Overview of the Business

Due to increased health and nutrition consciousness among people during the COVID-19 pandemic, the company has focused on promoting preventive healthcare products and services. To achieve this, the company developed and launched several online platforms - King Eagle Mall in July 2020, Kun Zhi Jian in October 2022, and Kun Zhi Jian Mini Program in November 2023.

King Eagle Mall is a mobile social e-commerce platform that sells health-related products and services, including dietary supplements, nutritional foods, beauty products, and household items. Kun Zhi Jian and Kun Zhi Jian Mini Program are newer online platforms that sell the company’s own brand of preventive healthcare products, as well as products from third-party vendors. The company also operates customer service centers to assist members with product purchases and health-related inquiries.

The company had initially planned to introduce “Smart Kiosks” as physical stores integrated with King Eagle Mall, but this project was abandoned due to delays in obtaining government approvals.

Recent Developments

In October 2022, the company launched Kun Zhi Jian, an online platform focused on selling physiotherapy equipment and the company’s own brand of preventive healthcare products. In November 2023, the company also introduced the Kun Zhi Jian Mini Program, which includes a customer service center, an online shopping mall, and a physiotherapy cabin.

The COVID-19 pandemic had initially impacted the company’s business, but with the relaxation of policies in China, the company has been able to focus on its online platforms to mitigate the adverse effects. The company does not expect the pandemic to have a material adverse impact on its business at this time, but it continues to monitor the evolving situation.

The company also faces uncertainty regarding recent regulatory developments in China, such as the Opinions on Strictly Cracking Down on Illegal Securities Activities and the Measures for Cybersecurity Review. While the company believes its current structure and operations are compliant, it acknowledges the potential for future actions by the Chinese government that could affect its financial performance and the enforceability of its VIE agreements.

Financial Operations Overview

Results of Operations for the years ended September 30, 2024 and 2023

Metric	2024	% of Revenue	2023	% of Revenue
Revenues	$2,078,741	100.0%	$3,917,335	100.0%
Cost of Revenues	$605,638	29.1%	$433,221	11.1%
Gross Profit	$1,473,103	70.9%	$3,484,114	88.9%
Operating Expenses	$3,473,901	167.1%	$5,733,003	146.4%
Loss from Operations	$(2,000,798)	(96.3)%	$(2,248,889)	(57.5)%
Net Loss	$(1,991,747)	(95.8)%	$(2,149,213)	(55.0)%

Revenues

The company’s revenues decreased by $1,838,594 or 46.93% in 2024 compared to 2023, primarily due to a sharp decline in wholesale revenue. In 2024, the company focused more on selling retail products through its King Eagle Mall, Kun Zhi Jian, and Kun Zhi Jian Mini Program platforms, as well as introducing new revenue streams such as commission, equipment service, technical service, and training.

Cost of Revenues

The company’s cost of revenues increased by $179,105 or 41.34% in 2024 compared to 2023, primarily due to the increased costs associated with the higher retail sales volume and the new revenue streams.

Gross Profit

The company’s gross profit margin for its retail business increased from 58.2% in 2023 to 76.3% in 2024, as the company was able to increase retail prices. However, the gross margin for the wholesale business declined from 89.9% in 2023 to 46.8% in 2024 as the company shifted its focus to retail sales.

Operating Expenses

The company’s total operating expenses decreased by $2,259,102 or 39.4% in 2024 compared to 2023, primarily due to reductions in both selling expenses and general and administrative expenses.

General and administrative expenses decreased by $597,495 or 24.7% in 2024, mainly due to a decrease in impairment charges and professional service fees.

Selling expenses decreased by $1,661,607 or 50.1% in 2024, primarily driven by a reduction in marketing and promotional service fees paid to service agents.

Other Income, Net

The company’s other income, net, decreased from $99,676 in 2023 to $11,538 in 2024, mainly due to a $12,426 investment loss from an associate and a decrease in government grants.

Income Tax Expense

The company incurred an income tax expense of $2,487 in 2024, compared to nil in 2023, due to the profit generated by its Kun Zhi Jian (Huai’an) subsidiary.

Net Loss

As a result of the factors discussed above, the company’s net loss decreased from $2,149,213 in 2023 to $1,991,747 in 2024.

Liquidity and Capital Resources

Metric	2024	2023
Net Cash Provided by (Used in) Operating Activities	$17,880	$(427,030)
Net Cash Used in Investing Activities	$(348,998)	$(606)
Net Cash Used in (Provided by) Financing Activities	$(54,769)	$644,803
Effect of Exchange Rate Change on Cash	$10,491	$(26,718)
Total Net Change in Cash and Cash Equivalents	$(375,396)	$190,449
Cash and Cash Equivalents	$82,184	$457,580
Working Capital	$(7,997,902)	$(5,523,743)

As of September 30, 2024, the company had cash and cash equivalents of $82,184 and a negative working capital of $7,997,902. The company’s net cash provided by operating activities was $17,880 in 2024, compared to net cash used in operating activities of $427,030 in 2023.

The company’s liquidity position is a concern, as it experienced a net loss of $1,991,747 in 2024 and had negative working capital. To address this, the company is focusing on increasing revenue through its online platforms, reducing overhead costs, and seeking financing from shareholders and directors.

Going Concern Consideration

The company’s financial statements have been prepared under the assumption of going concern, but the company’s ability to continue as a going concern is dependent on its ability to generate sufficient revenue, reduce costs, and obtain financing. The company’s net loss, negative working capital, and reliance on financing from shareholders and directors raise substantial doubt about its ability to continue as a going concern.

Contractual Obligations and Other Commitments

As of September 30, 2024, the company had the following contractual obligations:

Contractual Obligations	Less Than 1 Year	1 to 3 Years	3 to 5 Years	More Than 5 Years	Total
Operating Lease Obligations	$244,243	$44,887	$-	$-	$289,130
Finance Lease Obligations	$205,103	$77,848	$-	$-	$282,951
Purchase and Service Agreements	$4,987	$-	$-	$-	$4,987
Total	$454,333	$122,735	$-	$-	$577,068

The company does not have any off-balance sheet arrangements.

Critical Accounting Policies

The company’s critical accounting policies include principles of consolidation, use of estimates and assumptions, foreign currency translation, cash and cash equivalents, inventory, financial instruments, property and equipment, intangible assets, impairment of long-lived assets, fair value measurements, related party transactions, comprehensive income (loss), revenue recognition, deferred revenue, leases, and income taxes.

Outlook and Conclusion

The company’s financial performance in 2024 showed some improvement compared to 2023, with a reduction in net loss and operating expenses. However, the company’s liquidity position remains a significant concern, with negative working capital and reliance on financing from shareholders and directors.

To address these challenges, the company is focusing on increasing revenue through its online platforms, particularly the newer Kun Zhi Jian and Kun Zhi Jian Mini Program, and exploring additional revenue streams such as commission, equipment service, technical service, and training. The company is also working to streamline its overhead costs and explore financing options.

The company’s ability to continue as a going concern will depend on its success in executing these strategies and addressing its liquidity issues. Investors should closely monitor the company’s financial performance and its ability to improve its financial position in the coming years.