KUN PENG INTERNATIONAL LTD. Overview of the Business
Due to global health issues and the pandemic, people have increased their health and nutrition consciousness. We believe preventive care is the most effective investment in health. To promote the awareness of preventive care to the people in the PRC, we have developed and launched our mobile social e-commerce platform (King Eagle Mall ). We also started establishing physical (Smart Kiosk) platforms with the cooperation withGuoxin Star Network Co., Ltd.
King Eagle Mall is a mobile social e-commerce platform which was launched inJuly 2020 and promotes preventive health care products and services as our core business. It adopts the S2B2C business model and integrates many major health care products and services. We focus on health-related products and services.King Eagle Mall is designed to enable health-related products to be sold by us and by third parties.King Eagle Mall's products are divided into two sectors: self-operated products and selected products which promote preventive health care. Our team screens and examines products that are and will be offered both by us and affiliated merchants. Our major products include health care products such as dietary supplements, nutritional health foods, beauty cosmeceuticals, and other categories (for instance, milk powder, dried fruits) of health foods for supporting the cardiovascular system and bone joint health. We offer collagen peptides, probiotics, and health foods for improving blood circulation and vein health, as well as household products which can promote and improve a healthier lifestyle for our members. We receive customer orders and may arrange fulfillment with our merchants who are responsible for delivery arrangement or fulfill customer orders through our outsourced networks.
At the same time, we operate customer service centers with whom our members can directly communicate for any assistance related to product purchases, suggestions for health care products and services, and delivery logistics.
Smart Kiosk
We introduced "Smart Kiosk" with the support from the previous stakeholder ofKing Eagle (China ),Guoxin Ruilian Group Co., Ltd ("Guoxin Ruilian"), which is a wholly owned subsidiary ofCITIC Group Corporation Ltd and a related party of Guoxin Zhengye. The construction of Smart Kiosk was initiated and administered byGuoxin Ruilian Group Co., Ltd. After the completion of the construction of Smart Kiosk,Guoxin Ruilian Group Co., Ltd assigned its wholly-owned subsidiary,Guoxin Star Network Co., Ltd to cooperate withKing Eagle (Tianjin ) in development of Smart Kiosk. The Smart Kiosk is a physical platform which focuses on developing a "small shop economy." It is integrated with theKing Eagle Mall which creates a "social, health and physical store" to provide people with more professional and comprehensive preventive health care products and services. Smart Kiosk is a principal component of our business. The smart service kiosk functions as a physical customer service center and community marketing for attracting customers, providing customer services, promoting our 500+ preventive health care and health related household products and introducing concepts of maintaining a healthy life. 5G internet connection is also available for our customers to connect to our online application,King Eagle Mall , so that our customers can accessKing Eagle Mall and place orders for our products. Recent Developments COVID-19 Update Since the second quarter of 2022, the situation of COVID-19 in the PRC intensified, the PRC central and local government continued to maintain restrictions, quarantines, and closures in certain affected areas. The approval process of our applications for the construction permits of smart kiosks was delayed by the local governmental agencies and the construction project of smart kiosks was also postponed. The Company continues to focus its business through its online platform,King Eagle Mall , to mitigate the adverse impacts by COVID-19 and follows up closely with the local governmental agencies for the application for the construction permits of smart kiosks. In fact, the pandemic increased the overall public health consciousness in the PRC and the Company continued to incur a significant growth in its average monthly online sale revenue by$0.8 million or 207.7% from$0.4 million for the six months endedMarch 31, 2021 to$1.1 million for the six months endedMarch 31, 2022 , and by$0.1 million or 24.0% from$0.5 million for the three months endedMarch 31, 2021 to$0.6 million for the three months endedMarch 31, 2022 . 24 The Company does not expect that the coronavirus COVID-19 will have a material adverse effect on its online business or financial results at this time. Still, it is not possible to predict the unanticipated consequence of the pandemic on our future business performance and liquidity due to the severity of the situation of COVID-19 in the PRC. The Company continues to monitor and assess the evolving situation closely and evaluate its potential exposure.
Recent Regulatory Developments in
Under current Chinese laws and regulations, the Company believes that the VIE Agreements are not subject to any government approval. The shareholders ofKing Eagle (Tianjin ) were required to register with SAFE when they established offshore vehicles to holdKP International , and such SAFE registration was effected onMay 14, 2021 . These shareholders ofKing Eagle (Tianjin ) will have to register their equity pledge arrangement as required under the Equity Pledge Agreement withKing Eagle (China ). The Company faces uncertainty with respect to future actions by the PRC government that could significantly affectKing Eagle (Tianjin )'s financial performance and the enforceability of the VIE Agreements. OnJuly 6, 2021 , the PRC government issued the Opinions on Strictly Cracking Down on Illegal Securities Activities, calling for: (i) tightening oversight of data security, cross-border data flow and administration of classified information, as well as amendments to relevant regulation to specify responsibilities of overseas listed Chinese companies with respect to data security and information security; (ii) enhanced oversight of overseas listed companies as well as overseas equity fundraising and listing by Chinese companies; and (iii) extraterritorial application ofChina's securities laws. As the Opinions on Strictly Cracking Down on Illegal Securities Activities were recently issued, there are great uncertainties with respect to the interpretation and implementation thereof. We will closely monitor further developments. In addition, onJuly 10, 2021 , theCyberspace Administration of China issued the Measures for Cybersecurity Review (Revision Draft for Comments), or the Measures, for public comments, which propose to authorize the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security, including listings in foreign countries by companies that possess the personal data of more than one million users. The Measures are soliciting comments and subject to change. As we have less than one million users, we believe that the Measures are not applicable to us even after they take effect in current form. The PRC government is increasingly focused on data security, recently launching cybersecurity review against a number of mobile apps operated by several US-listed Chinese companies, and prohibiting these apps from registering new users during the review period. There are great uncertainties regarding the interpretation and enforcement of PRC laws, rules, and regulations regarding data and privacy security. We may be required to change our data and other business practices and be subject to regulatory investigations, penalties, increased cost of operations, or declines in issuer growth or engagement as a result of these laws and policies. Further, our consulting business with respect to overseas listing and capital raising may be adversely affected. 25
Financial Operations Overview
Results of Operations for the three months ended
For the three months ended March 31,
2022 2021
Amount % of revenue Amount % of revenue
Revenues $ 2,018,764 100.0 % $ 1,627,633 100.0 %
Cost of revenues 337,465 16.7 222,033 (13.6
Gross profit 1,681,299 83.3 1,405,600 86.4
Operating expenses:
General and administrative expenses 436,295 21.6 466,671 28.7 Selling expense 1,868,233 92.5 1,213,657 74.6 Total operating expenses 2,304,528 114.1 1,680,328 103.3 Loss from operations (623,229 ) (30.8 ) (274,728 ) (16.9 ) Other income 8,552 0.4 368 0.0 Loss before income taxes (614,677 ) (30.4 ) (274,360 ) (16.9 ) Income tax expense - - - - Net loss$ (614,677 ) (30.4 )$ (274,360 ) (16.9 ) Revenues For the three months endedMarch 31, 2022 and 2021, revenues amounted to$2,018,764 and$1,627,633 , respectively. Our revenues primarily included the sale of health care and health related household products to our customers via our mobile application,King Eagle Mall , which was launched inJuly 2020 . Compared to the three months endedMarch 31, 2021 , we generated a higher revenue amount during the three months endedMarch 31, 2022 as our service agents initiated more marketing and promotional activities for our online platform and products during the three months endedMarch 31, 2022 . We recognized our revenue on a gross basis, net of sub-charges and value-added tax ("VAT") of gross sales.
Cost of revenue
Our cost of revenue for the three months endedMarch 31, 2022 and 2021 were$337,465 and$222,033 , respectively. This primarily included the purchase of health care and health related household products from our suppliers. We incurred a higher cost of revenue for the three months endedMarch 31, 2022 , compared to that in the same period in 2021, because we generated a higher revenue amount during the three months endedMarch 31, 2022 as discussed above.
Gross profit
For the three months endedMarch 31, 2022 , and 2021, our gross profit amounted to$1,681,299 or 83.3%, and$1,405,600 or 86.4%, respectively. While our gross profit amount for the three months endedMarch 31, 2022 was slightly lower than that for the same period in 2021, our gross profit margin for the three months endedMarch 31, 2022 remained comparable to the same period in 2021.
Operating Expenses
Our operating expenses consist of general and administrative expenses and selling expense. For the three months endedMarch 31, 2022 and 2021, our total operating expenses were$2,304,528 and$1,680,328 , respectively. We experienced a higher amount of operating expenses in the three months endedMarch 31, 2022 , compared to the same period in 2021 primarily due to the higher selling expense. 26
General and administrative expenses
General and administrative expenses for the three months endedMarch 31, 2022 and 2021 were$436,295 and$466,671 , respectively. The decrease in general and administrative expenses during the three months endedMarch 31, 2022 by$30,376 was triggered by a shrinkage in employee compensation and benefits by$16,049 , office supplies by$9,178 , professional fees by$22,445 , travel, transportation, and gasoline by$12,532 and others by$20,279 , offset by an increase in lease and building management expenses by$15,591 , meals and entertainment,$10,714 , and depreciation and amortization,$23,802 . During the three months endedMarch 31, 2022 , the basic salary amounts of our new executives and consultant ofKing Eagle (Tianjin ) were reduced after our former CEO of the Company resigned onDecember 1, 2021 . Our office supplies and meeting expenses for the three months endedMarch 31, 2022 also decreased compared to the same period in 2021. During the three months endedMarch 31, 2021 , we continued to incur additional office supplies and decoration expense as we started our operations inJuly 2020 . Compared to the same period in 2022, we incurred higher professional fees in the three months endedMarch 31, 2021 as we recruited more consultants to assist our reverse acquisition that was completed inMay 2021 . Our travel, transportation and gasoline expense in the three months endedMarch 31, 2022 was reduced as we strike to minimize the travel of our executives in order to reduce overhead costs. On the contrary, our lease and building management expenses were higher in the three months endedMarch 31, 2022 as we moved to new office location and incurred additional rent payment for the new office inBeijing . During the three months endedMarch 31, 2022 , we incurred additional meals and entertainment expense for our executives, staff and business partners for appreciating for their efforts to increase sales volume and we recognized an additional depreciation amount,$15,118 , for the relative leasehold improvements as the estimated useful life of leasehold improvements of the former office location inBeijing was adjusted.
Our general and administrative expenses for the three months ended
For the three months ended March 31,
2022 2021
Employee compensation and benefit $ 160,214 $ 176,263
Lease and building management 124,669 109,078
Office supplies and meeting 9,100 18,278
Professional services fee 95,393 117,838
Travel, transportation, and gasoline 3,051 15,583
Meals and entertainment 14,811
4,097
Depreciation and amortization 24,644
842 Others 4,413 24,692 Total $ 436,295 $ 466,671 27 Selling expense Our selling expense, which was primarily incurred by our sales and marketing department, for the three months endedMarch 31, 2022 and 2021, were$1,868,233 and$1,213,657 , respectively. Compared to the three months endedMarch 31, 2021 , our selling expense for the three months endedMarch 31, 2022 increased by$654,576 . The increase was primarily driven by a rise in service agent fee by$580,563 , as our service agents initiated more marketing and promotional activities for our online platform and products. Compared to the three months endedMarch 31, 2021 , the average monthly revenue from our online sales for the same period in 2022 increased by approximately$0.1 million , from approximately$0.5 million for the three months endedMarch 31, 2021 to approximately$0.6 million for the same period in 2022. The increase in selling expense also included an increase in office supplies by$15,018 , travel and transportation by$12,081 , meals and entertainment by$35,400 and advertising by$12,050 . During the three months endedMarch 31, 2022 , as we aimed to increase our sales revenue and expand our market share, our sales and marketing department launched marketing activities in various cities which resulted in a higher travel and transportation, meals and entertainment and advertising expenses.
Our selling expense included the following:
For the three months ended March 31,
2022 2021
Service agents $ 1,635,044 $ 1,054,481 Employee compensation and benefit 134,357
124,729 Office supplies and meeting 31,673 16,655 Customer services 50 4,365
Travel, transportation, and gasoline 14,831
2,750 Meals and entertainment 36,068 668 Depreciation and amortization 1,580 1,280 Advertising 14,630 2,580 Other - 6,149 Total$ 1,868,233 $ 1,213,657 Other income
Other income primarily included bank interest income, foreign exchange gain or loss and other service income. Our other income for the three months endedMarch 31, 2022 and 2021 were$8,552 and$368 , respectively. Since the first quarter of 2022, we incurred an additional source of income related to online technical support services of our supplement products provided to a corporate customer. During the three months endedMarch 31, 2022 , we recognized$8,182 related to the provision of this services in other income.
Income tax expense
For the three months endedMarch 31, 2022 and 2021, the income tax expense of the Company was nil. During the three months endedMarch 31, 2022 , our entities incurred book loss and tax loss. The Company recognized a full valuation allowance against the deferred tax assets of these entities as it believes that it is more likely than not that these entities will not recognize its deferred tax assets in a near future. During the three months endedMarch 31, 2021 , the Company generated net loss before income tax and the Company recognized a full valuation allowance against its deferred tax assets, which included net operating loss carryforwards, as management believes it is more likely than not that the Company will not recognize its net operating loss carryforwards in a near future or before it expires. 28 Net loss As a result of the factors discussed above, the Company posted a net loss in an amount of$614,677 and$274,360 for the three months endedMarch 31, 2022 and 2021, respectively.
Foreign currency translation adjustment
The functional currency of our operation in PRC is Chinese Yuan or Renminbi
("RMB") and while our operation in Hong Kong is Hong Kong Dollars ("HKD"). The
financial statements are translated to U.S. dollars using the period end rates
of exchange for assets and liabilities, equity is translated at historical
exchange rates, and average rates of exchange (for the period) are used for
revenues and expenses and cash flows. Transaction gains and or losses that arise
from exchange rate fluctuations on transactions denominated in a currency other
than the functional currency are included in the results of operations as
incurred. As a result of foreign currency translation, which is a noncash
adjustment, we reported a foreign currency translation (loss) gain of $(47,086)
and $6,154 for the three months ended March 31, 2022 , and 2021, respectively.
Comprehensive income (loss)
The Company recognized a comprehensive loss in an amount of
Results of Operations for the six months ended
For the six months ended March 31,
2022 2021
Amount % of revenue Amount % of revenue
Revenues $ 6,688,172 100.0 % $ 2,173,594 100.0 %
Cost of revenues 1,046,674 15.6 315,883 14.5
Gross profit 5,641,498 84.4 1,857,711 85.5
Operating expenses:General and administrative expenses 818,196 12.2
901,089 41.5 Selling expense 5,133,686 76.8 1,602,121 73.7 Total operating expenses 5,951,882 89.0 2,503,210 115.2 Loss from operations (310,384 ) (4.6 ) (645,499 ) (29.7 ) Other income 33,565 0.5 421 (0.02 ) Loss before income taxes (276,819 ) (4.1 ) (645,078 ) (29.7 ) Income tax expense - - - - Net loss$ (276,819 ) (4.1 )$ (645,078 ) (29.7 ) 29 Revenues For the six months endedMarch 31, 2022 and 2021, revenues amounted to$6,688,172 and$2,173,594 , respectively. Our revenues primarily included the sale of health care and health related household products to our customers via our mobile application,King Eagle Mall , which was launched inJuly 2020 . Our revenue amount during the six months endedMarch 31, 2022 was as three times as much as it was for the six months endedMarch 31, 2021 as our service agents initiated more marketing and promotional activities for our online platform and products during the six months endedMarch 31, 2022 . We recognized our revenue on a gross basis, net of sub-charges and value-added tax ("VAT") of gross sales.
Cost of revenue
Our cost of revenue for the three months ended
Gross profit
For the six months endedMarch 31, 2022 , and 2021, our gross profit amounted to$5,641,498 or 84.4%, and$1,857,711 or 85.5%, respectively. While our gross profit amount for the three months endedMarch 31, 2022 was slightly lower than that for the same period in 2021, our gross profit margin for the six months endedMarch 31, 2022 remained comparable to the same period in 2021.
Operating Expenses
Our operating expenses consist of general and administrative expenses and selling expense. For the six months endedMarch 31, 2022 and 2021, our total operating expenses were$5,951,882 and$2,503,210 , respectively. We experienced a higher amount of operating expenses in the six months endedMarch 31, 2022 , compared to the same period in 2021 primarily due to a higher selling expense. 30
General and administrative expenses
General and administrative expenses for the six months endedMarch 31, 2022 and 2021 were$818,196 and$901,089 , respectively. The decrease in general and administrative expenses during the six months endedMarch 31, 2022 by$82,893 was triggered by a decline in employee compensation and benefits by$53,036 , office supplies and meeting by$30,707 , professional fees by$11,940 , travel, transportation, and gasoline by$23,617 and others by$15,170 , offset by an increase in lease and building management expenses by$18,076 , meals and entertainment by$6,530 , and depreciation and amortization by$26,971 . During the six months endedMarch 31, 2022 , the basic salary amounts of our new executives and consultant ofKing Eagle (Tianjin ) were reduced after our former CEO of the Company resigned onDecember 1, 2021 . Our office supplies and meeting expenses for the six months endedMarch 31, 2022 also decreased compared to the same period in 2021. During the six months endedMarch 31, 2021 , we continued to incur additional office supplies and decoration expense as we started our operations inJuly 2020 . Compared to the same period in 2022, we incurred higher professional fees in the six months endedMarch 31, 2021 as we recruited more consultants to assist our reverse acquisitions that was completed inMay 2021 . Our travel, transportation and gasoline expense in the six months endedMarch 31, 2022 was reduced as we minimized the travel of our executives in order to reduce overhead costs. On the contrary, our lease and building management expenses were higher in the six months endedMarch 31, 2022 as we moved to a new office location and incurred additional rent payment for the new office inBeijing . During the six months endedMarch 31, 2022 , we incurred additional meals and entertainment expense for our executives, staff and business partners for appreciating their efforts to increase sales volume. We recognized an additional depreciation amount,$15,118 , for the leasehold improvements of the former office location as the estimated useful life of the relative leasehold improvements was adjusted.
Our general and administrative expenses for the six months ended
For the six months ended March 31,
2022 2021
Employee compensation and benefit $ 316,539 $ 369,575
Lease and building management 220,514 202,438
Office supplies and meeting 16,505 47,212
Professional services fee 181,152 193,092
Travel, transportation, and gasoline 7,607 31,224
Meals and entertainment 23,163
16,633
Depreciation and amortization 32,607
5,636 Others 20,109 35,279 Total $ 818,196 $ 901,089 Selling expense Our selling expense, which was primarily incurred by our sales and marketing department, for the six months endedMarch 31, 2022 and 2021, were$5,133,686 and$1,602,121 , respectively. Compared to the six months endedMarch 31, 2021 , our selling expense for the six months endedMarch 31, 2022 rose by$3,531,565 . Such significant increase was primarily driven by an increase in service agent fee by$3,346,440 , as our service agents initiated more marketing and promotional activities for our online platform and products. Compared to the six months endedMarch 31, 2021 , the average monthly revenue from our online sales for the same period in 2021 increased by approximately$0.7 million , from approximately$0.4 million for the six months endedMarch 31, 2021 to approximately$1.1 million for the same period in 2022. The increase in selling expense also included an increase in employee compensation and benefit by$86,362 , travel and transportation by$43,849 , meals and entertainment by$46,604 and advertising by$12,050 . During the six months endedMarch 31, 2022 , as we aimed to increase our sales revenue and expand our market share, we increased our headcounts of our sales and marketing department in the first quarter of 2022 and our sales and marketing department launched marketing activities in various cities which resulted in a higher travel and transportation, meals and entertainment and advertising expenses.
Our selling expense included the following:
For the six months ended March 31,
2022 2021
Service agents $ 4,655,679 $ 1,309,239
Employee compensation and benefit 294,669 208,307
Office supplies and meeting 49,932 49,514
Customer services 13,597 12,797Travel, transportation, and gasoline 51,335
7,486 Meals and entertainment 50,695 4,091 Depreciation and amortization 3,149 1,958 Advertising 14,630 2,580 Other - 6,149 Total$ 5,133,686 $ 1,602,121 31 Other income
Other income primarily included bank interest income, foreign exchange gain or loss and other service income. Our other income for the six months endedMarch 31, 2022 and 2021 were$33,565 and$421 , respectively. Since the first quarter of 2022, we incurred an additional source of income related to online technical support services of our supplement products provided to a corporate customer. During the six months endedMarch 31, 2022 , we recognized$24,774 related to the provision of this services in other income.
Income tax expense
For the six months endedMarch 31, 2022 and 2021, the income tax expense of the Company was nil. During the six months endedMarch 31, 2022 ,King Eagle (Tianjin ) incurred book income before income tax and taxable income and utilized the net operating loss carryforwards to offset its entire taxable income. On the other hand, KPIL, the subsidiaries inHong Kong andKing Eagle (China ) incurred book loss and tax loss. The Company recognized a full valuation allowance against the deferred tax assets of these entities as it believes that it is more likely than not that these entities will not recognize its deferred tax assets in a near future. During the six months endedMarch 31, 2021 , the Company generated net loss before income tax and the Company recognized a full valuation allowance against its deferred tax assets, which included net operating loss carryforwards, as management believes it is more likely than not that the Company will not recognize its net operating loss carryforwards in a near future or before it expires. Net loss
As a result of the factors discussed above, the Company posted a net loss in an
amount of
Foreign currency translation adjustment
The functional currency of our operation in PRC is Chinese Yuan or Renminbi
("RMB") and while our operation in Hong Kong is Hong Kong Dollars ("HKD"). The
financial statements are translated to U.S. dollars using the period end rates
of exchange for assets and liabilities, equity is translated at historical
exchange rates, and average rates of exchange (for the period) are used for
revenues and expenses and cash flows. Transaction gains and or losses that arise
from exchange rate fluctuations on transactions denominated in a currency other
than the functional currency are included in the results of operations as
incurred. As a result of foreign currency translation, which is a noncash
adjustment, we reported a foreign currency translation loss of $34,082 and
$7,985 for the six months ended March 31, 2022 , and 2021, respectively.
Comprehensive income (loss)
The Company recognized a comprehensive loss in an amount of
32
Liquidity and Capital Resources
As of
For the six months endedMarch 31, 2022 , net cash used in operating activities totaled to$921,748 . Operating cash outflow was mainly attributable to the net loss,$276,819 , an increase in other receivables,$26,331 , a security deposit made to the new lessor for our new office inBeijing ,$44,467 and payments to our vendors,$629,413 , a decrease in advance receipts from customers,$372,786 , payroll payment,$19,061 , VAT and other indirect tax payments,$116,995 and lease payments to lessors,$289,950 . The cash outflow was offset by non-cash items: depreciation and amortization,$35,757 and right-of-assets amortization,$177,685 as well as a decrease in prepayments to vendors,$68,649 , and an increase in an amount due to a related party,$571,983 .
Net cash used in investing activities totaled to
There was no financing activity for the six months ended
Effect of exchange rate change on cash totaled
For the six months endedMarch 31, 2021 , net cash provided by operating activities totaled$389,620 . Operating cash inflow was mainly attributable to an increase in trade and other payable,$1,348,657 , offset by the net loss,$645,078 , prepayments to vendors and lessors,$105,342 and decrease in deferred revenue,$206,831 .
Net cash used in investing activities totaled
There was no financing activity for the six months ended
Effect of exchange rate change on cash totaled
The following table sets forth a summary of changes in our working capital as of
March 31, September 30,
2022 2021
Current Assets $ 1,942,574 2,871,157
Current Liabilities 4,707,802 5,189,941
$ (2,765,228 ) (2,318,784 )
We require additional cash of approximately $1.9 million within the next twelve
months which primarily relates to third party vendors payables. In an effort to
support and maintain our financial positions and operations, the Company focused
on increasing its revenue through its online platform and slimming its overhead
costs. As aforementioned, since the first quarter of 2022, our average monthly
online sales increased. We continue to exert efforts to increase our sales
volume and reduce administrative costs. Simultaneously, our director continues
to support our operation financially. We believe that such measures will improve
our liquidity in the next twelve months. If we are not able to increase revenue
or obtain any financing, we may be unable to continue as a going concern.
33
Going Concern Consideration
The accompanying condensed consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America which contemplate continuation of the Company as a going concern
basis. The going-concern basis assures that assets are realized and liabilities
are extinguished in the ordinary course of business at amounts disclosed on the
financial statements. The Company's ability to continue as a going concern
depends on the liquidation of its current assets and business developments. In
assessing the Company's liquidity, the Company monitors and analyzes its cash
and cash equivalents and its operating and capital expenditure commitments. The
Company's liquidity needs are to meet its working capital requirements,
operating expenses, and capital expenditure obligations. For the six months
ended March 31, 2022 , the Company incurred cash outflows from operating
activities of $921,748 , a net loss of $276,819 , and a negative working capital
of $2,765,228 . Moreover, as the COVID-19 outbreak continues, there is a delay in
the progress of construction and approval for the construction permit of smart
kiosk. While some areas in the PRC have opened up recently, majority of the
areas in the PRC are still under the tighten control andlockdown and the
government agencies in those affected areas in the PRC still remain closed.
These conditions raise substantial doubt about the ability of the Company to
continue as a going concern.
The Company continues to monitor its operations to help refine the Company's
financial liquidity. Options under consideration in the review process include,
but not limited to, increase of sales on its online business, reduction of
overhead costs, fund advance from the Company's stockholders and directors, or
financing through issuance of shares. The Company continues to focus on
increasing its revenue through its online platform and slimming its
administrative costs. For example, we reduced the compensation and benefits of
our executives, decreased office supplies expense and trimmed executive travel
expenses. Additionally, our director will provide financing to meet our working
capital requirements.
In order to continue as a going concern for the next 12 months, the Company
continues to focus on increasing its revenue through the sale of health care
products on its online platform, King Eagle Mall , streamlining its overhead
costs or obtaining a financing from its stockholders or directors. However, the
Company cannot provide any assurance that it will be able to increase revenue,
that it will be able to successfully implement its business plan, or that
financing that will be available to it on commercially acceptable terms, if at
all. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classifications of liabilities that may result should the
Company be unable to continue as a going concern. The directors will continue to
support the group by providing adequate financial assistance to enable the group
to continue its business operations for the foreseeable future.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support, and credit risk support or other benefits. 34 Future Financings We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities, or if we are able, there is no guarantee that existing shareholders will not be substantially diluted.
Critical Accounting Policies
We regularly evaluate the accounting policies and estimates that we use to make budgetary and financial statement assumptions. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
See Note 2 to the financial statements included herewith and Note 2 to the
financial statements on Form 10-K/A for the fiscal year ended
Recent Accounting Pronouncements
See Note 2 to the financial statements included herewith and Note 2 to the
financial statements on Form 10-K/A for the fiscal year ended
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