U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended:
OR
For the transition period from _______to _______
Commission File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of Incorporation or organization) | (IRS Employer Identification No.) |
Fengtai District,
(Address of principal executive offices)
(Issuer’s telephone number including area code)
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A |
Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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). ☐
Yes ☒
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. (Check one):
| 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
State the number of shares outstanding of each
of the issuer’s classes of common equity as of the latest practicable date. As of the date hereof, there are
ZHUOXUN HONGTU INC.
CONTENTS
i
PART I: FINANCIAL INFORMATION
Item 1. - Financial Statements
ZHUOXUN HONGTU INC.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(In U.S. dollars except Number of Shares)
| As of March 31, |
As of September 30, |
|||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Other monetary funds | ||||||||
| Accounts receivable, net | ||||||||
| Prepayment, net | ||||||||
| Other receivables, net | ||||||||
| Due from related parties | ||||||||
| Inventory, net | ||||||||
| Total Current Assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Right of use assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Total non-Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Lease Liability - current | ||||||||
| Contract liability | ||||||||
| Amount due to related parties | ||||||||
| Payroll payable | ||||||||
| Tax payable | ||||||||
| Other payable | ||||||||
| Accrued liabilities | ||||||||
| Total Current Liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock, par value $ |
||||||||
| Common stock, Par Value $ |
||||||||
| Additional paid-in capital | ||||||||
| Statutory reserve | ||||||||
| Accumulated deficits | ( |
) | ( |
) | ||||
| Accumulated other comprehensive gain | ||||||||
| Non-controlling interest | ( |
) | ( |
) | ||||
| Total Stockholders’ Deficit | ( |
) | ( |
) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
1
ZHUOXUN HONGTU INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In U.S. dollars except Number of Shares)
(UNAUDITED)
| For The Three Months | For The Six Months | |||||||||||||||
| Ended March 31, | Ended March 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| REVENUE | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUE | ||||||||||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Selling expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE), NET | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other income | ( | ) | ||||||||||||||
| Other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Other Income (Expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS BEFORE TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax benefit (expense) | ||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to the Company’s shareholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||
| Foreign currency translation gain/ (loss) attributable to non-controlling interests | ( | ) | ||||||||||||||
| Foreign currency translation gain/ (loss) attributable to shareholders | ( | ) | ( | ) | ||||||||||||
| COMPREHENSIVE INCOME/ (LOSS) ATTIBUTABLE TO NON-CONTROLLING INTERESTS | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| COMPREHENSIVE INCOME/ (LOSS) ATTIBUTABLE TO SHAREHOLDERS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and diluted loss per share* | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding – basic and diluted* | ||||||||||||||||
| * |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
2
ZHUOXUN HONGTU INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED March 31, 2025 and 2024
(In U.S. dollars except Number of Shares)
(UNAUDITED)
| Accumulated | ||||||||||||||||||||||||||||||||||||||||
| Additional | other | Non- | Total | |||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Statutory | Accumulated | comprehensive | controlling | Stockholders’ | |||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | reserves | Deficits | income (loss) | interests | Equity | |||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||||||||||
| Additional | other | Non- | Total | |||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Statutory | Accumulated | comprehensive | controlling | Stockholders’ | |||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | reserves | Deficits | income (loss) | interests | Equity | |||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| * | Outstanding and issued shares retrospectively reflected the effect of recapitalization due to reverse acquisition |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
3
ZHUOXUN HONGTU INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars)
(UNAUDITED)
| For The 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: | - | |||||||
| (Recovery) provision for credit losses, net | ( | ) | ||||||
| Impairment of intangible assets | ||||||||
| Gain from the disposal of property and equipment | ( | ) | ||||||
| Depreciation and amortization | ||||||||
| Amortization of prepaid expenses | ||||||||
| Operating lease expenses | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Account receivables | ( | ) | ||||||
| Other receivables | ( | ) | ( | ) | ||||
| Advances to suppliers | ( | ) | ||||||
| Due from related party | ||||||||
| Inventory | ( | ) | ||||||
| Accounts payable | ||||||||
| Contract liabilities | ( | ) | ||||||
| Payroll payable | ( | ) | ( | ) | ||||
| Tax payables | ( | ) | ( | ) | ||||
| Other payables | ( | ) | ||||||
| Lease liabilities- current & non-current | ( | ) | ||||||
| Accrued Liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Proceeds from sale of equipment | ||||||||
| Net cash provided by investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Due to related parties | ||||||||
| Net cash provided by financing activities | ||||||||
| EFFECT OF EXCHANGE RATE ON CASH | ( | ) | ||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AT BEGINNING OF PERIOD | $ | $ | ||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Cash paid during the years for: | ||||||||
| Income taxes | $ | $ | ||||||
| Interest | $ | $ | ||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
4
ZHUOXUN HONGTU INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars except Number of Shares)
| 1. | ORGANIZATION AND BUSINESS |
Zhuoxun Hongtu Inc. (the “Company”) was incorporated on March 9, 2015, in the state of Nevada. The name of the Company was changed from “Gushen, Inc.” to “Zhuoxun Hongtu Inc.”since August 23, 2024 to align with the Company's operations and brands for its subsidiaries.
On July 30, 2021, the Company, and Dyckmanst Limited,
a company organized under the laws of the British Virgin Islands (“Dyckmanst Limited”), and all shareholders of Dyckmanst
Limited immediately prior to the closing (collectively, the “Dyckmanst Limited Shareholders”, each, a “Dyckmanst
Limited Shareholder”) entered into a share exchange agreement (the “Share Exchange Agreement”), pursuant
to which the Company acquired
Dyckmanst Limited, via Beijing Zhuoxun Century Culture Communication Co., Ltd. (“Zhuoxun Beijing”), an affiliated entity incorporated in the People’s Republic of China (“PRC”), engages in providing family education resources to promote all-around education onsite in local communities organized by its regional collaborative education agencies and offering parents easy access to a wide variety of courses online through mobile applications.
In February 2021, Beijing Fengyuan Zhihui Education Technology Co., Ltd. (“Fengyuan Beijing”), a wholly foreign-owned enterprise under PRC law and subsidiary of Dyckmanst Limited, entered into a series of contractual agreements with Zhuoxun Beijing, and the shareholders of Zhuoxun Beijing for Zhuoxun Beijing to qualify as a variable interest entity or VIE (the “VIE Agreements”), which are summarized below. The following summary of the VIE Agreements does not purport to be complete and is subject to, and qualified in its entirety by, the VIE Agreement filed as exhibits to a Current Report on Form 8-K/A filed on August 6, 2021.
Consulting Service Agreement
Pursuant to the terms of an Exclusive Consulting
and Service Agreement dated February 5, 2021, between Fengyuan Beijing and Zhuoxun Beijing (the “Consulting Service Agreement”),
Fengyuan Beijing is the exclusive consulting and service provider to Zhuoxun Beijing 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 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 planning and 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 Zhuoxun Beijing’s profit before tax in the corresponding year deducts Zhuoxun Beijing’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. Zhuoxun Beijing agreed not to transfer its rights and obligations under the Consulting Service Agreement to any third party without
prior written consent from Fengyuan Beijing. In addition, Fengyuan Beijing may transfer its rights and obligations under the Consulting
Service Agreement to Fengyuan Beijing’s affiliates without Zhuoxun Beijing’s consent, but Fengyuan Beijing shall notify Zhuoxun
Beijing of such transfer. This Agreement is valid for a term of
5
Business Operation Agreement
Pursuant to the terms of a Business Operation
Agreement dated February 5, 2021, among Fengyuan Beijing, Zhuoxun Beijing and the shareholders of Zhuoxun Beijing (the “Business
Operation Agreement”), Zhuoxun Beijing has agreed to subject the operations and management of its business to the control of
Fengyuan Beijing. According to the Business Operation Agreement, Zhuoxun Beijing is not allowed to conduct any transactions that has substantial
impact upon its operations, assets, rights, obligations and personnel without the Fengyuan Beijing’s written approval. The shareholders
of Zhuoxun Beijing and Zhuoxun Beijing will take Fengyuan Beijing’s advice on appointment or dismissal of directors, employment
of Zhuoxun Beijing’s employees, regular operation, and financial management of Zhuoxun Beijing. The shareholders of Zhuoxun Beijing
have agreed to transfer any dividends, distributions or any other profits that they receive as the shareholders of Zhuoxun Beijing to
Fengyuan Beijing without consideration. The Business Operation Agreement is valid for a term of
Proxy Agreement
Pursuant to the terms of a Proxy Agreements dated February 5, 2021, among Fengyuan Beijing, and the shareholders of Zhuoxun Beijing (each, the “Proxy Agreement”, collectively, the “Proxy Agreements”), each shareholder of Zhuoxun Beijing has irrevocably entrusted his/her shareholder rights as Zhuoxun Beijing’s shareholder to Fengyuan Beijing, including but not limited to, proposing the shareholder meeting, accepting any notices with regard to the convening of shareholder meeting and any other procedures, conducting voting rights, and selling or transferring the shares held by such shareholder, for 10 years or earlier if the Business Operation Agreement was terminated for any reasons.
Equity Disposal Agreement
Pursuant to the terms of an Equity Disposal Agreement dated February 5, 2021, among Fengyuan Beijing, Zhuoxun Beijing, and the shareholders of Zhuoxun Beijing (the “Equity Disposal Agreement”), the shareholders of Zhuoxun Beijing granted Fengyuan Beijing or its designees an irrevocable and exclusive purchase option (the “Option”) to purchase Zhuoxun Beijing’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 Fengyuan Beijing’s discretion in full or in part, to the extent permitted by PRC law. The shareholders of Zhuoxun Beijing agreed to give Zhuoxun Beijing the total amount of the exercise price as a gift, or in other methods upon Fengyuan Beijing’s written consent to transfer the exercise price to Zhuoxun Beijing. The Equity Disposal Agreement is valid for a term of 10 years or longer upon the request of Fengyuan Beijing.
Equity Pledge Agreement
Pursuant to the terms of an Equity Pledge Agreement dated February 5, 2021, among Fengyuan Beijing and the shareholders of Zhuoxun Beijing (the “Pledge Agreement”), the shareholders of Zhuoxun Beijing pledged all of their equity interests in Zhuoxun Beijing to Fengyuan Beijing, including the proceeds thereof, to guarantee Zhuoxun Beijing’s performance of its obligations under the Business Operation Agreement, the Consulting Service Agreement and the Equity Disposal Agreement (each, a “Agreement”, collectively, the “Agreements”). If Zhuoxun Beijing or its shareholders breach its respective contractual obligations under any Agreements, or cause to occur one of the events regards as an event of default under any Agreements, Fengyuan Beijing, as pledgee, will be entitled to certain rights, including the right to dispose of the pledged equity interest in Zhuoxun Beijing. During the term of the Pledge Agreement, the pledged equity interests cannot be transferred without Fengyuan Beijing’s prior written consent. The Pledge Agreements is valid until all the obligations due under the Agreements have been fulfilled.
Based on these contractual arrangements, the Company consolidates the VIE in accordance with SEC Regulation S-X Rule 3A-02 and Accounting Standards Codification (“ASC”) topic 810 (“ASC 810”), Consolidation.
6
The accompanying interim condensed consolidated financial statements reflect the activities of each of the following entities:
| Name | Background | Ownership | |||
| Dyckmanst Limited | ● | ||||
| ● | |||||
| · | |||||
| Edeshler Limited | ● | ||||
| ● | |||||
| Beijing Fengyuan Zhihui Education Technology Co., Ltd. | ● | ||||
| ● | |||||
| Beijing Zhuoxun Century Culture Communication Co., Ltd. | ● | ||||
| ● | |||||
| ● | |||||
| Beijing Zhuoxin Education Technology Co., Ltd. | ● | ||||
| ● | |||||
The following combined financial information of the Group’s VIEs as of March 31, 2025 and September 30, 2024 and for the six months ended March 31, 2025 and 2024 included in the accompanying interim condensed consolidated financial statements of the Group was as follows:
| As of March 31, | As of September 30, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Other monetary funds | ||||||||
| Accounts receivable, net | ||||||||
| Prepayment, net | ||||||||
| Other receivables, net | ||||||||
| Intercompany receivables | ||||||||
| Due from related parties | ||||||||
| Inventory, net | ||||||||
| Total Current Assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Right of use assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Total non-Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Lease liability - current | ||||||||
| Contract liability | ||||||||
| Amount due to related parties | ||||||||
| Payroll payable | ||||||||
| Tax payable | ||||||||
| Other payable | ||||||||
| Accrued liabilities | ||||||||
| Total Current Liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
7
| For The Three Months | For The Six Months | |||||||||||||||
| Ended March 31, | Ended March 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| REVENUE | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUE | ||||||||||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Selling expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE), NET | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other income | ( | ) | ||||||||||||||
| Other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Other Income (Expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS BEFORE TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax benefit (expense) | ||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| For The Six Months | ||||||||
| Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| Net cash provided by investing activities | ||||||||
| Net cash provided by financing activities | ||||||||
8
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The accompanying interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
Going Concern
The accompanying interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and to pursue financing arrangements to support its working capital requirements.
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. As of March 31, 2025, the Company’s current liabilities exceeded the current assets by $
In evaluating if there is substantial doubt about the ability to continue as a going concern, the Company are trying to alleviate the going concern risk through (1) increasing cash generated from operations by controlling operating expenses and gradually shifted the business focus to the brand authorization for community healthy station and operation service charges to bring in more revenue, (2) financing from domestic banks and other financial institutions, and (3) equity or debt financing. The Company has certain plans to mitigate these adverse conditions and to increase the liquidity.
On an on-going basis, the Company will also receive financial support commitments from the Company’s related parties.
These conditions raise substantial doubt about our ability to continue as a going concern. 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.
Principles of Consolidation
The consolidated financial statements include the financial statements of the Company, its subsidiaries, and consolidated variable interest entity (“VIE”) in PRC (i.e. Beijing Zhuoxun Century Culture Communication Co., Ltd.), including the VIE’ subsidiaries, for which the Zhuoxun Hongtu Inc, is the primary beneficiary.
All transactions and balances among the Company, its subsidiaries, the VIE and the VIE’ subsidiaries have been eliminated upon consolidation.
9
Use of Estimates
The preparation of these interim condensed consolidated financial statements in conformity with U.S. GAAP requires management of the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an on-going basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Revenue Recognition
The Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company recognizes revenues following the five step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) the Company satisfies the performance obligation.
Revenues are recognized when control of the promised goods or services is transferred to our customers, which may occur at a point in time or over time depending on the terms and conditions of the agreement, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The Company identified the following performance obligations for each type of contract:
Training revenue
The Company’s online training course service primarily includes coursewares or videos which are already published on the app. Other than providing the access, there are no bundle or multiple separable and distinct tasks. According to ASC 606-10-25-19, there is one performance obligation for the training course service.The Company required and received fees before participants accessed the online courses. Revenue recognised over the period of the card after the E-card was activated.
Charge for use of brand
The Company authorized other enterprises using the Company’s brand to set up community health stations or Zhuoxun Youxuan stores, providing services to customers at their location, with a brand usage fee. Revenue was recognized when the community health stations or Zhuoxun Youxuan stores has been in operation.
Commission fee revenue
The Company charges commission fees to third-party merchants, who participated in the Company’s online broadcast room for Zhuoxun Youxuan stores. The Company generally is acting as an agent and its performance obligation is to arrange for the provision of the specified goods by the third-party merchants. Upon successful sales, the Company charges the third-party merchants a fixed rate commission fee based on the sales amount. Commission fee revenues are recognized on a net basis at the point of completion of orders.
Practical expedients and exemption
The Company has not incurred any costs to obtain contracts, and does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.
Other service income is earned when services have been rendered.
Contract liability
The contract liabilities consist of advances from
customers, which relate to unsatisfied performance obligations at the end of each reporting period and consists of cash payments received
in advance from customers in sales of training course and brand usage fee. As of March 3l, 2025 and September 30 2024, the Company’s
advances from customer unearned training fee and brand usage fee amounted to $
The Company reports revenues net of applicable sales taxes and related surcharges.
10
Revenue by major product line
| For The Three Months | For The Six Months | |||||||||||||||
| Ended March 31, | Ended March 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Training Revenue | $ | $ | $ | $ | ||||||||||||
| Charge for use of brand | ||||||||||||||||
| Commission fee revenue | ||||||||||||||||
| Other Revenue | ||||||||||||||||
| Total Revenue | $ | $ | $ | $ | ||||||||||||
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 is greater than
Foreign Currency and Foreign Currency Translation
The functional currency of the Company is the United States dollar (“US dollar”). Fengyuan Beijing and Zhuoxun Beijing, which are based in PRC, the local currency, the Chinese Yuan (“RMB”), as their functional currencies. An entity’s functional currency is the currency of the primary economic environment in which it operates, normally that is the currency of the environment in which the entity primarily generates and expends cash. Management’s judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements.
Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Gains and losses resulting from foreign currency re-measurement are included in the statements of comprehensive loss.
The interim condensed consolidated financial statements are presented in U.S. dollars. Assets and liabilities are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date, and revenues and expenses are translated at the average of the exchange rates in effect during the reporting period. Stockholders’ equity accounts are translated using the historical exchange rates at the date the entry to stockholders’ equity was recorded, except for the change in retained earnings during the period, which is translated using the historical exchange rates used to translate each period’s income statement. Differences resulting from translating functional currencies to the reporting currency are recorded in accumulated other comprehensive income in the interim condensed consolidated balance sheets.
11
Translation of amounts from RMB into U.S. dollars has been made at the following exchange rates:
| Balance sheet items, except for equity accounts | ||||
| March 31, 2025 | RMB | |||
| September 30, 2024 | RMB | |||
| Income statement and cash flows items | ||||
| For the six months ended March 31, 2025 | RMB | |||
| For the six months ended March 31, 2024 | RMB |
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and at banks and highly liquid investments, which are unrestricted from withdrawal or use, and which have original maturities of three months or less when purchased.
Other monetary funds
Other monetary funds consist of cash deposited in financial institutions other than banks and frozen bank account balance.
Allowance for credit loss
The Company adopted ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”) on October 1,2023. ASC 326 requires the application of a credit loss model based prospectively on current expected credit losses (CECL), and replaces the previous model based retrospectively on past incurred losses. When a receivable does not share risk characteristics with other receivables, management will evaluate such receivable for expected credit loss on an individual basis. Doubtful accounts balances are written off and deducted from allowance, when receivables are deemed uncollectible, after all collection efforts have been exhausted and the potential for recovery is considered remote. The adoption of ASC 326 did not have a material impact on our consolidated financial statements and related disclosures.
Inventory, net
Inventories are stated at the lower of cost (weighted average basis) or net realizable value. The methods of determining inventory costs are used consistently from year to year. Net realizable value is based on estimated selling prices less selling expenses and any further costs expected to be incurred for completion. Adjustments to reduce the cost of inventory to net realizable value are made, if required, for estimated excess, obsolescence, or impaired balances.
Long-Lived Assets
Long-lived assets consist primarily of property, plant and equipment and intangible assets.
12
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation and accumulated impairment. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.
| Estimated useful lives (years) | |||
| Office and computer equipment | |||
| Lease improvement | |||
| Transportation equipment |
Expenditure for maintenance and repairs is expensed as incurred.
The gain or loss on the disposal of property, plant and equipment is the difference between the net sales proceeds and the lower of the carrying value or fair value less cost to sell the relevant assets and is recognized in other expenses in the interim condensed consolidated statements of comprehensive loss.
Intangible Assets
Intangible assets mainly comprise domain names and trademarks. Intangible assets are recorded at cost less accumulated amortization with no residual value. Amortization of intangible assets is computed using the straight-line method over their estimated useful lives.
The estimated useful lives of the Company’s intangible assets are listed below:
| Estimated useful lives (years) | |||
| Software |
Impairment of Long-lived Assets
In accordance with ASC 360-10-35, the Company
reviews the carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable. Based on the existence of one or more indicators of impairment, the Company measures any impairment
of long-lived assets using the projected discounted cash flow method at the asset group level. The estimation of future cash flows requires
significant management judgment based on the Company’s historical results and anticipated results and is subject to many factors.
The discount rate that is commensurate with the risk inherent in the Company’s business model is determined by its management. An
impairment loss would be recorded if the Company determined that the carrying value of long-lived assets may not be recoverable. The impairment
to be recognized is measured by the amount by which the carrying values of the assets exceed the fair value of the assets. As of March
31, 2025 and September 30, 2024, the impairment of intangible assets was $
Lease
Under ASC Topic 842, 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-cancellable lease term in calculating the right-of-use assets and lease liabilities.
The Company may recognize the lease payments in the unaudited interim condensed consolidated statements of income 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 practical expedients for an entity ongoing accounting and applied 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 able to 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.
13
The Company did not adopt the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. Non-lease components include payments for building management, utilities and property tax. It separates the non-lease components from the lease components to which they relate.
The Company’s accounting for finance lease (formerly called capital lease) remains substantially unchanged. ASC Topic 842 adoption did not have a material impact on the Company’s consolidated financial statements. On the other hand, operating lease expense is recognized on a straight-line basis over the lease term.
The Company evaluates the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of finance and operating lease liabilities in any tested asset group and include the associated lease payments in the undiscounted future pre-tax cash flows. For the six months ended March 31, 2025 and 2024, the Company did not have any impairment loss against its operating lease ROU assets.
Credit risk
Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents. As of March 31, 2025 and September 30, 2024, substantially all of the Company’s cash and cash equivalents were held by major financial institutions located in the PRC, which management believes are of high credit quality.
For the credit risk related to trade accounts receivable, the Company performs ongoing credit evaluations of its customers and, if necessary, maintains reserves for potential credit losses. Historically, such losses have been within management’s expectations.
Concentrations
For the six months ended March 31, 2025, three
customers accounted for
For the six months ended March 31, 2025, the Company
has one supplier accounted for
Segments
The Company evaluates a reporting unit by first identifying its operating segments, and then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meets the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated. The Company has only one major reportable segment in the periods presented.
14
Fair Value of Financial Instruments
U.S. GAAP establishes a three-tier hierarchy to prioritize the inputs used in the valuation methodologies in measuring the fair value of financial instruments. This hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three-tier fair value hierarchy is:
Level 1 – observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – include other inputs that are directly or indirectly observable in the market place.
Level 3 – unobservable inputs which are supported by little or no market activity.
The carrying value of the Company’s financial instruments, including cash and cash equivalents, other receivables, other current assets, accounts and other payables, and other short-term liabilities approximate their fair value due to their short maturities.
Restricted assets
Fengyuan Beijing and Zhuoxun Beijing are restricted
in their ability to transfer a portion of their net assets to the Company. The payment of dividends by entities organized in China is
subject to limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated
profits as determined in accordance with accounting standards and regulations in China. Fengyuan Beijing and Zhuoxun Beijing are also
required to set aside at least
In addition, the Company’s operations are conducted and revenues are generated in China, and all of the Company’s revenues earned and currency received are denominated in RMB. RMB is subject to the foreign exchange control regulation in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to PRC foreign exchange control regulations that restrict the Company’s ability to convert RMB into U.S. dollars.
Recent Accounting Pronouncements
The ASU 2023-07: Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures provides improvements to reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple measures of segment profit or loss, provide new segment disclosure requirements for entities with a single reportable segment and contain other disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024. The ASU should be adopted retrospectively to all periods presented in the financial statements unless it is impracticable to do so. The adoption of ASU 2023-07 is not expected to materially impact the Company’s consolidated balance sheets, statements of income and comprehensive income, cash flows or disclosures.
In December 2023, the FASB issued ASU 2023-09, Improvement to Income Tax Disclosure. This standard requires more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This standard also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for public business entities, for annual periods beginning after December 15, 2024. We expect the adoption of this ASU will not have a material effect on the consolidated financial statements.
15
Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the consolidated financial position, statements of operations and cash flows.
| 3. | ACCOUNTS RECEIVABLE |
Accounts receivable consist of the following:
| March 31, 2025 | September 30, 2024 | |||||||
| Accounts receivable from third party | $ | $ | ||||||
| Totals | $ | $ | ||||||
| 4. | PREPAYMENTS |
Prepayments consist of the following:
| March 31, 2025 | September 30, 2024 | |||||||
| Prepaid service fee | $ | $ | ||||||
| Prepaid rental | ||||||||
| Totals | $ | $ | ||||||
| 5. | OTHER RECEIVABLES, NET |
Other receivables consist of the following:
| March 31, 2025 | September 30, 2024 | |||||||
| Amount due from third parties | $ | $ | ||||||
| Amount due from employees | ||||||||
| Deposit & guarantee | ||||||||
| Others | ||||||||
| Less: allowance for credit loss | ( | ) | ( | ) | ||||
| Other receivables, net | $ | $ | ||||||
The following table sets forth the movement of allowance for credit loss:
| March 31, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Beginning | $ | $ | ||||||
| Additions | ||||||||
| Write off bad debt | ( | ) | ||||||
| Exchange rate difference | ( | ) | ||||||
| Balance | $ | $ | ||||||
| 6. | INVENTORY, NET |
| March 31, 2025 | September 30, 2024 | |||||||
| Cost | $ | $ | ||||||
| Less: provision for inventory | ( | ) | ( | ) | ||||
| Net amount | $ | $ | ||||||
The following table sets forth the movement of provision for the inventory:
| March 31, 2025 | September 30, 2024 | |||||||
| Beginning | $ | $ | ||||||
| Exchange rate difference | ( | ) | ||||||
| Balance | $ | $ | ||||||
16
| 7. | PROPERTY, PLANT AND EQUIPMENT, NET |
Property, plant and equipment, net consist of the following:
| March 31, 2025 | September 30, 2024 | |||||||
| Office and computer equipment | $ | $ | ||||||
| Transportation equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Totals | $ | $ | ||||||
Depreciation expenses charged to the statements
of operations for the three months ended March 31, 2025 and 2024 were $
| 8. | INTANGIBLE ASSETS, NET |
Intangible assets, net, consist of the following:
| March 31, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Software | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Less: Impairment of intangible assets | ( | ) | ( | ) | ||||
| Totals | $ | $ | ||||||
Amortization charged to the statements of operations
for the three months ended March 31, 2025 and 2024 were $
| 9. | LEASE |
With the adoption of the new leasing standard,
the Company has recorded a right-of-use asset and corresponding lease liability, by calculating the present value of future lease payments,
discounted at
Supplemental balance sheet information related to operating leases and finance leases was as follows:
| March 31, 2025 |
September 30, 2024 |
|||||||
| Right-of-use assets | $ | $ | ||||||
| Right-of-use assets - Operating lease | ||||||||
| Accumulated amortization | ( |
) | ||||||
| Lease liabilities - current | ||||||||
| Operating lease | ||||||||
During the six months ended March 31, 2025 and 2024, the Company incurred
total operating lease expenses of $
The following is a schedule, by years, of maturities of lease liabilities as of March 31, 2025:
| Operating Leases | ||||
| 1st year | $ | |||
| Total lease payments | ||||
| Less: Imputed interest | ||||
| Present value of lease liabilities | ||||
| Current lease liabilities |
17
| 10. | ACCOUNTS PAYABLE |
Accounts payable consist of the following:
| March 31, 2025 | September 30, 2024 | |||||||
| Amount due to agents | $ | $ | ||||||
| Amount due to third parties | ||||||||
| Totals | $ | $ | ||||||
| 11. | CONTRACT LIABILITY |
Contract liability consist of the following:
| March 31, 2025 | September 30, 2024 | |||||||
| Advance from customers | $ | $ | ||||||
| Totals | $ | $ | ||||||
| 12. | ACCRUED LIABILITIES |
Accrued liabilities consist of the following:
| March 31, 2025 | September 30, 2024 | |||||||
| Late fees for accrued taxes | $ | $ | ||||||
| Judgment amount | ||||||||
| Profession fee | ||||||||
| Accrued rental | ||||||||
| Totals | $ | $ | ||||||
| 13. | BALANCES WITH RELATED PARTIES |
| Note | March 31, 2025 | September 30, 2024 | ||||||||||
| Due from related parties | ||||||||||||
| Shaowei Peng | (b) | $ | $ | |||||||||
| Wanwu Kang | (c) | |||||||||||
| Totals | $ | $ | ||||||||||
| Due to related parties | ||||||||||||
| Yulong Yi | (a) | $ | $ | |||||||||
| Ru Zhang | (d) | |||||||||||
| Totals | $ | $ | ||||||||||
| (a) | |
| (b) | |
| (c) | |
| (d) |
Amount due from related parties are mainly cash in advance provided to the related parties by the Company. Amount due to related parties are mainly the out-of-pocket expenses incurred by the related parties for working purpose which are to be reimbursed by the Company.
All the above balances are due on demand, interest-free, unsecured and expected to be settled within one operating period.
18
| 14. | TAXES |
Income tax
The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.
BVI Islands
The Company was incorporated in the British Virgin Islands (BVI). Under the current laws of the BVI, the Company is exempt from income tax and capital gains tax. Furthermore, dividend payments made by the Company are not subject to withholding tax within the BVI Islands.
Hong Kong
On March 21, 2018, the Hong Kong Legislative Council
passed The Inland Revenue (Amendment) (No. 7) Bill 2017 (the “Bill”) which introduces the two-tiered profits tax rates regime.
The Bill was signed into law on March 28, 2018 and was announced on the following day. Under the two-tiered profits tax rates regime,
the first
PRC Tax
Based on the Circular No. 13 of the State Tax
Bureau for 2022, effective from January 1, 2022, for small and micro-profit enterprises, the portion of the annual taxable income not
exceeding RMB
A reconciliation of the income tax benefit determined at the statutory income tax rate to the Company’s income taxes is as follows:
| For The Six Months Ended March 31, |
||||||||
| 2025 | 2024 | |||||||
| Loss before income taxes | $ | ( |
) | $ | ( |
) | ||
| PRC statutory income tax rate | % | % | ||||||
| Income tax benefit computed at statutory corporate income tax rate | ( |
) | ( |
) | ||||
| Reconciling items: | ||||||||
| Non-deductible expenses | ||||||||
| Change in valuation allowance | ||||||||
| Income tax expenses (benefits) | $ | $ | ||||||
The tax effects of temporary differences that give rise to the deferred tax balances as of March 31, 2025 and September 30, 2024 are as follows:
| March 31, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Deferred tax asset: | ||||||||
| Bad debt provision | $ | $ | ||||||
| Inventory provision | ||||||||
| Long-term asset impairment | ||||||||
| Impairment of intangible assets | ||||||||
| Tax loss carryforward | ||||||||
| Totals | ||||||||
| Less: Allowance of deferred tax asset | $ | ( | ) | $ | ( | ) | ||
| Net amount | ||||||||
19
Taxes payable
Taxes payable consisted of the following:
| March 31, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Company income tax payable | $ | $ | ||||||
| VAT tax payable | ||||||||
| Individual income tax payable | ||||||||
| Other taxes payable | ||||||||
| Totals | $ | $ | ||||||
| 15. | SEGMENT REPORTING |
The Company has determined that it operates in two main operating segments: (1) Charge for use of brand and (2) Commission fee revenue.
The following tables present the summary of each reportable segment’s revenue and income, which is considered as a segment operating performance measure, for the six months ended March 31, 2025:
| Charge for use of brand | Commission fee revenue | Others | Consolidated | |||||||||||||
| Current assets | $ | $ | $ | |||||||||||||
| Non-current assets | ||||||||||||||||
| Revenues | ||||||||||||||||
| Segment gross profit | ||||||||||||||||
| Segment gross margin | % | % | % | % | ||||||||||||
| 16. | CHINA CONTRIBUTION PLAN |
The Company participates in a government-mandated
multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees.
Chinese labor regulations require the Company to pay to the local labor bureau a monthly contribution at a stated contribution rate based
on the monthly compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit
obligations; the Company has no further commitments beyond their monthly contributions. For the six months ended March 31, 2025 and 2024,
the Company contributed a total of $
| 17. | SUBSEQUENT EVENT |
The Company has analyzed its operations subsequent to March 31, 2025 to the date these interim condensed consolidation financial statements were issued. There is not material subsequent event to disclose in these interim condensed consolidated financial statements.
20
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations.
As used herein and except as otherwise noted, the term “Company”, “it(s)”, “our”, “us” and “we” shall mean Zhuoxun Hongtu Inc., a Nevada corporation, and its consolidated subsidiary, as applicable.
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements appearing elsewhere in this report, as well as the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.
Certain statements in this report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements, which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plan,” “potential,” “project,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or the negative of these words or other variations on these words or comparable terminology. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.
The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.
Overview
Zhuoxun Hongtu Inc. (“we”, “us” or the “Company”) was incorporated on March 9, 2015, in the state of Nevada. The name of the Company was changed from “Gushen, Inc.” to “Zhuoxun Hongtu Inc.” on August 23, 2024 to align with the Company’s operations and brands for its subsidiaries.
The Company owns 100% of Dyckmanst Limited, a British Virgin Islands company (“Dyckmanst”), which owns 100% of Edeshler Limited, a Hong Kong company (“Edeshler”), which in return owns 100% of Beijing Fengyuan Zhihui Education Technology Co., Ltd., a PRC company (“Fengyuan Beijing”). The Company, Dyckmanst and Edeshler are holding companies with no substantive operations.
As a holding company with no material operations of our own, we consolidate financial results of Beijing Zhuoxun Century Culture Communication Co., Ltd., a PRC company (“Zhuoxun Beijing”), which is a variable interest entity (the “VIE”), through a series of contractual arrangements dated February 5, 2021, by and among our wholly-owned subsidiary Fengyuan Beijing, Zhuoxun Beijing and the shareholders of Zhuoxun Beijing (the “VIE Agreements”). Neither we nor our subsidiaries own any equity interests in the VIE or its subsidiary. A description of the VIE Agreements and forms of such agreements are incorporated by reference from the Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (“SEC”) on August 6, 2021.
21
Zhuoxun Beijing’s customers are parents who desire to acquire various family education resources. Zhuoxun Beijing delivers onsite educational services to parents through its nationwide physical network of regional collaborative education agencies. Zhuoxun Beijing’s onsite educational services include programs such as individual development, youth leadership development, and parenting schools, enabling in-person guidance and interactions in classes. Zhuoxun Beijing has developed long-term business relationships with 18 regional education agencies around the country, whom Zhuoxun Beijing provides systematic training and management for to ensure the delivery of high-quality and uniformed educational services to the customers.
In addition, Zhuoxun Beijing also provides online education to parents through their mobile application, Wisdom Lighthouse (“睿智灯塔”) (formerly known as ZhuoXun App). Zhuoxun Beijing’s products provide two sets of curricula: “Good Parenting” (“教子有方”) and “Wise Parents” (“智慧父母”). “Good Parenting”, focused on child development, provides courses including emotional intelligence (EQ) training, learning habits, learning ability, parents-children communication, stages of puberty, etc. to help parents promote children’s mental and psychological health. “Wise Parents” introduces general strategies of family education to parents to help them better understand and support their children’s growth and needs, whereby courses such as traditional family values, improvement of parents’ qualifications, and psychological analysis are provided. Through Zhuoxun Beijing’s mobile application, Zhuoxun Beijing’s users can, based on their own interest and needs, select courses that are suitable for them and obtain valuable knowledge and skills provided by Zhuoxun Beijing’s courses. Zhuoxun Beijing’s users on mobile platform can use iPhone, Android, iPad and other tablets to review the courses anywhere and anytime. As of the date hereof, Zhuoxun Beijing has around 52,000 active users on the Wisdom Lighthouse app.
Zhuoxun Beijing’s online family education mobile platform monetizes through in-app purchases. Zhuoxun Beijing provides one free trial class of each course for all the users. The remaining classes are available for purchase. Users are able to view the first class for free before determining if to purchase the remaining classes.
Zhuoxun Beijing’s product Zhuoxun Anti-Addiction Cellphone (“Zhuoxun Cellphone”) is an intelligent terminal device. Dami Zhilian Information Technology Group Co., Ltd, a technology company that develops and produces smartphones (“Dami Zhilian”), customizes and produces Zhuoxun Cellphone according to the design requirements set by Zhouxun Beijing. Zhuoxun Beijing does not own any intellectual property in connection with Zhuoxun Cellphones. Zhuoxun Beijing sells Zhuoxun Cellphones through regional collaborative education agencies. Zhuoxun Cellphone has primarily four functions including anti-addiction, myopia prevention, security, and study assistance, for the purpose of managing elementary and middle school students. Parents are able to personalize and monitor their children’s use of Zhuoxun Cellphone by setting screen auto-lock, monitoring internet surfing, monitoring mobile application usage, monitoring physical locations, etc.
Starting in the third quarter of fiscal year 2022, the Company sells household products via the Company’s app in a small scale, and the amount of sales was immaterial compared to the total revenue of the corresponding period.
Zhuoxun Beijing authorized other enterprises using the Zhuoxun Beijing’s brand to set up community health retailers or the so-called Zhuoxun Youxuan stores, monetizes through brand usage fees. From the first quarter of fiscal year 2024, the Company charges commission fees to third-party merchants, who participated in the Company’s online broadcast room for Zhuoxun Youxuan stores.
22
Critical Accounting Policies and Estimates
Basis of Presentation
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
Going Concern
The accompanying unaudited interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and to pursue financing arrangements to support its working capital requirements.
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. As of March 31, 2025, the Company’s current liabilities exceeded the current assets by $16,948,436, its accumulated deficit was $18,423,882 and the Company has incurred losses during the six months ended March 31, 2025 and 2024. None of the Company’s stockholders, officers or directors, or third parties, are under any obligation to advance us funds, or to invest in us. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of our business plan, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all.
In evaluating if there is substantial doubt about the ability to continue as a going concern, the Company are trying to alleviate the going concern risk through (1) increasing cash generated from operations by controlling operating expenses and gradually shifted the business focus to the brand authorization for community healthy station and operation service charges to bring in more revenue, (2) financing from domestic banks and other financial institutions, and (3) equity or debt financing. The Company has certain plans to mitigate these adverse conditions and to increase the liquidity.
On an on-going basis, the Company will also receive financial support commitments from the Company’s related parties.
These conditions raise substantial doubt about our ability to continue as a going concern. 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.
23
Principles of Consolidation
The consolidated financial statements include the financial statements of the Company, its subsidiaries, and consolidated variable interest entity (“VIE”) in PRC (i.e. Beijing Zhuoxun Century Culture Communication Co., Ltd.), including the VIE’ subsidiaries, for which the Zhuoxun Hongtu Inc, is the primary beneficiary.
All transactions and balances among the Company, its subsidiaries, the VIE and the VIE’ subsidiaries have been eliminated upon consolidation.
Use of Estimates
The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management of the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an on-going basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Identified below are the accounting policies that reflect the Company’s most significant estimates and judgments, and those that the Company believes are the most critical to fully understanding and evaluating its consolidated financial statements.
Revenue Recognition
Zhuoxun Beijing recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which Zhuoxun Beijing expects to receive in exchange for those goods or services. Zhuoxun Beijing recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) it satisfies the performance obligation.
Revenues are recognized when control of the promised goods or services is transferred to its customers, which may occur at a point in time or over time depending on the terms and conditions of the agreement, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Zhuoxun Beijing identified the following performance obligations for each type of contract:
Training revenue
Zhuoxun Beijing’s online training course service primarily includes coursewares or videos which are already published on the website. Other than providing the access, there are no bundle or multiple separable and distinct tasks. According to ASC 606-10-25-19, there is one performance obligation for the training course service. Zhuoxun Beijing required and received fees before participants accessed the online courses. Revenue recognised over the period of the card after the E-card was activated.
24
Charge for use of brand
Zhuoxun Beijing authorized other enterprises using the Zhuoxun Beijing’s brand to set up community health stations or the so-called Zhuoxun Youxuan stores, providing services to customers at their location, with a brand usage fee. Revenue was recognized when the community health stations or Zhuoxun Youxuan stores has been in operation.
Commission fee revenue
Zhuoxun Beijing charges commission fees to third-party merchants, who participated in Zhuoxun Beijing’s online broadcast room for Zhuoxun Youxuan stores. Zhuoxun Beijing generally is acting as an agent and its performance obligation is to arrange for the provision of the specified goods by the third-party merchants. Upon successful sales, Zhuoxun Beijing charges the third-party merchants a fixed rate commission fee based on the sales amount. Commission fee revenues are recognized on a net basis at the point of completion of orders.
Practical expedients and exemption
Zhuoxun Beijing has not incurred any costs to obtain contracts, and does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.
Other service income is earned when services have been rendered.
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 is greater than 50 percent 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.
Foreign Currency and Foreign Currency Translation
The functional currency of the Company is the United States dollar (“US dollar”). Fengyuan Beijing, Zhuoxun Beijing and Zhuoxun Beijing’s subsidiaries, all of which are based in PRC, use the local currency, the Chinese Yuan (“RMB”), as their functional currencies. An entity’s functional currency is the currency of the primary economic environment in which it operates, normally that is the currency of the environment in which the entity primarily generates and expends cash. Management’s judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements.
Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Gains and losses resulting from foreign currency re-measurement are included in the statements of comprehensive loss.
25
The consolidated financial statements are presented in U.S. dollars. Assets and liabilities are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date, and revenues and expenses are translated at the average of the exchange rates in effect during the reporting period. Stockholders’ equity accounts are translated using the historical exchange rates at the date the entry to stockholders’ equity was recorded, except for the change in retained earnings during the period, which is translated using the historical exchange rates used to translate each period’s income statement. Differences resulting from translating functional currencies to the reporting currency are recorded in accumulated other comprehensive income in the consolidated balance sheets.
Translation of amounts from RMB into U.S. dollars has been made at the following exchange rates:
| Balance sheet items, except for equity accounts | ||||
| March 31, 2025 | RMB7.2572 to $1 | |||
| September 30, 2024 | RMB7.0138 to $1 | |||
| Income statement and cash flows items | ||||
| For the six months ended March 31, 2025 | RMB7.2311 to $1 | |||
| For the six months ended March 31, 2024 | RMB7.1828 to $1 |
Impairment of Long-lived Assets
In accordance with ASC 360-10-35, the Company reviews the carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets using the projected discounted cash flow method at the asset group level. The estimation of future cash flows requires significant management judgment based on the Company’s historical results and anticipated results and is subject to many factors. The discount rate that is commensurate with the risk inherent in the Company’s business model is determined by its management. An impairment loss would be recorded if the Company determined that the carrying value of long-lived assets may not be recoverable. The impairment to be recognized is measured by the amount by which the carrying values of the assets exceed the fair value of the assets. As of March 31, 2025 and September 30, 2024, the impairment of intangible assets was $48,874 and $49,338.
Credit risk
Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents. As of March 31, 2025 and 2024, substantially all of the Company’s cash and cash equivalents were held by major financial institutions located in the PRC, which management believes are of high credit quality.
For the credit risk related to trade accounts receivable, the Company performs ongoing credit evaluations of its customers and, if necessary, maintains reserves for potential credit losses. Historically, such losses have been within management’s expectations.
Fair Value of Financial Instruments
U.S. GAAP establishes a three-tier hierarchy to prioritize the inputs used in the valuation methodologies in measuring the fair value of financial instruments. This hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three-tier fair value hierarchy is:
Level 1 – observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – include other inputs that are directly or indirectly observable in the market place
Level 3 – unobservable inputs which are supported by little or no market activity
26
The carrying value of the Company’s financial instruments, including cash and cash equivalents, accounts and other receivables, other current assets, accounts and other payables, tax payable, accrued liabilities, and other short-term liabilities approximate their fair value due to their short maturities.
Results of Operations
Comparison of Three Months Ended March 31, 2025 and 2024
The following table sets forth key components of our results of operations during the three months ended March 31, 2025 and 2024, both in dollars and as a percentage of our revenue.
| Three Months Ended March 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Amount | % of Revenue |
Amount | % of Revenue |
|||||||||||||
| Revenue | $ | 5,428 | 100.00 | $ | 36 | 100.00 | ||||||||||
| Cost of revenue | (1,046 | ) | (19.27 | ) | - | - | ||||||||||
| Gross profit | 4,382 | 80.73 | 36 | 100.00 | ||||||||||||
| Selling expenses | (48,703 | ) | (897.25 | ) | (63,349 | ) | (175,969.44 | ) | ||||||||
| General and administrative expenses | (87,242 | ) | (1,607.26 | ) | (136,587 | ) | (379,408.33 | ) | ||||||||
| Loss from operations | (131,563 | ) | (2,423.78 | ) | (199,900 | ) | (555,277.78 | ) | ||||||||
| Other income | (249,149 | ) | (4,590.07 | ) | (254,447 | ) | (706,797.22 | ) | ||||||||
| Net loss before income taxes | (380,712 | ) | (7,013.85 | ) | (454,347 | ) | (1,262,075.00 | ) | ||||||||
| Income tax benefit | - | - | - | - | ||||||||||||
| Net loss | $ | (380,712 | ) | (7,013.85 | ) | $ | (454,347 | ) | (1,262,075.00 | ) | ||||||
Revenue
The Company’s revenue increased from $36 to $5,428 during the three months ended March 31, 2025 compared with the same period in 2024. With the explosion of short videos in China and the proliferation of fragmented knowledge, people’s lifestyle and the way of thinking and learning have changed after the pandemic, resulting in an enormous shock to the Company’s operation. The Company adjusted its mode of operation, gradually shifted its business focus to the brand authorization for community healthy station and Zhuoxun Youxuan stores, and generation of commission fee revenue, preliminary results were achieved.
Cost of revenue
Our cost of revenue was $1,046 and $nil for the three months ended March 31, 2025 and 2024, respectively. The increase was mainly from data traffic costs of online broadcast room, depending on data usage, transmission rates and peak bandwidth, which influenced by duration, video quality, and audience size for online broadcast room. There were no costs for charge for use of brand revenue.
Gross profit and gross margin
Our gross profit was $4,382 for the three months ended March 31, 2025, compared with a gross profit of $36 for the same period in 2024. Gross profit as a percentage of revenue (gross margin) was 80.73% for the three months ended March 31, 2025, compared to 100.00% for the same period in 2024.
27
Selling expenses
Our selling expenses consist primarily of compensation and benefits to our expense related to the revenue, such as service fees, travel expenses. Our selling expenses decreased by $14,646 to $48,703 for the three months ended March 31, 2025 by controlling expenses, compared to $63,349 for the same period in 2024. As our main business shifted to commission fee revenue, we did not have to pay any cloud product service fees, so service fees decreased by $12,249 for the three months ended March 31, 2025 compared with the same period in 2024.
| Three Months ended March 31, | ||||||||||||||||||||||||
| 2025 | 2024 | Fluctuation | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Salary and welfare | 32,480 | 66.69 | 34,478 | 54.43 | (1,998 | ) | (5.79 | ) | ||||||||||||||||
| Service fee | 9,384 | 19.27 | 21,633 | 34.15 | (12,249 | ) | (56.62 | ) | ||||||||||||||||
| Depreciation and amortization | 3,600 | 7.39 | 3,655 | 5.77 | (55 | ) | (1.50 | ) | ||||||||||||||||
| Others | 3,239 | 6.65 | 3,583 | 5.65 | (344 | ) | (9.60 | ) | ||||||||||||||||
| Total Selling Expense | $ | 48,703 | 100.00 | $ | 63,349 | 100.00 | $ | (14,646 | ) | (23.12 | ) | |||||||||||||
General and administrative expenses
Our general and administrative expenses consist primarily of compensation and benefits to our general management, finance and administrative staff, professional fees and other expenses incurred in connection with general operations. Our general and administrative expenses decreased by $49,345 to $87,242 for the three months ended March 31, 2025, compared to $136,587 for the same period in 2024. The salary and welfare decreased by $20,331 for the three months ended March 31, 2024, compared with the same period 2024, mainly due to the decrease of chairman’s salary and the decrease of general and administrative employees. Due to the decrease of employees, the Company reconfigured the office, therefore our rent decreased by $24,762 for the three months ended March 31, 2025 compared with the same period 2024.
| Three Months ended March 31, | ||||||||||||||||||||||||
| 2025 | 2024 | Fluctuation | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Salary and welfare | 47,206 | 54.11 | 67,537 | 49.45 | (20,331 | ) | (30.10 | ) | ||||||||||||||||
| Depreciation and amortization | 794 | 0.91 | 1,505 | 1.10 | (711 | ) | (47.24 | ) | ||||||||||||||||
| Rent | 15,170 | 17.39 | 39,932 | 29.24 | (24,762 | ) | (62.01 | ) | ||||||||||||||||
| Professional fees | 14,129 | 16.20 | 16,364 | 11.98 | (2,235 | ) | (13.66 | ) | ||||||||||||||||
| Bad debt | - | - | 50 | 0.04 | (50 | ) | (100.00 | ) | ||||||||||||||||
| Others | 9,943 | 11.39 | 11,199 | 8.19 | (1,256 | ) | (11.22 | ) | ||||||||||||||||
| Total G&A Expenses | $ | 87,242 | 100.00 | $ | 136,587 | 100.00 | $ | (49,345 | ) | (36.13 | ) | |||||||||||||
Other expense, net
Our other expense was $249,149 for the three months ended March 31, 2025, compared to $254,447 for the same period 2024. It mainly includes late fees for accrued taxes.
Income tax benefit
Our income tax benefit were $nil and $nil for the three months ended March 31, 2025 and 2024.
Net loss
As a result of the cumulative effect of the factors described above, our net loss was $380,712 and $454,347 for the three months ended March 31, 2025 and 2024, respectively.
28
Comparison of Six Months Ended March 31, 2025 and 2024
The following table sets forth key components of our results of operations during the six months ended March 31, 2025 and 2024, both in dollars and as a percentage of our revenue.
| Six Months Ended March 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Amount | % of Revenue | Amount | % of Revenue | |||||||||||||
| Revenue | $ | 25,015 | 100.00 | $ | 84 | 100.00 | ||||||||||
| Cost of revenue | (6,532 | ) | (26.11 | ) | - | - | ||||||||||
| Gross profit | 18,483 | 73.89 | 84 | 100.00 | ||||||||||||
| Selling expenses | (96,875 | ) | (387.27 | ) | (164,736 | ) | (196,114.29 | ) | ||||||||
| General and administrative expenses | (295,492 | ) | (1,181.26 | ) | (595,084 | ) | (708,433.33 | ) | ||||||||
| Loss from operations | (373,884 | ) | (1,494.64 | ) | (759,736 | ) | (904,447.62 | ) | ||||||||
| Other income (expense), net | (505,289 | ) | (2,019.94 | ) | (496,478 | ) | (591,045.24 | ) | ||||||||
| Net loss before income taxes | (879,173 | ) | (3,514.58 | ) | (1,256,214 | ) | (1,495,492.86 | ) | ||||||||
| Income tax benefit | - | - | - | - | ||||||||||||
| Net loss | $ | (879,173 | ) | (3,514.58 | ) | $ | (1,256,214 | ) | (1,495,492.86 | ) | ||||||
Revenue
Our revenue was increased from $84 to $25,015 during the six months ended March 31, 2025 compared with the same period in 2024. With the explosion of short videos in China and the proliferation of fragmented knowledge, people’s lifestyle and the way of thinking and learning have changed after the pandemic, resulting in an enormous shock to the Company’s operation. The Company adjusted its mode of operation, gradually shifted its business focus to the brand authorization for community healthy station and Zhuoxun Yuo Xuan, and commission fee revenue, preliminary results were achieved.
Cost of revenue
Our cost of revenue was increased from $nil to $6,532 during the six months ended March 31, 2025 compared with the same period in 2024. The increase was mainly from data traffic costs of online broadcast room, depending on data usage, transmission rates and peak bandwidth, which influenced by duration, video quality, and audience size for online broadcast room. There were no costs for charge for use of brand revenue.
Gross profit and gross margin
Our gross profit was $18,483 for the six months ended March 31, 2025, compared with a gross profit of $84 for the same period in 2024. Gross profit as a percentage of revenue (gross margin) were 73.89% and 100% for the six months ended March 31, 2025 and 2024, respectively.
29
Selling expenses
Our selling expenses consist primarily of compensation and benefits to our expense related to the revenue, such as service fees, travel expenses. Our selling expenses decreased by $67,861 to $96,875 for the six months ended March 31, 2025 by controlling expenses, compared to $164,736 for the same period in 2024. As our main business shifted to charge for use of brand, we did not have to pay any cloud product service fees, so service fees decreased by $43,311 for the six months ended March 31, 2025 compared with the same period in 2024.
| Six Months ended March 31, | ||||||||||||||||||||||||
| 2025 | 2024 | Fluctuation | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Salary and welfare | 68,514 | 70.73 | 72,026 | 43.72 | (3,512 | ) | (4.88 | ) | ||||||||||||||||
| Service fee | 17,305 | 17.86 | 60,616 | 36.80 | (43,311 | ) | (71.45 | ) | ||||||||||||||||
| Depreciation and amortization | 7,239 | 7.47 | 7,287 | 4.42 | (48 | ) | (0.66 | ) | ||||||||||||||||
| Others | 3,817 | 3.94 | 24,807 | 15.06 | (20,990 | ) | (84.61 | ) | ||||||||||||||||
| Total Selling Expense | $ | 96,875 | 100.00 | $ | 164,736 | 100.00 | $ | (67,861 | ) | (41.19 | ) | |||||||||||||
General and administrative expenses
Our general and administrative expenses consist primarily of compensation and benefits to our general management, finance and administrative staff, professional fees and other expenses incurred in connection with general operations. Our general and administrative expenses decreased by $299,592 to $295,492 for the six months ended March 31, 2025 by controlling expenses, compared to $595,084 for the same period in 2024. The salary and welfare decreased by $45,040 for the six months ended March 31, 2025, compared with the same period 2024, mainly due to the decrease of chairman’s salary and the decrease of general and administrative employees. As a result of reconfigure the office, our rental expenses decreased by $48,301 for the six months ended March 31, 2025 compared with the same period 2024.
| Six Months ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | Fluctuation | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Salary and welfare | 95,910 | 32.46 | 140,950 | 23.69 | (45,040 | ) | (31.95 | ) | ||||||||||||||||
| Depreciation and amortization | 1,649 | 0.56 | 5,959 | 1.00 | (4,310 | ) | (72.33 | ) | ||||||||||||||||
| Rent | 24,726 | 8.37 | 73,027 | 12.27 | (48,301 | ) | (66.14 | ) | ||||||||||||||||
| Professional fees | 151,966 | 51.43 | 291,109 | 48.92 | (139,143 | ) | (47.80 | ) | ||||||||||||||||
| Bad debt | - | - | 16,219 | 2.73 | (16,219 | ) | (100.00 | ) | ||||||||||||||||
| Impairment of intangible assets | - | - | 38,938 | 6.54 | (38,938 | ) | 100.00 | |||||||||||||||||
| Others | 21,241 | 7.18 | 28,882 | 4.85 | (7,641 | ) | (26.46 | ) | ||||||||||||||||
| Total G&A Expenses | $ | 295,492 | 100.00 | $ | 595,084 | 100.00 | $ | (299,592 | ) | (50.34 | ) | |||||||||||||
Other expense, net
Our other expense was $505,289 for the six months ended March 31, 2025, compared to $496,478 for the same period 2024. It mainly includes late fees for accrued taxes.
Income tax benefit.
Our income tax benefit was $nil and $nil for the six months ended March 31, 2025 and 2024.
30
Net loss.
As a result of the cumulative effect of the factors described above, our net loss was $879,173 and $1,256,214 for the six months ended March 31, 2025 and 2024, respectively.
Liquidity and Capital Resources
The following table sets forth a summary of our cash flows for the periods indicated:
| Six Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (346,042 | ) | $ | (374,109 | ) | ||
| Net cash provided by investing activities | 16,318 | - | ||||||
| Net cash provided by financing activities | 327,255 | 380,204 | ||||||
| Net increase in cash and cash equivalents | (2,469 | ) | 6,095 | |||||
| Effect of exchange rate changes on cash and cash equivalents | (1,111 | ) | 541 | |||||
| Cash and cash equivalents at the beginning of period | 33,319 | 57,699 | ||||||
| Cash and cash equivalents at the end of period | $ | 29,739 | $ | 64,336 | ||||
As of March 31, 2025, we had cash and cash equivalents of $29,739. To date, we have financed our operations primarily through borrowings from our stockholders, related and unrelated parties.
Operating Activities
Net cash used in operating activities was $346,042 for the six months ended March 31, 2025, as compared to $374,109 net cash used in operating activities for the six months ended March 31, 2024.
The net cash used in operating activities for the six months ended March 31, 2025 was mainly due to our net loss of $879,173, and the increase in accounts receivable of $4,908, partially offset by the increase in accrued liabilities of $505,085.
The net cash used in operating activities for the six months ended March 31, 2024 was mainly due to our net loss of $1,256,214, partially offset by the adjustments to reconcile net loss of $49,605, the increase in accounts payable of $108,535, the increase in contract liabilities of $169,048.
Investing Activities
Net cash provided by investing activities was $16,318 for the six months ended March 31, 2025, as compared to $nil for the six months ended March 31, 2024. The net cash used in investing activities for the six months ended March 31, 2025 was mainly attributable to proceeds from sale of transportation equipment.
Financing Activities
Net cash provided by financing activities was $327,255 for the six months ended March 31, 2025, as compared to $380,204 for the six months ended March 31, 2024. The net cash used in financing activities for the six months ended March 31, 2025 and 2024 was mainly attributable to amount due to related parties.
Off-Balance Sheet Arrangements
As of March 31, 2025 and September 30, 2024, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
31
Limited Operating History; Need for Additional Capital
There is limited historical financial information about the Company on which to base an evaluation of its performance. There is no guarantee on the continued success in its business operations. The business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, a narrow client base, limited sources of revenue, and possible cost overruns due to the price and cost increases in supplies and services.
Without additional funding, management believes that the Company will not have sufficient funds to meet its obligations beyond one year after the date our condensed consolidated financial statements are issued. These conditions give rise to substantial doubt as to our ability to continue as a going concern.
The Company has been, and intend to continue, working toward identifying and obtaining new sources of financing. To date it has been dependent on related parties for its source of funding. No assurances can be given that it will be successful in obtaining additional financing in the future. Any future financing that it may obtain may cause significant dilution to existing stockholders. Any debt financing or other financing of securities senior to our common stock that it is able to obtain will likely include financial and other covenants that will restrict its flexibility. Any failure to comply with these covenants would have a negative impact on its business, prospects, financial condition, results of operations and cash flows.
If adequate funds are not available, it may be required to delay, scale back or eliminate portions of it or Zhuoxun Beijing’s operations or obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain of our assets. Accordingly, the inability to obtain such financing could result in a significant loss of ownership and/or control of our assets and could also adversely affect the Company’s ability to fund it or Zhuoxun Beijing’s continued operations and expansion efforts.
During the next 12 months, the Company expect to incur the same amount of expenses each month. However, as Zhuoxun Beijing works to expand its operations, it expects to incur significant research, marketing and development costs and expenses on Zhuoxun Beijing’s online service platforms that meet the constantly evolving industry standards and consumer demands.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures were not effective such that the information relating to us required to be disclosed in our SEC 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 and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s former management abandoned all operations for several years, and only recently did the Company appoint new management to make filings with the SEC on behalf of the Company.
Changes in Internal Control 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 Exchange Act) during the fiscal quarter covered by this report that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
32
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We or the VIE are not currently involved in any material legal proceedings other than ordinary routine litigations incidental to the business, to which we, any of our subsidiaries, or the VIE and its subsidiary (Beijing Zhuoxun Education Technology Co., Ltd.) is a party or of which any of our property is the subject. From time-to-time we or the VIE are, and we or the VIE anticipate that we or the VIE will be, involved in legal proceedings, claims, and litigation arising in the ordinary course of our or the VIE’s business and otherwise. The ultimate costs to resolve any such matters could have a material adverse effect on our financial statements. We could be forced to incur material expenses with respect to these legal proceedings, and in the event that there is an outcome in any that is adverse to us, our financial position and prospects could be harmed.
Item 1a. Risk Factors
For a discussion of our risk factors, see Part I, Item 1A. “Risk Factors” of the 10-K. The risks and uncertainties that we face are not limited to those set forth in the 10-K. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our securities. There have been no material changes to the Company’s risk factors since the filing of the 10-K.
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
Item 6. Exhibits
| 31.1* | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer | |
| 31.2* | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial and accounting officer | |
| 32.1* | Section 1350 Certification of principal executive officer | |
| 32.2* | Section 1350 Certification of principal financial and accounting officer | |
| 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 (formatted as Inline XBRL and contained in Exhibit 101). |
| * | filed herewith |
33
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Zhuoxun Hongtu Inc. | ||
| (Registrant) | ||
| Date: May 20, 2025 | By: | /s/ Yulong Yi |
| Yulong Yi | ||
| Chairman of the Board of Directors, | ||
| CEO, President, & Treasurer | ||
| (Principal Executive Officer & | ||
| Principal Financial Accounting Officer) | ||
34