UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of September 2022

 

Commission File Number: 001-40405

 

JIUZI HOLDINGS INC.

  

No.168 Qianjiang Nongchang Gengwen Road, 15th Floor

Economic and Technological Development Zone

Xiaoshan District, Hangzhou City

Zhejiang Province 310000

People’s Republic of China

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒        Form 40-F ☐  

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

 

 

 

 

 

In this report, as used herein, and unless the context suggests otherwise, the terms “Jiuzi,” “Company,” “we,” “us” or “ours” refer to the combined business of Jiuzi Holdings Inc., its subsidiaries and other consolidated entities. “NEVs” refers to new energy vehicles. References to “dollar” and “$” are to U.S. dollars, the lawful currency of the United States, and references to “Renminbi” and “RMB” are to the legal currency of China. References to “SEC” are to the Securities and Exchange Commission.

 

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited consolidated financial statements and the related notes included elsewhere in this report on Form 6-K. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those identified elsewhere in this report on Form 6-K.

 

Results of Operations

 

For the six months ended April 30, 2022 and 2021

 

The tables in the following discussion summarize our consolidated statements of operations for the periods indicated. This information should be read together with our consolidated financial statements included elsewhere in this press release. The operating results in any period are not necessarily of the results that may be expected for any future period.

 

   For six months ended         
   April 30,   Changes 
   2022   2021   Amount   % 
Net revenue  $4,109,736   $4,609,353   $-499,617    -10.84%
Cost of revenue   3,641,309    1,486,613    2,154,696    144.94%
Gross profit   468,427    3,122,740    -2,654,313    -85%
Selling, general and administrative expenses   6,528,418    1,312,510    5,215,908    397.40%
Income from operations   -6,059,991    1,810,230    -7,870,221    -434.76%
Interest income (expense), net   -454,152    357    -454,509    -127,313.45%
Other income (expense), net   1,391,065    -53,407    1,444,472    -2,704.65%
Income before income tax provision   -5,123,078    1,757,180    -6,880,258    -391.55%
Provision for income taxes   127,661    445,726    -318,065    -71.36%
Net income   -5,250,739    1,311,454    -6,562,193    -500.38%

 

1

 

 

Net Revenue 

 

The following table lists the calculation methods of gross profit and gross profit margin of each type of revenue: 

 

  

For the six months ended

April 30,

   Changes 
   2022   2021   Amount   % 
New energy vehicle sales                
Net revenue  $3,208,591    22,230    3,186,361    14,333.61%
Cost of revenue   3,186,391    5,613    3,180,778    56,668.06%
Gross profit  $22,200    16,617    5,583    33.60%
Gross profit margin   0.69%   74.75%   -74.06%   -99.08%
                     
Franchise initial fees                    
Net revenue  $901,145    4,587,123    -3,685,978    -80.35%
Cost of revenue   454,918    1,481,000    -1,026,082    -69.28%
Gross profit  $446,227    3,106,123    -2,659,896    -85.63%
Gross profit margin   49.52%   67.71%   -18.19%   -26.86%
                     
Franchisees’ royalties                    
Net revenue  $-    -    -    - 
Cost of revenue   -    -    -    - 
Gross profit  $-    -    -    - 
Gross profit margin                    
                     
Total                    
Net revenue  $4,109,736    4,609,353    -499,617    -10.84%
Cost of revenue   3,641,309    1,486,613    2,154,696    144.94%
Gross profit  $468,427    3,122,740    -2,654,313    -85.00%
Gross profit margin   11.40%   67.75%   -56.35%   -83.17%

 

Our net revenues were $4,109,736 for the six months ended April 30, 2022 as compared to $4,609,353 in 2021, a decrease of $499,617 or 10.84%. The decrease is mainly due to the re-outbreak of the pandemic in China and the increase in the procurement cost of new energy vehicles.

  

New Energy Vehicle (NEV) sales

 

Our NEVs sales include the sales of NEVs in our Shangli store and sales of NEVs to our franchisees. For the six months ended April 30, 2022, our NEVs sales increased by $3,186,361 or 14,333.61%, from $22,230 for the six months ended April 30, 2021 to $3,208,591 for the six months ended April 30, 2022.

 

The growth is mainly due to the gradual enrichment of new energy vehicle brands and the increase in sales of franchisees, which leads to the increase in sales of new energy vehicles

 

Cost of revenue was $3,186,391 for the six months ended April 30, 2022, an increase of $3,180,778 or 56668.06%, from $5613 for the six months ended April 30, 2021 which resulted from the increase in sales for the period.

 

Gross profit and gross profit margin were $22,200 and 0.69% for the six months ended April 30, 2022 as compared to $16,617 and 74.75% for the same period in 2021, respectively. Due to the increase of procurement cost, the gross profit rate decreased.

 

2

 

 

Franchisees initial fees

 

The initial franchise fee revenue decreased by $3,685,978or 80.35%, from $4,587,123 for the six months ended April 30, 2021 to $901,145 for the six months ended April 30, 2022. As of April 30, 2022 and 2021, we have entered into franchise agreements with 69 and 37 franchisees, respectively. Through our new business strategy, some of introduced franchisees are zero-franchise fee but in exchange they are required NEV-sales objective. The decline is mainly due to the re outbreak of the pandemic in China. People's interest in investment and consumption has generally declined, and our market development work has been hindered by the epidemic.

 

Cost of revenue was $454,918 for the six months ended April 30, 2022, a decrease of $1,026,082 or 69.28%, from $1,481,000 for the six months ended April 30, 2021.

 

Gross profit and gross profit margin were $446,227 and,49.52% for the six months ended April 30, 2022 as compared to $3,106,123 and 67.71% for the same period in 2021, respectively. The decrease was mainly due to a decrease in revenue and fixed cost per franchisee.

 

Franchisees’ royalties

 

We may collect royalties based on 10% of net incomes from our franchisees. As of April 30, 2022, we did not generate any revenues through franchisees’ royalties as our franchisees have yet to generate net income for the period. The revenues from our franchisees are dependent on the sales of the NEVs which were still small as they mostly just started operation in these two years and comparably large expenses such as administrative and overhead expenses. Due to COVID-19, the franchisees temporally closed their stores and the revenues decreased significantly in the first half of 2022. Even though the franchise stores are currently re-opened for business, the franchisees still face obstacles in increasing their sales and achieving NEV sources, the situation may continue until they generate revenues and cross the break-even point in future.

 

Selling, General and Administrative Expenses

 

We incurred selling, general and administrative expenses of $6,528,418 for the six months ended April 30, 2022, as compared to $1,312,510 for the six months ended April 30, 2021, an increase of $5,215,908, or 397.40%. This increase is due to the provision for credit losses.in our receivables.

  

Interest Expenses

 

Interest charges and bank charges are mainly from bank transfer charges and deposit interest offset. Interest expense as of April 30, 2022 and 2021 was approximately $ -457,466 and $ -357, respectively. 

    

Provision for Income Taxes

 

Provision for income tax was $127,661 during the six months ended April 30, 2022, a decrease of $318,065 or 71.36%, as compared to $445,726 for the six months ended April 30, 2021. Under the Income Tax Laws of the PRC, companies are generally subject to income tax at a rate of 25%. The decrease in provision for income taxes was mainly due to the decrease in income before income tax provision which was $5,123,078. for the six months ended April 30, 2022 as compared to $1,757,180 for the six months ended April 30, 2021.

 

Net Income

 

Our net income decreased by 6,562,193 $ or 500.38%, to $ -5,250,739 for the six months ended April 30, 2022, from $1,311,454 for the six months ended April 30, 2021. Such change was the result of the combination of the changes as discussed above. 

 

3

 

 

Liquidity and Capital Resources 

 

For the six months ended April 30, 2022 and 2021

 

As of April 30, 2022, we had $5,950,372 in cash and equivalent. The Company’s working capital and other capital needs mainly come from shareholders’ equity contribution and operating cash flow. Cash is needed to pay for inventory, wages, sales expenses, rent, income taxes, other operating expenses, and purchases to service debts.

 

Although the Company’s management believes that cash generated from operations will be sufficient to meet the Company’s normal working capital requirements, its ability to service its current debt will depend on its future realization of its current assets for at least the next 12 months. Management took into account historical experience, the economy, trends in the automotive industry, the collectability of accounts receivable as of April 30, 2022, and the realization of inventory. Based on these considerations, the Company’s management believes that the Company has sufficient funds to meet its working capital requirements and debt obligations, as they will be due at least 12 months from the date of financial reporting. However, there is no guarantee that management’s plan will succeed. There are a number of factors that can arise and cause the company’s plans to fall short, such as demand for NEVs, economic conditions, competitive pricing in the industry, and the continued support of banks and suppliers. If future cash flow from operations and other capital resources are insufficient to meet its liquidity needs, the Company may be forced to reduce or delay its anticipated expanding plans, sell assets, acquire additional debt or equity capital, or refinance all or part of its debt.

 

The following table summarizes the company’s cash flow data as of April 30, 2022 and April 30, 2021:

 

  

For the six months ended

April 30,

 
   2022   2021 
Net cash used in operating activities  $4,295,043   $132,848 
Net cash used in investing activities   946,930    1,742 
Net cash provided by (used in) financing activities   4,224,203    (23,749)
Effect of exchange rate on cash   (404,753)   59,718 
Net decrease in cash and cash equivalents  $1,017,770   $158,339 

 

Operating Activities 

 

Net cash used in operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, accounts receivable and contractual liabilities, and is adjusted for the impact of changes in working capital. Net cash used in operations as of April 30, 2022 was approximately $4,295,043, representing an increase of $4,162,195, compared to net cash used in operating activities of $132,848 for the six months ended April 30, 2021. 

 

Investing Activities 

 

Net cash used in investing activities was approximately $946,930 for the six months ended April 30, 2022, an increase of $945,188, as compared to $1,742 net cash used in investing activities for the six months ended April 30, 2021. The increase in cash used was due to Short-term investment in high liquidity and low risk.

 

4

 

 

Financing Activities

 

Net cash provided by financing activities was approximately $4,224,203 for the six months ended April 30, 2022, an increase of $4,247,952, or 17886.87%, as compared to net cash provided by $-23,749 for the six months ended April 30, 2021. The increase in cash provided by financing activities was due to proceeds from convertible debenture.

  

Subsequent Event

 

The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. Subsequent to the date the financial statements were available to be issued. There was no subsequent event that would require disclosure to or adjustment to the financial statements.

 

Statement Regarding Unaudited Financial Information

 

The unaudited financial information set forth above is subject to adjustments that may be identified when audit work is performed on the Company’s year-end financial statements, which could result in significant differences from this unaudited financial information.

 

Safe Harbor Statement 

 

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as “may, “will, “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following:  the Company’s goals and strategies; the Company’s future business development; product and service demand and acceptance; changes in technology; economic conditions; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the Securities and Exchange Commission.  For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the U.S. Securities and Exchange Commission, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

 

5

 

 

Jiuzi Holdings, Inc.

Consolidated Balance Sheets

As of April 30, 2022 and October 31, 2021

(Unaudited)

 

   April 30,   October 31, 
  2022   2021 
ASSETS        
Current Assets        
Cash and cash equivalents   5,950,372    7,372,895 
Short-term investment   2,050,390    1,180,772 
Accounts receivable   6,355    6,566 
Accounts receivable – related party   467,560    529,407 
Due from related parties   343,242    367,549 
Inventories   416,382    266,106 
Advances to suppliers   3,980,162    1,594,278 
Loans receivable from related parties, net   8,301,983    9,673,893 
Other receivables and other current assets   1,764,771    1,228,738 
Total current assets   23,281,217    22,220,204 
Non-current Assets          
Property, plant and equipment, net   321,280    373,108 
Intangible assets, net   16,345    18,053 
Other non-current assets   481,744    558,702 
Operating lease right of use asset   741,035    846,200 
Loans receivable from related parties, net   2,680,431    4,136,657 
Total non-current assets   4,240,835    5,932,720 
TOTAL ASSETS   27,522,052    28,152,924 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current liabilities          
Accruals and other payables   1,995,698    595,364 
Accounts payable – related party   40,070    44,366 
Accounts payable   -    15,695 
Convertible debenture   4,191,336    - 
Taxes payable   3,104,610    2,923,987 
Operating lease liabilities - current   161,628    163,148 
Contract liability   108,092    114,916 
Contract liability – related party   63,710    164,804 
Total current liabilites   9,665,144    4,022,280 
Non-current liabilities          
Operating lease liabilities - non-current   532,423    537,432 
Deferred income   1,094,570    1,263,840 
Total non-current assets   1,626,993    1,801,272 
TOTAL LIABILITIES   11,292,137    5,823,552 
           
COMMITMENTS AND CONTINGENCIES   -    - 
           
Shareholders’ equity          
Ordinary shares (150,000,000 shares authorized, par value $0.001, 21,426,844 shares issued and outstanding as of April 30, 2022 and October 31, 2021, respectively)*   21,427    21,427 
Additional paid in capital   13,150,667    13,150,667 
Statutory reserve   891,439    891,439 
Retained earnings   2,216,307    7,459,539 
Accumulated other comprehensive loss   (213,270)   541,615 
Total equity attributable to Jiuzi   16,066,570    22,064,687 
Equity attributable to noncontrolling interests   163,345    264,685 
Total Stockholders’ equity   16,229,915    22,329,372 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   27,522,052    28,152,924 

 

* Giving retroactive effect for the Share Subdivision and 2-for-1 stock dividend on post-Share Subdivision basis

 

See accompanying notes to financial statements.

 

6

 

 

Jiuzi Holdings, Inc.

Consolidated Statements of Income and Comprehensive Income

For the three and six months ended April 30, 2022 and 2021

(Unaudited)

 

   For the
Six Months
ended
   For the
Six Months
ended
 
  April 30,   April 30, 
  2022   2021 
Revenues, net   3,574,697    22,230 
Revenues – related party, net   535,039    4,587,123 
Total Revenues   4,109,736    4,609,353 
           
Cost of revenues   2,816,572    41,375 
Cost of revenues – related party   824,737    1,445,238 
Total cost of revenues   3,641,309    1,486,613 
           
Gross profit   468,427    3,122,740 
           
Selling and marketing expense   3,005    11,886 
General and administrative expenses   6,525,413    1,300,624 
Operating income (loss)   (6,059,991)   1,810,230 
           
Non-operating income (expense) items:          
Other income (expense), net   1,391,065    (53,407)
Interest income   1,657    357 
Interest expense   (455,809)   - 
    936,913    (53,050)
           
Earnings (Loss) before tax   (5,123,078)   1,757,180 
           
Income tax   127,661    445,726 
           
Net income (loss)   (5,250,739)   1,311,454 
Less: loss attributable to non-controlling interest   (7,507)   (12,605)
Net income (loss) attributable to Jiuzi   (5,243,232)   1,324,059 
           
Earnings (Loss) per share          
Basic   (0.24)   0.09 
Diluted   (0.24)   0.09 
           
*   Giving retroactive effect for the Share Subdivision and 2-for-1 stock dividend on post-Share Subdivision basis          
Basic   21,426,844    15,000,000 
Diluted   21,426,844    15,000,000 
           
Net income (loss)   (5,250,739)   1,311,454 
           
Other comprehensive income (loss):          
Foreign currency translation (loss) income   (752,728)   321,708 
Total comprehensive income (loss)   (6,003,467)   1,633,162 

 

* Giving retroactive effect for the Share Subdivision and 2-for-1 stock dividend on post-Share Subdivision basis

 

See accompanying notes to financial statements.

 

7

 

 

Jiuzi Holdings, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

For the three and six months ended April 30, 2022 and 2021

(Unaudited)

 

                       Accumulated   Equity         
   Ordinary shares*,**   Additional           Other   attributable   Non-     
   No. of   Par   Paid in   Statutory   Retained   Comprehensive   to   Controlling   Total 
   Shares   Value   Capital   Reserves   Earnings   Income   Jiuzi   interest   Equity 
                                     
Balance, October 31, 2020   15,000,000    15,000    308,939    690,624    6,846,609    (60,426)   7,800,746    414,430    8,215,176 
(Distribution) / Contribution in capital   -    -    38,338    -    -    -    38,338    -    38,338 
Net income   -    -    -    -    1,324,059    -    1,324,059    (12,650)   1,311,454 
Appropriations to statutory reserves   -    -    -    47,448    (47,448)   -    -    -    - 
Foreign currency translation adjustment   -    -    -    -    -    317,857    317,857    3,851    321,708 
Balance, April 30, 2021   15,000,000    15,000    347,277    738,072    8,123,220    257,431    9,481,000    405,676    9,886,676 
                                              
Balance, October 31, 2021   21,426,844    21,427    13,150,667    897,439    7,459,539    541,615    22,064,687    264,685    22,329,372 
(Distribution)/Contribution in capital   -    -    -    -    -    -    -    (95,990)   (95,990)
Net income   -    -    -    -    (5,243,232)   -    (5,243,232)   (7,507)   (5,250,739)
Appropriations to statutory reserves   -    -    -    -    -    -    -    -    - 
Foreign currency translation adjustment   -    -    -    -    -    (754,885)   (754,885)   2,157    (752,728)
Balance, April 30, 2022   21,426,844    21,427    13,150,667    891,439    2,216,307    (213,270)   16,066,570    163,345    16,229,915 

 

*Giving retroactive effect for the Share Subdivision and 2-for-1 stock dividend on post-Share Subdivision basis

 

See accompanying notes to financial statements.

 

8

 

 

Jiuzi Holdings, Inc.

Consolidated Statements of Cash Flows

For the years ended April 30, 2022 and 2021

 

   For the
Six Months
ended
   For the
Six Months
ended
 
   April 30,   April 30, 
   2022   2021 
Cash flows from operating activities        
Net income   (5,250,739)   1,311,454 
Depreciation and amortization   44,178    18,887 
Provision/(Recovery) for doubtful accounts   764    (7,894)
Amortazation of operating lease ROU assets   80,727      
Provision for credit losses   3,846,415    274,403 
Deferred income tax   -      
Imputed interest expense   183,557    493,933 
Loss from disposal of assets   -      
Changes in assets and liabilities   -      
(Increase) decrease in accounts receivable   -    - 
(Increase) decrease in accounts receivable – related party   45,657    685,203 
(Increase) decrease in inventories   (164,248)   24,972 
Increase in loans to related parties   (1,379,033)   (4,168,893)
(Increase) decrease in other assets   (3,054,582)   425,315 
(Decrease) increase in accrued and other liabilities   1,468,078    380,048 
Decrease in account payable   (15,713)   20,559 
Iincrease in accounts payable – related party   (2,973)   (64,497)
Increase in taxes payable   283,725    688,054 
(Decrease) increase in contract liability   (3,249)   (29,737)
(Decrease) increase in contract liability – related party   (99,098)   (184,655)
(Decrease) increase in operating leasae liabilites   (16,466)     
(Decrease) increase in other non-current liabilites   (262,043)     
Net cash generated by (used in) operating activities   (4,295,043)   (132,848)
           
Cash flows from investing activities          
Purchase of fixed assets   (8,362)   (1,742)
Purchase of intangible assets   -      
Acquisition of investment   (938,568)   - 
Disposal of fixed assets          
Refund of security deposits        - 
Net cash generated by (used in) investing activities   (946,930)   (1,742)
           
Cash flows from financing activities          
Proceeds from owner’s injection of capital   32,867    38,338 
Proceeds from convertible debenture   4,191,336    - 
Proceeds from (Repayment to) related party   -    (62,087)
Net cash provided by (used in) financing activities   4,224,203    (23,749)
           
Net increase (decrease) of cash and cash equivalents   (1,017,770)   (158,339)
           
Effect of foreign currency translation on cash and cash equivalents   (404,753)   59,718 
Cash, cash equivalents, and restricted cash – beginning of period   7,372,895    764,492 
Cash, cash equivalents, and restricted cash – end of period  $5,950,372   $665,871 
           
Supplementary cash flow information:          
Interest received  $-   $- 
Interest paid  $-   $- 
Income taxes paid  $-   $- 

  

See accompanying notes to financial statements.

 

 

9

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

 

Jiuzi Holdings, Inc. (“Company” or “Jiuzi”) was incorporated in the Cayman Islands on October 10, 2019. The Company in an investment holding company; its primary operations are conducted through subsidiaries and variable interest entities as described below.

 

Jiuzi (HK) Limited (“Jiuzi HK”) was incorporated in Hong Kong on October 25, 2019. It is wholly owned subsidiary of the Company.

 

Zhejiang Navalant New Energy Automobile Co., Ltd. (“Jiuzi WFOE”) was incorporated on June 5, 2020 as wholly foreign owned entity in the People’s Republic of China (“PRC”). Jiuzi WFOE is a wholly owned subsidiary of Jiuzi HK.

 

Zhejiang Jiuzi (“Zhejiang Jiuzi”) was incorporated on May 26, 2017 in the PRC. Zhejiang Jiuzi’s scope of business includes the sale of new energy vehicles (“NEVs”) and NEV components and parts, and the related development of products and services for the NEV industry. Zhejiang Jiuzi generates revenues by both selling NEVs and NEV components and parts to Jiuzi branded licensed NEV dealerships, and by rendering professional services to new Jiuzi NEV dealerships, such as initial setup, NEV product procurement services, and specialized marketing campaigns. The Zhejiang Jiuzi also provides short term financing solutions to the new Jiuzi NEV dealerships for the procurement of NEVs.

 

Shangli Jiuzi was incorporated on May 10, 2018 in the PRC. Its scope of business is similar to Zhejiang Jiuzi. Zhejiang Jiuzi owns 59.0% equity interest in Shangli Jiuzi, and the remaining 41% equity interest is owned by unrelated third-party investors; as such Shangli Jiuzi is accounted as a subsidiary of Zhejiang Jiuzi.

 

Hangzhou Zhitongche Technology Co., Ltd. (“Hangzhou Zhitongche”) was incorporated on February 2, 2018 in the PRC. The company is providing technical services, technical development, technical consulting and trading for new energy for motor vehicle and its accessories. Zhitongche is a wholly owned subsidiary of Zhejiang Jiuzi.

 

Zhejiang Jiuzi New Energy Network Technology Co., Ltd was incorporated on July 1, 2021 in PRC. Its scope of business includes software outsourcing services; industrial internet data services; network and information security software development; artificial intelligence application software development; Internet of Things technology research and development; internet security services; information system operation and maintenance services; artificial intelligence basic software development; cloud computing equipment technical services; research and development of robots (except for projects subject to approval according to law, business activities are carried out independently according to law with business licenses). Zhejiang Jiuzi owns 100% equity interest in Zhejiang Jiuzi Xinneng Network Technology Co., Ltd.

 

Guangxi Nanning Zhitongche New Energy Technology Co., Ltd was incorporated on December 31, 2021 in PRC. Its scope of business includes technical service, development and consultation; sales of electrical accessories for new energy vehicles; automobiles new car sales; business agency services; motor vehicle charging sales; sales of new energy prime movers; R&D of emerging energy technologies; car trailers, assistance, and clearance services; auto parts wholesale; auto parts retail; sales agency; domestic trade agency; import and export agency. Hangzhou Zhitongche owns 90% equity interest in Guangxi Nanning Zhitongche New Energy Technology Co., Ltd, and the remaining 10% equity interest is owned by unrelated third-party investor; as such Guangxi Nanning Zhitongche New Energy Technology Co., Ltd is accounted as a subsidiary of Zhejiang Jiuzi.

 

Hangzhou Jiuyao New Energy Automobile Technology Co. Ltd. was incorporated on January 24, 2022 in PRC. Its scope of business includes technical service, technology development, technical consultation and promotion, as well as sales of automobiles and new energy vehicles, and sales of electrical accessories and accessories for new energy vehicles. Hangzhou Jiuyao is 51% owned by Hangzhou Zhitongche, as such Hangzhou Jiuyao is accounted as a subsidiary of Zhejiang Jiuzi.; the remaining 49% equity interest is owned by unrelated third-party investors.

 

10

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

Contractual Arrangements between Jiuzi WFOE and Zhejiang Jiuzi

 

Due to PRC legal restrictions on foreign ownership, the Company and its subsidiaries do not own any direct equity interest in Zhejiang Jiuzi. Instead, the Company and its subsidiaries control and receive the economic benefits of Zhejiang Jiuzi’s business operation through a series of contractual arrangements.

 

Jiuzi WFOE, Zhejiang Jiuzi and the Zhejiang Jiuzi Shareholders entered into a series of contractual arrangements, 1) Exclusive Option Agreement, 2) Exclusive Business Cooperation Agreement, and 3) Share Pledge Agreement, known as VIE Agreements, on June 15, 2020. The VIE agreements are designed to provide Jiuzi WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Zhejiang Jiuzi, including absolute control rights and the rights to the assets, property and revenue of Zhejiang Jiuzi.

 

Each of the VIE Agreements is described in detail below:

 

Exclusive Option Agreement

 

Under the Exclusive Option Agreement, the Zhejiang Jiuzi Shareholders irrevocably granted Jiuzi WFOE (or its designee) an exclusive right to purchase, to the extent permitted under PRC law, once or at multiple times, at any time, a portion or whole of the equity interests or assets in Zhejiang Jiuzi held by the Zhejiang Jiuzi Shareholders. The purchase price is RMB 10 and subject to any appraisal or restrictions required by applicable PRC laws and regulations.

 

The agreement takes effect upon parties signing the agreement, and remains effective for 10 years, extendable upon Jiuzi WFOE or its designee’s discretion.

 

Exclusive Business Cooperation Agreement

 

Pursuant to the Exclusive Business Cooperation Agreement between Zhejiang Jiuzi and Jiuzi WFOE, Jiuzi WFOE provides Zhejiang Jiuzi with technical support, consulting services and other management services relating to its day-to-day business operations and management, on an exclusive basis, utilizing its advantages in technology, business management and information. For services rendered to Zhejiang Jiuzi by Jiuzi WFOE under this agreement, Jiuzi WFOE is entitled to collect a service fee that shall be calculated based upon service hours and multiple hourly rates provided by Jiuzi WFOE. The service fee should approximately equal to Zhejiang Jiuzi’s net profit.

 

The Exclusive Business Cooperation Agreement shall remain in effect for ten years unless earlier terminated upon written confirmation from both Jiuzi WFOE and Zhejiang Jiuzi before expiration. Otherwise, this agreement can only be extended by Jiuzi WFOE and Zhejiang Jiuzi does not have the right to terminate the agreement unilaterally.

 

 

11

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

Share Pledge Agreement

 

Under the Share Pledge Agreement between Jiuzi WFOE and certain shareholders of Zhejiang Jiuzi together holding 1,000,000 shares, or 100% of the equity interests, of Zhejiang Jiuzi (“Zhejiang Jiuzi Shareholders”), the Zhejiang Jiuzi Shareholders pledged all of their equity interests in Zhejiang Jiuzi to Jiuzi WFOE to guarantee the performance of Zhejiang Jiuzi’s obligations under the Exclusive Business Cooperation Agreement. Under the terms of the Share Pledge Agreement, in the event that Zhejiang Jiuzi breaches its contractual obligations under the Exclusive Business Cooperation Agreement, Jiuzi WFOE, as pledgee, will be entitled to certain rights, including, but not limited to, the right to dispose of dividends generated by the pledged equity interests. The Zhejiang Jiuzi Shareholders also agreed that upon occurrence of any event of default, as set forth in the Share Pledge Agreement, Jiuzi WFOE is entitled to dispose of the pledged equity interest in accordance with applicable PRC laws. The Zhejiang Jiuzi Shareholders further agree not to dispose of the pledged equity interests or take any actions that would prejudice Jiuzi WFOE’s interest.

 

The Share Pledge Agreement shall be effective until the full payment of the service fees under the Business Cooperation Agreement has been made and upon termination of Zhejiang Jiuzi’s obligations under the Business Cooperation Agreement.

 

The purposes of the Share Pledge Agreement are to (1) guarantee the performance of Zhejiang Jiuzi’s obligations under the Exclusive Business Cooperation Agreement, (2) ensure the shareholders of Zhejiang Jiuzi do not transfer or assign the pledged equity interests, or create or allow any encumbrance that would prejudice Jiuzi WFOE’s interests without Jiuzi WFOE’s prior written consent and (3) provide Jiuzi WFOE control over Zhejiang Jiuzi.

 

The Company has concluded that the Company is the primary beneficiary of Zhejiang Jiuzi and its subsidiaries, and should consolidate financial statements. The Company is the primary beneficiary based on the VIE Agreements that each equity holder of Zhejiang Jiuzi pledged their rights as a shareholder of Zhejiang Jiuzi to Jiuzi WFOE. These rights include, but are not limited to, voting on all matters of Zhejiang Jiuzi requiring shareholder approval, disposing of all or part of the shareholder’s equity interest in Zhejiang Jiuzi, oversee and review Zhejiang Jiuzi’s operation and financial information. As such, the Company, through Jiuzi WFOE, is deemed to hold all of the voting equity interest in Zhejiang Jiuzi and its subsidiaries.

 

For the periods presented, the Company has not provided any financial or other support to either Zhejiang Jiuzi or its subsidiaries. However, pursuant to the Exclusive Business Cooperation Agreement, the Company may provide complete technical support, consulting services and other services during the term of the VIE agreements. Though not explicit in the VIE agreements, the Company may provide financial support to Zhejiang Jiuzi and its subsidiaries to meet its working capital requirements and capitalization purposes. The terms of the VIE Agreements and the Company’s plan of financial support to the VIEs were considered in determining that the Company is the primary beneficiary of the VIEs. Accordingly, the financial statements of the VIEs are consolidated in the Company’s consolidated financial statements.

 

Based on the foregoing VIE Agreements, Jiuzi WFOE has effective control of Zhejiang Jiuzi and its subsidiaries, which enables Jiuzi WFOE to receive all of their expected residual returns and absorb the expected losses of the VIE and its subsidiaries. Accordingly, the Company consolidates the accounts of Zhejiang Jiuzi and its subsidiaries for the periods presented herein, in accordance with Accounting Standards Codification, or ASC, 810-10, Consolidation.

 

 

12

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its subsidiary. Significant inter-company transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management’s estimates and assumptions. In particular, the novel coronavirus (“COVID-19”) pandemic and the resulting adverse impacts to global economic conditions, as well as our operations, may impact future estimates including, but not limited to, our allowance for loan losses, inventory valuations, fair value measurements, asset impairment charges and discount rate assumptions. Certain prior year amounts have been reclassified to conform to the current year’s presentation. Amounts and percentages may not total due to rounding.

 

Functional and presentation currency

 

The functional currency of the Company is the currency of the primary economic environment in which the Company operates which is Chinese Yuan (“RMB”).

 

Transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at the end of the reporting periods. Exchange differences arising on the settlement of monetary items and on translation of monetary items at period-end are included in income statement of the period.

 

For the purpose of presenting these financial statements, the Company’s assets and liabilities are expressed in US$ at the exchange rate on the balance sheet date, stockholder’s equity accounts are translated at historical rates, and income and expense items are translated at the weighted average exchange rate during the period. The resulting translation adjustments are reported under accumulated other comprehensive income in the stockholder’s equity section of the balance sheets.

 

Exchange rate used for the translation as follows:

 

US$ to RMB

 

   Period
End
   Average 
April 30, 2022   6.6085    6.3894 
April 30, 2021   6.4741    6.5209 
October 31, 2021   6.3968    6.4242 
October 31, 2020   6.6925    6.4164 

 

Fair Values of Financial Instruments

 

The Company adopted ASC 820 “Fair Value Measurements,” which defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosures requirements for fair value measures. Current assets and current liabilities qualified as financial instruments and management believes their carrying amounts are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their current interest rate is equivalent to interest rates currently available. The three levels are defined as follow:

 

Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

 

Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value.

 

As of the balance sheet date, the estimated fair values of the financial instruments approximated their fair values due to the short-term nature of these instruments. Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates the hierarchy disclosures each year.

 

13

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

Related parties

 

The Company adopted ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.

 

Cash and Equivalents

 

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

 

Accounts Receivable

 

Accounts receivable are recorded at the net value less estimates for expected credit losses. Management regularly reviews outstanding accounts and provides an allowance for doubtful accounts. When collection of the original invoice amounts is no longer probable, the Company will either partially or fully write-off the balance against the allowance for doubtful accounts.

 

Short-term investments

 

Short-term investments consist primarily of investments in fixed deposits with original maturities between three months and one year and certain investments in wealth management products and other investments that the Company has the intention to redeem within one year. As of April 30, 2022 and October 31, 2021, the investments in bank wealth management and security that were recorded as short-term investments amounted to $2,050,390 and $1,180,772, respectively. 

 

Loans Receivable

 

Loans receivable are recorded at origination at the fair value less estimates for expected credit losses. Management regularly reviews outstanding accounts and provides an allowance for credit losses. When collection of the original amounts is no longer probable, the Company will either partially or fully write-off the balance against the allowance for credit losses.

  

Revenue Recognition

 

In 2014, the FASB issued guidance on revenue recognition (“ASC 606”), with final amendments issued in 2016. The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. The Company has concluded that the new guidance did not require any significant change to its revenue recognition processes.

 

The Company’s revenues consist of sales of vehicle by the Company’s own corporate retail store to third party customers, sales of vehicle to franchisees as a supplier, and fees from retail stores operated by franchisees. Revenues from franchised stores include initial franchise fees and annual royalties based on a percent of net incomes.

 

The Company recognizes sales of vehicle revenues at the point in time when the Company has transferred physical possession of the goods to the customer and the customer has accepted the goods, therefore, indicating as control of the goods has been transferred to the customer. The transaction price is determined and allocated to the product prior to the transfer of the goods to the customer.

  

The initial franchise services include a series of performance obligations and an indefinite license to use the Company’s trademark. The series of performance obligations are specific services and deliverables that are set forth in the agreement and are billed and receivable as delivered and accepted by the franchisee. These services and deliverables may be customized and are not transferable to other third parties.

 

The royalty revenues are distinct from the initial franchise services. The Company recognizes royalty revenues only when the franchisee has generated positive annual net income, at which point the Company has the contractual right to request for payment of the royalty. The royalty is calculated as a percentage of the franchisees’ annual net income.

 

The Company estimates potential returns and records such estimates against its gross revenue to arrive at its reported net sales revenue. The Company has not experienced any sales returns.

 

Inventory

 

Inventories, which are primarily comprised of finished goods for sale, are stated at the lower of cost or net realizable value, using the first-in first-out method. The Company evaluates the need for reserves associated with obsolete, slow-moving and non-salable inventory by reviewing net realizable values on a periodic basis. Only defects products can be return to our suppliers.

 

14

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

Advertising

 

The Company expenses advertising costs as incurred and includes it in selling expenses. The Company recorded $220,850 and $nil of advertising and promotional expenses for the six months ended April 30, 2022 and 2021, respectively.

 

Income Taxes

 

Income taxes are provided in accordance with ASC No. 740, Accounting for Income Taxes.  A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry-forwards. Deferred tax expense (benefit) results from the net change during the years of deferred tax assets and liabilities.

 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

A tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that the relevant taxing authority that has full knowledge of all relevant information will examine each uncertain tax position. Although the Company believes the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals.

 

Earnings (loss) per share

 

Basic income (loss) per share is computed by dividing net income (loss) attributable to the holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year. Diluted income (loss) per share is calculated by dividing net income (loss) attributable to the holders of ordinary shares as adjusted for the effect of dilutive ordinary share equivalents, if any, by the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. However, ordinary share equivalents are not included in the denominator of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded.

 

All per share amounts for all periods presented herein have been adjusted to reflect the Share Subdivision and 2 for 1 stock dividend on post-Share Subdivision basis. See Note 11.

 

Property and Equipment & Depreciation

 

Property and equipment are stated at historical cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Property and equipment are depreciated on a straight-line basis over the following periods:

 

Equipment  5 years
Furniture and fixtures  5 years
Motor vehicles  10 years

 

Intangible Assets & Amortization

 

Intangible assets are stated at historical cost net of accumulated amortization. Software are amortized on a straight-line basis over the estimated useful life of the software which is 3 years.

 

Impairment of Long-lived assets

 

The Company accounts for impairment of property and equipment and amortizable intangible assets in accordance with ASC 360, “Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of”, which requires the Company to evaluate a long-lived asset for recoverability when there is event or circumstance that indicate the carrying value of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset’s (or asset group’s) fair value.

 

15

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

New Accounting Pronouncements

 

In February of 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) “Leases (Topic 842)”. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted.

 

For finance leases, a lessee is required to do the following:

 

  Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position

 

  Recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income

 

  Classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows.

 

For operating leases, a lessee is required to do the following:

 

  Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position

 

  Recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis

 

  Classify all cash payments within operating activities in the statement of cash flows.

 

In July 2018, the FASB issued Accounting Standards Update No. 2018-11 (ASU 2018-11), which amends ASC 842 so that entities may elect not to recast their comparative periods in transition (the “Comparatives Under 840 Option”). ASU 2018-11 allows entities to change their date of initial application to the beginning of the period of adoption. In doing so, entities would:

 

  Apply ASC 840 in the comparative periods.

 

  Provide the disclosures required by ASC 840 for all periods that continue to be presented in accordance with ASC 840.

 

  Recognize the effects of applying ASC 842 as a cumulative-effect adjustment to retained earnings for the period of adoption.

 

In addition, the FASB also issued a series of amendments to ASU 2016-02 that address the transition methods available and clarify the guidance for lessor costs and other aspects of the new lease standard.

 

The management adopted the new standard using the modified retrospective method of adoption. The transition method expedient which allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result of electing this transition method, prior periods will not be restated. The adoption of this ASU resulted in the recording of additional lease assets and liabilities each with no effect to opening balance of retained earnings as the Company.

 

In June 2016, the FASB issued an accounting pronouncement (FASB ASU 2016-13) related to the measurement of credit losses on financial instruments. This pronouncement, along with subsequent ASUs issued to clarify certain provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019.

 

The management adopted the new standard and estimated the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of such financial asset. .

 

In October 2018, the FASB issued an accounting pronouncement (FASB ASU 2018-17) related to related party guidance for variable interest entities. The amendments in this pronouncement are effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. The adoption of this standards did not have a material effect on the consolidated financial statements.

 

In December 2019, the FASB issued an accounting pronouncement (FASB ASU 2019-12) related to simplifying the accounting for income taxes. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of this standards did not have a material effect on the consolidated financial statements.

 

16

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

NOTE 3 – VARIABLE INTEREST ENTITIES AND OTHER CONSOLIDATION MATTERS

 

On June 15, 2020, Jiuzi WFOE, Zhejiang Jiuzi and the Zhejiang Jiuzi Shareholders. The key terms of these VIE Agreements are summarized in “Note 1 - Organization and Principal Activities” above.

 

VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Jiuzi WFOE is deemed to have a controlling financial interest and be the primary beneficiary of Zhejiang Jiuzi and its subsidiaries, because it has both of the following characteristics:

 

  1. power to direct activities of Zhejiang Jiuzi that most significantly impact its economic performance, and

 

  2. obligation to absorb losses of the entity that could potentially be significant to Zhejiang Jiuzi or right to receive benefits from the entity that could potentially be significant to Zhejiang Jiuzi.

 

In addition, as all of these VIE agreements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could further limit the Company’s ability to enforce these VIE agreements. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event the Company is unable to enforce these VIE Agreements, it may not be able to exert effective control over Zhejiang Jiuzi and its ability to conduct its business may be materially and adversely affected.

 

All of the Company’s main current operations are conducted through Zhejiang Jiuzi and its subsidiaries. Current regulations in China permit Zhejiang Jiuzi to pay dividends to the Company only out of its accumulated distributable profits, if any, determined in accordance with their articles of association and PRC accounting standards and regulations. The ability of Zhejiang Jiuzi to make dividends and other payments to the Company may be restricted by factors including changes in applicable foreign exchange and other laws and regulations.

 

Risks of variable interest entity structure

 

In the opinion of management, (i) the corporate structure of the Company is in compliance with existing PRC laws and regulations; (ii) the VIE Arrangements are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect; and (iii) the business operations of WFOE and the VIE are in compliance with existing PRC laws and regulations in all material respects.

 

However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to the foregoing opinion of its management. If the current corporate structure of the Company or the VIE Arrangements is found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its corporate structure and operations in the PRC to comply with changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company’s current corporate structure or the VIE Arrangements is remote based on current facts and circumstances.

 

17

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

The following financial information of the VIEs in the PRC are included in the accompanying consolidated financial statements as of and for the six months ended April 30, 2022 and October 31, 2021.

 

   April 30,   October 31, 
   2022   2021 
Current assets        
Cash and cash equivalents   579,640    433,430 
Short-term investment   2,050,390    1,180,772 
Accounts receivables   6,355    6,566 
Accounts receivables – related parties   467,560    529,407 
Due from related parties   348,452    372,759 
Inventories   416,382    266,106 
Advances to suppliers   3,980,162    1,594,278 
Loans receivable from related parties, net - current portion,   8,301,983    9,673,893 
Other receivables and other current assets   1,095,327    1,228,738 
    17,246,251    15,285,949 
Non-current assets          
Property, plant and equipment, intangible assets   337,625    391,161 
Operating lease right of use asset   741,035    846,200 
Loans receivable from related parties, non-current portion   2,680,431    4,136,657 
Other non-current assets   481,744    558,702 
    4,240,835    5,932,720 
           
Total assets of VIE   21,487,086    21,218,669 
           
Current Liabilities          
Accruals and other payables   585,796    595,364 
Accounts payable – related party   40,070    44,366 
Accounts payable   -    15,695 
Taxes payable   3,102,917    2,923,130 
Operating lease liabilities - current   161,628    163,148 
Amounts due to parent and non-VIE subsidiaries of the Company   8,519,354    6,670,432 
Contract liability   1,517,994    114,916 
Contract liability – related party   63,710    164,804 
    13,991,469    10,691,855 
Non-current liabilities          
Operating lease liabilities – non-current   532,423    537,432 
Deferred income   1,094,570    1,263,840 
    1,626,993    1,801,272 
           
Total liabilities of VIE   15,618,462    12,493,127 

 

   For the six months ended 
   April 30,   April 30, 
   2022   2021 
Revenues   4,109,736    4,609,353 
Net (loss) income   (3,776,300)   1,311,454 
Net cash used in generated by operating activities   (3,768,491)   (132,848)
Net cash used in generated by investing activities   (4,033,248)   (1,742)
Net cash used in generated by financing activities   (100,165)   (23,749)

 

As of April 30, 2022 and October 31, 2021, the VIEs have not incurred any amount due from non-VIE subsidiaries of the Company.

 

As of April 30, 2022 and October 31, 2021, the VIEs have $8,519,354 and $6,670,432 due to non-VIE subsidiaries of the Company.

 

All material related party transactions are disclosed in Note 9, or elsewhere in these consolidated financial statements. For the six months ended April 30, 2022 and 2021, the VIES have not entered into any transaction with other subsidiaries that are not VIEs. If and when such transaction incurs, such transaction would be eliminated upon consolidation.

 

Under the contractual arrangements with the VIEs, the Company has the power to direct activities of the VIEs and can have assets transferred out of the VIEs under its control. Therefore, the Company considers that there is no asset in any of the VIEs that can be used only to settle obligations of the VIEs, except for registered capital and PRC statutory reserves. As all VIEs are incorporated as limited liability companies under the Company Law of the PRC, creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the VIEs.

18

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

The Company and its directly and indirectly wholly owned subsidiaries, Jiuzi (HK) and Jiuzi WFOE do not have any substantial assets or liabilities or result of operations. They were incorporated for the purpose of providing a tax efficient structure for the Zhejiang Jiuzi to raise additional capital for its development.

 

NOTE 4 – INVENTORY

 

Inventory, net comprised of the following:

 

   April 30,
2022
   October 31,
2021
 
Finished goods   416,382    266,106 
Total, net   416,382    266,106 

 

Inventory write-down expense was $nil and $nil for the years ended October 31, 2021 and 2020, respectively.

 

NOTE 5 – ACCOUNTS RECEIVABLES

 

Accounts receivables, net is comprised of the following:

 

   April 30,
2022
   October 31,
2021
 
Accounts receivables   6,355    6,566 
Allowance for doubtful accounts   -    - 
Total, net   6,355    6,566 

 

   April 30,
2022
   October 31,
2021
 
Accounts receivables-related parties   486,166    547,865 
Allowance for doubtful accounts   (18,606)   (18,458)
Total, net   467,560    529,407 

 

The following is a summary of the activity in the allowance for doubtful accounts:

 

   April 30,
2022
   October 31,
2021
 
Balance at beginning of year   18,458    53,727 
Provision   764    - 
Charge-offs        - 
Recoveries        (37,591)
Effect of translation adjustment   (616)   2,322 
Balance at end of year   18,606    18,458 

 

Bad debt expense/(recoveries) was ($764) and ($7,894) for the six months ended April 30, 2022 and 2021, respectively.

 

NOTE 6 – SHORT-TERM INVESTMENT

 

The following table summarizes the Company’s short-term investment:

 

   As of April 30, 2022 
   Level 1   Level 2   Level 3   Total 
Bank Wealth Management   -    2,050,390    -    2,050,390 
Security   -    -    -    - 
    -    2,050,390    -    2,050,390 

 

   As of October 31, 2021 
   Level 1   Level 2   Level 3   Total 
Bank Wealth Management   -    1,024,443    -    1,024,443 
Security   -    156,329    -    156,329 
    -    1,180,772    -    1,180,772 

 

19

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

NOTE 7 – LOANS RECEIVABLES

 

Loans receivables include amounts due from related franchisees and are presented net of imputed interest and an allowance for estimated loan losses. The loans are provided in the form of credit line to related franchisee to support their operations. These loans are unsecured with a due date of 18 months upon initial drawing.

 

Management has determined that the 18-month borrowing rate most appropriately capture the financing cost for these loans. Given that the loans are in the forms of credit lines to the franchisees that may have varying balances over time, as a practical expedient, management has elected to the expense the interest as a cost of revenue at inception rather than amortize over time.

 

The amounts charged were $183,557 and $497,506 for the six months ended April 30, 2022 and 2021, respectively.

 

The allowance for loan losses represents an estimate of the amount of net losses inherent in our portfolio of managed receivables as of the applicable reporting date and expected to become evident during the following 12 months.

 

Each lending request is evaluated by considering the borrower’s financial condition. The Company uses a proprietary model to assign each franchisee a risk rating. This model uses historical franchisee performance data to identify key factors about a franchisee that are considered most significant in predicting a franchisee’s ability to meet its financial obligations. The Company also considers numerous other financial and qualitative factors of the franchisee’s operations, including capitalization and leverage, liquidity and cash flow, profitability, and credit history with the Company and other creditors.

 

The Company also consider recent trends in delinquencies and defaults, recovery rates and the economic environment in assessing the models used in estimating the allowance for loan losses, and may adjust the allowance for loan losses to reflect factors that may not be captured in the models. In addition, the Company periodically consider whether the use of additional metrics would result in improved model performance and revise the models when appropriate. The provision for loan losses is the periodic expense of maintaining an adequate allowance.

 

An account is considered delinquent when the related franchisee fails to make a substantial portion of a scheduled payment 3 months after the due date. For purposes of determining impairment, loans are evaluated collectively, as they represent a large group of smaller-balance homogeneous loans, and therefore, are not individually evaluated for impairment.

 

   April 30,
2022
   October 31,
2021
 
Loan to related franchisees, gross   17,570,905    16,591,780 
Discount based on imputed interest rate of 11.75%   (2,064,079)    (1,949,060)
Loan to related franchisees, net of discount   15,506,826    14,642,720 

 

   April 30,
2022
   October 31,
2021
 
Loan to related franchisees, net of discount   15,506,826    14,642,720 
Provision for credit losses   (4,524,412)   (832,170)
Loan to related franchisees, net of discount and allowance   10,982,414    13,810,550 

 

The following is a summary of the activity in the allowance for credit loss:

 

   April 30,
2022
   October 31,
2021
 
Balance at beginning of year   832,170    498,762 
Provision   3,846,416    409,762 
Charge-offs        - 
Recoveries        (100,739)
Effect of translation adjustment   (154,174)   24,385 
Balance at end of year   4,524,412    832,170 

 

Credit loss was $ 3,846,416 and $274,403 for the six months ended April 30, 2022 and 2021, respectively.

 

The following is a summary of current and non-current loan receivables, net of allowance for credit losses:

 

   April 30,
2022
   October 31,
2021
 
Loan to related franchisees, net of discount and allowances, current   8,301,983    9,673,893 
Loan to related franchisees, net of discount and allowances, non-current   2,680,431    4,136,657 
    10,982,414    13,810,550 

20

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

Credit Quality

 

The Company extends credit to related franchisees primarily in the form of lines of credit to purchase vehicles and support their daily operations. Each of the franchisees are assigned to one of nine groups according to risk ratings with Group 1 demonstrating the strongest financial metrics, including performance and repayment ability and Group IX demonstrating the weakest financial metrics.

 

Generally, the company suspends credit lines and does not extend further funding to franchisee who are unable to repay the balance within 3 months after the 18-month deadline.

 

The Company regularly reviews the model to confirm the continued business significance and statistical predictability of the model and may make updates to improve the performance of the model. In addition, the Company regularly audits the related franchisee’s inventory and sales records to verify the franchisee’s performance. Based on the results of monitoring the franchisee’s performance, including daily payment verifications and monthly analysis of the franchisee’s financial statements, payoffs, aged inventory, over credit line and delinquency reports, the Company can adjust the franchisee’s risk rating, if necessary.

 

The credit quality of the loans receivables is evaluated based on our internal risk rating analysis. A franchisee has the same risk rating for its entire financing regardless of the type and timing of financing.

 

The credit quality analysis of franchisee loan receivables at April 30, 2022 and October 31, 2021 was as follows:

 

   April 30,
2022
   October 31,
2021
 
Franchisee Financing:        
Group I   -    - 
Group II   92,911    90,538 
Group III   -    - 
Group IV   -    - 
Group V   196,330    745,393 
Group VI   467,247    9,211,326 
Group VII   10,021,677    62,084 
Group VIII   -    - 
Group IX   60,095    365,070 
Group X   324,064    255,593 
Group XI   365,657    518,378 
Group XII   521,206    96,926 
Group XIII   127,207    740,337 
Group XIV   225,637    2,557,075 
Group XV   3,104,795    - 
Group XVI   -    - 
Balance at end of year   15,506,826    14,642,720 

 

NOTE 8 – PROPERTY & EQUIPMENT

 

Property and equipment, net comprised of the following:

 

   April 30,
2022
   October 31,
2021
 
At Cost:        
Equipment   78,671    74,114 
Motor vehicles   359,534    371,436 
Leasehold Improvement        30,397 
Furniture and fixtures   9,862    8,998 
    448,067    484,945 
           
Less: Accumulated depreciation   126,787    111,837 
Total, net   321,280    373,108 

 

Depreciation expenses was $42,471 and $31,755 for the six months ended April 30, 2022 and 2021, respectively.

 

21

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

NOTE 9 – INTANGIBLE ASSETS

 

Intangible assets, net comprised of the following:

 

   April 30,
2022
   October 31,
2021
 
At Cost:        
Financial software   19,565    17,196 
Domain name        3,068 
    19,565    20,264 
Less: Accumulated Amortization   3,220    2,211 
Total, net   16,345    18,053 

 

Amortization expenses was $1,708 and $nil for the six months ended April 30, 2022 and 2021, respectively.

 

NOTE 10 – RELATED PARTY TRANSACTIONS

 

The franchisees are related parties of the Company due to the nominal, symbolic equity interest ownership in the franchisees. The franchisees were originally incorporated with the Company shown as a 51.0% owner and subsequently as a 1.25% owner. The intent of having such ownership percentage in the franchisees was to enable the franchisees to register their respective individual business name to include the words “Jiuzi” as required by the local business bureau. Subsequent to the successful registration by the franchisees and completion of the Company’s obligations under the franchise and license agreement, the Company will decrease its ownership interest in these franchisees to 0%. The Company’s percentage of shareholding is nominal, inconsequential, and symbolic. The Company’s equity interest of 51.0% and 1.25% in the franchisees were symbolic in nature.

 

The Company did not and does not control the franchisees, exert significant influence over the franchisees, have the power to direct the use of the franchisee’s assets and the fulfillment of their obligations, appoint or dismiss directors, authorized representatives, or executive officers of the franchisees. Management has also determined that the percentage shareholding in the franchisee is not compensatory to the Company in nature, and accordingly, would not be subject to consideration as income under revenue recognition criteria. The Company did not contribute any permanent equity capital in these franchisees and if these franchisees were to incur substantial losses and accumulate significant liabilities, the Company is not obligated to absorb such losses on behalf of the franchisees. Accordingly, the management has determined that the financial positions and results of operations of these franchisees should not be included as part of the Company’s consolidated financial statements.

 

In addition, the Company did not and will not receive any actual ownership interest in the franchisees, nor receive any benefits from being a 51% or 1.25% owner in the franchisees. Any after tax profits generated by the franchisees that are potentially distributable to the Company are governed by the royalty agreements between the Company and the franchisee not the shareholding percentage. Accordingly, the management has determined that the ownership interest is not part of the initial franchise fee.

 

Accounts receivable from related franchisees comprised of the following:

 

   April 30,
2022
   October 31,
2021
 
Pingxiang Jiuzi New Energy Automobile Co., Ltd   4,062    2,490 
Yichun Jiuzi New Energy Automobile Co., Ltd   158,030    149,010 
Puyang Guozheng New Energy Vehicle Sales Co., Ltd   27,165    54,144 
Wanzai Jiuzi New Energy Automobile Co., Ltd   68,068    78,384 
Xinyu Jiuzi New Energy Automobile Co., Ltd   135,901    151,253 
Liuyang Jiuzi New Energy Automobile Co., Ltd          
Gao’an Jiuzi New Energy Automobile Co., Ltd   5,096    36,847 
Quanzhou Jiuzi New Energy Automobile Co., Ltd   17,985    20,135 
Dongming Jiuzi New Energy Automobile Co., Ltd   11,908    9,849 
Yulin Jiuzi New Energy Automobile Co., Ltd   39,345    27,295 
Total   467,560    529,407 

 

Accounts receivables above derived from sales of vehicles supplied to the Company’s franchisees without any special payment terms. Sales revenues from related parties’ franchisees were $484,543 and $ nil for the six months ended April 30, 2022 and 2021, respectively

 

22

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

Loan to related franchisees is comprised of the following (see note 7 for details):

 

   April 30, 2022   October 31, 2021 
   Gross   Discount   Net   Gross   Discount   Net 
Jiangsu Changshu  $256,989   $30,189   $226,800   $268,886   $31,587   $237,299 
Shandong Dongming   729,945    85,748    644,197    596,145    70,030    526,115 
Jiangxi Gao’an   517,703    60,815    456,888    495,861    58,250    437,611 
Hunan Huaihua   306,391    35,992    270,399    294,331    34,575    259,756 
Jiangxi Jiujiang   473,925    55,673    418,252    446,122    52,407    393,715 
Hunan Liuyang   578,344    67,939    510,405    580,250    68,163    512,087 
Hunan Loudi   573,624    67,384    506,240    583,945    68,597    515,348 
Hunan Pingjiang   538,043    63,205    474,838    564,977    66,369    498,608 
Jiangxi Pingxiang   643,288    75,568    567,720    694,826    81,622    613,204 
Henan Puyang   985,038    115,714    869,324    982,189    115,379    866,810 
Fujian Quanzhou   422,636    49,648    372,988    439,717    51,654    388,063 
Jiangxi Wanzai   568,223    66,750    501,473    557,532    65,494    492,038 
Jiangxi Xinyu   1,163,770    136,710    1,027,060    1,191,815    140,004    1,051,811 
Jiangxi Yichun   105,278    12,367    92,911    102,590    12,051    90,539 
Jiangxi Yudu   625,058    73,426    551,632    555,343    65,236    490,107 
Guangdong Zengcheng   701,444    82,400    619,044    544,391    63,950    480,441 
Jiangxi Shanggao   412,620    48,471    364,149    425,216    49,950    375,266 
Shandong Heze   877,733    103,109    774,624    750,382    88,148    662,234 
Jiangxi Ganzhou   118,898    13,967    104,931    122,834    14,429    108,405 
Anhui Fuyang                  31,266    3,672    27,594 
Hunan Liling   73,026    8,578    64,448    75,443    8,862    66,581 
Hunan Zhuzhou   144,139    16,932    127,207    109,828    12,902    96,926 
Hunan Chenzhou   576,941    67,774    509,167    556,864    65,416    491,448 
Jiangxi Ji’an   496,611    58,338    438,273    513,019    60,265    452,754 
Guangxi Nanning   181,987    21,378    160,609    183,322    21,535    161,787 
Hunan Leiyang   332,791    39,093    293,698    316,450    37,174    279,276 
Guangdong Dongguan Changping   506,651    59,517    447,134    262,089    30,788    231,301 
Hunan Changsha County   68,094    7,999    60,095    70,348    8,264    62,084 
Guizhou Zunyi   222,108    26,091    196,017    174,745    20,528    154,217 
Jiangsu Xuzhou   255,671    30,034    225,637    264,134    31,028    233,106 
Hunan Yongxing   222,463    26,133    196,330    229,312    26,938    202,374 
Hunan Hengyang   186,487    21,907    164,580    96,830    11,375    85,455 
Hainan Sanya   141,394    16,610    124,784    83,542    9,814    73,728 
Hunan Changsha Yuhua   272,452    32,005    240,447    281,393    33,056    248,337 
Shandong Dingtao   348,112    40,893    307,219    312,659    36,728    275,931 
Shandong Yuncheng   420,746    49,426    371,320    406,457    47,747    358,710 
Shandong Heze Gaoxin   60,604    7,119    53,485    62,532    7,346    55,186 
Shandong Zouping   54,475    6,399    48,076    56,279    6,611    49,668 
Shandong Juye   455,126    53,464    401,662    470,114    55,225    414,889 
Shandong Juncheng   438,904    51,559    387,345    434,596    51,053    383,543 
Shandong Shanxian   319,316    37,511    281,805    329,855    38,749    291,106 
Jiangxi Zhangshu   74,147    8,710    65,437    45,336    5,326    40,010 
Guangdong Foshan   106,908    12,559    94,349    110,447    12,974    97,473 
Jiangxi Jingdezhen   71,121    8,355    62,766    18,760    2,204    16,556 
Guangxi Yulin   376,425    44,219    332,206    398,554    46,819    351,735 
angxi Ji’an Yongfeng   20,428    2,400    18,028                
Guangxi Nanning Jiangnan   45,396    5,333    40,063                
Hunan Hengyang Shigu   

15,132

    

1,778

    

13,354

                
Shandong Heze Cao County   484,301    56,891    427,410    500,254    58,766    441,488 
Total  $17,570,905   $2,064,079   $15,506,826   $16,591,780   $1,949,060   $14,642,720 

 

23

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

The advances paid above are derived from funds advanced to the Company’s franchisees as working capital to support its operations. Such advances are due within 18 months.

 

Accounts payable to related parties’ franchisees comprised of the following: 

 

   April 30,
2022
   October 31,
2021
 
Liuyang   13,452    13,898 
Wanzai   8,475    8,754 
Huaihua   18,143    18,744 
XinYu        2,970 
Total   40,070    44,366 

 

Accounts payable above derived from vehicles purchased by the Company from the franchisees as inventory on a needed basis without any special payment terms. 

 

Contract liability – related party comprised of the following:

 

   April 30,
2022
   October 31,
2021
 
Deferred revenues-franchisees   27,111    81,474 
Deferred revenues-deposit   36,598    83,330 
Total, net   63,710    164,804 

   

Deferred revenues from related franchisees comprised of the following:

 

   April 30,
2022
   October 31,
2021
 
Hainan Sanya   -    48,462 
Hunan Changsha   3,707    4,299 
Hunan Yueyang   3,707    4,299 
Hunan Jishou   -    1,563 
Zhejiang Hangzhou Xiaoshan   3,632    4,220 
Hunan Yueyang Xiangyin   3,707    4,299 
Guangdong Zhongshan   12,358    14,332 
Total   27,111    81,474 

 

The deferred revenues above derived from initial franchise fees payments received in advance for services which have not yet been performed. The initial franchise fees include a series of performance obligations and an indefinite license to use the Company’s trademark. Amounts are recognized as advances when received, and are recognized as deferred revenues when the minimum amount required under the franchise or license agreement is attained. The payments are received in advance progressively and are not refundable once the required amount is attained. Such amounts are recognized as revenues when the Company performed the initial services required under the franchise or license agreement, which is generally when a specific performance obligation is completed or when and if the franchise or license agreement is terminated. 

 

Advance received from related franchisees for purchase car deposits comprised of the following:

 

   April 30,
2022
   October 31,
2021
 
Guangxi Yulin      46,898 
Hunan Huaihua   12,166    36,432 
Xinjiang   24,432      
Total, net   36,598    83,330 

 

24

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

The amount derived from initial franchise deposit received in advance for purchase car. Amounts are recognized as advances when received, and are recognized as revenues when the performance of obligation has completed.

 

Related parties receivables comprised of the following: 

 

   April 30,
2022
   October 31,
2021
 
Mr. Shuibo Zhang   286,592    296,252 
Mr. Qi Zhang   25,261    38,806 
Mr. Ruchun Huang   31,389    32,491 
Total   343,242    367,549 

 

As of April 30, 2022 and October 31, 2021, the Company has an outstanding receivable of $286,592 and $296,252, respectively, from Mr. Shuibo Zhang, the Company’s shareholder, director, and office. The amount was advanced to Mr. Zhang for business purposes. The advances were considered due on demand in nature and have not been formalized by a promissory note and are non-interest bearing.

  

As of April 30, 2022 and October 31, 2021, the Company has an outstanding receivable of $25,261 and $38,806, respectively, from Mr. Qi Zhang, the vice president of marketing department. The amount was advanced to Mr. Zhang for business purposes. The advances were considered due on demand in nature and have not been formalized by a promissory note and are non-interest bearing and due on demand without a specified maturity date.

 

As of April 30, 2022 and October 31, 2021, the Company has an outstanding receivable of $31,389 and $32,491, respectively, from Mr. Ruchun Huang, the Shangli Jiuzi New Energy Vehicle Co., Ltd.’s legal representative. The amount was advanced to Mr. Huang for business purposes. The advances were considered due on demand in nature and have not been formalized by a promissory note and are non-interest bearing. 

 

NOTE 11 – DEFERRED INCOME

 

Deferred income comprised of the following government grants which have not yet been earned:

 

   April 30,
2022
   October 31,
2021
 
Subsidy for the maintenance and repair of the office   295,831    341,580 
Rent subsidy for office   798,739    922,260 
Total   1,094,570    1,263,840 

 

NOTE 12 – LEASES

 

The Company has one operating leases for its corporate office and retail store. The current lease agreement was signed to cover the lease for the period from August 1, 2021 to July 31, 2026. The company will receive the subsidy from PRC government.

 

Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate present value is incremental borrowing rate or, if available, the rate implicit in the lease. The Company determines the incremental borrowing rate for each lease based primarily on its lease term in PRC which is approximately 4.75%.

 

Operating lease expenses were $97,191 and $44,476 for the six months ended April 30, 2022 and 2021, respectively.

 

The components of lease expense and supplemental cash flow information related to leases for the period are as follows:

 

   Six Months  Ended 
Lease Cost  April 30, 2022 
Operating lease cost (included in general and administrative expenses in the Company’s statement of operations)  $97,191 
      
Other Information     
Cash paid for amounts included in the measurement of lease liabilities for the year ended December 31, 2021  $- 
Weighted average remaining lease term – operating leases (in years)   4.33 
Average discount rate – operating lease   4.75%

 

25

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

The supplemental balance sheet information related to leases for the period is as follows:

 

   As of   As of 
   April 30,   October 31, 
   2022   2021 
Operating leases        
Right-of-use assets  $741,035   $846,200 
           
Operating lease liabilities  $694,051   $700,580 

 

The undiscounted future minimum lease payment schedule as follows:

 

For the six months ending April 30,    
2022 (six months from May 1, 2022 to October 31, 2022)   187,938 
2023   187,938 
2024   187,938 
2025   187,938 
Total   751,752 

 

NOTE 13 – CONVERTIBLE DEBENTURES

 

The Company issued convertible debenture of $6,000,000 with annual interest rate of 5%, which is valid for 12 months from the date of funds receipt. The debentures are carried out in three stages. In the first stage, the company would issue a convertible debenture of $2,500,000 on December 3, 2021, which is the date of signing this Agreement. Second stage, convertible debenture of $2,500,000 was issued by the company on January 4, 2022, which is the date of filing Registration Statement with SEC. In the third stage, convertible debenture of $1,000,000 will be issued on or about the date the Registration Statement has first been declared effective by the SEC. However, the transaction is not yet completed.

 

As of April 30, 202, the Company has outstanding convertible debenture of $4,191,336.

 

26

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

NOTE 14 – SHAREHOLDERS’ EQUITY

 

As of April 30, 2022 and October 31, 2021, the Company had 1,000,000 shares issued and outstanding.

 

On October 31, 2020, pursuant to a special resolution adopted by its shareholders to amend and restate the memorandum and articles of associations, the Company conducted a subdivision of its par value with each share of a par value of $0.005 of the authorized share capital of the Company (including issued and unissued share capital) be subdivided into 5 shares of a par value of $0.001 each (the “Share Subdivision”). Immediately following the Share Subdivision, the authorized share capital of the Company was $50,000 divided into 50,000,000 shares of a par value of $0.001 each, and the total issued and outstanding shares were 5,000,000.

 

Subsequent to the Share Subdivision, the Company increased its authorized share capital from 50,000,000 shares to 150,000,000 shares with a par value of $0.001 per share, and issued a stock dividend on 2 for 1 on post-Share Subdivision basis, whereby each shareholder holding 1 share of the 5,000,000 shares outstanding immediately preceding this stock dividend was issued an additional 2 shares; therefore, a total of 10,000,000 shares were issued; immediately following this transaction, there were a total of 15,000,000 shares issued and outstanding. All shares and per share amounts for all periods presented herein have been adjusted to reflect the Share Subdivision and stock dividend as if it had occurred at the beginning of the first period presented.

 

On May 20, 2021, we issued 5,200,000 ordinary shares to the investors in connection with the closing of the initial public offering at the offering price of $5.00 per share.

 

NOTE 15 – SEGMENTS AND GEOGRAPHIC INFORMATION

 

The Company believes that it operates in two business segments which comprised of sales of NEVs and franchise services; and it operates in one geographical location China. The Company disaggregates its revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

 

Sales of goods revenues comprised of sales of vehicles to third party customers and to the franchisees. Franchise services revenues comprised of initial fees and ongoing royalties from the franchisees. Under the franchise arrangement, franchisees are granted the right to operate retail store using the Company’s Jiuzi brand and system.

 

Sales revenues comprised of the following:

 

   Six Months Ended 
   April 30,
2022
   April 30,
2021
 
NEVs sales   3,208,591    78%   22,230    5%
Franchisees service revenues   901,145    22%   4,587,123    95%
Total   4,109,736    100%   4,609,353    100%

 

Direct costs comprised of the following:

 

   Six Months Ended 
   April 30,
2022
   April 30,
2021
 
NEVs sales   3,186,391    88%   5,613    0.4%
Franchisees service revenues   454,918    12%   1,481,000    99.6%
Total   3,641,309    100%   1,486,613    100%

  

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Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

Gross profit (loss) comprised of the following:

 

   Six Months Ended 
   April 30,
2022
   April 30,
2021
 
NEVs sales   22,200    5%   16,617    0.5%
Franchisees service revenues   446,227    95%   3,106,123    99.5%
Total   468,427    100%   3,122,740    100%

  

NOTE 16 – INCOME TAX

 

The Company is subject to profits tax rate at 25% for income generated for its operation in China and net operating losses can be carried forward for no longer than five years starting from the year subsequent to the year in which the loss was incurred.

 

The net taxable income (losses) before income taxes and its provision for income taxes comprised of the following:

 

   Six Months Ended 
   April 30,
2022
   April 30,
2021
 
Income attributed to China   (5,123,078)   1,757,180 
PRC statutory tax rate   25%   25%
Income tax expense at statutory rate   -    439,295 
Reconciliation   127,661    6,431 
Income tax expense / (benefit)   127,661    445,726 

   

NOTE 17 – CONCENTRATIONS, RISKS AND UNCERTAINTIES

 

Credit risk

 

Cash deposits with banks are held in financial institutions in China, which deposits are not federally insured. Accordingly, the Company has a concentration of credit risk related to the uninsured part of bank deposits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk.

 

Concentration

 

The Company has a concentration risk related to suppliers and customers. Failure to maintain existing relationships with the suppliers or customers to establish new relationships in the future could negatively affect the Company’s ability to obtain goods sold to customers in a price advantage and timely manner. If the Company is unable to obtain ample supply of goods from existing suppliers or alternative sources of supply, the Company may be unable to satisfy the orders from its customers, which could materially and adversely affect revenues.

 

The concentration on sales revenues generated by customers type comprised of the following:

 

   Six Months Ended 
   April 30,
2022
   April 30,
2021
 
Third party sales revenues   2,724,048    66%   22,230    0%
Related party sales revenues   484,543    12%   -    -%
Third party franchise revenues   850,649    21           
Related party franchise revenues   50,496    1    4,587,123    100%
Total   4,109,736    100%   4,609,353    100%

 

28

 

 

Jiuzi Holdings, Inc.

Notes to the Financial Statements

(Unaudited)

 

The concentration of sales revenues generated by third-party customers comprised of the following:

  

   Six Months Ended 
   April 30,   April 30, 
   2022   2021 
Customer A     %   -    -%
Customer B        %   -    -%
Customer C        %   -    -%
Customer D        %   3,366    15%
Customer E        %   3,162    14%
Customer F        %   1,216    6%
Customer G        %          
Customer H   742,374    27%          
Customer I   508,306    19%          
Customer J   310,690    11%          
Customer K   309,707    11%        -%
Total   1,871,077    69%   7,744    35%

  

NOTE 18 – SUBSEQUENT EVENTS

 

The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. Subsequent to the date the financial statements were available to be issued. There was no subsequent event that would require disclosure to or adjustment to the financial statements. 

 

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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.

 

Date: September 2, 2022 JIUZI HOLDINGS, INC.
     
  By: /s/ Shuibo Zhang
  Name:  Shuibo Zhang
  Title: Chief Executive Officer

 

 

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