Kun Peng International Ltd 10-Q for FY2025 Q2
Kun Peng International Ltd. (KPEA)
About this 10-Q
Kun Peng International Ltd filed this 10-Q on May 15, 2025, covering the quarter ended March 31, 2025 (FY2025 Q2).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $609.29K
- up 67.2% from $364.51K a year earlier
- Net loss
- $192.88K
- compared with a net loss of $577K a year earlier
- Diluted EPS
- $0.00
- compared with -$0.00 a year earlier
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
Mark One
For the quarterly period ended
For the transition period from ______ to _______
Commission File No.
(Exact name of registrant as specified in its charter)
| EIN | ||
| (State or Other Jurisdiction of | (IRS Employer | |
| Incorporation or Organization) | Identification Number) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes ☐
No
As of May 15, 2025, the registrant had shares of common stock issued and outstanding.
FORM 10-Q
KUN PENG INTERNATIONAL LTD.
INDEX
| 1 |
PART I
Item 1. Financial Statements.
KUN PENG INTERNATIONAL LTD
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In U.S. Dollars, except share data or otherwise stated)
| March 31, | September 30, | |||||||||
| Note | 2025 | 2024 | ||||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | $ | $ | ||||||||
| Advance and prepayments | 4 | |||||||||
| Other receivables | 5 | |||||||||
| Inventory | 6 | |||||||||
| Amount due from related parties | 10 | |||||||||
| Other receivables | 10 | |||||||||
| Total current assets | ||||||||||
| Noncurrent assets | ||||||||||
| Property and equipment, net | 7 | |||||||||
| Intangible assets, net | 8 | |||||||||
| Security deposits | ||||||||||
| Operating lease right-of-use assets | 14 | |||||||||
| Finance lease right-of-use assets | 14 | |||||||||
| Investment in associate held for sale | ||||||||||
| Others | ||||||||||
| Total noncurrent assets | ||||||||||
| Total assets | $ | $ | ||||||||
| Liabilities | ||||||||||
| Current liabilities | ||||||||||
| Short-term borrowing | 15 | |||||||||
| Trade and other payables | ||||||||||
| Deferred revenue | 9 | |||||||||
| Payroll payable | ||||||||||
| Tax payable | ||||||||||
| Amounts due to related parties | 10 | |||||||||
| Operating lease obligations, current portion | 14 | |||||||||
| Finance lease obligations, current portion | 14 | |||||||||
| Total current liabilities | ||||||||||
| Noncurrent liabilities | ||||||||||
| Operating lease obligations, net of current portion | 14 | |||||||||
| Finance lease obligations, net of current portion | ||||||||||
| Total noncurrent liabilities | ||||||||||
| Total liabilities | $ | $ | ||||||||
| Commitment and contingencies | ||||||||||
| Equity | ||||||||||
| Preferred stock, $ par value, shares authorized; shares issued and outstanding as of March 31, 2025 and September 30, 2024 | 11 | |||||||||
| Common stock, $ par value, shares authorized; shares issued and outstanding as of March 31, 2025 and September 30, 2024 | 11 | |||||||||
| Additional paid-in capital | 11 | |||||||||
| Accumulated deficits | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive income | ||||||||||
| Total stockholders’ equity | ( | ) | ( | ) | ||||||
| Non-controlling interests | ( | ) | ||||||||
| Total equity | ( | ) | ( | ) | ||||||
| Total liabilities and equity | $ | $ | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 2 |
KUN PENG INTERNATIONAL LTD
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(UNAUDITED)
(In U.S. Dollars, except share data or otherwise stated)
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||||
| Note | 2025 | 2024 | 2025 | 2024 | ||||||||||||||
| Revenue, net | $ | $ | $ | $ | ||||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Gross profit | ||||||||||||||||||
| Operating expenses | ||||||||||||||||||
| General and administrative expenses | ||||||||||||||||||
| Selling expense | ||||||||||||||||||
| Total operating expenses | ||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expenses): | ||||||||||||||||||
| Interest income | ||||||||||||||||||
| Other (expenses) income | ( | ) | ( | ) | ||||||||||||||
| Share of profit from investment in associate | ( | ) | ( | ) | ||||||||||||||
| Gain from investment | ||||||||||||||||||
| Total other income (expenses), net | ( | ) | ||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax expense | 11 | |||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: Net loss attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to Kun Peng International Ltd | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||||
| Comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: Comprehensive loss attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive loss attributable to Kun Peng International Ltd | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net loss per share attributable to common stockholders | ||||||||||||||||||
| Basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||||
| Weighted average shares used to compute net loss per share attributable to common stockholders | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 3 |
KUN PENG INTERNATIONAL LTD
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
(In U.S. Dollars, except share data or otherwise stated)
| Shares | Amount | capital | Deficits | income | equity | interest | equity | |||||||||||||||||||||||||
| Common stock | Additional paid-in | Accumulated | Accumulated other comprehensive | Total stockholders’ | Non- controlling | Total | ||||||||||||||||||||||||||
| Shares | Amount | capital | Deficits | income | equity | interest | equity | |||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Capital contribution | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net loss attributable to common stockholders | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Disposal of a subsidiary | - | |||||||||||||||||||||||||||||||
| Net loss attributable to noncontrolling interest | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||
| Common stock | Additional paid-in | Accumulated | Accumulated other comprehensive | Total stockholders’ | Non- controlling | Total | ||||||||||||||||||||||||||
| Shares | Amount | capital | deficits | income | equity | interest | equity | |||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Capital contribution | - | |||||||||||||||||||||||||||||||
| Net loss attributable to common stockholders | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net loss attributable to noncontrolling interest | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, March 31,2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||
| $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 4 |
KUN PENG INTERNATIONAL LTD
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In U.S. Dollars, except share data or otherwise stated)
Six Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right-of-use assets | ||||||||
| Share of profit from investment in associate | ||||||||
| Gain on investment of a subsidiary | ( | ) | ||||||
| Changes in operating assets and liabilities | ||||||||
| Advance and prepayments | ( | ) | ||||||
| Trade receivables | ( | |||||||
| Other receivables | ( | ) | ||||||
| Inventory | ||||||||
| Trade payables | ||||||||
| Other payables and accrual | ||||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Payroll payable | ||||||||
| Amounts due to related parties | ( | ) | ||||||
| Tax payable | ( | ) | ( | ) | ||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Acquisition of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from bank borrowings | ||||||||
| Payment of finance lease liabilities | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning balance | ||||||||
| Cash and cash equivalents, ending balance | $ | $ | ||||||
| Supplementary cash flows information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 5 |
KUN PENG INTERNATIONAL LTD
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Kun Peng International Limited (“the Company,” “KPIL,” “KPEA,” “we,” “us,” “our”), a Nevada corporation (formerly known as CX Network Group, Inc.), through its subsidiaries and VIE, is currently engaged in the sale of health care and health-related household products through its online platforms, King Eagle Mall and Kun Zhi Jian.
SCHEDULE OF COMPANY INFORMATION AND ORGANIZATIONAL ACTIVITIES
| Name | Background | Ownership | Registered capital / Authorized shares |
Principal activities | ||||
| Kun Peng International Limited |
● A U.S. company ● Incorporated on |
Authorized shares: ● Common stock: with par value $ per share ● shares issued and outstanding as of December 31, 2024 Preferred stock: ● with par value $ per share ● shares issued and outstanding as of December 31, 2024 |
||||||
| Kun Peng International Holding Limited |
● A BVI company ● Incorporated on |
Paid capital: ordinary shares at par value of $ per share | ||||||
| Kunpeng (China) Industrial Development Company Limited |
● A Hong Kong company ● Incorporated on ● Deregistration from Hong Kong Inland Revenue Department and Hong Kong Company Registry, approved on February 2, 2024 |
Paid share capital: ordinary shares at $ (HKD) | ||||||
| Kun Peng (Hong Kong) Industrial Development Limited |
● A Hong Kong company ● Incorporated on |
Paid share capital: ordinary share at $ (HK$) |
| 6 |
|
Kun Peng Tian Yu Health Technology (Tianjin) Co., Ltd.
|
● a limited liability company incorporated in
the People’s Republic of China and a wholly foreign owned enterprise (“WFOE”) since ● Incorporated on August 10, 2021 |
|
Registered capital of RMB |
|||||
| King Eagle (China) Co., Ltd |
● a wholly foreign owned enterprise (“WFOE”) until March 3, 2023 and a limited liability company incorporated in the People’s Republic of China ● Incorporated on |
Wholly owned by Kun Peng (China) Industrial Development Company Limited until March 3, 2023
Starting March 3, 2023, |
Registered capital: approximately $ |
|||||
|
King Eagle (Tianjin) Technology Co., Ltd.
|
● a limited liability company incorporated in the People’s Republic of China ● Incorporated on ● Became a variable interest entity (VIE) of King Eagle (China) Co., Ltd on May 15, 2021 |
Owned by multiple individuals: Chengyuan Li (approximately |
Registered capital of approximately $
Paid-in capital approximately $ |
|||||
| King Eagle (Beijing) Technology Co., Ltd |
● a limited liability company incorporated in the People’s Republic of China ● Incorporated on |
Registered capital of $ Paid-in capital approximately $ |
| 7 |
| King Eagle (Huai’an) Health Management Co., Ltd. |
● a limited liability company incorporated in the People’s Republic of China ● Incorporated on |
|
Registered capital of $ Paid-in capital approximately $ |
|||||
| Kun Zhi Jian (Huai’an) Technology Co., Ltd. |
● a limited liability company incorporated in the People’s Republic of China ● Incorporated on |
Registered capital of $ |
||||||
| Kun Zhi Jian (Shandong) Health Management Co., Ltd |
● a limited liability company incorporated in the People’s Republic of China ● Incorporated on |
Registered capital of $ |
||||||
| Chengdu Wenjiang Pengrun Internet Healthcare Co., Ltd. |
● a limited liability company incorporated in the People’s Republic of China ● Incorporated on |
Registered capital of $ |
||||||
| Kun Pin Hui (Shandong) Trading Co., Ltd |
●a limited liability company incorporated in the People’s Republic of China ● Incorporated on ● Acquired on April 17, 2024 |
Registered capital of $ |
||||||
| King Eagle (Hangzhou) Health Technology Co., Ltd | ●a limited liability company incorporated in the People’s Republic of China ● Incorporated on July 18, 2024 |
40% owned by King Eagle (Tianjin) Technology Co., Ltd. | Registered capital of $0.1 million (RMB 1 million) | Commenced operations in August 2024 |
Authorized Shares and Name Change
Effective as of September 9, 2021,
the Company’s Articles of Incorporation were amended to change the name of the Company from CX Network Group, Inc. to Kun Peng International
Limited. (“KPIL”) and to increase the Company’s authorized capital to
Effective October 12, 2022, we increased our authorized common stock from shares, par value $, to shares, par value $, and on October 18, 2022, we effected a 10:1 forward stock split after which we have shares of common stock issued and outstanding.
| 8 |
On November 8, 2022, the Company’s trading symbol was changed to “KPEA.”
On November 11, 2022, the Company received an electronic notice that OTC Markets had approved its application for uplisting from OTC Pink to the OTCQB Venture Market (OTCQB). The Company’s securities commenced trading on the OTCQB at the market open on November 14, 2022. The Company’s shares trade on the OTCQB under the current ticker symbol, “KPEA.”
Kun Peng International Holding Limited
Kun Peng International Holding Limited (“KP International Holding”) was incorporated in the British Virgin Islands on April 20, 2021. On May 3, 2021, KP International Holding purchased all of the issued and outstanding equity securities of Kun Peng (China) Industrial Development Company Limited (“KP (China)”), which was incorporated in Hong Kong on August 11, 2017, at a cash consideration of approximately $ (HK$). After the ownership transfer, KP International Holding became the sole shareholder of KP (China). KP International Holding is a holding company.
Kun Peng (China) Industrial Development Company Limited
Kun Peng (China) Industrial Development
Company Limited (“KP (China)”) was incorporated as a limited liability company in Hong Kong under the name of Jing Jin Ji
Investment Group Co., Limited (“Jing Jin Ji”) on August 11, 2017. The share capital of KP (China) is ordinary shares
at $
On August 24, 2023, we filed an application with the Companies Registry of Hong Kong for deregistration and dissolution of KP (China). The application for deregistration was approved on February 2, 2024 by the Hong Kong Company Registry.
Kun Peng (Hong Kong) Industrial Development Limited
Kun Peng (Hong Kong) Industrial Development Limited (“KP (Hong Kong)”) was incorporated as a limited liability company in Hong Kong on June 21, 2021. It is a holding company and is wholly owned by Kun Peng International Holding Limited. The share capital of this entity upon formation is $ (HK$).
King Eagle (China) Co., Ltd.
King Eagle (China) Co., Ltd. (“King
Eagle (China)”) was incorporated as a limited liability company in Beijing Economic Technological Development Zone in the People’s
Republic of China (“the PRC”) on March 20, 2019 with a registered capital of approximately $
On March 26, 2021, Guoxin Ruilian
Group Co., Ltd entered into equity transfer agreements with KP (China) and Guoxin Zhengye. Both Guoxin Ruilian Group Co., Ltd and Guoxin
Zhengye are wholly owned by a common shareholder, Guoxin United Holdings Group Co., Ltd. Under the agreements, Guoxin Ruilian Group Co.,
Ltd transferred an
| 9 |
On November 1, 2022, KP (China)
entered into ownership transfer agreements with Kun Peng (Hong Kong) Industrial Development Limited and Kun Peng Tian Yu Health Technology
Co., Ltd. The agreements provided that KP (China) would transfer
As discussed below, King Eagle (China) has entered into agreements (the “VIE Agreements”) with King Eagle (Tianjin) Technology Co., Ltd. and its shareholders through which King Eagle (China) controls and receives the economic benefits of King Eagle (Tianjin) Technology Co., Ltd.’s business operations.
King Eagle (Tianjin) Technology Co., Ltd.
King Eagle (Tianjin) Technology
Co., Ltd. (“King Eagle (Tianjin)”) was incorporated as a limited liability company in Tianjin Pilot Free Trade Zone in the
People’s Republic of China on September 2, 2020, with a registered capital of approximately $
Some of the business engaged in by King Eagle (Tianjin) is restricted or prohibited for foreign investment under PRC regulations. Therefore, King Eagle (China) has entered into VIE Agreements with King Eagle (Tianjin) and its shareholders. We do not own any equity interests in King Eagle (Tianjin), but control and receive the economic benefits of its business operations through the VIE Agreements. The VIE Agreements enable us to provide King Eagle (Tianjin) with consulting services on an exclusive basis in exchange for all of its annual profits, if any. In addition, we are able to appoint its senior executives and approve all matters requiring approval of its shareholders. The VIE Agreements are comprised of a Consulting Service Agreement, Business Operation Agreement, Proxy Agreement, Equity Disposal Agreement, and Equity Pledge Agreement.
Under current Chinese laws and regulations, the Company believes that the VIE Agreements are not subject to any government approval. The shareholders of King Eagle (Tianjin) were required to register with SAFE when they established offshore vehicles to hold KP International; such SAFE registration was effected on May 14, 2021. These shareholders of King Eagle (Tianjin) were required to register their equity pledge arrangement as required under the Equity Pledge Agreement with King Eagle (China). The binding rights over the VIE’s subsidiaries in the contractual arrangements between King Eagle (China) and King Eagle (Tianjin) are implicit and indirect and the company laws and regulations in the PRC governing the business operations of the VIE’s subsidiaries are uncertain. The Company faces uncertainty with respect to future actions by the PRC government that could significantly affect King Eagle (Tianjin)’s financial performance and the enforceability of the VIE Agreements.
Kun Peng Tian Yu Health Technology (Tianjin) Co., Ltd.
Kun Peng Tian Yu Health Technology
Co., Ltd. (“KP Tian Yu”) was incorporated as a limited liability company in Tianjin Pilot Free Trade Zone in the People’s
Republic of China on August 10, 2021 with a registered capital of approximately $
| 10 |
King Eagle (Beijing) Technology Co., Ltd
King Eagle (Beijing) Technology
Co., Ltd (“King Eagle (Beijing)”) was incorporated as a limited liability company in Beijing in the People’s Republic
of China on December 1, 2022 with a registered capital of $
King Eagle (Huai’an) Health Management Co., Ltd.
King Eagle (Huai’an) Health
Management Co., Ltd. (“King Eagle (Huai’an)”) was established on September 19, 2023 under the laws of the People’s
Republic of China. with a registered capital of approximately $
Kun Zhi Jian (Huai’an) Technology Co., Ltd.
Kun Zhi Jian (Huai’an) Technology
Co., Ltd. (“Kun Zhi Jian (Huai’an)”) was established on October 26, 2023 under the laws of the People’s
Republic of China. with a registered capital of approximately $
Kun Zhi Jian (Shandong) Health Management Co., Ltd
Kun Zhi Jian (Shandong) Health
Management Co., Ltd (“Kun Zhi Jian (Shangdong)”) was established on January 30, 2024 under the laws of the People’s
Republic of China. with a registered capital of approximately $
King Eagle (Hangzhou) Health Technology Co., Ltd
King Eagle (Hangzhou) Health Technology
Co., Ltd (“King Eagle (Hangzhou)”) was established on July 18, 2024 under the laws of the People’s Republic of China
with a registered capital of approximately $
On August 8, 2024, King Eagle
(Hangzhou) entered into certain agreements with Yunnan Linpingkang Pharmaceutical Co., Ltd, pursuant to which it purchased
In January 2025, King Eagle (Tianjin)
entered into an agreement to transfer
Kun Pin Hui (Shandong) Trading Co., Ltd.
Kun Pin Hui (Shandong) Trading
Co., Ltd (“Kun Pin Hui (Shandong)”) was established on November 23, 2023 under the laws of the People’s Republic of
China with a registered capital of approximately $
| 11 |
Chengdu Wenjiang Pengrun Internet Healthcare Co., Ltd
Chengdu Wenjiang Pengrun Internet
Healthcare Co., Ltd (“Chengdu Wenjiang”) was established on February 1, 2024 under the laws of the People’s Republic
of China with a registered capital of approximately $
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applicable to quarterly financial information and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosure required by accounting principles generally accepted in the United States of America for complete financial statements. Quarterly results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the quarterly periods have been included.
These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended September 30, 2024 included in the Form 10-K filed with the SEC on January 14, 2025.
The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. This basis of accounting involves the application of accrual accounting and, consequently, revenues and gains are recognized when earned and expenses and losses are recognized when incurred. The condensed consolidated financial statements are expressed in U.S. dollars.
Principles of Consolidation
The condensed consolidated financial statements include the financial statements of the Company, its subsidiaries and its variable interest entity (“VIE”). All significant intercompany transactions and balances within the Company have been eliminated upon consolidation.
Use of Estimates and Assumptions
The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that impact the presented amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the presented amounts of revenues and expenses during the period. Actual results may differ from those estimates. Significant estimates during the quarters ended March 31, 2025 and 2024 include the collectability of receivables, the useful lives of long-lived assets and intangibles, assumptions used in assessing impairment of long-lived assets, valuation of accruals for expenses, and tax due.
| 12 |
Going Concern
The accompanying condensed consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which
contemplate continuation of the Company as a going concern. The going-concern basis assumes that assets are realized and liabilities are
extinguished in the ordinary course of business at amounts disclosed on the financial statements. The Company’s ability to continue
as a going concern depends on the liquidation of its current assets and business developments. In assessing the Company’s liquidity,
the Company monitors and analyzes its cash and cash equivalents and its operating and capital expenditure commitments. The Company’s
liquidity needs are to meet its working capital requirements, operating expenses, and capital expenditure obligations. For the quarter
ended March 31, 2025, the Company incurred cash outflows from operating activities of $
The Company continues to monitor its operations to help improve its financial liquidity. Options under consideration in the review process include, but are not limited to, increase of sales through the Company’s online business, reduction of operating costs, fund advance from the Company’s stockholders and directors, or financing through the issuance of shares and bank loans. The Company has been focusing on increasing its revenue through its online platform and trimming its operating costs. For example, it explored additional revenue streams and reduced its service agent service fee. In order to continue as a going concern for the next 12 months, the Company continues to explore additional revenue streams, leverage the health care expertise and technology with local health care service providers, promote and sell preventive health care dietary supplements and products, and offer health care equipment services at the Kun Zhi Jian Customer Service Center. However, the Company cannot provide any assurance that it will be able to increase revenue, that it will be able to successfully implement its business plan, or that financing will be available to it on commercially acceptable terms, if at all. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. The directors intend to continue to support the group by providing adequate financial assistance to enable the group to continue its business operations for the foreseeable future.
Basic income (loss) per share is computed by dividing net income (loss) attributable to the holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year. Diluted income (loss) per share is calculated by dividing net income (loss) attributable to the holders of ordinary shares as adjusted for the effect of dilutive ordinary share equivalents, if any, by the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. However, ordinary share equivalents are not included in the denominator of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded.
Foreign Currency Translation
The reporting currency of the Company is the U.S. Dollar. Our entity in the British Virgin Islands uses U.S. dollar. Our entities in the PRC and Hong Kong use the local currencies, Renminbi (RMB) and the Hong Kong Dollar (HKD), as their functional currencies as determined based on the criteria of ASC 830, “Foreign Currency Translation.”
Assets and liabilities are translated at the unified exchange rate as quoted by www.xe.com at the end of the period. Income and expense accounts are translated at the average translation rates and equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
Translation adjustments included
in accumulated other comprehensive gain amounted to $
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The following table shows the foreign exchange rates set forth in the H.10 statistical release of the Federal Reserve Board used for translation:
SCHEDULE OF FOREIGN EXCHANGE RATES
Hong Kong Dollar (HKD) | Chinese Renminbi (RMB) | |||||||
| As of March 31, 2025 (Closing Rate) | ||||||||
| United States dollar ($1) | ||||||||
| For the six months ended March 31, 2025 (Average Rate) | ||||||||
| United States dollar ($1) | ||||||||
Hong Kong Dollar (HKD) | Chinese Renminbi (RMB) | |||||||
| As of September 30, 2024 (Closing Rate) | ||||||||
| United States dollar ($1) | ||||||||
Hong Kong Dollar (HKD) | Chinese Renminbi (RMB) | |||||||
| For the six months ended March 31, 2024 (Average Rate) | ||||||||
| United States dollar ($1) | ||||||||
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and a certain amount of cash kept in electronic wallets, “e-wallets.”
We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. We maintain accounts with various financial institutions in the PRC, and also e-wallets. As of March 31, 2025 and 2024, cash balances held in PRC banks are uninsured. Monies that are held in e-wallets are deemed equivalent to cash, are highly liquid, and are relatively unsafe compared to cash in banks. We have not experienced any losses in bank accounts or e-wallets and believe that we are not exposed to significant risks with respect to our cash in bank accounts and that we are exposed to low risk with respect to our cash kept in e-wallets.
Inventory
Inventory consists of finished goods, which include wines, gel and essence for beauty, ointment for health, prepaid cards, and detection kits. Inventory is measured at the lower of cost or net realizable value on a first-in, first-out basis. When evidence exists that the net realizable value of inventory is lower than its cost, provisions shall be made to write inventory down and a loss shall be recognized in earnings in the period in which it occurs. That loss may be required, for example, due to damage, physical deterioration, obsolescence, changes in price levels, or other reasons. As of March 31, 2025, there was no inventory located at third-party warehouses.
Financial Instruments
The carrying amounts reported in the balance sheet for cash, other receivables, accrued liabilities, and other payables approximate fair value because of the immediate or short-term maturities of these financial instruments.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and impairment losses. Gains and losses on dispositions of property and equipment are included in operating income (loss). Major additions, renewals, and improvements are capitalized, while maintenance and repairs are recognized as expense as incurred.
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Depreciation is provided over the estimated useful life of each class of depreciable assets and is computed using the straight-line method over the useful lives of the assets as follows:
SCHEDULE OF PROPERTY PLANT AND EQUIPMENT USEFUL LIVES
| Classification | Estimated useful life | |
| Leasehold improvements | ||
| Office equipment | ||
| Computer equipment | ||
| Computer software |
Intangible Assets
Intangible assets represent the licensing cost for trademark registration. For intangible assets with indefinite lives, the Company evaluates intangible assets for impairment at least annually and more often whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. Intangible assets with definite lives are amortized over their estimated useful lives, and are reviewed annually for impairment. The Company has not recorded impairment of intangible assets as of March 31, 2025 and 2024.
Impairment of Long-lived Assets
Long-lived assets, including buildings and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. We assess the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated discounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When we identify an impairment, we reduce the carrying amount of the asset to the estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. As of March 31, 2025 and 2024, management determined that there was no impairment.
Fair Value Measurements
The Company applies the provisions of ASC Subtopic 820-10, “Fair Value Measurements,” for fair value measurements of financial assets and financial liabilities and for fair value measurements of non-financial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
| ● | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. | |
| ● | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. |
The Company’s financial assets and liabilities include cash, receivables, accounts payable, and accrued expenses.
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Related Party Transactions
The Company follows the ASC 850-10, “Related Party Disclosures” for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825-10-15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented; and c) such other information deemed necessary to an understanding of the nature of the related party transactions.
Comprehensive Income (Loss)
Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity. Our other comprehensive loss for the quarters ended March 31, 2025 and 2024 was comprised of foreign currency translation adjustments.
Revenue Recognition
Revenue is comprised of sales of goods and represents the amount of consideration the Company is entitled to upon the transfer of goods. Pursuant to FASB ASU No. 2016-08, Revenue from Contracts with Customers (TOPIC 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), the Company recorded revenue on a gross basis, net of surcharges and value added tax (“VAT”) of gross sales. The Company recorded revenue on a gross basis because the Company is the primary obligor of the sales arrangements has latitude in establishing prices, has discretion in suppliers’ selection and assumes credit risks on receivables on gross sales from customers.
The Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”) using the full retrospective transition method. The Company’s adoption of ASU 2014-09 did not have a material impact on the amount and timing of revenue recognized in its condensed consolidated financial statements.
The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
● identify the contract with a customer;
● identify the performance obligations in the contract;
● determine the transaction price;
● allocate the transaction price to performance obligations in the contract; and
● recognize revenue as the performance obligation is satisfied.
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Consistent with the criteria of ASC 606 “Revenue from Contracts with Customers,” we recognize revenue when performance obligations are satisfied by transferring control of a promised good or service to a customer. For performance obligations that are satisfied at a point in time, we also consider the following indicators to assess whether control of a promised good or service is transferred to the customer: (i) right to payment, (ii) legal title, (iii) physical possession, (iv) significant risks and rewards of ownership, and (v) acceptance of the good or service. For performance obligations satisfied over time, we recognize revenue over time by measuring the progress toward complete satisfaction of a performance obligation.
Deferred Revenue
Deferred revenue results from transactions where the Company has received the payments from the customers but revenue recognition criteria under the five-step model of ASC Topic 606 have yet to be met. Once all revenue recognition criteria have been satisfied, the revenues will be recognized upon the transfer of risk and rewards to the customers in the consolidated statement of operations. We anticipated the majority of the revenue will be recognized in the fiscal year 2025. Management agreed that the amount received is non-refundable; however, this term is not bound by any agreement. Thus, the customers may have the rights to challenge and demand the advances to be refunded under relevant Commercial Laws or regulations.
Lease
Under ASC Topic 842, the Company determines if an arrangement is a lease at inception. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate based on the information available at the lease commencement date. The Company generally uses the base, non-cancelable lease term in calculating the right-of-use assets and lease liabilities.
The Company may recognize the lease payments in the condensed consolidated statements of operation on a straight-line basis over the lease terms and variable lease payments in the periods in which the obligations for those payments are incurred, if any. The lease payments under the lease arrangements are fixed.
The Company elected the package of practical expedients which allow the Company to carryforward its historical lease classification, its assessment on whether a contract is or contains a lease, and its initial direct costs for any lease that exists prior to adoption of the new standard.
The Company also elected to apply the short-term lease exception for lease arrangements with a lease term of 12 months or less at commencement. Lease terms used to compute the present value of lease payments do not include any option to extend, renew, or terminate the lease that the Company is not reasonably certain to exercise upon the lease inception. Accordingly, operating lease right-of-use assets and liabilities do not include leases with a lease term of 12 months or less.
Research and Development Expenses
Research and development (“R&D”) expenses are all costs associated with the original development and design of the product as well as any intellectual property (“IP”) generated during the development phase, including patents and copyrights. Research and development expenses are included in the overall operating expenses and reflected as a separate line item on the consolidated statement of operations.
We purchase the consumer preventive health food and health related household products sold on our platforms from our suppliers and we did not develop, design, or manufacture those products. Moreover, although we have built our online platform and mobile commerce in-house, the compensation costs for our in-house technology team were not significant. Accordingly, instead of capitalizing the compensation costs of our in-house technology team as research and development on our Balance Sheet or presenting it as research and development expenses, we included these amounts in employee compensation and benefit expenses within general and administrative expenses for the quarters ended March 31, 2025 and 2024.
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Selling Expenses
Selling expenses consist primarily of marketing and promotional service fees to service agents and other costs incurred by our sales and marketing department such as staff costs, office supplies, and other incidental expenses that are incurred directly to attract or retain customers.
Our selling expenses for the quarters
ended March 31, 2025 and 2024 were $
Concentration of Risk
Credit risk
Financial
instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents
and other receivables. As of March 31, 2025 and September 30, 2024, $
Historically, deposits in Chinese banks are secure due to state policy to protect depositor interests. However, China promulgated a Bankruptcy Law in August 2006 that came into effect on June 1, 2007, which contains a separate article expressly stating that the State Council may promulgate implementation measures to provide for the bankruptcy of Chinese banks based on the Bankruptcy Law. Under the current Bankruptcy Law, a Chinese bank may file bankruptcy if it deems itself to be insolvent. In addition, since China’s concession to the World Trade Organization, foreign banks have been gradually permitted to operate in China and have intensified competition in many aspects, especially since the opening of the Renminbi business to foreign banks in late 2006. Therefore, the risk of bankruptcy at the institutions that the Company maintains deposits has increased. In the event of bankruptcy, the Company is unlikely to reclaim its deposits in full since it is unlikely to be classified as a secured creditor under PRC laws.
Risks of variable interest entity structure
In the opinion of management, (i) the corporate structure of the Company is in compliance with existing PRC laws and regulations; (ii) the VIE Arrangements are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect; and (iii) the business operations of the foreign-invested enterprise and the VIE are in compliance with existing PRC laws and regulations in all material respects.
However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to the foregoing opinion of its management. If the current corporate structure of the Company or the VIE Arrangements is found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its corporate structure and operations in the PRC to comply with changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company’s current corporate structure or the VIE Arrangements is remote based on current facts and circumstances.
Foreign currency exchange risk
The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in greater fluctuation of the RMB against the U.S. dollar. The Company is a holding company and it relies on dividends paid by the Company’s operating subsidiaries in China for its cash needs. Any significant revaluation of the RMB may materially and adversely affect its liquidity and cash flows. To the extent that the Company needs to convert U.S. dollars into RMB for its operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount the Company would receive. Conversely, if the Company decides to convert RMB into U.S. dollars for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount the Company would receive.
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Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty raising liquid funds to meet commitments as they fall due. See “Commitments and Contingencies” in Note 16. In meeting its liquidity requirements, the Company continues to focus on increasing its revenue through the sale of consumer health care products on its online platform, King Eagle Mall, and promoting its own brand of preventive health care related products on its new online platform to reduce its costs of goods sold, streamlining its overhead costs, or obtaining financing from its stockholders or directors.
Concentration of customers and vendors
There was no
revenue from customers that individually represent greater than
For the six
months ended March 31, 2025, one major vendor accounted for
For the six months ended March
31, 2024, one major vendor accounted for
Income Taxes
We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.
We apply ASC 740, Accounting for Income Taxes, to account for uncertainty in income taxes and the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.
Commitments and Contingencies
The Company follows the ASC 450-20, “Contingencies” to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
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If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Recent Accounting Pronouncements
In March 2024, the FASB issued ASU 2024-01, Compensation – Stock Compensation. This ASU clarifies how to determine whether profits interest and similar awards should be accounted for as share-based payment arrangements. The ASU is effective in reporting periods beginning after December 15, 2024, including interim periods within the fiscal year, on a prospective or retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact that adoption of this accounting standard will have on its condensed consolidated financial statements and disclosures.
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures. This ASU requires annual and interim disclosure of significant segment expenses that are provided to the CODM as well as interim disclosures for all reportable segment’s profit or loss and assets. This guidance also requires disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources. This guidance is expected to improve financial reporting by providing additional information about a public company’s significant segment expenses and more timely and detailed segment information reporting throughout the fiscal period. The ASU is effective for the Company’s fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact that adoption of this accounting standard will have on its consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This ASU requires greater disaggregation of information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. This ASU applies to all entities subject to income taxes and is intended to help investors better understand an entity’s exposure to potential changes in jurisdictional tax legislation and assess income tax information that affects cash flow forecasts and capital allocation decisions. This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. This ASU should be applied on a prospective basis although retrospective application is permitted. The Company is currently evaluating the impact that adoption of this accounting standard will have on its consolidated financial statements and disclosures.
Other than those disclosed above, management does not believe that any recently issued or recently issued but not yet adopted accounting pronouncements will have a material impact on the Company’s financial position, results of operations, or cash flows.
NOTE 3 - VARIABLE INTEREST ENTITIES (“VIE”) ARRANGEMENTS
On May 15, 2021, King Eagle (China) entered into a series of contractual arrangements with King Eagle (Tianjin) and its shareholders. As a result of the contractual arrangements, the Company classified King Eagle (Tianjin) as a Variable Interest Entity (“VIE”).
King Eagle (Tianjin) Technology
Co., Ltd. (“King Eagle (Tianjin)”) was incorporated as a limited liability company in Tianjin Pilot Free Trade Zone in the
People’s Republic of China on September 2, 2020, with a registered capital of approximately $
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The VIE Agreements are as follows:
| (1) | Consulting Service Agreement | |
| (2) | Business Operation Agreement | |
| (3) | Proxy Agreement | |
| (4) | Equity Disposal Agreement | |
| (5) | Equity Pledge Agreement |
Consulting Service Agreement
Pursuant to the terms of a certain Exclusive Consulting Service Agreement dated May 15, 2021, between King Eagle (China) and King Eagle (Tianjin) (the “Consulting Service Agreement”), King Eagle (China) is the exclusive consulting service provider to King Eagle (Tianjin) to provide business-related software research and development services; design, installation, and testing services; network equipment support, upgrade, maintenance, monitor, and problem-solving services; employees technical training services; technology development and sublicensing services; public relations services; market investigation, research, and consultation services; short to medium term marketing plan-making services; compliance consultation services; marketing events and membership related activities organizing services; intellectual property permits; equipment and rental services; and business-related management consulting services. Pursuant to the Consulting Service Agreement, the service fee is the remaining amount after King Eagle (Tianjin)’s profit before tax in the corresponding year deducts King Eagle (Tianjin)’s losses, if any, in the previous year, the necessary costs, expenses, taxes, and fees incurred in the corresponding year, and the withdraws of the statutory provident fund. King Eagle (Tianjin)agreed not to transfer its rights and obligations under the Consulting Service Agreement to any third party without prior written consent from King Eagle (China). In addition, King Eagle (China) may transfer its rights and obligations under the Consulting Service Agreement to King Eagle (China)’s affiliates without King Eagle (Tianjin)’s consent, but King Eagle (China) shall notify King Eagle (Tianjin) of such transfer. This Agreement is valid for a term of 10 years subject to any extension requested by King Eagle (China) unless terminated by King Eagle (China) unilaterally prior to the expiration.
Business Operation Agreement
Pursuant to the terms of certain Business Operation Agreement dated on May 15, 2021, among King Eagle (China), King Eagle (Tianjin)and the shareholders of King Eagle (Tianjin) (the “Business Operation Agreement”), King Eagle (Tianjin) has agreed to subject the operations and management of its business to the control of King Eagle (China). According to the Business Operation Agreement, King Eagle (Tianjin) is not allowed to conduct any transactions that has substantial impact upon its operations, assets, rights, obligations and personnel without the King Eagle (China)’s written approval. The shareholders of King Eagle (Tianjin) and King Eagle (Tianjin) will take King Eagle (China) ‘s advice on appointment or dismissal of directors, employment of King Eagle (Tianjin)’s employees, regular operation, and financial management of King Eagle (Tianjin). The shareholders of King Eagle (Tianjin) have agreed to transfer any dividends, distributions or any other profits that they receive as the shareholders of King Eagle (Tianjin) to King Eagle (China) without consideration. The Business Operation Agreement is valid for a term of 10 years or longer upon the request of King Eagle (China) prior to the expiration thereof. The Business Operation Agreement might be terminated earlier by King Eagle (China) with a 30-day written notice.
Proxy Agreement
Pursuant to the terms of the Proxy Agreement dated on May 15, 2021, among King Eagle (China), and the shareholders of King Eagle (Tianjin) (the “Proxy Agreement”), the shareholders of King Eagle (Tianjin) have entrusted their voting rights as King Eagle (Tianjin)’s shareholders to King Eagle (China) for the longest duration permitted by PRC law. The Proxy Agreement can be terminated by mutual consent of the King Eagle (Tianjin) shareholders and King Eagle (China) or upon a 30-day notice by King Eagle (China).
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Equity Disposal Agreement
Pursuant to the terms of the Equity Disposal Agreement dated on May 15, 2021, among King Eagle (China), King Eagle (Tianjin), and the shareholders of King Eagle (Tianjin) (the “Equity Disposal Agreement”), the shareholders of King Eagle (Tianjin) granted King Eagle (China) or its designees an irrevocable and exclusive purchase option (the “Option”) to purchase King Eagle (Tianjin)’s all or partial equity interests and/or assets at the lowest purchase price permitted by PRC laws and regulations. The option is exercisable at any time at King Eagle (China)’s discretion in full or in part, to the extent permitted by PRC law. The shareholders of King Eagle (Tianjin) agreed to give King Eagle (Tianjin) the total amount of the exercise price as a gift, or in other methods upon King Eagle (China)’s written consent to transfer the exercise price to King Eagle (Tianjin). The Equity Disposal Agreement is valid for a term of 10 years or longer upon the request of King Eagle (China).
Equity Pledge Agreement
Pursuant to the terms of certain Equity Pledge Agreement dated on May 15, 2021, among King Eagle (China) and the shareholders of King Eagle (Tianjin) (the “Pledge Agreement”), the shareholders of King Eagle (Tianjin) pledged all of their equity interests in King Eagle (Tianjin) to King Eagle (China), including the proceeds thereof, to guarantee King Eagle (Tianjin)’s performance of its obligations under the Business Operation Agreement, the Consulting Service Agreement and the Equity Disposal Agreement (each, an “Agreement,” collectively, the “Agreements”). If King Eagle (Tianjin) or its shareholders breach their respective contractual obligations under any Agreement, or cause to occur one of the events regarded as an event of default under any Agreement, King Eagle (China), as pledgee, will be entitled to certain rights, including the right to dispose of the pledged equity interest in King Eagle (Tianjin). During the term of the Pledge Agreement, the pledged equity interests cannot be transferred without King Eagle (China)’s prior written consent. The Pledge Agreement is valid until all the obligations due under the Agreements have been fulfilled.
A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as voting rights and the right to receive the expected residual returns of the entity or the obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. King Eagle (China) is deemed to have a controlling financial interest and be the primary beneficiary of King Eagle (Tianjin) because it has both of the following characteristics:
| (1) | The power to direct the activities of King Eagle (Tianjin) that most significantly impact such entity’s economic performance, and | |
| (2) | The obligation to absorb losses of, or the right to receive benefits from, King Eagle (Tianjin) that could potentially be significant to such entity. |
As of the date of this Quarterly Report, King Eagle (Tianjin) has established five subsidiaries: King Eagle (Beijing) Technology Co., Ltd, King Eagle (Huai’an) Health Management Co., Ltd., Kun Zhi Jian (Huai’an) Technology Co., Ltd., Kun Zhi Jian (Shandong) Health Management Co., Ltd. and Chengdu Wenjiang Pengrun Internet Healthcare Co., Ltd., on December 1, 2022, September 19, 2023, October 26, 2023, January 31, 2024 and February 1, 2024, respectively, in the PRC. King Eagle (Tianjin) is the controlling shareholder under the company laws of the PRC. The binding rights over the VIE’s subsidiaries in the contractual arrangements between King Eagle (China) and King Eagle (Tianjin) are implicit and indirect and the company laws and regulations in the PRC governing the business operations of the VIE’s subsidiaries are uncertain.
Pursuant to the VIE Agreements, the shareholders of King Eagle (Tianjin) have agreed to transfer any dividends, distributions, or other profits that they receive to King Eagle (China). King Eagle (Tianjin) pays service fees equal to all of its net profit after tax to King Eagle (China). The VIE Agreements are designed so that King Eagle (Tianjin) operates for the benefit of King Eagle (China) and ultimately the Company.
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Moreover, King Eagle (Tianjin) has agreed to subject the operations and management of its business to the full control of King Eagle (China) and King Eagle (Tianjin) will take King Eagle (China)’s advice on the appointment or dismissal of directors and employment, regular operation, and financial management. Accordingly, the Company consolidates the accounts of King Eagle (Tianjin) and its subsidiaries for the periods presented herein, in accordance with Accounting Standards Codification, or ASC, 810-10, “Consolidation.”
VIE Financial Information
Set forth below is the consolidated balance sheet information as of March 31, 2025 and September 30, 2024, and the consolidated statements of operations and cash flows for the six months ended March 31, 2025 and 2024, showing financial information for the parent company, Kun Peng International Limited, the non-VIE subsidiaries (as defined below), and the VIE (as defined below), eliminating entries, and consolidated information (in dollars). In the tables below, the column headings correspond to the following entities:
“Parent entity” refers to Kun Peng International Limited;
“Non-VIE and Non-WFOE subsidiaries” refers to the following entities:
| ● | Kun Peng International Holding Limited (“KP International Holding”) | |
| ● | Kun Peng (Hong Kong) Industrial Development Limited (“KP (Hong Kong)”) | |
| ● | Kun Peng Tian Yu Health Technology Co., Ltd. (“KP Tian Yu”) until March 3, 2023 | |
| ● | King Eagle (China) Co., Ltd. (“King Eagle (China)”) commencing March 3, 2023 |
“WFOE” refers to King Eagle (China) until March 3, 2023 and KP Tian Yu commencing March 3, 2023;
“VIE” refers to King Eagle (Tianjin) Technology Co., Ltd. (“King Eagle (Tianjin)”), King Eagle (Beijing) Technology Co., Ltd (“King Eagle (Beijing)”), King Eagle (Huai’an) Health Management Co., Ltd. (“King Eagle (Huai’an)”), Kun Zhi Jian (Huai’an) Technology Co., Ltd. (“Kun Zhi Jian (Huai’an)”), Kun Zhi Jian (Shandong) Health Management Co., Ltd (“Kun Zhi Jian (Shangdong)”), Chengdu Wenjiang Pengrun Internet Healthcare Co., Ltd (“Chengdu Wenjiang”) and Kun Pin Hui (Shandong) Trading Co., Ltd (“Kun Pin Hui (Shandong)”).
Consolidated Balance Sheet
As of March 31, 2025
| Parent Only | Non-VIE and | WFOE | VIE
and VIE’s Subsidiaries Consolidated | Elimination Entries and Reclassification Entries | Consolidated | |||||||||||||||||||
| Cash and cash equivalent | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Intercompany receivables-current | ( | ) | ||||||||||||||||||||||
| Total current assets | ( | ) | ||||||||||||||||||||||
| Intercompany receivables-noncurrent | ( | ) | ||||||||||||||||||||||
| Total noncurrent assets | ( | ) | ||||||||||||||||||||||
| Total assets | ( | ) | ||||||||||||||||||||||
| Intercompany payables | ( | ) | ||||||||||||||||||||||
| Total current liabilities | ( | ) | ||||||||||||||||||||||
| Total noncurrent liabilities | ||||||||||||||||||||||||
| Total liabilities | ( | ) | ||||||||||||||||||||||
| Total shareholders’ equity | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Non-controlling interests | ||||||||||||||||||||||||
| Total equity | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Total liabilities and equity | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| 23 |
As of September 30, 2024
| Parent Only | Non-VIE
and Non-WFOE Subsidiaries Consolidated | WFOE | VIE
and VIE’s Subsidiaries Consolidated | Elimination Entries and Reclassification Entries | Consolidated | |||||||||||||||||||
| Cash and cash equivalent | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Intercompany receivables-current | ( | ) | ||||||||||||||||||||||
| Total current assets | ( | ) | ||||||||||||||||||||||
| Intercompany receivables-noncurrent | ( | ) | ||||||||||||||||||||||
| Total noncurrent assets | ( | ) | ||||||||||||||||||||||
| Total assets | ( | ) | ||||||||||||||||||||||
| Intercompany payables | ( | ) | ||||||||||||||||||||||
| Total current liabilities | ( | ) | ||||||||||||||||||||||
| Total noncurrent liabilities | ||||||||||||||||||||||||
| Total liabilities | ( | ) | ||||||||||||||||||||||
| Total shareholders’ equity | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Non-controlling interests | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Total equity | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Total liabilities and equity | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
Condensed Consolidated Statements of Operations Data
SCHEDULE OF VIE DATA OF OPERATION
| Parent Only | Non-VIE and Non-WFOE Subsidiaries Consolidated | WFOE | VIE and VIE’s Subsidiaries Consolidated | Eliminating Adjustments | Consolidated Totals | |||||||||||||||||||
| Six Months Ended March 31, 2025 | ||||||||||||||||||||||||
| Parent Only | Non-VIE and | WFOE | VIE and VIE’s Subsidiaries Consolidated | Eliminating Adjustments | Consolidated Totals | |||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Intercompany revenue | ( | ) | ||||||||||||||||||||||
| Cost of revenue and related tax | ||||||||||||||||||||||||
| Gross profit | ( | ) | ||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||
| Intercompany operating expenses | ( | ) | ||||||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Other (income) expense | ( | ) | ||||||||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Income tax expense | ||||||||||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Parent Only | Non-VIE and Non-WFOE Subsidiaries Consolidated | WFOE | VIE and VIE’s Subsidiaries Consolidated | Eliminating Adjustments | Consolidated Totals | |||||||||||||||||||
| Six Months Ended March 31, 2024 | ||||||||||||||||||||||||
| Parent Only | Non-VIE and | WFOE | VIE and VIE’s Subsidiaries Consolidated | Eliminating Adjustments | Consolidated Totals | |||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Intercompany revenue | ( | ) | ||||||||||||||||||||||
| Cost of revenue and related tax | ||||||||||||||||||||||||
| Gross profit | ( | ) | ||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||
| Intercompany operating expenses | ( | ) | ||||||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Other income | ||||||||||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Income tax expense | ||||||||||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||
| 24 |
Condensed Consolidated Schedules of Cash Flows
SCHEDULE OF VIE DATA OF CASH FLOWS
| Parent Only | Non-VIE and Non-WFOE Subsidiaries Consolidated | WFOE | VIE and VIE’s Subsidiary Consolidated | Eliminating Adjustments | Consolidated | |||||||||||||||||||
| Six Months Ended March 31, 2025 | ||||||||||||||||||||||||
| Parent Only | Non-VIE and Non-WFOE Subsidiaries Consolidated | WFOE | VIE and VIE’s Subsidiary Consolidated | Eliminating Adjustments | Consolidated | |||||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Intercompany receivables | ( | ) | ( | ) | ||||||||||||||||||||
| Intercompany payables | ( | ) | ( | ) | ||||||||||||||||||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||||||||||||||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||||||||||||||||||
| Effect of exchange rate fluctuation on cash | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||
| Parent Only | Non-VIE and Non-WFOE Subsidiaries Consolidated | WFOE | VIE and VIE’s Subsidiary Consolidated | Eliminating Adjustments | Consolidated | |||||||||||||||||||
| Six Months Ended March 31, 2024 | ||||||||||||||||||||||||
| Parent Only | Non-VIE and Non-WFOE Subsidiaries Consolidated | WFOE | VIE and VIE’s Subsidiary Consolidated | Eliminating Adjustments | Consolidated | |||||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Intercompany receivables | ( | ) | ( | ) | ||||||||||||||||||||
| Intercompany payables | ( | ) | ||||||||||||||||||||||
| Net cash (used in) provided by operating activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||||||||||||||||||
| Effect of exchange rate fluctuation on cash | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||
| 25 |
The Company consolidated its VIE as of March 31, 2025 and September 30, 2024. The carrying amounts and classification of the VIE’s assets and liabilities included in the consolidated balance sheets are as follows:
SCHEDULE OF VIE CONSOLIDATED BALANCE SHEETS, OPERATING RESULTS AND CASH FLOWS
| March 31, 2025 | September 30, 2024 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade receivable – intercompany | ||||||||
| Advance and prepayments | ||||||||
| Other receivables – third parties | ||||||||
| Inventory | ||||||||
| Amount due from a related party | ||||||||
| Other receivables | ||||||||
| Total current assets | ||||||||
| Noncurrent assets | ||||||||
| Property and equipment, net | ||||||||
| Investment in associate held for sale | ||||||||
| Operating lease right-of-use assets | ||||||||
| Finance lease right-of-use assets | ||||||||
| Total noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities | ||||||||
| Current liabilities | ||||||||
| Short-term borrowing | ||||||||
| Trade payables | $ | $ | ||||||
| Other payables and accrual | ||||||||
| Deferred revenue | ||||||||
| Intercompany payables | ||||||||
| Payroll payable | ||||||||
| Tax payable | ||||||||
| Amounts due to related parties | ||||||||
| Operating lease obligations-current portion | ||||||||
| Finance lease obligations-current portion | ||||||||
| Total current liabilities | ||||||||
| Noncurrent liabilities | ||||||||
| Operating lease obligations-noncurrent portion | ||||||||
| Finance lease obligations-noncurrent portion | ||||||||
| Total noncurrent liabilities | ||||||||
| Total liabilities | ||||||||
| Commitment and contingencies | ||||||||
| Equity | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficits | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ equity | ( | ) | ( | ) | ||||
| Non-controlling interests | ||||||||
| Total equity | ( | ) | ( | ) | ||||
| Total liabilities and equity | $ | $ | ||||||
| 26 |
The operating results of the VIE were as follows:
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue, net | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Selling expense | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other (expenses) income | ( | ) | ( | ) | ||||||||||||
| Share of profit from investment in associate | ( | ) | ( | ) | ||||||||||||
| Gain from investment | ||||||||||||||||
| Total other income (expenses), net | ( | ) | ||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Net income (loss) attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to Kun Peng International Ltd | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 27 |
The cash flows of the VIE were as follows:
| 2024 | 2023 | |||||||
Six Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right-of-use assets | ||||||||
| Share of profit from investment in associate | ||||||||
| Gain on investment of a subsidiary | ( | ) | ||||||
| Changes in operating assets and liabilities | ||||||||
| Advance and prepayments | ( | ) | ||||||
| Trade receivable- third parties | ( | ) | ||||||
| Trade receivable- intercompany | ( | ) | ( | ) | ||||
| Other receivables- third parties | ( | ) | ||||||
| Other receivables- intercompany | ( | ) | ||||||
| Inventory | ||||||||
| Amount due from a related party | ( | ) | ||||||
| Trade payable- third parties | ||||||||
| Trade payable- intercompany | ||||||||
| Other payables and accrual- third parties | ||||||||
| Other payables and accrual- intercompany | ( | ) | ||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Payroll payable | ||||||||
| Amounts due to related parties | ( | ) | ||||||
| Tax payable | ( | ) | ||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from bank borrowings | ||||||||
| Payment of finance lease liabilities | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning balance | ||||||||
| Cash and cash equivalents, ending balance | $ | $ | ||||||
NOTE 4 - ADVANCE AND PREPAYMENTS
Prepayments consisted of the following:
SCHEDULE OF PREPAYMENTS
| March 31, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Prepaid rent and building management and utilities | $ | $ | ||||||
| Prepaid supplies(1) | ||||||||
| Prepaid income tax | ||||||||
| Prepaid professional services(2) | ||||||||
| Prepaid others | ||||||||
| Total prepayments | $ | $ | ||||||
| 28 |
| (1) | ||
| (2) |
As of March 31, 2025, the ending balance of prepaid
professional services included $ |
These amounts are expected to be recoverable within twelve (12) months.
NOTE 5 - OTHER RECEIVABLES
Other receivables included the following:
SCHEDULE OF OTHER RECEIVABLES
| March 31, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Deposits | $ | $ | ||||||
| Advance to employees | ||||||||
| Advance to third-party company | ||||||||
| Others | ||||||||
| Total other receivables, net | $ | $ | ||||||
Advance to employees represents funds provided to our officers and employees for business expenses, such as travel, parking, gasoline, membership, and meals, that are anticipated to be incurred by our officers and employees on behalf of the Company. Advances to employees are required to be repaid in cash within a year.
Advance to third-party company represents funds provided to a third-party company for rental fee and deposit.
NOTE 6 - INVENTORY
Inventory consisted of the following:
SCHEDULE OF INVENTORY
| March 31, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Finished goods | $ | $ | ||||||
| Total | $ | $ | ||||||
NOTE 7 - PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
| March 31, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Leasehold improvements | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Computer equipment | ||||||||
| Office equipment | ||||||||
| Subtotal | ||||||||
| Property and equipment, gross | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation expense was $
| 29 |
NOTE 8 - INTANGIBLE ASSETS
| March 31, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Trademarks | $ | $ | ||||||
| Subtotal | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Total intangible assets, net | $ | $ | ||||||
Intangible assets consist of the
Company’s trademarks of King Eagle Mall with a useful life of
Amortization expense was $
NOTE 9 - DEFERRED REVENUE
SCHEDULE OF DEFERRED REVENUE
| March 31, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Advance payments from customers | $ | $ | ||||||
| Total deferred revenue | $ | $ | ||||||
Deferred revenue results from
transactions where the Company has received the payments from the customers but revenue recognition criteria under the five-step model
have yet to be met. As of March 31, 2025 and September 30, 2024, the Company had total deferred revenue of $
NOTE 10 - RELATED PARTY TRANSACTIONS
Acquisition of Kun Pin Hui (Shandong) Trading Co. Ltd.
On April 3, 2024, King Eagle (Tianjin) entered into a Share Transfer Agreement (the “Share Purchase Agreement”) with Zhandong Fan and Yuanyuan Zhang for the acquisition of all the subscribed shares of Kun Pin Hui (Shandong) Trading Co. Ltd.
Pursuant to the Share Purchase Agreement, King Eagle (Tianjin) agreed to acquire all of the subscribed capital of Kun Pin Hui (Shandong), amounting to $ million (RMB million), for an aggregate consideration of $ (RMB ). Zhandong Fan (the holder of % of the shares of Kun Pin Hui (Shandong)) and Yuanyuan Zhang (the holder of % of the shares of Kun Pin Hui (Shandong)), both of whom are shareholders of King Eagle (Tianjin), transferred their shares for consideration of $ (RMB )
| 30 |
The acquisition closed on April 7, 2024. As of March 31, 2025, King Eagle (Tianjin) had paid $ (RMB) of the registered capital.
Amounts due from related parties
Amounts due from related parties mainly represent monies advanced to officers or employees for daily operating expenses that are anticipated to be incurred by our officers and employees on behalf of the Company. The advances are required to be repaid in cash within a year.
Amounts due from related parties consisted of the following:
SCHEDULE OF AMOUNTS DUE FROM RELATED PARTIES
| Name of related party | Relationship | Nature of transactions | March 31, 2025 | September 30, 2024 | ||||||||
| Ms. Jinjing Zhang | $ | $ | ||||||||||
| Ms. Xiujin Wang | ||||||||||||
| Beijing Paiyue Technology Co., LTD | ||||||||||||
| King Eagle (Hangzhou) Health Technology Co., Ltd | ||||||||||||
| Total | $ | $ | ||||||||||
Amounts due to related parties
Amounts due to related parties are payables arising from transactions between the Company and related parties, such as payments of agency service charges to a related company, payments of operating expenses by such related parties on behalf of our entities in the PRC, and funding to meet working capital requirements. The payables owed to the related parties are interest free, unsecured, and repayable on demand.
Amounts due to related parties consisted of the following:
SCHEDULE OF AMOUNTS DUE TO RELATED PARTIES
| Name of related party | Relationship | Nature of transactions | March 31, 2025 | September 30, 2024 | ||||||||
| Ms. Chengyuan Li | $ | $ | ||||||||||
| Ms. Xiujin Wang | ||||||||||||
| Mr. Richun Zhuang | ||||||||||||
| Ms. Yuanyuan Zhang | ||||||||||||
| Ms. Jinjing Zhang | ||||||||||||
| Mr. Zhandong Fan | ||||||||||||
| Mr. Cairong Ji | ||||||||||||
| Tianjin Qianying Technology Co., Ltd. | ||||||||||||
| Beijing Paiyue Technology Co., LTD | ||||||||||||
| Total | $ | $ | ||||||||||
| 31 |
NOTE 11 - EQUITY
Effective as of September 9, 2021,
the Company’s Articles of Incorporation were amended to increase the Company’s authorized capital to
Effective on October 12, 2022, a Certificate of Amendment was filed with the Nevada Secretary of State to increase the authorized number of shares of the Company’s $ par value common stock from shares to shares of common stock.
The Company’s board of directors approved and declared a 10:1 forward split of its common stock on September 6, 2022. As a result of the stock split, holders of pre-split shares of common stock received post-split shares of common stock at a ratio of ten (10) shares of post-split common stock for every one (1) share of pre-split common stock. The stock split had a record date of September 16, 2022 and an effective date of October 18, 2022. No fractional shares were issuable as a result of the forward stock split. After the forward stock split, the Company has shares of common stock outstanding. The par value of the common stock remained unchanged at per share after the stock split.
Preferred stock
The Company’s authorized shares of preferred stock are shares, with a par value of $. The preferred stock may be issued in series and with such voting powers, designations, preferences, limitations, restrictions, and relative rights as the board of directors shall determine in its sole discretion. shares of preferred stock were issued and outstanding as of March 31, 2025 and September 30, 2024.
Common stock
The Company’s authorized shares of common stock were and shares with a par value of $, as of March 31, 2025 and September 30, 2024, respectively. The issued and outstanding shares of common stock were as of March 31, 2025 and September 30, 2024, respectively.
Restricted net assets
Our ability to pay dividends is
primarily dependent on us receiving distributions of funds from our VIE. Relevant PRC statutory laws and regulations permit payments of
dividends by our VIE and its subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC accounting
standards and regulations and after they have met the PRC requirements for appropriation to statutory reserves. Share capital of our PRC
subsidiaries and VIE included in the Company’s consolidated net assets are also non-distributable for dividend purposes. The results
of operations reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ from those
reflected in the statutory financial statements of KP Tian Yu, the foreign-invested enterprise, King Eagle (China), King Eagle (Tianjin),
the VIE, and its subsidiaries. The Company is required to set aside at least
As a result of the foregoing restrictions,
King Eagle (China), King Eagle (Tianjin), and KP Tian Yu are restricted in their ability to transfer their net assets to the Company.
Foreign exchange and other regulations in the PRC may further restrict these entities from transferring funds to the Company in the form
of dividends, loans, and advances. As of March 31, 2025, King Eagle (China), King Eagle (Tianjin), and KP Tian Yu incurred negative assets
in the amount of $ , $ and $ , respectively. As of September 30, 2024, King Eagle (China), King
Eagle (Tianjin) and KP Tian Yu incurred negative assets in the amount of $
NOTE 12- REVENUE
Revenue:
The following table presents revenues and the related cost of goods sold disaggregated by customer type for the three and six months ended March 31, 2025 and 2024:
SCHEDULE OF DISAGGREGATED REVENUES AND COST OF GOODS SOLD
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Retail product sales | $ | $ | $ | $ | ||||||||||||
| Wholesale product sales | ||||||||||||||||
| Equipment-based service revenue | ||||||||||||||||
| Technical service revenue | ||||||||||||||||
| Commissions | ( | ) | ||||||||||||||
| Training | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| 2025 | 2024 | |||||||
Six Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Performance obligations satisfied at a point in time | $ | $ | ||||||
| Performance obligations satisfied over time | ||||||||
| Total | $ | $ | ||||||
| Revenue | $ | $ | ||||||
| 32 |
Cost of revenue:
We disaggregated our cost of revenue for the three and six months ended March 31, 2025 and 2024:
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Retail product sales | $ | $ | $ | $ | ||||||||||||
| Wholesale product sales | ||||||||||||||||
| Equipment-based service revenue | ||||||||||||||||
| Technical service revenue | ||||||||||||||||
| Commissions | ||||||||||||||||
| Training | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | $ | $ | ||||||||||||||
NOTE 13- INCOME TAXES
The Company accounts for income taxes pursuant to the accounting standards that require the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards. Additionally, the accounting standards require the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. The Company and its subsidiaries file separate income tax returns.
United States
Kun Peng International Limited is incorporated in the State of Nevada and is subject to United States federal income tax. No provision for income taxes in the U.S. has been made as the Company has no U.S. taxable income for the six months ended March 31, 2025 and 2024.
British Virgin Islands
KP International Holding is a holding company organized as an International Business Company under the laws of the British Virgin Islands (“BVI”), and its principal operating subsidiaries are organized under the laws of Hong Kong and the laws of the PRC. KP International and its subsidiaries are not subject to income taxes in the BVI.
Hong Kong
The two-tier profits tax rates
system was introduced under the Inland Revenue (Amendment)(No.3) Ordinance 2018 (“the Ordinance”) of Hong Kong and became
effective for the assessment year 2018/2019. Under the two-tier profits tax rates regime, the profits tax rate for the first $
KP (Hong Kong) did not earn any income that was derived in Hong Kong for the six months ended March 31, 2025 and 2024, and, therefore, KP (Hong Kong) were not subject to Hong Kong profits tax for the periods reported.
Since the two-tier profit tax
rates regime is tentative, we applied the original profits tax rate,
PRC
The PRC’s statutory income
tax rate is
| 33 |
Income tax expense was comprised of the following:
SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE BENEFIT
| 2025 | 2024 | |||||||
Six Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Current | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Foreign | ||||||||
| Total current | ||||||||
| Deferred | ||||||||
| Federal | ||||||||
| State | ||||||||
| Foreign | ||||||||
| Total deferred | ||||||||
| Total income tax expense | $ | $ | ||||||
A reconciliation between the Company’s actual provision for income taxes and the provision at the statutory rate is as follow:
SCHEDULE OF RECONCILIATION OF PROVISION OF INCOME TAX
| 2025 | 2024 | |||||||
| Six Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Loss before income tax expense | $ | ( | ) | $ | ( | ) | ||
| Computed tax expense (benefit) with statutory tax rate | % | % | ||||||
| Impact of different tax rates in other jurisdictions | % | % | ||||||
| Tax effect of non-deductible expenses | % | ( | )% | |||||
| Change in valuation allowance | ( | )% | ( | ) | ||||
| Effective tax rate | % | ( | )% | |||||
Uncertain tax positions
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by the respective jurisdictions, where applicable. The statute of limitations for the tax returns varies by jurisdiction.
The statute of limitations for the U.S. Internal Revenue Service to assess the income tax returns of a taxpayer expires three years from the due date of the income tax return or the date on which it was filed, whichever is later.
In accordance with the Hong Kong profits tax regulations, a tax assessment by the IRD may be initiated within six years after the relevant year of assessment, but that period is extendable to 10 years in the case of potential willful underpayment or evasion.
In accordance with the PRC Tax Administration Law on the Levying and Collection of Taxes, the PRC tax authorities generally have up to five years to assess underpaid tax plus penalties and interest for PRC entities’ tax filings. In the case of tax evasion, which is not clearly defined in the law, there is no limitation on the tax years open for investigation. Accordingly, the PRC entities remain subject to examination by the tax authorities based on the above.
As of March 31, 2025 and September 30, 2024, the Company did not accrue any liability, interest, or penalties related to uncertain tax positions in the provision for income taxes in its consolidated financial statements. The Company does not expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months.
| 34 |
NOTE 14 - RIGHT-OF-USE ASSETS AND LEASE
The Company has operating leases for its office facilities, automobiles and employee accommodation and finance lease for equipment for revenue service. The Company classified the equipment for revenue service as finance lease as the lessor will transfer the ownership of equipment for revenue service to the Company by the end of the lease term.
Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognized lease expense on a straight-line basis over the lease term for operating lease. Meanwhile, the Company recognized the finance leases ROU assets and interest on an amortized cost basis.
The following table provides a summary of leases as of March 31, 2025 and September 30, 2024:
SUMMARY OF OPERATING LEASE ASSETS AND LIABILITIES
| Assets/liabilities | Classification | March 31, 2025 | September 30, 2024 | |||||||
| Assets | ||||||||||
| Operating lease right-of-use assets | Operating lease assets | $ | $ | |||||||
| Finance lease right-of-use assets | Finance lease assets | |||||||||
| Total lease assets | $ | $ | ||||||||
| Liabilities | ||||||||||
| Current | ||||||||||
| Operating lease liability - current | Current operating lease liabilities | $ | $ | |||||||
| Finance lease liability - current | Current finance lease liabilities | |||||||||
| $ | $ | |||||||||
| Long-term | ||||||||||
| Operating lease liability – net of current portion | Long-term finance lease liabilities | $ | $ | |||||||
| Finance lease liability – net of current portion | Long-term operating lease liabilities | |||||||||
| Total lease liabilities | $ | $ | ||||||||
The operating lease expense for the three and six months ended March 31, 2025 and 2024 was as follows:
SUMMARY OF OPERATING LEASE EXPENSE
| Lease cost | Classification | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||||
| Lease cost | Classification | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Operating lease cost | ||||||||||||||||||
| Lease expenses – short-term | General and administrative | $ | $ | $ | $ | |||||||||||||
| Lease expenses | General and administrative | |||||||||||||||||
| Finance lease cost | ||||||||||||||||||
| Amortization of leased asset | Cost of sales | |||||||||||||||||
| Interest on lease liabilities | Other expense - other | |||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||||
| 35 |
Maturities of operating lease and finance lease liabilities as of March 31, 2025 were as follows:
SCHEDULE OF MATURITY OF LEASE LIABILITIES
| Maturity of Lease Liabilities | Operating lease | Finance lease | ||||||
| 2025 | $ | $ | ||||||
| 2026 | ||||||||
| Thereafter | ||||||||
| Total lease payments | ||||||||
| Less: Interest | ( | ) | ( | ) | ||||
| Present value of lease payments | $ | $ | ||||||
Maturities of operating lease and finance lease liabilities as of September 30, 2024, were as follows:
| Maturity of Lease Liabilities | Operating lease | Finance lease | ||||||
| 2025 | $ | $ | ||||||
| 2026 | ||||||||
| Thereafter | ||||||||
| Total lease payments | ||||||||
| Less: Interest | ( | ) | ( | ) | ||||
| Present value of lease payments | $ | $ | ||||||
Supplemental information related to operating leases and finance leases was as follows:
SCHEDULE OF OPERATING LEASES
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | $ | $ | ||||||||||||
| New operating lease assets obtained in exchange for operating lease liabilities | $ | $ | $ | $ | ||||||||||||
Six Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Weighted average remaining operating lease term | ||||||||
| Weighted average remaining finance lease term | - | |||||||
| Weighted average discount rate for operating lease | % | % | ||||||
| Weighted average discount rate for finance lease | % | |||||||
The amortization expense was $
NOTE 15 - SHORT-TERM BORROWING
SCHEDULE OF SHORT-TERM BORROWING
| Loan period | Interest rate | March 31, 2025 | September 30, 2024 | |||||||||||
| China Construction Bank Co., LTD. Beijing Mentougou Branch | % | $ | $ | |||||||||||
| Short-term borrowing | $ | $ | ||||||||||||
The loans were guaranteed by a shareholder.
NOTE 16 - COMMITMENTS AND CONTINGENCIES
Purchase and service commitments
We entered into multiple purchase
and service commitments. As of March 31, 2025 and September 30, 2024, we had purchase and service commitments in an amount of $
NOTE 17 - SUBSEQUENT EVENT
As of March 31, 2025, the Company evaluated and concluded that there are no subsequent events that would require recognition or disclosure in the financial statements, other than as disclosed above.
| 36 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview of the Business
Due to global health issues and the COVID-19 pandemic, people have increased their health and nutrition consciousness. We believe preventive care is the most effective investment in health.
To promote awareness of preventive care among the people in the PRC, we developed and launched our mobile platform, King Eagle Mall, in July 2020, an online platform, Kun Zhi Jian, in October 2022, and Kun Zhi Jian Mini Program in November 2023.
King Eagle Mall
King Eagle Mall is a mobile social e-commerce platform launched in July 2020 that promotes preventive health care products and services. It adopts the S2B2C business model and integrates many major health care products and services. King Eagle Mall is designed to enable health-related products to be sold by us and by third parties. King Eagle Mall’s products are divided into two sectors: self-operated products and selected products which promote preventive health care. Our team screens and examines products that are and will be offered both by us and by affiliated merchants. Our major products include health care products such as dietary supplements, nutritional health foods, beauty cosmeceuticals, and other categories of health foods (for instance, milk powder, dried fruits) for supporting the cardiovascular system and bone joint health. We also offer collagen peptides, probiotics, and health foods for improving blood circulation and vein health, as well as household products that can promote and improve a healthier lifestyle for our members. We receive customer orders and may arrange fulfillment through our merchants who are responsible for delivery or we may fill customer orders through our outsourced networks. As of March 31, 2025, King Eagle Mall had approximately 5,669 members.
We also operate customer service centers with which our members can communicate directly for any assistance related to product purchases, suggestions for health care products and services, and delivery logistics.
Kun Zhi Jian and Kun Zhi Jian Mini Program
In October 2022, we introduced and implemented a new online platform, Kun Zhi Jian. In its initial phase of operation, we focused on selling a thermal therapy cabin to wholesalers. Currently, we promote and sell physiotherapy equipment products and our own brand, as well as other popular brands, of preventive health care related products. In November 2023 we also launched the Kun Zhi Jian Mini Program, which is composed of three main areas: physiotherapy cabin, a customer service center, and an online shopping mall (Kun Zhi Jian). We coordinate with local health service providers and leverage their health care expertise and technology to provide health screening and consulting services to our customers and members at the Kun Zhi Jian customer service center. Based on their health conditions, we provide nutritional consulting services and offer suggestions for our preventive health care products. As of March 31, 2025, our new online platform had approximately 2,869 members.
Cash Transfers Within our Organization
As between the Company and its subsidiaries, cash will generally be transferred by means of capital contributions and/or interest-free intercompany loans. Cash to be transferred or settled between the Company and its subsidiaries, on the one hand, and the consolidated VIE and its subsidiaries, on the other hand, will typically be transferred through payments for fees under our contractual arrangements with the VIE, expense reimbursements, or intercompany borrowings between the Company or one of its subsidiaries and the consolidated VIE. Any such loans will be interest-free, unsecured and payable on demand. For more information regarding these contractual arrangements, see Note 3 to our Condensed Consolidated Financial Statements – “Variable Interest Entities - “VIE” Agreements.” The enforceability and treatment of the intercompany agreements within our organization, including intercompany borrowings and the contractual arrangements with our VIE, have not been tested in court. To the extent cash and/or assets in the business are in the PRC and/or Hong Kong or our PRC and/or Hong Kong entities, such funds and/or assets may not be available to fund operations or for other use outside of the PRC and/or Hong Kong due to interventions in or the imposition of restrictions and limitations imposed by the PRC government on the ability of the Company or its subsidiaries to transfer cash and/or assets. There are no tax consequences for intercompany borrowings or the payment for intercompany services, except for the standard value added taxes and/or income taxes for the revenues and/or profits generated from such services.
| 37 |
The proceeds of any transactions within our organization, including with the VIE and its subsidiaries, are eliminated in our condensed consolidated financial statements. For more details, please refer to the principles of consolidation set forth in the notes to our Condensed Consolidated Financial Statements for the six months ended March 31, 2025 included in this report.
Financial Operations Overview
Results of Operations for the three months ended March 31, 2025 and 2024
Three Months Ended March 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Amount | % of revenue | Amount | % of revenue | |||||||||||||
| Revenues | $ | 609,285 | 100.0 | $ | 364,508 | 100.0 | ||||||||||
| Cost of revenues | 98,605 | 16.2 | 99,456 | 27.3 | ||||||||||||
| Gross profit | 510,680 | 83.8 | 265,052 | 72.7 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | 312,614 | 51.3 | 528,457 | 145.0 | ||||||||||||
| Selling expense | 512,908 | 84.2 | 320,226 | 87.9 | ||||||||||||
| Total operating expenses | 825,522 | 135.5 | 848,683 | 232.8 | ||||||||||||
| Loss from operations | (314,842 | ) | (51.7 | ) | (583,631 | ) | (160.1 | ) | ||||||||
| Other income (expense) | 121,965 | 20.0 | (440 | ) | (0.1 | ) | ||||||||||
| Loss before income taxes | (192,877 | ) | (31.7 | ) | (584,071 | ) | (160.2 | ) | ||||||||
| Income tax expense | - | - | 13,364 | 3.7 | ||||||||||||
| Net loss | $ | (192,877 | ) | (31.7 | ) | $ | (597,435 | ) | (163.9 | ) | ||||||
Revenues
For the three months ended March 31, 2025 and 2024, revenues amounted to $609,285 and $364,508, respectively.
The following table presents revenues disaggregated by customer type for the three months ended March 31, 2025 and 2024:
Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Retail | $ | 152,671 | $ | 37,118 | ||||
| Wholesale | - | 359 | ||||||
| Equipment-based service revenue | 456,614 | 299,019 | ||||||
| Technical service revenue | - | 36,018 | ||||||
| Commission revenue | - | (8,093 | ) | |||||
| Training revenue | - | 87 | ||||||
| Total | $ | 609,285 | $ | 364,508 | ||||
We recognize our revenue on a gross basis, net of sub-charges and value-added tax (“VAT”) on gross sales.
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In addition to revenue from retail and wholesale sales, we have developed the following sources of revenue: (i) equipment-based service revenue, generated through providing cards for online medical consultation services and selling prepaid cards to our customers for the use of card-operated health screening equipment located at the Kun Zhi Jian Customer Service Center; (ii) technical service revenue, generated through promoting vendors’ products or businesses on our online platform; (iii) commission revenue, generated through the Mini Program by selling health care instruments on behalf of third parties on a commission basis; and (iv) training revenue, generated through offering training programs provided by a local health care service team.
We recognize equipment-based service revenue upon the completion of medical consultation services and consuming the prepaid cards. We recognize technical service revenue upon the completion of promoting vendors’ products or businesses on our platform. We recognize commission revenue upon the completion of delivery of the sales order to the end customer. We recognize training revenue upon the completion of training sessions by our customers.
We generated $244,777, or 67.2%, higher revenue for the three months ended March 31, 2024 compared to the same period in 2025 due to increases in retail and in equipment-based services. For the three months ended March 31, 2025, we focused our business on equipment-based services as we believe that the market for health care equipment usage has potential growth in the future as more and more people are looking for professional health care assistance after COVID-19. Meanwhile, we updated products and engaged in promotions to increase retail revenue through our current online platform.
Cost of revenue
We disaggregated our cost of revenue for the three months ended March 31, 2025 and 2024 as follows:
Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Retail | $ | 21,049 | $ | 9,149 | ||||
| Wholesale | - | 233 | ||||||
| Equipment-based service revenue | 77,556 | 90,023 | ||||||
| Technical service revenue | - | - | ||||||
| Commission revenue | - | - | ||||||
| Training revenue | - | 51 | ||||||
| Total | $ | 98,605 | $ | 99,456 | ||||
Our cost of revenue for the three months ended March 31, 2025 was $98,605, a $851, or 0.9%, decrease over our cost of revenue of for the three months ended March 31, 2024 of $99,456. Our cost of revenue primarily consisted of consumer health care and health related household products from our suppliers, payments related to maintaining health screening equipment, and training fees to our third-party trainers. We made our retail product sales through our King Eagle Mall and our Kun Zhi Jian Mini Program. We also offered equipment-based services through the Kun Zhi Jian Mini Program. We pay an equipment service fee that includes a prepaid card activation fee and a technical support fee. Our costs of training revenue consist of training fees, accommodations, and transportation of the third-party trainers.
During the three months ended March 31, 2025, our cost of retail grew in line with our increase in revenue, whereas our cost for equipment-based services decreased slightly as a result of our having optimized our service process and having strengthened our cost control.
| 39 |
Gross profit
Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Retail | $ | 131,622 | $ | 27,969 | ||||
| Wholesale | - | 126 | ||||||
| Equipment-based service revenue | 379,058 | 208,996 | ||||||
| Technical service revenue | - | 36,018 | ||||||
| Commission revenue | - | (8,093 | ) | |||||
| Training revenue | - | 36 | ||||||
| Total | $ | 510,680 | $ | 265,052 | ||||
For the three months ended March 31, 2025 and 2024, our overall gross profit and margin was $510,680 or 83.8% and $265,052, or 72.7%, respectively.
For the three months ended March 31, 2025 and 2024, the gross profit and gross profit margin for our retail business amounted to $131,622, or 86.2%, and $27,969, or 75.4%, respectively. The increase in our gross profit or margin for our retail business for the three months ended March 31, 2025 as compared to the same period in 2024 was primarily due to our promotions and our updated products.
Since our new online platform, Kun Zhi Jian, was launched in October 2022, we have been phasing out our wholesale business and have refocused on selling dietary supplements, prepaid health screening cards, and the sale of physiotherapy equipment to our retail customers. Therefore, gross profit or margin for our equipment-based services increased for the three months ended March 31, 2025.
Operating expenses
Our operating expenses consist of general and administrative expenses and selling expenses. For the three months ended March 31, 2025 and 2024, total operating expenses were $825,522 and $848,683, respectively. The decrease in operating expenses for the three months ended March 31, 2025 compared to the same period in 2024 was primarily due to a decrease of $215,843 in general and administrative expenses, which was offset by an increase of $192,682 in selling expenses.
General and administrative expenses
General and administrative expenses for the three months ended March 31, 2025 and 2024 were $312,614 and $528,457, respectively. The decrease in general and administrative expenses of $215,843 between the two periods was chiefly due to decreases in employee compensation and benefits of $21,419, decreases in office rent and building management of $39,902, decreases in professional service fees of $87,334 and decreases in meals and entertainment of $74,462. These expenses declined as a result of our disposal of a subsidiary during the three months ended March 31, 2025.
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Our general and administrative expenses for the three months ended March 31, 2025 and 2024 were comprised of the following:
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Employee compensation and benefits | $ | 139,257 | $ | 160,676 | ||||
| Office rent and building management | 51,185 | 91,087 | ||||||
| Office supplies and meetings | 2,315 | 7,794 | ||||||
| Professional service fees | 54,686 | 142,020 | ||||||
| Travel, transportation, and gasoline | 25,078 | 27,238 | ||||||
| Meals and entertainment | 3,725 | 78,187 | ||||||
| Depreciation and amortization | 21,999 | 19,769 | ||||||
| Others | 14,369 | 1,686 | ||||||
| Total | $ | 312,614 | $ | 528,457 | ||||
Selling expenses
For the three months ended March 31, 2025 and 2024, our selling expenses were $512,908 and $320,226, respectively. The $192,682 increase in selling expenses for the three months ended March 31, 2025 was primarily driven by an increase in service agent costs of $148,071 and an increase in rental for equipment of $46,437. During the three months ended March 31, 2025, we launched more promotional activities with service agents to increase our retail business and rented several pieces of health care equipment for promotional activities to develop our equipment-based services business.
Our selling expenses for the three months ended March 31, 2025 and 2024 were comprised of the following:
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Service agents | $ | 333,816 | $ | 185,745 | ||||
| Employee compensation and benefits | 71,517 | 69,008 | ||||||
| Rental for equipment | 46,437 | - | ||||||
| Office supplies and meetings | 30,984 | 53,882 | ||||||
| Travel, transportation, and gasoline | 8,640 | 4,965 | ||||||
| Meals and entertainment | 658 | 1,861 | ||||||
| Depreciation and amortization | 16,963 | 236 | ||||||
| Advertising | 3,893 | 4,529 | ||||||
| Total | $ | 512,908 | $ | 320,226 | ||||
Other income (expense)
Other income (expense) primarily consisted of bank interest income and expense, share of profit from investment in associate, loss from investment, and foreign exchange gain or loss. Our other income for the three months ended March 31, 2025 was $121,965 and other expenses for the three months ended March 31, 2024 was $440. We recognized a $147,579 gain on the disposal of a subsidiary and a $21,444 loss from share of profit from investment in associate for the three months ended March 31, 2025.
Income tax expense
For the three months ended March 31, 2025 and 2024, our income tax expense was nil and $13,364, respectively. Due to the net loss before income tax, the Company recognized a full valuation recognition against its deferred tax assets, which mainly included net operating loss carryforwards, as management believes it is more likely than not that the Company will not realize its net operating loss carryforwards in the near future or before they expire.
During the three months ended March 31, 2024, Kun Zhi Jian (Huai’an) realized income of $50,293 and we recognized an income tax expense in accordance with the PRC’s statutory income tax rate 25%.
| 41 |
Net loss
As a result of the factors discussed above, we posted a net loss in the amount of $192,877 for the three months ended March 31, 2025 compared to a net loss in the amount of $597,435 for the three months ended March 31, 2024.
Foreign currency translation adjustment
The functional currency for our operations in the PRC is the Chinese Yuan or Renminbi (“RMB”); the functional currency for our operations in Hong Kong is the Hong Kong Dollar (“HKD”). The financial statements are translated to U.S. dollars using the period end rates of exchange for assets and liabilities; equity is translated at historical exchange rates; and average rates of exchange (for the period) are used for revenues and expenses and cash flows. Transaction gains and/or losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. As a result of foreign currency translation, which is a noncash adjustment, we reported foreign currency translation loss of $41,427 and income of $97,909 for the three months ended March 31, 2025 and 2024, respectively.
Comprehensive loss
We recognized a comprehensive loss of $234,304 and $499,526 for the three months ended March 31, 2025 and 2024, respectively.
Results of operations for the six months ended March 31, 2025 and 2024
Six Months Ended March 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Amount | % of revenue | Amount | % of revenue | |||||||||||||
| Revenues | $ | 965,804 | 100.0 | $ | 926,666 | 100.0 | ||||||||||
| Cost of revenues | 154,288 | 16.0 | 248,383 | 26.8 | ||||||||||||
| Gross profit | 811,516 | 84.0 | 678,283 | 73.2 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | 965,047 | 99.9 | 1,076,276 | 116.1 | ||||||||||||
| Selling expense | 859,397 | 89.0 | 752,214 | 81.2 | ||||||||||||
| Total operating expenses | 1,824,444 | 188.9 | 1,828,490 | 197.3 | ||||||||||||
| Loss from operations | (1,012,928 | ) | (104.9 | ) | (1,150,207 | ) | (124.1 | ) | ||||||||
| Other income | 169,044 | 17.5 | 31,750 | 3.4 | ||||||||||||
| Loss before income taxes | (843,884 | ) | (87.4 | ) | (1,118,457 | ) | (120.7 | ) | ||||||||
| Income tax expense | - | - | 13,364 | 1.4 | ||||||||||||
| Net loss | $ | (843,884 | ) | (87.4 | ) | $ | (1,131,821 | ) | (122.1 | ) | ||||||
| 42 |
Revenues
For the six months ended March 31, 2025 and 2024, revenues amounted to $965,804 and $926,666, respectively.
The following tables present disaggregated revenues for the six months ended March 31, 2025 and 2024:
Six Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Retail | $ | 231,128 | $ | 543,451 | ||||
| Wholesale | - | 2,164 | ||||||
| Equipment-based service revenue | 734,676 | 307,687 | ||||||
| Technical service revenue | - | 36,018 | ||||||
| Commission revenue | - | 2,953 | ||||||
| Training revenue | - | 34,393 | ||||||
| Total | $ | 965,804 | $ | 926,666 | ||||
We recognize our revenue on a gross basis, net of sub-charges and value-added tax (“VAT”) on gross sales.
In addition to revenue from retail and wholesale sales, we have developed the following sources of revenue: (i) equipment-based service revenue, generated through providing cards for online medical consultation services and selling prepaid cards to our customers for the use of card-operated health screening equipment located at the Kun Zhi Jian Customer Service Center; (ii) technical service revenue, generated through promoting vendors’ products or businesses on our online platform; (iii) commission revenue, generated through the Mini Program by selling health care instruments on behalf of third parties on a commission basis; and (iv) training revenue, generated through offering training programs provided by a local health care service team.
We recognize equipment-based service revenue upon the completion of medical consultation services and consuming the prepaid cards. We recognize technical service revenue upon the completion of promoting vendors’ products or businesses on our platform. We recognize commission revenue upon the completion of delivery of the sales order to the end customer. We recognize training revenue upon the completion of training sessions by our customers.
We generated $39,138, or 4.2%, higher revenue during the six months ended March 31, 2025 compared to the six months ended March 31, 2024 due to increases in equipment-based services. For the six months ended March 31, 2025, we focused our business on our equipment-based services as we believe that the market for health care equipment usage has potential growth in the future as more and more people are looking for professional health care assistance after COVID-19.
Cost of revenue
We disaggregated our cost of revenue for the six months ended March 31, 2025 and 2024 as follows:
Six Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Retail | $ | 33,136 | 132,284 | |||||
| Wholesale | - | 1,152 | ||||||
| Equipment-based service revenue | 121,152 | 94,590 | ||||||
| Technical service revenue | - | - | ||||||
| Commission revenue | - | - | ||||||
| Training revenue | - | 20,357 | ||||||
| Total | $ | 154,288 | 248,383 | |||||
Our cost of revenue for the six months ended March 31, 2025 was $154,288, a $94,095, or 37.9%, decrease over our cost of revenue for the six months ended March 31, 2024 of $248,383. Our cost of revenue primarily consisted of the purchase of consumer health care and health related household products from our suppliers, payments related to maintaining health screening equipment, and payments of training fees to our third-party trainers. We made our retail product sales through our King Eagle Mall and our Kun Zhi Jian Mini Program. We also offered equipment-based services and training through the Kun Zhi Jian Mini Program. We pay an equipment service fee that includes a prepaid card activation fee and a technical support fee. Our costs of training revenue consist of training fees, accommodations, and transportation of the third-party trainers.
| 43 |
During the six months ended March 31, 2025, our cost of retail declined in line with the decrease in revenue as a result of our having optimized our service process and having strengthened our cost control, whereas our cost for equipment-based services increased, although not as much as our equipment-based services revenue increased.
Gross profit
Six Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Retail | $ | 197,992 | $ | 411,167 | ||||
| Wholesale | - | 1,012 | ||||||
| Equipment-based service revenue | 613,524 | 213,097 | ||||||
| Technical service revenue | - | 36,018 | ||||||
| Commission revenue | - | 2,953 | ||||||
| Training revenue | - | 14,036 | ||||||
| Total | $ | 811,516 | $ | 678,283 | ||||
For the six months ended March 31, 2025 and 2024, our overall gross profit and margin was $811,516, or 84.0%, and $678,283, or 73.2%, respectively.
For the six months ended March 31, 2025 and 2024, the gross profit and margin for our retail business amounted to $197,992, or 85.7%, and $411,167, or 75.7% , respectively. The increase in our gross profit or margin for our retail business for the six months ended March 31, 2025 as compared to the same period in 2024 was primarily due to our promotions and updated products.
Since our new online platform, Kun Zhi Jian, was launched in October 2022, we have been phasing out our wholesale business and have refocused on selling dietary supplements, prepaid health screening cards, and the sale of physiotherapy equipment to our retail customers. Therefore, gross profit or margin for our equipment-based services increased for the six months ended March 31, 2025.
Operating expenses
Our operating expenses consist of general and administrative expenses and selling expenses. For the six months ended March 31, 2025 and 2024, our total operating expenses were $1,824,444 and $1,828,490, respectively. The decrease in operating expenses for the six months ended March 31, 2025 compared to the same period in 2024 was primarily due to a decrease of $111,229 in general and administrative expenses, which was offset by an increase of $107,183 in selling expenses.
General and administrative expenses
General and administrative expenses for the six months ended March 31, 2025 and 2024 were $965,047 and $1,076,276, respectively. The decrease in general and administrative expenses during the six months ended March 31, 2025 by $111,229 was due to decreases in meals and entertainment of $116,387 and in travel, transportation, and gasoline of $38,567, offset by an increase in professional service fees of $42,116. The increase in professional service fees resulted from more outsourcing, which also resulted in decreased in-house expenditures for travel, transportation, and gasoline and for meals and entertainment.
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Our general and administrative expenses for the six months ended March 31, 2025 and 2024 were comprised of the following:
Six Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Employee compensation and benefits | $ | 352,280 | $ | 324,254 | ||||
| Office rent and building management | 149,792 | 182,523 | ||||||
| Office supplies and meetings | 6,387 | 21,567 | ||||||
| Professional services fees | 334,081 | 291,915 | ||||||
| Travel, transportation, and gasoline | 35,262 | 73,829 | ||||||
| Meals and entertainment | 15,655 | 132,042 | ||||||
| Depreciation and amortization | 44,952 | 31,727 | ||||||
| Others | 26,638 | 18,419 | ||||||
| Total | $ | 965,047 | $ | 1,076,276 | ||||
Selling expense
Our selling expenses for the six months ended March 31, 2025 and 2024, were $859,397 and $752,214, respectively. The $107,183 increase was primarily due to an increase in rental for equipment of $101,387 and an increase in depreciation and amortization of $33,683. During the six months ended March 31, 2025, we rented and bought several pieces of health care equipment for promotional activities to develop our equipment-based business.
Our selling expenses included the following:
Six Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Service agents | $ | 495,001 | $ | 494,352 | ||||
| Employee compensation and benefits | 146,466 | 136,480 | ||||||
| Rental for equipment | 101,387 | - | ||||||
| Office supplies and meetings | 54,109 | 89,840 | ||||||
| Travel, transportation, and gasoline | 14,183 | 20,230 | ||||||
| Meals and entertainment | 2,163 | 5,151 | ||||||
| Depreciation and amortization | 34,218 | 535 | ||||||
| Advertising | 11,870 | 5,626 | ||||||
| Total | $ | 859,397 | $ | 752,214 | ||||
Other income
Other income primarily consisted of bank interest income, share of profit from investment in associate, loss from investment, and foreign exchange gain or loss. Our other income for the six months ended March 31, 2025 and 2024 was $169,044 and $31,750 respectively. We recognized a $147,579 gain on the disposal of a subsidiary and a $21,444 loss from share of profit from investment in associate for the six months ended March 31, 2025.
Income tax expense
For the six months ended March 31, 2025, the income tax expense of the Company was nil. Due to the net loss before income tax, the Company recognized a full valuation recognition against its deferred tax assets, which mainly included net operating loss carryforwards, as management believes it is more likely than not that the Company will not realize its net operating loss carryforwards in the near future or before they expire.
For the six months ended March 31, 2024, the income tax expense of the Company was $13,364 as Kun Zhi Jian (Huai’an) incurred book income of $50,293 during that period and we recognized an income tax expense in accordance with PRC’s statutory income tax rate of 25%.
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Net loss
As a result of the factors discussed above, the Company posted net losses in the amounts of $843,884 and $1,131,821 for the six months ended March 31, 2025 and 2024, respectively.
Foreign currency translation adjustment
The functional currency of our operations in the PRC is Chinese Yuan or Renminbi (“RMB”), while the functional currency of our operation in Hong Kong is Hong Kong Dollars (“HKD”). The financial statements are translated to U.S. dollars using the period end rates of exchange for assets and liabilities; equity is translated at historical exchange rates; and average rates of exchange (for the period) are used for revenues and expenses and cash flows. Transaction gains and/or losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. As a result of foreign currency translation, which is a noncash adjustment, we reported a foreign currency translation gain of $240,468 and loss of $48,057 for the six months ended March 31, 2025 and 2024, respectively. This non-cash gain had the effect of increasing our reported comprehensive gain.
Comprehensive loss
The Company recognized comprehensive losses in the amounts of $603,416 and $1,179,878 for the six months ended March 31, 2025 and 2024, respectively.
Liquidity and capital resources
As of March 31, 2025 and September 30, 2024, we had cash and cash equivalents balances of $27,379 and $82,184, respectively.
For the six months ended March 31, 2025, net cash used in operating activities totaled $3,710. Operating cash outflow was mainly attributable to our net loss of $843,884 and a decrease in amounts due to related parties of $2,458,960, partially offset by an increase in trade payables of $1,828,116 and other payable from third parties of $1,234,126.
Net cash used in investing activities totaled $38,590 and was related to the purchase of property, plant, and equipment during the six months ended March 31, 2025.
Net cash used in financing activities totaled $8,734 and was related to the payment of finance lease liabilities of $107,201, offset by proceeds from bank borrowings of $98,467 during the six months ended March 31, 2025.
The effect of exchange rate change on cash totaled $3,771. The resulting change in cash for the period was a decrease of $54,805.
For the six months ended March 31, 2024, net cash used in operating activities totaled $390,008. Operating cash outflow was mainly attributable to our net loss of $1,131,821 and a decline in customer advances of $1,235,253 offset by a decrease in inventory of $67,134 and the receipt of an advance from a related party of $1,535,989.
Net cash used in investing activities totaled $58,596 and was related to the acquisition of service equipment and leasehold improvement during the six months ended March 31, 2024.
There was no financial activity during the six months ended March 31, 2024.
The effect of exchange rate change on cash totaled $12,564. The resulting change in cash for the period was a decrease of $436,040.
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The following table sets forth a summary of changes in our working capital as of March 31, 2025 and September 30, 2024:
| March 31, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Current Assets | $ | 328,209 | $ | 548,518 | ||||
| Current Liabilities | 8,657,745 | 8,546,420 | ||||||
| $ | (8,329,536 | ) | $ | (7,997,902 | ) | |||
We require cash of approximately $7.7 million within the next twelve months, primarily related to third-party vendor payables and related-party payables. As of March 31, 2025 and September 30, 2024, we had received customer advances in the amount of approximately $0.5 million and $0.6 million, respectively. We anticipate that the majority of the revenue will be recognized in fiscal year 2025. Management has agreed that the amount received is non-refundable. However, this term is not bound by any agreement. Therefore, the customers may have the right to challenge and demand the advances be refunded under relevant commercial laws or regulations.
In an effort to support and maintain our financial position and operations, to fulfill our contractual commitments, and to meet the demands from our customers for refund of their advance payments, the Company focused on increasing its revenue through its online platform. In November 2023, we launched Kun Zhi Jian Mini Program and explored four additional revenue streams. Simultaneously, our directors and stakeholders continue to support our operation financially. We believe that such measures will improve our liquidity in the next twelve months. If we are not able to increase revenue or obtain any financing, we may be unable to continue as a going concern.
Going Concern Consideration
The financial statements included in this Quarterly Report have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. The going-concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed on the financial statements. The Company’s ability to continue as a going concern depends on the liquidation of its current assets. For the six months ended March 31, 2025, the Company experienced cash outflows from operating activities of $3,710 incurred a net loss of $843,884, and had negative working capital of $8,329,536. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.
The Company continues to monitor its operations to help improve its financial liquidity. Options under consideration in the review process include, but are not limited to, increase of sales through the Company’s online business, reduction of operating costs, fund advance from the Company’s stockholders and directors, or financing through the issuance of shares and bank loans. The Company has been focusing on increasing its revenue through its online platform and trimming its operating costs. For example, it explored additional revenue streams and reduced its service agent service fee. In order to continue as a going concern for the next 12 months, the Company continues to explore additional revenue streams, leverage the health care expertise and technology with local health care service providers, promote and sell preventive health care dietary supplements and products, and offer health care equipment services at the Kun Zhi Jian Customer Service Center. However, the Company cannot provide any assurance that it will be able to increase revenue, that it will be able to successfully implement its business plan, or that financing will be available to it on commercially acceptable terms, if at all. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. The directors intend to continue to support the group by providing adequate financial assistance to enable the group to continue its business operations for the foreseeable future.
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Contractual Obligations and Other Commitments
We had the following contractual obligations and commercial commitments as of March 31, 2025:
| Payments Due by Period | ||||||||||||||||||||
| Less Than 1 Year | 1 to 3 Years | 3 to 5 Years | More Than 5 Years | Total | ||||||||||||||||
| Contractual Obligations: | ||||||||||||||||||||
| Operating lease obligations | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Finance lease obligations | 163,013 | - | - | - | 163,013 | |||||||||||||||
| Short-term borrowing | 98,116 | - | - | - | 98,116 | |||||||||||||||
| Purchase and service agreements | 502 | - | - | - | 502 | |||||||||||||||
| Total contractual obligations | $ | 261,631 | $ | - | $ | - | $ | - | $ | 261,631 | ||||||||||
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support, credit risk support, or other benefits.
Future Financings
We will continue to rely on loans from our directors and major shareholders and on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of equity securities or arrange for debt or other financing to fund our operations and other activities, or if we are able, there is no guarantee that existing shareholders will not be substantially diluted.
Critical Accounting Policies
We regularly evaluate the accounting policies and estimates that we use to make budgetary and financial statement assumptions. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
See Note 2 to the financial statements included herewith and Note 2 to the financial statements in the Company’s Form 10-K for the fiscal year ended September 30, 2024 previously filed with the SEC.
Recent Accounting Pronouncements
See Note 2 to the financial statements included herewith and Note 2 to the financial statements in the Company’s Form 10-K for the fiscal year ended September 30, 2024 previously filed with the SEC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to respond to this item.
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ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15I under the Securities Exchange Act of 1934, as amended. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluation as of the end of the quarter ended March 31, 2025, our chief executive officer and our chief financial officer and principal accounting manager, concluded that our disclosure controls and procedures were not effective such that the information relating to our Company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms; and (ii) is accumulated and communicated to our management, including our chief executive officer, to allow timely decisions regarding required disclosure as a result of the material weaknesses in our internal control over financial reporting due to the existence of the following material weaknesses:
| ● | A lack of sufficient and adequately trained internal accounting and finance personnel with appropriate understanding of U.S. GAAP and SEC reporting requirements; |
| ● | A lack of segregation of duties within significant accounts; |
| ● | A lack of a functioning audit committee and a majority of outside directors on the Company’s board of directors. |
Management’s Report on Internal Control over Financial Reporting
As of March 31, 2025, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in the 2013 updated Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, management concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of U.S. GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that are considered to be material weaknesses as described above. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or quarterly financial statements will not be prevented or detected on a timely basis.
Notwithstanding the existence of these material weaknesses in our internal control over financial reporting, our management believes that the financial statements included in its reports fairly present in all material respects the Company’s financial condition, results of operations, and cash flows for the periods presented. We continue to evaluate the effectiveness of our internal controls and procedures on an on-going basis. We are currently hiring additional personnel in financial reporting and accounting, and we are providing training to newly hired personnel. In addition, once our cash position improves, we plan to hire an experienced controller and work to build an internal accounting team with sufficient in-house expertise in U.S. GAAP reporting. However, due to the limited cash flow we are currently having, we cannot assure you when we will be able to implement those remediation methods.
Because we are a smaller reporting company, this report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.
(b) Changes in internal controls over financial reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the fiscal quarter ended March 31, 2025 covered by this report that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting other than the facts disclosed above.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, government agency, self-regulatory organization, or body pending or, to the knowledge of the executive officers of our Company, threatened against or affecting our Company or our common stock, in which an adverse decision could have a material adverse effect.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to respond to this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
None
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ITEM 6. EXHIBITS
| Exhibit Number | Description | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act | |
| 32.1 | Certification of Chief Executive Officer under Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act | |
| 32.2 | Certification of Chief Financial Officer under Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| KUN PENG INTERNATIONAL LTD | ||
| Date: May 15, 2025 | By: | /s/ Zhuang Richun |
| Zhuang Richun, President | ||
| Date: May 15, 2025 | By: | /s/ Zhang Yuanyuan |
| Zhang Yuanyuan , Chief Financial Officer | ||
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, ZHUANG Richun, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Kun Peng International Ltd. (the “Company”);
2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Quarterly Report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluations; and
d. disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the Quarterly Report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
5. I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the Company’s auditors and the audit committee of the Company’s Board of Directors (or persons performing the equivalent function):
a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
| Date: May 15, 2025 | /s/ ZHUANG Richun |
| ZHUANG Richun, Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, ZHANG Yuanyuan, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Kun Peng International Ltd. (the “Company”);
2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Quarterly Report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluations; and
d. disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the Quarterly Report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
5. I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the Company’s auditors and the audit committee of the Company’s Board of Directors (or persons performing the equivalent function):
a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
| Date: May 15, 2025 | /s/ ZHANG Yuanyuan |
| ZHANG Yuanyuan, Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Kun Peng International Ltd., a Nevada corporation (the “Corporation”), does hereby certify, to such officer’s knowledge, that:
(1) The Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025 (the “Form 10-Q”) of the Corporation fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
| Date: May 15, 2025 | /s/ ZHUANG Richun |
| ZHUANG Richun, Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Kun Peng International Ltd., a Nevada corporation (the “Corporation”), does hereby certify, to such officer’s knowledge, that:
(1) The Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025 (the “Form 10-Q”) of the Corporation fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
| Date: May 15, 2025 | /s/ ZHANG Yuanyuan |
| ZHANG Yuanyuan, Chief Financial Officer |