UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended October 31, 2019
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 333-228847
MU GLOBAL HOLDING LIMITED
(Exact name of registrant issuer as specified in its charter)
| Nevada | 36-4838886 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
5F-1., No. 106, Chang’an W. Rd., Datong Dist.,
Taipei City, 103 Taiwan (R.O.C.)
(Address of principal executive offices, including zip code)
Registrant’s phone number, including area code+886905153139
Indicate by check mark whether the registrant (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 [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit and post such files).
YES [ ] NO [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer [ ] Accelerated Filer [ ] Non-accelerated Filer [ ] Smaller reporting company [X] Emerging growth company [X]
If an emerging growth company, indicate 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. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock | The OTC Market – Pink Sheets |
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has fled all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at December 13, 2019 | |
| Common Stock, $.0001 par value | 59,434,838 |
TABLE OF CONTENTS
| 2 |
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
MU GLOBAL HOLDING LIMITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| F-1 |
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 31, 2019 AND JULY 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| As of | As of | |||||||
| October 31, 2019 | July 31, 2019 | |||||||
| Unaudited | Audited | |||||||
| ASSETS | ||||||||
| NON CURRENT ASSETS | ||||||||
| Property, plant and equipment | $ | 465,248 | $ | 406,063 | ||||
| 465,248 | 406,063 | |||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 170,100 | $ | 394,403 | ||||
| Other receivables | 18,526 | 18,803 | ||||||
| Prepayments and deposits | 142,833 | 175,427 | ||||||
| Amount due from related parties | 10,460 | - | ||||||
| Inventories | 48,586 | 43,946 | ||||||
| Total Current Assets | $ | 390,505 | $ | 632,579 | ||||
| TOTAL ASSETS | 855,753 | 1,038,642 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Loan from director | $ | 42,631 | $ | - | ||||
| Other payables and accrued liabilities | 63,676 | 92,855 | ||||||
| Amount due to related parties | 38,727 | 44,611 | ||||||
| Deposit from franchisee | 46,019 | 32,202 | ||||||
| Total Current Liabilities | $ | 191,053 | $ | 169,668 | ||||
| TOTAL LIABILITIES | $ | 191,053 | $ | 169,668 | ||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $0.0001 par value; 200,000,000 shares authorized; None issued and outstanding | - | - | ||||||
| Common Shares, par value $0.0001; 600,000,000 shares authorized, 59,434,838 shares issued and outstanding as of October 31, 2019 and July 31, 2019 | $ | 5,943 | $ | 5,943 | ||||
| Additional paid in capital | 1,830,300 | 1,830,300 | ||||||
| Foreign currency adjustment | (3,211 | ) | 8,727 | |||||
| Accumulated deficit | (1,168,332 | ) | (975,996 | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | $ | 664,700 | $ | 868,974 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 855,753 | $ | 1,038,642 | ||||
See accompanying notes to condensed consolidated financial statements.
| F-2 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSSES
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019 and 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
Three months ended October 31, | ||||||||
| 2019 | 2018 | |||||||
| REVENUE | $ | 27,170 | $ | - | ||||
| COST OF REVENUE | (2,069 | ) | - | |||||
| GROSS PROFIT | 25,101 | - | ||||||
| REALISED GAIN ON FOREIGN EXCHANGE | - | - | ||||||
| UNREALISED LOSS ON FOREIGN EXCHANGE | - | - | ||||||
| OTHER INCOME | 3,721 | 1,105 | ||||||
| SELLING, GENERAL AND ADMINISTRATIVE AND OPERATING EXPENSES | (221,158 | ) | (59,904 | ) | ||||
| LOSS BEFORE INCOME TAX | (192,336 | ) | (58,799 | ) | ||||
| TAX PROVISION | - | - | ||||||
| NET LOSS | $ | (192,336 | ) | $ | (58,799 | ) | ||
| Other comprehensive income/(loss): | ||||||||
| - Foreign currency translation adjustment | (11,938 | ) | (2,406 | ) | ||||
| TOTAL COMPREHENSIVE LOSS | (204,274 | ) | (61,205 | ) | ||||
| Net income/(loss) per share- Basic and diluted | (0.00 | ) | (0.00 | ) | ||||
| Weighted average number of common shares outstanding – Basic and diluted | 59,434,838 | 58,505,000 | ||||||
See accompanying notes to condensed consolidated financial statements.
| F-3 |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THREE MONTHS ENDED OCTOBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| Three months ended 31 October 2019 | ||||||||||||||||||||||||
COMMON SHARES | ADDITIONAL | ACCUMULATED OTHER | ||||||||||||||||||||||
| Number of Shares | Amount | PAID-IN CAPITAL | COMPREHENSIVE INCOME | ACCUMULATED DEFICIT | TOTAL EQUITY | |||||||||||||||||||
| Balance as of August 1, 2019 | 59,434,838 | $ | 5,943 | $ | 1,830,300 | $ | 8,727 | $ | (975,996 | ) | $ | 868,974 | ||||||||||||
| Net loss for the period | - | - | - | - | (192,336 | ) | $ | (192,336 | ) | |||||||||||||||
| Foreign currency translation adjustment | - | $ | - | $ | - | $ | (11,938 | ) | $ | - | $ | (11,938 | ) | |||||||||||
| Balance as of October 31, 2019 | 59,434,838 | $ | 5,943 | $ | 1,830,300 | $ | (3,211 | ) | $ | (1,168,332 | ) | $ | 664,700 | |||||||||||
| Three months ended October 31, 2018 (Unaudited) | ||||||||||||||||||||||||
| Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||
| Number of shares | Amount | Paid-in Capital | Comprehensive Loss | Accumulated Deficit | Stockholders’ Equity | |||||||||||||||||||
| Balance as of August 1, 2018 | 58,505,000 | $ | 5,851 | $ | 900,554 | $ | - | $ | (29,716 | ) | $ | 876,689 | ||||||||||||
| Foreign currency translation | - | - | - | (2,406 | ) | - | (2,406 | ) | ||||||||||||||||
| Net loss | - | - | - | - | (58,799 | ) | (58,799 | ) | ||||||||||||||||
| Balance as of October 31, 2018 (Unaudited) | 58,505,000 | $ | 5,851 | $ | 900,554 | $ | (2,406 | ) | $ | (88,515 | ) | $ | 815,484 | |||||||||||
See accompanying notes to condensed consolidated financial statements.
| F-4 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| Three months ended October 31 | ||||||||
| 2019 | 2018 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (192,336 | ) | $ | (58,799 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 28,412 | 7,510 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivables | 277 | - | ||||||
| Deposit & Prepayment | 32,594 | (17,455 | ) | |||||
| Other payables and accrued liabilities | (29,179 | ) | 13,690 | |||||
| Inventory | (4,640 | ) | - | |||||
| Amount due to related party | (5,884 | ) | 94,863 | |||||
| Amount due from related party | (10,460 | ) | - | |||||
| Deposit from franchisee | 13,817 | - | ||||||
| Net cash (used in)/ generate from operating activities | $ | (167,399 | ) | $ | 39,809 | |||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property, plant and equipment | $ | (97,945 | ) | $ | (40,580 | ) | ||
| Net cash used in investing activities | $ | (97,945 | ) | $ | (40,580 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Loan from director | $ | 42,631 | ||||||
| Subscription receivables | - | 800,000 | ||||||
| Net cash provided by financing activities | $ | 42,631 | $ | 800,000 | ||||
| Effect of exchange rate changes on cash and cash equivalents | (1,590 | ) | (2,406 | ) | ||||
| Net change in cash and cash equivalents | (224,303 | ) | 796,823 | |||||
| Cash and cash equivalents, beginning of period | 394,403 | 106,417 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 170,100 | $ | 903,240 | ||||
| SUPPLEMENTAL CASH FLOWS INFORMATION | ||||||||
| Income taxes paid | $ | - | $ | - | ||||
| Interest paid | $ | - | $ | - | ||||
See accompanying notes to condensed consolidated financial statements.
| F-5 |
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND ORGANIZATION
MU Global Holding Limited is organized as a Nevada limited liability company, incorporated on June 4, 2018. For purposes of consolidated financial statement presentation, MU Global Holding Limited and its subsidiary are herein referred to as “the Company” or “we”. The Company business of which planned principal operations are to provide wellness and beauty services to customers via Company owned outlets, franchised outlets or distribution of our product to third party wellness and beauty salon.
On June 29, 2018, the Company acquired 100% interest in MU Worldwide Group Limited, a private limited liability company incorporated in Seychelles and its subsidiary MU Global Holding Limited, a private limited liability company incorporated in Hong Kong. On August 16, 2018, the Hong Kong Company incorporated MU Global Health Management (Shanghai) Limited, a wholly owned subsidiary of which incorporated in Shanghai, People Republic of China.
Details of the Company’s subsidiary:
| Company name | Place and date of incorporation | Particulars of issued capital | Principal activities | ||||
| 1. | MU Worldwide Group Limited | Seychelles, June 7, 2018 | 100 share of ordinary share of US$1 each | Investment holding | |||
| 2. | MU Global Holding Limited | Hong Kong, January 30, 2018 | 1 ordinary share of HKD$1 | Providing SPA and Wellness service in Hong Kong | |||
| 3. | MU Global Health Management | Shanghai, August 16, 2018 | RMB 7,400,300 | Providing SPA and Wellness service in China |
| F-6 |
MU GLOBAL HOLDING LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
The Company has adopted its fiscal year-end to be July 31.
Basis of consolidation
The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company accounts and transactions have been eliminated upon consolidation.
Use of estimates
Management uses estimates and assumptions in preparing these financial statements in accordance with US GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities in the balance sheets, and the reported revenue and expenses during the periods reported. Actual results may differ from these estimates.
Revenue recognition
In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605,“Revenue Recognition”, the Company recognizes revenue from sales of goods when the following four revenue criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) selling price is fixed or determinable; and (4) collectability is reasonably assured.
Revenue is measured at the fair value of the consideration received or receivable, net of discounts and taxes applicable to the revenue. The Company derives its revenue from provision of wellness and beauty services to customers via Company owned outlets, franchised outlets or distribution of our product to third party wellness and beauty salon.
Cost of revenue
Cost of revenue includes the cost of services and product incurred to provide wellness and beauty services and purchase of products.
Cash and cash equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Property, Plant and equipment
Property, Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational:
| Categories | Estimated useful life | |
| Leasehold improvement | 11 months to 60 months (over remaining lease term) | |
| Leasable equipment | 5 years | |
| Computer hardware and software | 3 years | |
| Office equipment | 3 years |
Expenditures for maintenance and repairs are expensed as incurred. The gain or loss on the disposal of plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognized in the statement of operations.
| F-7 |
MU GLOBAL HOLDING LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
Inventories
Inventories consisting of products available for sell, are stated at the lower of cost or market value. Cost of inventory is determined using the first-in, first-out (FIFO) method. Inventory reserve is recorded to write down the cost of inventory to the estimated market value due to slow-moving merchandise and damaged goods, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. The Company takes ownership, risks and rewards of the products purchased. Write downs are recorded in cost of revenues in the Condensed Consolidated Statements of Operations and Comprehensive Income.
Income taxes
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC Topic 740”). Under this 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 basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. Any 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.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
The Company conducts major businesses in China and is subject to tax in this jurisdiction. As a result of its business activities, the Company will file tax returns that are subject to examination by the foreign tax authority.
| F-8 |
MU GLOBAL HOLDING LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
Net loss per share
The Company calculates net loss per share in accordance with ASC Topic 260 “Earnings per share”. Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
Foreign currencies translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the Condensed Consolidated Statements of Operations and Comprehensive Income.
The reporting currency of the Company and its subsidiary is United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$.
In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of shareholders’ equity.
Foreign currencies translation (cont’d)
Translation of amounts from RMB and HK$ into US$1 has been made at the following exchange rates for the respective periods:
| As of and for the three months ended October 31 | ||||||||
| 2019 | 2018 | |||||||
| Period-end RMB : US$1 exchange rate | 7.04 | 6.97 | ||||||
| Period-average RMB : US$1 exchange rate | 7.09 | 6.87 | ||||||
| Period-end HKD$ : US$1 exchange rate | 7.84 | 7.84 | ||||||
| Period-average HKD$ : US$1 exchange rate | 7.84 | 7.84 | ||||||
Related parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
| F-9 |
MU GLOBAL HOLDING LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
Fair value of financial instruments:
The carrying value of the Company’s financial instruments: cash and cash equivalents, account receivables, amount due to a director, and accounts payable and approximate at their fair values because of the short-term nature of these financial instruments.
The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Recent accounting pronouncements
ASB issues various Accounting Standards Updates relating to the treatment and recording of certain accounting transactions. On June 10, 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-10, Development Stage Entities (Topic 915) Elimination of Certain Financial Reporting Requirements, including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which eliminates the concept of a development stage entity (DSE) entirely from current accounting guidance. The Company has elected adoption of this standard, which eliminates the designation of DSEs and the requirement to disclose results of operations and cash flows since inception.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
| F-10 |
MU GLOBAL HOLDING LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of October 31, 2019 are summarized below:
| As of October 31, 2019 (Unaudited) | As of July 31, 2019 (Audited) | |||||||
| Leasehold improvement | $ | 148,982 | $ | 148,982 | ||||
| Computer hardware and software | 129,301 | 129,301 | ||||||
| Outlet equipment | 45,755 | 8,423 | ||||||
| Leasable equipment | 193,415 | 132,802 | ||||||
| 1Outlet Design Fee and Equipment | 21,123 | 21,123 | ||||||
| 2App Development Fee | 37,413 | 37,413 | ||||||
| Total | 575,989 | 478,044 | ||||||
| Accumulated depreciation | $ | (101,194 | ) | $ | (72,444 | ) | ||
| Foreign currency translation adjustment | (9,547 | ) | 463 | |||||
| Property, plant and equipment, net | $ | 465,248 | $ | 406,063 | ||||
1Outlet design fee is fee incurred for the outlet design concept to be follow by all the outlets or shops under the Company so to be a signage outlets of the company. As of October 31, 2019, the outlet design has not yet completed, therefore no depreciation has been provided.
2App development fee is fee incurred for the design and development of the mobile App for the Company. As of October 31, 2019, the app development has not yet completed, therefore no depreciation has been provided.
4. PREPAYMENTS AND DEPOSITS
Prepayments and deposits consisted of the following at October 31, 2019 and July 31, 2019:
| As of October 31, 2019 | As of July 31, 2019 | |||||||
| Property, plant and equipment | $ | 82,498 | $ | - | ||||
| Deposits | 15,902 | $ | 99,244 | |||||
| Prepaid expenses | 44,433 | 76,183 | ||||||
| Total prepaid expenses and deposits | $ | 142,833 | $ | 175,427 | ||||
| F-11 |
MU GLOBAL HOLDING LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
5. COMMON STOCK
On June 4, 2018, our Chief Executive Officer, Ms. Niu Yen-Yen subscribed 100,000 shares of restricted common stock of the Company at par value of $0.0001 per share. The monies from this transaction, which totalled $10, went to the Company to be used as initial working capital.
On July 6, 2018, Ms. Niu Yen-Yen and Server Int’l Co., Ltd. subscribed 25,000,000 and 11,000,000 restricted shares of common stock, respectively, of the Company, at par value of $0.0001 per share. The monies from these transactions, which totalled $3,600, went to the Company to be used as initial working capital. Server Int’l Co., Ltd. is controlled entirely by Ms. Niu Yen-Yen.
On July 7, 2018, Chang Chun-Ying and Chang Su-Fen subscribed 4,300,000 and 5,000,000 restricted shares of common stock, respectively, of the Company, at par value of $0.0001 per share. The monies from these transactions, which totalled $930, went to the Company to be used as initial working capital.
On July 9, 2018, GreenPro Asia Strategic SPC and GreenPro Venture Capital Limited, subscribed 2,835,000 and 2,165,000 restricted shares of common stock of the Company, respectively, at par value of $0.0001 per share. The monies from these transactions, which totalled $500, went to the Company to be used as initial working capital.
From July 9, 2018 to July 10, 2018 the Company issued a total of 2,150,000 shares of restricted common stock to three non-US residents. Shares were sold at par value, $0.0001 per share. Total proceeds from these shares totalled $215 and went to the Company to be used as initial working capital.
On July 11, 2018 the Company issued a total of 710,000 shares of restricted common stock to two non-US residents at a price of $0.03 per share. Total proceeds from these sales of shares totalled $21,300 and went to the Company to be used as initial working capital.
On July 25, 2018 the Company issued a total of 995,000 shares of restricted common stock to ten non-US residents at a price of $0.03 per share. Total proceeds from these sales of shares totalled $29,850 and went to the Company to be used as initial working capital.
On July 26, 2018 the Company issued 250,000 shares of restricted common stock to one non-US resident at a price of $0.20 per share. Total proceeds from these sales of shares totalled $50,000 and went to the Company to be used as initial working capital.
On July 31, 2018 Dezign Format Pte Ltd and Cheng Young-Chien each subscribed 2,000,000 restricted shares of common stock of the Company, at $0.20 per share, for total consideration of $800,000. Proceeds went to the Company to be used as initial working capital.
On July 10, 2018, Server Int’l Co., Ltd, a Company solely controlled and owned by the CEO has transferred 1,500,000 shares of common stock to 8 non-US residents.
From August 1, 2018 to December 13, 2018, Ms. Niu Yen-Yen, the CEO of the Company has transferred 1,557,800 shares of common stock to 16 non-US residents.
On May 7, 2019, the convertible promissory note issued by the Company amounted $779,125 to 45 accredited investors who reside in Taiwan with the conversion price of $1 per share have been converted to 779,125 common stock of the company after the S-1 registration statement was declared effective on May 6, 2019.
From May 14, 2019 to July 31, 2019, the company issued 150,317 shares of common stock at a price of $1.00 per share through the Initial Public Offering (IPO) to 36 non-US residents.
As of October 31, 2019, MU Global Holding Limited has an issued and outstanding common share of 59,434,838.
6. INVENTORIES
| As of | As of | |||||||
| October 31, 2019 | July 31, 2019 | |||||||
| Finished goods, at cost | $ | 48,586 | $ | 43,946 | ||||
| Total inventories | $ | 48,586 | $ | 43,946 | ||||
7. DUE FROM RELATED PARTIES
As of (Unaudited) | As of (Audited) | |||||||
| Tien Mu International Co., Ltd1 | $ | 10,460 | $ | - | ||||
| Total | 10,460 | - | ||||||
1Tien Mu International Co., Ltd is owned by Yen-Yen Niu, the director and chief executive officer of the Company. Tien Mu is the operating agent of the Company in Taiwan’s operation and collects the deposit from franchisee on behalf of the company.
8. OTHER PAYABLES AND ACCRUED LIABILITIES
Other payables and accrued liabilities consisted of the following at October 31, 2019 and July 31, 2018:
| As of October 31, 2019 | As of July 31, 2019 | |||||||
| Accrued audit fees | $ | 17,500 | $ | 15,000 | ||||
| Accrued professional fees | 3,000 | 30,000 | ||||||
| Accrued other expenses | 43,176 | 22,127 | ||||||
| Other payable and accrued liabilities | - | 25,728 | ||||||
| Total payables and accrued liabilities | $ | 63,676 | $ | 92,855 | ||||
| F-12 |
MU GLOBAL HOLDING LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
9. DUE TO RELATED PARTIES
As of (Unaudited) | As of (Audited) | |||||||
| Wu, Chun-Teh1 | $ | 38,727 | $ | 39,611 | ||||
| Hsieh, Chang-Chung2 | - | 5,000 | ||||||
| $ | 38,727 | $ | 44,611 | |||||
As of October 31, 2019, the balance $38,727 represented an outstanding payable to 1 related party.
1Wu, Chun-Tehis a shareholder of the Company, at the same time providing consultation services to the Company and also staff of the company have paid company operation expenses such as renovation cost, rental and staff salaries on behalf of Company.
2Hsieh, Chang-Chung is Chief Financial Officer (“Principal Financial Officer”, “Principal Accounting Officer”) of the company, and the amount represents the consultancy fee accrued.
The amounts due to related parties are unsecured, interest-free with no fixed repayment term, for working capital purpose.
10. LOAN FROM DIRECTOR
| As of | As of | |||||||
| October 31, 2019 | July 31, 2019 | |||||||
| Loan from Niu Yen-Yen | $ | 42,631 | $ | - | ||||
| Total | $ | 42,631 | $ | - | ||||
The loan provided by director is unsecured, interest-free with no fixed repayment term, for working capital purpose. The amount is repayable on demand.
11. INCOME TAXES
For the three months ended October 31, 2019, the local (United States) and foreign components of income/(loss) before income taxes were comprised of the following:
| Three months ended October 31, 2019 | ||||||||
| 2019 | 2018 | |||||||
| Tax jurisdictions from: | ||||||||
| Local | $ | (8,500 | ) | (2,500 | ) | |||
| Foreign, representing | ||||||||
| - Seychelles | - | - | ||||||
| - Hong Kong | $ | (54,484 | ) | (19,800 | ) | |||
| - Shanghai | $ | (129,352 | ) | (36,499 | ) | |||
| Loss before income tax | $ | (192,336 | ) | 58,799 | ) | |||
The provision for income taxes consisted of the following:
| For the period ended October 31, 2019 | For the year ended October 31, 2018 | |||||||
| Current: | ||||||||
| - Local | $ | - | $ | - | ||||
| -Foreign | - | - | ||||||
| Deferred: | ||||||||
| - Local | - | - | ||||||
| - Foreign | - | - | ||||||
| Income tax expense | $ | - | $ | - | ||||
The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The Company has subsidiaries that operate in various countries: United States Seychelles, Hong Kong and Shanghai, PRC that are subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
The Company is registered in the State of Nevada and is subject to the tax laws of the United States of America. As of October 31, 2019, the operations in the United States of America incurred $265,391 of cumulative net operating losses which can be carried forward to offset future taxable income. The net operating loss carryforwards begin to expire in 2038, if unutilized. The Company has provided for a full valuation allowance of $55,732 against the deferred tax assets on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
Seychelles
Under the current laws of the Seychelles, MU Worldwide Group Limited is registered as an international business company which governs by the International Business Companies Act of Seychelles and there is no income tax charged in Seychelles.
Hong Kong
MU Global Holding Limited is subject to Hong Kong Profits Tax, which is charged at the statutory income tax rate of 16.5% on its assessable income.
Shanghai
MU Global Health Management (Shanghai) Limited are operating in the People’s Republic of China (PRC) subject to the Corporate Income Tax governed by the Income Tax Law of the PRC with a unified statutory income tax rate of 25%.
| F-13 |
MU GLOBAL HOLDING LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(UNAUDITED)
12. CONCENTRATIONS OF RISK
Exchange rate risk
The Company cannot guarantee that the current exchange rate will remain stable, therefore there is a possibility that the Company could post the same amount of income for two comparable periods and because of the fluctuating exchange rate actually post higher or lower income depending on exchange rate of RMB converted into US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
13. COMMITMENTS AND CONTINGENCIES
On October 10, 2018, the Company has to enter into rental agreement to rent the outlet in Shanghai for a period of 5 years commencing October 15, 2018 amounted to $4,860 per month and payment to be conducted in advance on bi monthly basis.
As of October 31, 2019, the Company has the aggregate minimal rent payments due in the next 5 years as follows:
| Year ending July, 31 | ||||
| 2020 | $ | 57,702 | ||
| 2021 | $ | 57,702 | ||
| 2022 | $ | 57,702 | ||
| 2023 | $ | 57,702 | ||
| Total | $ | 230,808 | ||
On December 19, 2018, the company entered into a contract with supplier for the development of Mobile App which have not been completed during the three months ended October 31, 2019 with a capital commitment as follows:
As of (Unaudited) | ||||
| Commitment for acquisition of Mobile App development | 21,642 | |||
14. RELATED PARTY TRANSACTIONS
For the period ended October 31, 2019 the Company has following transactions with related parties:
For the period ended October 31, 2019 (Unaudited) | For the year ended July 31, 2019 (Audited) | |||||||
| Professional fee paid: | ||||||||
| - Related party A | $ | 6,000 | $ | 200,000 | ||||
| Consultation fee paid: | ||||||||
| - Related party B | $ | 5,800 | $ | 23,200 | ||||
| - Related party C | $ | 15,955 | $ | 34,800 | ||||
| Total | $ | 27,755 | $ | 258,000 | ||||
Related party A is the fellow subsidiaries of a corporate shareholder of the Company. Related party B and C are the shareholders of the Company.
For the year ended October 31, 2019, the Company incurred professional fees of $6,000 due to related party A. Related party B and C are the employees of the Company and have provided consultancy service for business operation.
The related party transactions are generally transacted in an arm-length basis at the current market value in the normal course of business.
14.SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after October 31, 2019 up through the date December 6, 2019 was the Company presented these audited consolidated financial statements.
On December 12, 2019, the Company resolved to close the initial public offering from the registration statement on Form S-1/A, dated April 30, 2019 that had been declared effective by the Securities and Exchange Commission on May 6, 2019. The Offering resulted in 150,713 shares of common stock being sold at $1.00 per share for a total of $150,713.
| F-14 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained in this quarter report on Form 10-Q is intended to update the information contained in our Form S-1 Amendment No.3, dated April 30, 2019, for the period ended October 31, 2019 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form S-1. The following discussion and analysis also should be read together with our consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this Form 10-Q.
The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form S-1 Amendment No.3, dated April 30, 2019, in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this transition report on Form 10-Q. The following should also be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto that appear elsewhere in this report.
Company Overview
MU Global Holding Limited, the US Company, operates through its wholly owned subsidiary, MU Worldwide Group Limited, a Seychelles Company; which operates through its wholly owned subsidiary, MU Global Holding Limited, a Hong Kong Company; which operates through its wholly owned subsidiary, MU Global Health Management (Shanghai) Limited, a Shanghai Company. The US, Seychelles and Hong Kong Companies act solely for holding purposes whereas all current and future operations in China are planned to be carried out via MU Global Health Management (Shanghai) Limited, the Shanghai Company. The purpose of the Hong Kong Company is to function as the current regional hub of the Company.
At present, we have a physical office in Shanghai with an address of A310, No. 2633, Yan’an West Road, Changning District, Shanghai City, 200050 People Republic China, in which renovation has completed in October 2018 and the Company has commenced business operations from the office. In addition, we also have a physical outlet in Shanghai with address of 203, No. 193 Luo Jin Hui South Road, Minhang District, Shanghai City, 201103, People Republic China in which renovation completed in January 2019 and we have started to provide our services to customers in Shanghai. In the future, we do not have definitive plans for which markets intend to expand to, but we base our operations out of our Shanghai location, as we prepare for future unidentified expansion efforts.
All of the previous entities share the same exact business plan with the goal of developing and providing wellness and beauty services to our future clients. We aim to promote improved overall health and beauty in our clients through a holistic detoxification method. We will, at least initially, primarily focus our efforts on attracting customers in China. We have intentions, but no definitive plans or timelines, to expand to Singapore, Malaysia, Hong Kong, and Middle Eastern countries in the coming years, and subsequently we intend to make efforts to expand throughout Asia. We anticipate spending a substantial amount in marketing and advertising in the coming year.
| 3 |
Results of Operation
For the three months ended October 31, 2019 and 2018
Revenues
For the three months ended October 31, 2019 and 2018, the Company has generated revenue of $27,170 and $0 respectively. The revenue represented income from wellness and beauty services provided to customers and sales of products via Shanghai outlets and sharing of revenue from leasable equipment with business alliance and franchisee.
Cost of Revenue and Gross Margin
For the three months ended October 31, 2019 and 2018, cost incurred arise in providing wellness and beauty services is $2,069 and $0 respectively, and generate a Gross profits the for the three months ended October 31, 2019 and 2018 of $25,101 and $0.
Selling and marketing expenses
For the three months ended October 31, 2019 and 2018, we had incurred marketing expenses in the amount of $3,107 and $0 respectively. These expenses comprised of advertisement expenses on Wechat, mobile apps and public research on the market.
General and administrative expenses
For the three months ended October 31, 2019 and 2018, we had incurred general and administrative expenses in the amount of $218,051 and $59,904 respectively. These expenses are comprised of salary, allowance, professional fees, consultancy fee for IT and system management, office and outlet operation expenses and depreciation.
Other Income
The Company recorded an amount of $3,721 and $1,105 as other income for the three months ended October 31, 2019 and 2018. This income is derived from the interest income.
Net Loss
Our net loss for three months ended October 31, 2019 and 2018 were $192,336 and $58,799. The net loss mainly derived from the general and administrative expenses incurred.
| 4 |
Liquidity and Capital Resources
As of October 31, 2019 and 2018, we had cash and cash equivalents of $170,100 and $903,240 respectively. We expect increased levels of operations going forward will result in more significant cash flow and in turn working.
We depend substantially on financing activities to provide us with the liquidity and capital resources we need to meet our working capital requirements and to make capital investments in connection with ongoing operations. During the three months ended October 31, 2019, we have met these requirements primarily from the receipt of subscription for convertible promissory note and share subscription from Initial Public Offering (IPO).
Cash Used In Operating Activities
For the three months ended October 31, 2019, net cash used in operating activities was $167,399 as compared to net cash generate from operating activities of $39,809 for the three months ended October 31, 2018. The increased in cash used in operating activities was mainly for payment of general and administrative expenses.
Cash Provided In Financing Activities
For the three months ended October 31, 2019 and 2018, net cash provided by financing activities was $42,631 and $800,000 respectively. The financing cash flow performance primarily reflects the provision of long-term loan by director.
Cash Provided In Investing Activities
For the three months ended October 31, 2019 and 2018, the net cash used in investing activities was $96,854 and $40,580. The investing cash flow performance primarily reflects the purchase of property, plant and equipment.
Credit Facilities
We do not have any credit facilities or other access to bank credit.
Off-balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders as of October 31, 2019.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
| 5 |
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 4 CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures:
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of October 31, 2019. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of April 30, 2019, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of October 31, 2019, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
Changes in Internal Control over Financial Reporting:
There were no changes in our internal control over financial reporting during the quarter ended October 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 6 |
We know of no materials, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to us.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable.
None
| 7 |
| Exhibit No. | Description | |
| 31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer* | |
| 31.2 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial officer* | |
| 32.1 | Section 1350 Certification of principal executive officer * | |
| 32.2 | Section 1350 Certification of principal financial officer * | |
| 101.INS | XBRL Instance Document* | |
| 101.SCH | XBRL Schema Document* | |
| 101.CAL | XBRL Calculation Linkbase Document* | |
| 101.DEF | XBRL Definition Linkbase Document* | |
| 101.LAB | XBRL Label Linkbase Document* | |
| 101.PRE | XBRL Presentation Linkbase Document* |
* Filed herewith.
| 8 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MU Global Holding Limited | ||
| (Name of Registrant) | ||
| Date: December 13, 2019 | By: | /s/ NIU YEN YEN |
| Title: | Chief Executive Officer, President, Director, Secretary and Treasurer | |
| (Principal Executive Officer) | ||
| Date: December 13, 2019 | By: | /s/ HSIEH CHANG CHUNG |
| Title: | Chief Financial Officer, (Principal Financial Officer, Principal Accounting Officer) |
| 9 |