6-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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Form 6-K

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REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

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For the month of August 2024

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Commission File Number: 001-39805

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Qilian International Holding Group Ltd

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Jiuquan Economic and Technological Development Zone

Jiuquan City, Gansu Province, 735000

People’s Republic of China

+86-0937-2689523

(Address of principal executive office)

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

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Form 20-F ☒ Form 40-F ☐

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EXPLANATORY NOTE

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Qilian International Holding Group Limited (the “Company”) is furnishing this Form 6-K to provide its financial results for the six months ended March 31, 2024.

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Exhibits

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Exhibit No.		Description
99.1		Unaudited Condensed Consolidated Financial Statements for the Six Months Ended March 31, 2024 and 2023
99.2	​	Management’s Discussion and Analysis of Financial Condition and Results of Operations
101	​	Interactive Data Files (formatted as Inline XBRL)
104	​	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

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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.

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Dated: August 14, 2024

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Qilian International Holding Group Ltd
By:	/s/ Chen Xin
Name:	Chen Xin
Title:	Chief Executive Officer

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Table of Contents Exhibit 99.1

QILIAN INTERNATIONAL HOLDING GROUP LIMITED

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

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Condensed Consolidated Financial Statements	​
Condensed Consolidated Balance Sheets as of March 31, 2024 and September 30, 2023	F-2
Condensed Consolidated Statements of Operations and Comprehensive Income for the six months ended March 31, 2024, 2023 and 2022	F-3
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the six months ended March 31, 2024, 2023 and 2022	F-4
Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2024, 2023, and 2022	F-5
Notes to Condensed Consolidated Financial Statements	F-6

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​ F-1

Table of Contents Qilian International Holding Group Limited and Subsidiaries

Condensed Consolidated Balance Sheets

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​	​	​	​	​	​	​
​	​	As of March 31		​	As of September 30
​		2024			2023
ASSETS		​			​
CURRENT ASSETS:		​			​
Cash and cash equivalent	​	$	10,345,332	​	$	7,476,247
Short term investment	​	​	—	​	​	1,000,000
Accounts receivable, net	​		717,404	​		1,975,716
Bank acceptance notes receivable	​	​	1,876,510	​	​	4,131,392
Inventories, net	​		4,650,721	​		4,991,435
Prepayment to suppliers, net	​		270,002	​		708,248
Investment in trading securities	​	​	15,009,946	​	​	13,943,019
Other current assets	​	​	456,505	​	​	286,564
TOTAL CURRENT ASSETS	​		33,326,420	​		34,512,621
​	​	​	​	​	​	​
Property, plant and equipment, net	​	​	8,761,074	​	​	9,143,583
Construction in progress	​	​	3,646,219	​	​	2,867,683
Intangible assets, net	​		3,418,483	​		3,423,582
Long term investment	​	​	—	​	​	606,005
Right-of-use assets	​		47,672	​		59,300
Deferred tax assets	​		11,488	​		10,778
Prepayments for property and equipment	​		641,014	​		634,442
TOTAL ASSETS	​	​	49,852,370	​	​	51,257,994
​	​	​	​	​	​	​
​	​	​	​	​	​	​
CURRENT LIABILITIES:	​	​	​	​	​	​
Bank loans	​		—	​		479,715
Accounts payable	​	​	2,672,052	​	​	3,592,687
Contract liabilities	​		392,518	​		1,028,318
Deferred government grants-current	​	​	77,608	​	​	76,812
Taxes payable	​		302,345	​		203,498
Lease liabilities, current	​		83,089	​		73,560
Accrued expenses and other payables	​		1,201,789	​		1,205,549
TOTAL CURRENT LIABILITIES	​		4,729,401	​		6,660,139
​	​	​	​	​	​	​
LONG TERM LIABILITIES	​		​	​		​
Non-current lease liabilities, noncurrent	​		17,667	​		24,575
Deferred government grants - noncurrent	​		184,328	​		221,879
TOTAL LIABILITIES	​		4,931,396	​		6,906,593
​	​		​	​	​	​
​	​	​	​	​	​	​
Commitments and contingencies	​			​
​	​	​	​	​	​	​
EQUITY:	​		​	​		​
Ordinary Shares, $0.00166667 par value, 100,000,000 shares authorized, 35,750,000 and 35,750,000 Ordinary Shares issued and outstanding as of March 31, 2024 and September 30, 2023, respectively	​		59,583	​		59,583
Additional paid-in capital	​		36,410,931	​		36,410,931
Statutory Reserve	​		3,212,308	​		3,162,333
Retained earnings	​		6,260,866	​		5,896,373
Accumulated other comprehensive loss	​		(2,511,829)	​		(2,737,087)
Total shareholders’ equity attributable to Qilian International	​		43,431,859	​		42,792,133
Noncontrolling interests	​		1,489,115	​		1,559,268
TOTAL EQUITY	​		44,920,974	​		44,351,401
TOTAL LIABILITIES AND EQUITY	​	​	49,852,370	​		51,257,994

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The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents Qilian International Holding Group Limited and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income

​	​	​	​	​	​	​	​	​	​
​	​	For the six months ended March 31
​	​	2024		​	2023		​	2022
NET REVENUE	​	$	12,562,599		$	29,163,616		$	32,086,522
​	​	​	​	​	​	​	​	​	​
COST OF REVENUE	​	​	11,148,577	​		26,868,870	​		28,584,031
​	​	​	​	​	​	​	​	​	​
GROSS PROFIT	​	​	1,414,022	​		2,294,746	​		3,502,491
​	​	​	​	​	​	​	​	​	​
SELLING, GENERAL AND ADMINISTRATIVE, RESEARCH AND DEVELOPMENT EXPENSES	​	​	2,093,110	​		2,084,115	​		2,275,246
​	​	​	​	​	​	​	​	​	​
INCOME (LOSS) FROM OPERATIONS	​	​	(679,088)	​		210,631	​		1,227,245
​	​	​	​	​	​	​	​	​	​
Interest income (expense), net	​	​	57,782	​		32,701	​		18,772
Investment income (loss)	​	​	966,711	​	​	217,593	​	​	(958,167)
Grant income	​	​	39,975	​	​	96,259	​	​	59,225
Other income (expenses)	​	​	(44,664)	​		130,450	​		22,759
Total Other income (expense)	​	​	1,019,804	​		477,003	​		(857,411)
​	​	​	​	​	​	​	​	​	​
INCOME BEFORE INCOME TAX PROVISION	​	​	340,716	​		687,634	​		369,834
​	​	​	​	​	​	​	​	​	​
PROVISION FOR INCOME TAXES	​	​	11,936	​		248,254	​		120,153
​	​	​	​	​	​	​	​	​	​
NET INCOME	​	​	328,780	​		439,380	​		249,681
​	​	​	​	​	​	​	​	​	​
Less: net income (loss) attributable to non-controlling interest	​	​	(85,688)	​		(56,141)	​		161,819
​	​	​	​	​	​	​	​	​	​
NET INCOME (LOSS) ATTRIBUTABLE TO QILIAN INTERNATIONAL HOLDING GROUP LIMITED	​	$	414,468	​	$	495,521	​	$	87,862
​	​	​	​	​	​	​	​	​	​
OTHER COMPREHENSIVE INCOME	​	​	​	​		​	​
Foreign currency translation adjustment	​	​	240,793	​		1,148,573	​		589,156
COMPREHENSIVE INCOME	​	​	569,573	​		1,587,953	​		838,837
Less: comprehensive income (loss) attributable to non - controlling interests	​	​	(70,153)	​		6,741	​		219,732
COMPREHENSIVE INCOME ATTRIBUTABLE TO QILIAN INTERNATIONAL HOLDING GROUP LIMITED	​	​	639,726	​	​	1,581,212	​	​	619,105
​	​	​	​	​	​	​	​	​	​
Earnings per common share - basic and diluted	​	$	0.01	​	$	0.01	​	$	0.00
Weighted average shares - basic and diluted	​	​	35,750,000	​		35,750,000	​		35,750,000

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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Table of Contents Qilian International Holding Group Limited and Subsidiaries

Condensed Consolidated Statements of Changes in Equity

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	Accumulated		​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	Other		​	​	​	​	​	​	​	​	​
​	​	Ordinary Shares				​	Additional		​	​		​	​		​	Comprehensive		​	Shareholders’		​	Non-controlling		​	Total
​	****	Shares	****	Amount		****	Paid-in Capital		****	Retained Earnings		****	Statutory Reserve		****	Income		****	Equity		****	Interests		****	Equity
Balance as of September 30, 2021	​	35,750,000	​	$	59,583	​	$	36,390,931	​	$	14,693,905	​	$	2,857,121	​	$	857,066	​	$	54,858,606	​	$	1,809,852	​	$	56,668,458
Net income for the period	​	—	​	​	—	​	​	—	​	​	87,862	​	​	—	​	​	—	​	​	87,862	​	​	161,819	​	​	249,681
Appropriation for statutory reserve	​	—	​	​	—	​	​	—	​	​	(217,386)	​	​	217,386	​	​	—	​	​	—	​	​	—	​	​	—
Foreign currency translation adjustment	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	​	531,243	​	​	531,243	​	​	57,913	​	​	589,156
Balance as of March 31, 2022	​	35,750,000	​	$	59,583	​	$	36,410,931	​	$	14,564,381	​	$	3,074,507	​	$	1,388,309	​	$	55,477,911	​	$	2,029,584	​	$	57,507,295
Balance as of September 30, 2022	​	35,750,000	​	$	59,583	​	$	36,410,931	​	$	15,509,177	​	$	3,118,542	​	$	(2,046,091)	​	$	53,052,142	​	$	1,911,394	​	$	54,963,536
Net income (loss) for the period	​	—	​	​	—	​	​	—	​	​	495,521	​	​	—	​	​	—	​	​	495,521	​	​	(56,141)	​	​	439,380
Acquisition of equity interest from unrelated third party shareholders	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	​	(28,669)	​	​	(28,669)
Appropriation for statutory reserve	​	—	​	​	—	​	​	—	​	​	(130,774)	​	​	130,774	​	​	—	​	​	—	​	​	—	​	​	—
Dividend	​	—	​	​	—	​	​	—	​	​	(1,787,517)	​	​	—	​	​	—	​	​	(1,787,517)	​	​	—	​	​	(1,787,517)
Foreign currency translation adjustment	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	​	1,085,690	​	​	1,085,690	​	​	62,883	​	​	1,148,573
Balance as of March 31, 2023	​	35,750,000	​	$	59,583	​	$	36,410,931	​	$	14,086,407	​	$	3,249,316	​	$	(960,401)	​	$	52,845,836	​	$	1,889,467	​	$	54,735,303
Balance as of September 30, 2023	​	35,750,000	​	$	59,583	​	$	36,410,931	​	$	5,896,373	​	$	3,162,333	​	$	(2,737,087)	​	$	42,792,133	​	$	1,559,268	​	$	44,351,401
Net income (loss) for the period	​	—	​	​	—	​	​	—	​	​	414,468	​	​	—	​	​	—	​	​	414,468	​	​	(85,688)	​	​	328,780
Appropriation for statutory reserve	​	—	​	​	—	​	​	—	​	​	(49,975)	​	​	49,975	​	​	—	​	​	—	​	​	—	​	​	—
Foreign currency translation adjustment	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	​	225,258	​	​	225,258	​	​	15,535	​	​	240,793
Balance as of March 31, 2024	​	35,750,000	​	$	59,583	​	$	36,410,931	​	$	6,260,866	​	$	3,212,308	​	$	(2,511,829)	​	$	43,431,859	​	$	1,489,115	​	$	44,920,974

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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Table of Contents Qilian International Holding Group Limited and Subsidiaries

Condensed Consolidated Statements of Cash flows

​	​	​	​	​	​	​	​	​	​
​	​	For the six months ended March 31
​	​	2024		​	2023		​	2022
Cash flows from operating activities:		​			​			​
Net Income	​	$	328,780	****	​	439,380	****	​	249,681
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	​		​		​			​
Non-cash operating lease expenses	​		12,281		​	13,937		​	25,217
Depreciation and amortization	​		554,772		​	571,441		​	542,214
Provision of doubtful accounts	​		62,422		​	1,281		​	(25,688)
Inventory reserve	​		(785,426)		​	397,039		​	(108,861)
Deferred tax expense	​	​	(600)	​	​	135,274	​	​	82,257
Unrealized loss (gain) from investment in securities	​		(1,066,927)		​	(245,800)		​	988,800
investment income	​	​	100,216	​	​	28,207	​	​	(30,633)
Changes in operating assets and liabilities:	​		​		​			​
Accounts receivable	​		1,220,376		​	(728,868)		​	1,487,728
Bank acceptance notes receivable	​		2,304,899		​	(1,096,994)		​	224,657
Bank acceptance notes payable	​		—		​	—		​	1,657,977
Inventories	​		1,179,076		​	(2,069,096)		​	(535,184)
Prepayment to suppliers	​		446,983		​	305,403		​	654,668
Other current assets	​		(229,212)		​	1,450,828		​	287,351
Accounts payable	​		(960,861)		​	(1,069,672)		​	(1,851,881)
Contract liabilities	​		(648,484)		​	1,877,996		​	712,649
Contract liabilities - related parties	​		—		​	—		​	(7,795)
Deferred government grants	​		(39,975)		​	(96,259)		​	(136,176)
Tax payables	​		97,043		​	22,210		​	6,646
Accrued expenses and other payables	​		(16,298)		​	7,009		​	4,416
Lease liabilities	​		1,610		​	(26,331)		​	(40,913)
Net cash provided by (used in) operating activities	​	****	2,560,675	****	​	(83,015)	****	​	4,187,130
​	​	​	​	​	​	​	​	​	​
Cash flows from investing activities:	​		​		​			​
Purchase of property and equipment	​		(786,547)		​	(716,251)		​	(1,748,429)
Purchase of intangible assets	​	​	—	​	​	(1,885,870)	​	​	—
Cash received from disposal of long term investment	​		1,458,424		​	—		​	—
Dividend received	​		55,566		​	—		​	—
Prepayment for peroty and equipment purchase	​		—		​	—		​	(1,689,933)
Purchase of non controlling interest	​	​	—	​	​	(28,669)	​	​	—
Net cash provided by (used in) investing activities	​	****	727,443	****	​	(2,630,790)	****	​	(3,438,362)
​	​	​	​	​	​	​	​	​	​
Cash flows from financing activities:	​		​		​			​
Proceeds from bank loans	​		—		​	—		​	3,139,126
Repayment of bank loans	​		(486,208)		​	(143,347)		​	—
Proceeds from (Repayment of) bank notes payable	​	​	—	​	​	(972,291)	​	​	—
Dividend paid	​		—		​	(1,787,517)		​	—
Net cash provided by (used in) financing activities	​	****	(486,208)	​	​	(2,903,155)	​	​	3,139,126
​	​	​	​	​	​	​	​	​	​
Effect of exchange rate change on Cash, cash equivalents and restricted cash	​		67,175	​	​	352,153	​	​	170,904
​	​	​	​	​	​	​	​	​	​
Net increase (decrease) in Cash, cash equivalents and restricted cash	​	****	2,869,085	****	​	(5,264,807)	****	​	4,058,798
Cash, cash equivalents and restricted cash at beginning of period	​	****	7,476,247	****	​	14,979,013	****	​	12,607,373
Cash, cash equivalents and restricted cash at end of period	​	$	10,345,332	****	​	9,714,206	****	​	16,666,171
​	​	​	​	​	​	​	​	​	​
Supplemental cash flow information	​		​		​	​		​	​
Cash paid for interest	​	$	—	​	$	—	​	$	151,456
Cash paid for income taxes	​	$	—	​	$	26,990	​	$	140,331

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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Table of Contents QILIAN INTERNATIONAL HOLDING GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Qilian International, its subsidiaries, the VIE and VIE’s subsidiaries (the “Company,” “we,” “us,” “our,” and “QLS”) are principally engaged in the development, manufacture, marketing, and sale of licorice products, oxytetracycline products, traditional Chinese medicine derivatives (“TCMD”) product, heparin product, sausage casings, and fertilizers.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The Company, its subsidiaries, the VIE and VIE’s subsidiaries condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The condensed consolidated financial statements include the financial statements of Qilian International, and its subsidiaries, the VIE and VIE’s subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. See Risks and Uncertainties disclosure for VIE structures in China. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in our 2023 Annual Report on Form 20-F. These interim results are not necessarily indicative of results for the full year.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. The reclassification has no impact on the total assets and total liabilities as of September 30, 2023or on the total cash flows and the consolidated statements of operations and comprehensive income (loss) and change in shareholders' equity for the six months ended March 31, 2024, 2023 and 2022.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company, its subsidiaries, the VIE and VIE’s subsidiaries’ accounting estimates included, but are not limited to: allowance for estimated uncollectible receivables, inventory valuations, impairment of long-lived assets, useful lives of property and equipment and intangible assets, fair value of investment in trading securities, impairment of intangible assets, realization of deferred tax assets and uncertain tax position, and income taxes. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. The cash and cash equivalent don’t have withdrawal restrictions.

Short-term Investment

The Company’s short-term investment include a time deposit which has maturity less than 12 months.

Accounts Receivable, net

Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The WFOE, the VIE and VIE’s subsidiaries usually grant credit to customers with good credit standing with a maximum of 90 days and determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The F-6

Table of Contents Company evaluates the creditworthiness of its customers. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

Bank acceptance notes receivable

Bank acceptance notes receivable generally due within six months and with specific payment terms and definitive due dates, are comprised of the notes issued by some customers to pay certain outstanding receivable balances to the Company. Bank acceptance notes do not bear interest. From time to time, the Company endorse bank notes receivable to its suppliers as the payment of material purchase. The bank notes receivable is considered sold and derecognized from balance sheets when they are transferred beyond the reach of the Company and its creditors, the purchaser has the right to pledge or exchange the note receivables, and the Company has surrendered control over the transferred note receivable. If the Company does not surrender control, the cash received from the purchaser is account for as a secured borrowing.

As of March 31, 2024 and September 30, 2023, bank acceptance notes receivable from customers were $1,876,510 and $4,131,392, respectively. There was $3,003,223 bank acceptance notes receivable endorsed by the companies to make payments that were unmatured as of March 31, 2024 and derecognized from balance sheet.

Inventories, net

Inventories are stated at the lower of cost or net realizable value. Costs include the cost of raw materials, freight, direct labor and related production overhead. The cost of inventories is calculated using the weighted average method. Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for diminution in the value of inventories. Net realizable value is the estimated selling price in the normal course of business less any costs to complete and sell products. Allowances for obsolescence are also assessed based on expiration dates, as applicable, taking into consideration historical and expected future product sales.

Property, Plant and Equipment

Property and equipment are stated at cost less accumulated depreciation and impairment charge. The straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows:

​

​	​	​
Items	****	Useful life
Property and buildings		20–40 years
Leasehold improvement		Lesser of useful life and lease term
Machinery and equipment		3–10 years
Automobiles		3–5 years
Office and electric equipment		3–5 years

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Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the statements of operations in other income and expenses.

Construction in Progress

Construction in progress is comprised of costs related to the capital projects that are not completed and is not depreciated until such time as the subject asset is ready for its intended use. Construction in progress as of March 31, 2024 and September 30, 2023 represents costs of construction incurred for Chongqing’s new manufacturing facilities for heparin products.

Intangible Assets

Intangible assets consist primarily of land use rights, software and license for drug manufacturing (See Note 7). Under the PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company. The government grants individuals and F-7

Table of Contents companies the right to use parcels of land for specified periods of time. Land use rights are stated at cost less accumulated amortization. Intangible assets are amortized using the straight-line method with the following estimated useful lives:

​

​	​	​
Items	****	Useful life
Land use rights		50 years
Software		10 years
License for drug manufacturing		10 years

​

Leases

On October 1, 2019 the Company adopted Accounting Standards Update (“ASU”) 2016-02. For all leases that were entered into prior to the effective date of ASC 842, we elected to apply the package of practical expedients. Based on this guidance we will not reassess the following: (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or existing leases; and (3) initial direct costs for any existing leases. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on the Company’s consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of obligations under finance leases, and obligations under finance leases, non-current on our consolidated balance sheets.

Operating lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date, adjusted by the deferred rent liabilities at the adoption date. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made. The Company’s terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.

We have made an accounting policy election to not include leases with an initial term of 12 months or less on the balance sheets and the short term lease expense recognized for the years presented are immaterial.

Investment in Securities

The Company entered into an investment with a iFactors SPC related to shares participating in the Golden Bridge Global Income Opportunities SP (the Fund), an exempted segregated Portfolio Company incorporated in the Cayman Islands and managed by Golden Bridge Capital Management Limited. The Fund primarily invests in bonds offered by private entities (debt securities), globally and also invests in convertible debt securities, publicly traded debt and stock, and governmental fixed income securities. The redemption of such shares for cash can be made with ninety days advance written notice (such written notice period can be extended by the investment manager), except during the lock up period which is initially 24 months and then extended to 36 months, from the initial investment date.

The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determinations at each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are recorded as either short term or long term on the Balance Sheet, based on contractual maturity date and are stated at amortized cost. Investment securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value. Investment securities not classified as trading securities or as held-to-maturity securities shall be classified as available-for-sale securities.

As of March 31, 2024 and September 30, 2023, the investment consisted of 20,000 units of the Fund. Such securities have been classified as trading securities. The private equity fund is measured at fair value with gains and losses recognized in earnings. For the years ended September 30, 2022 and 2021, as a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of the Fund. NAV is primarily determined based on information provided by external fund administrators. As of September 30, 2023, the management had intention to redeem the investment and it is probable that the investment will be redeemed for an amount different from the NAV. Thus, the fair value of the investment was measured using discounted cash flow method. The fair value of the Fund was $15,009,946 and $13,943,019 as of March 31, 2024 and September 30, 2023, respectively. See Fair Value of Financial Instruments disclosure in this footnote. F-8

Table of Contents Long-Term Investment

Investments in entity in which the Company, its subsidiaries, the VIE and VIE’s subsidiaries can exercise significant influence but does not own a majority equity interest or control are accounted for using the equity method of accounting. Under the equity method, the Company, its subsidiaries, the VIE and VIE’s subsidiaries initially record its investment at cost. The Company’s share of investee earnings or losses is recorded in our Consolidated Statements of Operations within Other income (expense). The Company’s interest in the net assets of the investees is included in the equity method investment on the consolidated balance sheets. The Company, its subsidiaries, the VIE and VIE’s subsidiaries evaluate the equity method investments for impairment under ASC 323. An impairment loss on the equity method investments is recognized in earnings when the decline in value is determined to be other-than-temporary. The Company, its subsidiaries, the VIE and VIE’s subsidiaries subsequently adjust the carrying amount of the investment to recognize their proportionate share of each equity investee’s net income or loss into earnings after the date of investment, the adjustment of basis difference initially recognized and the other comprehensive income allocated to the Company from the investees.

Impairment of Long-lived Assets

The Company, its subsidiaries, the VIE and VIE’s subsidiaries review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated undiscounted cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value. There were no indicators of impairment of long-lived assets as of March 31, 2024 and September 30, 2023.

Transactions with Non-controlling Interests of Subsidiaries

The Company, its subsidiaries, the VIE and VIE’s subsidiaries account for a change in ownership interests in its subsidiaries that does not result in a change of control of the subsidiary under the provisions of ASC 810-10-45-23, Consolidation – Other Presentation Matters, which prescribes the accounting for changes in ownership interest that do not result in a change in control of the subsidiary, as defined by GAAP, before and after the transaction. Under this guidance, changes in a controlling shareholder’s ownership interest that do not result in a change of control, as defined by GAAP, in the subsidiary are accounted for as equity transactions. Accordingly, if the controlling shareholder retains control, no gain or loss is recognized in the statements of operations of the controlling shareholder. Similarly, the controlling shareholder will not record any additional acquisition adjustments to reflect its subsequent purchases of additional shares in the subsidiary if there is no change of control. Only a proportional and immediate transfer of carrying value between the controlling and the noncontrolling shareholders occurs based on the respective ownership percentages. For the year ended September 30, 2021, the VIE, Gansu QLS acquired 7.76% of equity interest in Chengdu QLS and its subsidiaries from its shareholders. The equity interest Gansu QLS has in Chengdu QLS increased from 71.75% as of September 30, 2020 to 79.51% as of September 30, 2021.

In the year ended September 30, 2023, the Company made 200,000 RMB (equivalent to $28,356) additional investment to acquire 0.2% ownership of Gansu QLS from third party shareholders and the Company’s ownership in VIE increased to 79.71% as of March 31, 2024 and September 30, 2023.

Non-controlling Interests

Non-controlling interests are recognized to reflect the portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling shareholder. For the Company’s consolidated subsidiaries, VIE and VIE’s subsidiaries, non-controlling interests represent a minority shareholder’s 49% ownership interest in Zhongqiao E Commerce Limited (“Zhongqiao”), as well as 0.786% ownership interest in Gansu QLS, 20.29% ownership interest in Chengdu QLS and in subsidiaries including Rugao and Chongqing. F-9

Table of Contents The following table summarizes the shareholders’ equity for the non-controlling interest from each subsidiary that is not 100% owned by the Company:

​

​	​	​	​	​	​	​
​	​	As of
​	​	March 31		​	September 30,
​	​	2024		​	2023
Gansu QLS		$	202,376		$	169,574
Chengdu QLS and subsidiaries		​	1,266,529		​	1,332,983
Zhongqiao		​	20,210		​	56,711
Total	​	$	1,489,115	​	$	1,559,268

​

Non-controlling interest in the equity of a subsidiary is reported in equity in the consolidated balance sheets. Net income and losses attributable to the non-controlling interest is reported as described above in the consolidated statements of operations and comprehensive income.

Revenue Recognition

The Company, its subsidiaries, the VIE and VIE’s subsidiaries recognize revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To perform revenue recognition for arrangements within the scope of ASC 606, the Company, its subsidiaries, the VIE and VIE’s subsidiaries perform the following five steps:

(i)	identification of the promised goods or services in the contract;
(ii)	determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;
---	---
(iii)	measurement of the transaction price, including the constraint on variable consideration;
---	---
(iv)	allocation of the transaction price to the performance obligations based on estimated selling prices; and
---	---
(v)	recognition of revenue when (or as) we satisfy each performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606.
---	---

The majority of the WFOE, the VIE and VIE’s subsidiaries’ contracts have one single performance obligation as the promise to transfer the individual goods is not separately identifiable from other promises in the contracts and are, therefore, not distinct. The revenue streams are recognized at a point in time when title and risk of loss passes and the customer accepts the goods, which generally occurs at delivery. The WFOE, the VIE and VIE’s subsidiaries’ products are sold with no right of return and the WFOE, the VIE and VIE’s subsidiaries do not provide other credits or sales incentives, which would be accounted for as variable consideration. Sales taxes invoiced to customers and remitted to government authorities are excluded from net sales.

The contract liabilities of the Company consist of advance payments from customers. The contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting period. Contract liabilities were recognized when the Company receives prepayment from customers resulting from sales contracts. Contract liabilities will be recognized as revenue when the products are delivered. As of March 31, 2024 and September 30, 2023, the Company record advance from customers of $392,518 and $1,028,318, respectively, which will be recognized as revenue upon delivery of the products sold. For the six months ended March 31, 2024 , 2023 and 2022, the beginning balance of contract liabilities of $995,468 and $565,223 were recognized as revenue when the products are delivered.

Refer to Note 15 for disaggregated revenue information. F-10

Table of Contents Government Grants

Government grants are recognized when there is reasonable assurance that the attached conditions will be complied with. When the grant relates to an expense item, it is net against the expense and recognized in the consolidated statements of operations and comprehensive income over the period necessary to match the grant on a systematic basis to the related costs. Where the grant relates to an asset acquisition, it is recognized in the consolidated statements of operations and comprehensive income in proportion to the useful life of the related assets. Government grants received for the six months ended March 31 2024, 2023 and 2022 were $14,002, $59,360, and $125,724, respectively. Grant income recognized for the six months ended March 31 2024, 2023, and 2022 were $39,975, $96,259 and $59,225, respectively, included in other income within the consolidated statements of operations and comprehensive income. As of March 31, 2024 and September 30, 2023, the deferred government grants were $261,936 and $298,691, respectively. The weighted average remaining periods for the government grant to be recognized were 6.61 years and 6.33 years, respectively.

Selling, General and Administrative, Research and Development Expenses

Selling, general and administrative, research and development expenses primarily consist of salaries and benefits for employees, shipping expense, utilities, maintenance and repairs expenses, insurance expense, depreciation and amortization expenses, research and development expense, selling and marketing expenses, professional fees, and other operating expenses.

The Company, its subsidiaries, the VIE and VIE’s subsidiaries expense all internal research costs as incurred, which primarily comprise employee costs, internal and external costs related to execution of studies, including manufacturing costs, facility costs of the research center, and amortization, depreciation of intangible assets and property, plant and equipment used in the research and development activities. For the six months ended March 31, 2024, 2023 and 2022, total selling, general and administrative, research and development expense were as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	For the six months ended
​	​	March 31,
​	​	2024		​	2023		​	2022
Selling expense		$	229,092		$	445,154		$	306,574
General and administrative expense	​		1,396,655	​		1,366,888	​		1,968,672
Research and development expense	​		467,363	​		272,073	​		—
Total	​	$	2,093,110	​	$	2,084,115	​	$	2,275,246

​

Advertising Cost

Advertising costs are expensed when incurred and are included in selling, general and administrative, research and development expense on the accompanying consolidated statements of operations. The Company incurred $55,240, $48,820 and $13,455 of advertising costs during the six months ended March 31, 2024, 2023 and 2022, respectively. Advertising costs consist primarily of online marketing costs, such as advertising on social networking sites and e-mail marketing campaigns.

Income Taxes

The Company, its subsidiaries, the VIE and VIE’s subsidiaries account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company, its subsidiaries, the VIE and VIE’s subsidiaries determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company, its subsidiaries, the VIE and VIE’s subsidiaries recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, the Company, its subsidiaries, the VIE and VIE’s subsidiaries consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company, its subsidiaries, the VIE and VIE’s subsidiaries determine that they would be able to realize the deferred tax assets in the future in excess of their net recorded amount, they would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. F-11

Table of Contents The Company, its subsidiaries, the VIE and VIE’s subsidiaries record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company, its subsidiaries, the VIE and VIE’s subsidiaries determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company, its subsidiaries, the VIE and VIE’s subsidiaries recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company does not believe that there were any uncertain tax positions at March 31, 2024 and September 30, 2023.

Earnings per Share

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the six months ended March 31, 2024, 2023 and 2022, 300,000 underwriter warrants were considered in the diluted EPS calculation using treasury stock method. There were no diluted shares for the six months ended March 31, 2024, 2023 and 2022.

The following table sets forth the computation of basic and diluted earnings (loss) per share for the six months ended March 31, 2024, 2023 and 2022:

​

​	​	​	​	​	​	​	​	​	​
​	​	For the six months ended March 31,
​	****	2024		****	2023		****	2022
Numerator:	​	​	​	​	​	​	​	​	​
Net income attributable to ordinary shareholders	​	$	414,468	​	$	495,521	​	$	87,862
​	​	​	​	​	​	​	​	​	​
Denominator:	​		​	​		​	​		​
Weighted-average number of ordinary shares outstanding – basic	​		35,750,000	​		35,750,000	​		35,750,000
Weighted-average number of ordinary shares outstanding – diluted	​		35,750,000	​		35,750,000	​		35,750,000
Earnings per share – basic	​	$	0.01	​	$	0.01	​	$	0.00
Earnings per share – diluted	​	$	0.01	​	$	0.01	​	$	0.00

​

Stock Based Compensation

The Company issued shares for its independent director for the service rendered. Stock-based compensation is estimated at the grant date based on the fair value of the shares and is recognized as expense over the requisite service period of the award. The Company recognizes compensation cost on a straight-line basis over the requisite service period of the award, which is generally the award vesting term. The Company has elected to recognize forfeitures as incurred.

Foreign Currency Translation

The Company’s principal country of operations is the PRC. The financial position and results of its operations are determined using RMB, the local currency, as the functional currency. Our financial statements are reported using U.S. Dollars. The results of operations and the statement of cash flows denominated in currency other than U.S. Dollars are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income included in statement of changes in equity. Gains and losses from foreign currency transactions are included in the consolidated statements of operations and comprehensive income.

The value of RMB against US$ and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of US$ F-12

Table of Contents reporting. The following table outlines the currency exchange rates that were used in creating the condensed consolidated financial statements in this report:

​

​	​	​	​
​	****	March 31, 2024	September 30, 2023
Year-end spot rate		US1=RMB 7.2212	US$1=RMB 7.2960
​	​	​	​
Average rate		US1=RMB 7.1986	US$1=RMB 7.0533

All values are in US Dollars.

​

Fair Value of Financial Instruments

The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with U.S GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:

Level 1: Quoted prices for identical instruments in active markets.

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

For the year ended September 30, 2022, as a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of its certain fund investment. NAV is primarily determined based on information provided by external fund administrators. The Company’s investments valued at NAV as a practical expedient are private equity funds, which represent the investment in trading securities on the balance sheet. For the year ended September 30, 2023 and six months ended March 31 2024, the Company planned to sell the investment and fair value measurement using NAV as practical expedient is not permitted. The investment is measured using discounted cash flow method and classified as Level 3 in the fair value hierarchy. The discount rate used for the valuation of trading securities was 28% as of September 30, 2023 and March 31, 2024.

Cash and cash equivalents, restricted cash, accounts receivable, bank notes receivable, short term investment, advances to suppliers, other current assets, accounts payable, and accrued expenses and other payables approximate fair value because of the short maturity of those instruments. Based on comparable open market transactions, the fair value of the bank loans, lease liabilities, bank notes payable and other liabilities, including current maturities, approximated their carrying value as of March 31, 2024 and September 30, 2023, respectively.

The Company noted no transfers between levels during any of the periods presented.

The following is a reconciliation of the beginning and ending balance of the investment in securities measured at fair value on a recurring basis for the six months ended March 31, 2024, 2023 and 2022:

​

​	​	​	​	​	​	​	​	​	​
​	****	As of		****	As of		​	As of
​	​	March 31,		​	March 31,		​	March 31,
​	​	2024		​	2023		​	2022
Beginning balance	​	$	13,943,019	​	$	19,470,400	​	​	20,323,400
Change in fair value	​		1,066,927	​	​	245,800	​		(988,800)
Ending balance	​	$	15,009,946	​	$	19,716,200	​	​	19,334,600

​

Concentrations and Credit Risk

A majority of the Company, its subsidiaries, the VIE and VIE’s subsidiaries’ expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries, the VIE and VIE’s subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in F-13

Table of Contents currencies other than RMB by the Company, its subsidiaries, the VIE and VIE’s subsidiaries in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.

As of March 31, 2024 and September 30, 2023, $8,660,473 and $6,197,461 of the Company’s cash and cash equivalents and restricted cash were on deposit at financial institutions in the PRC which are protected under Deposit Protection Scheme in accordance with the Deposit Protection Scheme Ordinance. The maximum protection is up to RMB500,000 per depositor per Scheme member, including both principal and interest. Cash and cash equivalent of $959,771 and $1,001,568 were deposited at financial institutions in Hong Kong as of March 31, 2024 and September 30, 2023, which are insured by Hong Kong Deposit Board and subject to a certain limitation of HKD 500,000 (approximately $ 65,000). As of March 31, 2024 and September 30, 2023, $725,062 and $277,218 of the Company’s cash were on deposit at financial institutions in the U.S. which were insured by the FDIC subject to certain limitations. The Company has not experienced any losses in such accounts.

Substantially all of the Company’s sales are made to customers that are located in China. The Company has a concentration of its revenues and receivables with specific customers. For the six months ended March 31, 2024, two customers accounted for 16% and 14% of total revenue, respectively and two vendors accounted for 13% and 13% of total purchase. As of March 31, 2024, two major customer’s account receivable accounted for 58% and 15% of the total account receivable, respectively, and no vendor accounted for more than 10% of the total accounts payable outstanding.

For the six months ended March 31, 2023, two customers accounted for 16% and 15% of total revenue, respectively and no vendor accounted more than 10% of total purchase.

For the six months ended March 31, 2022, two customers accounted for 17% and 11% of total revenue, respectively and two vendors accounted for $25% and 19% of total purchase, respectively.

A loss of any of these customers or suppliers could adversely affect the operating results or cash flows of the Company.

Recent Accounting Pronouncements

There were no new accounting standards or updates during the three months ended March 31, 2024 that would have a material impact on the Company’s Unaudited Condensed Consolidated Financial Statements.

​

NOTE 3 – ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

​

​	​	​	​	​	​	​
​	****	As of		****	As of
​	​	March 31, 2024		​	September 30, 2023
Trade accounts receivable	​	$	785,519	​	$	1,981,545
Less: allowances for doubtful accounts	​		(68,115)	​		(5,829)
Accounts receivable, net	​	$	717,404	​	$	1,975,716

​

The change of the allowance for doubtful accounts are as follow:

​

​	​	​	​	​	​	​
​	****	As of		****	As of
​	****	March 31, 2024		****	March 31, 2023
Beginning balance		$	5,829		$	4,373
Addition	​	​	62,422	​	​	1,281
Exchange rate difference	​	​	(136)	​	​	26
Ending balance		$	68,115		$	5,680

​

​ F-14

Table of Contents NOTE 4 – INVENTORY, NET

Inventories consisted of the following:

​

​	​	​	​	​	​	​
​	****	As of		****	As of
​	​	March 31, 2024		​	September 30, 2023
Raw materials	​	$	2,165,269	​	$	2,497,298
Low value consumables	​	​	3,577	​	​	254,828
Work-in-progress	​		343,898	​		237,987
Finished goods	​		2,249,897	​		2,887,031
Inventory provision	​		(111,920)	​		(885,709)
Total inventory	​	$	4,650,721	​	$	4,991,435

​

For the six months ended March 31, 2024, 2023 and 2022, the inventory provision expenses (reversal) were $(785,426), $397,039 and (108,861), respectively.

​

​

NOTE 5 – OTHER CURRENT ASSETS

Other current assets consisted of the following:

​

​	​	​	​	​	​	​
​	****	As of		****	As of
​	​	March 31, 2024		​	September 30, 2023
Prepaid expense	​	$	326,893	​	$	39,083
Other receivables	​		129,612	​		247,481
Total other current assets	​	$	456,505	​	$	286,564

​

​

​

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following:

​

​	​	​	​	​	​	​
​	****	As of		****	As of
​	​	March 31, 2024		​	September 30, 2023
Property and Buildings	​	$	13,022,964	​	$	12,889,450
Machinery and equipment	​		18,053,537	​		17,833,560
Automobiles	​		288,707	​		285,747
Office and electric equipment	​		197,196	​		195,174
Subtotal	​		31,562,404	​		31,203,931
Less: accumulated depreciation	​		(22,801,330)	​		(22,060,348)
Property and equipment, net	​	$	8,761,074	​	$	9,143,583

​

Depreciation expense was $514,083, $547,192 and $478,819 for the six months ended March 31, 2024, 2023 and 2022 respectively. Certain properties and equipment have been pledged as collateral under the bank loan agreement as discussed in Note 9.

As of March 31, 2024 and September, 30, 2023, Qilian Chengdu made advance payments for property and buildings acquisition for $641,014 and $634,442, respectively, which was recorded in prepayments for property and equipment on the consolidated balance sheets.

​ F-15

Table of Contents NOTE 7 – INTANGIBLE ASSETS, NET

Intangible assets, net consisted of the following:

​

​	​	​	​	​	​	​
​	****	As of		****	As of
​	​	March 31, 2024		​	September 30, 2023
Land use rights	​	$	4,101,384	​	$	4,059,336
Software	​		39,238	​		38,836
License for drug manufacturing	​		55,393	​		54,825
Total	​		4,196,015	​		4,152,997
Less: accumulated amortization	​		(777,532)	​		(729,415)
Intangible assets, net	​	$	3,418,483	​	$	3,423,582

​

Amortization expense was $40,689, $24,249, and $63,395 for the six months ended March 31, 2024, 2023 and 2022 respectively. The land use right was pledged for the bank loans as of September 30, 2023. Refer to Note 9.

Estimated future amortization expense for intangible assets is as follows:

​

​	​	​	​
​	****	Amortization
Year ending September 30,	​	expense
2024	​	$	44,822
2025	​		85,382
2026	​		85,382
2027	​	​	84,990
2028	​	​	84,710
Thereafter	​		3,033,197
​	​	$	3,418,483

​

​

​

NOTE 8 – LONG-TERM INVESTMENT

In July 2017, Moshangfa acquired 40% ownership interest of JiuQuan Funong Biotech Co., Ltd (“Funong”) with a total investment amount of RMB3,300,000, which have been paid in the amount of RMB1,200,000 ($176,121 equivalent) in 2017, RMB1,658,750 ($253,596 equivalent) in 2018, and RMB441,250 ($64,165 equivalent) in 2019, respectively. The investment was accounted for using equity method.

Equity method investment consisted of the following:

​

​	​	​	​	​	​	​
​	****	As of		****	As of
​	​	March 31, 2024		​	September 30, 2023
Equity method investment:		​			​
Cost of equity method investment		​	456,988		​	452,303
Profit from equity method investment		​	210,687		​	208,527
Dividend Distribution received	​	​	(110,786)	​	​	(54,825)
Investment disposed	​	​	(456,988)	​	​	—
Loss recognized from disposal		​	(99,901)		​	—
Total long-term investment	​	$	—	​	$	606,005

​

​

NOTE 9 – BANK LOANS

In June 2023, Chengdu QLS entered into loan agreement with Chengdu Agriculture and Commercial Bank for RMB 3,500,000 (approximately $ 0.5 million). The loans bear fixed interest rates of 3.9% per annum and matured and paid off in October 2023. The credit was secured by Chengdu QLS’s land use right of approximately $637,000.

​ F-16

Table of Contents NOTE 10 –TAXES

**(a)**Corporate Income Taxes

The Company, its subsidiaries, the VIE and VIE’s subsidiaries are subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

Cayman Islands

Under the current tax laws of the Cayman Islands, the Company is not subject to tax on its income or capital gains. In addition, no Cayman Islands withholding tax will be imposed upon the payment of dividends by the Company to its shareholders.

Hong Kong

In accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income. From year of assessment of 2018/2019 onwards, Hong Kong profit tax rates are 8.25% on assessable profits up to HK$2,000,000, and 16.5% on any part of assessable profits over HK$2,000,000. However, the Company’s HK subsidiary did not generate any assessable profits arising in or derived from Hong Kong for the six months ended March 31, 2024, 2023, and 2022, and accordingly no provision for Hong Kong profits tax has been made in these periods.

China

The WFOE, the VIE and VIE’s subsidiaries are all incorporated in the PRC and are subject to PRC income tax, which is computed according to the relevant laws and regulations in the PRC. Under the Corporate Income Tax Law of PRC, current corporate income tax rate of 25% is applicable to all companies, including both domestic and foreign-invested companies. However, according to Tax Preferential Policies for the Development of the Western Region and Chengdu QLS are eligible for a favorable income tax rate of 15% for the six months ended March 31, 2024, 2023, and 2022. In accordance with the implementation rules of Corporate Income Tax Law of PRC, a qualified “High and New Technology Enterprise” (“HNTE”) is eligible for a preferential tax rate of 15% with HNTE certificate, subject to a requirement that they re-apply for HNTE status every three years. Gansu QLS is eligible for a favorable income tax rate of 15% for the six months ended March 31, 2024, 2023, and 2022.

On January 17, 2019, the State Taxation Administration issued the notice on the scope of small-scale and low-profit corporate income tax preferential policies of the Ministry of Finance and the State Administration of Taxation, [2019] No. 13 for small-scale and low-profit enterprises whose annual taxable income is less than RMB1,000,000 (including RMB1,000,000), approximately $154,000, for the period from January 1, 2019 to December 31, 2020, the income before tax is reduced to 25% as their taxable income, and enterprise income tax is paid at 20% tax rate, which is essentially resulting in a favorable income tax rate of 5%. While for the portion of annual taxable income exceeding RMB1,000,000, approximately $154,000, but not more than RMB3,000,000, approximately $465,000, the income is reduced to 50% as their taxable income, and enterprise income tax is paid at 20% tax rate, which is essentially resulting in a favorable income tax rate of 10%. On April 2, 2021, the State Taxation Administration further reduced the tax for small-scale and low-profit enterprises for the periods from Jan 1, 2021 to December 31, 2023 as following: for entities whose annual taxable income is less than RMB1,000,000 (including RMB1,000,000), approximately $154,000, the income before tax is reduced to 12.5% as its taxable income, and enterprise income tax is paid at 20% tax rate, which is essentially resulting in a favorable income tax rate of 2.5%. While for the portion of annual taxable income exceeding RMB1,000,000, approximately $154,000, but not more than RMB3,000,000, approximately $465,000, the income is reduced to 50% as their taxable income, which is further reduced to 25% starting from January 2022 and enterprise income tax is paid at 20% tax rate, which is essentially resulting in a favorable income tax rate of 10%, or 5% under the further reduced rate starting from January 2022. The qualifications of small-scale and low-profit enterprises were examined annually by the Tax Bureau. All of the Company’s affiliated entities other than Gansu QLS and Chengdu QLS met the criteria of small-scale and low-profit enterprises.

Interim income tax expenses or benefit is recognized based on the Company’s estimated annual effective tax rate, which is based upon the tax rate expected for the full fiscal year applied to the pretax income or loss of the interim period. The Company’s consolidated effective tax rate for the six months ended March 31, 2024 was 3.5%, and differed from the effective China statutory income tax rate of 25.0%, favorable tax rate, tax rate differentials in jurisdictions other than China, and valuation allowance adjustments.

​

​ F-17

Table of Contents NOTE 11 – RELATED PARTY TRANSACTIONS

During the normal course of business, the VIE and VIE’s subsidiaries may make sales to affiliated companies controlled by its major shareholders or subsidiaries. For the six months ended March 31, 2024, 2023 and 2022, the VIE and VIE’s subsidiaries made sales to affiliated companies in the amount of $12,172, Nil, and $117,213 respectively.

​

NOTE 12 – LEASE

As of September 30, 2023, the VIE and VIE’s subsidiaries have one factory lease with expiration date through December 2025. For the years ended September 30, 2023, 2022 and 2021, the lease expenses were $30,275, $63,480 and $109,346, respectively. Balance sheet information related to the VIE and VIE’s subsidiaries’ operating leases as of March 31, 2024 and September 30, 2023 was as follows:

​

​	​	​	​	​	​	​	​
​	****	As of		​	As of		****
​	​	March 31,		​	September 30,		****
​	​	2024		​	2023		****
Operating Lease Assets:		​	​	​	​		​
Right-of-use asset	​	$	47,672	​	$	59,300	​
Total right-of-use asset	​		47,672	​		59,300	​
Lease obligations:	​		​	​		​	​
Current lease liabilities	​		83,089	​		73,560	​
Non-current lease liabilities	​		17,667	​		24,575	​
Total Lease liabilities	​	$	100,756	​	$	98,135	​
​	​	​	​	​	​	​	​
Remaining Lease Term Operating Lease	​		1.75 years	​		2.25 years	​
Discount rate	​		5.5	%		5.5	%

​

Lease liability maturities as of March 31, 2024, are as follows:

​

​	​	​	​
​	****	Operating,
​	​	lease
For the six months ending September 30, 2024		​	55,393
For the year ending March 31, 2025		​	27,696
For the year ending March 31, 2026		​	20,772
Total minimum lease payments	​	$	103,861
Less: Imputed interest	​		(3,105)
Total	​	$	100,756

​

​ F-18

Table of Contents NOTE 13 – SEGMENT REPORTING

The Company, its subsidiaries, the VIE and VIE’s subsidiaries mainly manufactures and distributes active pharmaceutical ingredients and TCMD products as well as other by-products in China. Currently no revenue is derived from international markets. The following table presents segment information for the six months ended March 31, 2024, 2023 and 2022, respectively:

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the six months ended March 31, 2024
​	​	Oxytetracycline		​	​	​	​	​	​	​	​	​
​	​	& Licorice		​	​	​	​	Heparin		​	​	​
​	​	products and		​	​	​	​	products and		​	​	​
​		TCMD			Fertilizer			Sausage casing			Total
Revenue		$	10,755,535		$	159,199		$	1,647,865		$	12,562,599
Cost of revenue	​		9,501,675	​		104,591	​		1,542,311	​		11,148,577
Gross profit	​	$	1,253,860	​	$	54,608	​	$	105,554	​	$	1,414,022
Depreciation and amortization	​	$	444,832	​	$	22,857	​	$	87,083	​	$	554,772
Capital expenditures	​	$	685,827	​	$	23,771	​	$	76,949	​	$	786,547

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For six months ended March 31, 2023
​	​	Oxytetracycline		​	​	​	​	​		​	​	​
​	​	& Licorice		​	​	​	​	Heparin		​	​	​
​	​	products and		​	​	​	​	products and		​	​	​
​		TCMD			Fertilizer			Sausage casing			Total
Revenue		$	18,521,112		$	752,672		$	9,889,832		$	29,163,616
Cost of revenue	​		16,622,793	​		365,813	​		9,880,264	​		26,868,870
Gross profit	​	$	1,898,319	​	$	386,859	​	$	9,568	​	$	2,294,746
Depreciation and amortization	​	$	452,036	​	$	22,123	​	$	97,282	​	$	571,441
Capital expenditures	​	$	2,570,090	​	$	28,098	​	$	3,933	​	$	2,602,121

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the six months ended March 31, 2022
​	​	Oxytetracycline		​	​	​	​	​	​	​	​	​
​	​	& Licorice		​	​	​	​	Heparin		​	​	​
​	​	products and		​	​	​	​	products and		​	​	​
​		TCMD			Fertilizer			Sausage casing			Total
Revenue		$	20,150,899		$	677,274		$	11,258,349		$	32,086,522
Cost of revenue	​		17,531,280	​		537,227	​		10,515,524	​		28,584,031
Gross profit	​	$	2,619,619	​	$	140,047	​	$	742,825	​	$	3,502,491
Depreciation and amortization	​	$	473,219	​	$	23,597	​	$	45,398	​	$	542,214
Capital expenditures	​	$	1,678,558	​	$	18,520	​	$	51,351	​	$	1,748,429

​

​	​	​	​	​	​	​
​	****	March 31,		****	September 30,
​	​	2024		​	2023
Total Assets		​			​
Oxytetracycline & Licorice products and TCMD	​	$	37,965,308	​	$	38,382,322
Fertilizer	​	$	2,948,492	​	$	3,291,960
Heparin products and Sausage casing	​	$	8,938,570	​	$	9,583,712
Total	​	$	49,852,370	​	$	51,257,994

​

​

NOTE 14 – COMMITMENTS

On July 5, 2021, The Company entered into an investment agreement with Chongqing Jintong Industrial Construction Investment Co., Ltd (“Chongqing Jintong”). The Company agreed to invest for the construction of a factory for manufacturing pig by-products in Chongqing Tongnan High Tech Industrial Zone. As of September 30, 2023, a total of $8.5 million (RMB 60 million) construction contracts has been signed for this project, the Company’s obligation shall be satisfied during the process of construction.

​

As of March 31, 2024, the Company has commitment to pay $2.7 million (RMB 19.6 million) under the investment agreement.

​ F-19

Table of Contents NOTE 15 – SUBSEQUENT EVENTS

On April 19, 2024 , the Company’s shareholders approved the increase of the Company’s authorized share capital, with effect from such date as the board of directors of the Company may determine in its sole discretion, from US$166,667 divided into 100,000,000 ordinary shares of par value US$0.00166667 each (each being an “Ordinary Share”) to US$833,335 divided into 500,000,000 Ordinary Shares of par value US$0.00166667 each (the “Share Capital Increase”). Each issued and outstanding Ordinary Share, which is expected to be 35,750,000 Ordinary Shares, be re-designated and re-classified into one Class A ordinary share of par value US$0.00166667 each (each being a “Class A Ordinary Share”). Of the remaining authorized but unissued Ordinary Shares:

(a)	50,000,000 Ordinary Shares be re-designated and re-classified into 50,000,000 preferred shares of par value US$0.00166667 each (each being a “Preferred Share”);
(b)	100,000,000 Ordinary Shares be re-designated and re-classified into 100,000,000 Class B Ordinary Shares of par value US$0.00166667 each; and
---	---
(c)	each of the remaining authorized but unissued Ordinary Shares, which is expected to be 314,250,000 be re-designated and re-classified into Class A Ordinary Shares of par value US$0.00166667 each, (the “Share Capital Reorganization”), such that following the Share Capital Reorganization, the authorized share capital of the Company shall be US$833,335 divided into 350,000,000 Class A Ordinary Shares of par value US$0.00166667 each, 100,000,000 Class B Ordinary Shares of par value US$0.00166667 each, and 50,000,000 Preferred Shares of par value US$0.00166667 each.
---	---

The Company’s management reviewed all material events that have occurred after the balance sheet date through September 15, 2024 on which these financial statements were available to be issued. Based upon this review, the Company did not identify any subsequent events except disclosed in above that would have required adjustment or disclosure in the condensed consolidated financial statements.

​

​ F-20

Exhibit 99.2

Financial Information Related to the VIE

The following tables provide condensed consolidating schedules depicting the financial position, cash flows, and results of operations for the parent, subsidiaries, WFOE, the consolidated VIE, and any eliminating adjustments and consolidated totals as of March 31, 2024 and 2023 and for the six months ended March 31, 2024, 2023 and 2022.

Selected Condensed Consolidating Statements of Operations Information

​	​	​	​	​	​	​	​
​	​	For the six months ended March 31, 2024
​	​	​	​	​	The VIE	​	​
​	​	​	​	​	and	​	Consolidated
​	​	Parent	Qilian HK	WFOE	subsidiaries	Elimination	Total
​	****	US	US	US	US	US	US$
Total revenues		—	—	124,118	12,480,035	(41,554)	12,562,599
Including: Service fee revenue (loss absorbed) from the VIE		—	—	41,554	—	(41,554)	—
Cost of revenues		—	—	3,776	11,144,801	—	11,148,577
Total operating expenses		582,834	—	148,338	1,403,492	(41,554)	2,093,110
Including: Service fee expense charged by the WFOE		—	—	—	41,554	(41,554)	—
Share of (loss) income of subsidiary (1)		(97,303)	(97,303)	—	—	194,606	—
Net income (loss)		414,468	(97,303)	(97,303)	(85,688)	194,606	328,780

All values are in US Dollars.

​

​	​	​	​	​	​	​	​
​	​	For the six months ended March 31, 2023
​	​	​	​	​	The VIE	​
​	​	​	​	​	and	​	Consolidated
​	​	Parent	Qilian HK	WFOE	subsidiaries	Elimination	Total
​	****	US	US	US	US	US	US$
Total revenues		—	—	923,386	29,163,616	(923,386)	29,163,616
Including: Service fee revenue from the VIE		—	—	850,360	—	(850,360)	—
Cost of revenues		—	—	637	26,868,233	—	26,868,870
Total operating expenses		537,406	—	194,642	2,275,453	(923,386)	2,084,115
Including: Service fee expense charged by the WFOE		—	—	—	850,360	(850,360)	—
Share of income of subsidiary(1)		724,249	724,249	—	—	(1,448,498)	—
Net income (loss)		(58,957)	724,249	724,249	6,737	(956,898)	439,380

All values are in US Dollars.

​

​	​	​	​	​	​	​	​
​	​	For the six months ended March 31, 2022
​	​	​	​	​	The VIE	​
​	​	​	​	​	and	​	Consolidated
​	​	Parent	Qilian HK	WFOE	subsidiaries	Elimination	Total
​	****	US	US	US	US	US	US$
Total revenues		—	—	5,832,126	32,086,522	(5,832,126)	32,086,522
Including: Service fee revenue (loss absorbed) from the VIE		—	—	(1,450,093)	—	1,450,093	—
Cost of revenues		—	—	4,043,496	28,987,722	(4,447,187)	28,584,031
Total operating expenses		428,452	—	64,020	3,167,713	(1,384,939)	2,275,246
Including: Service fee revenue (loss absorbed) by the WFOE		—	—	—	(1,450,093)	1,450,093	—
Share of income of subsidiary(1)		1,678,420	1,678,420	—	—	(3,356,840)	—
Net income (loss)		261,169	1,678,420	1,678,420	(11,488)	(3,356,840)	249,681

All values are in US Dollars.

​ 1

Selected Condensed Consolidating Balance Sheets Information

​

​	​	​	​	​	​	​	​
​	​	As of March 31, 2024
​	​	​	​	​	The VIE	​	​
​	​	​	​	​	and	​	Consolidated
​	​	Parent	Qilian HK	WFOE	subsidiaries	Elimination	Total
​	****	US	US	US	US	US	US$
Cash and cash equivalents		725,062	—	234,630	9,385,640	—	10,345,332
Amount due from the Parent/WFOE(2)		—	—	—	3,699,880	(3,699,880)	—
Total current assets	****	15,742,008	—	278,732	21,005,560	(3,699,880)	32,326,420
Service fee receivable from the VIE		—	—	11,132,719	—	(11,132,719)	—
Investment in subsidiary(3)		11,007,608	11,007,608	—	—	(22,015,216)	—
Other non-current assets		—	—	2,786,454	13,739,496	—	16,525,950
Total assets	****	26,749,616	11,007,608	14,197,905	34,745,056	(36,847,815)	49,852,370
Amounts due to the VIE and its subsidiaries(2)		575,793	—	3,124,087	—	(3,699,880)	—
Total current liabilities	****	575,793	—	3,190,297	4,663,191	(3,699,880)	4,729,401
Service fee payable to the WFOE		—	—	—	11,132,719	(11,132,719)	—
Other non-current liabilities		—	—	—	201,995	—	201,995
Total liabilities	****	575,793	—	3,190,297	15,997,905	(14,832,599)	4,931,396
Total equity	****	26,173,823	11,007,608	11,007,608	18,747,151	(22,015,216)	44,920,974
Total liabilities and equity	****	26,749,616	11,007,608	14,197,905	34,745,056	(36,847,815)	49,852,370

All values are in US Dollars.

​

​	​	​	​	​	​	​	​
​	​	As of September 30, 2023
​	​	​	​	​	The VIE	​
​	​	​	​	​	and	​	Consolidated
​	​	Parent	Qilian HK	WFOE	subsidiaries	Elimination	Total
​	****	US	US	US	US	US	US$
Cash and cash equivalents		277,218	—	322,834	6,876,195	—	7,476,247
Amount due from the Parent/WFOE(2)		—	—	—	4,125,329	(4,125,329)	—
Total current assets	****	15,230,237	—	369,857	23,037,856	(4,125,329)	34,512,621
Service fee receivable from the VIE		—	—	11,091,165	—	(11,091,165)	—
Investment in subsidiary(3)		10,693,672	10,693,672	—	—	(21,387,344)	—
Other non-current assets		—	—	2,772,206	13,973,167	—	16,745,373
Total assets	****	25,923,910	10,693,672	14,233,228	37,011,023	(36,603,839)	51,257,994
Amounts due to the VIE and its subsidiaries(2)		575,793	—	3,549,536	—	(4,125,329)	—
Total current liabilities	****	575,793	—	3,539,555	6,670,120	(4,125,329)	6,660,139
Service fee payable to the WFOE		—	—	—	11,091,165	(11,091,165)	—
Other non-current liabilities		—	—	—	246,454	—	246,454
Total liabilities	****	575,793	—	3,539,555	18,007,739	(15,216,494)	6,906,593
Total equity	****	25,348,117	10,693,672	10,693,673	19,003,284	(21,387,345)	44,351,401
Total liabilities and equity	****	25,923,910	10,693,672	14,233,228	37,011,023	(36,603,839)	51,257,994

All values are in US Dollars.

​

​ 2

Selected Condensed Consolidating Cash Flows Information

​

​	​	​	​	​	​	​	​
​	​	For the six months ended March 31, 2024
​	​	​	​	​	The VIE and	​	Consolidated
​	​	Parent	Qilian HK	WFOE	subsidiaries	Elimination	Total
​	****	US	US	US	US	US	US$
Net cash (used in) provided by operating activities		(1,552,156)	—	(91,835)	4,204,666	—	2,560,675
Net cash (used in) provided by investing activities		1,000,000	—	—	(272,557)	—	727,443
Net cash used in financing activities		—	—	—	(486,208)	—	(486,208)

All values are in US Dollars.

​

​	​	​	​	​	​	​	​
​	​	For the six months ended March 31, 2023
​	​	​	​	​	The VIE and	​	Consolidated
​	​	Parent	Qilian HK	WFOE	subsidiaries	Elimination	Total
​	****	US	US	US	US	US	US$
Net cash (used in) provided by operating activities	​	(2,344,921)	—	537,078	1,724,828	—	(83,015)
Net cash used in investing activities	​	—	—	(29,671)	(1,884,386)	(716,733)	(2,630,790)
Net cash used in financing activities	​	—	—	(716,733)	(2,903,155)	716,733	(2,903,155)

All values are in US Dollars.

​

​	​	​	​	​	​	​	​
​	​	For the six months ended March 31, 2022
​	​	​	​	​	The VIE and	​	Consolidated
​	​	Parent	Qilian HK	WFOE	subsidiaries	Elimination	Total
​	****	US	US	US	US	US	US$
Net cash (used in) provided by operating activities	​	(856,904)	—	1,589,717	3,454,317	—	4,187,130
Net cash (used in) provided by investing activities	​	428,452	—	(2,396,742)	(554,363)	(915,709)	(3,438,362)
Net cash provided by (used in) financing activities	​	—	—	(915,709)	3,139,126	915,709	3,139,126

All values are in US Dollars.

​

The following table represents the roll-forward of the investments in our subsidiaries, the VIE and the VIE’s subsidiaries:

​

​	​	​
​	****	USD
As of September 30, 2023		10,693,672
Share of loss of subsidiaries, the VIE and the VIE’s subsidiaries		(97,302)
Effect of exchange rate		411,238
As of March 31, 2024		11,007,608

---

Notes

(1)	It represents the elimination of share of income by Qilian International from Qilian HK with the net income recognized at Qilian HK level, and share of income by Qilian HK from the WFOE with the net income recognized at the WFOE level, respectively.
(2)	It represents the elimination of intercompany balances among Qilian International, Qilian HK, the Primary WFOE, and the VIEs and their subsidiaries that we consolidate.
---	---
(3)	As of March 31, 2024, the $3,699,880 intercompany balances included $575,793 loan due to the VIE and its subsidiaries from the Parent, $3,124,087 of receivable of the VIE and its subsidiaries from WFOE originated from purchase made by WFOE from the VIE and its subsidiaries.
---	---
(4)	As of September 30, 2023, the $4,125,329 intercompany balances included $575,793 loan due to the VIE and its subsidiaries from the Parent, $3,316,379 of receivable of the VIE and its subsidiaries from WFOE originated from purchase made by WFOE from the VIE and its subsidiaries and $233,157 of other payable to the VIE and its subsidiaries from WFOE.
---	---
(5)	It represents the elimination of the investments in Qilian HK by Qilian International, and investments in the WFOE by Qilian HK, respectively.
---	---

3

A.Operating Results

Overview

Qilian International Holding Group Limited is not a Chinese operating company but a Cayman Islands holding company with its business operations conducted by Gansu Qilianshan Pharmaceutical Co., Ltd. (the “VIE”, “Gansu QLS”) and its subsidiaries established in the PRC. Qilian International Holding Group Limited is a Cayman Islands exempted company with limited liability incorporated on February 7, 2019. Through the VIE, we are engaged in the research, development, and production of licorice products, oxytetracycline products, TCMD product, heparin product, sausage casings, and fertilizers.

On May 20, 2019 and November 20, 2020, we, through our wholly foreign-owned entity Chengdu Trade, entered into a series of contractual arrangements with Gansu QLS, which include an Exclusive Service Agreement, an Equity Pledge Agreement, a Call Option Agreement, a Shareholders’ Voting Rights Proxy Agreement and Powers of Attorney. Pursuant to the VIE Agreements, WFOE provides Gansu QLS with technical support, consulting services and other management services and is entitled to receive 99.214% of Gansu QLS’ net profits, this percentage being the number of shares of Gansu QLS held by shareholders having signed the VIE Agreements over the total issued and outstanding shares of Gansu QLS. In addition, Gansu QLS’s shareholders have pledged 99.214% of their equity interests in Gansu QLS to WFOE, irrevocably granted WFOE an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Gansu QLS, and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by WFOE.

To optimize its corporate structure, Chengdu Trade and Gansu QLS executed certain exclusive service termination agreement (the “Service Termination Agreement”) to terminate certain contractual service arrangements between Chengdu Trade and Gansu QLS. As a result of the aforementioned termination, Chengdu Trade will no longer have contractual control over, nor receive the economic benefits of Gansu QLS. In connection with such termination, Qilian Shan International Trade (Hainan) Co., Ltd (“Hainan Trade”), a wholly-owned subsidiary of Qilian International (Hong Kong) Holdings Limited, entered into a series of VIE Agreements with Gansu QLS. The Service Termination Agreement and the new service agreement with Hainan Trade became effective on December 1, 2022.

Through the VIE Agreements, WFOE is deemed as the primary beneficiary of Gansu QLS for accounting purpose and is able to consolidate the VIE’s financial statements under the U.S. GAAP.

Based on the VIE Agreements, Gansu QLS is considered a VIE of Qilian Chengdu/Hainan Trade under U.S. GAAP. As the above entities were under common control before and after the execution of the VIE Agreements, the restructuring was accounted for as a reorganization of entities under common control and consolidated financial statements were prepared as if the reorganization occurred at the beginning of the first period presented. Thus, the financial results presented here include those of the VIE and the VIE’s subsidiaries from the first period presented. Refer to our Risk Factors under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”

As of the date of this report, there are 4,826,480 Class A ordinary shares, par value $0.00833335 each, (“Class A ordinary shares”) and 2,400,000 Class B ordinary shares, par value $0.00833335 each, (“Class B ordinary shares”)  issued and outstanding.

Outlook

We and the VIE and its subsidiaries plan to continue developing their business by expanding their marketing network and investing in pharmaceutical and chemical facilities, which depend heavily on sufficient capital. If we are not able to obtain equity or debt financing, we and our affiliates may not be able to execute the development and expansion plans, which could have material adverse effect on our, the VIE and its subsidiaries’ future business performance and operating results.

Our net revenue for the six months ended March 31, 2024 was $12.6 million, representing a decrease of $16.6 million, or 57%, from $29.2 million for the six months ended March 31, 2023. Net income attributable to our shareholders for the six months ended March 31, 2024 was $0.4 million, representing a decrease of $81,000, or 16%, from $0.5 million net income attributable to our shareholders for the six months ended March 31, 2023. Non-GAAP EBITDA (as defined below) for the six months ended March 31, 2024 was $0.8million, representing a decrease of 3%, from $0.9 million for the six months ended March 31, 2023. For additional information on EBITDA, please see the subsection “—EBITDA” below. 4

Key Indicators of the Company’s Performance

In assessing performance, we consider a variety of performance and financial measures, including principal growth in net revenue, gross profit, distribution, general and administrative expenses, net income from operations, and EBITDA (Non-GAAP) (as defined below). The key measures that we use to evaluate the performance of our subsidiaries and the VIE and its subsidiaries’ business are set forth below:

Net Revenue

Net revenue is equal to gross sales minus sales returns and sales incentives that the Company offers to our customers, such as discounts that are offset to gross sales. Our net sales are driven by changes in the number of customers, product varieties, selling price, and mix of products sold.

Gross Profit

Gross profit is equal to net sales minus cost of goods sold. Cost of goods sold primarily includes inventory costs (net of supplier consideration), inbound freight, custom clearance fees, and other miscellaneous expenses. Cost of goods sold generally changes as the Company incurs higher or lower costs from suppliers and as the customer and product mix changes.

Selling, General and Administrative, Research and Development Expenses

Selling, general and administrative, research and development expenses primarily consist of salaries and benefits for employees, shipping expense, utilities, maintenance and repairs expenses, insurance expense, depreciation and amortization expenses, research and development expense, selling and marketing expenses, professional fees, and other operating expenses.

Non-GAAP Financial Measures-EBITDA

Management uses certain financial measures to evaluate our operating performance which is calculated and presented on the basis of methodologies other than in accordance with GAAP (“Non-GAAP”). These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, and our calculations thereof may not be comparable to similarly entitled measures reported by other companies. We believe that EBITDA is a useful performance measure and can be used to facilitate a comparison of our operating performance on a consistent basis from period to period and to provide for a more complete understanding of factors and trends affecting our subsidiaries and the VIE and its subsidiaries’ business than GAAP measures alone can provide. Our management believes that EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect its operating performance. Our management believes that the use of these Non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with the companies in the same industry, many of which present similar Non-GAAP financial measures to investors. We present EBITDA in order to provide supplemental information that our management considers relevant for the readers of our consolidated financial statements included elsewhere in this annual report, and such information is not meant to replace or supersede U.S. GAAP measures.

​

​ 5

Our management defines EBITDA as net income (loss) before interest expense, income taxes, and depreciation and amortization. EBITDA is not defined under U.S. GAAP and is subject to important limitations as analytical tools and, as such, you should not consider them in isolation or as substitutes for analysis of our Company’s financial results as reported under U.S. GAAP. For example, EBITDA:

●	excludes certain tax payments that may represent a reduction in cash available to the Company;
●	does not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;
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●	does not reflect changes in, or cash requirements for, the Company’ working capital needs; and
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●	does not reflect the significant interest expense, or the cash requirements, necessary to service the Company’s debt.
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Results of Operations for the six months ended March 31, 2024 and 2023

​

​	​	​	​	​	​	​	​	​	​
​	****	For the Six Months Ended
​	​	March 31,
​	****	2024		****	2023		****	% Change	****
Revenue	​	$	12,562,599	​	$	29,163,616		(57)	%
Cost of revenue	​	$	11,148,577	​	$	26,868,870		(59)	%
Gross profit	​	$	1,414,022	​	$	2,294,746		(38)	%
Gross margin	​		11.3	%		7.9	%	3.4	%
Income (loss) from operations	​	$	(679,088)	​	$	210,631		(422)	%
Net income	​	$	328,780	​	$	439,380		(25)	%
Net Income attributable to Qilian International Holding Group Limited (“Qilian International”)	​	$	414,468	​	$	495,521		(16)	%
Basic and diluted earnings per share	​	$	0.01	​	$	0.01		(16)	%

​

Revenue

Revenue decreased by 57% year-over-year to $12.6 million for the six months ended March 31, 2024 from $29.2 million for the six months ended March 31, 2023. The significant decrease of revenue was due to the unbalanced supply and demand of our products in China in late 2023 and the first quarter 2024. The supply side was much stronger than demand side. In addition, the COVID-19 pandemic and a trade war between China and the U.S have complicated the Company’s growth strategy as the cost has gone up and demand from exporting customers decreased dramatically.

For the six months ended March 31, 2024, revenue from oxytetracycline & licorice products decreased by $7.8 million or 42%. In this period, the Company had to decrease its production of oxytetracycline by approximately 50% compared to the same period of last year, in order to reduce inventory and increase working capital. We saw significant demand decrease from our customers due to the shrink of international and domestic market. In the six months ended March 31, 2024, the quantity sold for oxytetracycline has decreased by 54%

For the six months ended March 31, 2024, revenue from heparin products decreased by $8.2 million or 83% compared to the six months ended March 31, 2023. The Company has ceased production of heparin since September 2023 to relieve the challenge from decreased demand. In addition, beginning in February 2023, heparin product became one of the centralized procurement medicine by the PRC government which intensified the competition of the product in the market. The sales price of heparin product decreased from RMB 38.8 per gram for the six months ended March 31, 2023 to RMB 12.06 per gram for the six month ended March 31, 2024. Quantity sold decreased by 51% as well for the six months ended March 31, 2024.

For the six months ended March 31, 2024, revenue from natural fertilizer products decreased by $0.6 million or 79%. In 2024, we experienced pressure to decrease our selling price due to the competition in the fertilizer industry and incurred higher cost due to the inflation and lower production volume. For the six months ended March 31, 2024, the sales price decreased by 7.7%, and sales quantity decreased by 68% compared to the same period last year. 6

Cost of revenue

Cost of revenue decreased by $15.7 million, or 59%, to $11.1 million for the six months ended March 31, 2024 from $26.9million for the six months ended March 31, 2023. The decrease in cost of sales was primarily attributable to the decreased sales as discussed above. The cost of revenue to decreased slightly more than the decreased sales, which improved the gross margin, which is discussed in the section “Gross profit” below.

Gross profit

Gross profit decreased by $0.9 million, or 38%, to $1.4 million for the six months ended March 31, 2024 from $2.3 million for the six months ended March 31, 2023, mainly due to the decrease of sales for all products types as discussed above. The decrease of gross product includes $0.6 million from oxytetracycline & Licorice products, $0.3 million from natural fertilizer products, and partially offset by the increased gross margin of $0.1 million from heparin product and sausage casing. However, gross margin percentage increased to 11.3% for the six months ended March 31, 2024 from 7.9% for the same period of the prior fiscal year, mainly due to the decrease of production compared to the six months ended March 31, 2023, as discussed below.

Gross profit margin for oxytetracycline & Licorice products increased by 1.5% for the six months ended March 31, 2024 as a result of the decrease production cost in 2024. In 2023, due to the higher labor cost and utility cost post the COVID-19 pandemic, the Company had significant increase of production cost.

Gross profit margin for heparin product and sausage casing increased by 6.3% for the six months ended March 31, 2023. The Company experienced significant decrease of selling price for heparin product for the six months ended March 31, 2023 due to intense price competition of the product in the market, as Chinese government announced centralized procurement of the medicine from beginning of 2023, which resulted 0.1% gross profit margin for the product line. For the six months ended March 31, 2024, the gross profit margin increased to 6.4%, which went back to the normal margin for this product line.

Gross profit margin for fertilizer decreased by 17% from 54% for the six months ended March 31, 2023 to 34% for the six months ended March, 31, 2024. The significant decrease of gross profit margin is due the increase of cost of sale as the fixed cost increased significantly as the production volume has been decreased. In addition, from 2023, the Company became one of designated suppliers by Gansu government to provide organic fertilizer for certain soil improvement projects. For the six months ended March 31, 2023, the sales associated with these projects are $0.3 million, with a gross profit margin over 50%, which made the overall gross margin higher than normal. For the six months ended March 31, 2024, government purchase decreased by 17%, which lower the gross margin profit in the current period.

Selling, General and Administrative, Research and Development Expenses

Selling, general and administrative expenses were $2.1 million for the six months ended March 31, 2024, which is flat comparing to the same period in the prior year.

Other Income (expense)

Other income was $1.0 million for the six months ended March 31, 2024, increased by $0.5 million, compared to $0.5 million for the  six months ended March 31, 2023, which primarily consisted of government grants and investment loss. The increase was mainly from the $0.7 million increased income recognized from the fair value change in the investment in trading securities.

Income Taxes Provision

Provision for income taxes decreased by $0.2 million, or 95%, from approximately $248,000 for the six months ended March 31, 2023 to approximately $11,000 for the six months ended March 31, 2024. The decreased tax expense for 2024 was due to the decreased income before income tax, as well as the reversal of provision made for deferred tax asset as the Company can recognized the tax benefit from net operating loss carryforward from prior year, which was fully reserved.

Net Income (loss) Attributable to Non-controlling interest

Net loss attributable to non-controlling interest was approximately $85,000 for the six months ended March 31, 2024, an increase of $30,000, or 53%, from approximately $56,000 of net income attributable to non-controlling interest for the six months ended March 31, 7

2023. The increase was a result of the increase of net loss of Zhongqiao Youguan (Chengdu) E-Commerce Service Co., Ltd. (“Zhongqiao”), a limited liability company organized under the laws of the PRC, which is a 51% subsidiary of Hainan Trade. Zhongqiao experienced a net loss of approximately $69,000 for the six months ended March 31, 2024 and it had no operation for the six months ended March 31, 2023.

Net Income (loss) Attributable to Our Shareholders

As a result of the above, our net income attributable to our shareholders was flat for the six months ended March 31, 2024 compared to the six months ended March 31, 2023, which were $0.4 million and $0.5 million, respectively.

EBITDA

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​	​	​	​	​	​	​	​	​	​	​	​	​
​	****	For the six months ended						​	​	​	​
​	​	March 31,					​	Changes
​	****	2024		****	2023		****	Amount		****	%	****
Net income	​	$	328,780	​	$	439,380	​	$	(110,600)		(25)	%
Interest income	​		(57,782)	​		(32,701)	​		(25,081)		77	%
Income tax provision	​		11,936	​		248,254	​		(236,318)		(95)	%
Depreciation & Amortization	​		554,772	​		571,441	​		(16,669)		(3)	%
EBITDA	​	$	837,706	​	$	1,226,374	​	$	(388,668)		(32)	%
Percentage of EBITDA to revenue	​		6.7	%		4.2	%		2.5	%		​

​

Our EBITDA was $0.8 million for the six months ended March 31, 2024, a decrease of $0.4 million, or 32%, compared to $1.2 million for the six months ended March 31, 2023. This was mainly due to the decrease in net income resulting from decreased gross margin due to the lower revenue. The percentage of EBITDA to revenue was 6.7% and 4.2% for the six months ended March 31, 2024 and 2023, respectively.

Results of Operations for the six months ended March 31, 2023 and 2022

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​	​	​	​	​	​	​	​	​	​
​	****	For the Six Months Ended
​	​	March 31,
​	****	2023		****	2022		****	% Change	****
Revenue	​	$	29,163,616	​	$	32,086,522		(9)	%
Cost of revenue	​	$	26,868,870	​	$	28,584,031		(6)	%
Gross profit	​	$	2,294,746	​	$	3,502,491		(34)	%
Gross margin	​		7.9	%		10.9	%	(3)	%
Income from operations	​	$	210,631	​	$	1,227,245		(83)	%
Net income	​	$	439,380	​	$	249,681		76	%
Net Income attributable to Qilian International Holding Group Limited (“Qilian International”)	​	$	495,521	​	$	87,862		464	%
Basic and diluted earnings per share	​	$	0.01	​	$	0.00		464	%

​

Revenue

Revenue decreased by 9% year-over-year to $29.2 million for the six months ended March 31, 2023 from $32.1 million for the same period of the prior fiscal year. The revenue denominated in Renminbi (“RMB”) decreased by 1 million RMB (equivalent to $0.14 million U.S. dollars (“USD”), using the average conversion rate for current period) The decrease in revenue translated in USD is primarily attributable to the depreciation of RMB against USD from an average exchange rate of 1 USD = 6.3712 RMB for the six months ended March 31, 2022 to an average exchange rate of 1 USD = 6.9761 for the six months ended March 31, 2023.

For the six months ended March 31, 2023, revenue from heparin products decreased by $0.4 million or 4%. The sales price of heparin product decreased from RMB 42.8 per gram for the six months ended March 31, 2022 to RMB 38.8 per gram for the six month ended March 31, 2023. Commence from February 2023, heparin product became one of the centralized procurement medicine by the PRC government which intensified the competition of the product in the market. 8

For the six months ended March 31, 2023, revenue from oxytetracycline & licorice products increased by $0.3 million or 1.7%. This is a normal fluctuation in our oxytetracycline & licorice products line business and increased sales only accounts for less than 1% of our total sales which is related to slight sales quantity increase in the current period.

Cost of revenue

Cost of revenue decreased by $1.7 million, or 6%, to $26.9 million for the six months ended March 31, 2023 from $28.6 million for the same period of the prior fiscal year. The decrease in cost of sales is primarily attributable to the depreciation RMB against USD, from an average exchange rate of 1 USD = 6.3712 RMB for the six months ended March 31, 2022 to an average exchange rate of 1 USD = 6.9761 for the six months ended March 31, 2023. The cost of revenue denominated in RMB increased by 5.3 million RMB which is discussed in the section “Gross profit” below.

Gross profit

Gross profit decreased by $1.2 million, or 34%, to $2.3 million for the six months ended March 31, 2023 from $3.5 million for the same period of the prior fiscal year, mainly due to the decrease of gross margin of $0.9 million from heparin product and sausage casing, $0.5 million from oxytetracycline & Licorice products, partially offset by the increased gross margin of $0.2 million from natural fertilizer. As a result, gross margin percentage decreased to 7.9% for the six months ended March 31, 2023 from 10.9% for the same period of the prior fiscal year.

Gross profit margin for oxytetracycline & Licorice products decreased by 1.8% for the six months ended March 31, 2023 as a result of the increase production cost due to the higher labor cost and utility cost post pandemic, compared to the same period of last year. Gross profit margin for heparin product and sausage casing decreased by 6.5% for the six months ended March 31, 2023 as a result of the decreased selling price for heparin product in the current period, compared to the same period of prior year, due to intense price competition of the product in the market, as Chinese government announced centralized procurement of the medicine from beginning of 2023.

Gross profit margin for fertilizer increased by 29% as the Company became one of designated suppliers by Gansu government to provide organic fertilizer for certain soil improvement projects. The sales associated with these projects are $0.3 million, with a gross profit margin over 50%.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $2.1 million for the six months ended March 31, 2023, representing a decrease of approximately $0.2 million, or 9%, from $2.3 million for six months ended March 31, 2022. The decrease was mainly attributable $0.4 million decrease of research and development expense related to developing new products in the oxytetracycline & licorice products line for six months ended March 31, 2022, offset by increase of salary and incentive bonus for our sales force for their post-pandemic sales effort for the six months ended March 31, 2023.

Investment income (loss)

Investment income was $0.2 million for the six months ended March 31, 2023, compared to investment loss of $1.0 million for the same period of the prior fiscal year. Investment income (loss) is driven by the fair value change of the investment in available-for-sale securities.

Net income and net income attributable to Qilian International

Net income was approximately $0.4 million and $0.2 million for the six months ended March 31, 2023 and 2022. After deducting non-controlling interests, net income attributable to Qilian International was approximately $0.5 million for the six months ended March 31, 2023, compared to net income attributable to Qilian International of less than $0.1 million for the same period of the prior fiscal year.

Earnings per share-basic and diluted

After deducting non-controlling interests, earnings per share attributable to the Company was $ 0.01 per basic and diluted share, for the six months ended March 31, 2023, compared to earnings per share of less than $0.01 per basic and diluted share, for the same period of the prior fiscal year. 9

Weighted average number of shares outstanding was 35,750,000 for the six months ended March 31, 2023, compared to 35,750,000 for the same period of last fiscal year.

EBITDA

The following table sets forth of the calculation of our EBITDA:

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​	​	​	​	​	​	​	​	​	​	​	​	​
​	****	For the six months ended						​
​	​	March 31,					​	Changes
​	****	2023		****	2022		****	Amount		****	%	****
Net income	​	$	439,380	​	$	249,681	​	$	189,699		76	%
Interest income	​		(32,701)	​		(18,772)	​		(13,929)		74	%
Income tax provision	​		248,254	​		120,153	​		128,101		107	%
Depreciation & Amortization	​		571,441	​		542,214	​		29,227		5	%
EBITDA	​	$	1,226,374	​	$	893,276	​	$	333,098		37	%
Percentage of EBITDA to revenue	​		4.2	%		2.8	%		1.4	%		​

​

Our EBITDA was $1.2 million for the six months ended March 31, 2023, an increase of $0.3 million, or 37%, compared to $0.9 million for the six months ended March 31, 2022. This was mainly due to the increase in net income resulting from increased investment income. The percentage of EBITDA to revenue was 4.2% and 2.8% for the six months ended March 31, 2023 and 2022, respectively.

**B.**Liquidity and Capital Resources

Liquidity and Capital Resources

As of March 31, 2024, we had cash of approximately $10.3 million. We have funded our working capital and other capital requirements primarily by cash flow from operations, and bank loans.

Although our management believes that the cash generated from operations will be sufficient to meet our normal working capital needs for at least the next twelve months, our ability to repay our current obligations will depend on the future realization of our current assets. Our management has considered the historical experience, the economy, trends in the pharmaceutical industry, the expected collectability of accounts receivable and the realization of the inventories as of March 31, 2024. Based on these considerations, our management believes that we have sufficient funds to meet our working capital requirements and debt obligations as they become due for at least the next twelve months from the date of this annual report. However, there is no assurance that management will be successful in their plan. There are a number of factors that could potentially arise and result in shortfalls to our plan, such as the demand for the WFOE and the VIE and its subsidiaries’ products, economic conditions, the competitive pricing in the industry and our banks and suppliers being able to provide continued supports. If the future cash flow from operations and other capital resources are insufficient to fund our liquidity needs, we may be forced to reduce or delay our expected acquisition plan, sell assets, obtain additional debt or equity capital or refinance all or a portion of our and our affiliates’ debt.

The following table summarizes our cash flow data for the six months ended March 31, 2024, 2023 and 2022:

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​	​	​	​	​	​	​	​	​
​	****	For the six months ended
​	​	March 31,
​	****	2024		****	2023		****	2022
Net cash provided by (used in) operating activities	​	$	2,560,675	​	$	(83,015)		4,187,130
Net cash provided by (used in) investing activities	​		727,443	​		(2,630,790)		(3,438,362)
Net cash provided by (used in) financing activities	​		(486,208)	​		(2,903,155)		3,139,126
Effect of exchange rate on cash	​		67,175	​		352,153		170,904
Net (decrease) increase in cash, cash equivalents and restricted cash	​	$	2,869,085	​	$	(5,264,807)		4,058,798

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Operating Activities

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, accounts receivable and inventory reserve, deferred tax, unrealized gain(loss) from trading securities and adjusted for the effect of working capital changes. 10

Net cash provided by operating activities was approximately $2.6 million for the six months ended March 31, 2024, an increase of $2.6 million in cash provided by operating activities, compared to net cash used in operating activities of approximately $83,000 for the six months ended March 31, 2023. The increase of net cash inflow was a result of the following:

1.	Net loss excluding non-cash items were $0.8 million, compared to $1.3 million of net income, which represented a decrease of cash inflow of $2.1 million.
2.	Change in account receivable was $1.2 million net cash inflow for the six months ended March 31, 2024. For the six months ended March 31, 2023, the change in account receivable was $0.7 million net cash outflow, which led to a $2.0 million decrease in net cash inflow from operating activities.
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3.	Change in bank acceptance note receivable was $2.3 million net cash inflow for the six months ended March 31, 2024. For the six months ended March 31, 2023, the change in bank acceptance note receivable was $1.1 million net cash outflow, which led to a $3.4 million increase in net cash inflow from operating activities.
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4.	Change in inventory was $1.2 million net cash inflow for the six months ended March 31, 2024. For the six months ended March 31, 2023, the change in inventory was $2.1 million net cash outflow, which led to a $3.2 million increase in net cash inflow from operating activities.
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5.	Change in contract liabilities was $0.7 million net cash outflow for the six months ended March 31, 2024. For the six months ended March 31, 2023, the change in contract liabilities was $1.9 million net cash inflow, which led to a $2.5 million decrease in net cash inflow from operating activities.
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Net cash used in operating activities was approximately $83,000 for the six months ended March 31, 2023, a decrease of $4.2 million in cash provided by operating activities, compared to net cash provided by operating activities of $4.2 million for the six months ended March 31, 2022. The decrease of net cash inflow was a result of the following:

1.	Net income excluding non-cash items were $1.3 million, compared to $1.7 million of net income, which represents a decrease of cash inflow of $0.4 million;
2.	Change in account receivable was $0.7 million net cash outflow for the six months ended March 31, 2023. For the six months ended March 31, 2022, the change in account receivable was $1.5 million net cash inflow, which led to a $2.2 million decrease in net cash inflow from operating activities.
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3.	Change in bank acceptance note receivable was $1.1 million net cash outflow for the six months ended March 31, 2023. For the six months ended March 31, 2022, the change in bank acceptance note receivable was $0.2 million net cash inflow, which led to a $1.3 million decrease in net cash inflow from operating activities.
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4.	Change in bank acceptance note payable was Nil net cash inflow for the six months ended March 31, 2023. For the six months ended March 31, 2022, the change in bank acceptance note payable was $1.7 million net cash inflow, which led to a $1.7million decrease in net cash inflow from operating activities.
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5.	Change in inventory was $2.1 million net cash outflow for the six months ended March 31, 2023. For the six months ended March 31, 2023, the change in inventory was $0.5 million net cash outflow, which led to a $1.5 million increase in net cash outflow from operating activities.
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6.	Change in account payable was $1.1 million net cash outflow for the six months ended March 31, 2023. For the six months ended March 31, 2022, the change in account payable was $1.9 million net cash outflow, which led to a $0.8 million decrease in net cash outflow from operating activities.
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7.	Change in contract liabilities was $1.9 million net cash inflow for the six months ended March 31, 2023. For the six months ended March 31, 2022, the change in contract liabilities was $0.7 million net cash inflow, which led to a $1.2 million increase in net cash outflow from operating activities.
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Investing Activities

Net cash provided from investing activities was approximately $0.7 million for the six months ended March 31, 2024, an increase of $3.3 million, compared to $2.6 million net cash used in investing activities for the six months ended March 31, 2023. The increase was 11

mainly due to the increased cash from disposal of long term equity investment for $1.5 million, and decrease of capital expenditure of $1.8 million.

Net cash used in investing activities was $2.6 million for the six months ended March 31, 2023, compared to net cash used in investing activities $3.4 million for the same period last year. Cash used in investing activities for the six months ended March 31, 2023 includes cash used for purchase of property and equipment of $0.7 million, cash used for purchase of intangible assets of $1.9 million and cash used for purchase of non controlling interest less than $0.1 million. Cash used in investing activities for the six months ended March 31, 2022 includes cash used for purchase of property and equipment of $1.8 million and cash used for purchase of intangible assets of $1.7 million.

Financing Activities

Net cash used in financing activities was approximately $0.5 million for the six months ended March 31, 2024, a decrease of $2.4 million, or 83%, compared to $2.9 million for the six months ended March 31, 2023. The decrease was mainly a result of $1.8 million decrease from dividend paid, as well as decrease from cash used for repayment of bank loan and bank notes payable of $0.6 million.

Net cash used in financing activities was $2.9 million for the six months ended March 31, 2023, compared to net cash provided by financing activities $3.1 million for the same period of last year. Cash used in financing activities for the six months ended March 31, 2023 includes cash used for repayment of bank loan and bank notes payable of $1.0 million, as well as dividend paid of $1.8 million. Cash provided by financing activities for the six months ended March 31, 2022 include cash proceeds from bank loans of $3.1 million.

Capital Expenditures

Our capital expenditures were $0.8 million, $2.2 million and $3.4 million for the six months ended March 31, 2024, 2023 and 2022, respectively. We intend to fund our future capital expenditures with our existing cash balance and cash flow from operating activities. We will continue to make capital expenditures to meet the expected growth of the WFOE and the VIE and its subsidiaries’ business. The capital expenditure for the full year ended September 30, 2024 is estimated to be $2.6 million for the new facility to be built in Chongqing city for producing our heparin products, and the construction of the new facility. 12