BGM 6-K
BGM Group Ltd. (BGM)
Exhibit 99.1
BGM GROUP LTD
INDEX TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
TABLE OF CONTENTS
CONTENTS | PAGE(S) |
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2025 and September 30, 2024 | F-2 |
F-3 | |
F-4 | |
F-5 | |
Notes to Audited Condensed Consolidated Financial Statements | F-6 |
F-1
BGM Group Ltd and ITS SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(Expressed in U.S. Dollars, except for the number of shares)
As of March 31 | As of September 30 | |||||
| 2025(Unaudited) |
| 2024(Audited) | |||
ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalent | $ | | $ | | ||
Restricted Cash | | — | ||||
Accounts receivable, net |
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Bank acceptance notes receivable | | | ||||
Inventories, net |
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Prepayment to suppliers, net |
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Investment in trading securities | | | ||||
Other current assets | | | ||||
TOTAL CURRENT ASSETS |
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Restricted Cash | | — | ||||
Property, plant and equipment, net | ||||||
Construction in progress | ||||||
Intangible assets, net |
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Goodwill | | — | ||||
Long term investment | | | ||||
Operating lease right of use assets |
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Deferred tax assets |
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Prepayments for property and equipment |
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Other long term assets |
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TOTAL ASSETS | | | ||||
CURRENT LIABILITIES: | ||||||
Bank loans |
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Insurance premium payables | | — | ||||
Accounts payable | | | ||||
Contract liabilities |
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Deferred government grants-current | | | ||||
Taxes payable |
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Operating lease liability |
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Accrued expenses and other payables |
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TOTAL CURRENT LIABILITIES |
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LONG TERM LIABILITIES |
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Operating lease liability |
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Deferred government grants - noncurrent |
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TOTAL LIABILITIES |
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Commitments and contingencies |
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SHAREHOLDERS’ EQUITY: |
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Ordinary Shares, $ |
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Additional paid-in capital |
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Statutory Reserve |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total shareholders’ equity attributable to BGM Group Ltd |
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Noncontrolling interests |
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TOTAL SHAREHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | |
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*
The accompanying notes are an integral part of these consolidated financial statements.
F-2
BGM Group Ltd and ITS SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Expressed in U.S. Dollars, except for the number of shares)
For the six months ended March 31 |
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| 2025 |
| 2024 |
| 2023 |
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NET REVENUE | $ | | $ | | $ | | ||||
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COST OF REVENUE | |
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GROSS PROFIT | |
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SELLING, GENERAL AND ADMINISTRATIVE, RESEARCH AND DEVELOPMENT EXPENSES | |
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INCOME (LOSS) FROM OPERATIONS | ( |
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Interest income, net | |
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Investment income (loss) | ( | | | |||||||
Share of results of associates | ( | — | — | |||||||
Grant income | | | | |||||||
Other income (expenses) | |
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Total Other income (expense) | ( |
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INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)/ EXPENSE | ( |
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INCOME TAXES (BENEFIT)/EXPENSE | ( | | | |||||||
NET INCOME (LOSS) | ( |
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Less: net income (loss) attributable to non-controlling interest | |
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NET INCOME (LOSS) ATTRIBUTABLE TO BGM GROUP LTD | $ | ( | $ | | $ | | ||||
OTHER COMPREHENSIVE INCOME |
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Foreign currency translation adjustment | ( |
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COMPREHENSIVE INCOME (LOSS) | ( |
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Less: comprehensive income (loss) attributable to non - controlling interests | |
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COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO BGM GROUP LTD | ( | | | |||||||
Earnings (loss) per common share - basic and diluted | $ | ( | | * | | * | ||||
Weighted average shares - basic and diluted | |
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*
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-3
BGM Group Ltd and ITS SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Changes in Equity
(Expressed in U.S. Dollars, except for the number of shares)
Accumulated | |||||||||||||||||||||||||||||||
Shareholders’ | Other | Shareholders’ | |||||||||||||||||||||||||||||
Class A Ordinary Shares | Class B Ordinary Shares | Additional | Equity Attributable | Comprehensive | Equity Attributable | Non-controlling | Total | ||||||||||||||||||||||||
| Shares* |
| Amount |
| Shares |
| Amount |
| Paid-in Capital |
| Retained Earnings |
| to BGM Group Ltd |
| Income |
| to BGM Group Ltd |
| Interests |
| Shareholders’ Equity | ||||||||||
Balance as of September 30, 2022 | | $ | | — | $ | — | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | | |||||||||||
Net income (loss) for the period | — | — | — | — | — | | — | — | | ( | | ||||||||||||||||||||
Acquisition of equity interest from unrelated third party shareholders | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||
Appropriation for statutory reserve | — | — | — | — | — | ( | | — | — | — | — | ||||||||||||||||||||
Dividend | — | — | — | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | | | | | ||||||||||||||||||||
Balance as of March 31, 2023 | | $ | | — | $ | — | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | | |||||||||||
Balance as of September 30, 2023 | | $ | | — | $ | — | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | | |||||||||||
Net income (loss) for the period | — | — | — | — | — | | — | — | | ( | | ||||||||||||||||||||
Appropriation for statutory reserve | — | — | — | — | — | ( | | — | — | — | — | ||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | | | | | ||||||||||||||||||||
Balance as of March 31, 2024 | | $ | | — | $ | — | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | | |||||||||||
Balance as of September 30, 2024 | | $ | | — | $ | — | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | | |||||||||||
Issuance of common shares | | | | | | — | — | — | | — | | ||||||||||||||||||||
Net income (loss) for the period | — | — | — | — | — | ( | — | — | ( | | ( | ||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | ( | ( | ( | ( | ||||||||||||||||||||
Balance as of March 31, 2025 | | $ | | | $ | | $ | | $ | | $ | | $ | ( | $ | | $ | | $ | | |||||||||||
*The shares and per share data are presented on a retroactive basis to reflect the Company’s Share Consolidation.
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4
BGM Group Ltd and ITS SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash flows
(Expressed in U.S. Dollars, except for the number of shares)
For the six months ended March 31 | |||||||||
2025 | 2024 | 2023 | |||||||
Cash flows from operating activities: |
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Net income(loss) | $ | ( |
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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Non-cash operating lease expenses |
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Depreciation and amortization |
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Provision of credit loss |
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Provision for inventory(reversal) | ( | ( | | ||||||
Deferred tax expense | ( | ( | | ||||||
Unrealized gain from investment in securities |
| — |
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Investment income | | | | ||||||
Share of results of associates | | — | — | ||||||
Changes in operating assets and liabilities: |
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Accounts receivable |
| ( |
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Bank acceptance notes receivable |
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Inventories |
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Prepayment to suppliers |
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Other current assets |
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Accounts payable |
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Insurance premium payables |
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Contract liabilities |
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Deferred government grants |
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Tax payables |
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Accrued expenses and other payables |
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Other non-current assets | ( | — | — | ||||||
Lease liabilities |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Purchase of property, plant and equipment |
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Purchase of intangible assets |
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Cash received from disposal of long term investment |
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Dividend received | — | | — | ||||||
Payments on long term investment | ( | — | — | ||||||
Purchase of non controlling interest | — | — | ( | ||||||
Net cash provided by (used in) investing activities |
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Cash flows from financing activities: |
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Proceeds from bank loans |
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Repayment of bank loans |
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Proceeds from (Repayment of) bank notes payable | — | — | ( | ||||||
Net proceeds from issuance cost | | — | — | ||||||
Dividend paid |
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Net cash provided by (used in) financing activities |
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Effect of exchange rate change on Cash, cash equivalents and restricted cash |
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Net increase (decrease) in Cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period | $ | |
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Supplemental cash flow information |
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Cash paid for interest | $ | | $ | — | $ | — | |||
Cash paid for income taxes | $ | | $ | — | $ | | |||
Supplemental non-cash information | |||||||||
Goodwill arising from the acquisition of the company by issuing shares | $ | | $ | — | $ | — | |||
Lease liabilities arising from obtaining right-of-use assets | $ | | $ | — | $ | — | |||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-5
BGM GROUP LTD AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Qilian International Holding Group Limited (“Qilian International”, or “the Company”) is a Cayman Islands exempted company incorporated on February 7, 2019 as a holding company to develop business opportunities in the People’s Republic of China (“PRC” or “China”).
On October 18, 2024, shareholders approved the change of our company name to BGM Group Ltd at an extraordinary meeting of shareholders. Effective on October 30, 2024, the Company changed our name to “BGM Group Ltd.”
BGM Group Ltd has a strategic focus on the technology fields of AI application, intelligent robots, algorithmic computing power, cloud computing, and biopharmaceuticals.
On November 27, 2024, BGM Group Ltd (the “Company”), entered into a transaction agreement (the “Transaction Agreement”) with CISG Holdings Ltd, a company incorporated under the laws of the British Virgin Islands and wholly owned by AIX Inc. (NASDAQ: AIFU) (the “Seller”), Patriton Limited, a company incorporated under the laws of British Virgin Islands (the “Target Company”), GM Management Company Limited, a company incorporated under the laws of Hong Kong, DuXiaoBao Intelligent Technology (Shenzhen) Co., Ltd., RONS Intelligent Technology (Beijing) Co., Ltd. (“RONS Intelligent”), Shenzhen Xinbao Investment Management Co., Ltd. (“Shenzhen Xinbao”), Fanhua RONS Insurance Sales & Service Co., Ltd. (“RONS Sales”) and Shenzhen Baowang E-commerce Co., Ltd. (“Shenzhen Baowang”), all of which are companies with limited liability incorporated under the laws of the People’s Rublic of China.
Pursuant to the Transaction Agreement, BGM Group Ltd agreed to purchase from the Seller,
The issuance of
The following summarizes the identified assets acquired and liabilities assumed pursuant to the THE Company of AI Solutions and Insurance Business acquisition as of December 27, 2024:
Items |
| Amount | |
Assets |
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Cash and cash equivalent | $ | | |
Accounts receivable, net |
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Other current assets |
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Property and equipment, net |
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Operating lease right of use assets |
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Deferred tax assets |
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Liabilities |
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Insurance premium payables |
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Accounts payable |
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Taxes payable |
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Operating lease liabilities, current |
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Accrued expenses and other payables |
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Total net assets | $ | | |
F-6
In the field of biopharmaceuticals, the group’s biopharmaceutical division mainly produces oxytetracycline API, crude heparin sodium, and licorice preparations, which are widely supplied to the global animal husbandry, pharmaceutical, and drug retail markets. The group deeply integrates AI-assisted decision-making into every link of production and manufacturing, achieving supply chain optimization, process efficiency improvement, and market trend prediction. This provides scientific decision-making basis for the management and offers high-quality products and precise services for consumers.
Qilian International (Hong Kong) Holdings Ltd (“Qilian HK”) is a wholly-owned subsidiary of Qilian International formed in accordance with the laws and regulations of Hong Kong on January 30, 2019.
Qilian International is a holding company whose only asset is
BGM (Hubei) Health Biological industry Co, LTD is a wholly-owned subsidiary of Qilian HK formed on September 12, 2024. BGM Brand Operation Management (Hubei) Co., Ltd. was founded on December 2, 2024, and is a wholly-owned subsidiary of BGM (Hubei) Health Biological Industry Co., Ltd.
Gansu QLS was established in August 2006 under the laws of the PRC with initial capital of approximately $
| Ownership as of | Ownership as of |
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September 30, | September 30, |
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2024 |
| 2024 | |||
Moshangfa (Gansu) Fertilizer Industry Co., Ltd (formerly Jiuquan Qiming Biotechnology Co., Ltd, “Moshangfa”) | | % | | % | |
Chengdu Qilianshan Biotechnology Co., Ltd (“Chengdu QLS”) |
| | % | | % |
Jiuquan Ahan Biotechnology Co., Ltd. (“Ahan”) |
| | % | | % |
Tibet Samen Trading Co., Ltd (“Samen”) (1) |
| — | % | — | % |
Tibet Cangmen Trading Co., Ltd (“Cangmen”) |
| | % | | % |
Rugao Tianlu Animal Products Co., Ltd (“Rugao”) |
| | % | | % |
Chongqing Shengfu Biological Technology Co., Ltd (“Chongqing”) | | % | | % |
(1) | Samen was dissolved in June 2023, the business of which continues via the operation of the Company’s other subsidiaries. |
On May 20, 2019, Qilian International, through its WFOE, Qilian Chengdu, entered into a series of agreements with Gansu QLS and its shareholders, including an Exclusive Services Agreement, Call Option Agreement, Shareholders’ Voting Rights Proxy and Equity Pledge Agreement, Powers of Attorney, and the Spousal Consents (collectively “VIE agreements”). These contractual arrangements oblige Qilian Chengdu to absorb a majority of the risk of loss from Gansu QLS’s activities and entitle Qilian Chengdu to receive a majority of their residual returns. In essence, Qilian Chengdu has gained certain level of control over Gansu QLS. In addition,
F-7
To optimize its corporate structure, Chengdu Trading 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 Trading”), a wholly-owned subsidiary of Qilian International (Hong Kong) Holdings Limited, entered into a certain exclusive service agreement with Gansu QLS, through which Hainan Trade obtained contractual control over Gansu QLS. The terms of these agreement are identical to the VIE agreement. The Service Termination Agreement and the new service agreement with Hainan Trading became effective on December 1, 2022.
Based on these contractual arrangements, Gansu QLS is considered as a VIE of Qilian Chengdu and Hainan Trading under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 810 (“ASC 810”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No.51”, because the equity investors in Gansu QLS do not have the characteristics of a controlling financial interest. In addition, Qilian Chengdu and Hainan Trading are the primary beneficiary of Gansu QLS, and, as such, Gansu QLS’s books and records are consolidated into those of WFOE. Risks in relation to the VIE structure are discussed under “Risks and Uncertainties” below.
As the above entities were under common control before and after the consummation of the VIE agreements, the restructuring was accounted for as a reorganization of entities under common control and the consolidation of Qilian International and its subsidiaries, the VIE and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements.
Qilian International, its subsidiaries, the VIE and VIE’s subsidiaries 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.
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 2024 Annual Report on Form 20-F. These interim results are not necessarily indicative of results for the full year.
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.
F-8
Restricted Cash
Restricted cash balance includes guarantee deposit required by the National Financial Regulatory Administration which replaces the China Banking and Insurance Regulatory Commission as the regulatory body since May 2023 in order to protect insurance premium appropriation by insurance agency which is restricted as to withdrawal for other than current operations. The balance was $
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 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, 2025 and September 30, 2024, bank acceptance notes receivable from customers were $
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 |
| |
Leasehold improvement |
| Lesser of useful life and lease term |
Machinery and equipment |
| |
Automobiles |
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Office and electric equipment |
|
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.
F-9
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, 2025 and September 30, 2024 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 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 |
| |
Software |
| |
License for drug manufacturing |
|
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, . 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, plant 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.
The right-of-use of asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and less any lease incentive received.
Lease liabilities are recognized based on the present value of the lease payments not yet paid, discounted using the average borrowing rate of the Company’s outstanding loans.
Lease term includes rent holidays and options to extend or terminate the lease when the Company is reasonably certain that the Company will exercise that option. The lease assets for operating leases consist of the amount of the measurement of the lease liabilities and any prepaid lease payments. Operating lease expense is recognized on a straight-line basis over the lease term by adding interest expense determined using the effective interest method to the amortization of the right-of-use assets. Interest expense is determined using the effective interest method. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
F-10
The Company reviews the impairment of its right-of-use assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of lease liabilities in any tested asset group and include the associated operating lease payments in the undiscounted future pre-tax cash flows.
Investment in Trading 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, 2025 and September 30, 2024, the investment consisted of
As of September 20, 2024, the Company has redeemed $
The Company agrees to redeem the remaining balance of the agreed redemption assets in the form of securities. The Fund Management shall deliver
Goodwill
Goodwill represents the excess of the purchase consideration over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from the acquired entity as a result of the Company’s acquisitions of interests in its subsidiaries. The Company assesses goodwill for impairment in accordance with ASC 350-20 (“ASC 350-20”), “Intangibles–Goodwill and Other: Goodwill”, which requires that goodwill to be tested for impairment at the reporting unit level at least annually and more frequently upon the occurrence of certain events, as defined by ASC 350-20.
F-11
Prior to the adoption of ASU 2017-04, “Simplifying the Test for Goodwill Impairment”, on January 1, 2022, the Company has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step test in accordance with ASC 350-20. If the Company believes, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, the two-step quantitative impairment test described above is required. Otherwise, no further testing is required. In the qualitative assessment, the Company considers primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations. In performing the two-step quantitative impairment test, the first step compares the carrying amount of the reporting unit to the fair value of the reporting unit based on either quoted market prices of the ordinary shares or estimated fair value using a combination of the income approach and the market approach. If the fair value of the reporting unit exceeds the carrying value of the reporting unit, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, then the Company must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. The fair value of the reporting unit is allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. If the carrying amount of the goodwill is greater than its implied fair value, the excess is recognized as an impairment loss.
In January 2017, the FASB issued Accounting Standards Update No. 2017-04(“ASU 2017-04”), “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value.
On and after January 1, 2025, the Company performed qualitative and quantitative assessment in accordance with ASU 2017-04, there was
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
Borrowings
Borrowings comprise short-term loans and long-term loans. Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds net of transaction costs and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.
F-12
Insurance premium payables
Insurance premium payables represent premium payments that have been received from insureds, but not yet remitted to the insurance carriers.
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
In the year ended September 30, 2023, the Company made
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
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, | |||||
2025 | 2024 | |||||
Gansu QLS |
| $ | |
| $ | |
Chengdu QLS and subsidiaries |
| |
| | ||
Zhongqiao |
| |
| | ||
Total | $ | | $ | | ||
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; |
F-13
| (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.
Diversified Pharma & Allied Portfolio, which includes oxytetracycline products, licorice products, TCMD, Heparin Products, Sausage Casings, and Organic fertilizer.AI solutions offer enterprises customized AI software services and solutions, leveraging advanced technologies to automate processes, analyze data, and enhance decision-making for competitive advantages.The insurance business markets life (term, whole, universal) and non-life (property, casualty, liability) insurance products to provide financial protection and risk management.
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, 2025 and September 30, 2024, the Company record contract liabilities of $
Refer to Note 13 for disaggregated revenue information.
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 2025, 2024 and 2023 were $
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.
F-14
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, 2025, 2024 and 2023, total selling, general and administrative, research and development expense were as follows:
For the six months ended | |||||||||
March 31, | |||||||||
2025 |
| 2024 |
| 2023 | |||||
Selling expense |
| $ | |
| $ | |
| $ | |
General and administrative expense |
| |
| |
| | |||
Research and development expense |
| |
| |
| | |||
Total | $ | | $ | | $ | | |||
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 $
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.
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, 2025 and September 30, 2024.
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. There were
F-15
The following table sets forth the computation of basic and diluted earnings (loss) per share for the six months ended March 31, 2025, 2024 and 2023:
For the six months ended March 31, |
| |||||||||
| 2025 |
| 2024* |
| 2023* |
| ||||
Numerator: | ||||||||||
Net income (loss) attributable to ordinary shareholders | $ | ( | $ | | $ | | ||||
Denominator: |
|
|
|
|
|
| ||||
Weighted-average number of ordinary shares outstanding – basic |
| |
| | * |
| | * | ||
Weighted-average number of ordinary shares outstanding – diluted |
| |
| | * |
| | * | ||
Earnings (loss) per share – basic | $ | ( | $ | | $ | | ||||
Earnings (loss) per share – diluted | $ | ( | $ | | $ | | ||||
*The shares and per share data are presented on a retroactive basis to reflect the Company’s Share Consolidation.
Stock Based Compensation
The Company’s stock based payment transactions with employees are measured based on the grant-date fair value of the instruments, with recognition of either a corresponding increase in equity or a liability, depending on whether the instruments granted satisfy the equity or liability classification criteria. The fair value of the award is recognized as compensation expense, net of estimated forfeitures, over the period during which an employee is required to provide service in exchange for the award on straight line basis, which is generally the vesting period.
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$ reporting. The following table outlines the currency exchange rates that were used in creating the condensed consolidated financial statements in this report:
| March 31, 2025 |
| September 30, 2024 | |
Year-end spot rate |
|
| ||
Average rate |
|
|
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.
F-16
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, 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
The Company agrees to redeem the remaining balance of the agreed redemption assets in the form of securities. The Fund Management shall deliver
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 September 30, 2024 and March 31, 2025, respectively.
The Company noted
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, 2025, 2024 and 2023:
| As of |
| As of |
| As of | ||||
March 31, | March 31, | March 31, | |||||||
2025 | 2024 | 2023 | |||||||
Beginning balance | $ | | $ | | | ||||
Change in fair value |
| ( |
| | | ||||
Ending balance | $ | | $ | | | ||||
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 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.
F-17
As of March 31, 2025 and September 30, 2024, $
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, 2025,
For the six months ended March 31, 2024,
For the six months ended March 31, 2023,
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, 2025 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, 2025 | September 30, 2024 | |||||
Trade accounts receivable | $ | | $ | | ||
Less: allowances for credit losses |
| ( |
| ( | ||
Accounts receivable, net | $ | | $ | | ||
The change of the allowance for credit losses are as follow:
| As of |
| As of | |||
| March 31, 2025 |
| September 30, 2024 | |||
Beginning balance | $ | | $ | | ||
Addition |
| |
| | ||
Exchange rate difference |
| ( |
| | ||
Ending balance | $ | | $ | | ||
F-18
NOTE 4 – INVENTORIES, NET
Inventories consisted of the following:
| As of |
| As of | |||
March 31, 2025 | September 30, 2024 | |||||
Raw materials | $ | | $ | | ||
Work-in-progress | | | ||||
Finished goods |
| | | |||
Inventory provision |
| ( | ( | |||
Total inventory | $ | | $ | | ||
For the six months ended March 31, 2025, 2024 and 2023, the inventory provision expenses (reversal) were $(
The change of inventories provision are as follow:
As of | As of | |||||
| March 31, 2025 |
| September 30, 2024 | |||
Beginning balance | $ | | $ | | ||
Addition |
| ( |
| ( | ||
Exchange rate difference |
| ( |
| | ||
Ending balance | $ | | $ | | ||
NOTE 5 – OTHER CURRENT ASSETS
Other current assets consisted of the following:
| As of |
| As of | |||
March 31, 2025 | September 30, 2024 | |||||
Other receivables | $ | | $ | | ||
Receivable from third party |
| |
| — | ||
Input VAT | | | ||||
Total other current assets | $ | | $ | | ||
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
| As of |
| As of | |||
March 31, 2025 | September 30, 2024 | |||||
Property and Buildings | $ | | $ | | ||
Machinery and equipment |
| |
| | ||
Automobiles |
| |
| | ||
Office and electric equipment |
| |
| | ||
Subtotal |
| |
| | ||
Less: accumulated depreciation |
| ( |
| ( | ||
Property and equipment, net | $ | | $ | | ||
Depreciation expense was $
As of March 31, 2025 and September 30, 2024, Qilian Chengdu made advance payments for property and buildings acquisition for $
F-19
NOTE 7 – INTANGIBLE ASSETS, NET
Intangible assets, net consisted of the following:
| As of |
| As of | |||
March 31, 2025 | September 30, 2024 | |||||
Land use rights | $ | | $ | | ||
Software |
| |
| | ||
License for drug manufacturing |
| |
| | ||
Total |
| |
| | ||
Less: accumulated amortization |
| ( |
| ( | ||
Intangible assets, net | $ | | $ | | ||
Amortization expense was $
Estimated future amortization expense for intangible assets is as follows:
| Amortization | ||
Year ending September 30, | expense | ||
2025 | $ | | |
2026 |
| | |
2027 | | ||
2028 | | ||
2029 | | ||
Thereafter |
| | |
$ | | ||
NOTE 8 – LONG-TERM INVESTMENT
In July 2024, Qilian International acquired
Equity method investment consisted of the following:
| As of |
| As of | |||
March 31, 2025 | September 30, 2024 | |||||
Equity method investment: |
|
|
|
| ||
Cost of equity method investment |
| |
| | ||
Share of results of associates |
| ( |
| ( | ||
Loss on disposal of Long term investment | — | ( | ||||
Profit from equity method investment | — | | ||||
Dividend Distribution received |
| — |
| ( | ||
Investment disposed | — | ( | ||||
Exchange rate difference | | ( | ||||
Total long-term investment | $ | | $ | | ||
The change of share of results of associates are as follow:
| As of |
| As of | |||
March 31, 2025 | September 30, 2024 | |||||
Beginning balance | $ | | $ | — | ||
Addition |
| |
| | ||
Ending balance | $ | | $ | | ||
F-20
NOTE 9 – BANK LOANS
In November 2024, Gansu QLS entered into a loan agreement with the Postal Savings Bank of China for a principal amount of RMB
In March 2025, Gansu QLS entered into a loan agreement with the Agricultural Bank of China for an amount of RMB
In January 2025, Chongqing entered into a loan agreement with Chongqing Rural Commercial Bank for an amount of RMB
In March 2025, Chongqing signed another loan agreement with Chongqing Rural Commercial Bank for RMB
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
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
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 RMB
F-21
RMB
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, 2025 was
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, 2025, 2024 and 2023, the VIE and VIE’s subsidiaries made sales to affiliated companies in the amount of $
F-22
NOTE 12 – LEASE
As of September 30, 2024, the VIE and VIE’s subsidiaries have
| As of |
| As of |
| |||
March 31, | September 30, |
| |||||
2025 | 2024 |
| |||||
Operating Lease Assets: |
|
| |||||
Operating Lease right of use asset | $ | | $ | — | |||
Total operating lease assets |
| |
| — | |||
Operating lease obligations: |
|
|
| ||||
Current operating lease liabilities |
| |
| — | |||
Non-current operating lease liabilities |
| |
| — | |||
Total Lease liabilities | $ | | $ | — | |||
| |||||||
Remaining Lease Term Operating Lease |
| |
| — | |||
Discount rate |
| | % |
| — | % | |
Lease liability maturities as of September 30, are as follows:
| Operating, | ||
| lease | ||
2025 |
| | |
2026 |
| | |
Total minimum lease payments | $ | | |
Less: Imputed interest |
| ( | |
Total | $ | | |
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, AI solutions and insurance business. Currently
For the six months ended March 31, 2025 | ||||||||||||
Diversified | ||||||||||||
Pharmaceutical | ||||||||||||
and Allied | Insurance | |||||||||||
| Products* |
| AI Solutions |
| Business |
| Total | |||||
Revenue |
| $ | |
| $ | |
| $ | |
| $ | |
Cost of revenue |
| |
| |
| |
| | ||||
Gross profit | $ | | $ | | $ | | $ | | ||||
Depreciation and amortization | $ | | $ | | $ | | $ | | ||||
Capital expenditures | $ | | $ | | $ | — | $ | | ||||
* | Due to the acquisition of THE Company, the revenue has been reclassified into three categories. Among them, diversified pharmaceutical and allied products includes the former oxytetracycline & licorice products and TCMD, fertilizer, and heparin products and sausage casing. |
F-23
For the six months ended March 31, 2024 | ||||||||||||
Oxytetracycline | ||||||||||||
& Licorice | Heparin | |||||||||||
products and | products and | |||||||||||
| TCMD |
| Fertilizer |
| Sausage casing |
| Total | |||||
Revenue |
| $ | | $ | | $ | | $ | | |||
Cost of revenue |
| | | | | |||||||
Gross profit | $ | | $ | | $ | | $ | | ||||
Depreciation and amortization | $ | | $ | | $ | | $ | | ||||
Capital expenditures | $ | | $ | | $ | | $ | | ||||
For six months ended March 31, 2023 | ||||||||||||
Oxytetracycline | ||||||||||||
& Licorice | Heparin | |||||||||||
products and | products and | |||||||||||
| TCMD |
| Fertilizer |
| Sausage casing |
| Total | |||||
Revenue |
| $ | | $ | | $ | | $ | | |||
Cost of revenue |
| | | | | |||||||
Gross profit | $ | | $ | | $ | | $ | | ||||
Depreciation and amortization | $ | | $ | | $ | | $ | | ||||
Capital expenditures | $ | | $ | | $ | | $ | | ||||
| March 31, |
| September 30, | |||
2025 | 2024 | |||||
Total Assets |
|
|
|
| ||
Diversified Pharmaceutical and Allied Products | $ | | $ | | ||
AI Solutions | $ | | $ | — | ||
Insurance Business | $ | | $ | — | ||
Total | $ | | $ | | ||
NOTE 14 – THE ACQUISITION OF THE Company of AI Solutions and Insurance Business
On November 27, 2024, BGM Group Ltd (the “Company”), entered into a transaction agreement (the “Transaction Agreement”) with CISG Holdings Ltd, a company incorporated under the laws of the British Virgin Islands and wholly owned by AIX Inc. (NASDAQ: AIFU) (the “Seller”), Patriton Limited, a company incorporated under the laws of British Virgin Islands (the “Target Company”), GM Management Company Limited, a company incorporated under the laws of Hong Kong, DuXiaoBao Intelligent Technology (Shenzhen) Co., Ltd., RONS Intelligent Technology (Beijing) Co., Ltd. (“RONS Intelligent”), Shenzhen Xinbao Investment Management Co., Ltd. (“Shenzhen Xinbao”), Fanhua RONS Insurance Sales & Service Co., Ltd. (“RONS Sales”) and Shenzhen Baowang E-commerce Co., Ltd. (“Shenzhen Baowang”), all of which are companies with limited liability incorporated under the laws of the People’s Rublic of China.
Pursuant to the Transaction Agreement, BGM Group Ltd agreed to purchase from the Seller,
The issuance of
F-24
The following summarizes the identified assets acquired and liabilities assumed pursuant to the THE Company of AI Solutions and Insurance Business acquisition as of December 27, 2024:
Items |
| Amount | |
Assets |
|
| |
Cash and cash equivalent | $ | | |
Accounts receivable, net |
| | |
Other current assets |
| | |
Property and equipment, net |
| | |
Operating lease right of use assets |
| | |
Deferred tax assets |
| | |
Liabilities |
|
| |
Insurance premium payables |
| | |
Accounts payable |
| | |
Taxes payable |
| | |
Operating lease liabilities, current |
| | |
Accrued expenses and other payables |
| | |
Total net assets | $ | | |
The fair value of all assets acquired and liabilities assumed was the estimated book value of THE Company of AI Solutions and Insurance Business. Goodwill represents the excess of the fair value of purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of THE Company of AI Solutions and Insurance Business at the acquisition date.
The determination of the share value was determined according to the closing price of the Company’s Common Stock on the day the shares were issued.
The value of the shares issued on December 27, 2024 |
| | |
Total consideration | $ | | |
Net assets |
| | |
Goodwill |
| |
NOTE 15 – 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 March 31, 2025, the Company has commitment to pay $
Non-cancellable operating leases within one year
The following table sets forth our contractual obligations as of March 31, 2025:
| Total |
| 2025 |
| 2026 | ||||
Operating lease commitments under lease agreements | $ | | $ | | $ | | |||
NOTE 16 – SUBSEQUENT EVENTS
On March 18, 2025, BGM Group Ltd (the “Company”), entered into a transaction agreement (the “Transaction Agreement”) with YX Management Company Limited, a company duly incorporated under the laws of Hong Kong (the “Target Company”), Martline Limited, Cymatrix Limited, Innovo Limited and Techvovo Limited, the existing shareholders holding
F-25
Pursuant to the Transaction Agreement, the Company agreed to purchase from the Sellers,
The issuance of
On April 21, 2025, BGM Group Ltd (the “Company”), entered into a transaction agreement (the “Transaction Agreement”) with Wonder Dragon Global Limited, a business company duly incorporated under the laws of the British Virgin Islands (the “Target Company”), Yang Lou Dong International Limited Management Company Limited, a company duly incorporated under the laws of Hong Kong and a wholly owned subsidiary of the Target Company (“Yang Lou Dong”), and Success Myth Limited, the existing sole shareholder holding
The issuance of
On May 2, 2025, BGM Group Ltd (the “Company”) entered into a transaction agreement (the “Transaction Agreement”) with HM Management Company Limited (“HM Management”), a company duly incorporated under the laws of Hong Kong (the “Target Company”), Catch Group Limited, a company duly incorporated under the laws of the British Virgin Islands (“Catch”), Expansion Group Limited, a company duly incorporated under the laws of the British Virgin Islands (“Expansion”, collectively referred to as the “Sellers” with Catch), HM Consultant Management (Shenzhen) Co., Limited, a company duly incorporated under the PRC laws, Beijing Shuda Technology Co., Ltd., a company duly incorporated under the PRC laws (“Beijing Shuda”) and New Media Star Technology (Shenzhen) Co., Ltd., a company duly incorporated under the PRC laws (“New Media Star”), with Beijing Shuda and New Media Star as the wholly-owned subsidiaries of the Target Company.Pursuant to the Transaction Agreement, the Company agreed to purchase from the Sellers,
Pursuant to the Transaction Agreement, the Company agreed to purchase from the Sellers,
F-26
On May 27, 2025, BGM Group Ltd (the “Company”) entered into a transaction agreement (the “Transaction Agreement”) with Xingdao AI Robot Co., Limited (“Xingdao”), a company duly incorporated under the laws of Hong Kong (the “Target Company”), Canoe Group Ltd., a business company duly incorporated under the laws of British Virgin Islands (“Canoe”), which holds
Pursuant to the Transaction Agreement, the Company agreed to purchase from the Sellers,
The Company’s management reviewed all material events that have occurred after the balance sheet date through July 24, 2025 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-27