| Summary of significant accounting policies | 2.
Summary of significant accounting policies Basis
of presentation The
consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”). Principal
of consolidation The
consolidated financial statements include the financial statements of the Company and its subsidiaries. All transactions and balances
among the Company and its subsidiaries have been eliminated upon consolidation.
Principal
activities Percentage Date
of Place
of
Epicquest
Education Group International Limited (the “Company”) Investment holding — December 13, BVI
Quest Holdings
International LLC (“QHI”) Foreign education programs and student dormitory services 100 % December 19, Ohio, US
Quest
International Education Center LLC (“QIE”) Collection of tuition payments from oversea students 100 % January 23, Ohio, US
Highrim Holding International
Limited (“HHI”) Investing holding 100 % July 9, BC, Canada
Richmond Institute of Language
Inc. (“RIL”) Academic services for college and university applications 80 % April 18, BC, Canada
Ameri-Can Education Group
Corp. (“AEGC”) Education services 70 % November 17, Ohio, US
Student Up Center, LLC
(“SUPC”) Student education assistance 100 % April 27, Ohio, US On
November 24, 2021, the Company acquired 70% of AEGC and on January 15, 2022, the Company acquired 80% of RIL. Refer to Note 3 below for
details. On
April 27, 2022, the Company incorporated the new subsidiary SUPC to provide student education assistance services. Use
of estimates The
preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that
affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Actual amounts could differ
from those estimates and differences could be material. Changes in estimates are recorded in the period they are identified. Judgments, estimates and underlying
assumptions are evaluated on an ongoing basis by management and are based on historical experience and other factors including expectations
of future events that are believed to be reasonable under the circumstances. However, existing circumstances and assumptions about future
developments may change due to market changes or circumstances and such changes are reflected in the assumptions when they occur. Accounting for business combinations
and asset acquisitions requires estimates with respect to the fair value of the assets acquired and liabilities assumed. Such estimates
of fair value may require valuation methods which use significant estimates and assumptions. At the acquisitions of AEGC and RIL, we estimated
the fair value of the long term investment and intangible assets acquired, using valuation methods, which required management to make
estimates with respect to expected future cash flows and growth rates, gross margins, discount rates, terminal value, and forecast period
etc. The Company based these estimates on historical and anticipated results, industry trends, economic analysis, and various other
assumptions that it believes are reasonable, including assumptions as to future events. Foreign
currency and foreign currency translation The
Company’s reporting currency is the United States dollar (“US$”). The US$ is the functional currency of the Company
and its subsidiaries of QHI, QIE, HHI, AEGC and SUPC. The CAD$ is the functional currency of the Company’s subsidiary of RIL. Transactions
denominated in other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates
prevailing on the transaction dates. Monetary assets and liabilities denominated in currencies other than the applicable functional currencies
are translated into the functional currency at the prevailing rates of exchange at the balance date. The resulting exchange differences
are reported in the consolidated statements of operations and comprehensive income. The
assets and liabilities of the Company’s subsidiary in the CAD$, which is RIL, are translated at the exchange spot rate at the balance
sheet date, stockholders’ equity is translated at the historical rates and the revenues and expenses are translated at the average
exchange rates for the periods. The resulting translation adjustments are reported under other comprehensive income in the consolidated
statements of income and comprehensive income in accordance with ASC 220. The following are the exchange rates that were used in translating
RIL’s financial statements into the consolidated financial statements: September 30, Year-end spot rate US$1=CAD$ 1.3752 Average rate US$1=CAD$ 1.2841* (*
For period from January 15, 2022, acquisition date, to September 30, 2022 Certain
risks and concentration The
Company’s financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily
of cash and cash equivalents, accounts receivable and notes receivable. As of September 30, 2022 and 2021, substantially all of the Company’s
cash and cash equivalents were held in major financial institutions located in the US. The
Company does not have trades receivable related to students as they are required to prepay service fees. Accounts receivable at September
30, 2022 primarily consist of receivable of $32,116 in relation interest receivable and $13,486 in relation to GST receivable. The
remaining $485,000 note receivable balance as at September 30, 2022 is related to a third-party borrower. Although the Company is directly
affected by the financial conditions of the borrower, the Company does not believe significant credit risk exist with respect to the
note receivable. Therefore,
there was no significant concentration risk for the Company as at September 30, 2022 and 2021. Cash
and cash equivalents Cash
and cash equivalents consist of petty cash on hand and cash held in banks, which are highly liquid and have original maturities of three
months or less and are unrestricted as to withdrawal or use. Revenue
recognition ASC
606 provides for a five-step model for recognizing revenue from contracts with customers. These five steps include:
(i) Identify the contract
(ii) Identify performance obligations
(iii) Determine transaction price
(iv) Allocate transaction price
(v) Recognize revenue Under
ASC 606, revenue is recognized when the customer obtains control of a good or service. A customer obtains control of a good or service
if it has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. The Company’s
revenue streams contain two primary performance obligations, which are the: i) English education programs; and ii) the accommodation
services. The transfer of control of the Company’s English education programs occurs over time upon the delivery of the services
to the students based on the terms of the semester. Similar, the transfer of the accommodation services occurs over time as the students
receive the benefits of the accommodation services based on the terms of the semester. Therefore, revenues for English education programs
and accommodation services are both recognized over time as the students simultaneously receive the services and consume the benefits
provided by the Company’s performance of the services. Funds
received from student prior to provision of our education and accommodation services are recognized as deferred revenue. The deferred
revenue is subsequently released into revenue once the registered semester starts and is released using straight-line method based on
the semester period, which is generally three months. The release of the deferred revenue is to match the timing of the cost of our services,
which is generally also based on the semester term. Costs
of services Costs
of services are primarily comprised of the tuition fees paid to our partnered education institution, Miami University, for the provision
of our English language programs and fees paid to Dongbei University of Finance and Economics (“DUFE”) for using DUFE’s
facilities, to host remote online English education programs and provide accommodation to students during their studies. These fees are
recognized into costs of services when such fees are incurred based on semester terms in direct relation to Miami University’s
conducting of the English language education services for us. Fair
value measurement Fair
value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to
be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers
assumptions that market participants would use when pricing the asset or liability. The
established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level
of input that is significant to the fair value measurement. The three levels of inputs that may be used to measure fair value as follows:
Level 1: Quoted
prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Observable,
market-based inputs, other than quoted prices, in active markets for identical assets or liabilities.
Level 3: Unobservable
inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The
Company’s financial instruments include cash and cash equivalents, accounts receivable, notes receivables, long-term investment,
accounts payable and accrued liabilities and taxes payable. The carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and accrued liabilities and taxes payable approximate their fair values due to the short-term nature of these instruments. The
Company noted no transfers between levels during any of the periods presented. The Company did not have any instruments that were measured
at fair value on a recurring nor non-recurring basis as of September 30, 2022 and 2021. Property
and equipment Property
and equipment are recorded at cost, less accumulated depreciation and impairment. Depreciation of property and equipment is calculated
on a straight-line basis, after consideration of expected useful lives and estimated residual values. The estimated annual deprecation
rate of these assets are generally as follows:
Category Depreciation years Estimated
Buildings 33 to 39 $Nil
Machinery & equipment 3 $Nil
Vehicles 5 $Nil
Furniture and fixtures 7 $Nil
Software 5 $Nil Expenditures
for maintenance and repairs are expensed as incurred. Gains and losses on disposals are the differences between net sales proceeds and
carrying amount of the relevant assets and are recognized in the consolidated statements of operations and comprehensive income. Intangible
assets Intangible
assets are measured at cost less accumulated amortization and accumulated impairment losses. Cost includes all expenditures that are
directly attributable to the acquisition or development of the asset, net of any amounts received in relation to those assets. Amortization
is recognized in net earnings on a straight-line basis over the estimated useful lives of intangible assets from the date that they are
available for use. The estimated useful lives are:
Asset Basis Rate / term
University relationship Straight-line 10 years
Education license/certificate Straight-line 5 years
In-process course curriculum Straight-line 5 years Leases The
Company adopted ASC 842 – Leases for its fiscal year beginning on October 1, 2020. There was only one office lease subject to ASC
842 upon the adoption of the new standard. Since the office lease is classified as operating lease under ASC 842 and was also previously
classified as operating lease under the legacy ASC 840, the adoption of the ASC 842 did not result in material adjustments to this office
lease compared to ASC 840. The
Company determines if an arrangement is a lease at inception. The Company may have lease agreements with lease and non-lease components,
which are generally accounted for separately. Leases are classified as either operating leases or finance leases pursuant to ASC 842.
i) Operating
leases Operating
leases are recognized as right-of-use assets (“ROU”) in non-current assets and lease liabilities in non-current liabilities
in the consolidated balance sheets if the initial lease term is greater than 12 months. For leases with an initial term of 12 months
or less the Company recognizes those lease payments on a straight-line basis over the lease term. ROU
assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease
payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present
value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, management uses the
incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
Management uses the implicit rate when readily determinable. Lease expense for lease payments is recognized on a straight-line basis
over the lease term and are included in general and administrative (“G&A”) expenses.
ii) Finance
leases Finance
lease ROU assets are included in property, plant and equipment, trade and other payables, and other non-current liabilities in the consolidated
balance sheets. Finance
lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.
As most of the Company’s leases do not provide an implicit rate, management uses the incremental borrowing rate based on the information
available at commencement date in determining the present value of lease payments. Management uses the implicit rate when readily determinable.
Finance lease ROU assets are generally amortized over the lease term and are included in depreciation expense. The interest on the finance
lease liabilities is included in interest expense. Impairment
of long-lived assets The
Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amounts to the expected future undiscounted
cash flows attributable to these assets. If it is determined that an asset is not recoverable, an impairment loss is recorded in the
amount by which the carrying amount of the assets exceeds the expected discounted cash flows arising from those assets. There
were no impairment losses for the years ended September 30, 2022 and 2021. Goodwill Goodwill
represents the excess of the purchase price of an acquired enterprise over the fair value assigned to the assets acquired and liabilities
assumed in a business combination. Goodwill
is not amortized, but it is tested annually for impairment at the reporting unit level as of September 30, and between annual tests if
indicators of potential impairment exist. The Company has the option of performing a qualitative assessment of a reporting unit to first
determine whether the quantitative impairment test is necessary. This involves an assessment of qualitative factors to determine the
existence of events or circumstances that would indicate whether it is more likely than not that the fair value of the reporting unit
to which goodwill belongs is less than its carrying value. If the qualitative assessment indicates it is not more likely than not that
the reporting unit’s fair value is less than its carrying value, a quantitative impairment test is not required. If a quantitative impairment test is required, the procedure is to
identify potential impairment by comparing the reporting unit’s fair value with its carrying amount, including goodwill. The reporting
unit’s fair value is determined using various valuation approaches and techniques that involve assumptions based on what the Company
believes a hypothetical marketplace participant would use in estimating fair value on the measurement date. An impairment loss is recognized
as the difference between the reporting unit’s carrying amount and its fair value. If the difference between the reporting units
carrying amount and fair value is greater than the amount of goodwill allocated to the reporting unit, the impairment loss is restricted
by the amount of the goodwill allocated to the reporting unit. Significant items subject to estimates include, the recoverable amounts
of goodwill and indefinite-lived intangible assets, the useful lives of long-lived assets and finite-lived intangible assets, share-based
compensation, share-based continuing employment costs, the determination of lease term and lease liabilities, deferred income taxes, reserves
for tax uncertainties, derivative financial instruments and other contingencies.
As
of September 30, 2022, the Company performed a qualitative assessment of its goodwill and concluded that there were no indicators of
impairment. Taxation Current
income taxes are provided on the basis of net profit for financial reporting purposes, adjusted for income and expense items which are
not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred
income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the
consolidated financial statements, net operating loss carry forwards and credits. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Current income taxes are provided in accordance with the laws of the relevant taxing authorities. Deferred tax assets and liabilities
are measured using enacted rates expected to apply to taxable income in which temporary differences are expected to be reversed or settled.
The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement of operation and comprehensive
income in the period of the enactment of the change. The
Company considers positive and negative evidence when determining whether a portion or all of its deferred tax assets will more likely
than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses,
forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes expiring unused,
and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate sufficient
future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary differences
become deductible. When assessing the realization of deferred tax assets, the Company has considered possible sources of taxable income
including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing
temporary differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific
known trend of profits expected to be reflected within the industry. The
Company recognizes a tax benefit associated with an uncertain tax position when, in its judgment, it is more likely than not that the
position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition
threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company judges to have a greater
than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The Company’s liability associated with
unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments
and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The Company’s
effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered
appropriate by management. The Company classifies interest and penalties recognized on the liability for unrecognized tax benefits as
income tax expense. Earnings
per share Basic
earnings per share is computed by dividing net income attributable to shareholders by the weighted average number of common shares outstanding
during the period using the two-class method. Under the two-class method, net income is allocated between common shares and other participating
securities based on their participating rights. Net loss is not allocated to other participating securities if based on their contractual
terms they are not obligated to share in the losses. Diluted earnings per share is calculated by dividing net income attributable to
common shareholders by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common
equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be
anti-dilutive. Defined
contribution plans The
Company contributes to defined contribution retirement schemes which are available to all employees. Contributions to the schemes by
the Company and employees are calculated as a percentage of employees’ basic salaries. The retirement benefit scheme cost charged
to profit or loss represents contributions payable by the Company to the funds. Stock-Based Compensation The
measure stock-based awards at fair value on the date of the grant and expense the awards in Consolidated Statements of Operations and
Comprehensive Loss over the requisite service period of employees or consultants. The fair value of stock options is determined using
the Black-Scholes valuation model. The fair value of stock-based awards is determined using the share price of the Company at the date
of grant. Stock-based compensation expense related to all stock-based awards, including stock option, is recognized over the requisite
service period on a straight-line basis. The amount of stock-based compensation expense recognized at any date must at least equal the
portion of the grant-date value of the award that is vested at that date. Forfeitures are accounted for as they occur. Business
combinations The
Company recognizes and measures the assets acquired and liabilities assumed in a business combination based on their estimated fair values
at the acquisition date, while transaction costs related to business combinations are expensed as incurred. An income, market or cost
valuation method may not one not Recently
issued accounting standards In
August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts
in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
(“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under
current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception,
and it simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for public business entities
that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal
years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments
are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is
currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows. |
