UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q10-Q/A
Amendment No. 1
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For the quarterly period ended April 30, 2020October 31, 2019
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For the transition period from ______________________ to ________________________
Commission file number: number 001-39052
Toga Limited |
(Exact name of registrant as specified in its charter) |
Nevada | 98-0568153 | |
(State or other jurisdiction of incorporation or organization) | ( Identification No.) |
2575 McCabe Way, Suite 100
Irvine, CA 92614
515 S. Flower Street 18th Floor Los Angeles, CA 90071 | ||
(Address of principal executive offices) |
(949) 333-1603
(Registrant’s telephone number)number, including area code)
Securities registered pursuant to Section 12(b) of the ActAct:
Title of |
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N/A | N/A | N/A |
Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒☐ No ¨☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒☐ No ¨☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”filer”, “accelerated filer,”filer”, “smaller reporting company,”company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| Accelerated filer |
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Non-accelerated filer |
| Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicateindicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ ☐ No ☒
The number of shares of the issuer’s common stock outstanding as of JuneFebruary 10, 20202021 was 91,011,633 shares,91,013,640, par value $0.0001 per share.
EXPLANATORY NOTE
This Amendment No. 1 to the Form 10-Q (this “Amendment”) amends the Quarterly Report on Form 10-Q of Toga Limited (the “Company”) for the quarterly period ended October 31, 2019 (the “Form 10-Q”), filed on December 19, 2019 with the Securities and Exchange Commission (the “SEC”). This Amendment restates the Company’s financial statements in order to correct errors resulting from improper timing of revenue recognition from PT Toga International Indonesia (“PT Toga”), the Company’s wholly-owned Indonesian subsidiary. In the course of preparing the Annual Report on Form 10-K for the annual period ended July 31, 2020, the Company’s management discovered that revenue recognition was occurring on the collection of proceeds rather than on the shipment of product. In addition, the related commissions expense is being restated to properly reflect these costs against the restated revenues, resulting in a prepaid commission asset balance for the portion of the commissions expense for which revenue recognition was deferred. A summary of the accounting impact of these adjustments to the Company’s condensed consolidated unaudited financial statements as of and for the three months ended October 31, 2019 is provided at “Note 8. Restatement of Financial Statements.”
This Amendment also amends and includes a summary of updates to the business description of the Company to include descriptions of the Company’s direct marketing line of business and the Company’s general services agreement with a related party, both of which comprise the majority of the Company’s revenue during the quarterly period ended October 31, 2019. These discussions should be read in conjunction with the Company’s Form 10-K/A for the fiscal year ended July 31, 2019, as filed on February 8, 2021.
In order to provide the Company’s stockholders with a better understanding of the Company’s business, this Amendment also includes modifications and updates to Management’s Discussion and Analysis of Financial Condition and Results of Operations and other disclosures made in the original Form 10-Q to be accurate as of the date of filing of this Amendment.
Finally, in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is also including with this Amendment currently dated certifications of the Company’s Chief Executive Officer and Chief Financial Officer (attached as Exhibits 31.1, 31.2, 32.1, and 32.2).
2 |
FORM 10-Q10-Q/A
Quarterly Period Ended April 30, 2020October 31, 2019
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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PART I.I – FINANCIAL INFORMATION
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Notes to the Condensed Consolidated Financial Statements (Unaudited) |
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Condensed Consolidated Balance Sheets
(Unaudited)
|
| October 31, |
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| July 31, |
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| 2019 |
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| 2019 |
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| (Restated) |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
| $ | 12,902,002 |
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| $ | 14,916,556 |
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Accounts receivable, net |
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| 93,976 |
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| 89,056 |
|
Accounts receivable, net – related party |
|
| 20,000 |
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| 205,210 |
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Prepaid expense and other current assets |
|
| 3,244,354 |
|
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| 3,747,648 |
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Inventories |
|
| 972,364 |
|
|
| 162,985 |
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Total Current Assets |
|
| 17,232,696 |
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| 19,121,455 |
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Operating lease right-of-use assets |
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| 333,798 |
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| - |
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Property and equipment |
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| 4,444,834 |
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| 4,421,252 |
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Intangible asset - goodwill |
|
| 11,718 |
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| 11,718 |
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TOTAL ASSETS |
| $ | 22,023,046 |
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| $ | 23,554,425 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities |
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Accounts payable and accrued liabilities |
| $ | 5,274,989 |
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| $ | 4,221,413 |
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Due to related parties |
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| 63,608 |
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| 1,083 |
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Notes due to related parties |
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| 24,126 |
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|
| 24,126 |
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Deferred revenue |
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| 5,275,748 |
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| 4,741,945 |
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Income tax payable |
|
| 85,053 |
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| 52,641 |
|
Operating lease liabilities - current portion |
|
| 111,503 |
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| - |
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Total Current Liabilities |
|
| 10,835,027 |
|
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| 9,041,208 |
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Operating lease liabilities |
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| 222,295 |
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| - |
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Deferred tax liabilities |
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| 8,471 |
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| 8,574 |
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Total Liabilities |
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| 11,065,793 |
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| 9,049,782 |
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Stockholders’ Equity |
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Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none issued and outstanding |
|
| - |
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| - |
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Common stock, $0.0001 par value, 1,000,000,000 shares authorized; 90,758,279 and 90,762,893 shares issued and outstanding as of October 31, 2019 and July 31, 2019, respectively |
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| 9,076 |
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| 9,076 |
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Common stock subscribed; 30,000,000 common shares, $0.0001 par value |
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| (3,000 | ) |
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| (3,000 | ) |
Additional paid-in capital |
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| 39,037,472 |
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| 38,993,002 |
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Accumulated deficit |
|
| (28,171,791 | ) |
|
| (24,622,041 | ) |
Accumulated other comprehensive loss |
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| 28,751 |
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| 69,238 |
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Total Stockholders’ equity of Toga Ltd. |
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| 10,900,508 |
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| 14,446,275 |
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Non-controlling interest |
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| 56,745 |
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| 58,368 |
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Total Stockholders’ Equity |
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| 10,957,253 |
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| 14,504,643 |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 22,023,046 |
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| $ | 23,554,425 |
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See accompanying notes to the unaudited condensed consolidated financial statements
F-1 |
Table of Contents |
Condensed Consolidated Balance SheetsStatements of Operations and Comprehensive Loss
(Unaudited)
|
| April 30, |
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| July 31, |
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| 2020 |
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| 2019 |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
| $ | 11,269,840 |
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| $ | 14,916,556 |
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Accounts receivable, net |
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| 633,979 |
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| 294,266 |
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Prepaid expense, deposits and other current assets |
|
| 1,364,069 |
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| 1,199,649 |
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Inventories |
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| 889,527 |
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| 162,985 |
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Total Current Assets |
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| 14,157,415 |
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| 16,573,456 |
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Operating lease right-of-use assets |
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| 182,248 |
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| - |
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Property and equipment, net |
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| 4,309,445 |
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| 4,421,252 |
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Intangible asset – goodwill |
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| 11,718 |
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| 11,718 |
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TOTAL ASSETS |
| $ | 18,660,826 |
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| $ | 21,006,426 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities |
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Accounts payable and accrued liabilities |
| $ | 5,732,741 |
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| $ | 4,221,413 |
|
Due to related parties |
|
| 20,686 |
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| 1,083 |
|
Notes due to related parties |
|
| - |
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| 24,126 |
|
Deferred revenue |
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| 5,603,071 |
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| 1,782,252 |
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Income tax payable |
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| - |
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| 52,641 |
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Operating lease liabilities, current portion |
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| 161,269 |
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| - |
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Total Current Liabilities |
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| 11,517,767 |
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| 6,081,515 |
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Operating lease liabilities, non-current portion |
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| 20,979 |
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| - |
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Deferred tax liabilities |
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| 8,344 |
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| 8,574 |
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Total Liabilities |
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| 11,547,090 |
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| 6,090,089 |
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Stockholders’ Equity |
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Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none issued and outstanding |
|
| - |
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| - |
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Common stock, $0.0001 par value, 1,000,000,000 shares authorized; 91,011,633 and 90,762,893 shares issued and outstanding as of April 30, 2020 and July 31, 2019, respectively |
|
| 9,101 |
|
|
| 9,076 |
|
Common stock subscribed; 30,000,000 common shares |
|
| - |
|
|
| (3,000 | ) |
Additional paid-in capital |
|
| 42,242,668 |
|
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| 38,993,002 |
|
Accumulated other comprehensive income |
|
| (11,142 | ) |
|
| 69,238 |
|
Accumulated deficit |
|
| (35,153,704 | ) |
|
| (24,210,347 | ) |
Total Stockholders’ Equity of Toga Ltd. |
|
| 7,086,923 |
|
|
| 14,857,969 |
|
Non-controlling interest |
|
| 26,813 |
|
|
| 58,368 |
|
Total Stockholders' Equity |
|
| 7,113,736 |
|
|
| 14,916,337 |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 18,660,826 |
|
| $ | 21,006,426 |
|
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| Three months ended |
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| October 31, |
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|
| 2019 |
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| 2018 |
| ||
|
| (Restated) |
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Revenue |
| $ | 2,997,321 |
|
| $ | 407,610 |
|
Revenue – related party |
|
| 219,709 |
|
|
| 335,143 |
|
Cost of goods sold |
|
| (1,741,800 | ) |
|
| (117,499 | ) |
Gross profit |
|
| 1,475,230 |
|
|
| 625,254 |
|
|
|
|
|
|
|
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|
OPERATING EXPENSES |
|
|
|
|
|
|
|
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General and administrative expenses |
|
| 3,726,046 |
|
|
| 238,306 |
|
Salaries and wages |
|
| 840,218 |
|
|
| 400,407 |
|
Professional fees |
|
| 475,115 |
|
|
| 311,619 |
|
Depreciation |
|
| 50,803 |
|
|
| 10,524 |
|
Total Operating Expenses |
|
| 5,092,182 |
|
|
| 960,856 |
|
|
|
|
|
|
|
|
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LOSS FROM OPERATIONS |
|
| (3,616,952 | ) |
|
| (335,602 | ) |
|
|
|
|
|
|
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OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
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Other income |
|
| 48,479 |
|
|
| - |
|
Interest income |
|
| 17,886 |
|
|
| 174 |
|
Interest expense |
|
| (385 | ) |
|
| (35 | ) |
Total Other Income (Expense) |
|
| 65,980 |
|
|
| 139 |
|
|
|
|
|
|
|
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Loss before Income Taxes |
|
| (3,550,972 | ) |
|
| (335,463 | ) |
|
|
|
|
|
|
|
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Income Tax Provision |
|
| (401 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (3,551,373 | ) |
| $ | (335,463 | ) |
Net loss attributable to non-controlling interest |
|
| 1,623 |
|
| - |
| |
Net loss attributable to Toga ltd. |
| $ | (3,549,750 | ) |
| $ | (335,463 | ) |
|
|
|
|
|
|
|
|
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OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
| (40,487 | ) |
|
| (27,507 | ) |
TOTAL COMPREHENSIVE LOSS |
| $ | (3,591,860 | ) |
| $ | (362,970 | ) |
|
|
|
|
|
|
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|
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BASIC AND DILUTED NET LOSS PER COMMON SHARE: |
|
|
|
|
|
|
|
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
|
| 90,759,165 |
|
|
| 71,695,762 |
|
NET LOSS PER COMMON SHARE |
| $ | (0.04 | ) |
| $ | (0.00 | ) |
See accompanying notes to the unaudited condensed consolidated financial statements.
statements
Table of Contents |
Toga Limited and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
|
| Three Months Ended |
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| Nine Months Ended |
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|
| April 30, |
|
| April 30, |
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|
| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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Revenue |
| $ | 2,176,670 |
|
| $ | 3,104,032 |
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| $ | 8,719,525 |
|
| $ | 4,703,168 |
|
Cost of goods sold |
|
| 1,950,594 |
|
|
| 1,641,101 |
|
|
| 6,335,778 |
|
|
| 1,885,324 |
|
Gross profit |
|
| 226,076 |
|
|
| 1,462,931 |
|
|
| 2,383,747 |
|
|
| 2,817,844 |
|
|
|
|
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|
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|
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OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, General and administrative expenses |
|
| 671,394 |
|
|
| 431,906 |
|
|
| 5,830,163 |
|
|
| 1,725,779 |
|
Salaries and wages |
|
| 650,030 |
|
|
| 7,576,512 |
|
|
| 5,751,943 |
|
|
| 8,224,676 |
|
Professional fees |
|
| 683,938 |
|
|
| 216,824 |
|
|
| 1,617,526 |
|
|
| 846,465 |
|
Depreciation |
|
| 137,468 |
|
|
| 18,311 |
|
|
| 323,731 |
|
|
| 41,974 |
|
Total Operating Expenses |
|
| 2,142,830 |
|
|
| 8,243,553 |
|
|
| 13,523,363 |
|
|
| 10,838,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
| (1,916,754 | ) |
|
| (6,780,622 | ) |
|
| (11,139,616 | ) |
|
| (8,021,050 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
| 5,072 |
|
|
| - |
|
|
| 115,228 |
|
|
| - |
|
Interest income |
|
| 15,914 |
|
|
| 4,112 |
|
|
| 54,448 |
|
|
| 6,833 |
|
Interest expense |
|
| (1,775 | ) |
|
| (118 | ) |
|
| (4,972 | ) |
|
| (185 | ) |
Total Other Income (Expense) |
|
| 19,211 |
|
|
| 3,994 |
|
|
| 164,704 |
|
|
| 6,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before Income Taxes |
|
| (1,897,543 | ) |
|
| (6,776,628 | ) |
|
| (10,974,912 | ) |
|
| (8,014,402 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Provision |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (1,897,543 | ) |
| $ | (6,776,628 | ) |
| $ | (10,974,912 | ) |
| $ | (8,014,402 | ) |
Less: Net Loss attributable to non-controlling interest |
|
| (23,246 | ) |
|
| - |
|
|
| (31,555 | ) |
|
| - |
|
Net Loss attributable to Toga Ltd. |
|
| (1,874,297 | ) |
|
| (6,776,628 | ) |
|
| (10,943,357 | ) |
|
| (8,014,402 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
| (21,597 | ) |
|
| (121,785 | ) |
|
| (80,380 | ) |
|
| (26,407 | ) |
Total Comprehensive Loss |
| $ | (1,919,140 | ) |
| $ | (6,898,413 | ) |
| $ | (11,055,292 | ) |
| $ | (8,040,809 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED NET LOSS PER COMMON SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
|
| 91,003,291 |
|
|
| 8,903,619 |
|
|
| 90,921,322 |
|
|
| 8,022,235 |
|
NET LOSS PER COMMON SHARE |
| $ | (0.02 | ) |
| $ | (0.76 | ) |
| $ | (0.12 | ) |
| $ | (1.00 | ) |
See accompanying notes to the unaudited condensed consolidated financial statements.
Toga Limited and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the Nine Months Ended April 30, 2020
(Unaudited)
|
|
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|
|
| Accumulated |
|
|
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|
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| ||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
| ||||||||
|
| Common Stock |
|
|
|
|
| Additional |
|
|
|
|
| Comprehensive |
|
| Non- |
|
| Total |
| |||||||||||
|
| Number of Shares |
|
| Amount |
|
| Subscription Receivable |
|
| Paid-in Capital |
|
| Accumulated Deficit |
|
| Income (Loss) |
|
| controlling Interest |
|
| Stockholders' Equity |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance - July 31, 2019 |
|
| 90,762,893 |
|
| $ | 9,076 |
|
| $ | (3,000 | ) |
| $ | 38,993,002 |
|
| $ | (24,210,347 | ) |
| $ | 69,238 |
|
| $ | 58,368 |
|
| $ | 14,916,337 |
|
Cancellation of common shares |
|
| (24,614 | ) |
|
| (2 | ) |
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Reissuance of previously cancelled shares |
|
| 20,000 |
|
|
| 2 |
|
|
| - |
|
|
| (2 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Issuance of stock options |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 44,470 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 44,470 |
|
Other comprehensive loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (40,487 | ) |
|
| - |
|
|
| (40,487 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,826,719 | ) |
|
| - |
|
|
| (1,623 | ) |
|
| (3,828,342 | ) |
Balance - October 31, 2019 |
|
| 90,758,279 |
|
|
| 9,076 |
|
|
| (3,000 | ) |
|
| 39,037,472 |
|
|
| (28,037,066 | ) |
|
| 28,751 |
|
|
| 56,745 |
|
|
| 11,091,978 |
|
Issuance of common shares for employee compensation |
|
| 253,354 |
|
|
| 25 |
|
|
| - |
|
|
| 3,294,018 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,294,043 |
|
Issuance of stock options |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 43,589 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 43,589 |
|
Proceeds from common stock subscribed |
|
| - |
|
|
| - |
|
|
| 3,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,000 |
|
Forgiveness of related party note |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 24,126 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 24,126 |
|
Other comprehensive loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (18,296 | ) |
|
| - |
|
|
| (18,296 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (5,242,341 | ) |
|
| - |
|
|
| (6,686 | ) |
|
| (5,249,027 | ) |
Balance - January 31, 2020 |
|
| 91,011,633 |
|
|
| 9,101 |
|
|
| - |
|
|
| 42,399,205 |
|
|
| (33,279,407 | ) |
|
| 10,455 |
|
|
| 50,059 |
|
|
| 9,189,413 |
|
Redemption of stock options |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (156,537 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (156,537 | ) |
Other comprehensive loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (21,597 | ) |
|
| - |
|
|
| (21,597 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,874,297 | ) |
|
| - |
|
|
| (23,246 | ) |
|
| (1,897,543 | ) |
Balance - April 30, 2020 |
|
| 91,011,633 |
|
| $ | 9,101 |
|
| $ | - |
|
| $ | 42,242,668 |
|
| $ | (35,153,704 | ) |
| $ | (11,142 | ) |
| $ | 26,813 |
|
| $ | 7,113,736 |
|
See accompanying notes to the unaudited condensed consolidated financial statements.
Toga Limited and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the Nine Months Ended April 30,three months ended October 31, 2019
(Unaudited)
(Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
| |||||||||
|
| Common Stock |
|
|
|
| Additional |
|
|
|
| Comprehensive |
|
| Total |
| ||||||||||||
|
| Number of Shares |
|
| Amount |
|
| Subscription Receivable |
|
| Paid-in Capital |
|
| Accumulated Deficit |
|
| Income (Loss) |
|
| Stockholders' Equity |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance - July 31, 2018 |
|
| 69,586,517 |
|
| $ | 6,959 |
|
| $ | (3,000 | ) |
| $ | 16,942,861 |
|
| $ | (14,351,459 | ) |
| $ | (53,996 | ) |
| $ | 2,541,365 |
|
Issuance of common shares for cash |
|
| 6,270,762 |
|
|
| 627 |
|
|
| - |
|
|
| 1,253,524 |
|
|
| - |
|
|
| - |
|
|
| 1,254,151 |
|
Cancellation of common shares |
|
| (20,000 | ) |
|
| (2 | ) |
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Other comprehensive loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (27,507 | ) |
|
| (27,507 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (335,463 | ) |
|
| - |
|
|
| (335,463 | ) |
Balance - October 31, 2018 |
|
| 75,837,279 |
|
|
| 7,584 |
|
|
| (3,000 | ) |
|
| 18,196,387 |
|
|
| (14,686,922 | ) |
|
| (81,503 | ) |
|
| 3,432,546 |
|
Issuance of common shares for cash |
|
| 2,993,121 |
|
|
| 299 |
|
|
| - |
|
|
| 598,327 |
|
|
| - |
|
|
| - |
|
|
| 598,626 |
|
Issuance of common shares for digital currency |
|
| 8,575,916 |
|
|
| 858 |
|
|
| - |
|
|
| 3,802,822 |
|
|
| - |
|
|
| - |
|
|
| 3,803,680 |
|
Cancellation of common shares |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 122,885 |
|
|
| 122,885 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (902,311 | ) |
|
| - |
|
|
| (902,311 | ) |
Balance - January 31, 2019 |
|
| 87,406,316 |
|
|
| 8,741 |
|
|
| (3,000 | ) |
|
| 22,597,536 |
|
|
| (15,589,233 | ) |
|
| 41,382 |
|
|
| 7,055,426 |
|
Issuance of common shares for cash |
|
| 1,226,479 |
|
|
| 123 |
|
|
| - |
|
|
| 245,173 |
|
|
| - |
|
|
| - |
|
|
| 245,296 |
|
Issuance of common shares for digital currency |
|
| 396,293 |
|
|
| 40 |
|
|
| - |
|
|
| 79,218 |
|
|
| - |
|
|
| - |
|
|
| 79,258 |
|
Issuance of common shares for compensation |
|
| 782,948 |
|
|
| 78 |
|
|
| - |
|
|
| 6,805,219 |
|
|
| - |
|
|
| - |
|
|
| 6,805,297 |
|
Other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (121,785 | ) |
|
| (121,785 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (6,776,628 | ) |
|
| - |
|
|
| (6,776,628 | ) |
Balance - April 30, 2019 |
|
| 89,812,036 |
|
| $ | 8,981 |
|
| $ | (3,000 | ) |
| $ | 29,727,147 |
|
| $ | (22,365,861 | ) |
| $ | (80,403 | ) |
| $ | 7,286,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
| ||||||||||
|
| Common Stock |
|
|
|
| Additional |
|
|
|
| Other |
|
| Non- |
|
| Total |
| |||||||||||||
|
| Number of Shares |
|
| Amount |
|
| Subscription Receivable |
|
| Paid-in Capital |
|
| Accumulated Deficit |
|
| Comprehensive Income (Loss) |
|
| controlling Interest |
|
| Stockholders’ Equity |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance - July 31, 2019 |
|
| 90,762,893 |
|
| $ | 9,076 |
|
| $ | (3,000 | ) |
| $ | 38,993,002 |
|
| $ | (24,622,041 | ) |
| $ | 69,238 |
|
| $ | 58,368 |
|
| $ | 14,504,643 |
|
Cancellation of common shares |
|
| (24,614 | ) |
|
| (2 | ) |
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Reissuance of previously cancelled shares |
|
| 20,000 |
|
|
| 2 |
|
|
| - |
|
|
| (2 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Issuance of stock options |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 44,470 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 44,470 |
|
Other comprehensive loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (40,487 | ) |
|
| - |
|
|
| (40,487 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,549,750 | ) |
|
| - |
|
|
| (1,623 | ) |
|
| (3,551,373 | ) |
Balance - October 31, 2019 |
|
| 90,758,279 |
|
| $ | 9,076 |
|
| $ | (3,000 | ) |
| $ | 39,037,472 |
|
| $ | (28,171,791 | ) |
| $ | 28,751 |
|
| $ | 56,745 |
|
| $ | 10,957,253 |
|
See accompanying notes to the unaudited condensed consolidated financial statements.statements
Table of Contents |
Toga Limited and Subsidiaries
Condensed Consolidated Statements of Cash FlowsChanges in Stockholders’ Equity
For the three months ended October 31, 2018
(Unaudited)
|
| Nine Months Ended |
| |||||
|
| April 30, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| ||
Net loss |
| $ | (10,974,912 | ) |
| $ | (8,014,402 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
| 323,731 |
|
|
| 41,974 |
|
Stock based compensation |
|
| 3,382,102 |
|
|
| 6,805,297 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (340,306 | ) |
|
| 149,702 |
|
Prepaid expenses, deposits and other current assets |
|
| (213,982 | ) |
|
| (309,220 | ) |
Inventories |
|
| (750,307 | ) |
|
| (205,406 | ) |
Accounts payable and accrued liabilities |
|
| 1,675,810 |
|
|
| 787,558 |
|
Deferred revenue |
|
| 3,818,863 |
|
|
| 643,336 |
|
Income tax payable |
|
| (61,216 | ) |
|
| - |
|
Deferred tax liabilities |
|
| 8,344 |
|
|
| - |
|
Operating lease liabilities |
|
| (141,060 | ) |
|
| - |
|
Net cash used in operating activities |
|
| (3,272,933 | ) |
|
| (101,161 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (247,333 | ) |
|
| (198,017 | ) |
Net cash used in investing activities |
|
| (247,333 | ) |
|
| (198,017 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from common stock subscribed |
|
| 3,000 |
|
|
| - |
|
Proceeds from issuance of common stock |
|
| - |
|
|
| 2,098,073 |
|
Redemption of stock options |
|
| (156,537 | ) |
|
| - |
|
Proceeds from related parties |
|
| 105,708 |
|
|
| 126,813 |
|
Repayment to related parties |
|
| (86,105 | ) |
|
| (74,927 | ) |
Net cash provided by (used in) financing activities |
|
| (133,934 | ) |
|
| 2,149,959 |
|
|
|
|
|
|
|
|
|
|
Effects on changes in foreign exchange rate |
|
| 7,484 |
|
|
| (98,153 | ) |
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| (3,646,716 | ) |
|
| 1,752,628 |
|
Cash and cash equivalents - beginning of period |
|
| 14,916,556 |
|
|
| 1,064,672 |
|
Cash and cash equivalents - end of period |
| $ | 11,269,840 |
|
| $ | 2,817,300 |
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Disclosures: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | - |
|
| $ | - |
|
Cash paid for income taxes |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Non-Cash Investing and Financing Activity: |
|
|
|
|
|
|
|
|
Cancellation of Common Stock |
| $ | 2 |
|
| $ | 2 |
|
Reissuance of previously cancelled Common Stock |
| $ | 2 |
|
| $ | - |
|
Debt forgiven by related party |
| $ | 24,126 |
|
| $ | - |
|
Operating lease right-of-use assets |
| $ | 333,798 |
|
| $ | - |
|
Common shares issued for digital currency |
| $ | - |
|
| $ | 3,882,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| |||||||||
|
| Common Stock |
|
|
|
| Additional |
|
|
|
| Other |
|
| Total |
| ||||||||||||
|
| Number of Shares |
|
| Amount |
|
| Subscription Receivable |
|
| Paid-in Capital |
|
| Accumulated Deficit |
|
| Comprehensive Loss |
|
| Stockholders’ Equity |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance - July 31, 2018 |
|
| 69,586,517 |
|
| $ | 6,959 |
|
| $ | (3,000 | ) |
| $ | 16,942,861 |
|
| $ | (14,351,459 | ) |
| $ | (53,996 | ) |
| $ | 2,541,365 |
|
Issuance of common shares for cash |
|
| 6,270,762 |
|
|
| 627 |
|
|
| - |
|
|
| 1,253,524 |
|
|
| - |
|
|
| - |
|
|
| 1,254,151 |
|
Cancellation of common shares |
|
| (20,000 | ) |
|
| (2 | ) |
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Other comprehensive loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (27,507 | ) |
|
| (27,507 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (335,463 | ) |
|
| - |
|
|
| (335,463 | ) |
Balance - October 31, 2018 |
|
| 75,837,279 |
|
| $ | 7,584 |
|
| $ | (3,000 | ) |
| $ | 18,196,387 |
|
| $ | (14,686,922 | ) |
| $ | (81,503 | ) |
| $ | 3,432,546 |
|
See accompanying notes to the unaudited condensed consolidated financial statements.statements
Table of Contents |
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| Three months ended |
| |||||
|
| October 31, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
|
| (Restated) |
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| ||
Net loss |
| $ | (3,551,373 | ) |
| $ | (335,463 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
| 50,803 |
|
|
| 10,524 |
|
Stock based compensation |
|
| 44,470 |
|
|
| - |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 180,290 |
|
|
| 71,915 |
|
Inventories |
|
| (809,379 | ) |
|
| - |
|
Prepaid expenses and other current assets |
|
| 503,294 |
|
| (143,040 | ) | |
Accounts payable and accrued liabilities |
|
| 1,053,576 |
|
|
| 59,537 |
|
Deferred revenue |
|
| 533,803 |
|
|
| (20,500 | ) |
Income tax payable |
|
| 32,309 |
|
|
| - |
|
Net cash used in operating activities |
|
| (1,962,207 | ) |
|
| (357,027 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (77,769 | ) |
|
| (20,566 | ) |
Net cash used in investing activities |
|
| (77,769 | ) |
|
| (20,566 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
| - |
|
|
| 1,254,151 |
|
Proceeds from related parties |
|
| 66,992 |
|
|
| 38,225 |
|
Repayment to related party |
|
| (4,467 | ) |
|
| (42,438 | ) |
Net cash provided by financing activities |
|
| 62,525 |
|
|
| 1,249,938 |
|
|
|
|
|
|
|
|
|
|
Effects on changes in foreign exchange rate |
|
| (37,103 | ) |
|
| 51,703 |
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
| (2,014,554 | ) |
|
| 924,048 |
|
Cash and cash equivalents - beginning of period |
|
| 14,916,556 |
|
|
| 1,064,672 |
|
Cash and cash equivalents - end of period |
| $ | 12,902,002 |
|
| $ | 1,988,720 |
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Disclosures |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | - |
|
| $ | - |
|
Cash paid for income taxes |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Non-Cash Investing and Financing Activity: |
|
|
|
|
|
|
|
|
Cancellation of Common Stock |
| $ | 2 |
|
| $ | 20 |
|
Reissuance of previously cancelled Common Stock |
| $ | 2 |
|
| $ | - |
|
Operating lease right-of-use assets |
| $ | 333,798 |
|
| $ | - |
|
See accompanying notes to the unaudited condensed consolidated financial statements
F-5 |
Table of Contents |
Notes to the Condensed Consolidated Financial Statements
April 30, 2020October 31, 2019
(Unaudited)
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) share (50:1) currently issued and outstanding (“Forward Split”). The Forward Split became effective in the market on September 11, 2017 following approval by FINRA.
In July 2018, we changed our state of incorporation to the State of Nevada.
The Company incorporated a wholly-owned subsidiary, TOGL Technology Sdn. Bhd. (“TOGL Technology”) in Malaysia on September 26, 2017.
The Company incorporated a wholly-owned subsidiary, PT. Toga International Indonesia (“PT Toga”) in Indonesia on November 23, 2017.
On May 28, 2018, the Company’s wholly-owned subsidiary TOGL Technology formed a branch office in Taiwan.
The Company’s wholly-owned subsidiary TOGL Technology 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. The 10-1 Reverse Split was effectuated on June 5, 2019. All share and per share information contained herein reflected the effect of the reverse stock split.
F-6 |
Table of Contents |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation (Restated)
The accompanying unaudited consolidated condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"of America (“GAAP”) for interim financial information and with the instructions to Form 10-Qrules and Rule 8-03regulations of Regulation S-X. Theythe U.S. Securities and Exchange Commission (“SEC”). Accordingly, these condensed consolidated financial statements do not include all of the information and notesfootnotes required by U.S. GAAP for completeaudited annual financial statements. However, except as disclosed herein, thereIn the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the consolidated financial statements not misleading have been included. The balance sheet at July 31, 2019, has been no material changederived from the Company’s audited consolidated financial statements as of that date.
The unaudited consolidated condensed financial statements included herein should be read in conjunction with the information disclosed inaudited consolidated financial statements and the Notes to Consolidated Financial Statementsnotes thereto that are included in the Company’s Annual Report on Form 10-K of Toga Limited10-K/A for the year ended July 31, 2019, that was filed with the Securities and Exchange Commission (the “SEC”)SEC on November 14, 2019.
When used in these notes, the terms “Toga Limited,” “Company,” “we,” “us,” and “our” mean Toga Limited and all entities included in our condensed consolidated financial statements. In the opinionFebruary 8, 2021. The results of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating resultsoperations for the three and nine months ended April 30, 2020October 31, 2019 are not necessarily indicative of the results that mayto be expected for the year ending July 31, 2020.
Reclassification
Balance Sheets & Income Statements
Certain amounts from prior periods have been reclassified to conform to the current period presentation.
Equity Statement
The Company has reclassified a balance related to Non-controlling Interest to Accumulated Other Comprehensive Income as of July 31, 2019. The impact was an increase of Non-controlling Interest of $116,736 and a decrease in the Accumulated Other Comprehensive Income of $116,736. The equity reclassification was due to an incorrect classification of the Non-controlling Interest balance during the year-ended July 31, 2019. The net effect of this reclassification on total equity was $0.
These reclassifications had no effect on the reported results of operations for the three and nine months ended April 30, 2020.full year.
Basis of Consolidation
The accompanyingThese consolidated condensed consolidated financial statements include the accounts of: (i)of the Company’s wholly owned subsidiary,Company and the wholly-owned subsidiaries, TOGL Technology Sdn. Bhd., a Malaysian company ("and PT Toga. All material intercompany balances and transactions have been eliminated. TOGL Technology"); (ii) TOGL Technology'sTechnology incorporates the financial statements of the Taiwan branch office ("Taiwan Branch Office"); (iii) TOGL Technology's wholly owned subsidiaries, Togaand Vietnam Company Limited ("Toga Vietnam")subsidiary.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and WGS Discovery Tours & Travel, a Malaysian company ("WGS") which operates underassumptions that affect the Company’s brand name “TogaGo”; (iv)reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the Company’s majority owned (95%) subsidiary, PT. Toga International Indonesia, an Indonesian limited liability company ("Toga International");date of the financial statements and (v) Toga International's majority owned (67%) subsidiary, PT TOGL Technology Indonesia, an Indonesian limited liability company ("PT TOGL Technology Indonesia").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 of October 31, 2019, the Company has potentially 123,662 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.
Table of Contents |
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 October 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 the 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 April 30, 2020October 31, 2019, and July 31, 2019, the Company had inventories consisting of health and beauty productsfinished goods of $889,527$972,364 and $162,985, respectively.
Leases
Effective August 1, 2019,The Company adopted ASC 842 for the recognition of operating leases on office premises commencing from the three months ended October 31, 2019. Under ASC 842, the Company adoptedrecognizes on the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), and additional ASUs issued to clarify and updatebalance sheet the guidance in ASU 2016-02 (collectively, the “new leases standard”), which modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for the right and obligations from the operating leases and disclosing key information about leasing arrangements. The Company adopted the new leases standard utilizing the modified retrospective transition method, under which amounts in prior periods presented were not restated. For contracts existing at the time of adoption, the Company elected to not reassess (i) whether any are or contain leases, (ii) lease classification, and (iii) initial direct costs. Upon adoption, the Company recorded $333,798 of right-of-use (“ROU”) assets and $333,798 of lease liabilities on its Condensed Consolidated Balance Sheet.leases.
Equipment and Furniture
Property and equipment are stated at cost. Depreciation is computed usingon 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 | 1 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 ninethree months ended April 30, 2020October 31, 2019 and 2019,2018, no impairment losses have been identified.
Goodwill and Other Intangible Assets
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.
Table of Contents |
On June 24, 2019, the Company’s wholly-owned subsidiary TOGL Technology 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 October 31, 2019, no indicators of impairment exist. No impairment loss on goodwill was recognized for the three months ended October 31, 2019 and 2018.
Foreign Currency Translations
The Company’s functional and reporting currency is the U.S. dollar. We have four subsidiaries and one business division which use various currencies as follows: WGS and TOGL Technology’sOur subsidiary’s functional currency is the Malaysian ringgit (the “MYR”Ringgit. All transactions initiated in Malaysian Ringgit (“MYR”); the functional currency of the Taiwan Branch Office of TOGL Technology is the, New Taiwan dollar (“NTD”); Toga Vietnam’s functional currency is the and Vietnamese dong (“VND”); PT Toga International Indonesia, and PT TOGL Technology Indonesia’s currency is the Indonesian rupiah (“IDR”) and aforementioned currencies are translated into U.S. dollars in accordance with ASC 830-30, “Translation”Translation of Financial Statements,” as follows:
|
| Monetary assets and liabilities |
|
| Equity |
|
| Revenue and expense items |
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.
|
| Three Months Ended |
|
| Year Ended |
|
| Three Months Ended |
| |||
|
| October 31, |
|
| July 31, |
|
| October 31, |
| |||
|
| 2019 |
|
| 2019 |
|
| 2018 |
| |||
Spot MYR: USD exchange rate |
| $ | 0.2393 |
|
| $ | 0.2422 |
|
| $ | 0.2389 |
|
Average MYR: USD exchange rate |
| $ | 0.2388 |
|
| $ | 0.2421 |
|
| $ | 0.2420 |
|
Spot NTD: USD exchange rate |
| $ | 0.0328 |
|
| $ | 0.0321 |
|
| $ | 0.0323 |
|
Average NTD: USD exchange rate |
| $ | 0.0322 |
|
| $ | 0.0323 |
|
| $ | 0.0325 |
|
Spot IDR: USD exchange rate |
| $ | 0.000071 |
|
| $ | 0.000071 |
|
| $ | 0.000066 |
|
Average IDR: USD exchange rate |
| $ | 0.000071 |
|
| $ | 0.000069 |
|
| $ | 0.000067 |
|
Spot VND: USD exchange rate |
| $ | 0.000043 |
|
| $ | 0.000043 |
|
| $ | n/a |
|
Average VND: USD exchange rate |
| $ | 0.000043 |
|
| $ | 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 common 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.
F-9 |
Table of Contents |
Stock-based compensation incurred for the ninethree months ended April 30, 2020October 31, 2019 and 2019,2018, respectively, are summarized as follows:
|
| Nine Months Ended |
|
| Three Months Ended |
| ||||||||||
|
| April 30, |
|
| October 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
| ||||
Vesting of stock options issued to directors and officers |
| $ | 88,059 |
| $ | - |
|
| $ | 44,470 |
|
| $ | - |
| |
Common stock issued to employees |
|
| 3,294,043 |
|
|
| 6,805,297 |
| ||||||||
Total |
| $ | 3,382,102 |
|
| $ | 6,805,297 |
|
| $ | 44,470 |
|
| $ | - |
|
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 and accrued interest payable 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 4)
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.
F-10 |
Table of Contents |
Revenue Recognition (Restated)
In May 2014, the FASB issued new accounting guidance, ASC 606, “Revenue from Contracts with Customers” (“ASC 606”), related to revenue from contracts with customers. The core principle of ASC 606 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 adopted and applied the standards beginning in the fiscal year ended July 31, 2019, using the modified retrospective approach, which applies ASC 606 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 ASC 606.
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) identifyIdentify the contract, or contracts, with a customer; (ii) identifyIdentify the performance obligations in the contract; (iii) determineDetermine the transaction price; (iv) allocateAllocate the transaction price to the performance obligations in the contract; and (v) recognizeRecognize 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 thatwhich 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 pursuant toper 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 in accordance with ASC 606 as defined above. During the ninethree months ended April 30, 2020October 31, 2019 and 2019,2018, the Company derived its revenues from the following:
(1) The sale of products through a direct marketing network (approximately $3.7$2.2 million and $3.2 million$231,000 for ninethree months ended April 30, 2020October 31, 2019 and 2019, respectively and approximately $328,000 and $2.4 million for 3 months ended April 30, 2020 and 2019,2018, respectively). Invoices are prepared for all sales of products through a direct marketing network. In accordance with ASC 606, revenues related to direct marketing network sales are recognized when:
| · | The invoice has been generated and provided to the customer. |
| · | The performance obligations of delivery of products are stated in the invoice. |
| · | The transaction price has been identified in the invoice. |
| · | The Company has allocated the transaction price to performance obligation in the invoice. |
| · | The Company has shipped out the product and, therefore, satisfied the performance obligation. |
(2) The in-app purchases through the Company’s mobile application called “Yippi” or the “Yippi App” (approximately $3.2 million and $0 for the nine months ended April 30, 2020 and 2019, respectively and approximately $1.3 million$935,000 and $0 for the three months ended April 30, 2020October 31, 2019 and 2019,2018, respectively). In accordance with ASC 606, revenue related to in-app purchases are recognized when:
| · | An invoice or receipt is generated upon the in-app purchase. |
| · | The performance obligations of the delivery of in-app purchases are stated or implied on the purchase portal. |
| · | The transaction price has been identified in the in-app purchase. |
| · | The Company has allocated the transaction price to the implied performance obligation. In regards to in-apps purchases, there is a lag in between the time where a customer makes in-apps purchase and the time that the customer spends the in-app purchase and/or points. |
| · | The Company has provided the in-app purchase to the end user. When the end-user utilizes the in-apps purchase and/or points, revenue is recognized at that point in time only to the extent of the in-app point usage. All in-app purchases that have not been utilized by the end-user are recorded as deferred revenue until the point in which they are utilized by the end-user, at which time they will be recorded as revenue. |
(3) The hotel and flight feature (“TogaGo”) in the Yippi App (approximately $1.0 million and $0 for nine months ended April 30, 2020 and 2019, respectively and approximately $80,000$500 and $0 for three months ended April 30, 2020October 31, 2019 and 2019,2018, respectively). In accordance with ASC 606, revenue related to the TogaGo platform purchases are recognized when:
| · | The invoice or receipt is generated upon a purchase on the TogaGo platform. |
| · | The performance obligations of the delivery of products and services are stated or implied on the purchase portal. |
| · | The transaction price has been identified in the TogaGo platform purchase. |
| · | The Company has allocated the transaction price to the implied performance obligation. |
| · | The Company has received confirmation from the third-party that it has booked the TogaGo platform purchase and, thus; the Company has satisfied the performance obligation. |
(4) Royalty fees ($360,000 and $180,000 for nine months ended April 30, 2020 and 2019, respectively and $120,00060,000 and $60,000 for three months ended April 30, 2020October 31, 2019 and 2019,2018, respectively). In accordance with ASC 606, related to royalty/licensing fees are recognized when:
| · | The contract has been signed by both parties for licensing and/or royalty fees. |
| · | The performance obligations are stated or implied in the contract. |
| · | The transaction price has been identified in the contract. |
| · | The Company has allocated the transaction price to the performance obligations pursuant to the contract. |
| · | The Company has provided the licensing to the end user and, therefore, satisfied the performance obligation. |
(5) Advertising revenue (approximately $475,000$45,000 and $168,000 for nine months ended April 30, 2020 and 2019, respectively and approximately $330,000 and 23,000$80,000 for three months ended April 30, 2020October 31, 2019 and 2019,2018, respectively). In accordance with ASC 606, related to in-app advertising are recognized when:
| · | The contract has been signed by both parties for advertising to be provided within the Yippi App. |
| · | The performance obligations of the delivery of the in-app advertising are implied in the contract. |
| · | The transaction price has been identified in the contract. |
| · | The Company has allocated the transaction price to the advertising performance obligations pursuant to the contract. |
| · | The Company has provided in-app advertising in accordance with the contract and, therefore, has satisfied the performance obligation. |
The Company analyses whether gross sales, or net sales should be recorded. Since the Company has control over establishing price, and has control over the related costs with earning revenues, it has recorded all revenues at the gross price.
F-11 |
Table of Contents |
For the period ended October 31, 2019, deferred revenue was related to Yippi in-app purchases and sales of product.
Deferred Revenue from Yippi In-App Purchases
For the period ended April 30, 2020, 100% of the deferred revenue was related to Yippi in-app purchases. The Company has created in-app points to use within the Yippi App. These in-app points are called Yipps. Once purchased by a user, Yipps can be used in a variety of different ways within the Yippi App. Yipps can be used to gift or tip other users, or to purchase merchandise and services from vendors.
Yipps points are purchased in cash. When these points are initially purchased (but not yet used), they are recognized as deferred revenue. When these points are later used within the Yippi App (for purchases, tipping, gifting, etc.), the revenue is recognized.
The Company monitors the following in order to validate the deferred revenue balances and revenue recognized during the period in relation in to the in-apps purchases:
| · | purchase price and quantity of the Yipps points to be utilized in the Yippi App; |
| · | usage of the Yipps points over the reporting period (in order to record revenue); and |
| · | reconciliation between the used and unused points at the end of each reporting period. |
The increase in deferred revenue for the three and nine months ended April 30, 2020October 31, 2019 is due to an increase from product sales not yet shipped and in the amount of Yipps credits that were purchased (but remained unused) compared to the amount of Yipps credits that were used during that period and, therefore, recognized as revenue during the period. Thus, the total amount of unused Yipps increased during the period.
Please refer to the Revenue Recognition policy above with respect to revenue recognition of in-app purchases and Yipps points.
Upon use or redemption of the Yipps inside of the Yippi app, the Company pays the price set by the third-party supplier of the desired product or service (approximately 70% of the total cost of the item) and retains the balance as a commission (approximately 30% of the total cost of the item). The exception to this commission breakdown is when Yipps are used to redeem products and services in the Company’s TogaGo travel platform, where the Company currently takes a much lower commission to keep advertised prices low and encourages the use of the TogaGo platform (the Company’s commission is approximately 3-5% of the total cost of the product or service purchased). At the time the Yipps are used and the revenue is recognized, the amount that is paid to third-party suppliers of the goods or services is recorded by the Company as the cost of goods sold.
Yipps do not have an expiration date, and this is a relatively new revenue source for the Company (deferred revenue from Yipps was first recorded in May 2019). On an ongoing basis as Yipps are purchased and used in-app, the Company expects to recognize all of the deferred revenue from a Yipps purchase as revenue within 12 months of the original purchase of such Yipps. The Company’s estimate is qualified by the limited data of historical usage.
Prepaid Commission
In connection with the sale of our Eostre branded products, we pay a commission to our independent agents. The commission is payable upon the sale of the products, not upon shipment of the products. The Company books the commission at the time of sale to a prepaid Commission account, included in prepaid expense and other current assets, and offsets this amount by booking a payable to the independent agent. At the time the product is shipped, and the obligation is fulfilled, the Company then recognizes commission expense out of the prepaid commission account. As of October 31, 2019, and July 31, 2019, the Company recorded in prepaid expense and other current assets $1,642,632 and $2,503,269, respectively, for prepaid commissions.
Concentration of Revenue by Customer
During the three and nine months ended April 30, 2020 andOctober 31, 2019, the Company’s concentration of revenue for individual customers above 10% are as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| April 30, |
|
| April 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Agel Enterprises International Sdn Bhd |
|
| 10 | % |
|
| 20 | % |
|
| 7 | % |
|
| 31 | % |
Shen Zhen Shang Networks Technology Co. Ltd. |
|
| 22 | % |
|
| - |
|
|
| 29 | % |
|
| - |
|
Success Fortune Trading Limited |
|
| 10 | % |
|
| - |
|
|
| 1 | % |
|
| - |
|
Shen Zhen Shi Ding Shang: | 19 | % | ||
Agel Enterprise International Sdn Bhd: | 11 | % | ||
Others: | 70 | % |
Concentration of Revenue by Country:
During the three and nine months ended April 30, 2020 and 2019,October 31, 2018, the Company’s concentration of revenue by countryfor individual customers above 10% are as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| April 30, |
|
| April 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Malaysia (TOGL Technology) |
|
| 85 | % |
|
| 34 | % |
|
| 62 | % |
|
| 54 | % |
Indonesia (Toga International) |
|
| 10 | % |
|
| 64 | % |
|
| 33 | % |
|
| 42 | % |
United States (Toga Limited) |
|
| 6 | % |
|
| 2 | % |
|
| 4 | % |
|
| 4 | % |
• | Agel Enterprise International Sdn Bhd: 45% | |
• | Others: 55% |
F-12 |
Table of Contents |
Concentration of Revenue by Country:
Three months ended October 31, 2019:
- | Malaysia (TOGL Technology Sdn. Bhd): 40% | |
- | Indonesia (PT. Toga International Indonesia): 58% | |
- | United States (Toga Limited): 2% |
Three months ended October 31, 2018:
- | Malaysia (TOGL Technology Sdn. Bhd): 92% | |
- | Indonesia (PT. Toga International Indonesia): 0% | |
- | United States (Toga Limited): 8% |
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 is primarily related to product sales, Yippi in-app purchase and royalty fees. Accounts receivable are recorded in accordance with ASC 310, “Receivables.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 October 31, 2019, the Company’s accounts receivable are concentrated 64% with Shen Zhen Shi Ding Shang Internet Tech Co. and 18% with Agel Enterprises International Sdn. Bhd. |
As of April 30, 2020, the largest concentrations ofOctober 31, 2018, the Company’s accounts receivable by individual customer was 41%are concentrated 55% with Shen Zhen Ding Shang Networks Technology Co. Ltd. (“Shen Zhen Ding Networks Technology”). Agel Enterprise International Sdn Bhd, and 26% with Fuji Avenue Sdn Bhd.
As of April 30,October 31, 2019, the largest concentration of the Company’s accounts receivable by individual customer was 94% with Agel Enterprise Internationalare concentrated 82% in Malaysia (TOGL Technology Sdn. Bhd. (“Agel”)Bhd) and 18% in United States (Toga Limited).
As of April 30, 2020 and April 30, 2019, the largest concentration ofOctober 31, 2018, the Company’s accounts receivable by country was 91%are concentrated 92% in Malaysia (TOGL Technology)Technology Sdn. Bhd), respectively.7% in United States (Toga Limited) and 1% in Indonesia (PT. Toga International Indonesia).
COVID-19Research and Development Expenses
In March 2020,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 World Health Organization declared the outbreak of coronavirus (“COVID-19”) as a pandemiccontracted work has been performed or milestone results have been achieved. Indirect costs are allocated based on the rapid increase in global exposure. COVID-19 continues to spread throughout the world. The Company is closely monitoring developments and is taking steps to mitigate the potential riskspercentage usage related to the COVID-19 pandemic to the Company, its employees,research and its customers. To protect the Company’s employees while continuing to provide the services needed by its clients, the Company limited customer contact and minimized employee contact with other employees by having its employees work remotely.
On March 19, 2020, a Movement Control Order (”MCO”) was issued by the Malaysian Prime Minister which reduced movement within Malaysia and cancelled all non-essential travel and limited travel from outsiders deemed as non-essential. While the MCO had an original duration of two weeks, it was extended numerous times but eventually the MCO was lifted as of June 9, 2020 with safe-distance and other controlling protocols in place to protect customers and employees.
Our office-based employees located in Malaysia have been working remotely since the middle of March and our office-based employees located in the United States have been working remotely since the middle of March. All of our employees have been able to continue to address customer needs in a timely fashion. Travel remains restricted to limit the risk of our employees coming in contact with COVID-19.
Through April 30, 2020, there has been a noticeable increase in accounts receivable for the Company. It is likely that if the COVID-19 pandemic persists and state stay-at-home orders remain in place, more customers will be unable to keep their bills current. Further, while we have not yet experienced any interruption to our normal materials and supplies process, it is impossible to predict whether COVID-19 will cause future interruptions and delays.
Through April 30, 2020, we have not had any of our employees contract the COVID-19 virus. Should we have a significant number of our employees contract the COVID-19 virus it could have a negative impact on our ability to serve customers in a timely fashion.
The Company has been impacted by the MCO order in regards to TogaGo revenue. With the MCO, travel was restricted and customers were not using the Yippi App for travel and hotel bookings. This resulted in TogaGo revenue decreasing by 90% in the third quarter ended April 30, 2020. However, we expect for revenue to increase now that the MCO has been lifted.development.
Recent Accounting Pronouncements
In November 2018, the FASB issued ASU No. 2018-08 “Collaborative Arrangements“”Collaborative Arrangements” (Topic 808) (“ASU 2018-08”), intended to improve financial reporting around collaborative arrangements and align the current guidance under ASC 808 with ASC 606.606 “Revenue from Contracts with Customers.” The ASU 2018-08 affects all companies that enter into collaborative arrangements. The ASU 2018-08 clarifies when certain transactions between collaborative arrangement participants should be accounted for as revenue under ASCTopic 606 and changes certain presentation requirements for transactions with a collaborative arrangement participants that are not directly related to sales to third parties. ASU 2018-08The 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 ASU 2018-08this standard to have a material effect on its Consolidated Financial Statements. The Company plans to adopt this ASU 2018-08 either on Augustthe effective date of January 1, 2020 (the date of the Company’s fiscal year beginning after December 15, 2019) 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 ASU 2018-08.this ASU.
F-13 |
Table of Contents |
The Company has reviewed and analyzed the above recent accounting pronouncements and notes no material impact on the financial statements as of April 30, 2020.October 31, 2019.
NOTE 3. PROPERTY AND EQUIPMENT
As of October 31, 2019 and July 31, 2019, the balance of property and equipment represented consisted of the following:
|
| October 31, |
|
| July 31, |
| ||
|
| 2019 |
|
| 2019 |
| ||
Building |
| $ | 3,971,435 |
|
| $ | 4,019,563 |
|
Renovation |
|
| 232,419 |
|
|
| 154,120 |
|
Fixtures and Furniture |
|
| 88,703 |
|
|
| 69,558 |
|
Tools and Equipment |
|
| 121,162 |
|
|
| 92,493 |
|
Vehicles |
|
| 162,006 |
|
|
| 163,969 |
|
Computer Equipment |
|
| 28,003 |
|
|
| 26,256 |
|
Total Property and Equipment |
|
| 4,603,728 |
|
|
| 4,525,959 |
|
Accumulated depreciation |
|
| (158,894 | ) |
|
| (104,707 | ) |
Total Property and Equipment, net |
| $ | 4,444,834 |
|
| $ | 4,421,252 |
|
Depreciation expense for the three months ended October 31, 2019 and 2018 was $50,803 and $10,524, respectively.
During the three months ended October 31, 2019 and 2018, the Company acquired property and equipment of $77,769 and $20,566, respectively.
NOTE 4. RELATED PARTY TRANSACTIONS
Revenue and accounts receivable
During the three months ended October 31, 2019 and 2018, the Company recorded revenue of $219,709 and $335,143 from Agel, respectively. As of October 31, 2019 and July 31, 2019, the Company recorded accounts receivable from Agel of $20,000 and $205,210, respectively.
Notes due to related parties
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 a related party, a director of the Company, of $24,126 and $24,126 as of October 31, 2019 and July 31, 2019, respectively. The amount is non-interest bearing, unsecured and due on demand.
Due to related parties
During the three months ended October 31, 2019 and 2018, the Company borrowed a total amount of $52 and $0 from a related party, Toga Capital, and repaid $332 and $42,438, respectively.
During the three months ended October 31, 2019 and 2018, total expenses paid directly by a related party, Toga Capital, on behalf of the Company were $0 and $38,225, respectively.
During the three months ended October 31, 2019 and 2018, the Company received advancement for a total amount of $66,670 and $0, respectively and repaid $4,135 and $0, respectively, from the Chief Executive Officer of the Company. The amount is non-interest bearing, unsecured and due on demand.
During the three months ended October 31, 2019 and 2018, the Company purchased property and equipment of $0 and $20,566 from related parties, Toga Capital, respectively.
As at October 31, 2019 and July 31, 2019, $63,608 and $1,083 is due to related parties. The amount is non-interest bearing, unsecured and due on demand.
Table of Contents |
NOTE 2. PROPERTY AND EQUIPMENT
As of April 30, 2020 and July 31, 2019, property and equipment consisted of the following:
|
| April 30, |
|
| July 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
Building |
| $ | 3,849,238 |
|
| $ | 4,019,563 |
|
Renovation |
|
| 265,237 |
|
|
| 154,120 |
|
Fixtures and Furniture |
|
| 113,749 |
|
|
| 69,558 |
|
Tools and Equipment |
|
| 146,215 |
|
|
| 92,494 |
|
Vehicles |
|
| 147,326 |
|
|
| 163,969 |
|
Computer Equipment |
|
| 52,454 |
|
|
| 26,256 |
|
Total property and equipment |
|
| 4,574,219 |
|
|
| 4,525,960 |
|
Accumulated depreciation |
|
| (264,774 | ) |
|
| (104,707 | ) |
Property and equipment net |
| $ | 4,309,445 |
|
| $ | 4,421,253 |
|
Depreciation expense for the nine months ended April 30, 2020 and 2019 was $323,731 and $41,974, respectively.Related party compensation
During the ninethree months ended April 30, 2020October 31, 2019 and 2019,2018, the Company acquired property and equipment of $247,333 and $198,017, respectively.
NOTE 3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of April 30, 2020 and July 31, 2019, accounts payable and accrued liabilities consisted of the following:
|
| April 30, |
|
| July 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
Trades payable |
| $ | 1,633,475 |
|
| $ | 3,948,695 |
|
Wages and commission accruals |
|
| 1,077,425 |
|
|
| 166,752 |
|
Other accruals |
|
| 3,021,841 |
|
|
| 105,966 |
|
|
| $ | 5,732,741 |
|
| $ | 4,221,413 |
|
NOTE 4. DEFERRED REVENUE
Deferred revenue by geographic segment were as follows:
|
| April 30, |
|
| July 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
Malaysia |
| $ | 5,535,238 |
|
| $ | 1,548,398 |
|
Taiwan |
|
| 67,833 |
|
|
| 142,939 |
|
Indonesia |
|
| - |
|
|
| 90,915 |
|
|
| $ | 5,603,071 |
|
| $ | 1,782,252 |
|
Changes in deferred revenue were as follows:
|
| Nine Months Ended April 30, 2020 |
| |
Balance, beginning of period – July 31, 2019 |
| $ | 1,782,252 |
|
Deferral of revenue |
|
| 8,609,287 |
|
Recognition of deferred revenue |
|
| (4,788,468 | ) |
Balance, end of period – April 30, 2020 |
| $ | 5,603,071 |
|
Deferred revenue is entirely comprised of revenue associated with Yippi in-apps purchases. Please refer to the Revenue Recognition policy set forth in Note 1, Summary of Significant Accounting Policies, for additional information. Deferred revenue meets the performance obligations required to recognize when the end-user of the in-apps purchases utilizes the points included in their in-app purchases.
Revenue allocated to remaining performance obligations, which includes deferred revenue was $5,603,071 as of April 30, 2020. We expect to recognize all of this revenue over the next 12 months.
NOTE 5. RELATED PARTY TRANSACTIONS
Notes Due to Related Parties
The Company had an outstanding notes payable to the Chief Executive Officer of the Company of $24,126 as of July 31, 2019. During the period ended April 30, 2020, the related party forgave this note and the Company recorded this amount to additional paid-in capital.
Due to Related Parties
During the nine months ended April 30, 2020 and 2019, the Company borrowed a total amount of $20,991 and $122,678, respectively from a related party, Toga Capital Sdn. Bhd. (“Toga Capital”), and repaid $1,741 and $72,959, respectively.
During the nine months ended April 30, 2020 and 2019, the Company received advancement of $84,717 and $4,135, respectively, and repaid $84,364 and $1,968, respectively, from the Chief Executive Officer of the Company. The amounts are non-interest bearing, unsecured, and due on demand.
At April 30, 2020 and July 31, 2019, $20,686 and $1,083, respectively, was due to related parties. The amounts are non-interest bearing, unsecured, and due on demand.
Related Party Compensation
During the nine months ended April 30, 2020 and 2019, TOGL Technology paid directorincurred director’s fees of $114,202 and $46,025, respectively, to directors of TOGL Technology.
During the nine months ended April 30, 2020 and 2019, the Company paid director fees of $39,000$10,000 and $0, respectively, to directors of the Company.
During the ninethree months ended April 30, 2020October 31, 2019 and 2019,2018, the Company paid consulting fees of $15,000 and $0, respectively, to a director of the Company. The consulting fee was paid for marketing research services during October, November and December 2019.
During the nine months ended April 30, 2020 and 2019, the Company paidincurred wages of $133,750$45,000 and $0, respectively, to the Company’s Chief Financial Officer.CFO of the Company.
During the ninethree months ended April 30, 2020,October 31, 2019 and 2018, the Company granted stock options exercisable for 6,792 shares of the Company’s common stock to the Chief Financial Officer, valued at $88,059. No stock options were granted in the nine months ended April 30, 2019. On March 25, 2020, the Company redeemed3,662 and 0 stock options to purchase 18,792 shares of the Company’s common stock from the Chief Financial Officer, for an aggregate purchase price of $156,537 (or $8.33 per share). Such redeemed options included the 6,792 options granted to the Chief Financial Officer during the nine months ended April 30, 2020. Please seeDirectors and CFO, valued at $44,470 and $0, respectively (See Note 6, Changes in Equity, below.5).
NOTE 6. CHANGES IN5. 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 October 31, 2019 and July 31, 2019, no preferred shares were issued and outstanding.
Common Stockstock
The Company is authorized to issue 1,000,000,000 shares of common stock at a par value of $0.0001 at October 31, 2019.
During the ninethree months ended April 30, 2020,October 31, 2019, the Company issued 273,35420,000 shares of common stock and cancelled 24,614 shares of common stock, as follows:
|
|
|
| On September 9, 2019, the Company issued 20,000 shares of common stock to | |
• | During the three months ended October 31, 2019, the Company cancelled 24,614 shares of common stock in connection with [l] overissuance of common shares to employees by mistake in June 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, who is a related party, at a price of $0.20 per share. | |
• | 9,078,998 shares of common stock issued for | |
|
|
|
|
|
|
During the nine months ended April 30, 2019, the Company issued 20,245,519 shares of common stock, as follows:
|
| |
|
| |
|
|
On October 29, 2018, a shareholder of the Company canceled 20,000 shares of common stock without consideration for such cancellation because suchcancelation.
As of October 31, 2019 and July 31, 2019, 90,758,279 and 90,762,893 shares of the Company’s common stock were issued in error.and outstanding, respectively.
F-15 |
Table of Contents |
Stock Options
During the ninethree months ended April 30, 2020,October 31, 2019, the Company granted stock3,662 options to purchase up to 6,792 shares of common stock to the Chief Financial Officer,CFO at an exercise price of $0.20 per share, and were valued at the fair value calculated using the Black-Scholes-Merton model. The value of the options was $88,059$44,470 and recorded as stock-basedstock based compensation. The options are subject to a vesting schedule of one-third⅓ of the options vesting every thirty (30) days.
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. During the year ended July 31, 2019, the stock options were fully vested . 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. |
The following assumptions were used to determine the fair value for the options granted using a Black-Scholes-Merton pricing model during the ninethree months ended April 30, 2020:October 31, 2019:
|
| For the nine months ended April 30, 2020 |
|
| For the three months ended October 31, 2019 |
| ||
Fair values |
| $ | 12.30-14.12 |
|
| $ | 12.30 |
|
Exercise price |
| $ | 0.20 |
|
| $ | 0.20 |
|
Expected term at issuance |
| 1year |
|
| 2 years |
| ||
Expected average volatility |
| 89.04-169.92 | % |
| 169.92 | % | ||
Expected dividend yield |
| — |
|
| — |
| ||
Risk-free interest rate |
| 1.56-1.73 | % |
| 1.73 | % |
A summary of the change in stock options outstanding for the ninethree months ended April 30, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
| Average |
| ||||
|
|
|
|
| Weighted |
|
| Weighted |
|
| Remaining |
| ||||
|
|
|
|
| Average |
|
| Average |
|
| Contractual |
| ||||
|
| Options |
|
| Exercise |
|
| Grant Date |
|
| Life |
| ||||
|
| Outstanding |
|
| Price |
|
| Fair Value |
|
| (Years) |
| ||||
Balance – July 31, 2019 |
|
| 12,000 |
|
| $ | 0.30 |
|
| $ | 8.84 |
|
| $ | 1.63 |
|
Options issued |
|
| 6,792 |
|
|
| 0.20 |
|
|
| 12.30 |
|
|
| 1.50 |
|
Options cancellation |
|
| (18,792 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Options exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balance – April 30, 2020 |
|
| - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
During the nine monthsOctober 31, 2019 and year ended April 30, 2020, the Company redeemed stock options to purchase 18,792 shares of the Company’s common stock from the Chief Financial Officer, for an aggregate purchase price of $156,537 (or $8.33 per share). Such redeemed options included the 6,792 options granted to the Chief Financial Officer during the nine months ended April 30, 2020.
NOTE 7. LEASES
We have operating leases primarily for real estate.
As of April 30, 2020, the Company owned ROU assets under operating leases for eight office premises of $182,248 and operating lease liabilities of $182,248.
|
| April 30, 2020 |
| |
Operating lease ROU assets |
| $ | 182,248 |
|
Current portion of operating lease liabilities |
|
| 161,269 |
|
Noncurrent portion of operating lease liabilities |
|
| 20,979 |
|
Total operating lease liabilities |
| $ | 182,248 |
|
Information associated with the measurement of our remaining operating lease obligations as of April 30, 2020July 31, 2019 is as follows:
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Table of Contents |
The following table summarizes the maturity of our operating lease liabilities as of April 30, 2020:
Year Ended July 31 2020 |
| $ | 163,221 |
|
Year Ended July 31 2021 |
|
| 21,024 |
|
Total operating lease payments |
| $ | 184,245 |
|
Less: Imputed interest |
|
| 1,997 |
|
Total operating lease liabilities |
| $ | 182,248 |
|
We had operating lease costs of $151,550 for the nine months ended April 30, 2020, which are included in selling, general and administrative expenses in the statement of operations.
Our leases have remaining lease terms of 0.1 month to 1.3 years, inclusive of renewal or termination options that we are reasonably certain to exercise.
NOTE 8. SEGEMENTED6. SEGMENT DISCLOSURE (RESTATED)
Operating Activities
The following table shows operating activities information by geographic segment for the three and nine months ended April 30, 2020October 31, 2019 and 2019:2018:
Three Months Ended April 30, 2020October 31, 2019
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Vietnam |
|
| Indonesia |
|
| Total |
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Vietnam |
|
| Indonesia |
|
| Total |
| ||||||||||||
Revenue |
| $ | 120,000 |
| $ | 1,714,740 |
| $ | 120,259 |
| $ | - |
| $ | 221,671 |
| $ | 2,176,670 |
|
| $ | 60,000 |
| $ | 975,567 |
| $ | 308,023 |
| $ | - |
| $ | 1,873,440 |
| $ | 3,217,030 |
| ||||||||||
Cost of goods sold |
|
| - |
|
|
| 1,783,830 |
|
|
| 42,187 |
|
|
| - |
|
|
| 124,577 |
|
|
| 1,950,594 |
|
|
| - |
|
|
| 1,680,491 |
|
|
| 40,684 |
|
|
| - |
|
|
| 20,625 |
|
|
| 1,741,800 |
|
Gross profit |
|
| 120,000 |
|
|
| (69,090 | ) |
|
| 78,072 |
|
|
| - |
|
|
| 97,094 |
|
|
| 226,076 |
|
|
| 60,000 |
|
|
| (704,924 | ) |
|
| 267,339 |
|
|
| - |
|
|
| 1,852,215 |
|
|
| 1,475,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Selling, general and administrative expenses |
| 34,721 |
| 250,601 |
| 129,206 |
| 4,236 |
| 252,630 |
| 671,394 |
| |||||||||||||||||||||||||||||||||||
Selling, General and administrative expenses |
| 97,270 |
| 680,817 |
| 539,933 |
| 4,378 |
| 2,403,648 |
| 3,726,046 |
| |||||||||||||||||||||||||||||||||||
Salaries and wages |
| 111,979 |
| 455,400 |
| 13,031 |
| 3,135 |
| 66,485 |
| 650,030 |
|
| 99,470 |
| 674,659 |
| 12,154 |
| 3,135 |
| 50,800 |
| 840,218 |
| ||||||||||||||||||||||
Professional fees |
| 543,938 |
| 21,338 |
| 2,067 |
| 564 |
| 116,031 |
| 683,938 |
|
| 331,558 |
| 34,223 |
| 322 |
| 449 |
| 108,563 |
| 475,115 |
| ||||||||||||||||||||||
Depreciation |
|
| 32,311 |
|
|
| 59,785 |
|
|
| 1,830 |
|
|
| - |
|
|
| 43,542 |
|
|
| 137,468 |
|
|
| 1,256 |
|
|
| 41,576 |
|
|
| 1,777 |
|
|
| - |
|
|
| 6,194 |
|
|
| 50,803 |
|
Total Operating Expenses |
| 722,949 |
| 787,124 |
| 146,134 |
| 7,935 |
| 478,688 |
| 2,142,830 |
|
| 529,554 |
| 1,431,275 |
| 554,186 |
| 7,962 |
| 2,569,205 |
| 5,092,182 |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
LOSS FROM OPERATIONS |
| (602,949 | ) |
| (856,214 | ) |
| (68,062 | ) |
| (7,935 | ) |
| (381,594 | ) |
| (1,916,754 | ) |
| (469,554 | ) |
| (2,136,199 | ) |
| (286,847 | ) |
| (7,962 | ) |
| (716,390 | ) |
| (3,616,952 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
OTHER INCOME (EXPENSE) |
|
| 1,167 |
|
|
| 5,091 |
|
|
| - |
|
|
| 12 |
|
|
| 12,941 |
|
|
| 19,211 |
|
|
| 2,382 |
|
|
| 24,025 |
|
|
| - |
|
|
| 27 |
|
|
| 39,546 |
|
|
| 65,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Net Loss |
| $ | (601,782 | ) |
| $ | (851,123 | ) |
| $ | (68,062 | ) |
| $ | (7,923 | ) |
| $ | (368,653 | ) |
| $ | (1,897,543 | ) |
| $ | (467,172 | ) |
| $ | (2,112,575 | ) |
| $ | (286,847 | ) |
| $ | (7,935 | ) |
| $ | (676,844 | ) |
| $ | (3,551,373 | ) |
During the three months ended April 30, 2020, our Indonesian entities generated revenues of approximately $208,000 from the sale of products through a direct marketing network.
During the three months ended April 30, 2020,October 31, 2019, our Malaysian entityIndonesian entities generated revenue from Yippi in-app purchases of approximately $1.3 million and Yippi advertising revenue of approximately $330,000.
During the three months ended April 30, 2020, our Taiwan branch generated revenues of approximately $120,000 from the sale of products through a direct marketing network.network of approximately $1.9 million.
During the three months ended April 30, 2020, the Company recognized royalty feeOctober 31, 2019, our Malaysian entities generated advertising revenue from Yippi of approximately $120,000 from Agel and Toga Japan Co. Ltd. (“Toga Japan”).$976,000.
During the three months ended April 30, 2020,October 31, 2019, our Taiwan entity generated revenue through the direct marketing network sales of approximately $308,000.
During the three months ended October 31, 2019, our USA parent company recognized management fee revenue of approximately $60,000 from Agel Enterprise International Sdn Bhd.
During the three months ended October 31, 2019, our Malaysian entityentities incurred selling, general and 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 in the amount of $561,893.acquisitions.
During the three months ended April 30, 2020, our Taiwan branch incurred selling, general and administrative expenses primarily related to financial and administrative contracted services, professional fees, salaries and wages of the Company in the amount of $447,530.
During the three months ended April 30, 2020, our Indonesian entities incurred selling, general and administrative expenses primarily related to financial and administrative contracted services, professional fees, salaries and wages of the Company in the amount of $41,159.
During the three months ended April 30, 2020, our U.S. entity incurred selling, general and administrative expenses primarily related to corporate overhead, financial and administrative contracted services, professional fees, salaries and wages of the Company in the amount of $7,048,670.
Three Months Ended April 30, 2019
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Indonesia |
|
| Total |
| |||||
Revenue |
| $ | 60,000 |
|
| $ | 568,721 |
|
| $ | 486,395 |
|
| $ | 1,988,916 |
|
| $ | 3,104,032 |
|
Cost of goods sold |
|
| - |
|
|
| 68,017 |
|
|
| 45,153 |
|
|
| 1,527,931 |
|
|
| 1,641,101 |
|
Gross profit |
|
| 60,000 |
|
|
| 500,704 |
|
|
| 441,242 |
|
|
| 460,985 |
|
|
| 1,462,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
| 35,808 |
|
|
| 55,716 |
|
|
| 332,029 |
|
|
| 8,353 |
|
|
| 431,906 |
|
Salaries and wages |
|
| 6,835,297 |
|
|
| 703,082 |
|
|
| 9,205 |
|
|
| 28,928 |
|
|
| 7,576,512 |
|
Professional fees |
|
| 177,565 |
|
|
| 34,446 |
|
|
| 4,508 |
|
|
| 305 |
|
|
| 216,824 |
|
Depreciation |
|
| - |
|
|
| 12,950 |
|
|
| 1,788 |
|
|
| 3,573 |
|
|
| 18,311 |
|
Total Operating Expenses |
|
| 7,048,670 |
|
|
| 806,194 |
|
|
| 347,530 |
|
|
| 41,159 |
|
|
| 8,243,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS |
|
| (6,988,670 | ) |
|
| (305,490 | ) |
|
| 93,712 |
|
|
| 419,826 |
|
|
| (6,780,622 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
| - |
|
|
| 3,557 |
|
|
| (35 | ) |
|
| 472 |
|
|
| 3,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
| $ | (6,988,670 | ) |
| $ | (301,933 | ) |
| $ | 93,677 |
|
| $ | 420,298 |
|
| $ | (6,776,628 | ) |
Table of Contents |
During the three months ended April 30, 2019, our Indonesian entities generated revenues of approximately $2.0 million from the sale of products through a direct marketing network.
Three Months Ended October 31, 2018
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Indonesia |
|
| Total |
| |||||
Revenue |
| $ | 60,000 |
|
| $ | 451,303 |
|
| $ | 231,450 |
|
| $ | - |
|
| $ | 742,753 |
|
Cost of goods sold |
|
| - |
|
|
| 97,261 |
|
|
| 20,238 |
|
|
| - |
|
|
| 117,499 |
|
Gross profit |
|
| 60,000 |
|
|
| 354,042 |
|
|
| 211,212 |
|
|
| - |
|
|
| 625,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, General and administrative expenses |
|
| 45,057 |
|
|
| 59,027 |
|
|
| 106,220 |
|
|
| 28,002 |
|
|
| 238,306 |
|
Salaries and wages |
|
| - |
|
|
| 218,633 |
|
|
| 168,936 |
|
|
| 12,838 |
|
|
| 400,407 |
|
Professional fees |
|
| 283,590 |
|
|
| 26,140 |
|
|
| 1,418 |
|
|
| 471 |
|
|
| 311,619 |
|
Depreciation |
|
| - |
|
|
| 6,149 |
|
|
| 1,564 |
|
|
| 2,811 |
|
|
| 10,524 |
|
Total Operating Expenses |
|
| 328,647 |
|
|
| 309,949 |
|
|
| 278,138 |
|
|
| 44,122 |
|
|
| 960,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
| (268,647 | ) |
|
| 44,093 |
|
|
| (66,926 | ) |
|
| (44,122 | ) |
|
| (335,602 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 139 |
|
|
| 139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (268,647 | ) |
| $ | 44,093 |
|
| $ | (66,926 | ) |
| $ | (43,983 | ) |
| $ | (335,463 | ) |
During the three months ended April 30, 2019,October 31, 2018, our Malaysian entity recognized managemententities generated advertising revenue of approximately $80,000, information technology fee revenue of approximately $530,000$48,000 and advertisingmanagement fee revenue from Agel Enterprise International Sdn Bhd. of approximately $23,000.$324,000.
During the three months ended April 30, 2019,October 31, 2018, our Taiwan branch officeentity generated revenue through the direct marketing network sales of approximately $486,000 from the sale of products through a direct marketing network.$231,000.
During the three months ended April 30, 2019, the CompanyOctober 31, 2018, our USA parent company recognized royaltymanagement fee revenue of approximately $60,000 from Agel.Agel Enterprise International Sdn Bhd.
During the three months ended April 30, 2019,October 31, 2018, our Malaysian entity and USA parent company incurred selling, general and 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.
Nine Months Ended April 30, 2020The following table shows assets information by geographic segment at October 31, 2019:
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Vietnam |
|
| Indonesia |
|
| Total |
| ||||||
Revenue |
| $ | 360,000 |
|
| $ | 4,517,910 |
|
| $ | 743,777 |
|
| $ | - |
|
| $ | 3,097,838 |
|
| $ | 8,719,525 |
|
Cost of goods sold |
|
|
|
|
|
| 4,690,785 |
|
|
| 113,356 |
|
|
| - |
|
|
| 1,531,637 |
|
|
| 6,335,778 |
|
Gross profit |
|
| 360,000 |
|
|
| (172,875 | ) |
|
| 630,421 |
|
|
| - |
|
|
| 1,566,201 |
|
|
| 2,383,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
| 202,342 |
|
|
| 1,488,766 |
|
|
| 935,999 |
|
|
| 8,948 |
|
|
| 3,194,108 |
|
|
| 5,830,163 |
|
Salaries and wages |
|
| 3,604,081 |
|
|
| 1,794,378 |
|
|
| 41,509 |
|
|
| 9,405 |
|
|
| 302,570 |
|
|
| 5,751,943 |
|
Professional fees |
|
| 1,148,049 |
|
|
| 77,819 |
|
|
| 5,686 |
|
|
| 1,324 |
|
|
| 384,648 |
|
|
| 1,617,526 |
|
Depreciation |
|
| 65,103 |
|
|
| 151,472 |
|
|
| 11,289 |
|
|
| 3,965 |
|
|
| 91,902 |
|
|
| 323,731 |
|
Total Operating Expenses |
|
| 5,019,575 |
|
|
| 3,512,435 |
|
|
| 994,483 |
|
|
| 23,642 |
|
|
| 3,973,228 |
|
|
| 13,523,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
| (4,659,575 | ) |
|
| (3,685,310 | ) |
|
| (364,062 | ) |
|
| (23,642 | ) |
|
| (2,407,027 | ) |
|
| (11,139,616 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
| 5,244 |
|
|
| 30,745 |
|
|
| 260 |
|
|
| 17 |
|
|
| 128,438 |
|
|
| 164,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (4,654,331 | ) |
| $ | (3,654,565 | ) |
| $ | (363,802 | ) |
| $ | (23,625 | ) |
| $ | (2,278,589 | ) |
| $ | (10,974,912 | ) |
As of October 31, 2019 |
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Vietnam |
|
| Indonesia |
|
| Total |
| ||||||
Current assets |
| $ | 9,330,627 |
|
| $ | 752,375 |
|
| $ | 723,562 |
|
| $ | 31,776 |
|
| $ | 6,394,356 |
|
| $ | 17,232,696 |
|
Operating lease right-of-use assets |
|
| 92,565 |
|
|
| 22,290 |
|
|
| 13,888 |
|
|
| 9,295 |
|
|
| 195,760 |
|
|
| 333,798 |
|
Property and equipment |
|
| 30,284 |
|
|
| 4,294,557 |
|
|
| 16,840 |
|
|
| - |
|
|
| 103,153 |
|
|
| 4,444,834 |
|
Intangible assets |
|
| - |
|
|
| 11,718 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 11,718 |
|
Total assets |
| $ | 9,453,476 |
|
| $ | 5,080,940 |
|
| $ | 754,290 |
|
| $ | 41,071 |
|
| $ | 6,693,269 |
|
| $ | 22,023,046 |
|
During the nine months ended April 30, 2020, our Indonesian entities generated revenues of approximately $2.9 million from the sale of products through a direct marketing network and revenues of approximately $181,000 from Yippi in-app purchases.
During the nine months ended April 30, 2020,As of October 31, 2019, our USA parent company has current assets of $9.3 million, which primarily includes cash and cash equivalents of $9.2 million.
As of October 31, 2019, our Malaysian entities have current assets of $752,000, which primarily includes cash and cash equivalents of $109,000, prepaid expenses of $155,000 and accounts receivable of $481,000.
As of October 31, 2019, our Malaysian entities have property and equipment of $4.3 million, including land and building of $3.9 million, automobile of $140,000, leasehold improvement of $104,000 and furniture and equipment of $110,000
As of October 31, 2019, our Taiwan entity generated revenuehas current assets of approximately $3.2 million from Yippi in-app purchases, revenues$724,000, which primarily includes cash and cash equivalent of approximately $855,000 from the TogaGo platform,$521,000 and advertising revenueinventory of approximately $475,000.$154,000.
Table of Contents |
During the nine months ended April 30, 2020, our Taiwan branch generated revenues of approximately $745,000 from the sale of products through a direct marketing network.
During the nine months ended April 30, 2020, the Company recognized royalty fee revenueAs of approximately $360,000 from Agel and Toga Japan.
During the nine months ended April 30, 2020, our Malaysian and Indonesian entities incurred selling, general and administrative expenses primarily related to maintenance of applications, corporate overhead, financial and administrative contracted services, professional fees, salaries and wages of the Company, and costs incurred for potential acquisitions.
Nine Months Ended April 30, 2019
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Indonesia |
|
| Total |
| |||||
Revenue |
| $ | 180,000 |
|
| $ | 1,352,578 |
|
| $ | 1,181,674 |
|
| $ | 1,988,916 |
|
| $ | 4,703,168 |
|
Cost of goods sold |
|
| - |
|
|
| 244,952 |
|
|
| 112,441 |
|
|
| 1,527,931 |
|
|
| 1,885,324 |
|
Gross profit |
|
| 180,000 |
|
|
| 1,107,626 |
|
|
| 1,069,233 |
|
|
| 460,985 |
|
|
| 2,817,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, General and administrative expenses |
|
| 101,422 |
|
|
| 481,812 |
|
|
| 1,111,785 |
|
|
| 30,760 |
|
|
| 1,725,779 |
|
Salaries and wages |
|
| 6,835,297 |
|
|
| 1,296,518 |
|
|
| 35,106 |
|
|
| 57,755 |
|
|
| 8,224,676 |
|
Professional fees |
|
| 708,836 |
|
|
| 108,673 |
|
|
| 8,748 |
|
|
| 20,208 |
|
|
| 846,465 |
|
Depreciation |
|
| - |
|
|
| 27,617 |
|
|
| 5,140 |
|
|
| 9,217 |
|
|
| 41,974 |
|
Total Operating Expenses |
|
| 7,645,555 |
|
|
| 1,914,619 |
|
|
| 1,160,779 |
|
|
| 117,940 |
|
|
| 10,838,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
| (7,465,555 | ) |
|
| (806,993 | ) |
|
| (91,546 | ) |
|
| 343,045 |
|
|
| (8,021,050 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
| - |
|
|
| 5,787 |
|
|
| 119 |
|
|
| 741 |
|
|
| 6,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (7,465,555 | ) |
| $ | (801,206 | ) |
| $ | (91,427 | ) |
| $ | 343,786 |
|
| $ | (8,014,402 | ) |
During the nine months ended April 30,October 31, 2019, our Indonesian entities generated revenueshave current assets of approximately $2.0$6.4 million, from the salewhich primarily includes cash and cash equivalents of products through a direct marketing network.$2.7 million, inventory of $806,000 and prepaid expenses of $2.6 million.
During the nine months ended April 30,As of October 31, 2019, our Indonesian entities have operating lease right-of-use assets of $196,000.
The following table shows assets information by geographic segment at July 31, 2019:
Year Ended July 31, 2019 |
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Vietnam |
|
| Indonesia |
|
| Total |
| ||||||
Current assets |
| $ | 9,618,099 |
|
| $ | 1,874,078 |
|
| $ | 1,016,412 |
|
| $ | 35,531 |
|
| $ | 6,577,335 |
|
| $ | 19,121,455 |
|
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 |
|
| $ | 6,623,188 |
|
| $ | 23,554,425 |
|
As of July 31, 2019, our USA parent company has current assets of $9.6 million, which primarily includes cash and cash equivalents of $9.5 million.
As of July 31, 2019, our Malaysian entity recognized management fee revenueentities have current assets of $1.1$1.9 million, which primarily includes cash and advertising revenuecash equivalents of approximately $168,000.$1.2 million, prepaid expenses of $222,000 and accounts receivable of $194,000.
During the nine months ended April 30,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.
As of July 31, 2019, our Taiwan branch generated revenueentity has current assets of approximately $1.2$1.0 million, from the salewhich primarily includes cash and cash equivalent of products through a direct marketing network.$820,000 and inventory of $140,000.
During the nine months ended April 30,As of July 31, 2019, our Indonesian entities have current assets of $6.6 million, which primarily includes cash and cash equivalents of $2.8 million, inventory of $507,000 and prepaid expenses of $3.0 million.
NOTE 7. LEASES
As of October 31, 2019, the Company recognized royalty fee revenueowns right-of-use assets under operating leases for eight office premises of approximately $180,000 from Agel.$333,798 and operating lease liabilities of $333,798.
|
| October 31, 2019 |
| |
Office Lease |
| $ | 333,798 |
|
Less: accumulated amortization |
|
| - |
|
Right-of-use, net |
| $ | 333,798 |
|
|
| October 31, 2019 |
| |
Office Lease |
| $ | 333,798 |
|
Less: current portion |
|
| (111,503 | ) |
Long term portion |
| $ | 222,295 |
|
Table of Contents |
During the nine months ended April 30, 2019, our Malaysian entity incurred selling, general and administrative expenses primarily related to maintenance of applications, corporate overhead, financial and administrative contracted services, professional fees, salaries and wages the Company, and costs incurred for potential acquisitions.
|
|
|
|
|
| As of Oct 31, 2019 |
| |||||||||
|
|
|
|
|
| Right-of-use |
|
| Lease |
| ||||||
Office Premises |
| Location |
| Term |
| Monthly Rent |
|
| Assets |
|
| Liability |
| |||
TOGA LTD. |
| USA |
| Sep 1 2019 - Aug 31 2020 |
| $ | 9,383 |
|
| $ | 92,565 |
|
| $ | 92,565 |
|
TOGL TECHNOLOGY SDN BHD |
| Malaysia |
| Aug 1 2018 - Jul 31 2020 |
| $ | 2,503 |
|
| $ | 22,291 |
|
| $ | 22,291 |
|
TOGL TAIWAN BRANCH |
| Taiwan |
| Jun 10 2018- Jun 9 2020 |
| $ | 2,030 |
|
| $ | 13,888 |
|
| $ | 13,888 |
|
TOGA VIETNAM |
| Vietnam |
| May 15 2019- May 31 2020 |
| $ | 1,337 |
|
| $ | 9,295 |
|
| $ | 9,295 |
|
PT TOGL TECHNOLOGY INDONESIA -Menara Mandiri (Cohive) Big room 47 |
| Indonesia |
| Sept 16 2019 - Dec 15 2019 |
| $ | 861 |
|
| $ | 861 |
|
| $ | 861 |
|
PT TOGL TECHNOLOGY INDONESIA -Menara Mandiri Small room 86 |
| Indonesia |
| Sept 9 2019- Dec 8 2019 |
| $ | 373 |
|
| $ | 373 |
|
| $ | 373 |
|
PT TOGA INTERNATIONAL INDONESIA-office 1 (Plaza Asia) |
| Indonesia |
| Feb 1 2019 - Jan 31 2021 |
| $ | 3,413 |
|
| $ | 50,441 |
|
| $ | 50,441 |
|
PT TOGA INTERNATIONAL INDONESIA-new office 2 (Menara Sudirman) |
| Indonesia |
| Aug 1 2019- July 31 2021 |
| $ | 7,008 |
|
| $ | 144,085 |
|
| $ | 144,085 |
|
|
|
|
|
|
|
|
|
|
| $ | 333,798 |
|
| $ | 333,798 |
|
Asset Information
The following table shows asset information by geographic segment at April 30, 2020:
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Vietnam |
|
| Indonesia |
|
| Total |
| ||||||
Current assets |
| $ | 8,601,593 |
|
| $ | 2,353,089 |
|
| $ | 445,110 |
|
| $ | 27,203 |
|
| $ | 2,730,420 |
|
| $ | 14,157,415 |
|
Operating lease right-of-use assets |
|
| 37,362 |
|
|
| 7,489 |
|
|
| 2,030 |
|
|
| 1,337 |
|
|
| 134,030 |
|
|
| 182,248 |
|
Property and equipment, net |
|
| 33,402 |
|
|
| 4,093,785 |
|
|
| 13,539 |
|
|
| - |
|
|
| 168,719 |
|
|
| 4,309,445 |
|
Intangible assets - goodwill |
|
| - |
|
|
| 11,718 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 11,718 |
|
Total assets |
| $ | 8,672,357 |
|
| $ | 6,466,081 |
|
| $ | 460,679 |
|
| $ | 28,540 |
|
| $ | 3,033,169 |
|
| $ | 18,660,826 |
|
As of April 30, 2020, the Company had current assets of $8.6 million, which primarily included cash and cash equivalents of $8.4 million.
As of April 30, 2020, our Malaysian entity had current assets of $2.4 million, which primarily included cash and cash equivalents of $1.5 million, prepaid expenses and other current assets of $310,000, and accounts receivable of $575,000.
As of April 30, 2020, our Malaysian entity had property and equipment of $4.1 million, which included land and a building of $3.8 million, automobiles of $111,000, renovation costs of $88,000, and tools and equipment of $87,000.
As of April 30, 2020, our Taiwan branch had current assets of $445,000, which primarily included cash and cash equivalents of $224,000, and inventory of $200,000.
As of April 30, 2020, our Indonesian entities had current assets of $2.7 million, which primarily included cash and cash equivalents of $1.1 million, inventory of $679,000, and prepaid expenses and other current assets of $886,000.
As of April 30, 2020, our Indonesian entities had property and equipment of $169,000, which included renovation costs of $75,000.
As of April 30, 2020, our Indonesian entities had operating lease right-of-use assets of $134,000.
NOTE 9. SUBSEQUENT EVENTS
Acquisition of Eostre Sdn. Bhd., a Malaysian corporation8. COMMITMENTS AND CONTINGENCIES (RESTATED)
On May 31, 2020, the CompanyJuly 29, 2019, TOGL Technology entered into two StockSale and Purchase Agreements (the “Stock Purchase“Second Mammoth Agreements”) with Toh Kok SoonMammoth, for the purchase of additional real estate located in the Empire Damansara. The Second Mammoth Agreements relate to the acquisition of an additional 11,614 square feet of space in the Empire Damansara. This additional space is located on the Level Basement 1 and Level Basement 3 of the building. Pursuant to the Second Mammoth Agreements, we entered into a Subscription Agreement with Mammoth dated July 29, 2019 for the purchase of an aggregate of 118,174 shares of our Common Stock for an aggregate purchase price of approximately $1,418,087, valued at $12.00 per share, which was the closing price of the shares on July 29, 2019 as reported by the OTC Markets Group Inc.’s (“Toh”OTCM”), Pink Open Market (“OTC Pink”). Mammoth agreed to pay the purchase price in the form of legal title to those certain portions of real estate set forth in the Mammoth Agreements. Legal title has not been passed to us and no shares have been issued pursuant to the Second Mammoth Agreements. We are still awaiting the bank serving as the bridging financier to disclaim its interest in such property in favor of TOGL Technology.
NOTE 9 - RESTATEMENT OF FINANCIAL STATEMENTS
The Company’s financial statements as of October 31, 2019, contained the following errors: (i) understatement of revenue of $471,044 and general and administrative expense of $860,637 and overstatement of cost of goods sold of $666,562; and (ii) understatement of prepaid commission of $2,353,924 and understatement of deferred revenue of $2,488,649.
Certain income statement items have been reclassified to conform to the 2020 fiscal year end presentation. These reclassifications had no impact on reported operating and net loss.
The effects of the adjustments on the Company’s President, Chief Executive Officerpreviously issued financial statements as of October 31, 2019 and Director, Lim Jun Hao (“Lim”), a former board member and current shareholder, andfor the two shareholders of Eostre Sdn Bhd, a Malaysia corporation (“Eostre”), pursuant to which the Company will, subject to the terms and conditions of each Stock Purchase Agreement and other related agreements (“Transaction Documents”), acquire 100% of the equity of Eostre (comprised of 5,000,000 ordinary shares of stock, par value of RM 1.00 per share) (the “Acquisition”) for MYR 5 Million (approximately USD $1,250,000) (the “Purchase Price”). The Acquisition is subject to certain approvals by the relevant governmental authorities in Malaysia, which approvalsthree months ended October 31, 2019 are still being obtained by the Company.summarized as follows:
|
| Originally |
|
|
|
|
| Restatement |
|
| As |
| ||||
ASSETS |
| Reported |
|
| Reclassification |
|
| Adjustment |
|
| Restated |
| ||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Prepaid expense and other current assets |
| $ | 890,430 |
|
|
| - |
|
| $ | 2,353,924 |
|
| $ | 3,244,354 |
|
Total Current Assets |
|
| 14,878,772 |
|
|
| - |
|
|
| 2,353,924 |
|
|
| 17,232,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 19,669,122 |
|
|
| - |
|
| $ | 2,353,924 |
|
| $ | 22,023,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
| $ | 2,787,099 |
|
|
| - |
|
| $ | 2,488,649 |
|
| $ | 5,275,748 |
|
Income tax payable |
|
| 93,524 |
|
|
| (8,471 | ) |
|
| - |
|
|
| 85,053 |
|
Total Current Liabilities |
|
| 8,354,849 |
|
|
| (8,471 | ) |
|
| 2,488,649 |
|
|
| 10,835,027 |
|
Deferred tax liabilities |
|
| - |
|
|
| 8,471 |
|
|
| - |
|
|
| 8,471 |
|
Total Liabilities |
|
| 8,577,144 |
|
|
| (8,471 | ) |
|
| 2,488,649 |
|
|
| 11,065,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit |
|
| (28,037,066 | ) |
|
| - |
|
|
| (134,725 | ) |
|
| (28,171,791 | ) |
Total Stockholders’ equity of Toga Ltd, |
|
| 11,035,233 |
|
|
| - |
|
|
| (134,725 | ) |
|
| 10,900,508 |
|
Total Stockholders’ equity |
|
| 11,091,978 |
|
|
| - |
|
|
| (134,725 | ) |
|
| 10,957,253 |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 19,669,122 |
|
|
| - |
|
| $ | 2,353,924 |
|
| $ | 22,023,046 |
|
Eostre was incorporated in Malaysia on May 29, 2019. Its principal place of business is Selangor, Malaysia. At the time of the Acquisition, Eostre was a shell entity with no current business or operations. Its sole asset was a direct selling license (the “License”) to operate a business in the “direct sales” space in Malaysia. Subject to the “Direct Sales and Anti-Pyramid Scheme Act 1933,” this License is a pre-requisite to operating a company in the direct sales space in Malaysia. The expiration date of the License is November 21, 2021; however, the Company anticipates that it will renew the License at such time.
Table of Contents |
The Acquisition is expected to be completed in two phases to meet certain regulations under Malaysian law. In the first phase, (i) the Company will acquire 20% of Eostre, consisting of 1,000,000 ordinary shares of stock; (ii) Toh and Lim will acquire 20% (1,000,000 ordinary shares) and 25% (1,250,000 ordinary shares) of Eostre, respectively; and (iii) a current owner of Eostre will acquire the balance of 1,350,000 shares, which, combined with his current ownership of 400,000 ordinary shares, will result in his owning 35% (1,750,000 ordinary shares) of Eostre. Toh, Lim, and the current owner of Eostre will be referred to herein as the “Individual Purchasers.”
Three Months Ended October 31, 2019 |
| Originally |
|
|
|
|
| Restatement |
|
| As |
| ||||
|
| Reported |
|
| Reclassification |
|
| Adjustment |
|
| Restated |
| ||||
Revenue |
| $ | 2,745,986 |
|
|
| - |
|
| $ | 471,044 |
|
| $ | 3,217,030 |
|
Cost of goods sold |
|
| 2,408,362 |
|
|
| - |
|
|
| (666,562 | ) |
|
| 1,741,800 |
|
Gross profit |
|
| 337,624 |
|
|
| - |
|
|
| 1,137,606 |
|
|
| 1,475,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
| 4,180,742 |
|
|
| (1,315,333 | ) |
|
| 860,637 |
|
|
| 3,726,046 |
|
Salaries and wages |
|
| - |
|
|
| 840,218 |
|
|
| - |
|
|
| 840,218 |
|
Professional fees |
|
| - |
|
|
| 475,115 |
|
|
| - |
|
|
| 475,115 |
|
Total Operating Expenses |
|
| 4,231,545 |
|
|
| - |
|
|
| 860,637 |
|
|
| 5,092,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
| (3,893,921 | ) |
|
| - |
|
|
| 276,969 |
|
|
| (3,616,952 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before Income Taxes |
|
| (3,827,941 | ) |
|
| - |
|
|
| 276,969 |
|
|
| (3,550,972 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
| $ | (3,828,342 | ) |
|
| - |
|
| $ | 276,969 |
|
| $ | (3,551,373 | ) |
Net loss attributable to non-controlling interest |
|
| (1,623 | ) |
|
| - |
|
|
| - |
|
|
| (1,623 | ) |
Net loss attributable to Toga ltd. |
| $ | (3,826,719 | ) |
|
| - |
|
| $ | 276,969 |
|
| $ | (3,549,750 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED NET LOSS PER COMMON SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
|
| 90,759,165 |
|
|
| - |
|
|
| - |
|
|
| 90,759,165 |
|
NET LOSS PER COMMON SHARE |
| $ | (0.04 | ) |
| $ | - |
|
| $ | 0.00 |
|
| $ | (0.04 | ) |
The Company will deposit the Purchase Price directly into the bank account of Eostre, which will be controlled by the Company or its designees subsequent to the closing date of the first phase. Pursuant to the Stock Purchase Agreements, Toh, Lim and the two original owners of Eostre are not entitled to receive any profit in connection. The Individual Purchasers will execute demand notes in favor of the Company for their respective portions of the Purchase Price. Such demand notes will bear interest at a rate of 4% per annum. In addition, the Individual Purchasers will each execute a security and pledge agreement in favor of the Company pledging their shares in Eostre as collateral, until such time as the second phase is completed. The Individual Purchasers will also grant irrevocable proxies to the Company to vote their shares in Eostre until such time as the second phase of the Acquisition is completed.
|
| Originally |
|
|
|
| Restatement |
|
| As |
| |||
|
| Reported |
|
| Reclassification |
| Adjustment |
|
| Restated |
| |||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
| |||
Net loss |
| $ | (3,828,342 | ) |
|
|
| $ | 276,969 |
|
| $ | (3,551,373 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| 309,219 |
|
|
|
|
| 194,075 |
|
|
| 503,294 |
|
Deferred revenue |
|
| 1,004,847 |
|
|
|
|
| (471,044 | ) |
|
| 533,803 |
|
Net cash used in operating activities |
| $ | (1,962,207 | ) |
|
|
| $ | - |
|
| $ | (1,962,207 | ) |
In the second phase of the Acquisition, the promissory notes issued by the Individual Purchasers will be cancelled and deemed paid in full, and the remaining 80% of the equity in Eostre will be transferred to the Company. The second phase of the Acquisition is expected to close as soon as practicable after the six-month anniversary of the signing date of the Stock Purchase Agreements, based on the expected timing required to obtain the necessary approvals from the Malaysian Ministry of Trade.
The Stock Purchase Agreements contain representations and warranties made by and to the parties thereto as of specific dates. The statements embodied in those representations and warranties were made for the purpose of allocating risk between the parties rather than establishing matters as facts, and are subject to qualifications and limitations agreed upon by the parties in connection with negotiating the terms of the Stock Purchase Agreements. In addition, certain representations and warranties were made as of a specified date and may be subject to a contractual standard of materiality different from those generally applicable to investors.
As of June 12, 2020, the purchase price has not been deposited into the bank account of Eostre, and the shares have yet to be issued.
Termination of Agel and Toga Japan License AgreementsNOTE 10. SUBSEQUENT EVENTS
On April 1, 2018, and as subsequently amended on August 1, 2019, the Company entered into a Trademark License Agreement with Agel (the “Agel License Agreement”) to allow Agel to use the “Yippi” and “Eostre” trademarks for marketing purposes. As set forth in the Agel License Agreement, the Company granted Agel a non-exclusive, non-sublicensable, non-transferable license to reproduce and display the trademarks for certain promotional activities, merchandise, and events. As consideration for the license, Agel paid the Company a monthly fee in the amount of $20,000 USD.
On April 1, 2019, and as subsequently amended on August 1, 2019, the Company entered into a Trademark License Agreement with Toga Japan (the “Toga Japan License Agreement” and, together with the Agel License Agreement, the “License Agreements”) to allow Toga Japan to use all the trademarks associated with the Yippi App and the “Eostre” trademark for marketing purposes. As set forth in the Toga Japan License Agreement, the Company granted Toga Japan a non-exclusive, non-sublicensable, non-transferable license to reproduce and display the trademarks for certain promotional merchandise and events. As consideration for the license, Toga Japan paid the Company a monthly fee in the amount of $20,000 USD.
Due to the COVID-19 pandemic and subsequent lockdown, Agel and Toga Japan have advised the Company that they have been unable to sell the Company’s Eostre line of products since February 2020. On or about May 27, 2020, Agel and Toga Japan formally requested the termination of their respective License Agreements with the Company. The Company subsequently terminated the License Agreements effective May 31, 2020. Going forward, independent agents in Malaysia and Japan will be able to purchase Eostre products directly from Eostre or the Company, as applicable.
Entry into Subtle Collaboration Agreement
On June 1, 2020, the Company entered into a Collaboration Agreement (the “Collaboration Agreement”) with Subtle Energy Sciences, LLC, an Indiana Limited Liability Company (“Subtle”), for a period of two (2) years, which grants the Company the exclusive right in Asia and certain parts of the Middle East to market and sell Subtle’s products on Toga Limited’s websites and mobile applications. The Company will pay Subtle a monthly fee of the greater of 1% of gross sales of Subtle’s products or sixteen thousand dollars ($16,000), per month, and the parties to the Collaboration Agreement will revisit this financial arrangement six (6) months after June 1, 2020.
The Company has evaluated subsequentSubsequent events from April 30, 2020are disclosed through the date these financial statements were originally issued and determined there are no additional events requiring disclosure.on December 19, 2019.
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.
Table of Contents |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q10-Q/A (this “Quarterly Report”). The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Our unaudited consolidated financial statements are stated in United States Dollars and are prepared in accordance with GAAP.
Forward-Looking Statement
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and is subject to the “safe harbor” created by those sections. Any statements that are not statements of historical fact should be considered to be forward-looking statements. Words such as “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seek,” “should,” “targets,” “will,” “would,” and similar expressions or variations or negatives of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Quarterly Report. Additionally, forward-looking statements include, but are not limited to:
| our plans to develop and market new products, enhancements or technologies and the timing of these development and marketing plans; | |
| our estimates regarding our capital requirements and our needs for additional financing; | |
| our estimates of our expenses, future revenues and profitability; | |
| our estimates of the size of the markets for our products and services; | |
| our expectations related to the rate and degree of market acceptance of our products; and | |
| our estimates of the success of other competing technologies that may become available. |
Although forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known and understood by us. Consequently, forward-looking statements involve inherent risks and uncertainties and actual financial results and outcomes may differ materially and adversely from the results and outcomes discussed in or anticipated by the forward-looking statements. A number of important factors could cause actual financial results to differ materially and adversely from those in the forward-looking statements. We urge you to consider the risks and uncertainties discussed elsewhere in this Quarterly Report and in the other documents filed by us with the SEC in evaluating our forward-looking statements. We have no plans, and undertake no obligation, to revise or update our forward-looking statements to reflect any event or circumstance that may arise after the date of this report. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made.
In this document, the words “we,” “our,” “ours,” “us,” “Toga Limited,” and “the Company” refer only to Toga Limited, and its consolidated subsidiaries and not any other person or entity.
Overview
The Company wasWe were incorporated inon October 23, 2003 pursuant to the laws of the State of Delaware on October 23, 2003, under the name Fashionfreakz International Inc. On December 2, 2005, the Company, which we later changed its name to Blink Couture, Inc. Until March 4,From 2003 until 2008, the Company’sour principal business was the online retail marketing of trendy clothing and accessories produced by independent designers.
Indesigners, with headquarters based in Canada. From 2008 until 2017, the Company’s business plan consisted of exploring potential targets for a business combination. On July 22, 2016, the Companywe changed itsour name from “Blink Couture, Inc.”, to “Toga Limited.” The Company effected this name change by formingIn July 2018, we changed our state of incorporation to the State of Nevada.
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Subsidiaries
InSeptember 2017, we formed TOGL Technology Sdn. Bhd. (“TOGL Technology”), a wholly-owned subsidiary located in the State of Delaware on July 21, 2016, with the name Toga Limited. This subsidiary never had any operations, business, or assets and was formed purely for the purpose of effecting the Company’s name change pursuant to Delaware General Corporation Law Title 8, Section 251(f). On July 21, 2016, the Company entered into an Agreement and Plan of Merger with the subsidiary, pursuant to which the Company was intended to merge with the subsidiary. This merger was consummated on July 22, 2016 upon the Company’s filing ofMalaysia. In May 2018, TOGL Technology opened a Certificate of Merger with the Secretary of State of the State of Delaware and as a result the separate existence of the subsidiary ceased, and the name of the Company became “Toga Limited.”
The name change to Toga Limited became effectivebranch office in the market on December 16, 2016, following approval by the Financial Industry Regulatory Authority, Inc. (“FINRA”), and in conjunction with the name change, the quotation symbol for the Company’s common stock, $0.0001 per share (“Common Stock”), was changed to “TOGL.”
Taiwan. The Company incorporated a wholly-owned subsidiary, TOGL Technologysuspended operations of its Taiwan branch in Malaysia on September 26, 2017.July 2020 due to the novel coronavirus (“COVID-19”). TOGL Technology offers technology and professional services to facilitate the use of technology by enterprises and end users. These services include software development, integration, maintenance, mobile services, and web applications. TOGL Technology also provides development of, and upgrades to, our mobile application, the Yippi App.
The Company incorporated a subsidiary,In November 2017, we formed PT. Toga International Indonesia (“PT Toga Indonesia”), a majority-owned subsidiary located in Indonesia on November 23, 2017. The Company ownsIndonesia. We own a 95% interest in PT Toga Indonesia. The remaining portion is owned by three individuals who are employed by our subsidiaries. PT Toga Indonesia in partnership with an Indonesian citizen owning a 1.5% interest, a Malaysian citizen owning a 2% interest, and a Malaysian citizen owning a 1.5% interest. Its main business activities are selling ofmainly sells health-related and facial products via retail stores or through direct selling independent sales agents that sell our “Eostre” branded products at exhibitions and healthy introduction seminars.
In 2017, the Company commenced development of a social media app for mobile devices called “Yippi,” or the “Yippi App.” The Company commenced development with the hiring of a Chief Technology Officer and development team.
On July 10, 2018, we changed our state of incorporation from the State of Delaware to the State of Nevada (the “Reincorporation”) due to the annual cost of incorporation in Delaware. The Reincorporation was accomplished by filing Articles of Incorporation and Articles of Domestication with the Secretary of State of the State of Nevada, as a well as a Certificate of Conversion with the Secretary of State of the State of Delaware.
On May 28, 2018, the Company’s wholly-owned subsidiary,January 2019, TOGL Technology formed a branch office in Taiwan. This office was formed for the purpose of selling health-related products via retail stores or through direct selling agents that sell our products at exhibitions and health introduction seminars in Taiwan.
On January 11, 2019, the Company’s wholly-owned subsidiary, TOGL Technology, formed a subsidiaryToga Vietnam Company Limited (“Toga Vietnam”), located in Vietnam, named Toga Vietnam. Toga Vietnam was formed for the purpose of providingprovides customer services support for Yippi users located in Vietnam.
OnIn May 1, 2019, TOGL Technology entered into a Yipps Agreement with Agel for the purchase and distribution of Yipps, points that can be used by the Yippi App users located in Malaysia.
On May 1, 2019, Toga Limited entered into a Yipps Agreement with Toga Japan, an entity unrelated to Toga Limited and its subsidiaries and branch office, for the purchase and distribution of Yipps to the Yippi App users located in Japan.
On May 24, 2019, the Company’s wholly-owned subsidiary TOGL Technology formed a majority-owned subsidiary, in Indonesia, named PT TOGL Technology Indonesia (“PT TOGL Indonesia”), located in Indonesia. TOGL Technology owns a 67% interest in PT TOGL Technology Indonesia in partnership with PT. Aviva Tata Karya, an Indonesian entity which owns the remaining 33% interest.Indonesia. PT TOGL Technology Indonesia provides technology and professional services to facilitate the use of technology by enterprises and end users. These services include software development, integration, maintenance, mobile services, and web applications.
OnIn June 24, 2019, TOGL Technology acquired 100% of the issued and outstanding shares of WGS Discovery Tours &and Travel (M) Sdn. Bhd., a Malaysian based company.company (“WGS”). WGS manages our travel, hotel, and flight feature (“TogaGo”) offered through the Yippi App.
On April 1, 2018, and as subsequently amended on August 1,Subsidiaries formed after October 31, 2019 the Company entered into a License Agreement to allow Agel to use the “Yippi” and “Eostre” trademarks for marketing purposes. As set forth in the Agel License Agreement, the Company granted Agel a non-exclusive, non-sublicensable, non-transferable license to reproduce and display the trademarks for certain promotional activities, merchandise, and events. As consideration for the license, Agel paid the Company a monthly fee in the amount of $20,000 USD.
On April 1, 2019, and as subsequently amended on August 1, 2019, the Company entered into a License Agreement and, together with the Agel License Agreement, the “License Agreements”) to allow Toga Japan to use all the trademarks associated with the Yippi App and the “Eostre” trademark for marketing purposes. As set forth in the Toga Japan License Agreement, the Company granted Toga Japan a non-exclusive, non-sublicensable, non-transferable license to reproduce and display the trademarks for certain promotional merchandise and events. As consideration for the license, Toga Japan paid the Company a monthly fee in the amount of $20,000 USD.
Due to the COVID-19 pandemic and subsequent lockdown, Agel and Toga Japan have advised the Company that they have been unable to sell the Company’s Eostre line of products since February 2020. On or about May 27,In June 2020, Agel and Toga Japan formally requested the termination of their respective License Agreements with the Company. The Company subsequently terminated the License Agreements effective May 31, 2020. Going forward, independent agents in Malaysia and Japan will be able to purchase Eostre products directly from Eostre or the Company, as applicable.
On May 31, 2020, the Company entered into the Stock Purchase Agreement withMichael Toh the Company’s President,Kok Soon (“Mr. Toh”), our Chief Executive Officer and Director,Chairman, Roy Lim Jun Hao (“Mr. Lim”), TOGL Technology’s Deputy Executive Officer, and we collectively acquired 65% of the issued and outstanding shares of Eostre Bhd., a former board memberMalaysia corporation (“Eostre Bhd.”). We intend to acquire the remaining 35% of the issued and current shareholder,outstanding shares of Eostre Bhd. as described in more detail below under the section entitled “Eostre – Recent Changes to the Eostre Business.” Further, Eostre Bhd.’s business is discussed in detail below under the section entitled “Eostre.”
Yippi
Industry Overview
An “app” is a type of application software designed to run on a mobile device, such as a smartphone or tablet device. Over the last several years, mobile devices, including smartphones and tablets, have proliferated extensively around the world across a wide range of demographic groups.
As mobile devices have become more prevalent, the mobile apps industry has experienced corresponding growth in the number of apps published and the two shareholdersniches they serve, as well as the revenues they generate. We believe that there will continue to be an increase in the number of Eostre, pursuant to which the Company will, subject to the termssmartphones and conditions of each Stock Purchase Agreementtablets sold. In addition, Apple, Inc. (“Apple”), Samsung Group (“Samsung”), and other related agreements, acquire 100%mobile device manufacturers have introduced new, larger, and more powerful smartphones and tablets that enable more complex apps and that allow app developers to create apps that are optimized for larger screen sizes and designed to take advantage of these devices’ advanced capabilities and functionality. We believe that the equityproliferation of, Eostre (comprised of 5,000,000 ordinary shares of stock, par value of RM 1.00 per share)and technological developments to, mobile devices will continue to drive growth in our industry for MYR 5 Million (approximately USD $1,250,000) (the “Purchase Price”). The Acquisition is subject to certain approvals by the relevant governmental authorities in Malaysia, which approvals are still being obtained by the Company.foreseeable future.
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Eostre was incorporated in Malaysia on May 29, 2019. Its principal place of business is Selangor, Malaysia. At the time of the Acquisition, Eostre was a shell entity with no current business or operations. Its sole asset was the License to operate a business in the “direct sales” space in Malaysia. Subject to the “Direct Sales and Anti-Pyramid Scheme Act 1933,” this License is a pre-requisite to operating a company in the direct sales space in Malaysia. The expiration date of the License is November 21, 2021; however, the Company anticipates that it will renew the License at such time.
The Acquisition is expected to be completed in two phases to meet certain regulations under Malaysian law. In the first phase, (i) the Company will acquire 20% of Eostre, consisting of 1,000,000 ordinary shares of stock; (ii) TohProduct and Lim will acquire 20% (1,000,000 ordinary shares) and 25% (1,250,000 ordinary shares) of Eostre, respectively; and (iii) a current owner of Eostre will acquire the balance of 1,350,000 shares, which, combined with his current ownership of 400,000 ordinary shares, will result in his owning 35% (1,750,000 ordinary shares) of Eostre. Toh, Lim, and the current owner of Eostre will be referred to herein as the “Individual Purchasers.”
The Company will deposit the Purchase Price directly into the bank account of Eostre, which will be controlled by the Company or its designees subsequent to the closing date of the first phase. Pursuant to the Stock Purchase Agreements, Toh, Lim and the two original owners of Eostre are not entitled to receive any profit in connection. The Individual Purchasers will execute demand notes in favor of the Company for their respective portions of the Purchase Price. Such demand notes will bear interest at a rate of 4% per annum. In addition, the Individual Purchasers will each execute a security and pledge agreement in favor of the Company pledging their shares in Eostre as collateral, until such time as the second phase is completed. The Individual Purchasers will also grant irrevocable proxies to the Company to vote their shares in Eostre until such time as the second phase of the Acquisition is completed.
In the second phase of the Acquisition, the promissory notes issued by the Individual Purchasers will be cancelled and deemed paid in full, and the remaining 80% of the equity in Eostre will be transferred to the Company. The second phase of the Acquisition is expected to close as soon as practicable after the six-month anniversary of the signing date of the Stock Purchase Agreements, based on the expected timing required to obtain the necessary approvals from the Malaysian Ministry of Trade.
The Stock Purchase Agreements contain representations and warranties made by and to the parties thereto as of specific dates. The statements embodied in those representations and warranties were made for the purpose of allocating risk between the parties rather than establishing matters as facts, and are subject to qualifications and limitations agreed upon by the parties in connection with negotiating the terms of the Stock Purchase Agreements. In addition, certain representations and warranties were made as of a specified date and may be subject to a contractual standard of materiality different from those generally applicable to investors.
On June 1, 2020, the Company entered into the Collaboration Agreement with Subtle for a period of two (2) years, which grants the Company the exclusive right in Asia and certain parts of the Middle East to market and sell Subtle’s products on Toga Limited’s websites and mobile applications. The Company will pay Subtle a monthly fee of the greater of 1% of gross sales of Subtle’s products or sixteen thousand dollars ($16,000), per month, and the parties to the Collaboration Agreement will revisit this financial arrangement six (6) months after June 1, 2020.
Business DevelopmentMarket
The Yippi App is a messaging appmobile application with a social media messaging focus that enables users to discover new friends as well as connect with friends and family. The Yippi App also focuses on entertainment and security. It is fast, simple, secure, and free. Yippi seamlessly syncs a user’s normal messages and secret messages into one application. Users can send an unlimited number of messages, photos, and voice messages. Yippi groups allow users to send broadcasts up to 100 contacts at a time. Users can download the Yippi App through the Apple App Store, and Google Play, or the Amazon App Store. Users in China can downloadSimilar to other social media mobile apps, the Yippi App (International version)allows users to post photos and videos, watch, like, and share live events, use a beauty camera to enhance photos, and generally connect with others through chat messaging and video calls. Our chat feature allows users to use a “secret chat” function that automatically deletes text messages, voice messages, or photos sent through chat messages. We also have other features to allow chat messages to be more interactive between users, such as our “whiteboard presentation” feature that allows up to 5 users to draw on a whiteboard within the Apple App Store or the Huawei App Store. The Yippi App (Chinese version) can be downloaded through the Baidu App Store, the 360 App Store, or the Oppo App Store. Revenue is generated from selling advertising, emoji stickers, and special filters, effects, and features for use with Yippi.
In addition, our users bring business opportunities from all over the world to other users all over the world. We offer different platforms through the Yippi App, including online-to-offline, business-to-business, business-to-customer, and customer-to-customer to help business owners promote their businesses on Yippi.chat message.
The Company is focused on the development of theFinally, through Yippi, App and attracting active users to Yippi and the sale of products through direct marketing network.
The Company has createdwe also offer an in-app points to use within the Yippi App. These in-app points arefeature called Yipps. Once purchased by a user, Yipps can be used in a variety of different ways within the Yippi App. Yipps can be used to gift or tip other users, or to purchase merchandise and services from vendors.
Yipps points are purchased in cash. When these points are initially purchased (but not yet used), they are recognized as deferred revenue. When these points are later used within the Yippi App (for purchases, tipping, gifting, etc.), the revenue is recognized.
Upon use or redemption of the Yipps inside of the Yippi app, the Company pays the price set by the third-party supplier of the desired product or service (approximately 70% of the total cost of the item) and retains the balance as a commission (approximately 30% of the total cost of the item). The exception to this commission breakdown is for when Yipps are used to redeem products and services in the Company’s TogaGo, travel platform, where the Company currently takes a much lower commission to keep advertised prices low and encourages the use of the TogaGo platform (the Company’s commission is approximately 3-5% of the total cost of the product or service purchased). At the time the Yipps are used and the revenue is recognized, the amount that is paid to third-party suppliers of the goods or services is recorded by the Company as the cost of goods sold.
Yipps do not have an expiration date, and this is a relatively new revenue source for the Company (deferred revenue from Yipps was first recorded in May 2019). On an ongoing basis as Yipps are purchased and used in-app, the Company expects to recognize all of the deferred revenue from a Yipps purchase as revenue within 12 months of the original purchase of such Yipps. The Company’s estimate is qualified by the limited data of historical usage.
Yippi App Features
Social Messaging
Messaging
Yippi has embedded and enhanced the quality of voice and video calls for the ease of connectivity to anyone anywhere. We expanded on the functions of our chat application in making the action of contacting friends and family with choices of text, voice, and video calls that are parallel with leading chat applications in the market.
The quality of voice and video calls made via Yippi is clear, and, as with other chat applications, is dependent on network strength. We believe the simplicity of placing a call or a video call will be further enhanced with the advancement of technology and data speed packets as 5G connectivity is upon us.
From its launch in July 2017, we have continued to develop and expand this messaging feature within the Yippi App, not just with regards to peer-to-peer calls, but also improving group calls. Group video calls enable a tele-conference from individual smartphones, anytime and anywhere; in line with the ease of communications on the go. Yippi offers a group video call of up to 9 video feeds at the moment. Continued enhancement of this feature is important to us as we strive to offer the market standard of quality of voice and video calls to our users.
Stickers
Since its release in July 2017, the Yippi App has been packed with pre-loaded stickers (“Stickers”) that are suitable for any occasion.
We firmly believe that Stickers opens up a whole new avenue for aspiring graphic designers to create and sell their artwork stickers.
For example, the revenue-generating sticker pioneered by the Line chat app has achieved tremendous success in generating revenue from its users through affordable e-stickers ever since its inception in 2010 and has steadily been a part of the its source of income; albeit with extensive competition from other chat apps’ introduction of their own stickers.
We are committed to bringing the next evolution of Stickers to market and providing creative creators an opportunity to share in our technological advances. The Yippi App provides a platform for sticker creations and development, with written tutorials and market trends provided to the creators upon request. This may include the next evolution of “Motion Stickers,” “Animated GIFs,” and cinemographs with snippets of sound/voice, which would further differentiate and modernize all our Stickers compared to our major sticker competitors. In doing so, we believe we will be able to derive revenue from this digital product.
Secret Chat
Our “Secret Chat” feature was developed with an enhanced level of security in mind. Launched in January 2017, this feature is a secretive function that self–destructs chat messages upon leaving the chat conversation without a record on the Yippi App or our server. We believe the Secret Chat feature negates the function of encrypting messages found in other chat apps, which we believe provides our users with a chat that is safe and, virtually un-hackable because it does not have a trace on either server once our proprietary system purges the chat thread.
Within the chat conversation, the user has the same functionalities of a regular chat, such as sending images/videos, recording voice messages, sending stickers or gifting eggs.
Eggs
The Yippi App contains the feature of giving and receiving “Yipps” in the form of “Eggs” in individual chats or group chats. Yipps may be used for rewarding contents on Social (as defined below) and as a form of payment for the purchase of discounts from third- party shops and TogaGo. Eggs can contain any number of Yipps, as determined by the sender.
Whiteboard
We developed and launched “Whiteboard” as a Yippi App feature in July 2017. Whiteboard enables users to simultaneously write on the screen display. A user can currently share a Whiteboard with another user, and both parties can write and talk on the Whiteboard remotely within a single session.
Whiteboard also has a voice function with an on/off switch so that users can communicate while sketching together on the shared Whiteboard.
In addition, the Whiteboard can be “erased” by either party at any time to clear the Whiteboard for another new Whiteboard for continuous writing. Sharing of information or ideas could be sketched out over the Whiteboard or dictated to the other user with ease, rather than the conventional method of writing on a piece of paper before snapping a picture.
This is an excellent feature for sketches and scribbles as it engages a real-time experience, as well as a fun tool for leisure.
Auto Translate
“Auto Translate” is a built-in function in Yippi. Users can chat with other users in a foreign language and this feature will auto translate into your spoken language.
Social
The Yippi App contains an embedded social media platform called “Social”, which is fully developed and functioning. Social incorporates a personal social media timeline with integrated functions such as: (i) sharing of updates; (ii) following video channels; (iii) receiving event invitations; (iv) sharing photo and video links; and (v) joining groups of interests.
Social enables users to share their content internally and externally via other platforms (social media or communication applications within their devices) in contrast to WeChat Moments’ or Facebook Timeline’s internal-only sharing capability.
Tips Rewards
The “Tips Rewards” feature enables the Yippi user to give rewards to other Yippi user’s photos, videos and stickers.
Beauty Camera
This trendy and advanced video camera feature allows Yippi users to beautify and add animated filters as 3D Face Technology on a video call (the “Beauty Camera”). Currently in use, this feature has a number of different filters and augmented reality (“AR”) skins exclusive to Yippi App users.
Users making video calls can use options to enhance both the caller and recipient with beauty skins, fun stickers, or facial-recognition AR caricatures or cartoons for a shared fun experience.
Artificial Intelligence
Artificial Intelligence (“AI”) is the simulation of human intelligence processes by machines, especially computer systems. These processes include learning, reasoning and self-correction.
AI within Yippi was launched in June 2018 with the introduction of Hungry Bear, an AI robot customer service chat box. When a user enters a question in Hungry Bear, the AI chat box will provide immediate answers to the questions.
People Nearby
With its launch in July 2017, users can use this “People Nearby” feature to seek out other Yippi users within their immediate area to communicate and network, or chat for leisure.
Yippi users can arrange a meeting and make new friends, or seek out business opportunities by networking through this feature. With the impending official brand accounts, we could evolve this further with geo-location push notification on promotions and offers for Yippi users that switch their People Nearby feature on. Currently, there are no brand accounts.
Market Place
TogaGo
TogaGo, a hotel and flight feature in Yippi boasts an impressive array of hotel, cruise, and flight partners that enable users to search for the best price for their travel needs.needs on an array of hotel, cruise, and flights and book and purchase these accommodations. Currently, prices are relatively cheaper and comparable to major travel applications in the market, and with this feature we have bridged these two different applications into one comprehensive application.
These extensions are developed and functioning and areessentially bridged within Yippi with a link to the target platform while the user is still logged into theirhis or her Yippi account. We also maintain a website that allows users to access TogaGo.
Games
As with most social chat applications, Yippi has 9 games built into the application.
We areIn addition to TogaGo, we also anticipating the acquisition of additional games to add to our collection, in order to cater to a wider gaming audience.
Globally, a large share of gaming revenues are generatedgenerate revenue from mobile gaming. It is our intention to identify, invest inselling advertising, emoji stickers, and partner with up-and-coming developers, which we believe will allow us to compete for additional gaming revenue within the market.
Toga-Resonance Technology
Toga Resonance Technology (“TRT”) is the brand behind the use of “quantum resonance technology” found in certain of our physical products soldYipps through our direct sales network,tipping feature called Yippi Star. As of December 1, 2020, we had 214,442 monthly active users and in certain of our digital applications distributed through our Yippi App. This technology was developed by an independent consultant and is utilized by our Company.
With respect to all of the features and functionalities120,412 daily active users on Yippi. We define a “monthly active user” as a registered user of the Yippi App we are lookingwho opens the Yippi App at trends and opportunities to enhance Yippi’s current features and functionalities and to add new features.least once during a 30-day period. We define a “daily active user” as a registered user of the Yippi App who opens the Yippi App at least once during a 24-hour period for a consecutive 30-day period.
The market for our Yippi App is characterized by rapid technological change, particularly in the technical capabilities of smartphones and tablets, and changing end-user preferences. Therefore, we will be required to continuously invest capital to innovate and modify our Yippi App and publish new applications. We cannot provide assurances that we will have adequate capital to modify our Yippi App or develop new applications.
EostreMarketing Strategy
The Company is in the business of selling wellness products through directIn an effort to increase our daily active users and monthly active users, our marketing networks. As of June 1, 2020, in accordance with the Company’s strategic business plan, the Company will engage in the sale of such wellness products through Eostre, which is anticipated to become the Company’s wholly-owned subsidiary upon the closing of the second phase of the Acquisition.strategy focuses on three areas: (i) Market Penetration; (ii) Yippi Publicity; and (iii) Market Development.
Sources, significant classesMarket Penetration. Market Penetration focuses on engaging key opinion leaders and agencies to help increase our publicity and contests within Yippi. We also intend to engage in corporate branding on social media and increase our internet presence.
Yippi Publicity. Yippi Publicity focuses on corporate social responsibility (such as raising money for charitable causes), awareness campaigns (to increase daily active users or to increase users’ daily activity), and live concerts and music sharing (such as engaging Malaysian singers and exclusive content for the Yippi App). We intend to have monthly events broadcast through “YippiTV” (which is a function within the Yippi App for video streaming of products sold,these publicity events). We may utilize celebrity endorsements from the Philippines, Indonesia, and distribution channelsMalaysia.
We have also engaged in a series of branding campaigns, or sponsorships, with selected corporate entities in the Asian region, specifically Southeast Asia. For example, we have partnered with AirAsia Academy in cross-promotion and sponsorship of the academy players in badminton competitions since July 2018. We also sponsored the Panagbenga Flower Festival in the Philippines in February 2019, which festival was the marketing promotion that created brand awareness of the Yippi App throughout Asia.
Market Development. :Market Development focuses on contests within the Yippi App to connect users to each other and encourage content creation within the Yippi ecosystem. Beginning in May 2018, we have had and continue to have on-going weekly contests via the social function of the Yippi App. The Company sells productscontests encompass questions, quizzes, personal preferences, and favorite pictures, among others, all of which are intended to increase engagement among users through their participation of commenting and sharing on their social walls. The winners are picked based on traditional, eastern wellness principles under its “Eostre” brand.the criteria of either most creative, most shares, or most “likes” earned. We also hold weekly contests based on the top downloaded “sticker” within the Yippi App, and the designer of the most downloaded sticker for that particular week wins $100. A sticker set may only win once in a month, and only verified sticker designers are eligible to win. Winners are from Malaysia, Indonesia, ROC Taiwan, and the Philippines. Since March 2020, we have held daily non-monetary contests ranking all live streams from Yippi users and awarding the “star of the day” to the Yippi users with the most points based on live stream unique views and rewards earned for each day. Users can create a live stream by live broadcasting to users through the Yippi App. The Company’s products include pendants (necklaceswinner receives “Yellow Beans” (tokens) and a privilege badge (similar to a virtual trophy), with crystalsthe achievements being unlocked in the winning user’s Yippi profile. Similar contests are held in the Yippi App for celebrations such as Mother’s Day (for the most likes on them), home goods, supplementsa photo or video submission) and topical sprays, serums and creams. The products offered byNational Day (for the Company are as follows:most creative photo or video post).
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Scientific Advisory Council. In order to further our market development, in September 2019, we established a Scientific Advisory Council (the “Council”) consisting of Dr. Beverly Rubik, Prof. Dr. Konstantin Korotkov, Deputy Director of Saint-Petersburg Federal Research institute of Physical Culture, and Erick Wayne Thompson of Subtle Energy Sciences, LLC. The members of the Council were retained to provide product ideas and advice on technologies relating to energy, lifestyle and nutrition wellness, as well as to deliver keynote speeches and attend Company events. The members of the Council were each paid an annual fee of $36,000 with additional payments for each keynote presentation. As of the date of this report, all agreements with the members have expired.
Target Market
The product branding “Eostre”Yippi App is ownedfree for users and can be downloaded through the Apple App Store, Google Play, or the Amazon App Store. We are focused on increasing our users. Currently, our users are concentrated in Indonesia, Malaysia, China, Philippines, Vietnam, and Taiwan. The Yippi App is also available to users in the United States; however, the Toga Resonance Technology (“TRT”) feature within the Yippi App is not available to users in the United States.
Competition
We compete with companies that focus on mobile social engagement and advertising. Many of these companies, such as Apple; Facebook Inc. (“Facebook”), which owns and operates the applications Facebook, Instagram, and WhatsApp; Tencent Holdings, Ltd., which owns and operates the application WeChat; Snap Inc., which owns and operates the application Snapchat; Google, LLC (“Google”), which owns and operates YouTube; and Twitter, Inc. (“Twitter”), which owns and operates the social networking service known as Twitter, have significantly greater financial and human resources. Our competitors span from internet technology companies and digital platforms to traditional companies in print, radio, and television sectors to underlying technologies like default smartphone messaging. Additionally, our competition for engagement varies by region. The main bases on which we currently compete with competitors include engagement, partnerships, advertising, and talent.
We compete by attracting and retaining our users’ attention, both in terms of reach and engagement. We focus on constantly improving and expanding the Yippi App and related features, as described below under “New Product Development.”
Finally, we also compete for advertising revenue, especially with respect to video and other highly engaging formats. We believe our ability to compete depends primarily on our reach and ability to deliver a strong return on investment to our advertisers, which is driven by our advertising products, delivery and measurement capabilities, including application programming interfaces, and other tools. The industry in which we operate is changing rapidly and we find ourselves in competition with internet-based platforms, advertising networks, and traditional media.
Business Overview Subsequent to Quarter ended October 31, 2019
New Yippi Product Development – Subsequent to October 31, 2019
Between January and July 31, 2020, we launched new features within the Yippi App to enhance our user experience, including, but not limited to, new TRT features, which include relieving fatigue, relaxation and rejuvenation, and enhancements to live streaming, “yellow bean” social tokens, sticker artist profiles, social gamification, leaderboard, daily login reward, “Pong Pong” social networking, web instant messaging, text translation, eShop e-commerce, TogaGo user experience and “Go Cash” rewards points, and in-app Yipps purchasing through the Apple Appstore, Google Playstore, Alipay, and Huawei. “Go Cash” rewards points can be used as credits for users to receive discounts on future bookings made through TogaGo.
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We also have a number of new features and enhancements to current features in development that we plan to incorporate into the Yippi App in the future, including, but not limited to, eSports live streaming, mini videos, a portal to allow for journalists and blogger content updates, expanded travel features such as train service and airport transfers bookable through TogaGo, and other “mini-programs.” Mini-programs are “sub-applications” within the Yippi App ecosystem, which offer advanced features to users in e-commerce, task management, coupons/offers, brand page, or exclusive content from official accounts. These enhancements provide experiences that are built completely within the Yippi App, for a more complete user experience. Mini-programs are similar to separate applications but because the mini-programs are within the Yippi App, users do not need to separately download each mini-program; thus, the mini-programs do not use any additional storage space on the user’s device. Users may scan quick response, or QR, codes or input the names of the mini-programs in-app to launch them. The success of the mini-programs is dependent upon encouraging talented and independent developers to create these mini-programs that are powered by our Yipp App. We currently anticipate that our mini-programs will be publicly released in 2021. Our newest version of the Yippi App, “Yippi X” was unveiled in January 2021.
Yipps Agreements
We generate revenue from the sale of Yipps, which are the in-app credit that can be used for purchases, services and tipping within the Yippi App. We use third party entities to distribute Yipps to certain end users, pursuant to Yipps Agreements. Each Yipps Agreement provides that the company purchasing the Yipps can purchase them via a purchase order, for a price set by TOGL Technology, and then distribute the Yipps to their members / agents to be used in the Yippi App. TOGL Technology has the right to change the price of the Yipps from time to time.
In May 2019, TOGL Technology entered into Yipps Agreements with each of Agel Enterprise International Sdn. Bhd., Malaysian corporation (“Agel”), Toga Japan Co. Ltd., a Japanese company (“Toga Japan”), and ShenZhen DingShang Network Technology Co. Ltd., a Chinese company (“ShenZhen DingShang”), for the purchase and distribution of Yipps. However, because of the COVID-19 pandemic, the Yipps Agreement with Agel was terminated in May 2020.
On March 1, 2020 (as amended on July 1, 2020), TOGL Technology entered into a Yipps Agreement with Success Fortune Trading Limited, a Hong Kong company (“Success Fortune”) for the purchase and distribution of Yipps that can be used by the CompanyYippi App users.
On June 1, 2020, TOGL Technology entered into a Yipps Agreement with our newly acquired, partially-owned Malaysian subsidiary, Eostre Bhd., for the purchase and distribution of Yipps that can be used by the Yippi App users.
Eostre – Products Sold Through Our Direct Marketing Network
Recent Changes to the Eostre Business
We recently changed our business model for our Eostre business line by bringing the direct marketing sales activities in Asia under our newly acquired, partially-owned Malaysian subsidiary, Eostre Bhd. Beginning on June 1, 2020, independent sales agents in Malaysia and Japan can purchase our “Eostre” branded products directly from Eostre Bhd.
Prior Business Structure; Eostre Trademark License Agreements
The recent changes to the business model of our Eostre business occurred because of the prolonged effect of the COVID-19 pandemic. Previously, from 2018 until May 31, 2020, we sold our “Eostre” branded products exclusively to independent sales agents in Malaysia, Japan, Taiwan, and Indonesia. We did not sell our products directly to consumers. These independent sales agents distributed our products through direct marketing networks in our principal markets. In Indonesia and Taiwan, we, through our subsidiaries, administered the sale of such products. Independent agents in Indonesia and Taiwan purchase products and earn commission through a point system. In Malaysia, the program for sales was administered by Agel, and, in Japan, by Toga Japan, an unaffiliated third party.
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Agel and Toga Japan each engaged independent sales agents to sell our products through their respective direct marketing networks. At no time were any of the independent sales agents of Agel or Toga Japan employed by us. In order to sell our products, we granted Agel and Toga Japan certain licensing rights to use our “Yippi App” and “Eostre” trademarks for marketing purposes pursuant to, (i) in the case of Agel, a Trademark License Agreement dated April 1, 2018, as subsequently amended on August 1, 2019 (the “Agel License Agreement”) and, (ii) in the case of Toga Japan, a Trademark License Agreement dated April 1, 2019, as subsequently amended on August 1, 2019 (the “Toga Japan License Agreement” and, together with the Agel License Agreement, the “License Agreements”). The License Agreements allowed Agel and Toga Japan to administer the sales programs. As consideration for the licenses, each of Agel and Toga Japan paid us a monthly fee in the amount of $20,000 USD. We also granted our subsidiaries operating in Taiwan and Indonesia licensing rights to use our “Yippi App” and “Eostre” trademarks for marketing purposes pursuant to a Trademark License Agreement dated September 1, 2018 with TOGL Technology’s Taiwan branch and a Trademark License Agreement dated August 1, 2019 with PT Toga Indonesia. As consideration for the licenses, each of TOGL Technology and PT Toga Indonesia paid us a monthly fee in the amount of $20,000 USD.
Because of the COVID-19 pandemic and the Company licensesresulting inability of independent agents to engage with customers in person, neither Agel nor Toga Japan had been able to sell our Eostre products since February 2020. As a result, the License Agreements with Agel and Toga Japan were terminated in May 2020. Because of the COVID-19 pandemic, TOGL Technology’s Taiwan branch requested and received a reduction to the monthly royalty fee to $10,000 per month for each of April and May 2020, and the license agreement with TOGL Technology’s Taiwan branch was terminated in June 2020.
Acquisition of Eostre Bhd. – Subsequent to October 31, 2019
In connection with the termination of the License Agreements, we decided to operate the direct sales business in Malaysia and Japan ourselves, through our subsidiary, Eostre Bhd., instead of through unaffiliated, third-parties. We anticipate that in the future all independent agents in various jurisdictions throughout Asia will eventually purchase products directly from Eostre Bhd. As a result of this new business model, we (or our subsidiaries, as applicable), hired some of Agel’s former employees to assist us in the operation of our direct marketing sales activities.
In order to effectuate this new business model, we are acquiring 100% of the equity of Eostre Bhd. pursuant to two Stock Purchase Agreements, dated March 31, 2020, with Mr. Toh, Mr. Lim, and the two shareholders of Eostre Bhd. (the “Stock Purchase Agreements”), and some other related agreements (the “Acquisition”), for a purchase price of MYR 5 Million (approximately USD $1,250,000) (the “Purchase Price”). The Acquisition is subject to certain approvals by the relevant governmental authorities in Malaysia, which approvals are still being obtained by us.
The Acquisition is expected to be completed in two phases to meet certain regulations under Malaysian law. In the first phase, (i) we acquired 20% of Eostre Bhd., consisting of 1,000,000 ordinary shares of stock; (ii) Mr. Toh and Mr. Lim acquired 20% (1,000,000 ordinary shares) and 25% (1,250,000 ordinary shares) of Eostre Bhd., respectively; and (iii) a current owner of Eostre Bhd. acquired the balance of 1,350,000 shares, which, combined with his current ownership of 400,000 ordinary shares, resulted in his owning 35% (1,750,000 ordinary shares) of Eostre Bhd. Mr. Toh, Mr. Lim, and the current owner of Eostre Bhd. are referred to herein as the “Individual Purchasers.”
We have deposited the Purchase Price directly into the bank account of Eostre Bhd., which will be controlled by us or our designees subsequent to the closing date of the first phase. Pursuant to the Stock Purchase Agreements, Mr. Toh, Mr. Lim, and the two original owners of Eostre Bhd. are not entitled to receive any profit in connection with the Acquisition. The Individual Purchasers executed demand notes in favor of us for their respective portions of the Purchase Price. Such demand notes bear interest at a rate of 4% per annum. In addition, the Individual Purchasers each executed a security and pledge agreement in favor of us pledging their shares in Eostre Bhd. as collateral, until such time as the second phase of the Acquisition is completed. The Individual Purchasers also granted irrevocable proxies to us to vote their shares in Eostre Bhd. until such time as the second phase of the Acquisition is completed. As such, we currently hold 100% voting control of Eostre Bhd.
In the second phase of the Acquisition, set to begin on February 21, 2021, the promissory notes issued by the Individual Purchasers will be cancelled and deemed paid in full, and the remaining 80% of the equity in Eostre Bhd. will be transferred to us. The second phase of the Acquisition is expected to close as soon as practicable after the six-month anniversary of the signing date of the Stock Purchase Agreements, based on the expected timing required to obtain the necessary approvals from the Malaysian Ministry of Trade.
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At the time of the of completion of the first phase of the Acquisition, Eostre Bhd. was considered a shell entity with no current business or operations. Its sole asset is a direct selling license (the “License”) to operate a business in the “direct sales” space in Malaysia. Subject to the “Direct Sales and Anti-Pyramid Scheme Act 1933,” this License is a pre-requisite to operating a company in the direct sales space in Malaysia. The expiration date of the License is November 21, 2021; however, we anticipate that we will renew the License at such time. The License will allow us to operate the direct sales business directly, instead of through unaffiliated, third-parties.
Business in China
On June 1, 2020, we entered into a Collaboration Agreement (the “ShenZhen Yi Yi Collaboration Agreement”) with ShenZhen Yi Yi Technology Private Limited, a company registered in China (“ShenZhen Yi Yi”), for provision of certain services to us and our subsidiaries within the territory of the Peoples’ Republic of China (the “Territory”). The ShenZhen Yi Yi Collaboration Agreement memorialized the parties’ understanding with respect to the provisions of these services, which began in March 2020. Pursuant to the ShenZhen Yi Yi Collaboration Agreement, within the Territory, ShenZhen Yi Yi agreed to provide us with web hosting services, launch and release our apps, act as our exclusive proxy to promote our products and services, protect our trademarks, products and apps from unauthorized use, and make payments on behalf of the company to third-parties. The ShenZhen Yi Yi Collaboration Agreement grants ShenZhen Yi Yi a non-exclusive, non-sublicensable, and non-transferable right to use our trademarks. In consideration for the aforementioned services, we agreed to pay ShenZhen Yi Yi monthly consideration of RMB 200,000. Pursuant to a letter of authorization, dated March 1, 2020, which had the effect of amending the ShenZhen Yi Yi Collaboration Agreement, TOGL Technology granted ShenZhen Yi Yi the right to sell Yipps to users in the Territory, with 30% of the total amount of the selling price for such Yipps sold payable to ShenZhen Yi Yi as commission. In addition, on June 1, 2020, Eostre Bhd. also began collaborating with ShenZhen YiYi for the sale of Eostre Bhd.’s products in the Territory. This collaboration has not been memorialized in writing yet between Eostre Bhd. and ShenZhen YiYi.
Industry Overview
Since the 1990s, the use of direct selling and network marketing sales channels has grown in popularity and general acceptance, including acceptance by prominent investors and capital investment groups who have invested in direct selling companies. In addition, many large corporations have diversified their marketing strategy by entering the direct selling arena. Several consumer-product companies have launched their own direct selling businesses with international operations and often accounting for the majority of their revenues. Consumers and investors are beginning to realize that direct selling provides unique opportunities and a competitive advantage in today’s markets. Businesses like us are able to quickly communicate and develop strong relationships with our customers, bypass expensive ad campaigns, and introduce products and services that would otherwise be difficult to promote through traditional distribution channels such as retail stores.
According to the worldwide direct sales data published by the World Federation of Direct Selling Association, in 2019, approximately 118 million global direct sellers collectively generated annual retail sales of $180.4 billion, of which approximately 44% of total annual sales, or $78.9 billion, are generated in the Asia/Pacific marketplace by approximately 68.4 million independent sales agents operating in the Asia/Pacific marketplace.
Products and Market
Beginning on June 1, 2020, we sell our Eostre products directly to independent sales agents, that then sell to their customers through direct marketing networks. Prior to June 1, 2020, we licensed the “Eostre” brand to agents withAgel and Toga Japan, both of which had direct marketing networks in Malaysia (Agel) and Japan (Toga Japan), while it sells brandedJapan. We also sold Eostre products directly to independent sales agents to sell within the agents’ own networks in Taiwan and Indonesia. The Company has a registered trademark for “Eostre”We continue to rely on the revenues generated from our Eostre business to sustain the development of our Yippi App.
Our Eostre products are based on traditional, eastern wellness principles. We sell both physical products and digital products online (eostre.biz), through our “E-Booster” App, and through direct marketing networks. Our products include pendants (necklaces with crystals on them), home goods, personal care products (supplements, topical sprays, serums, and creams), and digital downloads. We offer the following physical products:
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Product | Product Category | Available Markets | Manufactured | |||
Eostre Energy Crystal Pendant | Pendant | Indonesia, Taiwan, Malaysia, and Japan | Korea | |||
Eostre Quantum Disc | Pendant | Indonesia, Taiwan, Malaysia, and Japan | Korea | |||
Eostre Vitality Pendant | Pendant | Indonesia and Malaysia | China | |||
Eostre Sanare Sleep Mat | Home good | Indonesia and Malaysia | Korea | |||
Eostre Life Force Diffuser (humidifier) | Home good | Indonesia and Malaysia | China | |||
Eostre Ohrus (light) | Home good | Malaysia | China | |||
Eostre Smart LED Desk Lamp | Home good | Available in Malaysia in September 2019, but since discontinued | China | |||
Essential Young Serum | Personal care | Indonesia | Indonesia | |||
Perfect Hydrating Spray | Personal care | Indonesia | Indonesia | |||
Healthy 99 | Personal care | Taiwan and Japan | Taiwan | |||
Beauty 99 | Personal care | Taiwan | Taiwan | |||
Cadalobs Chlorella | Personal care | Taiwan | Taiwan | |||
Toga Dammarane | Personal care | Taiwan | Taiwan | |||
Dammarane Sapogenin | Personal care | Japan | Taiwan |
We also offer digital downloads and applications that use our “Toga-Resonance Technology” (“TRT”). TRT is part of our wellness program and is pursuing trademark registrations in additional jurisdictions.designed to be a solution for electric and magnetic field (“EFM”) radiation, or emissions from wireless products or powered items. For example, our “headache” program application includes soothing nature sounds with video and a digital image for a user to use as his or her phone wallpaper.
AsOur TRT digital downloads are available online at eostre.biz and through our Yippi App (for our non-U.S. users) and our “E-Booster” App (branded as “eT-RT” when delivered in connection with our Eostre brand), although such digital products are not available to users located in the United States. E-Booster is a digital wellness app that delivers wellness-focused digital downloads of May 31, 2020,images, audio, and videos to users’ electronic devices, which are also available for download on the eostre.biz website.
Marketing Strategy
We, and our subsidiaries, rely on our network of independent sales agents to sell our Eostre branded products in our various jurisdictions. The independent sales agents are eligible to receive compensation on a number of different levels, ranging from retaining profit from retail sales to bonuses, which may be achieved as each such agent becomes a leader of their own network.
Independent sales agents purchase points packages from the Company, terminated its trademark license agreements with Agel and Toga Japan, as more fully discussed above. The Company anticipates entering into a license agreementwhich can be used to license the “Eostre” trademarkpurchase packages of products to Eostre. The anticipated terms of the agreement will grant Eostre a non-exclusive, non-sublicensable, and non-transferable licensethen be sold to use the trademark: on products which will be manufactured, sold and/or distributed by Eostre; on marketing materials; and for events organized by Eostre. The term of the license is anticipated to be for one year, with the agreement automatically renewing for additional one year terms unless either party provides notice to the other of its intention to terminate the agreement within 60 days before the beginning of the next term. In consideration for the license, Eostre will payend users. Independent sales agents also distribute points that they have purchased from the Company a fee of $20,000 USD on a monthly basis.
The products Eostre Energy Crystal Pendant, Eostre Quantum Disc, Eostre Vitality Pendant, Eostre Sanare Sleep Mat, Eostre Life Force Diffuser and Eostre Ohrus are manufactured in Hong Kong. The Eostre Smart LED Desk Lamp is manufactured in Malaysia. The products Essential Young Serum and Perfect Hydrating Spray are manufactured in Indonesia. The products Healthy 99, Beauty 99, Cadalobs Chlorella, Toga Dammarane, and Dammarane Sapogenin are manufactured in Taiwan.
The products are manufactured by unaffiliated third-party companies, who ship finished products containing the Company’s Eostre branding. For products sold in Malaysia and Japan, the manufacturers directly ship products to the customers withother independent sales agents within their direct marketing networks in those jurisdictions.(their down-line, as described below), who then also use such points to purchase packages of products and then sell such product to end users.
For the products soldEnrolling new independent sales agents creates multiple levels in Taiwan and Indonesia, ordersour direct selling structure. The independent sales agents that are placedenrolled by other independent sales agents within our network are referred to the Company. The Company then receives fully manufactured products from the manufacturers, which the Company sells through wholesale distribution toas “sponsored” independent sales agents, who havemay purchase product with their points packages solely for their own personal consumption, for resale, or both. Persons newly enrolled are assigned into network positions that can be “under” other independent sales agents, and thus they can be called “down-line” independent sales agents. If down-line independent sales agents also enroll new independent sales agents, they create additional levels within the structure, but their down-line independent sales agents remain in the same down-line network as the original independent sales agent that introduced them to our business.
While we provide informational brochures and other sales materials, independent sales agents are primarily responsible for enrolling and educating their new down-line sales agents with respect to products, the compensation plan and how to build a successful direct marketing network.
Independent sales agents are not required to enroll other sales agents as their down-line, and we do not pay any commissions for enrolling new independent sales agents. Enrollment in our direct marketing network is contingent upon an independent sales agent purchasing a points package. However, because of the financial incentives provided to those who succeed in building a direct marketing network that consumes and resells products, we believe that many of our independent sales agents attempt, with varying degrees of effort and success, to enroll additional sales agents in their respective direct marketing networksnetworks.
Our Company policies and procedures establish the rules that independent sales agents must follow in each market. Independent sales agents’ presentations to customers must be consistent with, and limited to, the product claims and representations made in our literature. Independent sales agents are not entitled to use our trademarks or other intellectual property without our prior consent.
If we are made aware of unapproved materials being used, we notify and direct the relevant independent sales agents to cease using such materials. We provide training materials to our independent sales agents to ensure compliance with our Company policies and to prevent unauthorized publications and/or sales practices from independent sales agents. An example of such a training and compliance presentation for sellingindependent sales agents was included in the Company’s Current Report on Form 8-K/A, filed on June 9, 2020, as Exhibits 99.1 (“The Importance of Optimization and Compliance”) and 99.2 (“A country we have national laws, at home we have house rules”).
In light of the current COVID-19 pandemic, we anticipate that Eostre Bhd.’s independent sales agents will primarily use e-commerce as their main sales channel. We intend to pursue paid marketing opportunities, such as Facebook ads with targeting marketing, and hiring product ambassadors to promote our products. In addition, we intend to pursue organic marketing strategies such as using social media accounts and search engine optimization to promote the products.
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Principal marketsTarget Market: The Company currently sells its products to
Independent sales agents in Malaysia, Japan, Taiwan, and Indonesia. The Company does not sell itsour products directly to consumers, but instead sells exclusively to independent agents who distribute such products through direct marketing networks in the Company’s principal markets, as described below. The products are marketed to wellness-minded consumers, typically adults (between approximatelybetween the ages of 20 and 80 years old),old, within their sales network. These consumers include both men and women, located in urban centers.centers throughout Asia, including in Malaysia, China, Taiwan, Indonesia, and the Philippines.
Competitive conditionsCompetition: The Company purchases
We purchase white labeled products and brandsbrand them with itsthe “Eostre” trademark. The CompanyWe then producesproduce sales and marketing materials for such products. Because the Company ownswe own the Eostre brand, it haswe have no competitors selling identically branded products without itsour authorization. However, the Company doeswe do not own the underlying intellectual property to the products that it sells,we sell, nor does itdo we have exclusive rights to sell such products. The Company hasWe have competition risk in that itwe cannot ensure that itwe will continue to be able to source itsour products from itsour third-party suppliers, at competitive prices.
In addition, the Company iswe are aware that those third-party suppliers sell the same white labeled products to other companies (with differeddifferent branding applied), who compete directly or indirectly with the Companyus in itsour principal markets. Except for the “Eostre” product branding and marketing, the Company iswe are aware of one such competitor who sells identical products (with the competitor’s own marketing and branding applied to the underlying product) to the Eostre Energy Crystal Pendant, Eostre Vitality Pendant, Eostre Quantum Disc, Eostre Ohrus, Eostre Life Force Diffuser, Essential Young Serum, and Perfect Hydrating Spray. This provides additional direct sales competition with respect to those products and provides competition for talent for those independent sales agents who may want to sell these or similar wellness products through a direct marketing network.
Furthermore, the Company haswe have competition in each jurisdiction in which it operateswe operate with the entire market of other companies and individuals who sell health and wellness products, especially those that are in the business of selling natural products (including crystals, topical sprays, serums and cremes, home goods, supplements, and similar items) based on traditional, eastern wellness principles.
Employees: ManufacturingAs
The Eostre products are manufactured by unaffiliated third-party companies, who ship finished products containing our Eostre branding. We receive fully manufactured products from the manufacturers, which we sell through wholesale distribution to independent sales agents who have their own respective direct marketing networks for selling the products.
Collaboration Agreements
From time to time, TOGL Technology enters into collaboration agreements with third parties to allow such parties to provide their services or sell their products on the Yippi App or in connection with Eostre products or the E-Booster App.
On May 1, 2020, we entered into a Supplier Agreement (the “Subtle Supplier Agreement”) with Subtle Energy Sciences, LLC, an Indiana limited liability company (“Subtle”), where Subtle agreed to provide us with an “Immunity” app developed by Subtle which included digital files, videos, audio files and images. Pursuant to the Subtle Supplier Agreement, we were granted the exclusive right to publish and market the app worldwide. We paid Subtle a one-time sum of $30,000 as consideration under the Subtle Supplier Agreement. In connection with the Subtle Supplier Agreement, we entered into a mutual agreement, dated May 15, 2020, with Dr. Anura Gnanasothi Kandasamy, a Malaysian individual (“Dr. Anura”), who agreed to act as Subtle’s agent under the Subtle Supplier Agreement and guarantee the delivery of Subtle’s obligations thereunder, including the delivery of a scientific report in connection with Subtle’s app, in exchange for a 10% commission from the total consideration payable under the Subtle Supplier Agreement. On June 1, 2020, Eostre has hiredwe entered into a Collaboration Agreement (the “Subtle Collaboration Agreement”) with Subtle, for a period of two (2) years, which grants us the exclusive right in Asia and certain parts of the Middle East to market and sell Subtle’s products on our websites and mobile applications. We pay Subtle a monthly fee of the greater of 1% of gross sales of Subtle’s products or $16,000 per month. In connection with the Subtle Collaboration Agreement, we entered into a mutual agreement, dated June 1, 2020, with Dr. Anura, who agreed to act as Subtle’s agent under the Subtle Collaboration and guaranteed the delivery of a scientific report in connection with each of the 12 expected Subtle products to be delivered over the term of the Subtle Collaboration Agreement, in exchange for a 10% commission from the total consideration payable to Subtle under the Subtle Collaboration Agreement.
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On June 1, 2020, TOGL Technology entered into a Collaboration Agreement (the “Redbox Collaboration Agreement”) with Redbox Holdings Berhad, a Malaysian company (“Redbox”). On November 16, employees, who2020, TOGL Technology entered into an App Development and Services Agreement with Redbox (the “Redbox App Development Agreement”). Redbox provides karaoke entertainment to the public via rentable rooms at public spaces such as shopping malls, where the public can book a karaoke room to sing. Pursuant to the Redbox Collaboration Agreement, TOGL Technology allows end users to purchase Redbox’s products within the Yippi App, using Yipps as the form of payment. Redbox may also promote its product, including providing discounts or promotions within the Yippi App. Both parties also have agreed to collaborate to expand each party’s respective business. The Redbox Collaboration Agreement grants a non-exclusive, non-sublicensable, and non-transferable right to use our Yippi trademarks, and we have a reciprocal right to use Redbox’s trademarks. The trademarks are professionalsnot to be used for any purpose other than the purpose of the Redbox Collaboration Agreement without our, or Redbox’s, prior written consent, as applicable. Only Yipps can be used for paying for Redbox services or products, such as paying for karaoke rooms. Redbox pays TOGL Technology a portion of each transaction that utilized Yipps as the payment form. Each unit of Yipps is equivalent to RM 0.60, however, the value of each unit may be changed from time to time in the healthdiscretion of TOGL Technology. The initial term of the Redbox Collaboration Agreement expires on June 1, 2021 and directautomatically renews for an additional one-year term, unless either party provides notice to the other of its intention not to renew at least 30 days prior to the end of the initial term. Pursuant to the Redbox App Development Agreement, TOGL Technology provides development and servicing of a social karaoke app for Redbox, and, in exchange, Redbox will pay TOGL Technology RM 1,000,000.00 for such services, payable in installments upon completion of certain milestones as set forth in the Redbox App Development Agreement.
On June 1, 2020, TOGL Technology entered into a Collaboration Agreement (the “Gintell Collaboration Agreement”) with Gintell Rest N Go Sdn Bhd, a Malaysian company (“Gintell RNG”). On July 21, 2020, TOGL Technology entered into a Yippi E-Shop Collaboration Agreement (the “Gintell E-Shop Agreement”) with Gintell Irest Sdn. Bhd., a Malaysian company and affiliate of Gintell RNG (“Gintell Irest” and, collectively with Gintell RNG, the “Gintell Companies”). On March 2, 2020, TOGL Technology also entered into a Sponsorship Agreement with Gintell Irest for the provision of certain of Gintell Irest’s products at two of our live streamed events broadcast on the Yippi App (the “Gintell Sponsorship Agreement”). The Gintell Companies are a healthcare retail chain store in Malaysia, which provides massage, exercise, and wellness products, such as massage chairs that are installed in public spaces and available for booking and use by customers in exchange for a fee. Pursuant to the Gintell Collaboration Agreement, TOGL Technology allows end users to purchase Gintell RNG’s products within the Yippi App, using Yipps as the form of payment. Pursuant to the Gintell E-Shop Agreement, Yippi users may also purchase Gintell Irest’s products through the Yippi App’s online E-Shop. The Gintell Companies may also promote its products, including providing discounts or promotions within the Yippi App. Both TOGL Technology and the Gintell Companies also have agreed to collaborate to expand each party’s respective business. Both the Gintell Collaboration Agreement and the Gintell E-Shop Agreement grant the Gintell Companies a non-exclusive, non-sublicensable, and non-transferable right to use our Yippi trademarks, and we have a reciprocal right to use the Gintell Companies’ trademarks. The trademarks are not to be used for any purpose other than this purpose without our, or the Gintell Companies’, prior written consent, as applicable. Yipps are intended to be the sole payment form accepted for Gintell RNG’s customers purchasing services or products, such as by using Yipps at a massage chair to redeem massage time and services. Under the Gintell Collaboration Agreement, Gintell RNG pays TOGL Technology a portion of each transaction that utilized Yipps as payment. Each unit of Yipps is equivalent to RM 0.60, however, the value of each unit may be changed from time to time in the discretion of TOGL Technology. Under the Gintell E-Shop Agreement, TOGL Technology may retain 15% from the sale of each of Gintell Irest’s products. The initial term of the Gintell Collaboration Agreement expires on June 1, 2021 and automatically renews for an additional one-year term, unless either party provides notice to the other of its intention not to renew at least 30 days prior to the end of the initial term. The Gintell E-Shop Agreement expired on January 21, 2020, and may be renewed by mutual written agreement of the parties. The Gintell Sponsorship Agreement expired on December 31, 2020 and the Company is in the process of renewing the agreement.
On August 11, 2020, TOGL Technology entered into a Yippi E-Shop Collaboration Agreement (the “Ideahom E-Shop Agreement”) with Ideahom Global Enterprise, a Malaysian company (“Ideahom”). Ideahom sells household appliance products, kitchen products and electrical appliances. Pursuant to the Ideahom E-Shop Agreement, Yippi users may purchase the Ideahom’s products through the Yippi App’s online E-Shop. The Ideahom E-Shop Agreement grants a non-exclusive, non-sublicensable, and non-transferable right for us to use Ideahom’s trademarks for promotion and sales industry, and Eostre will begin towithin the Yippi App with Ideahom’s prior written consent. As consideration for featuring Ideahom’s products in the Yipp App’s E-Shop, TOGL Technology may retain a teamcertain percentage from the sale of independent agents to sell Eostre’seach of Ideahom’s products. In light of the COVID-19 pandemic, Eostre’s agentsThe Ideahom E-Shop Agreement will primarily use e-commerce as their main sales channel.expire on February 10, 2021 and will not be renewed.
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SalesOther Agreements
On June 1, 2020, TOGL Technology entered into a Talent Agency Appointment Agreement with De Top Entertainment, a Malaysian Company (“DTE Agency”), for services of Yumi Wong, an artist who works for DTE Agency, to be a promoting ambassador of the Yippi App and Marketing:our other products and services. The Companyagreement expires on May 31, 2021.
On July 1, 2020, TOGL Technology entered into a Research Grant Agreement (“Research Agreement”) with Universiti Telekom Sdn. Bhd., a Malaysian company (“UTSB”), which is the registered owner of Multimedia University, a private university that offers tertiary level education in multimedia and technology, among other subjects. TOGL Technology agreed to sponsor and fund a research project to be conducted by PhD postgraduate students attending UTSB to study the effects of extremely low frequency electric fields on cancer cells and normal cells (the “Project”). The Research Agreement expires on June 1, 2023. TOGL Technology agreed to provide RM 221,180 in three yearly installments of RM 118,580, RM 51,300, and RM 51,300 payable pursuant to certain milestones set forth in the Research Agreement. In exchange, TOGL Technology will primarily focusown 90% of any intellectual property developed in connection with the Project, with UTSB owning the remaining 10%. TOGL Technology will be solely entitled to commercialize the intellectual property developed under the Project, and any profits derived from the commercialization will be divided in proportion to the parties respective ownership percentages of the intellectual property.
On January 1, 2020, we entered into a Service Agreement (the “SNA Service Agreement”) with Social Networking Association (“SNA”), whereby SNA agreed to present ten-minute multi-media presentations about us to 1,000 individuals over a period of 90 days. We agreed to pay SNA an aggregate of $30,000 in three installments of $10,000 payable on salesJanuary 1, February 1, and marketingMarch 1, 2020. SNA is directed by Jim Lupkin, a member of its products online though e-commerce. It will pursue paid marking opportunities such as Facebook ads with targeting marketingour Board. Mr. Lupkin was in charge of performing services on behalf of SNA under the SNA Service Agreement. Beginning in June 2020, Mr. Bratt, another member of our Board, was appointed the Executive Vice President and hiring product ambassadors to promote the product. The Company will also pursue organic marketing strategies such as using Eostre social media accounts and search engine optimization to promote the product.Chief Operating Officer of SNA.
Independent AgentsAdvertising Agreements: Eostre will rely
During the fiscal year ended July 31, 2020, we entered into agreements with six different companies to provide advertising services for them on its networkour Yippi app. Pursuant to these agreements, we generated an aggregate of independent agents to sell the products. The agents will be eligible to receive compensation on a numberapproximately $100,000 per month. As of different levels, ranging from retaining profit from retail sales, to bonuses which may be achieved as each such agent becomes a leader of their own network.January 29, 2021 these agreements are still in effect.
Subsequent Event - COVID-19
In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic based on the rapid increase in global exposure. COVID-19 continues to spread throughout the world. The Company isWe are closely monitoring developments and isare taking steps to mitigate the potential risks related to the COVID-19 pandemic to the Company, itsus, our employees, and itsour customers. To protect the Company’sour employees while continuing to provide the services needed by itsour clients, the Companywe limited customer contact and minimized employee contact with other employees by having itsour employees work remotely.
On March 19, 2020, the MCOa Movement Control Order (the “MCO”) was issued by the Malaysian Prime Minister, which reduced movement within Malaysia, andclosed all offices within the country that were non-essential, cancelled all non-essential travel and limited travel from outsiders deemed as non-essential. WhileEventually, the MCO had an original duration of two weeks, it was extended numerous times but the MCO was ultimately lifted as of June 9, 2020, withand certain safe-distance and other controlling protocols (the Recovery Movement Control Order or “RMCO”) were put into place, which were in placeeffect until December 31, 2020. As of January 26, the RMCO has been extended to protect customers and employees.March 31, 2021.
Our office-based employees locatedoffices in Malaysia have been working remotely sinceclosed as a result of the middle of MarchMCO, and our office-based employees located both in Malaysia, Vietnam, Indonesia, and in the United States have been working remotely since the middle of March. All of our employees have been able to continue to address customer needs in a timely fashion. Travel remains restricted to limit the risk of our employees coming in contact with COVID-19.
15 |
Table of Contents |
As a result of COVID-19, we have terminated certain agreements with Agel and Toga Japan. Please see Item 1. Business, Recent Changes to the Eostre Business, for additional information.
Through April 30, 2020, thereJanuary 31, 2021, we have not had any of our employees contract COVID-19. Should a significant number of our employees contract COVID-19, our ability to serve our customers in a timely fashion could be negatively impacted on our ability to serve customers in a timely fashion.
In addition to the termination of the License Agreements and the Yipps Agreement, COVID-19 also has been a noticeablenegatively impacted our business with respect to TogaGo revenue. The MCO restricted travel, which resulted in customers not booking travel and hotels through the Yippi app. TogaGo’s revenue decreased significantly during the year ended July 31, 2020. However, we expect TogaGo’s revenue to increase in accounts receivable foronce the Company. ItMCO is likely that if the COVID-19 pandemic persists and state stay-at-home orders remain in place, more customers will be unable to keep their bills current. lifted.
Further, while we have not yet experienced any interruption to our normal materials and supplies process, it is impossible to predict whether COVID-19 will cause future interruptions and delays.
Through April 30, 2020, we have not had anyResults of our employees contract the COVID-19 virus. Should we have a significant number of our employees contract the COVID-19 virus it could have a negative impact on our ability to serve customers in a timely fashion.Operations (Restated)
The Company was impactedThree months ended October 31, 2019 Compared to Fiscal Three months ended October 31, 2018
|
| Three months ended |
|
|
|
|
|
|
| |||||||
|
| October 31, |
|
|
|
|
|
|
| |||||||
|
| 2019 |
|
| 2018 |
|
| Change |
|
| % |
| ||||
Revenue |
| $ | 3,217,030 |
|
| $ | 742,753 |
|
| $ | 2,474,277 |
|
|
| 333.1 | % |
Cost of Goods Sold |
|
| 1,741,800 |
|
|
| 117,499 |
|
|
| 1,624,301 |
|
|
| 1,382.4 | % |
Gross Profit |
| $ | 1,475,230 |
|
| $ | 625,254 |
|
| $ | 849,976 |
|
|
| 135.9 | % |
Gross Margin |
|
| 45.86 | % |
|
| 84.18 | % |
|
|
|
|
|
|
|
|
Gross Margin by product for the MCO order in regards to TogaGo revenue. The MCO restricted travel, which resulted in customers not booking travel and hotel through the Yippi app. TogaGo’s revenue decreased by 90% in the third quarterthree months ended April 30, 2020. However, we expect TogaGo’s revenue to increase now that the MCO has been lifted.October 31, 2019
|
| Product Sales |
|
| Advertising |
|
| Royalty Fee |
|
| Yippi |
|
| TogaGo |
|
| Total |
| ||||||
Revenue |
| $ | 2,176,756 |
|
| $ | 45,133 |
|
| $ | 60,000 |
|
| $ | 934,642 |
|
| $ | 499 |
|
| $ | 3,217,030 |
|
Cost of Goods Sold |
|
| 51,428 |
|
|
| - |
|
|
| - |
|
|
| 1,245,546 |
|
|
| 444,826 |
|
|
| 1,741,800 |
|
Gross Profit (Loss) |
| $ | 2,125,328 |
|
| $ | 45,133 |
|
| $ | 60,000 |
|
| $ | (310,904 | ) |
| $ | (444,327 | ) |
| $ | 1,475,230 |
|
Gross Margin |
|
| 97,64 | % |
|
| 100.00 | % |
|
| 100.00 | % |
|
| (33.26 | )% |
|
| (89,043.49 | )% |
|
| 45.86 | % |
Table of Contents |
Results of Operations
The Company is focused on the development of the Yippi App and attracting active users to Yippi and the sale of products through direct marketing network. The Company commenced generating advertising revenue from Yippi during the fourth quarter of the year ended July 31, 2019.
Three-Months Ended April 30, 2020 Compared to April 30, 2019
|
| Three months ended |
|
|
|
|
|
|
| |||||||
|
| April 30, |
|
|
|
|
|
|
| |||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| % |
| ||||
Revenue |
| $ | 2,176,670 |
|
| $ | 3,104,032 |
|
| $ | (927,362 | ) |
| (30 | %) | |
Cost of Goods Sold |
|
| 1,950,594 |
|
|
| 1,641,101 |
|
|
| 309,493 |
|
|
| 19 | % |
Gross Profit |
| $ | 226,076 |
|
| $ | 1,462,931 |
|
| $ | (1,236,855 | ) |
| (85 | %) | |
Gross Margin |
|
| 10 | % |
|
| 47 | % |
|
|
|
|
|
|
|
|
Gross Margin by product for the three-monththree months ended April 30, 2020October 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
| Software |
|
|
| |||||||||||||||||||||||||||||||||||||||
|
| Product Sales |
|
| Advertising |
|
| Royalty Fee |
|
| Yippi |
|
| TogaGo |
|
| Total |
|
| Product Sales |
|
| Advertising |
|
| Royalty Fee |
|
| Management Fee |
|
| Yippi |
|
| TogaGo |
|
| & Subscription |
|
| Total |
| ||||||||||||||
Revenue |
| 328,418 |
| 330,108 |
| 120,000 |
| 1,317,423 |
| 80,721 |
| 2,176,670 |
|
| $ | 231,450 |
| $ | 79,860 |
| $ | 60,000 |
| $ | 323,536 |
| $ | - |
| $ | - |
| $ | 47,907 |
| $ | 742,753 |
| ||||||||||||||||||
Cost of goods sold |
|
| 145,521 |
|
|
| - |
|
|
| - |
|
|
| 1,678,018 |
|
|
| 127,055 |
|
|
| 1,950,594 |
| ||||||||||||||||||||||||||||||||
Gross profit (loss) |
|
| 182,897 |
|
|
| 330,108 |
|
|
| 120,000 |
|
|
| (360,595 | ) |
|
| (46,334 | ) |
|
| 226,076 |
| ||||||||||||||||||||||||||||||||
Cost of Goods Sold |
|
| 20,238 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 97,261 |
|
|
| - |
|
|
| - |
|
|
| 117,499 |
| ||||||||||||||||||||||||
Gross Profit (Loss) |
| $ | 211,212 |
|
| $ | 79,860 |
|
| $ | 60,000 |
|
| $ | 323,536 |
|
| $ | (97,261 | ) |
| $ | - |
|
| $ | 47,907 |
|
| $ | 625,254 |
| ||||||||||||||||||||||||
Gross Margin |
| 56 | % |
| 100 | % |
| 100 | % |
| (27 | %) |
| (57 | %) |
| 10 | % |
| 91.26 | % |
| 100.00 | % |
| 100.00 | % |
| 100.00 | % |
| - |
| - |
| 100.00 | % |
| 84.18 | % |
Gross MarginRevenue increased by product forapproximately $2.5 million in the three-monththree months ended April 30,October 31, 2019,
|
|
|
|
|
|
|
|
|
|
| Management |
|
|
|
|
|
|
|
| Software Maintenance & |
|
|
|
| ||||||||
|
| Product Sales |
|
| Advertising |
|
| Royalty Fee |
|
| Fee |
|
| Yippi |
|
| TogaGo |
|
| Subscription |
|
| Total |
| ||||||||
Revenue |
|
| 2,475,312 |
|
|
| 22,720 |
|
|
| 60,000 |
|
|
| 530,487 |
|
|
| - |
|
|
| - |
|
|
| 15,513 |
|
|
| 3,104,032 |
|
Cost of goods sold |
|
| 1,573,083 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 66,894 |
|
|
| 1,124 |
|
|
| - |
|
|
| 1,641,101 |
|
Gross profit (loss) |
|
| 902,229 |
|
|
| 22,720 |
|
|
| 60,000 |
|
|
| 530,487 |
|
|
| (66,894 | ) |
|
| (1,124 | ) |
|
| 15,513 |
|
|
| 1,462,931 |
|
Gross Margin |
|
| 36 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| - |
|
|
| - |
|
|
| 100 | % |
|
| 47 | % |
Despite compared to the steady growth ofprior year period, driven primarily by $934,000 in Yippi in-appsin-app purchases, and TogaGo platform sales over the last three quarters, total revenue decreased by approximately $927,000, or 30%, during the quarter ended April 30, 2020 due to the decreasea $1.9 million increase in direct marketing network revenue of approximately $2.1 million. There have been no management fees during the first three quarters.product sales.
Gross profit decreasedalso increased by approximately $1.2 million, or 85%, during the quarter ended April 30, 2020 due to the decrease in direct marketing network revenue. Gross margin percentage decreased from 47% to 10% driven by sales mix shift from the higher margin businesses of management and information technology to the lower margin business of Yippi in-app purchases and TogaGo platform sales. The Company has invested significantly on the development of system and platform in support of the Yippi App and TogaGo platform operations$850,000 in the early implementation stage but management expects reductions in cost of sales and increases in gross margin gradually over time.
|
| Three months ended |
|
|
|
|
|
| ||||||||
|
| April 30, |
|
|
|
|
|
| ||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| % |
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling, general and administrative expenses |
| $ | 671,394 |
|
| $ | 431,906 |
|
| $ | 239,488 |
|
|
| 55 | % |
Salaries and wages |
|
| 650,030 |
|
|
| 7,576,512 |
|
|
| (6,926,482 | ) |
| (91 | %) | |
Professional fees |
|
| 683,938 |
|
|
| 216,824 |
|
|
| 467,114 |
|
|
| 215 | % |
Depreciation |
|
| 137,468 |
|
|
| 18,311 |
|
|
| 119,157 |
|
|
| 651 | % |
Total operating expenses |
|
| 2,142,830 |
|
|
| 8,243,553 |
|
|
| (6,100,723 | ) |
| (74 | %) | |
Loss from Operations |
|
| 1,916,754 |
|
|
| 6,780,622 |
|
|
| (4,863,868 | ) |
| (72 | %) | |
Other Income |
|
| 19,211 |
|
|
| 3,994 |
|
|
| 15,217 |
|
|
| 381 | % |
Net Loss |
| $ | 1,897,543 |
|
| $ | 6,776,628 |
|
| $ | (4,879,085 | ) |
| (72 | %) |
Net loss decreased by approximately $4.9 million, or 72%, in the quarterthree months ended April 30, 2020,October 31, 2019, compared to the prior year period, due primarily to the decreasean increase in operating expenses primarily attributed to the decrease in stock-based compensationproduct sales of approximately $6.8 million. During the three months ended April 30, 2019, the Company issued 782,948 shares1.8 million, but offset by losses resulting from approximately $1.2 million of cost of goods sold in connection with [Yippi in-app purchases] and approximately $444,000 in [costs of goods sold] for TogaGo related to booking cost, hotel disbursement and handling charge, as well as the Company’s common stock as employee compensation.
Segment Operating Performance
Our operating performance by segment are as followsdecision to no longer provide general management services to Agel in exchange for the three months ended April 30, 2020 and 2019:
Three months ended April 30, 2020:
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Vietnam |
|
| Indonesia |
|
| Total |
| ||||||
Revenue |
| $ | 120,000 |
|
| $ | 1,714,740 |
|
| $ | 120,259 |
|
| $ | - |
|
| $ | 221,671 |
|
| $ | 2,176,670 |
|
Gross Profit (Loss) |
| $ | 120,000 |
|
| $ | (69,090 | ) |
| $ | 78,072 |
|
| $ | - |
|
| $ | 97,094 |
|
| $ | 226,076 |
|
Gross Margin |
|
| 100 | % |
| (4 | %) |
|
| 65 | % |
|
| - |
|
|
| 100 | % |
|
| 100 | % | |
Net Loss |
| $ | (601,782 | ) |
| $ | (851,123 | ) |
| $ | (68,062 | ) |
| $ | (7,923 | ) |
| $ | (368,653 | ) |
| $ | (1,897,543 | ) |
Three months ended April 30, 2019:
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Indonesia |
|
| Total |
| |||||
Revenue |
| $ | 60,000 |
|
| $ | 568,721 |
|
| $ | 486,395 |
|
| $ | 1,988,916 |
|
| $ | 3,104,032 |
|
Gross Profit (Loss) |
| $ | 60,000 |
|
| $ | 500,704 |
|
| $ | 441,242 |
|
| $ | 460,985 |
|
| $ | 1,462,931 |
|
Gross Margin |
|
| 100 | % |
|
| 88 | % |
|
| 91 | % |
|
| 23 | % |
|
| 47 | % |
Net Income (Loss) |
| $ | (6,988,670 | ) |
| $ | (301,933 | ) |
| $ | 93,677 |
|
| $ | 420,298 |
|
| $ | (6,776,628 | ) |
Despite the steady growth of Yippi-in apps purchases and TogaGo platform sales over the last three quarters, total revenuea management fee. Gross margin percentage decreased by approximately $927,000to 46% in the three months ended April 30 2020,October 31, 2019 compared to the prior year period, due to the decrease in direct marketing network revenue in Indonesia and Taiwan and the absence of a management fee in Malaysia. The Company gradually restructured its business operations from direct marketing network, management, and information technology to Yippi in-app purchases and TogaGo platform sales.
Net loss decreased by approximately $4.9 million in the three months ended April 30, 2020, compared to the prior year period, due to the decrease in salaries and wages primarily attributed to the decrease of stock-based compensation of approximately $6.8 million. In the three months ended April 30, 2019, the Company issued 782,948 shares of the Company’s common stock as employee compensation. In addition, net loss in Malaysia and Indonesia both increased due to the increase in sales and marketing commissions and increased payroll costs for workforce reinforcement in support of business operations.
Nine-Months Ended April 30, 2020 Compared to April 30, 2019
|
| Nine months ended |
|
|
|
|
|
|
| |||||||
|
| April 30, |
|
|
|
|
|
|
| |||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| % |
| ||||
Revenue |
| $ | 8,719,525 |
|
| $ | 4,703,168 |
|
| $ | 4,016,357 |
|
|
| 85 | % |
Cost of Goods Sold |
|
| 6,335,778 |
|
|
| 1,885,324 |
|
|
| 4,450,454 |
|
|
| 236 | % |
Gross Profit |
| $ | 2,383,747 |
|
| $ | 2,817,844 |
|
|
| (434,097 | ) |
| (15 | %) | |
Gross Margin |
|
| 27 | % |
|
| 60 | % |
|
|
|
|
|
|
|
|
Gross Margin by product for the nine-month ended April 30, 2020
|
| Product Sales |
|
| Advertising |
|
| Royalty Fee |
|
| Yippi |
|
| TogaGo |
|
| Total |
| ||||||
Revenue |
|
| 3,656,589 |
|
|
| 474,543 |
|
|
| 360,000 |
|
|
| 3,200,370 |
|
|
| 1,028,023 |
|
|
| 8,719,525 |
|
Cost of goods sold |
|
| 1,448,255 |
|
|
| - |
|
|
| - |
|
|
| 3,965,691 |
|
|
| 921,832 |
|
|
| 6,335,778 |
|
Gross profit (loss) |
|
| 2,208,334 |
|
|
| 474,543 |
|
|
| 360,000 |
|
|
| (765,321 | ) |
|
| 106,191 |
|
|
| 2,383,747 |
|
Gross Margin |
|
| 60 | % |
|
| 100 | % |
|
| 100 | % |
| (24%) |
|
|
| 10 | % |
|
| 27 | % |
Gross Margin by product for the nine-month ended April 30, 2019
|
| Product Sales |
|
| Advertising |
|
| Royalty Fee |
|
| Management Fee |
|
| Yippi |
|
| TogaGo |
|
| Subscription |
|
| Total |
| ||||||||
Revenue |
|
| 3,170,590 |
|
|
| 167,996 |
|
|
| 180,000 |
|
|
| 1,072,630 |
|
|
| - |
|
|
| - |
|
|
| 111,952 |
|
|
| 4,703,168 |
|
Cost of goods sold |
|
| 1,640,370 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 243,830 |
|
|
| 1,124 |
|
|
| - |
|
|
| 1,885,324 |
|
Gross profit (loss) |
|
| 1,530,220 |
|
|
| 167,996 |
|
|
| 180,000 |
|
|
| 1,072,630 |
|
|
| (243,830 | ) |
|
| (1,124 | ) |
|
| 111,952 |
|
|
| 2,817,844 |
|
Gross Margin |
|
| 48 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| - |
|
|
| - |
|
|
| 100 | % |
|
| 60 | % |
Revenue increased by $4.0 million, or 85%, in the nine months ended April 30, 2020, compared to the prior year period, driven by a $3.2 million increase in Yippi in-app purchases, a $1.0 million increase in TogaGo platform sales, and a $486,000 increase in direct marketing network revenue.
Gross profit decreased by $434,000, or 15%, in the nine months ended April 30, 2020, compared to the prior year period, due to the increase in cost of goods sold of $4.5 million as a result of the increase in revenue of $4.0 million. Gross margin percentage decreased to 27% in the nine months ended April 30, 2020 compared to 60%84% in the prior year period, primarily driven by the sales mix shift from the higher margin businesses of management and information technology to the lower margin business of Yippi in-app purchases. The Company has invested significantly on the development of a systemin staff and platform in support of the Yippi and TogaGo operations,infrastructure, which are in the early implementation stage, but management expects reductions in costour general and administrative expenses as a percentage of sales and increases in gross margin gradually over time.revenue going forward.
|
| Nine months ended |
|
|
|
|
| Three months ended |
|
|
|
|
| |||||||||||||||||||
|
| April 30, |
|
|
|
|
| October 31, |
|
|
|
|
| |||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| % |
|
| 2019 |
|
| 2018 |
|
| Change |
|
| % |
| ||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Selling, general and administrative expenses |
| $ | 5,830,163 |
| $ | 1,725,779 |
| $ | 4,104,384 |
| 238 | % | ||||||||||||||||||||
General and administrative expenses |
| $ | 3,726,046 |
| 238,306 |
| 3,487,740 |
| 1,463.6 | % | ||||||||||||||||||||||
Salaries and wages |
| 5,751,943 |
| 8,224,676 |
| (2,472,733 | ) |
| (30 | %) |
| 840,218 |
| 400,407 |
| 439,811 |
| 109.8 | % | |||||||||||||
Professional fees |
| 1,617,526 |
| 846,465 |
| 771,061 |
| 91 | % |
| 475,115 |
| 311,619 |
| 163,496 |
| 52.5 | % | ||||||||||||||
Depreciation |
|
| 323,731 |
|
|
| 41,974 |
|
|
| 281,757 |
|
|
| 671 | % |
|
| 50,803 |
|
|
| 10,524 |
|
|
| 40,279 |
|
|
| 382.7 | % |
Total operating expenses |
|
| 13,523,363 |
|
|
| 10,838,894 |
|
|
| 2,684,469 |
|
|
| 25 | % |
|
| 5,092,182 |
|
|
| 960,856 |
|
|
| 4,131,326 |
|
|
| 430.0 | % |
Loss from Operations |
| 11,139,616 |
| 8,021,050 |
| 3,118,566 |
| 39 | % |
| (3,616,952 | ) |
| (335,602 | ) |
| (3,281,350 | ) |
| 977.8 | % | |||||||||||
Other Income |
|
| 164,704 |
|
|
| 6,648 |
|
|
| 158,056 |
|
| 2377 | % |
|
| 65,980 |
|
|
| 139 |
|
|
| 65,841 |
|
|
| 47,367.6 | % | |
Net Loss |
| $ | 10,974,912 |
|
| $ | 8,014,402 |
|
| $ | 2,960,510 |
|
|
| 37 | % |
| $ | (3,551,373 | ) |
|
| (335,463 | ) |
|
| (3,215,910 | ) |
|
| 958.6 | % |
Net loss increased by approximately $3.0$3.2 million, or 37%958.6%, in the ninethree months ended April 30, 2020,October 31, 2019, compared to the prior year period, due to thean increase in operating expenses primarily attributed to the increases in selling, general and administration expenses and professional fees. Selling, generaladministrative expenses. General and administrative expenses increased primarily due to the increase in sales and marketing commissionscommission of $2.2$2.3 million and advertising and promotion fees of $1.2 million, which were$764,000 driven by increasesincrease in sales activities and advertising and marketing efforts. Professional fees increased during the nine months ended April 30, 2020 mainly attributed to the increase in legal fees of $440,000 related to due diligence, SEC filings, and corporate status matters and maintenance matters.effort.
17 |
Table of Contents |
Segment Operating Performance
Our operating performance by segment are as follows for the ninethree months ended April 30, 2020October 31, 2019 and 2019:2018:
NineThree months ended April 30, 2020:
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Vietnam |
|
| Indonesia |
|
| Total |
| ||||||
Revenue |
| $ | 360,000 |
|
| $ | 4,517,910 |
|
| $ | 743,777 |
|
| $ | - |
|
| $ | 3,097,838 |
|
| $ | 8,719,525 |
|
Gross Profit (Loss) |
| $ | 360,000 |
|
| $ | (172,875 | ) |
| $ | 630,421 |
|
| $ | - |
|
| $ | 1,566,201 |
|
| $ | 2,383,747 |
|
Gross Margin |
|
| 100 | % |
| (4 | %) |
|
| 85 | % |
|
| - |
|
|
| 51 | % |
|
| 27 | % | |
Net Loss |
| $ | (4,654,331 | ) |
| $ | (3,654,565 | ) |
| $ | (363,802 | ) |
| $ | (23,625 | ) |
| $ | (2,278,589 | ) |
| $ | (10,974,912 | ) |
Nine months ended April 30,October 31, 2019:
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Indonesia |
|
| Total |
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Vietnam |
|
| Indonesia |
|
| Total |
| |||||||||||
Revenue |
| $ | 180,000 |
| $ | 2,534,252 |
| $ | - |
| $ | 1,988,916 |
| $ | 4,703,168 |
|
| $ | 60,000 |
| $ | 975,567 |
| $ | 308,023 |
| $ | - |
| $ | 1,873,440 |
| $ | 3,217,030 |
| |||||||||
Gross Profit (Loss) |
| $ | 180,000 |
| $ | 1,107,626 |
| $ | 1,069,233 |
| $ | 460,985 |
| $ | 2,817,844 |
| ||||||||||||||||||||||||||||
Gross Profit |
| $ | 60,000 |
| $ | (704,924 | ) |
| $ | 267,339 |
| $ | - |
| $ | 1,852,815 |
| $ | 1,475,230 |
| ||||||||||||||||||||||||
Gross Margin |
| 100 | % |
| 82 | % |
| 90 | % |
| 23 | % |
| 60 | % |
| 100.00 | % |
| (72.26 | )% |
| 86.79 | % |
| - |
| 98.90 | % |
| 45,86 | % | ||||||||||||
Net Loss |
| $ | (7,465,555 | ) |
| $ | (801,206 | ) |
| $ | (91,427 | ) |
| $ | 343,786 |
| $ | (8,014,402 | ) |
| $ | (467,172 | ) |
| $ | (2,112,575 | ) |
| $ | (286,847 | ) |
| $ | (7,935 | ) |
| $ | (676,844 | ) |
| $ | (3,551,373 | ) |
RevenueThree months ended October 31, 2018:
|
| USA |
|
| Malaysia |
|
| Taiwan |
|
| Indonesia |
|
| Total |
| |||||
Revenue |
| $ | 60,000 |
|
| $ | 451,303 |
|
| $ | 231,450 |
|
| $ | - |
|
| $ | 742,753 |
|
Gross Profit |
| $ | 60,000 |
|
| $ | 354,042 |
|
| $ | 211,212 |
|
| $ | - |
|
| $ | 625,254 |
|
Gross Margin |
|
| 100.00 | % |
|
| 78.45 | % |
|
| 91.26 | % |
|
| - |
|
|
| 84.18 | % |
Net Loss |
| $ | (268,647 | ) |
| $ | 44,093 |
|
| $ | (66,926 | ) |
| $ | (43,983 | ) |
| $ | (335,463 | ) |
During the three months ended October 31, 2019 most of the Company’s revenue was derived from Yippi in-app purchases in Malaysia, and product sales generated in Taiwan and Indonesia. Net loss increased by approximately $4.0$3.2 million in the nine months ended April 30, 2020 compared to the prior year period driven by the growth across each of our segments primarily, with respect to the increase in Yippi in-app purchases and TogaGo platform sales in Malaysia and the increase in direct marketing network revenue in Indonesia and Taiwan.
Net Loss increased by approximately $3.0 million in the nine months ended April 30, 2020 compared to the prior year period, due to the increase in operating expenses primarily attributed to the increase in payroll costs and legal fees for the Company and the increase in sales and marketing commissions and payroll costs and advertising and promotion fees in Malaysia and Indonesia in support of business operations..expenses.
Plan of Operation
The Company’sOur current business activities do not at this time provide positive cash flow, although the Company haswe commenced generating revenue forduring the third quarter ended April 30, 2018. During the next twelve months, we anticipate incurring costs related to:
| i. | Further development to the Yippi app to add additional features; |
ii. | Marketing the Yippi app to users located throughout Asia; | |
|
| Developing and marketing the Eostre business throughout Asia; |
iv. | Investigating, analyzing, and consummating potential acquisition or merger opportunities; | |
|
| Other ongoing general and administrative type costs; and |
|
| The preparation and filing of |
We believe that we are nearing the point where we will commence generating a net profit on a quarterly basis from advertising within the Yippi app, and through sales within the direct marketing network, although we cannot predict exactly when this will occur. We have begun generating gross revenues and believe our revenue will increase during the current fiscal year.
During the prior fiscal year, the Company temporarily adopted selling products to assist the Company to generate cash flow to support its operations while the Company continued to develop the Yippi app. The Company has decided that due to the success of adding this division to the Company, that investing further into the direct marketing network was in the Company’s best interest and has acquired the subsidiary named Eostre. See Note 9 for additional details.
We believe that in order to grow our business going forward, we will need to continue to invest in marketing and advertising of our Yippi app and for our Eostre business throughout Asia. Because of this, we expect going forward to continue to invest heavily in marketing and advertising. We believe we will be able to meet our operating costs and additional marketing and advertising in excess of our revenues, through additional amounts, as necessary, to be loaned to or invested in us by our stockholders and management, although no agreements have been entered into with anyone.
Liquidity and Capital Resources
|
| April 30, |
| July 31, |
|
|
|
|
| October 31, |
| July 31, |
|
|
|
|
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| % |
|
| 2019 |
|
| 2019 |
|
| Change |
|
| % |
| ||||||||
Cash and cash equivalents |
| $ | 11,269,840 |
| $ | 14,916,556 |
| $ | (3,646,716 | ) |
| (24 | %) |
| $ | 12,902,002 |
| $ | 14,916,556 |
| $ | (2,014,554 | ) |
| (13.5 | %) | ||||||
Total Assets |
| $ | 18,660,826 |
| $ | 21,006,426 |
| $ | (2,345,600 | ) |
| (11 | %) |
| $ | 22,023,046 |
| $ | 23,554,425 |
| $ | (1,531,379 | ) |
| (6.5 | %) | ||||||
Total Liabilities |
| $ | 11,547,090 |
| $ | 6,090,089 |
| $ | 5,457,001 |
| 90 | % |
| $ | 11,065,793 |
| $ | 9,049,782 |
| $ | 2,016,011 |
| 22.3 | % | ||||||||
Working Capital |
| $ | 2,639,648 |
| $ | 10,491,941 |
| $ | (7,852,293 | ) |
| (75 | %) |
| $ | 6,397,669 |
| $ | 10,080,247 |
| $ | (3,682,578 | ) |
| (36.5 | %) |
As of April 30, 2020,October 31, 2019, our total assets were $18.7$22.0 million, and our total liabilities were $11.5$11.1 million. Liabilities were comprised primarily of our current liabilities of $11.5$10.8 million, of which included accounts payable and accrued liabilities of $5.7$5.3 million and deferred revenue of $5.6$5.3 million.
Our stockholders’ equity decreased from $15$14.5 million as of July 31, 2019 to $7.1$11.0 million as of April 30, 2020.October 31, 2019.
We had $11.3$12.9 million in cash as of April 30, 2020,October 31, 2019, and the Company had assets to meet ongoing expenses or debts that may accumulate. Accumulated deficit was $35.2$28.2 million as of April 30, 2020October 31, 2019 compared to accumulated deficit of approximately $24.2$24.6 million as of July 31, 2019.
Our working capital decreased by $7.9 million$3.7 from $10.5$10.1 million at July 31, 2019, as compared to $2.6$6.4 million at April 30, 2020,October 31, 2019, due primarily to the decrease in our current assets for the decrease by cash and cash equivalents of $2.0 million and the increase in our current liabilities, by $5.4 million, as explained by theconsisting of an increase in accounts payable and accrued liabilities of $1.5$1.1 million and deferred revenue of $3.8 million, and the decrease in current assets for the decrease in cash and cash equivalents of $3.6 million.$534,000.
Cash Flow
|
| Nine months ended |
|
|
|
|
|
|
| |||||||
|
| April 30, |
|
| Change |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| Amount |
|
| % |
| ||||
Cash Flows (used in) operating activities |
| $ | (3,272,933 | ) |
| $ | (101,161 | ) |
| $ | (3,171,772 | ) |
|
| 3,135 | % |
Cash Flows (used in) investing activities |
|
| (247,333 | ) |
|
| (198,017 | ) |
|
| 49,316 |
|
|
| 25 | % |
Cash Flows provided by (used in) financing activities |
|
| (133,934 | ) |
|
| 2,149,959 |
|
|
| (2,283,893 | ) |
| (106%) |
| |
Effects on changes in foreign exchange rate |
|
| 7,484 |
|
|
| (98,153 | ) |
|
| 105,637 |
|
| (108%) |
| |
Net change in cash and cash equivalents during period |
| $ | (3,646,716 | ) |
| $ | 1,752,628 |
|
| $ | (5,399,344 | ) |
| (308%) |
|
Table of Contents |
Cash Flow
|
| Three months ended |
|
|
|
|
| |||||||||
|
| October 31, |
|
| Change |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| Amount |
|
| % |
| ||||
Cash Flows (used in) operating activities |
| $ | (1,962,207 | ) |
| $ | (357,027 | ) |
| $ | (1,605,180 | ) |
|
| 449.6 | % |
Cash Flows (used in) investing activities |
|
| (77,769 | ) |
|
| (20,566 | ) |
|
| (57,203 | ) |
|
| 278.1 | % |
Cash Flows provided by financing activities |
|
| 62,525 |
|
|
| 1,249,938 |
|
|
| (1,187,413 | ) |
|
| (95.0 | )% |
Effects on changes in foreign exchange rate |
|
| (37,103 | ) |
|
| 51,703 |
|
|
| (88,806 | ) |
|
| (171.8 | )% |
Net change in cash and cash equivalents during period |
| $ | (2,014,554 | ) |
| $ | 924,048 |
|
| $ | (2,938,602 | ) |
|
| (318.0 | )% |
Cash Flow from Operating Activities
We haveAs of October 31, 2019, we had not generated significant positive cash flow from operating activities. For the nine-month periodthree months ended April 30, 2020,October 31, 2019, net cash flows used in operating activities was $3.3$2.0 million compared to $101,000$357,000 used during the nine-month periodthree months ended April 30, 2019.October 31, 2018. Cash flows used in operating activities for the nine-monthsthree months ended April 30, 2020,October 31, 2019, comprised of a net loss of $11$3.6 million, which was reduced by non-cash expenses of $324,000$51,000 for depreciation and $3.4 million$44,000 for stock-based compensation and a net change in working capital of $4.0$1.5 million. Cash flows used in operating activities for the nine-monthsthree months ended April 30, 2019,October 31, 2018, comprised of a net loss of $8.0 million,$335,000, which was reduced by non-cash expenses of $42,000$11,000 for depreciation and $6.9 million for stock-based compensation andincreased by a net change in working capital of $1.1 million.$32,000.
Cash Flows from Investing Activities
During the nine-month periodthree months ended April 30, 2020,October 31, 2019, we used $247,000$78,000 in investing activities for the purchase of property and equipment. During the nine-month periodthree months ended April 30, 2019,October 31, 2018, we used $198,000$21,000 for the purchase of property and equipment.
Cash Flows from Financing Activities
We have financed our operations primarily from either advances and loans from related and third parties or the issuance of equity instruments. For the nine-month periodthree months ended April 30, 2020, net cash used in financing activities was $134,000, consisting of the repayment for cancellation of stock options of $157,000 and the repayment to related parties of $86,000, offset by common stock subscribed of $3,000 and proceeds from related parties of $106,000. For the nine-month period ended April 30,October 31, 2019, net cash provided by financing activities was $2.2$63,000, consisting of proceeds from related parties of $67,000, offset by repayment to related parties of $4,000. For the three months ended October 31, 2018, net cash provided by financing activities was $1.2 million, consisting of proceeds from the sale of shares of our common stock of $2.1$1.3 million and proceeds from related parties of $127,000,$38,000, offset by repayment to related parties of $75,000.$42,000.
Application of Critical Accounting Policies
We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact on our business operations and any associated risks related to these policies are discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported or expected financial results.
In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with U.S. GAAP. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
The material estimates for our company are that of the stock-based compensation recorded for options. The fair values of options are determined using the Black-Scholes option pricing model. We have no historical data on the accuracy of these estimates. The estimated sensitivity to change is related to the various variables of the Black-Scholes option pricing model. The specific quantitative variables are included in the notes to the consolidated financial statements.
19 |
Table of Contents |
We prepare our financial statements in conformity with U.S. GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
For our critical accounting policies and estimates for “Revenue Recognition” and “Leases” see Note 1, Summary of Significant Accounting Policies, to the unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report. Other than the policy changes disclosed in Note 1, Summary of Significant Accounting Policies, to the unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report, there have been no material changes to our critical accounting policies and estimates during the ninethree months ended April 30, 2020October 31, 2019 from those disclosed in our Annual Report on Form 10-K for the year ended July 31, 2019.
Off-Balance Sheet Arrangements
We do not haveengage in any activities involving variable interest entities or off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to an investor in our securities.arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’sOur management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Companyus in the reports that the Company fileswe file or submitssubmit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms,forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’sissuer’s management, including its principal executive officer or officersofficer(s) and principal financial officer or officers,officer(s), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
In accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was completed under the supervision and with the participation of the Company’sour management, including the Company’sour Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’sour disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on that evaluation, the Company’sour management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’sour disclosure controls and procedures were not effective in providing reasonable assurance that information required to be disclosed in the Company’sour reports filed or submitted under the Exchange Act was recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
In connection with our continued monitoring and maintenance of our controls procedures as part of the implementation of Section 404 of the Sarbanes-Oxley Act, we continue to review, test, and improve the effectiveness of our internal controls. There were nohave not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period ending April 30, 2020,October 31, 2019 or subsequent to the date the Company completed its evaluation, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
In response to the COVID-19 pandemic, our accounting employees began working remotely beginning in mid-March 2020. We are continually monitoring and assessing the impact of the COVID-19 pandemic on our internal controls to minimize the impact to their design and operating effectiveness while these employees work remotely.
Table of Contents |
There are no legal proceedings, which are pending or have been threatened against us or any of our officers, directors, or control persons, of which management is aware.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On February 10, 2020, the Company approved the issuance of 113 shares of the Company’s common stock to its independent Directors, Iain Bratt, Jim Lupkin, and Shemori BoShae Guinn, pursuant to the terms of their Independent Director Agreements. The shares had an aggregate value of $1,500, which equals the total number of shares multiplied by the average of the closing price of our common stock as reported on OTC Market for the 30 trading days preceding the end of the second fiscal quarter, or $13.35 per share. These issuances of shares of the Company’s common stock are qualified for the exemption from registration contained in Section 4(a)(2) of the Securities Act.None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
None.
Table of Contents |
Exhibits:
| ||
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | ||
| ||
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | ||
| ||
| ||
101.INS | XBRL Instance Document* | |
| ||
101.SCH | XBRL Taxonomy Extension Schema Document* | |
| ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document* | |
| ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document* | |
| ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document* | |
| ||
101.PRE | XBRL Taxonomy Presentation Linkbase Document* |
___________
*filedFiled herewith
Table of Contents |
In accordance with the requirements of the Securities Exchange Act of 1934, as amended,, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TOGA LIMITED | ||||
| ||||
| By: | /s/ Toh Kok Soon | ||
Toh Kok Soon | ||||
| President, Chief Executive Officer and Member of the Board | |||
|
| By: | /s/ Alexander Henderson | |
Alexander Henderson | |||
Chief Financial Officer, Secretary, Treasurer and Member of the Board |