Set forth below are the audited financial statements for the Company for the fiscal years ended July 31, 2019 and 2018, and the report thereon of Pinnacle Accountancy Group of Utah.
Notes to the Consolidated Financial Statements
July 31, 2019
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Business description
On June 30, 2016, Blink Couture, Inc. entered into a merger agreement with its wholly-owned subsidiary, Toga Limited (the “Company”), a Delaware corporation with no material operations. The Company continued operations under the name Toga Limited.
Blink Couture, Inc. was originally incorporated as Fashionfreakz International Inc. on October 23, 2003, under the laws of the State of Delaware. On December 2, 2005, Fashionfreakz International Inc. changed its name to Blink Couture Inc. Until March 4, 2008, the Company’s principal business was the online retail marketing of trendy clothing and accessories produced by independent designers. On March 4, 2008, the Company discontinued its prior business and changed its business plan. On June 13, 2016, a change of control of the Company occurred. On that date, the current president and Chief Executive Officer purchased a total of 13,869,150 of the issued and outstanding shares of the Company.
On June 10, 2017, the Board of Directors unanimously adopted resolutions authorizing the increase of the Company’s authorized number of shares of common stock from one hundred million (100,000,000) shares to ten billion (10,000,000,000) shares and increased the number of the Company’s total issued and outstanding shares of common stock by conducting a forward split at the rate of fifty (50) shares for every one (1) (50:1) share currently issued and outstanding (the “Forward Split”). The Forward Split became effective in the market on September 11, 2017 following approval by the FINRA. All share amounts in this filing have been adjusted retroactively.
The Company incorporated a wholly-owned subsidiary, TOGL Technology Sdn. Bhd. (“TOGL”) in Malaysia on September 26, 2017.
On May 28, 2018, the Company’s wholly-owned subsidiary TOGL formed a branch office in Taiwan.
The Company incorporated a wholly-owned subsidiary, PT. Toga International Indonesia (“PT Toga”) in Indonesia on November 23, 2017.
The Company’s wholly-owned subsidiary TOGL formed a wholly-owned subsidiary Toga Vietnam Company Limited (“Toga Vietnam”) in Vietnam on January 15, 2019, acquired 100% shares of WGS Discovery Tours & Travel in Malaysia on June 24, 2019 and acquired 67% of the shares in PT TOGL Technology Indonesia in Indonesia on May 24, 2019.
On May 8, 2019, the Company filed a Certificate of Amendment with the Nevada Secretary of State whereby it amended Article IV of its Articles of Incorporation by decreasing the Company’s authorized number of shares of common stock from ten billion (10,000,000,000) shares to one billion (1,000,000,000) shares and decreasing its issued and outstanding shares of common stock at a ratio of ten (10) shares for every one (1) share held (“10-1 Reverse Split”). The Company’s Board of Directors approved this amendment on April 24, 2019.
On May 17, 2019, the Company filed an Issuer Company-Related Action Notification Form with FINRA requesting that the 10-1 Reverse-Split and share decrease be effected in the market. All share and per share information in these consolidated financial statements retroactively reflect this stock distribution.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company uses the accrual basis of accounting and has adopted a July 31 fiscal year end.
Basis of Consolidation
These consolidated condensed financial statements include the accounts of the Company and the wholly-owned subsidiaries, TOGL Technology Sdn. Bhd., and PT. Toga International Indonesia. All material intercompany balances and transactions have been eliminated. TOGL Technology incorporates the financial statements of the Taiwan and Vietnam office.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with remaining maturities of less than ninety days at the date of purchase.
Basic and Diluted Earnings per Share
Pursuant to the authoritative guidance, basic net income and net loss per share are computed by dividing the net income and net loss by the weighted average number of common shares outstanding. Diluted net income and net loss per share is the same as basic net income and net loss per share when their inclusion would have an anti-dilutive effect due to our continuing net losses.
As at July 31, 2019, the Company has potentially 120,000 dilutive securities from outstanding stock options, which were excluded from the computation of diluted net loss per common share as the result of the computation was anti-dilutive.
Software Development
The Company accounts for all software and development costs in accordance with ASC 985-20 – Software. Accordingly, all costs incurred prior to establishing technological feasibility have been expensed. As of July 31, 2019, none of the costs subsequent to technological feasibility associated with software and development met the criteria for capitalization.
Inventories
Inventories are stated at lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method.
No reserves are considered necessary for slow moving or obsolete inventory as inventory on hand at year-end was purchased near the end of the year. The Company continuously evaluates the adequacy of these reserves and makes adjustments to these reserves as required.
As of July 31, 2019 and 2018, the Company had inventories of $162,985 and $NIL, respectively.
Equipment and Furniture
Property and equipment are stated at cost. Depreciation is computed on the straight-line method. The depreciation and amortization methods are designed to amortize the cost of the assets over their estimated useful lives, in years, of the respective assets as follows:
Building
|
|
20 years
|
Renovation
|
|
3 to 5 years
|
Fixtures and Furniture
|
|
4 to 5 years
|
Tools and Equipment
|
|
4 to 5 years
|
Vehicles
|
|
3 to 5 years
|
Computer Equipment
|
|
4 to 5 years
|
Maintenance and repairs are charged to expense as incurred. Improvements of a major nature are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any gains or losses are reflected in income.
The long-lived assets of the Company are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment” (“ASC 360”), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the years ended July 31, 2019 and 2018, no impairment losses have been identified.
Goodwill and Other Intangible Assets – digital currency
We account for goodwill and intangible assets in accordance with ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units; assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.
On June 24, 2019, the Company’s wholly-owned subsidiary TOGL acquired 100% shares of WGS Discovery Tours & Travel in Malaysia, which generated Goodwill of $11,718. The Company has accounted for transaction in accordance with ASC 805 “Business Combinations.”
Based on the Company’s analysis of goodwill as of July 31, 2019, no indicators of impairment exist. No impairment loss on goodwill was recognized for the year ended July 31, 2019.
Foreign Currency Translations
The Company’s functional and reporting currency is the U.S. dollar. Our subsidiary’s functional currency is the Malaysian ringgit. All transactions initiated in Malaysian ringgit, New Taiwan dollar and Vietnamese dong, and Indonesian rupiah are translated into U.S. dollars in accordance with ASC 830-30, ”Translation of Financial Statements,” as follows:
|
1)
|
Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date.
|
|
2)
|
Equity at historical rates.
|
|
3)
|
Revenue and expense items at the average rate of exchange prevailing during the period.
|
Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ equity as a component of comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income. Gains and losses from foreign currency transactions are included in earnings in the period of settlement.
|
|
Year ended
|
|
|
Year ended
|
|
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2019
|
|
|
2018
|
|
Spot MYR: USD exchange rate
|
|
$
|
0.2422
|
|
|
$
|
0.246
|
|
Average MYR: USD exchange rate
|
|
$
|
0.2421
|
|
|
$
|
0.2489
|
|
Spot NTD: USD exchange rate
|
|
$
|
0.0321
|
|
|
$
|
0.0326
|
|
Average NTD: USD exchange rate
|
|
$
|
0.0323
|
|
|
$
|
0.033
|
|
Spot IDR: USD exchange rate
|
|
$
|
0.000071
|
|
|
$
|
0.000069
|
|
Average IDR: USD exchange rate
|
|
$
|
0.000069
|
|
|
$
|
0.000072
|
|
Spot VND: USD exchange rate
|
|
$
|
0.000043
|
|
|
$
|
n/a
|
|
Average VND: USD exchange rate
|
|
$
|
0.000043
|
|
|
$
|
n/a
|
|
Stock-based Compensation
We account for stock-based awards at fair value on the date of grant, and recognize compensation over the service-period that they are expected to vest. We estimate the fair value of stock options and stock purchase warrants using the Black-Scholes option pricing model. The estimated value of the portion of a stock-based award that is ultimately expected to vest, taking into consideration estimated forfeitures, is recognized as expense over the requisite service periods. The model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time, of other comparative securities, equal to the weighted average life of the options. The estimate of stock awards that will ultimately vest requires judgment, and to the extent that actual forfeitures differ from estimated forfeitures, such differences are accounted for as a cumulative adjustment to compensation expenses and recorded in the period that estimates are revised.
Stock-based compensation incurred for the year ended July 31, 2019 and 2018, respectively, are summarized as follows:
|
|
Year Ended
|
|
|
|
July 31,
|
|
|
|
2019
|
|
|
2018
|
|
Vesting of stock options issued to directors and officers
|
|
|
1,061,017
|
|
|
|
-
|
|
Common stock issued to related parties, employees and consultants
|
|
|
10,015,674
|
|
|
|
-
|
|
|
|
$
|
11,076,691
|
|
|
$
|
-
|
|
Fair Value
FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:
Level 1—Quoted market prices for identical assets or liabilities in active markets or observable inputs;
Level 2—Significant other observable inputs that can be corroborated by observable market data; and
Level 3—Significant unobservable inputs that cannot be corroborated by observable market data.
The carrying amounts of cash, accounts payable and other liabilities, accrued interest payable, and convertible notes approximate fair value because of the short-term nature of these items.
Related Party Balances and Transactions
The Company follows FASB ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transaction. (See Note 5)
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods presented.
Revenue Recognition
In May 2014, the FASB issued new accounting guidance related to revenue from contracts with customers. The core principle of the Standard is that recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new guidance requires that companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company has chosen to early adopt and apply the standards beginning in the fiscal year ended July 31, 2019, using the modified retrospective approach, which applies the new standard to contracts that are not completed as of the date of adoption. The Company concluded that no adjustment to the opening balance of retained earnings was required upon the adoption of the new standard.
The Company recognizes revenue from its contracts with customers in accordance with ASC 606 – Revenue from Contracts with Customers. The Company recognizes revenues when satisfying the performance obligation of the associated contract that reflects the consideration expected to be received based on the terms of the contract.
Revenue related to contracts with customers is evaluated utilizing the following steps: (i) Identify the contract, or contracts, with a customer; (ii) Identify the performance obligations in the contract; (iii) Determine the transaction price; (iv) Allocate the transaction price to the performance obligations in the contract; (v) Recognize revenue when the Company satisfies a performance obligation.
When the Company enters into a contract, the Company analyzes the services required in the contract in order to identify the required performance obligations which would indicate the Company has met and fulfilled its obligations. For the current contracts in place, the Company has identified performance obligations as agreement from both parties (implicit or explicit) that the obligations have been met. To appropriately identify the performance obligations, the Company considers all of the services required to be satisfied per the contract, whether explicitly stated or implicitly implied. The Company allocates the full transaction price to the single performance obligation being satisfied.
The Company recognizes revenue when the customer confirms to the Company that all of the terms and conditions of the contract has been met. The Company derives its revenues from the following:
|
-
|
advertising using a custom-built advertising feature that matches client advertising requirements (approximately $0.4 million)
|
|
-
|
management fees and information technology fees (approximately $1.4 million)
|
|
-
|
sale of products through a direct marketing network (approximately $7.1 million)
|
The Company analyses whether gross sales, or net sales should be recorded, has control over establishing price, and has control over the related costs with earning revenues. The Company has recorded all revenues at the gross price.
Cash payments received are recorded as deferred revenue until the conditions, stated above, of revenue recognition have been met, specifically all obligations have been met as specified in the related customer contract.
Concentration of Revenue by Customer
The Company’s concentration of revenue for individual customers above 10% are as follows:
|
·
|
Agel Enterprise International Sdn Bhd: 14%,
|
|
·
|
Others: 85%
|
Concentration of Revenue by Country:
|
-
|
Malaysia (TOGL Technology Sdn. Bhd): 34%
|
|
-
|
Indonesia (PT. Toga International Indonesia): 63%
|
|
-
|
United States (Toga Limited): 3%
|
The Company attributes revenue from external customers to individual countries based upon the responsibility of the entity to fulfil the sales obligation and the entity from which the actual service is provided.
Accounts Receivable
The Company’s accounts receivable balance is related to advertising through TOGL. Accounts receivable are recorded in accordance with ASC 310, “Receivables.” Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company does not currently have any amount recorded as an allowance for doubtful accounts. Based on management’s estimate and based on all accounts being current, the Company has not deemed it necessary to reserve for doubtful accounts at this time.
As of July 31, 2019, the Company’s accounts receivable are concentrated 70% with Agel Enterprise International Sdn Bhd.
As of July 31, 2019, the Company’s accounts receivable are concentrated 93% in Malaysia (TOGL Technology Sdn. Bhd) and 7% in United States (Toga Limited).
Research and Development Expenses
We follow ASC 730, “Research and Development,” and expense research and development costs when incurred. Accordingly, third-party research and development costs, including designing, prototyping and testing of product, are expensed when the contracted work has been performed or milestone results have been achieved. Indirect costs are allocated based on percentage usage related to the research and development.
Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, “Leases” (“ASC 842”). The guidance requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model and the new revenue recognition standard. Existing sale-leaseback guidance, including guidance for real estate, is replaced with a new model applicable to both lessees and lessors. ASC 842 is effective for fiscal years beginning after December 15, 2018. The Company is evaluating the adoption of ASC 842, but has not determined the effects it may have on the Company’s consolidated financial statements.
In November 2018, the FASB issued ASU No. 2018-08 “Collaborative Arrangements” (Topic 808) intended to improve financial reporting around collaborative arrangements and align the current guidance under ASC 808 with ASC 606 “Revenue from Contracts with Customers.” The ASU affects all companies that enter into collaborative arrangements. The ASU clarifies when certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 and changes certain presentation requirements for transactions with a collaborative arrangement participants that are not directly related to sales to third parties. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods therein. Earlier adoption is permitted for any annual or interim period for which consolidated financial statements have not yet been issued. The Company has not entered into any collaborative arrangements and therefore does not currently expect the adoption of this standard to have a material effect on its Consolidated Financial Statements. The Company plans to adopt this ASU either on the effective date of January 1, 2020 or possibly in an earlier period if a collaborative arrangement is entered. Upon adoption, the Company will utilize the retrospective transition approach, as prescribed within this ASU.
The Company has reviewed and analyzed the above recent accounting pronouncements and notes no material impact on the financial statements as of July 31, 2019.
NOTE 3. PROPERTY AND EQUIPMENT
As of July 31, 2019 and 2018, the balance of property and equipment represented consisted of the followings:
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2019
|
|
|
2018
|
|
Building
|
|
$
|
4,019,563
|
|
|
$
|
-
|
|
Renovation
|
|
|
154,120
|
|
|
|
85,362
|
|
Fixtures and Furniture
|
|
|
69,555
|
|
|
|
38,046
|
|
Tools and Equipment
|
|
|
92,494
|
|
|
|
20,796
|
|
/Vehicles
|
|
|
163,969
|
|
|
|
-
|
|
Computer Equipment
|
|
|
26,256
|
|
|
|
5,798
|
|
|
|
|
4,525,959
|
|
|
|
150,002
|
|
Accumulated depreciation
|
|
|
(104,707
|
)
|
|
|
(14,296
|
)
|
|
|
$
|
4,421,252
|
|
|
$
|
135,706
|
|
Depreciation expense for the year ended July 31, 2019 and 2018 was $93,426 and $15,050, respectively.
During the year ended July 31, 2019 and 2018, the Company acquired property and equipment of $4,375,957 and $152,287, respectively.
NOTE 4. INTANGIBLE ASSET - DIGITAL CURRENCY
During the year ended July 31, 2019, the Company issued 9,078,998 shares of common stock at $0.54 for digital currency valued at $4,878,440.
During the year ended July 31, 2018, the Company issued 269,838 shares of common stock at $5.00 per share for digital currency valued at $1,348,920.
During the year ended July 31, 2019, the Company sold a total of 1,200 Bitcoins, recorded as Intangible Asset - Digital Currency, for a total $9,458,242, recognizing gain on sales of digital currency of $3,230,882.
As of July 31, 2019 and 2018, the Company had digital currency of $NIL and $1,348,920, respectively.
Digital currencies are nonfinancial assets that lack physical substance. We believe that digital currencies meet the definition of indefinite-lived intangible assets
NOTE 5. RELATED PARTY TRANSACTIONS
Notes due to related parties
On September 30, 2017, the Company issued a note payable in the amount of $152,973 to Toga Capital Sdn. Bhd. (“Toga Capital”), which is partially owned by an officer and director of the Company, for repayment of amounts due to related parties of $152,973. The note is a 2% interest bearing promissory note that is payable on September 30, 2018.
During the year ended July 31, 2018, the Company issued 1,533,552 shares of common stock with a fair value of $2,453,683 to repay the note payable of $152,973 and accrued interest of $383. As a result, the Company recorded a loss on settlement of debt of $2,300,327.
On May 31, 2016, all outstanding related party advances were paid by a current director of the Company. The Company has outstanding notes payable to related party who is a Company’s director, of $24,126 and $24,126 as of July 31, 2019 and July 31, 2018, respectively. The amount is non-interest bearing, unsecured and due on demand.
Due to related parties
During the year ended July 31, 2019 and 2018, the Company borrowed a total amount of $0 and $434,355 from a related party, Toga Capital, and repaid $183,339 and $49,036, respectively.
During the year ended July 31, 2019 and 2018, total expenses paid directly by a related party, Toga Capital, on behalf of the Company were $0 and $48,679, respectively.
During the year ended July 31, 2019 and 2018, the Company borrowed a total amount of $0 and $0, respectively and repaid $1,968 and $0, respectively, from the Chief Executive Officer of the Company.
During the year ended July 31, 2019 and 2018, the Company purchased property and equipment of $0 and $25,218 from related parties, respectively.
As at July 31, 2019 and July 31, 2018, $1,083 and $186,390 is due to a related party. The amount is non-interest bearing, unsecured and due on demand.
Related party compensation
During the year ended July 31, 2019 and 2018, the Company incurred director’s fees of $9,000 and $0, respectively, to directors of the Company.
During the year ended July 31, 2019 and 2018, the Company incurred wages of $66,000 and $NIL, respectively, to the CFO of the Company.
During the year ended July 31, 2019, Company granted 120,000 stock options to Directors and CFO, valued at $1,061,017 (See Note 7).
During the year ended July 31, 2019, the Company issued 113,530 common shares as stock based compensation to the CEO of the Company valued at $1,033,899.
NOTE 6. EQUITY
Amendment to Articles of Incorporation and reverse stock split
On May 8, 2019, the Company filed a Certificate of Amendment with the Nevada Secretary of State whereby it amended Article IV of its Articles of Incorporation by decreasing the Company’s authorized number of shares of common stock from 10,000,000,000 shares to 1,000,000,000 shares and decreasing its issued and outstanding shares of common stock at a ratio of 10 shares for every 1 share held (“10-1 Reverse Split”) (see Note 1). All share and per share information in these consolidated financial statements retroactively reflect this stock distribution.
Preferred stock
The Company is authorized to issue 20,000,000 shares of preferred stock at a par value of $0.0001.
As of July 31, 2019 and July 31, 2018, no preferred shares were issued and outstanding.
Common stock
The Company is authorized to issue 1,000,000,000 shares of common stock at a par value of $0.0001 at July 31, 2019.
During the year ended July 31, 2019, the Company issued 21,196,376 shares of common stock, as follows:
|
·
|
10,490,362 shares of common stock for cash of $2,098,073 to Agel Enterprise International Sdn Bhd, who is a related party, at a price of $0.02 per share.
|
|
|
|
|
·
|
9,078,998 shares of common stock issued for $4,878,440 of digital currency (see Note 4)
|
|
|
|
|
·
|
1,156,539 shares of common stock issued valued at $10,015,674 for employee compensation
|
|
|
|
|
·
|
470,477 share of common stock issued for the acquisition of real properties valued at $3,999,054
|
On October 29, 2018, a shareholder of the Company canceled 20,000 shares of common stock without consideration for such cancelation.
During the year ended July 31, 2018, the Company issued 14,951,047 shares of common stock, as follows:
|
·
|
8,402,929 shares of common stock for $842,209 to Toga Capital, a company that is partially owned by an officer and director of the Company, at a price of $0.10 per share.
|
|
·
|
1,533,552 shares of common stock with a fair value of $2,453,683 as settlement of a note payable due to a related party of $152,973 and accrued interest of $383.
|
|
·
|
2,388,277 shares of common stock with a fair value of $11,221,067 as settlement of due to a related party of $238,828.
|
|
·
|
2,356,451 shares of common stock for $471,290 to AGEL Enterprise International Sdn Bhd, at a price of $0.20 per share.
|
|
·
|
269,838 shares of common stock at $5.00 per share for digital currency valued at $1,348,920
|
On July 6, 2018, three majority shareholders of the Company canceled a total of 2,000,000,000 shares of common stock without consideration for such cancelation.
As of July 31, 2019 and 2018, 90,762,893 and 69,586,517 shares of the Company’s common stock were issued and outstanding, respectively.
Stock Options
During the year ended July 31, 2019, the Company granted 120,000 options to the CFO. 60,000 of those options had an exercise price of $0.20 and 60,000 options at an exercise price of $0.40, and were valued at the fair value calculated using the Black-Scholes-Merton model. The value of the options was $1,061,017 and recorded as stock based compensation. The options are subject to a vesting schedule of ⅓ of the options vesting every thirty (30) days.
No stock options were issued during the year ended July 31, 2018.
The following assumptions were used to determine the fair value for the options granted using a Black-Scholes-Merton pricing model during the year ended July 31, 2019:
|
|
For the year
ended
July 31, 2019
|
|
Fair values
|
|
$
|
8.46-9.22
|
|
Exercise price
|
|
$
|
0.20-0.40
|
|
Expected term at issuance
|
|
|
2years
|
|
Expected average volatility
|
|
|
260.11-300.53
|
%
|
Expected dividend yield
|
|
|
—
|
|
Risk-free interest rate
|
|
|
2.31-2.56
|
%
|
A summary of the change in stock options outstanding for the year ended July 31, 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
Contractual
|
|
|
|
Options
|
|
|
Exercise
|
|
|
Grant Date
|
|
|
Life
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
Fair Value
|
|
|
(Years)
|
|
Balance – July 31 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Options issued
|
|
|
120,000
|
|
|
$
|
0.30
|
|
|
$
|
8.84
|
|
|
|
1.75
|
|
Options expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance – July 31, 2019
|
|
|
120,000
|
|
|
$
|
0.30
|
|
|
$$8.84
|
|
|
|
1.75
|
|
NOTE 7. INCOME TAXES
The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company has not incurred any income tax liabilities due to accumulated net losses. We operate in various tax jurisdictions, and accordingly, our income is subject to varying rates of tax.
For the fiscal year ended July 31, 2019, no taxable income was generated. All tax years since inception are open for review. The Company had a net loss of $9,800,520 for the year ended July 31, 2019 and $13,620,308 for the same period in 2018. As of July 31, 2019, the Company’s net operating loss carry forward was approximately $3,000,000, which will begin to expire in year 2036.
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company has completed the accounting for the effects of the Act during the quarter ended July 31, 2018. The Company’s financial statements for the year ended July 31, 2018 reflect certain effects of the Act which includes a reduction in the corporate tax rate from 35% to 21%, Malaysia’s corporate tax rate of 24%, Indonesia’s corporate tax rate of 25% as well as other changes.
The components of income tax expense benefit are as follows:
|
|
Years Ended
|
|
|
|
July 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
US Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
State
|
|
|
-
|
|
|
|
-
|
|
Foreign taxes
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
The reconciliation of income tax expense at the blended U.S. statutory rate of 21%, to the Company’s effective tax rate is as follows:
|
|
Years Ended
|
|
|
|
July 31,
|
|
|
|
2019
|
|
|
2018
|
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
Net loss (benefit) at Federal Statutory rate (21% for 2019)
|
|
$
|
2,707,198
|
|
|
$
|
3,677,000
|
|
Non-deductible expenses
|
|
|
(2,326,105
|
)
|
|
|
(3,586,000
|
)
|
Foreign taxes
|
|
|
(61,215
|
)
|
|
|
-
|
|
State taxes
|
|
|
-
|
|
|
|
-
|
|
Effect of change in statutory rate
|
|
|
-
|
|
|
|
(98,200
|
)
|
Change in valuation allowance
|
|
|
(319,878
|
)
|
|
|
7,200
|
|
Total tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
There were no significant foreign tax losses or income to date.
The significant components of deferred tax assets are as follows:
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards at tax rates in effect at period end
|
|
$
|
546,478
|
|
|
$
|
226,600
|
|
Less: valuation allowance
|
|
|
(546,478
|
)
|
|
|
(226,600
|
)
|
Total deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE 8. OTHER INCOME
Other income for the year ended July 31, 2019 was $0, and $205,748 for the year ended July 31, 2018. Other income of $205,748 for the year ended July 31, 2018 was generated through real estate commissions.
NOTE 9. SEGEMENTED DISCLOSURE
The following table shows operating activities information by geographic segment for the year ended July 31, 2019 and 2018:
Year Ended July 31, 2019
|
|
USA
|
|
|
Malaysia
|
|
|
Taiwan
|
|
|
Vietnam
|
|
|
Indonesia
|
|
|
Total
|
|
Revenue
|
|
$
|
240,000
|
|
|
$
|
1,356,336
|
|
|
$
|
1,673,781
|
|
|
$
|
-
|
|
|
$
|
5,577,810
|
|
|
$
|
8,847,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
524,507
|
|
|
|
1,251,514
|
|
|
|
-
|
|
|
|
4,081,785
|
|
|
|
5,857,806
|
|
Gross profit
|
|
|
240,000
|
|
|
|
831,829
|
|
|
|
422,267
|
|
|
|
-
|
|
|
|
1,496,025
|
|
|
|
2,990,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
11,805,611
|
|
|
|
2,605,729
|
|
|
|
348,441
|
|
|
|
8,738
|
|
|
|
204,006
|
|
|
|
14,972,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
-
|
|
|
|
815,589
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
815,589
|
|
Depreciation
|
|
|
-
|
|
|
|
73,330
|
|
|
|
6,910
|
|
|
|
-
|
|
|
|
13,186
|
|
|
|
93,426
|
|
Total Operating Expenses
|
|
|
11,805,611
|
|
|
|
3,494,648
|
|
|
|
355,351
|
|
|
|
8,738
|
|
|
|
217,192
|
|
|
|
15,881,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(11,565,611
|
)
|
|
|
(2,662,819
|
)
|
|
|
66,916
|
|
|
|
(8,738
|
)
|
|
|
1,278,833
|
|
|
|
(12,891,419
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
3,232,266
|
|
|
|
9,917
|
|
|
|
653
|
|
|
|
41
|
|
|
|
3,542
|
|
|
|
3,246,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before Income Taxes
|
|
|
(8,333,345
|
)
|
|
|
(2,652,902
|
)
|
|
|
67,569
|
|
|
|
(8,697
|
)
|
|
|
1,282,375
|
|
|
|
(9,645,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Provision
|
|
|
-
|
|
|
|
(155,520
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(155,520
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(8,333,345
|
)
|
|
$
|
(2,808,422
|
)
|
|
$
|
67,569
|
|
|
$
|
(8,697
|
)
|
|
$
|
1,282,375
|
|
|
$
|
(9,800,520
|
)
|
During the year ended July 31, 2019, our Indonesian entities generated advertising revenue through the social media apps and direct marketing network sales of approximately $0.2 million and $5.4 million, respectively.
During the year ended July 31, 2019, our Malaysian entities generated advertising revenue of approximately $0.2 million, information technology fee revenue of approximately $0.1 million and management fee revenue from Agel Enterprise International Sdn Bhd. of approximately $1.1 million.
During the year ended July 31, 2019, our Taiwan entity generated revenue through the direct marketing network sales of approximately $1.7 million.
During the year ended July 31, 2019, our USA parent company recognized management fee revenue of approximately $0.2 million from Agel Enterprise International Sdn Bhd.
During the year ended July 31, 2019, our Malaysian entities incurred general administrative expenses primarily related to maintenance of applications, corporate overhead, financial and administrative contracted services, professional fees, salaries and wages, legal fees for reorganization of the Company and costs incurred for potential acquisitions.
During the year ended July 31, 2019, our USA parent company incurred stock based compensation from the issuance of shares of common stock for employee compensation.
During the year ended July 31, 2019, our Malaysian entity incurred research and development expenses.
During the year ended July 31, 2019, our USA parent company incurred other income from gain on sale of intangible assets.
Year Ended July 31, 2018
|
|
USA
|
|
|
Malaysia
|
|
|
Taiwan
|
|
|
Indonesia
|
|
|
Total
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
1,225,149
|
|
|
$
|
29,346
|
|
|
$
|
-
|
|
|
$
|
1,254,495
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
137,282
|
|
|
|
2,087
|
|
|
|
-
|
|
|
|
139,369
|
|
Gross profit
|
|
|
-
|
|
|
|
1,087,867
|
|
|
|
27,259
|
|
|
|
-
|
|
|
|
1,115,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
642,998
|
|
|
|
819,439
|
|
|
|
25,532
|
|
|
|
68,540
|
|
|
|
1,556,509
|
|
Research and development
|
|
|
-
|
|
|
|
86,674
|
|
|
|
-
|
|
|
|
-
|
|
|
|
86,674
|
|
Depreciation
|
|
|
-
|
|
|
|
7,621
|
|
|
|
866
|
|
|
|
6,563
|
|
|
|
15,050
|
|
Total Operating Expenses
|
|
|
642,998
|
|
|
|
913,734
|
|
|
|
26,398
|
|
|
|
75,103
|
|
|
|
1,658,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(642,998
|
)
|
|
|
174,133
|
|
|
|
861
|
|
|
|
(75,103
|
)
|
|
|
(543,107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
(13,270,449
|
)
|
|
|
133,248
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,077,201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before Income Taxes
|
|
|
(13,853,447
|
)
|
|
|
307,381
|
|
|
|
861
|
|
|
|
(75,103
|
)
|
|
|
(13,620,308
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Provision
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(13,853,447
|
)
|
|
$
|
307,381
|
|
|
$
|
861
|
|
|
$
|
(75,103
|
)
|
|
$
|
(13,620,308
|
)
|
During the year ended July 31, 2018, our Malaysian entity generated advertising revenue of approximately $0.1 million, information technology fee revenue of approximately $0.6 million and management fee revenue of approximately $0.5 million from Agel Enterprise International Sdn Bhd.
During the year ended July 31, 2018, our Malaysian entity and USA parent company incurred general administrative expenses primarily related to maintenance of applications, corporate overhead, financial and administrative contracted services, professional fees, salaries and wages, legal fees for reorganization of the Company and costs incurred for potential acquisitions.
During the year ended July 31, 2018, our USA parent company incurred other expenses mainly related to loss on settlement of debt.
The following table shows assets information by geographic segment at July 31, 2019 and 2018:
Year Ended July 31, 2019
|
|
USA
|
|
|
Malaysia
|
|
|
Taiwan
|
|
|
Vietnam
|
|
|
Indonesia
|
|
|
Total
|
|
Current assets
|
|
$
|
9,618,099
|
|
|
$
|
1,874,078
|
|
|
$
|
1,016,412
|
|
|
$
|
35,531
|
|
|
$
|
4,029,336
|
|
|
$
|
16,573,456
|
|
Property and equipment
|
|
|
-
|
|
|
|
4,357,148
|
|
|
|
18,251
|
|
|
|
-
|
|
|
|
45,853
|
|
|
|
4,421,252
|
|
Intangible asset - digital currency
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Intangible asset - goodwill
|
|
|
-
|
|
|
|
11,718
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,718
|
|
Deposit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total assets
|
|
$
|
9,618,099
|
|
|
$
|
6,242,944
|
|
|
$
|
1,034,663
|
|
|
$
|
35,531
|
|
|
$
|
4,075,189
|
|
|
$
|
21,006,426
|
|
As of July 31, 2019, our USA parent company has current assets of $8.6 million primarily includes cash and cash equivalents of $9.5 million.
As of July 31, 2019, our Malaysian entities have current assets of $1.9 million primarily includes cash and cash equivalents of $1.2 million, prepaid expenses of $222,000 and accounts receivable of $194,000.
As of July 31, 2019, our Taiwan entity has current assets of $1.0 million primarily includes cash and cash equivalent of $820,000 and inventory of $140,000.
As of July 31, 2019, our Indonesian entities have current assets of $4.0 million primarily includes cash and cash equivalents of $2.8 million, inventory of $507,000 and prepaid expenses of $431,000.
As of July 31, 2019, our Malaysian entities have property and equipment of $4.4 million including land and building of $4 million, automobile of $151,000, leasehold improvement of $109,000 and tolls and equipment of $64,000.
Year Ended July 31, 2018
|
|
USA
|
|
|
Malaysia
|
|
|
Taiwan
|
|
|
Indonesia
|
|
|
Total
|
|
Current assets
|
|
$
|
333,098
|
|
|
$
|
722,354
|
|
|
$
|
375,179
|
|
|
$
|
27,917
|
|
|
$
|
1,458,548
|
|
Property and equipment
|
|
|
-
|
|
|
|
86,073
|
|
|
|
10,294
|
|
|
|
39,339
|
|
|
|
135,706
|
|
Intangible asset - digital currency
|
|
|
1,348,920
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,348,920
|
|
Deposit
|
|
|
-
|
|
|
|
9,780
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,780
|
|
Total assets
|
|
$
|
1,682,018
|
|
|
$
|
818,207
|
|
|
$
|
385,473
|
|
|
$
|
67,256
|
|
|
$
|
2,952,954
|
|
As of July 31, 2018, our USA parent company has current assets of $333,000 primarily includes cash and cash equivalents of $313,000.
As of July 31, 2018, our Malaysian entity has current assets of $722,000 primarily includes cash and cash equivalents of $445,000 and accounts receivable of $344,000.
As of July 31, 2018, our Taiwan entity has current assets of $357,000 primarily includes cash and cash equivalent of $306,000.
As of July 31, 2018, our USA parent company had intangible assets valued at $1.3 million.
NOTE 10. SUBSEQUENT EVENTS
On September 9, 2019, the Company issued 20,000 shares of common stock to Agel Enterprises. This issuance was to correct a transaction where 20,000 shares were transferred to certain shareholders by Agel and subsequently cancelled by Agel. The shares should have been returned to Agel but were inadvertently returned to the Company.
As of September 6, 2019, the Company moved it U.S.–based headquarters from Las Vegas, Nevada to Irvine, California. The Company has leased an office at 2757 McCabe Way, Suite 100, Irvine, California 92614.
As of October 1, 2019, the Company was approved and upgraded to OTCQX Best Market.
On November 7, 2019, the Company issued a total of 253,039 shares of its common stock to twenty-seven (27) of its employees, pursuant to an Employee Stock Bonus Agreement. Pursuant to the terms of such agreement, said shares were fully vested as of July 15, 2019.
On June 11, 2019, 24,614 common shares were issued to employees through clerical errors. Subsequent to July 31, 2019, the shares were cancelled.
The Company has evaluated subsequent events from July 31, 2019 through the date these financial statements were issued and determined there are no additional events requiring disclosure.