Overview of the Business
Due to global health issues and the pandemic, people have increased their health
and nutrition consciousness. We believe preventive care is the most effective
investment in health. To promote the awareness of preventive care to the people
in the PRC, we have developed and launched our mobile social e-commerce platform
(
with the cooperation with
King Eagle Mall
business. It adopts the S2B2C business model and integrates many major health
care products and services. We focus on health-related products and services.
and by third parties.
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 affiliated merchants. Our major products include health care products
such as dietary supplements, nutritional health foods, beauty cosmeceuticals,
and other categories (for instance, milk powder, dried fruits) of health foods
for supporting the cardiovascular system and bone joint health. We offer
collagen peptides, probiotics, and health foods for improving blood circulation
and vein health, as well as household products which can promote and improve a
healthier lifestyle for our members. We receive customer orders and may arrange
fulfillment with our merchants who are responsible for delivery arrangement or
fulfill customer orders through our outsourced networks.
At the same time, we operate customer service centers with whom our members can
directly communicate for any assistance related to product purchases,
suggestions for health care products and services, and delivery logistics.
Smart Kiosk
We introduced “Smart Kiosk” with the support from the previous stakeholder of
wholly owned subsidiary of
Guoxin Zhengye. The construction of Smart Kiosk was initiated and administered
by
Smart Kiosk,
development of Smart Kiosk. The Smart Kiosk is a physical platform which focuses
on developing a “small shop economy.” It is integrated with the
which creates a “social, health and physical store” to provide people with more
professional and comprehensive preventive health care products and services.
Smart Kiosk is a principal component of our business.
The smart service kiosk functions as a physical customer service center and
community marketing for attracting customers, providing customer services,
promoting our 500+ preventive health care and health related household products
and introducing concepts of maintaining a healthy life. 5G internet connection
is also available for our customers to connect to our online application,
Eagle Mall
for our products.
Recent Developments COVID-19 Update
The ongoing and evolving COVID-19 pandemic continues to spread throughout the
world and outbreak prompted governments and business to take a widespread of
quarantines, lockdowns, site closures. It has negatively impacted the global
economy, workforces, customers, and created significant volatility and
disruption of economic activities.
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During the first quarter of 2022, the restrictions, quarantines and closures
remained in certain affected areas and government agencies in the PRC. The
approval process of our applications for the construction permits of smart
kiosks was delayed by the local governmental agencies and the construction
project of smart kiosks was also postponed. The Company continues to focus its
business through its online platform,
impacts by COVID-19 and follows up closely with the local governmental agencies
for the application for the construction permits of smart kiosks. In fact, the
pandemic increased the overall public health consciousness in the PRC and the
Company experienced a significant growth in its average monthly online sale
revenue by
The Company does not expect that the coronavirus COVID-19 will have a material
adverse effect on its online business or financial results at this time. Still,
it is not possible to predict the unanticipated consequence of the pandemic on
our future business performance and liquidity due to the severity of global
situation of COVID-19. The Company continues to monitor and assess the evolving
situation closely and evaluate its potential exposure.
Recent Regulatory Developments in
Under current Chinese laws and regulations, the Company believes that the VIE
Agreements are not subject to any government approval. The shareholders of
Eagle
offshore vehicles to hold
effected on
to register their equity pledge arrangement as required under the Equity Pledge
Agreement with
future actions by the PRC government that could significantly affect
On
Down on Illegal Securities Activities, calling for: (i) tightening oversight of
data security, cross-border data flow and administration of classified
information, as well as amendments to relevant regulation to specify
responsibilities of overseas listed Chinese companies with respect to data
security and information security; (ii) enhanced oversight of overseas listed
companies as well as overseas equity fundraising and listing by Chinese
companies; and (iii) extraterritorial application of
the Opinions on Strictly Cracking Down on Illegal Securities Activities were
recently issued, there are great uncertainties with respect to the
interpretation and implementation thereof. We will closely monitor further
developments.
In addition, on
Measures for Cybersecurity Review (Revision Draft for Comments), or the
Measures, for public comments, which propose to authorize the relevant
government authorities to conduct cybersecurity review on a range of activities
that affect or may affect national security, including listings in foreign
countries by companies that possess the personal data of more than one million
users. The Measures are soliciting comments and subject to change. As we have
less than one million users, we believe that the Measures are not applicable to
us even after they take effect in current form. The PRC government is
increasingly focused on data security, recently launching cybersecurity review
against a number of mobile apps operated by several US-listed Chinese companies
and prohibiting these apps from registering new users during the review period.
There are great uncertainties regarding the interpretation and enforcement of
PRC laws, rules, and regulations regarding data and privacy security. We may be
required to change our data and other business practices and be subject to
regulatory investigations, penalties, increased cost of operations, or declines
in issuer growth or engagement as a result of these laws and policies. Further,
our consulting business with respect to overseas listing and capital raising may
be adversely affected.
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Financial Operations Overview
Results of Operations for the three months ended
For the three months ended December 31,
2021 2020
Amount % of revenue Amount % of revenue
Revenues $ 4,669,408 100.0 % $ 545,961 100.0 %
Cost of revenues 709,209 15.2 93,850 17.2
Gross profit 3,960,199 84.8 452,111 82.8
Operating expenses:
General and administrative
expenses 381,901 8.2 434,418 79.6
Selling expense 3,265,453 69.9 388,464 71.2
Total operating expenses 3,647,354 78.1 822,882 150.8
Income (loss) from
operations 312,845 6.7 (370,771 ) (68.0 )
Other income 25,013 0.5 53 0.0
Income (loss) before income
taxes 337,858 7.2 (370,718 ) (68.0 )
Income tax expense - - - -
Net income (loss) $ 337,858 7.2 $ (370,718 ) (68.0 )%
Revenues
For the three months ended
of health care and health related household products to our customers via our
mobile application,
to the three months ended
amount during the three months ended
agents to promote our platform and products since
our revenue on a gross basis, net of sub-charges and value-added tax (“VAT”) of
gross sales.
Cost of revenue
Our cost of revenue for the three months ended
health care and health related household products from our suppliers. We
incurred a higher cost of revenue for the three months ended
compared to that in the same period of 2020, because we generated a higher
revenue amount during the three months ended
above.
Gross profit
For the three months ended
amounted to
gross profit amount for the three months ended
significantly higher than that for the same period in 2020 due to a higher
revenue generated during the three months ended
profit margin for the three months ended
to the same period in 2020.
Operating Expenses
Our operating expenses consist of general and administrative expenses and
selling expense. For the three months ended
total operating expenses were
experienced a higher amount of operating expenses in the three months ended
higher selling expense.
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General and administrative expenses
General and administrative expenses for the three months ended
and 2020 were
administrative expenses by
compensation and benefits and office supplies during the three months ended
meeting decreased by
ended
CEO of the Company and
amounts of our executives were reduced in order to save operating costs. Our
office supplies and meeting expenses for the three months ended
2021
the same period in 2020. As we started our operation in
additional office supplies and decoration expenses during the three months ended
Our general and administrative expenses for the three months ended
2021
For the three months ended December 31,
2021 2020
Employee compensation and benefit $ 156,325 $ 193,312
Office rent and building management 95,845 93,360
Office supplies and meeting 7,405 28,934
Professional services fee 85,759 75,254
Travel, transportation and gasoline 4,556 15,641
Meals and entertainment 8,352 12,536
Depreciation and amortization 7,963 4,794
Repair and maintenance - 4,550
Others 15,696 6,037
Total $ 381,901 $ 434,418
Selling expense
Our selling expense, which was primarily incurred by our sales and marketing
department, for the three months ended
2021
an increase in service agent fee by
since
months ended
sales for the same period in 2021 increased by approximately
approximately
approximately
expense also included an increase in employee compensation and benefit by
the three months ended
compensation for our planning team. Our sales and marketing department as well
as executives launched marketing activities in various cities which resulted in
a higher travel expense.
Our selling expense included the following:
For the three months ended December 31,
2021 2020
Service agents $ 3,020,635 $ 254,758
Employee compensation and benefit 160,312 83,578
Office supplies and meeting 18,259 32,859
Customer services 13,547 8,432
Travel, transportation and gasoline 36,504 4,736
Meals and entertainment 14,627 3,423
Depreciation and amortization 1,569 678
Total $ 3,265,453 $ 388,464
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Other income
Other income primarily included bank interest income, foreign exchange gain or
loss and other service income. Our other income for the three months ended
months ended
amount of
lutein supplement provided to a corporate customer. We also incurred a higher
interest income during the three months ended
revenue amount, our average monthly cash balance in our bank accounts during
this period was higher compared to the same period in 2020. Conversely, we only
incurred bank interest income in an amount of
Income tax expense
For the three months ended
the Company was nil. During the three months ended
the net operating loss carryforwards to offset its entire taxable income. On the
other hand, KPIL, the subsidiaries in
book loss and tax loss. The Company recognized a full valuation allowance
against the deferred tax assets of these entities as it believes that it is more
likely than not that these entities will not recognize its deferred tax assets
in a near future. During the three months ended
generated net loss before income tax and the Company recognized a full valuation
allowance against its deferred tax assets, which included net operating loss
carryforwards, as management believes it is more likely than not that the
Company will not recognize its net operating loss carryforwards in a near future
or before it expires.
Net income (loss)
As a result of the factors discussed above, the Company posted a net income in
an amount of
recorded a net loss in an amount of
31, 2020
Foreign currency translation adjustment
The functional currency of our operation in PRC is Chinese Yuan or Renminbi
(“RMB”) and while our operation in
financial statements are translated to
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 (loss) of
and
respectively.
Comprehensive income (loss)
The Company recognized a comprehensive income in an amount of
three months ended
an amount of
Liquidity and Capital Resources
As of
equivalents balance of
For the three months ended
activities totaled to
the net income,
increase in amount due to related parties,
third party vendors,
a decrease in customers’ prepayment,
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Net cash used in investing activities totaled to
to the purchase of office and computer equipment.
There was no financing activity for the three months ended
Effect of exchange rate change on cash totaled
cash for the period was an increase of
For the three months ended
activities totaled to
to a net loss of
payments to our lessors on behalf of
in payroll payments,
in trade and other payable,
Net cash used in investing activities totaled to
of office and computer equipment, software and leasehold improvements.
There was no financing activity for the period for the three months ended
Effect of exchange rate change on cash totaled
cash for the period was a decrease by
The following table sets forth a summary of changes in our working capital as of
December 31, September 30,
2021 2021
Current Assets $ 3,416,783 2,871,157
Current Liabilities 5,311,868 5,189,941
$ (1,895,085 ) (2,318,784 )
We require additional cash of approximately
months which primarily relates to third party vendors payables. In an effort to
support and maintain our financial positions and operations, the Company focused
on increasing its revenue through its online platform and slimming its overhead
costs. As aforementioned, during the first quarter of 2022, our average monthly
online sales increased. We also reduced the compensation and benefits of our
executives, decreased office supplies expense, trimmed staff meeting expense and
terminated the lease arrangements of employee accommodations. 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 accompanying condensed consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in
of America
basis. The going-concern basis assures 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 three months
ended
operating activities of
negative working capital of
continues, there is a delay in the progress of construction and approval for the
construction permit of smart kiosk due to the lockdown of the affected areas in
the PRC and the closure of the government agencies in the PRC. These conditions
raise substantial doubt about the ability of the Company to continue as a going
concern.
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The Company continues to monitor its operations to help refine the Company’s
financial liquidity. Options under consideration in the review process include,
but not limited to, increase of sales on its online business, reduction of
overhead costs, fund advance from the Company’s stockholders and directors, or
financing through issuance of shares. During the first quarter of 2022, the
Company focused on increasing its revenue through its online platform and
slimming its overhead costs, for example, we reduced the compensation and
benefits of our executives, decreased office supplies expense, trimmed staff
meeting expense and terminated the lease arrangements of employee
accommodations. Additionally, the Company obtained a fund advance of
approximately
to meet its working capital requirements.
In order to continue as a going concern for the next 12 months, the Company
continues to focus on increasing its revenue through the sale of health care
products on its online platform,
costs or obtaining a financing from its stockholders or directors. 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 that 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 will continue to
support the group by providing adequate financial assistance to enable the group
to continue its business operations for the foreseeable future.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, including arrangements that would
affect our liquidity, capital resources, market risk support, and credit risk
support or other benefits.
Future Financings
We will continue to rely 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 the 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 on Form 10-K/A for the fiscal year ended
2021
Recent Accounting Pronouncements
See Note 2 to the financial statements included herewith and Note 2 to the
financial statements on Form 10-K/A for the fiscal year ended
2021
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