 31, 2023, the Company issued 207,404 shares of Common Stock, at a per share purchase price of $ 2.50 for gross proceeds of $ 518,498 , as part of a series of offerings by the Company for an aggregate of up to 6,000,000 shares of Common Stock at a per share purchase price of $ 2.50 (“Offering”) . During the nine months period ended May 31, 2023, the Company received gross proceeds of $ 625,330 for 250,132 shares to be issued during the nine months period ended May 31, 2024 as part of the Offering. During the nine months period ended May 31, 2023, the Company received cash proceeds of $ 157,255 from capital contribution. During the nine months period ended May 31, 2024, the Company issued 373,822 shares of Common Stock at a per share purchase price of $ 2.50 for gross proceeds of $ 934,555 , as part of the Offering. As such, the Company had $ 0 shares to be issued on May 31, 2024. During the nine months period ended May 31, 2024, the Company issued in aggregate 52,107 shares of Common Stock to 15 referral agents in consideration for their referral to the Company of certain investors. During the nine months period ended May 31, 2024, the Company issued, in aggregate, 5,500 shares of Common Stock to two individuals in consideration for marketing services provided to the Company by Artisan Creative Studio, a marketing entity based in Malaysia. As of May 31, 2024, and August 31, 2023, the Company had 102,742,362 and 102,310,933 shares of its common stock issued and outstanding, respectively. 16 | Page NOTE 12 INCOME TAXES The Company’s operating subsidiaries are governed by the Income Tax Law (defined hereunder), which concerns Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws (“Income Tax Laws”). We routinely undergo examinations in the jurisdictions in which we operate. The Company has operations in Singapore, Malaysia, Cambodia, BVI, and China that are subject to taxes in the jurisdictions in which they operate, as follows: Singapore WKL Eco Earth Holdings is incorporated in Singapore, and under the current tax laws of Singapore, its standard corporate income tax rate is 17 %. Malaysia WKL Eco Earth, WKL Green Energy and Evoair Manufacturing (including its 100 % subsidiary Evo Air Marketing) are incorporated in Malaysia and are subject to common corporate income tax rate at 24 %. Cambodia WKL EcoEarth Indochina is incorporated in Cambodia, and under the current tax laws of Cambodia, its standard corporate tax rate is 20 %. BVI EvoAir International is incorporated in BVI, and a BVI Business Company is exempt from the BVI income tax. China WKL Guanzhe is incorporated in China. Under the current tax law in the PRC, WKL Guanzhe is subject to the enterprise income tax rate of 25 %. Due to the Company’s net loss position, there was no provision for income taxes recorded. As a result of the Company’s losses to date, there exists doubt as to the ultimate realization of the deferred tax assets. Accordingly, a valuation allowance equal to the total deferred tax assets has been recorded. Reconciliation between the statutory tax rate to income before income taxes and the actual provision for income taxes is as follows: SCHEDULE OF RECONCILIATION BETWEEN THE STATUTORY TAX RATE AND THE ACTUAL PROVISION 2024 2023 Nine Months Ended May 31, 2024 2023 US Statutory rate 21 % 21 % Effect of reconciling items for tax purposes ( 21 )% ( 21 )% Effective income tax rate - % - % The components of net deferred tax assets are as follows: SCHEDULE OF COMPONENTS OF NET DEFERRED TAX ASSETS May 31, 2024 August 31, 2023 Net operating loss carry-forward $ 17,230,000 $ 13,520,000 Less: valuation allowance ( 17,230,000 ) ( 13,520,000 ) Net deferred tax asset - - 17 | Page The Company had net operating loss carry forwards for tax purposes of approximately $ 17,230,000 at May 31 , 2024, and approximately $ 13,520,000 at August 31, 2023, which may be available to offset future taxable income. Utilization of the net operating loss carry forwards may be subject to substantial annual limitations due to the ownership change limitations provided by Section 381 of the Internal Revenue Code of 1986, as amended. The annual limitation may result in the expiration of net operating loss carry forwards before utilization. NOTE 13 ROU ASSET AND LEASES A lease is defined as a contract that conveys the right to control the use of identifiable tangible property for a period of time in exchange for consideration. On February 28, 2022, the Company adopted ASC Topic 842 which primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee including the Company’s leases of office and factory. The Company elected to not recognize ROU assets and lease liabilities arising from short-term leases with initial lease terms of twelve months or less (deemed immaterial) on the accompanying consolidated balance sheets. ROU assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on the effective interest, the effective amortization on the lease liability. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option. When measuring lease liabilities for leases that were classified as operating leases as of May 31, 2024, the Company discounted lease payments using its estimated incremental borrowing rate of 10 %. On March 28, 2023, the Company entered into a lease termination agreement to its Cambodia office lease at #65, 1st, 2nd and 3rd Floor, Street 123, Sangkat Toul Tumpong I, Khan Chamkarman, Phnom Penh, Cambodia (the “Lease Termination”). The Lease Termination terminated the Company’s rights and obligations with respect to the leased premises on April 15, 2023. As such, the ROU assets and operating lease liabilities were remeasured, and the Company recorded a gain of $ 14,890 as a component of operating expenses for the year ended August 31, 2023. No impairment of the ROU assets was deemed to have occurred. The following is a summary of ROU asset and operating lease liabilities: SUMMARY OF ROU ASSET AND OPERATING LEASE LIABILITIES May 31, 2024 August 31, 2023 Assets: ROU asset $ 209,670 $ 271,021 Liabilities: Current: Operating lease liabilities current $ 91,658 $ 84,879 Non-current Operating lease liabilities non current 127,015 198,163 Total lease liabilities $ 218,673 $ 283,042 As of May 31, 2024, the remaining maturities of lease liabilities were as follows: SCHEDULE OF MATURITIES OF LEASE LIABILITIES Operating lease 2025 $ 91,658 2026 88,327 2027 38,688 2028 - 2029 and thereafter - Total $ 218,673 18 | Page NOTE 14 COMMITMENTS AND CONTINGENCIES Litigation and Claims On October 8, 2021, a filing (the “Filing”) was made with the Kuala Lumpur High Court by a reseller (the “Reseller”) of the Company’s INCU ionic nano copper solution (the “Solution”) and the Reseller’s related party (together with the Reseller, the “Plaintiffs”). The Reseller was authorized by WKL Eco Earth’s sole distributor of the Solution (the “WKL Distributor”) to resell the Solution together with a diffuser with a capacity of not more than 1000ml through a tripartite agreement (the “Tripartite Agreement”) entered into between (a) the Reseller, (b) the WKL Distributor and (c) a solution packaging company (the “Packaging Company”). WKL Eco Earth was not a party to the Tripartite Agreement and did not directly authorize or engage the Reseller in the resale of the Solution. In the Filing, the Plaintiffs claimed against (i) WKL Eco Earth; (ii) Dr. Low; (iii) Chan Kok Wei, (iv) the Packaging Company and (v) two directors of the Packaging Company for loss and damages arising from an alleged breach of contract, defamation and tort of inducement. The Plaintiffs also alleged that pursuant to the Tripartite Agreement, WKL Eco Earth was prohibited from selling the Solution to any party other than the WKL Distributor and allow for the resale of the Solution by the Plaintiffs without limitation, and that the Plaintiffs were not confined in their resale of the Solution to a diffuser with a capacity of not more than 1000ml. On April 9, 2024, a notice of withdrawal was filed with the Kuala Lumpur High Court, whereby it was agreed upon both the Reseller and the Company that the Reseller withdraws their claims in the Filing without liberty to file afresh and with no order as to costs, and that the Company withdraws its counterclaim against the Reseller without liberty to file afresh and with no order as to costs The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. The outcome of the above case very much depends on the evidence produced and the weight of the Court places on the evidence. As it stands, WKL has a probability of success in its Counterclaim against the parties. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. NOTE 15 SUBSEQUENT EVENTS In accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to May 31, 2024, to the date these consolidated financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these consolidated financial statements 19 | Page