Flywheel Advanced Technology, Inc 10-Q for FY2024 Q2
Flywheel Advanced Technology, Inc. (FWFW)
About this 10-Q
Flywheel Advanced Technology, Inc filed this 10-Q on July 16, 2024, covering the quarter ended March 31, 2024 (FY2024 Q2).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.34M
- up 3591.7% from $36.41K a year earlier
- Net loss
- $68.33K
- compared with a net loss of $1.32M a year earlier
- Diluted EPS
- $0.00
- compared with -$0.07 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
or
For the transition period from ______ to ______
Commission
file number:
| (Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
| N/A | N/A | N/A |
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. ☒
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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 Act.) Yes ☐ No
The number of shares outstanding of the registrant’s common stock as of July 15, 2024, was shares.
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | 3 | |
| Item 1. | Unaudited Financial Statements. | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 29 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk. | 40 |
| Item 4. | Controls and Procedures. | 40 |
| PART II – OTHER INFORMATION | 41 | |
| Item 1. | Legal Proceedings. | 41 |
| Item 1A. | Risk Factors. | 41 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 41 |
| Item 3. | Defaults Upon Senior Securities. | 41 |
| Item 4. | Mine Safety Disclosures. | 41 |
| Item 5. | Other Information. | 41 |
| Item 6. | Exhibits. | 41 |
| SIGNATURES | 42 | |
| 2 |
PART I- FINANCIAL INFORMATION
Item 1. Financial Statements.
FLYWHEEL ADVANCED TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2024 AND 2023
| 3 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
CONTENTS
| 4 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowances | ||||||||
| Due from related parties | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Deferred tax assets | ||||||||
| Total Current Assets | ||||||||
| PROPERTY AND EQUIPMENT, NET | ||||||||
| GOODWILL | ||||||||
| ACQUISITION-RELATED INTANGIBLES | ||||||||
| RIGHT-OF-USE ASSETS | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Bank loans - current portion | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Due to related parties | ||||||||
| Operating lease liabilities | ||||||||
| Income tax payable | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Bank loans | ||||||||
| Deferred tax liabilities – arise from fair value gain | ||||||||
| Total long-term liabilities | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common stock, $ par value , shares authorized, shares issued and outstanding | ||||||||
| Paid in Capital | ||||||||
| Accumulated other comprehensive income/(loss) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 5 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| REVENUE, NET | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUE | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| GROSS PROFIT | ( | ) | ( | ) | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| OPERATING LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSES) | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest (expenses) income, net | ( | ) | ( | ) | ||||||||||||
| Total Other Income | ||||||||||||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income taxes | ||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER COMPREHENSIVE (LOSS) INCOME | ||||||||||||||||
| Foreign currency translation (loss) gain | ( | ) | ( | ) | ( | ) | ||||||||||
| COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share - basic and diluted: | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 6 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN STOCKHOLDERS’ EQUITY
| Common Stock | Paid in | Accumulated other comprehensive | Accumulated | |||||||||||||||||||||
| Shares | Value | Capital | (loss)/income | Deficit | Total | |||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Exchange difference on translation | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Exchange difference on translation | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common Stock | Paid in | Accumulated other comprehensive | Accumulated | |||||||||||||||||||||
| Shares | Value | Capital | (loss)/income | Deficit | Total | |||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Issuance of common stock for acquisition | ||||||||||||||||||||||||
| Exchange difference on translation | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 7 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjusted to reconcile net loss to cash provided (used) by operating activities: | ||||||||
| Amortization | ||||||||
| Depreciation | ||||||||
| Lease amortization | ||||||||
| Allowance of expected credit losses | ||||||||
| Reversal of allowance of expected credit losses | ( | ) | ||||||
| Deferred income taxes | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities | ||||||||
| (Increase)/decrease in: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Increase/(decrease) in: | ||||||||
| Accounts payable | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Income tax payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash acquired from purchase of a subsidiary | ||||||||
| Advance to related parties | ||||||||
| Purchase of property, plant and equipment | ( | ) | ||||||
| Net cash (used in)/provided by investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Repayment of borrowings | ( | ) | ||||||
| (Repayment to)/ Advances from related party | ( | ) | ||||||
| Net cash (used in)/provided by financing activities | ( | ) | ||||||
| NET (DECREASE)/INCREASE IN CASH AND EQUIVALENTS | ( | ) | ||||||
| EFFECT OF EXCHANGE RATES ON CASH | ( | ) | ||||||
| AT BEGINNING OF PERIOD | ||||||||
| CASH AND EQUIVALENTS AT END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 8 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE- 1 ORGANIZATION AND BUSINESS
Flywheel Advanced Technology, Inc. (formerly known as Pan Global Corp.) (“the Company”) was incorporated in the state of Nevada on April 30, 2010.
The Company had the following significant events:
| ● | Stock Purchase Agreement (July 13, 2021) –
In July 2021, the Company entered into a Stock Purchase Agreement between NYJJ Hong Kong Limited (Seller) and Sparta Universal Industrial
Ltd. (Purchaser), wherein the Purchaser purchased shares of Series A-1 Preferred Stock, par value
$per share (the “Shares”) of the Company.
| |
| ● | Name Change (November 21, 2021) – On November 21, 2021, Board of directors and majority shareholder approved the change of the Company’s name to “Flywheel Advanced Technology, Inc.”. | |
| ● | Reverse Stock Split (July 13, 2022) – On
July 13, 2022, the Company completed a | |
| ● | Ticker Symbol Change (August 5, 2022) – On August 5, 2022, the Company was informed by the FINRA that the new ticker symbol of the Company is “FWFW”. |
Issuance
of Preferred Stock A-1 (September 15, 2022) – On September 15, 2022, the Company filed with the Secretary of State of
the State of Nevada an Amendment (the “Amendment”) to the Certificate of Designation for the Series A-1 Preferred Stock
(the “Preferred Stock”). The Amendment was approved by the Board of Directors of the Company and Sparta Universal
Industrial Ltd. (“Sparta”), the sole holder of all the issued
and outstanding shares of Preferred Stock. Pursuant to the Amendment, the conversion rate of the Preferred Stock was changed to
provide that each share of Preferred Stock shall be convertible, at the option of the holder, into 1.62 fully paid and nonassessable
shares of the Company’s common stock.
| ● | The Company’s outstanding shares of Preferred Stock were converted on a one for |
| 9 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Formation of Blue Print Global, Inc. (November 30, 2022) – On November 30, 2022, the Company incorporated Blue Print Global, Inc. (“Blue Print”) in the British Virgin Islands to establish an operation to source the supply and sale of warehouse patrol robots.
| ● | Blue Print Agency Agreement (December 7, 2022) – On December 7, 2022, Blue Print entered into an Agency Agreement (the “Agency Agreement”) with International Supply Chain Alliance Co., Ltd. of Hong Kong (“ISCA”). Pursuant to the Agency Agreement, Blue Print appointed ISCA as its authorized agent to distribute warehouse patrol robots in the People’s Republic of China (“China”). The Agency Agreement is valid for five years and will be automatically renewed for another five years unless a written non-renewal notice is provided by either party at least 30 days before the expiration date. However, there is no early termination option in the Agency Agreement. | |
| ● | Share Exchange with QBS System Limited (December 15, 2022) – On December 15, 2022, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with QBS System Limited, a limited company incorporated under the laws of Hong Kong (“QBS System”), and its shareholder, QBS Flywheel Limited, a company incorporated under the laws of Australia (the “Seller”). On March 22, 2023, the Seller transferred and assigned to the Company all of the issued and outstanding shares of QBS System in exchange for newly issued shares of the Company’s common stock, par value $per share (the “Common Stock”). Following the closing of the share exchange, there will be no change in the officers and directors of the Company, and QBS System will continue its business as a wholly owned subsidiary of the Company. | |
| ● | Common Stock Issuances (May 24, 2023) – On May 24, 2023, the Company issued shares of common stock to each of Sau Ping Leung and So Ha Tsang. Such shares were issued on May 24, 2023. These two individuals collectively hold 30% of Blue Print. | |
| ● | Formation of Mega Fortune Company Limited and Ponte Fides Company Limited (January 30, 2024 and February 13, 2024) – On January 30, 2024 and February 13, 2024, the Company incorporated Mega Fortune Company Limited (“Mega Fortune”) in the Cayman Islands and Ponte Fides Company Limited (“Ponte Fides”) in the British Virgin Islands, respectively. | |
| ○ | Transfer of QBS System Shares to Ponte Fides Company
Limited (April 29, 2024) – On April 29, 2024, the Company transferred all of the issued and outstanding shares of QBS System
at HK$ | |
| ○ | QBS System was incorporated in Hong Kong on April 14, 2011 with limited liability and its principal activities are providing Internet of Things (“IoT”) solutions and services across industries. Its IoT solutions help clients to build applications using available IoT device, sensors, framework and platform, to integrate the available hardware and software solution with clients’ existing landscape or implement a new IoT solution for enterprises. |
| 10 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| QBS System provides a full-range IoT services comprising consulting development and implementation, analytics, support, and evolution. It has a business portfolio providing IoT integration solution services, IoT maintenance, support services, IoT projects and ventures Business Process Outsourcing (“BPO”) services, and approximately years of experience in Hong Kong providing IoT software and hardware engineering services. Clients range across various industries, such as logistics and supply chain management, food and beverage, automation and smart building. The applications of QBS System’s IoT Solution include connected equipment in the enterprise (“Enterprise IoT”) and industrial assets such as machines, robots, or even workers in smart factories and industrial facilities (“Industrial IoT”, the essential component of Industry 4.0). | ||
| ○ | QBS System formed a wholly owned subsidiary, QBS System Pty Ltd (“QBS System Pty”) in Australia on May 8, 2020 and its principal activities are providing computer network systems design and integration services. |
The Company’s subsidiaries are as follows as of March 31, 2024:
SCHEDULE OF COMPANY SUBSIDIARIES
| Name of Corporation | Date of Formation | Ownership | Description of Business | |||
Flywheel Advanced Technology, Inc. (Nevada Corporation) |
||||||
Blue Print Global, Inc. (British Virgin Islands Corporation) |
||||||
QBS System Limited (Hong Kong Corporation) |
(date of acquisition) |
|||||
Mega Fortune Company Limited (Cayman Islands Corporation) |
||||||
Ponte Fides Company Limited (British Virgin Islands Corporation) |
We use the terms “Company”, “we” and “us” to refer to both Flywheel Advanced Technology, Inc. and its subsidiaries.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| Basis of Presentation |
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification” (the “Codification”) which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States.
| Unaudited Interim Consolidated financial statements |
The accompanying interim unaudited condensed consolidated financial statements (“Interim Financial Statements”) of the Company and its wholly owned and majority owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Regulation S-X. Accordingly, these Interim Financial Statements do not include all of the information and notes required by GAAP for complete financial statements. These Interim Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended September 30, 2023 included in the Company’s Form 10-K. In the opinion of management, the Interim Financial Statements included herein contain all adjustments, including normal recurring adjustments, considered necessary to present fairly the Company’s financial position, the results of operations and cash flows for the periods presented.
The operating results and cash flows of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.
| Principles of Consolidation |
The accompanying Unaudited Condensed consolidated financial statements are presented using the accrual basis of accounting and include the Company and its wholly owned and majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
| 11 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Use of estimates |
The preparation of Unaudited Condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment, revenue recognition, allowance for credit losses, the measurement of lease liabilities and right-of-use (“ROU”) assets, measurements of assets and obligations related to employee benefits, the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, variable consideration, other obligations for revenue recognition, and other contingencies. Management believes the estimates used in the preparation of the Unaudited Condensed consolidated financial statements are reasonable, and management has made assumptions about the possible effects of the ongoing COVID-19 pandemic on critical and significant accounting estimates. Although these estimates and assumptions are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. Any changes in estimates are adjusted prospectively in the Company’s unaudited condensed consolidated financial statements.
| Financial Instruments and Concentration of Credit Risk |
Financial instruments that potentially subject the Company to concentration of credit risk are reflected principally in cash and equivalents and accounts receivable.
| ● | Cash | |
| The Company places its cash with banks, limits the amount of credit exposure with any one bank and conducts ongoing evaluations of the creditworthiness of the banks with which it does business. | ||
| ● | Revenue and Accounts Receivables | |
The Company extends credit to our customers and performs
ongoing credit evaluations of such customers. The Company evaluates our accounts receivable on a regular basis for collectability and
provides an allowance for potential credit losses as deemed necessary. The Company recorded allowance for bad debt of $
Substantially all of the Company’s revenues are derived from sales of IoT products and services. Any significant decline in market acceptance of our products or in the financial condition of our existing customers could impair our ability to operate effectively.
A significant portion of our revenue is derived from a small number of
customers. For the three and six months ended March 31, 2024, sales to our two largest customers accounted for |
| Accounts receivable and allowance for expected credit losses |
Accounts receivable are recorded net of allowances for expected credit losses. The Company follows ASC Topic 326, Financial Instruments-Credit Losses. Accounts receivable and contract assets are in the scope for which assessment is made. The Company evaluates the credit risk of its customers based on a combination of various financial and qualitative factors that may affect the ability of each customer to pay. The Company considered current and anticipated future economic conditions relating to the industries of the Company’s customers and the countries where it operates. In calculating expected credit loss, the Company also considered past payment trends, credit rating and other related credit information for its significant customers to estimate the probability of default in the future. Accounts receivable balances are written-off against the allowance for expected credit losses after all means of collection have been exhausted and the potential for recovery is considered remote.
| 12 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Property and Equipment, net |
Property and equipment are stated at cost less accumulated depreciation and amortization and accumulated impairment loss. Expenditures for replacements and improvements are capitalized, whereas the costs of maintenance and repairs are expensed.
Depreciation
is provided on a straight-line basis, less estimated residual value over the assets’ estimated useful lives. The estimated useful
lives are
| Right-of-use asset |
In accordance with FASB Codification Topic 842 (ASC Topic 842), Leases, right-of-use (ROU) asset is stated at cost, less accumulated amortization.
Amortization is provided on a straight-line basis, less estimated residual value over the assets’ estimated useful lives. The estimated useful live is the term of the leases.
| Long-lived assets |
In accordance with FASB Codification Topic 360 (ASC Topic 360), “Accounting for the impairment or disposal of Long-Lived Assets”, long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets. The Company reviews property and equipment to determine that carrying values are not impaired.
| Goodwill |
Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in a business combination. The Company evaluates its goodwill for potential impairment annually during the fourth quarter and whenever events or changes in circumstances indicate the carrying value of a reporting unit may not be recoverable. The Company’s divisions are at the operating segment level, which is the level the Company’s management conducts regular reviews of the operating results. Goodwill created by acquiring a foreign operation is converted from foreign entity’s functional currency to Company’s reporting currency using the spot rate prevailing at the reporting date.
| 13 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Leases |
ASC Topic 842 requires a lessee to record a ROU asset and a lease liability for all leases with terms longer than 12 months. Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’ s obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company determines the lease term by assuming the exercise of renewal options that are reasonably certain. As most of the Company’s leases do not provide an implicit interest rate, the Company uses its local incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. When the Company’s contracts contain lease and non- lease components, the Company accounts for both components as a single lease component. Refer to Note 8.
| Fair value of financial instruments |
FASB Codification Topic 825 (ASC Topic 825), “Disclosure about Fair Value of Financial Instruments,” requires certain disclosures regarding the fair value (“FV”) of financial instruments. The carrying amounts of accounts receivables, other current assets and prepaid expenses, accounts payable, other payables and accrued liabilities and due to Company companies approximate their FVs because of the short-term nature of the instruments. The management of the Company is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial statements.
| Revenue recognition |
The Company’s revenue is comprised mainly the following services: IoT software and hardware development service, BPO service and IoT support and maintenance service.
Revenues from IT software and hardware development are measured based on the skills, estimate time, cost of outsourcing, human resources and materials required for the project which are specified in a quotation or contract with a customer and exclude discounts and amounts collected on behalf of third parties. Revenues recognized under quotation or contracts generally when persuasive evidence of an arrangement exists, services have been performed and collection of amounts billed is fixed, based on the achievement of milestone in contract and is reasonably assured.
Revenues from BPO services are measured based on headcounts, rate of each headcount, skill level and whether the headcount is engaged on a full-time or part-time basis. Revenues are recognized under quotations or contracts generally when persuasive evidence of an arrangement exists, the sales price is fixed or determinable, services have been performed and collection of amounts billed is reasonably assured.
| 14 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Revenues from IoT maintenance and support services are measured based on the skills, hardware/material required and estimate time required for the project. Revenue are recognized over time as services are provided and extended service plans are recognized over the performance period of the service contract or quotation as the obligation represents a stand-ready obligation to the customer.
The Company follows ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from services by: (1) identifying the contract (if any) with a customer; (2) identifying the performance obligations in the contract (if any); (3) determining the transaction price; (4) allocating the transaction price to each performance obligation in the contract (if any); and (5) recognizing revenue when each performance obligation is satisfied. The Company has no outstanding contracts with any of its customers as of March 31, 2024 and September 30, 2023. The Company recognizes revenue when it satisfies a performance obligation by providing services to a customer.
The Company generally invoices a client after performance of services. Payments are due as per contract terms.
| Cost of revenue |
Cost of revenue primarily consists of sub-contracting fee, engineers’ salary and purchases of equipment used or installed as part of the project. It also includes operational expenses, which consist of facilities maintenance expenses, travel and living expenses, IT expenses, and consulting and certain other expenses. Consulting charges represent the cost of consultants and contract resources with specialized skills who are directly responsible for the performance of services for clients and travel and other billable costs related to the Company’ s clients. Recurring direct costs for services are recognized as incurred.
| Foreign currency translation |
The Company’s consolidated financial statements are reported in United States dollars (“US$”), the Company’s reporting currency, also the functional currency. The functional currency for the Company’s subsidiary organized in Hong Kong is Hong Kong dollars (“HK$”). The functional currency for the Company’s subsidiary organized in Australian is Australian dollars (“A$”). The translation of the functional currencies of the Company’s subsidiaries into US$ is performed for balance sheet accounts using the exchange rates in effect as of the balance sheet date and for revenues and expense accounts using a monthly average exchange rate prevailing during the respective period. The gains or losses resulting from such translation are reported as currency translation adjustments under other comprehensive income (loss), net, under accumulated other comprehensive income (loss) as a separate component of equity.
Monetary assets and liabilities of the Company and its subsidiary denominated in currencies other than the functional currency of the Company and subsidiary are translated into their respective functional currency at the rates of exchange prevailing on the balance sheet date.
| 15 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Transactions of the Company and its subsidiary in currencies other than the Company’s and the Subsidiary’s functional currencies are translated into the respective functional currencies at the average monthly exchange rate prevailing during the period of the transaction. The gains or losses resulting from foreign currency transactions are included in the consolidated statements of income.
The exchange rates used to translate amounts in HK$ and AU$ into US$ for the purposes of preparing the consolidated financial statements were as follows:
SCHEDULE OF EXCHANGE RATES
| March 31, 2024 | September 30, 2023 | |||||||
| Balance sheet items, except for common stock, additional paid-in capital and retained earnings, as of period end | US$1=HK$ | US$1=HK$ | ||||||
| US$1=AUD | US$1=AUD | |||||||
| Amounts included in the statements of operations and cash flows for the period | For the Three Months Ended March 31, | |||||||
| 2024 | 2023 | |||||||
| US$1=HK$ | US$1=HK$ | |||||||
| US$1=AUD | US$1=AUD | |||||||
| Amounts included in the statements of operations and cash flows for the period | For the Six Months Ended March 31, | |||||||
| 2024 | 2023 | |||||||
| US$1=HK$ | US$1=HK$ | |||||||
| US$1=AUD | US$1=AUD | |||||||
| Other comprehensive (loss)/income |
The foreign currency translation gain or loss resulting from translation of the financial statements expressed in HK$ and AU$ to US$ is reported as other comprehensive income or loss in the statements of operations and stockholders’ equity.
| Employee benefit plans |
Contributions to defined contribution plans are expensed in the period in which services are rendered by the covered employees. The Company recognizes its liabilities for compensated absences dependent on whether the obligation is attributable to employee services already rendered, relates to rights that vest or accumulate and payment is probable and estimable. Refer to Note 14.
| 16 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Income taxes |
The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, 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. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period included the enactment date.
| Earning per share |
Basic
earnings(loss) per share are computed by dividing income available to stockholders by the weighted average number of shares outstanding
during the period. Diluted income per share is computed like basic income per share except that the denominator is increased to include
the number of additional shares that would have been outstanding if the potential shares had been issued and if the additional shares
were diluted. There were
| Commitments and contingencies |
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Legal costs incurred in connection with such liabilities are expensed as incurred.
| Segments |
The Company operates in three reportable segments, provision of IoT maintenance and support services, IoT BPO services and IoT development services in Hong Kong and Australia.
The chief operating decision maker (“CODM”) generally reviews financial information such as revenues, cost of revenues and gross profit, disaggregated by the operating segments to allocate an overall budget among the operating segments.
The Company does not allocate and therefore the CODM does not evaluate, certain operating expenses, interest expense or income taxes by segment. Many of the Company’s assets are shared by multiple operating segments. The Company manages these assets on a total Company basis, not by operating segment, and therefore asset information and capital expenditures by operating segment are not presented. Refer to Note 15.
| Recently Issued Accounting Standards |
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements.
NOTE 3 – CASH
Cash is composited of the following
SCHEDULE OF CASH AND EQUIVALENTS
| March 31, 2024 | September 30, 2023 | |||||||
| Cash at bank | $ | $ | ||||||
| Cash on hand | ||||||||
| Total | $ | $ | ||||||
| 17 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – ACCOUNTS RECEIVABLE, NET OF ALLOWANCES
Accounts receivable consisted of the following:
SCHEDULE OF ACCOUNTS RECEIVABLE
| March 31, 2024 | September 30, 2023 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for expected credit losses | ||||||||
| Accounts receivable, net | $ | $ | ||||||
The movement in “Allowance for expected credit losses” for three and six months ended March 31, 2024 and 2023 was as follows:
| March 31, 2024 | March 31, 2023 | March 31, 2024 | March 31, 2023 | |||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| March 31, 2024 | March 31, 2023 | March 31, 2024 | March 31, 2023 | |||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | ||||||||||||
| Provision from acquistion | ||||||||||||||||
| Reversal of allowance of expected credit losses | ( | ) | ( | ) | ||||||||||||
| Provision during the period | ||||||||||||||||
| Translation adjustment | ( | ) | ( | ) | ( | ) | ||||||||||
| Balance at end of period | $ | $ | $ | $ | ||||||||||||
NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS
| March 31, 2024 | September 30, 2023 | |||||||
| Advisory fees prepaid for business development | $ | $ | ||||||
| Deposits | ||||||||
| Advance to suppliers | ||||||||
| Others | ||||||||
| Total Prepaid expenses and other current assets | $ | $ | ||||||
| 18 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – PROPERTY AND EQUIPMENT, NET
The following is a summary of property and equipment:
SCHEDULE OF PROPERTY AND EQUIPMENT CONSISTED
| March 31, 2024 | September 30, 2023 | |||||||
| Furniture and Fixtures | $ | $ | ||||||
| Computer Equipment | ||||||||
| Property and equipment, gross | ||||||||
| Less: accumulated depreciation | ||||||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expense was $
NOTE 7 – GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill represents the excess of the purchase price over the fair values of the assets acquired and liabilities assumed in a business combination, at the date of acquisition. Goodwill is not amortized but is tested for potential impairment at the reporting unit level, at a minimum on an annual basis in the fourth fiscal quarter, or when indications of potential impairment exist.
Acquisition-related intangibles
Acquisition-related intangibles are amortized using the straight-line method over the period in which these assets contribute to our cash flows and are evaluated for impairment in accordance with our policies for valuation of long- lived assets.
Intangible assets consist of the following:
SCHEDULE OF INTANGIBLE ASSETS
| Weighted- estimated useful | March 31, 2024 | September 30, 2023 | ||||||||
| Customer relationships | ||||||||||
| Gross carrying amount | $ | $ | ||||||||
| Less: accumulated amortization | ||||||||||
| Net | $ | $ | ||||||||
Amortization
expense was $
| 19 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – LEASES
The Company leases offices. Rental contract is for periods of 36 months. The lease agreement has no covenants.
Accumulated ROU assets and amortization are as follows:
SCHEDULE OF LEASE EXPENSE
| March 31, 2024 | September 30, 2023 | |||||||
| Operating lease cost - office | $ | $ | ||||||
| Less: accumulated amortization | ||||||||
| ROU assets, net | $ | $ | ||||||
The following is leases liabilities:
SCHEDULE OF LEASE LIABILITIES
| March 31, 2024 | September 30, 2023 | |||||||
| Current portion | $ | $ | ||||||
| Non-current portion | ||||||||
| Total operating lease current and non current | $ | $ | ||||||
The following is a summary of the weighted remaining leases term and the weighted average discount rate for the Company’s leases at March 31, 2024 and September 30, 2023:
SCHEDULE OF WEIGHTED REMAINING LEASES TERM AND THE WEIGHTED AVERAGE DISCOUNT RATE
| March 31, 2024 | September 30, 2023 | |||||||
| Weighted average remaining lease term | ||||||||
| Operating leases | ||||||||
| Weighted average discount rate | ||||||||
| Operating leases | % | % | ||||||
During
the three months ended March 31, 2024 and 2023, cash paid for operating leases liabilities was $
| 20 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s leases have remaining lease terms inclusive of renewal or termination options that the Company is reasonably certain to exercise. The following table summarizes the maturity of the Company’s operating lease liabilities as of March 31, 2024 and September 30, 2023:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS FOR OPERATING LEASES
| Period Ending March 31 2024 | $ | |||
| Total operating lease payments | ||||
| Less: Imputed interest | ||||
| Total operating lease liabilities | $ | |||
| Year Ending September 30 2023 | $ | |||
| Total operating lease payments | ||||
| Less: Imputed interest | ||||
| Total operating lease liabilities | $ |
There
were
NOTE 9 - BANK LOANS
A summary of the Company’s loans payable is as follows
SCHEDULE OF LOANS PAYABLE
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| Bank loans | ||||||||
| HK$ | $ | $ | ||||||
| HK$ | ||||||||
| HK$ | ||||||||
| Total | $ | $ | ||||||
| Current portion | $ | $ | ||||||
| Non-current portion | ||||||||
| Total | $ | $ | ||||||
| (a) | ||
| (b) | ||
| (c) |
Fund-based
and non-fund-based credit facilities with banks are available for operational requirements in the form of short-term loans. As of March
31, 2024, the limits available were $
Total
interest expense was $
Total interest expense was $
| 21 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:
SCHEDULE OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
| March 31, 2024 | September 30, 2023 | |||||||
| Accrued expenses | $ | $ | ||||||
| Accrued employee cost | ||||||||
| Sales tax payable | ||||||||
| Other payable | ||||||||
| Total | $ | $ | ||||||
NOTE 12 - INCOME TAX
The income tax benefit is summarized as follows:
SCHEDULE OF INCOME TAX BENEFIT
| 2024 | 2023 | |||||||
| For the six months March 31, | ||||||||
| 2024 | 2023 | |||||||
| Current tax expense: | ||||||||
| Hong Kong profits tax | ||||||||
| Provision for the period | $ | $ | ||||||
| One-off tax deduction | ( | ) | ||||||
| Total | ||||||||
| Deferred tax benefit: | ||||||||
| Hong Kong profits tax | ||||||||
| Deferred tax benefit | ( | ) | ( | ) | ||||
| Total income taxes | $ | ( | ) | $ | ( | ) | ||
The
Company is subject to a Federal Corporate tax rate of
Subsidiary
in Hong Kong is subject to Hong Kong profit tax and profits tax was provided in the unaudited condensed consolidated financial statements on the estimated assessable
profit for the first HK$
Subsidiary
in Australia is subject to a tax rate of
| 22 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the provision for income taxes compared with the amount at the tax rate for the six months ended March 31, 2024 and 2023 was as follows:
SCHEDULE OF PROVISION FOR INCOME TAXES
| 2024 | 2023 | |||||||
| For the six months March 31, | ||||||||
| 2024 | 2023 | |||||||
| Loss before income tax expense | $ | ( | ) | $ | ( | ) | ||
| Tax charge at the applicable tax rate ( | $ | ( | ) | $ | ( | ) | ||
| Tax effect on foreign tax rate differential | ||||||||
| Tax effect of expenses not deductible | ||||||||
| Tax effect of exempted bank interest income not taxable | ( | ) | ( | ) | ||||
| Tax effect of tax losses carried forward | ||||||||
| Others | ( | ) | ( | ) | ||||
| Total income taxes | $ | ( | ) | $ | ( | ) | ||
The components and movements in deferred tax assets are as follows:
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
| Accelerated depreciation allowances | allowance for expected credit losses | Total | ||||||||||
| At September 30, 2023 | $ | ( | ) | $ | $ | |||||||
| Deferred taxation charged (credited) to statement of operations | ( | ) | ||||||||||
| Translation difference | ( | ) | ( | ) | ||||||||
| At March 31, 2024 | $ | ( | ) | $ | $ | |||||||
The components and movements in deferred tax liabilities are as follows:
Fair value of net assets acquired | ||||
| At September 30, 2023 | $ | ( | ) | |
| Deferred taxation credited to statement of operations | ||||
| At March 31, 2024 | $ | ( | ) | |
| 23 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - NET REVENUE
Disaggregation of revenue:
SCHEDULE OF DISAGGREGATION OF REVENUE
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| For the three months March 31, | For the six months March 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| IoT projects and ventures BPO services | $ | $ | $ | $ | ||||||||||||
| IoT software and hardware engineering services | ||||||||||||||||
| IoT maintenance and support services | ||||||||||||||||
| Net revenue | $ | $ | $ | $ | ||||||||||||
NOTE 14 - EMPLOYEE BENEFITS
The
Company contributes to a Mandatory Provident Fund plan which is available to all employees in Hong Kong. Mandatory contributions for
both employees and employers to the plan are payable at
Employees
of the Company’ s Australian subsidiary are entitled to receive retirement benefits from the Emergency Services Superannuation
Scheme in Australia. The benefit amounts are calculated based on the member’s periods of service and final average salary. The
total contributions made for such employee benefits was $
| 24 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - SEGMENTS
The Company has identified its operating segments based on the internal reports that are reviewed and used by the Chief Executive Officer (being the chief operating decision maker) in assessing performance and determining the allocation of resources. The Company operates in three reportable segments; provision of IoT maintenance and support services, IoT projects and ventures BPO services and IoT software and hardware engineering services in Hong Kong. The accounting policies of the segments are the same as described in the summary of significant accounting policies. The Company evaluates segment performance based on income from operations. All inter- company transactions between segments have been eliminated. As a result, the components of operating income for one segment may not be comparable to another segment. The following is a summary of the Company’s segment information as of and for the three and six months ended March 31, 2024 and 2023:
SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT
| IoT BPO services | IoT development services | IoT maintenance and support services | Total Reportable segments | |||||||||||||
| For the three months ended March 31, 2024 | ||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross loss | ||||||||||||||||
| Net loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Depreciation and amortization | ||||||||||||||||
| For the three months ended March 31, 2023 | ||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Depreciation and amortization | ||||||||||||||||
| For the six months ended March 31, 2024 | ||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross loss | ||||||||||||||||
| Net loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Depreciation and amortization | ||||||||||||||||
| For the six months ended March 31, 2023 | ||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Depreciation and amortization | ||||||||||||||||
| 25 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| Segment of assets | ||||||||
| IoT BPO services | $ | $ | ||||||
| IoT development services | ||||||||
| IoT maintenance and support services | ||||||||
| $ | $ | |||||||
NOTE 16 - RELATED PARTY TRANSACTIONS
The
Company advanced to a related company, Wolf Asia Pty Limited, of $
The
Company advanced to a related company, QBS Flywheel Limited, of $
The
Company owed a related party $
The
Company owed a related company, QBS Group Limited, of $
The
Company owed a related company, Flywheel Financial Strategy (Hong Kong) Company Limited of $
Due from related parties consisted of the following:
SCHEDULE OF AMOUNT DUE FROM RELATED PARTIES
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| Amount due from Wolf Asia Pty Limited | $ | $ | ||||||
| Amount due from QBS Flywheel Limited | ||||||||
| Due from related parties | $ | $ | ||||||
| 26 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Due to related parties consisted of the following:
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| Amount due to a director | $ | $ | ||||||
| Amount due to QBS Group Limited | ||||||||
| Amount due to Flywheel Financial Strategy (Hong Kong) Company Limited | ||||||||
| Due to related parties | $ | $ | ||||||
NOTE 17 - CONCENTRATIONS AND RISKS
During the three and six months ended March 31, 2024 and 2023, 100% of the Company’s assets were located in Pacific Asia.
Net revenue from geographic areas based on the location of the Company’s service delivery centres for the three and six months ended March 31, 2024 and 2023 is as follows.
SCHEDULE OF NET REVENUE FROM GEOGRAPHIC AREAS BASED ON THE LOCATION OF THE COMPANY
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| For the three months | For the six months | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Hong Kong | $ | $ | $ | $ | ||||||||||||
Details of the customers accounting for 10% or more of the Company’s total revenue and account receivables are as
SCHEDULE OF TOTAL CUSTOMER AND SUPPLIERS
| Customer A | Customer B | Customer C | Customer D | |||||||||||||
| For the three months ended | ||||||||||||||||
| March 31, 2024 | $ | $ | $ | $ | ||||||||||||
| March 31, 2023 | $ | $ | $ | $ | ||||||||||||
| For the six months ended | ||||||||||||||||
| March 31, 2024 | $ | $ | $ | $ | ||||||||||||
| March 31, 2023 | $ | $ | $ | $ | ||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Accounts receivable As of March 31, 2024 | $ | $ | $ | $ | ||||||||||||
| As of September 30, 2023 | $ | $ | $ | $ | ||||||||||||
| Accounts receivable | $ | $ | $ | $ | ||||||||||||
| 27 |
FLYWHEEL ADVANCED TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024 and 2023
(Unaudited)
Details of the suppliers accounting for 10% or more of the Company’s total cost of revenue and account payables are
| Supplier A | Supplier B | Supplier C | Supplier D | Supplier E | ||||||||||||||||
| For the three months ended | ||||||||||||||||||||
| March 31, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| March 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| For the six months ended | ||||||||||||||||||||
| March 31, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| March 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| Cost of revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Accounts payable | ||||||||||||||||||||
| As of March 31, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| As of September 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| Accounts payable | $ | $ | $ | $ | $ | |||||||||||||||
NOTE 18 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events occurring through the date these financial statements were issued, for their potential impact on the carve-out consolidated financial statements and disclosures and there were the following
Transfer and Sales of Subsidiaries
On
January 30, 2024 and 13 February, 2024, the Company incorporated Mega Fortune Company Limited (“Mega Fortune”) in the
Cayman Islands and Ponte Fides Company Limited (“Ponte Fides”) in the British Virgin Islands respectively. On April 29,
2024, the Company transferred all of the issued and outstanding shares of QBS System to Ponte Fides at HK$
On
July 5, 2024, the Company entered into a share purchase agreement (the “Share Purchase Agreement”) with Mericorn Company
Limited (“Buyer”), to sell all of the equity associated with the Company’s wholly owned subsidiary, Mega Fortune, which
is comprised of the Company’s subsidiaries Ponte Fides Company Limited, QBS System Limited and QBS System Pty Ltd at consideration
of HK$ (or approximately $) by the transfer of shares of the Buyer’s wholly owned subsidiary, Elison Virtus
Company Limited (“Elison”) from the Buyer to the Company which the Company holds approximately
| 28 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited financial statements are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in 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. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this quarterly report on Form 10-Q, “we”, “our”, “us” and “Company” refer to Flywheel Advanced Technology, Inc., a Nevada corporation unless the context requires otherwise.
Overview
Flywheel Advanced Technology, Inc. (“FWFW”) (formerly known as Pan Global Corp.) was incorporated in the state of Nevada on April 30, 2010. On November 30, 2022, FWFW incorporated Blue Print Global, Inc. (“Blue Print”) in the British Virgin Islands to establish an operation to source the supply and sale of warehouse patrol robots. FWFW holds 70% of Blue Print, and the balance is held by two individuals unrelated to the Company, with each party holding 15%. On March 22, 2023, FWFW acquired QBS System Limited (“QBS System”), a limited company incorporated under the laws of Hong Kong (the “QBS Acquisition”). FWFW and its subsidiaries (collectively, “we,” “us,” “our,” “FWFW” or the “Company,” unless context requires or indicates otherwise) were formed to provide Internet of Things (“IoT”) solutions and services to assist its clients to build applications using available IoT devices, sensors, frameworks, and platforms, integrate hardware and software solutions with clients existing landscape, or implement new IoT solutions for enterprises.
We provide a full range of IoT services comprising consulting, development and implementation, analytics, support, and evolution. QBS System has a business portfolio consisting of IoT integration solution services, IoT maintenance and support services, IoT projects and ventures, Business Process Outsourcing (“BPO”) services, and approximately twelve years of experience in Hong Kong providing IoT software and hardware engineering services. Its clientele ranges across various industries, such as logistics and supply chain management, food & beverage, automation, and smart buildings. The applications of QBS System’s IoT solutions include connected equipment in the enterprise (“Enterprise IoT”) and industrial assets such as machines and robots (“Industrial IoT”), the essential component of the fourth revolution of manufacturing or “Industry 4.0”
| 29 |
IoT Integration Solution Services
QBS System’s IoT Integration Solution Service helps clients to build applications using available IoT devices, sensors, framework and platform, to integrate the available hardware and software solution with clients existing landscape or to implement a new IoT solution for enterprises.
The applications of the QBS System’s IoT Integration Solution Service includes Enterprise IoT and Industrial IoT, the essential component of Industry 4.0.
QBS System provides full-range of services under its IoT Integration Solution Service program such as consulting, development and implementation, analytics, support, and evolution.
QBS System’s IoT Integration Solution Service focuses on researching and developing technologies to improve and enhance the quality of life for clients and find a faster, more economical, and easier ways to solve problems. The list below shows certain of the technologies developed and utilized by QBS System’s IoT Integration Solution Services in the following industries:
| ● | Low Carbon Property Management – carbon management involves understanding the carbon footprint of an entity or an individual by collecting and analyzing a massive volume of data. Carbon footprint benchmarking assesses and manages carbon emissions. This technology saves operating costs, reduces carbon emissions, slows climate change, improves air quality, and benefits human health. |
| ● | Energy Management - energy management is the key to conserving energy and saving money. It provides an opportunity to optimize energy costs by understanding energy flow, procurement, and economics of energy and reducing its harmful impact on our environment. This technology monitors energy consumption resulting in savings and reduction in carbon emissions for greater corporate social responsibility; |
| ● | Stock Management – stock management enables real-time stock information and facilitates warehouse and retail operation activities, a critical supply chain element. Stock management aims to have the right product in the right place at the right time without creating excess inventory. This technology offers a timely, efficient, and cost savings solution, especially for retail businesses; |
| ● | Greentech Management – Greentech management monitors, for example, planting requirements based on dynamic environmental data captured. This technology helps those growing houseplants or vegetation to reduce sound level and carbon footprint in the house, improve indoor air quality, and use resources more efficiently; and Enhanced Lifestyle Management – Enhanced Lifestyle Management facilitates the hospitality industry to be more efficient and reduce operating costs. This technology also improves the wellness, comfort, and safety of individuals. |
IoT Maintenance and Support Service
Following the completion of a QBS System’s IoT Integration Solution Service for a client, QBS System can provide ongoing maintenance and support services, as well as maintenance and support services on consumable hardware and software (license) purchased by the client. QBS System’s maintenance and support services are in high demand by their clients to facilitate long-term usage of QBS System’s products and help them be competitive in their respective fields, such as real estate, leisure, and entertainment industries.
Maintenance and support services entail ad-hoc technical services, IoT system administration, maintenance, secondment, and corrective services. QBS System also offers license renewal subscriptions for individual IoT systems, hardware, and software provided by the IoT products vendors.
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IoT Business Process Outsourcing Service
QBS System provides BPO services to IoT projects, which is an end-to-end technology service, outsourcing services to assist enterprises in launching IoT projects or ventures, creating a new technology solution, upscaling an existing IoT application, or reliably and cost-effectively integrating any IoT solution with a legacy system while addressing business challenges.
IoT BPO service helps ensure:
| ● | New Product Launch Success |
| ● | Product Transitions & Life Cycle Management |
| ● | Roadmap & Technology Reviews |
| ● | Business Planning |
| ● | Target Operational Model |
| ● | Forecast Management |
In addition to the IoT BPO services, QBS System offers technical consultants on flexible client assignments. This service assists clients in recruiting, training, and managing teams of consultants and related administrative staff. It is also involved with all technical aspects of clients’ IoT by deeply analyzing clients’ vision and creating IoT technology solutions enabling clients to build new IoT-based products and establish a new business model. The IoT BPO service helps with hardware and software that can adequately address the complexity and fragmentation in clients’ IoT projects, including hardware integration, software integration, system architecture, sensor monitoring, device management and connectivity, data analysis, etc.
Location Based Services
Smart Buildings
Smart buildings are equipped with energy-saving equipment for the efficient functioning of all the components and systems of a building, including lighting; monitoring; safety and security; emergency systems; heating, ventilation, and air conditioning systems; and car parking. The concept of smart buildings has gained pace due to the increasing adoption of IoT solutions and services, and the growing deployment of IoT sensors.
With the growing numbers of IoT network devices, the critical need for reliable IoT integration services, such as system design and architecture services, advisory services, and testing services, has emerged for the smooth integration, interconnectivity, and functioning of connected devices. IoT-enabled smart buildings have enhanced features, such as personalization of operations, device mobility inside buildings, comfort to occupants, enhanced productivity, and automation of indoor activities. IoT home automation systems utilize control systems and smart devices to automatically control and manage the basic home functions over the Internet, irrespective of the user location.
During 2020, one of the leading utility service companies in Hong Kong collaborated with QBS System to build an IoT factory in order to cross-integrate multiple brands of IoT Gateway as a single management platform, catering to different user scenarios in office or campus energy management in a more innovative way, such as sensory data of room occupancy capturing for electricity control purpose.
In 2016, QBS System collaborated with the Hong Kong government is to design and build the Waste Electrical and Electronic Equipment Treatment and Recycling Facility (WEEE·PARK), which provides a collection service and operates the facility. The facility uses state-of-the-art technology to process refrigerators, TVs, computers, washing machines, and air conditioners into valuable secondary raw materials while controlling the management of the hazardous materials that are contained in this equipment.
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In 2012, QBS System delivered a smart building application for the first zero-carbon building in Hong Kong developed by the Construction Industry Council in collaboration with the HKSAR Government. Our application utilizes the Building Automation and Controls Network (BACnet), a communication protocol standard explicitly designed to provide a way to integrate building control products made by different manufacturers. The BACnet enables a vast volume of data to be analyzed automatically and visualizes carbon footprint benchmarking data to the Low Carbon property management dashboard.
IoT Home Growing Device
QBS System’s IoT home growing device is a technology solution designed to enable individuals to grow plants and crops in their homes using IoT technology. The device is typically equipped with sensors, cameras, and other tools that allow for remote monitoring and management of the plant growth process.
A home growing device enables sensing technologies, such as humidity, temperature, etc., to monitor dynamic planting requirements for plans and crops. For example, as an intelligent virtual assistant the growing device can propose watering schedules based on the dynamic environmental data captured and a plant’s specific characteristics and needs.
The IoT growing device can be used to grow a variety of plants, including herbs, vegetables, and flowers, and can be configured to meet the specific needs of each plant. The device is typically connected to a mobile app or web platform, allowing users to monitor the progress of their plants, receive alerts and notifications, and adjust settings as needed.
The IoT home growing device can be used to grow a variety of plants, including herbs, vegetables, and flowers, and can be configured to meet the specific needs of each plant. The device is typically connected to a mobile app or web platform, allowing users to monitor the progress of their plants, receive alerts and notifications, and adjust settings as needed
The use of IoT technology in home growing devices allows for greater precision and control over the plant growth process. Sensors can monitor factors such as temperature, humidity, and light levels, and automatically adjust settings to ensure optimal growing conditions. This can result in faster growth, higher yields, and healthier plants.
IoT home growing devices are gaining popularity among consumers who are interested in sustainable and healthy living, as well as those who have limited outdoor space or live in areas with harsh climates. They are also used in commercial settings such as restaurants and grocery stores to provide fresh produce on site.
Overall, IoT home growing devices offer a convenient and efficient way for individuals to grow plants and crops in their homes, while leveraging the benefits of IoT technology to optimize the plant growth process.
Smart Bench
QBS System has co-developed with another innovator the Smart Bench, a modern, multifunctional bench designed for use in outdoor spaces. It has various features, such as wireless charging for mobile devices, Wi-Fi connectivity, and sensors that track environmental data like temperature, air quality, and noise levels. While powered by solar panels, the Smart Bench stores energy with a built-in battery for use at night. QBS System led the team in IoT Device Integration and System Implementation of the Smart Bench. The Smart Bench aims to enhance the user experience of public spaces by providing a convenient and comfortable place to sit while offering helpful technology features. Additionally, environmental sensors can help city planners gather data on how people use outdoor spaces and make informed decisions about improving urban infrastructure. QBS System’s believes that the Smart Bench is an innovative and practical solution for modern urban living.
Development of Digital Twin Business
The global digital twin industry was valued at US$6.5 billion in 2021 and is projected to reach US$125.7 million by 2030. The Company has been working deeply in various of industries, especially the supply chain and complex building sectors. With the domain knowledge adoption from our customers in these two industries, the Company currently allocates its research and development resources strategically in the digital twin implementation by extending the IoT technologies to the predictive analysis over the data lake built from food and beverage and smart building use cases. Through the launch of digital twin, the Company expects that, in the future, its major revenue model will migrate from project-based to subscription base in long run.
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QBS System’s Prospects in IoT Market
Forecast by Market Research
According to a report published by Market Data Forecast in March 2023, the global IoT market is expected to continue its growth trajectory in the period from 2023 through 2028, driven by technological advancements and increasing adoption across various industries. The IoT market size is projected to reach $875 billion by 2028, growing at a CAGR of 26.9% from 2023 to 2028. We believe that several factors are driving the market expansion of the IoT industry:
● Increasing adoption of smart devices: The increasing adoption of smart devices, such as smartphones, smartwatches, and smart home devices, drives the demand for IoT solutions because these devices rely on IoT technology to connect and communicate.
● Growing demand for automation and digitization: Companies are increasingly adopting automation and digitization to improve efficiency, reduce costs, and provide better customer experiences. IoT technology can enable automation and digitization by providing real-time data and insights.
● Increasing focus on sustainability: Companies increasingly focus on sustainability and environmental responsibility, driving demand for IoT solutions that can help reduce energy consumption, minimize waste, and optimize resource utilization.
● Advancements in technology: Advancements in technology, such as 5G networks, artificial intelligence, and machine learning, enable the development of more sophisticated IoT solutions that can provide more value to customers.
The emergence of new use cases and applications: IoT technology is being applied to new use cases and applications, such as smart cities, connected cars, and industrial IoT, which drive demand for IoT solutions.
Future Prospects of IoT Market
We believe that the promise of IoT will be realized through the development of cloud-enabled intelligent devices and systems that contribute critical data, facilitate distributed control and decision-making, and operate securely at scale.
The opportunity to help clients transform their businesses and operations through these intelligent systems is enormous. We believe that the Company, through our subsidiary QBS System, offers a combination of expertise in device-level solutions, embedded operating systems, and IoT software and services. Since its founding in 2011, QBS System has sought to design products which operate at the intersection of hardware and software. Today, we believe that intersection is the “edge” where cloud-enabled devices connect to create intelligent systems that share data, facilitate distributed control and machine learning, and operate securely at scale.
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In addition, we believe environmental, social, and governance (“ESG”) considerations have become increasingly important in recent years, as companies are expected to focus on financial performance and their impact on society and the environment. Through our subsidiary QBS System, we can provide solutions that are particularly relevant to ESG:
● Environmental Sustainability: we believe that we can contribute to environmental sustainability by developing products and services that reduce energy consumption and minimize waste. For example, IoT sensors are intended to optimize energy usage in buildings, reducing the carbon footprint and improving efficiency.
● Social Responsibility: we believe that we can demonstrate social responsibility by ensuring that our products and services are accessible to all, including marginalized communities. Additionally, we believe that they can address issues such as data privacy, security, and ethical concerns related to the use of customer data.
● Governance: Good governance practices are crucial for QBS System to build trust with customers, investors, and regulators. Governance includes transparent reporting on ESG performance, accountability for actions, and responsible management of risks.
Furthermore, the convergence of IoT and Artificial Intelligence (“AI”) is a significant trend that can potentially transform many industries. Combining these two technologies can enable more intelligent and autonomous systems, leading to greater efficiencies and improved decision-making. Below are some examples of QBS System’s performance history:
● Predictive maintenance: IoT sensors can collect data from machines and equipment, which can be analyzed using AI algorithms to predict when maintenance is required. Predictive maintenance help prevents equipment failures and reduces downtime.
● Smart buildings: IoT devices such as lighting systems, lift systems, and security cameras can be integrated with AI algorithms to create more intelligent and automated systems that can learn and adapt to user behavior and preferences.
● Agriculture: IoT sensors can collect data from crops and soil, which can be analyzed using AI algorithms to optimize irrigation, fertilization, and other agricultural practices, leading to more efficient and sustainable farming.
We believe that the convergence of IoT and AI has the potential to drive innovation and transform many industries, enabling more intelligent and connected systems that can learn and adapt to changing environments and user behavior.
Key Business Drivers of QBS System’s IoT Services
Increased efficiency and productivity - QBS System enables companies to optimize operations and automate processes to increase efficiency and productivity. For example, we use IoT sensors to monitor equipment performance, predict maintenance needs, and reduce downtime.
Cost savings - QBS System helps companies save costs by improving operational efficiency, reducing waste, and optimizing resource utilization. For example, IoT sensors monitor energy consumption and optimize usage, leading to cost savings.
Competitive advantage - Companies that adopt IoT can gain a competitive advantage by differentiating themselves from competitors, improving their products and services, and providing better customer experiences. For example, IoT can enable companies to offer personalized services, such as customized product recommendations and targeted marketing.
New revenue streams - QBS System can enable companies to create new revenue streams by developing innovative products and services that leverage IoT technology. For example, IoT can enable companies to offer subscription-based services, such as predictive maintenance and remote monitoring.
Improved Customer Experiences - QBS System can enable companies to improve customer experiences by providing personalized, real-time services and support. For example, IoT sensors monitor customer usage patterns and provide customized recommendations.
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IoT has become commonplace in all walks of life, from homes and industries to enterprises. IoT connects everything, making the world smarter and better than ever. IoT encompasses a set of advanced equipment (sensors and meters), network connectivity architecture, smart devices, and software that helps to interchange information between machines and devices. IoT technology holds significant potential in developing countries’ overall IT and communication industry.
Small and medium enterprises are adopting IoT solutions to maintain cost efficiency, productivity, and operation enhancements. Also, the rapid adoption of cloud-based solutions in the IT industry is the critical driver for the growth of the IoT market during the forecast period.
In conclusion, the impact that IoT has had, and will increasingly continue to have, upon all facets of modern society: (i) in the public sector in applications as varied as healthcare delivery, public safety, traffic management, and the eventual construction of smart cities; (ii) in the consumer space for lifestyle enhancement, entertainment, connected cars, smart homes; and, possibly most valuable; and (iii) in the industrial space for location tracking, demand and supply synchronization, dynamic routing and scheduling, predictive maintenance, inspection technology and so on.
Transfer and Sales of Subsidiaries
On January 30, 2024 and February 13, 2024, the Company incorporated Mega Fortune Company Limited (“Mega Fortune”) in the Cayman Islands and Ponte Fides Company Limited (“Ponte Fides”) in the British Virgin Islands respectively. On April 29, 2024, the Company transferred all of the issued and outstanding shares of QBS System to Ponte Fides at HK$100 under restructure. Following the closing of the share transfer, there will be no change in the officers and directors of the Company, and QBS System will continue its business as a wholly owned subsidiary of the Company.
On July 5, 2024, the Company entered into a share purchase agreement with Mericorn Company Limited (“Buyer”), to sell all of the equity associated with the Company’s wholly owned subsidiary, Mega Fortune, which is comprised of the Company’s subsidiaries Ponte Fides Company Limited, QBS System Limited and QBS System Pty Ltd at consideration of HK$56,360,000 (or approximately $7,230,000) by the transfer of 938 shares of the Buyer’s wholly owned subsidiary, Elison Virtus Company Limited (“Elison”) from the Buyer to the Company which the Company holds, approximately 10% of the equity of Elison.
Results of Operations:
Comparison of the Three Months Ended March 31, 2024 and 2023
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue, net | $ | 1,344,142 | $ | 36,410 | ||||
| Cost of revenue | (657,732 | ) | (88,834 | ) | ||||
| GROSS PROFIT (Loss) | 686,410 | (52,424 | ) | |||||
| Operating expenses | (872,471 | ) | (1,291,383 | ) | ||||
| LOSS FROM OPERATIONS | (186,061 | ) | (1,343,807 | ) | ||||
| Other income | 55,741 | - | ||||||
| Interest (expenses) income, net | (4,945 | ) | 14 | |||||
| LOSS BEFORE INCOME TAXES | (135,265 | ) | (1,343,793 | ) | ||||
| Income taxes | 66,931 | 24,492 | ||||||
| NET LOSS | (68,334 | ) | (1,319,301 | ) | ||||
| Foreign currency translation loss | (5,543 | ) | (322 | ) | ||||
| COMPREHENSIVE LOSS | $ | (73,877 | ) | $ | (1,319,623 | ) | ||
Revenue
Revenue from services
Revenue from services increased from $36,410 to $1,344,142 for the three months ended March 31, 2024, compared to same period in 2023. This is due to the acquisition of QBS System in late March 2023, while revenue for the current quarter represent revenue earned for the whole quarter.
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Revenue from the QBS System segment relates to the provision of IoT maintenance and support services, IoT projects and ventures BPO services and IoT software and hardware engineering services and is summarized as follows:
| For the Three Months Ended March 31, | ||||||||||||||||
| % of Net | % of Net | |||||||||||||||
| 2024 | Revenue | 2023 | Revenue | |||||||||||||
| IoT projects and ventures BPO services | $ | 506,288 | 38 | % | $ | 9,109 | 25 | % | ||||||||
| IoT software and hardware engineering services | 631,338 | 47 | % | 26,819 | 74 | % | ||||||||||
| IoT maintenance and support services | 206,516 | 15 | % | 482 | 1 | % | ||||||||||
| $ | 1,344,142 | 100 | % | $ | 36,410 | 100 | % | |||||||||
Gross Profit (Loss)
Gross profit of $686,410 changed from gross loss of $52,424 for the three months ended March 31, 2024, compared to same period in 2023. This is due to increase in revenue from IoT projects and ventures BPO services from 25% to 38% and IoT maintenance and supporting service from 1% to 15% on Jan to March 2024, which higher gross profit was earned.
Operating expenses
General and administrative expenses
General and administrative expenses decreased by $448,218 to $826,282 from $1,274,500 for the three months ended March 31, 2024, compared to the same period in 2023. This is largely due to legal and professional fees for acquisition of QBS System were incurred during the three months ended March 31, 2023 and there were no such expenses in 2024.
As the Company’s operating activities increase, we expect its general and administrative costs will include additional costs in overhead contribution, consultancy, as well as employee related costs associated with a higher headcount.
Depreciation and amortization
Depreciation and amortization increased from $8,123 to $30,422 for the three months ended March 31, 2024, compared to same period in 2023. There was no amortization and lease amortization for the three months ended March 31, 2023 as the acquisition of QBS System took place in late March 2023.
Other income
Other income increased from $0 to $55,741 for the three months ended March 31, 2024, compared to same period in 2023. This is mainly due to reversal of allowance for credit loss on trade receivable of $40,214 recognized during the current quarter.
Interest Expense
Interest expense, net of $4,945 changed from interest income, net of $14 for the three months ended March 31, 2024 compared to the same period in 2023. This is also due to the acquisition of QBS System in late March 2023, while current quarter recorded interest expenses from bank loans for the whole quarter.
Income tax
Income tax expenses increased from $24,492 to $66,932 for the three months ended March 31, 2024, compared to same period in 2023. This is due to the acquisition of QBS System and deferred tax expenses on allowance for expected credit losses was recorded during the current quarter.
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Other comprehensive loss
Foreign currency translation loss
Foreign currency translation loss increased from $322 to $5,543 for the three months ended March 31, 2024, compared to the same period in 2023. It is incurred on translation of assets and liabilities of foreign subsidiaries in reporting currency adopted by the subsidiaries to the reporting currency of the Company.
Net loss
Net loss decreased by $1,250,967 to $68,334 from $1,319,301 for the three months ended March 31, 2024, compared to the same period in 2023. This decrease is primarily driven by increase in revenue in 2024 and decrease in legal and professional fees.
Comparison of the Six Months Ended March 31, 2024 and 2023
| For the Six Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue, net | $ | 1,970,257 | $ | 36,410 | ||||
| Cost of revenue | (1,072,212 | ) | (88,834 | ) | ||||
| GROSS PROFIT (LOSS) | 898,045 | (52,424 | ) | |||||
| Operating expenses | (1,262,371 | ) | (1,317,215 | ) | ||||
| LOSS FROM OPERATIONS | (364,326 | ) | (1,369,639 | ) | ||||
| Other income | 159,454 | - | ||||||
| Interest (expenses) income, net | (10,131 | ) | 14 | |||||
| LOSS BEFORE INCOME TAXES | (215,003 | ) | (1,369,625 | ) | ||||
| Income taxes | 58,359 | 24,492 | ||||||
| NET LOSS | (156,644 | ) | (1,345,133 | ) | ||||
| Foreign currency translation gain (loss) | 3,000 | (322 | ) | |||||
| COMPREHENSIVE LOSS | $ | (153,644 | ) | $ | (1,345,455 | ) | ||
Revenue
Revenue from services
Revenue from services increased from $36,410 to $1,970,257 for the six months ended March 31, 2024, compared to same period in 2023. This is due to the acquisition of QBS System in late March 2023, and revenue for the six months ended March 31, 2024 represent revenue earned for the whole six-month period.
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Revenue from the QBS System segment relates to the provision of IoT maintenance and support services, IoT projects and ventures BPO services and IoT software and hardware engineering services and is summarized as follows:
| For the Six Months Ended December 31, | ||||||||||||||||
| % of Net | % of Net | |||||||||||||||
| 2024 | Revenue | 2023 | Revenue | |||||||||||||
| IoT projects and ventures BPO services | $ | 693,203 | 35 | % | $ | 9,109 | 25 | % | ||||||||
| IoT software and hardware engineering services | 1,002,527 | 51 | % | 26,819 | 74 | % | ||||||||||
| IoT maintenance and support services | 274,527 | 14 | % | 482 | 1 | % | ||||||||||
| $ | 1,970,257 | 100 | % | $ | 36,410 | 100 | % | |||||||||
Gross Profit (Loss)
Gross profit of $898,045 changed from gross loss of $52,424 for the six months ended March 31, 2024, compared to same period in 2023. This is due to increase in revenue from IoT projects and ventures BPO services from 25% to 35% and IoT maintenance and supporting service from 1% to 14%, which higher gross profit was earned from Jan to March 2024.
Operating expenses
General and administrative expenses
General and administrative expenses increased by $137,813 to $1,300,332 from $1,162,519 for the six months ended March 31, 2024, compared to the same period in 2023. This is largely due to decrease in legal and professional fees during the six months ended March 31, 2024 as legal and professional fees for acquisition of QBS System were incurred in late March 2023 and there were no such expenses in 2024.
As the Company’s operating activities increase, we expect its general and administrative costs will include additional costs in overhead contribution, consultancy, as well as employee related costs associated with a higher headcount.
Depreciation and amortization
Depreciation and amortization increased from $8,123 to $61,809 for the six months ended March 31, 2024, compared to same period in 2023. There was no amortization and lease amortization as the acquisition of QBS System took place in late March 2023.
Other income
Other income increased from $0 to $159,454 for the six months ended March 31, 2024, compared to same period in 2023. This is due to the reversal of allowance for credit loss on trade receivable of $125,568 recognized during the current quarter.
Interest Expense
Interest expense, net of $10,131 changed from interest income, net of $14 for the six months ended March 31, 2024 compared to the same period in 2023. This is also due to the acquisition of QBS System in late March 2023, while the six months ended March 31, 2024 recorded interest expenses from bank loans for the whole period.
Income tax
Income tax from $24,492 to $58,359 for the six months ended March 31, 2024, compared to same period in 2023. This is due to the acquisition of QBS System and deferred tax expenses on allowance for expected credit losses was recorded during the current quarter.
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Other comprehensive income (loss)
Foreign currency translation gain (loss)
Foreign currency translation gain of $3,000 changed from loss of $322 for the six months ended March 31, 2024, compared to the same period in 2023. It is incurred on translation of assets and liabilities of foreign subsidiaries in reporting currency adopted by the subsidiaries to the reporting currency of the Company.
Net loss
Net loss decreased by $1,191,811 to $153,644 from $1,345,455 for the six months ended March 31, 2024, compared to the same period in 2023. This decrease is primarily driven by increase in revenue in 2024 and decrease in legal and professional fees.
Liquidity and Capital Resources
Comparison of the Six Months Ended March 31, 2024 and 2023
Our use of cash was primarily related to operating activities. We have historically financed our operations primarily through our cash flow generated from our operations and bank borrowings. As of March 31, 2024, we had $439,518 in cash and cash equivalents.
Cash flows from operating activities generally reflect net loss adjusted for certain non-cash items including depreciation and amortization, changes in deferred taxes, and changes in allowance of expected credit losses. Cash used in operating activities was $98,913 for the six months ended March 31, 2024 compared to cash used in operating activities of $141,645 for the six months ended March 31, 2023. Cash used in operating activities was decreased during the six months ended March 31, 2024 was due to decrease in net loss, increase in accounts receivable and accounts payable due to increase in revenue and cost of revenue in Jan to March 2024 and decrease in accrued expenses as there was no accrued legal and professional fees for acquisition in 2024.
Cash flows from investing activities reflect capital expenditure for the purchase of Company’s assets. Cash used in investing activities during the six months ended March 31, 2024 was $7,299 compared to cash from investing activities of $565,211 due to acquisition of QBS System during the six months ended March 31, 2023.
Cash flows used in financing activities generally reflect changes in the Company’s stock and debt activity during the period. Net cash used in financing activities was $75,893 for the six months ended March 31, 2024 compared to net cash provided by financing activities of $80,703 for the six months ended March 31, 2023. Net cash used in financing activities for the six months ended March 31, 2024 was primarily attributable to repayment of borrowings and repayment to related party. Net cash provided by financing activities for the six months ended March 31, 2023 was primarily attributable to advance from related party.
Management believes the cash on hand combined with net cash provided by operations will be sufficient to fund operations for the next 12 months and beyond.
Critical Accounting Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that impact the amounts reported in our consolidated financial statements and accompanying notes that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.
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Recently issued Accounting Pronouncements
For the impact of recently issued accounting pronouncements on the Company’s consolidated financial statements, see Note 2 (W) to the unaudited condensed consolidated financial statements included in “Part I, Item 1 — Financial Statements” of this Quarterly Report on Form 10-Q and incorporated herein by reference.
Item 3. Quantitative And Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information called for by this Item.
Item 4. Controls and Procedures.
Management’s Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (who is the same person), to allow for timely decisions regarding required disclosure.
As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive and Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, he concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; and (4) management dominated by a single individual without adequate compensating controls. The aforementioned material weaknesses were identified by our Chief Executive and Financial Officer in connection with the review of our financial statements as of March 31, 2024.
Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the period ended March 31, 2024, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in litigation relating to claims arising out of its operations in the normal course of business. We are not involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on us.
Item 1A. Risk Factors.
As a “smaller reporting company”, we are not required to provide the information required by 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.
Item 5. Other Information.
None.
Item 6. Exhibits.
The exhibits listed on the Exhibit Index below are provided as part of this report.
| Exhibit
No. |
Description | |
| 31.1* | Certification of principal executive and financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended. | |
| 32.1* | Certification of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended. | |
| 101* | Inline XBRL Document Set for the condensed financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q. | |
| 104 | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. |
| * | Filed herewith. |
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SIGNATURES
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.
| Dated: July 16, 2024 | ||
| FLYWHEEL ADVANCED TECHNOLOGY, INC. | ||
| By: | /s/ Tang Siu Fung | |
| Name: | Tang Siu Fung | |
| Title: | President and Chief Executive Officer | |
| (Principal Executive Officer and Principal Financial and Accounting Officer) | ||
| 42 |
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
I, Tang Siu Fung, certify that:
| 1. | I have reviewed this Quarterly Report of Flywheel Advanced Technology, Inc. on Form 10-Q for the period ended March 31, 2024; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions): | |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
| Dated: July 16, 2024 | By: | /s/ Tang Siu Fung |
| Tang Siu Fung | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer and Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Flywheel Advanced Technology, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tang Siu Fung, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Dated: July 16, 2024 | By: | /s/ Tang Siu Fung |
| Tang Siu Fung | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer and Principal Financial and Accounting Officer) |